As filed with the Securities and Exchange Commission on February 27, 1998
Securities Act File No. 33-27352
Investment Company Act File No. 811-5780
- --------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
--
Pre-Effective Amendment No.
Post-Effective Amendment No. 22 X
------- --
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No. 25
ENDEAVOR SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
2101 East Coast Highway, Suite 300
Corona del Mar, California 92625
------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Are Code: (800) 854-8393
------------------------------------------------------------------
Vincent J. McGuinness, Jr.
-------------------------
President
Endeavor Series Trust
2101 East Coast Highway, Suite 300, Corona del Mar, California 92625
--------------------------------------------------------------------
(Name and Address of Agent for Service)
---------------------------------------
Copies to:
Robert N. Hickey, Esq.
Sullivan & Worcester LLP
1025 Connecticut Avenue, N.W. Washington, D.C. 20036
------------------------------------------------------
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
on ____________ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
X on May 1, 1998 pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on ____________ pursuant to paragraph (a)(2) of Rule 485
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
- -----------------------------------------
The Registrant has previously filed a declaration of indefinite registration of
shares of beneficial interest of its Endeavor Money Market Portfolio (formerly,
TCW Money Market Portfolio), Endeavor Asset Allocation Portfolio (formerly, TCW
Managed Asset Allocation Portfolio), T. Rowe Price International Stock Portfolio
(formerly, Global Growth Portfolio), Endeavor Value Equity Portfolio (formerly,
Value Equity Portfolio), Dreyfus Small Cap Value Portfolio (formerly, Quest for
Value Small Cap Portfolio), Dreyfus U.S. Government Securities Portfolio
(formerly, U.S. Government Securities Portfolio), T. Rowe Price Equity Income
Portfolio, T. Rowe Price Growth Stock Portfolio, Endeavor Opportunity Value
Portfolio (formerly, Opportunity Value Portfolio), Endeavor Enhanced Index
Portfolio (formerly, Enhanced Index Portfolio) and Endeavor Select 50 Portfolio
(formerly, Select 50 Portfolio) pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended, (the "1940 Act"). Registrant's Rule 24f-2
Notice, on behalf of its Endeavor Money Market Portfolio, Endeavor Asset
Allocation Portfolio, T. Rowe Price International Stock Portfolio, Endeavor
Value Equity Portfolio, Dreyfus Small Cap Value Portfolio, Dreyfus U.S.
Government Securities Portfolio, T. Rowe Price Equity Income Portfolio, T. Rowe
Price Growth Stock Portfolio , Endeavor Opportunity Value Portfolio and Endeavor
Enhanced Index Portfolio for the fiscal year ended December 31, 1997 is expected
to be filed on or about March 31, 1998. The Registrant did not sell shares of
beneficial interest for its Endeavor Select 50 Portfolio during the fiscal year
ended December 31, 1997 pursuant to such declaration and, therefore, did not
file a Rule 24f-2 Notice for the fiscal year ended December 31, 1997 pursuant to
Rule 24f-2(b) of the 1940 Act.
-1-
<PAGE>
ENDEAVOR SERIES TRUST
Cross Reference Sheet
Pursuant to Rule 495(a)
Part A
<TABLE>
<CAPTION>
Item Registration Statement
No. Caption Caption in Prospectus
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Not Applicable
3. Condensed Financial
Information Financial Highlights
4. General Description
of Registrant Cover Page; The Fund; Investment Objectives and
Policies
5. Management of the Fund The Fund; Management of the Fund; Additional
Information
5A. Management's Discussion
of Fund Performance Not Applicable
6. Capital Stock and Other
Securities The Fund; Dividends, Distributions and Taxes;
Organization and
Capitalization of the
Fund; Additional
Information
7. Purchase of Securities
Being Offered Sale and Redemption of Shares
8. Redemption or Repurchase Sale and Redemption of Shares
9. Pending Legal Proceedings Not Applicable
PART B
Item Registration Statement Caption in Statement
No. Caption of Additional Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and
History Organization and Capitalization of the Fund
13. Investment Objectives and
Policies Investment Objectives and Policies
14. Management of the Fund Management of the Fund
15. Control Persons and
Principal Holders of
Securities Management of the Fund
16. Investment Advisory and
Other Services Management of the Fund
17. Brokerage Allocation and
Other Practices Portfolio Transactions
18. Capital Stock and Other
Securities Organization and
Capitalization of the Fund
19. Purchase, Redemption and
Pricing of Securities
Being Offered Net Asset Value;
Redemption of Shares
20. Tax Status Taxes
21. Underwriters Management of the Fund
22. Calculation of
Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
PART C
The information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this Post-Effective
Amendment.
<PAGE>
Prospectus
ENDEAVOR(sm) SERIES TRUST
Endeavor Series Trust (the "Fund") is a diversified, open-end
management investment company that offers a selection of managed investment
portfolios, each with its own investment objective designed to meet different
investment goals. There can be no assurance that these investment objectives
will be achieved.
This Prospectus describes the following eleven portfolios currently
offered by the Fund (the "Portfolios").
o Endeavor Money Market Portfolio
o Endeavor Asset Allocation Portfolio
o T. Rowe Price International Stock Portfolio
o Endeavor Value Equity Portfolio
o Dreyfus Small Cap Value Portfolio
o Dreyfus U.S. Government Securities Portfolio
o T. Rowe Price Equity Income Portfolio
o T. Rowe Price Growth Stock Portfolio
o Endeavor Opportunity Value Portfolio
o Endeavor Enhanced Index Portfolio
o Endeavor Select 50 Portfolio
<PAGE>
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 web site (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.
Endeavor(sm) is a registered service mark of Endeavor Management Co.
<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 . 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.
The Endeavor Select 50 Portfolio will accept orders for the purchase of
its shares until the total assets of the Portfolio equal $200 million; however,
the Portfolio may, with the agreement of the manager and investment adviser,
accept orders for the purchase of its shares until its total assets equal $250
million (collectively, the "maximum offering"). As of the date of this
Prospectus, the Endeavor Select 50 Portfolio's assets were approximately $_____
million. Once the maximum offering has been sold, no additional shares will be
sold except pursuant to the reinvestment of dividends and to Endeavor variable
annuity contract owners who have existing interests in the Endeavor Select 50
Portfolio.
-3-
<PAGE>
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:
Endeavor Money Market Portfolio (formerly, TCW Money Market Portfolio)
- - seeks current income, preservation of capital and maintenance of liquidity
through investment in short-term money market securities. The Portfolio's shares
are neither insured by nor guaranteed by the U.S. government. The Portfolio
seeks to maintain a constant net asset value of $1.00 per share although no
assurances can be given that such constant net asset value will be maintained.
Endeavor Asset Allocation Portfolio (formerly, TCW Managed Asset
Allocation Portfolio) - seeks high total return through a managed asset
allocation portfolio of equity, fixed income and money market securities.
T. Rowe Price International Stock Portfolio - seeks long-term growth of
capital through investments primarily in common stocks of established non-U.S.
companies.
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.
Dreyfus U.S. Government Securities Portfolio (formerly, U.S.
Government Securities Portfolio) - seeks as high a level of total
-4-
<PAGE>
return as is consistent with prudent investment strategies by investing under
normal conditions at least 65% of its assets in U.S. government debt obligations
and mortgage-backed securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities.
T. Rowe Price Equity Income Portfolio - seeks to provide substantial
dividend income and also capital appreciation by investing primarily in
dividend-paying common stocks of established companies.
T. Rowe Price Growth Stock Portfolio - seeks long-term growth of
capital and to increase dividend income through investment primarily in common
stocks of well-established growth companies.
Endeavor Opportunity Value Portfolio (formerly, Opportunity Value
Portfolio) - seeks growth of capital over time through investment in a portfolio
consisting of common stocks, bonds and cash equivalents, the percentages of
which will vary based upon the Portfolio Adviser's assessment of relative
values.
Endeavor Enhanced Index Portfolio (formerly, Enhanced Index Portfolio)-
seeks to earn a total return modestly in excess of the total return performance
of the S&P 500 Composite Stock Price Index (the "S&P 500 Index") while
maintaining a volatility of return similar to the S&P 500 Index.
Endeavor Select 50 Portfolio (formerly, Select 50 Portfolio) - seeks
capital appreciation by investing in at least 50 different equity securities of
companies of all sizes throughout the world.
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 MONEY MARKET PORTFOLIO*
<TABLE>
<CAPTION>
Year Year Year Year
Ended Ended Ended Ended
12/31/97 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C>
Operating
Performance:
Net asset
value,
beginning of
period $1.00 $1.00 $1.00 $1.00
---- ---- ---- ----
Net investment
income# 0.0498 0.0479 0.0540 0.0337
------ ------ ------ ------
Distributions:
Dividends from
net investment
income (0.0498) (0.0479) (0.0540) (0.0336)
Distributions
from net
realized
capital gains --- --- ----- (0.0001)
----- ----- ----- --------
Total
distributions (0.498) (0.0479) (0.0540) (0.0337)
------- -------- -------- --------
Net asset
value, end of
period $1.00 $1.00 $1.00 $1.00
==== ==== ==== ====
-6-
<PAGE>
Total return++ 5.07% 4.91% 5.54% 3.41%
==== ==== ==== ====
Ratios to average
net assets/supple-
mental data:
Net assets,
end of period
(in 000's) $51,162 $41,545 $27,551 $20,766
Ratio of net
investment
income to
average net
assets 4.99% 4.81% 5.37% 3.58%
Ratio of
operating
expenses to
average net
assets 0.60%*** 0.60% 0.60% 0.85%
======================
</TABLE>
<TABLE>
<CAPTION>
Year Year Period
Ended Ended Ended
12/31/93 12/31/92 12/31/91*
<S> <C> <C> <C>
Operating
Performance:
Net asset
value,
beginning of
period $1.00 $1.00 $1.00
---- ---- ----
Net investment
income# 0.0218 0.0287 0.0377
------ ------ ------
Distributions:
-7-
<PAGE>
Dividends from
net investment
income (0.0218) (0.0287) (0.0377)
Distributions
from net
realized
capital gains ----- ----- -----
----- ----- -----
Total
distributions (0.0218) (0.0287) (0.0377)
-------- -------- --------
Net asset
value, end of
period $1.00 $1.00 $1.00
==== ==== ====
Total return++ 2.19% 2.90% 3.84%
==== ==== ====
Ratios to average
net assets/supple-
mental data:
Net assets,
end of period
(in 000's) $12,836 $4,527 $1,907
Ratio of net
investment
income to
average net
assets 2.19% 2.84% 5.02%+
Ratio of
operating
expenses to
average net
assets 0.99% 0.91% 0.00%+**
- ------------------
</TABLE>
-8-
<PAGE>
* Effective May 1, 1998, the name of the TCW Money Market Portfolio was
changed to Endeavor Money Market Portfolio and Morgan Stanley Asset
Management Inc. became the Portfolio's Adviser. Effective May 1, 1996,
the name of the Money Market Portfolio was changed to TCW Money Market
Portfolio. The Portfolio commenced operations on April 8, 1991.
** Annualized operating expense ratios before waiver of fees and/or
reimbursement of expenses by investment manager for the years ended
December 31, 1993, December 31, 1992 and the period ended December 31,
1991 were 1.23%, 2.37% and 8.48%, respectively.
*** Annualized operating expense ratio before credits allowed by the
custodian for the year ended December 31, 1997 was 0.60%.
+ Annualized.
++ Total return represents the aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
# Net investment income/(loss) before fees waived and/or reimbursement of
expenses by investment manager for the years ended December 31, 1993,
December 31, 1992 and the period ended December 31, 1991 were $0.0195,
$0.0140 and $(0.0259), respectively.
-9-
<PAGE>
ENDEAVOR ASSET ALLOCATION PORTFOLIO*
<TABLE>
<CAPTION>
Year Year Year Year
Ended Ended Ended Ended
12/31/97 12/31/96 12/31/95 12/31/94+++
<S> <C> <C> <C> <C>
Operating
Performance:
Net asset
value,
beginning of
period $18.84 $16.28 $13.48 $14.30
----- ----- ----- -----
Net investment
income# 0.32 0.27 0.33 0.28
Net realized
and unrealized
gain/(loss) on
investments 3.45 2.61 2.72 (1.03)
---- ---- ---- ------
Net increase/
(decrease) in
net assets
resulting from
investment
operations 3.77 2.88 3.05 (0.75)
---- ---- ---- ------
Distributions:
Dividends from
net investment
income (0.27) (0.32) (0.25) (0.07)
------ ------ ------ ------
Net asset
value, end of
period $22.34 $18.84 $16.28 $13.48
===== ===== ===== =====
-10-
<PAGE>
Total Return++ 20.14% 17.82% 22.91% (5.28)%
===== ===== ===== ======
Ratios to
average net
assets/
supplemental
data:
Net assets,
end of period
(in 000's) $303,102 $240,210 $198,876 $172,449
Ratio of net
investment
income to
average net
assets 1.61% 1.59% 2.12% 2.03%
Ratio of
operating
expenses to
average net
assets 0.84%*** 0.85%% 0.84% 0.90%
Portfolio
turnover rate 67% 58% 93% 67%
Average
commission
rate (per
share of
security) (a) $0.0606 $0.0041 --- ---
====================================
</TABLE>
<TABLE>
<CAPTION>
Year Year Period
Ended Ended Ended
12/31/93+++ 12/31/92+++ 12/31/91*
<PAGE>
<S> <C> <C> <C>
Operating
Performance:
Net asset
value,
beginning of
period $12.31 $11.37 $10.00
----- ----- -----
Net investment
income# 0.23 0.24 0.10
Net realized
and unrealized
gain/(loss) on
investments 1.84 0.77 1.27
---- ---- ----
Net increase/
(decrease) in
net assets
resulting from
investment
operations 2.07 1.01 1.37
---- ---- ----
Dividends from
net investment
income (0.08) (0.07) ---
------ ------ ---
Net asset
value, end of
period $14.30 $12.31 $11.37
====== ===== =====
Total Return++ 16.79% 9.01% 13.70%
===== ==== =====
Ratios to
average net
assets/
supplemental
data:
-12-
<PAGE>
Net assets,
end of period
(in 000's) $96,657 $14,055 $4,247
Ratio of net
investment
income to
average net
assets 1.71% 2.11% 4.54%+
Ratio of
operating
expenses to
average net
assets 1.12% 1.18%** 0.00%+**
Portfolio
turnover rate 67% 50% 61%
Average
commission
rate (per
share of
security) (a) --- --- ---
---
</TABLE>
- ---------------
* Effective May 1, 1998, the name of the TCW Managed Asset Allocation
Portfolio was changed to Endeavor Asset Allocation Portfolio and Morgan
Stanley Asset Management Inc. became the Portfolio's Adviser. Effective
May 1, 1996, the name of the Managed Asset Allocation Portfolio was
changed to TCW Managed Asset Allocation Portfolio. The Portfolio
commenced operations on April 8, 1991.
** Annualized operating expense ratios before waiver of fees and/or
reimbursement of expenses by investment manager for the year ended
December 31, 1992 and the period ended December 31, 1991 were 1.73% and
5.18%, respectively.
*** Annualized operating expense ratio before credits allowed by the
custodian for the year ended December 31, 1997 was 0.84%.
+ Annualized.
-13-
<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 does not accord with
results of operations.
# Net investment income/(loss) before fees waived and/or reimbursement of
expenses by investment manager for the year ended December 31, 1992 and
the period ended December 31, 1991 were $0.18 and $(0.01),
respectively.
(a) Average commission rate paid per share of securities purchased and sold
by the Portfolio.
-14-
<PAGE>
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO*
<TABLE>
<CAPTION>
Year Year Year Year
Ended Ended Ended Ended
12/31/97 12/31/96+++ 12/31/95## 12/31/94
<S> <C> <C> <C> <C>
Operating
Performance:
Net asset value,
beginning of
period $13.95 $12.19 $11.31 $11.99
----- ----- ----- -----
Net investment
income/(loss)# 0.08 0.09 0.09 (0.02)
Net realized and
unrealized
gain/(loss) on
investments 0.28 1.76 1.06 (0.66)
---- ---- ---- ------
Net increase/
(decrease) in
net assets
resulting from
investment
operations 0.36 1.85 1.15 (0.68)
---- ---- ---- ------
Distributions:
Dividends from
net investment
income (0.10) (0.09) --- ---
Distributions
from net
realized gains --- (0.00)### (0.27) ---
--- --------- ------ ---
-15-
<PAGE>
Total
Distributions (0.10) (0.09) (0.27) ---
------ ------ ------ ---
Net asset value,
end of period $14.21 $13.95 $12.19 $11.31
===== ===== ===== =====
Total return++ 2.54% 15.23% 10.37% (5.67)%
==== ===== ===== ======
Ratios to
average net
assets/
supplemental
data:
Net assets, end
of period (in
000's) $164,560 $134,435 $92,352 $84,102
Ratio of net
investment
income/(loss) to
average net
assets 0.74% 0.73% 0.81% (0.16)%
Ratio of
operating
expenses to
average net
assets** 1.07%*** 1.18% 1.15% 1.16%
Portfolio
turnover rate 19% 11% 111% 88%
Average
commission rate
(per share of
security) (a) $0.0016 $0.0024 --- ---
</TABLE>
===============================
-16-
<PAGE>
<TABLE>
<CAPTION>
Year Year Period
Ended Ended Ended
12/31/93+++ 12/31/92+++ 12/31/91*
<S> <C> <C> <C>
Operating
Performance:
Net asset value,
beginning of
period $10.12 $10.52 $10.00
----- ----- -----
Net investment
income/(loss)# (0.04) 0.00### 0.06
Net realized and
unrealized
gain/(loss) on
investments 1.91 (0.38) 0.46
---- ------ ----
Net increase/
(decrease) in
net assets
resulting from
investment
operations 1.87 (0.38) 0.52
---- ------ ----
Distributions:
Dividends from
net investment
income --- (0.02) ---
Distributions
from net
realized gains --- --- ---
--- --- ---
Total
Distributions --- (0.02) ---
--- ------ ---
-17-
<PAGE>
Net asset value,
end of period $11.99 $10.12 $10.52
===== ===== =====
Total return++ 18.48% (3.61)% 5.20%
===== ====== =====
Ratios to
average net
assets/
supplemental
data:
Net assets, end
of period (in
000's) $52,777 $6,305 $3,200
Ratio of net
investment
income/(loss) to
average net
assets (0.31)% 0.01% 3.18%+
Ratio of
operating
expenses to
average net
assets** 1.52% 1.43% 0.00%+
Portfolio
turnover rate 37% 34% 0%
Average
commission rate
(per share of
security) (a) --- --- ---
---
</TABLE>
- -----------------
* Effective March 24, 1995, the name of the Global Growth Portfolio was
changed to T. Rowe Price International Stock Portfolio and the
investment objective was changed from investment on a global basis to
investment on an international basis (i.e., in non-U.S. companies). The
Portfolio commenced operations on April 8, 1991.
-18-
<PAGE>
** Annualized operating expense ratio before waiver of fees and/or
reimbursement of expenses by investment manager for the year ended
December 31, 1992 and the period ended December 31, 1991 were 2.10% and
6.83%, respectively.
*** Annualized operating expense ratio before credits allowed by the
custodian for the year ended December 31, 1997 was 1.12%.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
+++ Per share amounts have been calculated using the monthly average share
method, which more appropriately presents the per share data for this
period since use of the undistributed method does not accord with
results of operations.
# Net investment loss before fees waived and/or reimbursement of expenses
by investment manager for the year ended December 31, 1992 and the
period ended December 31, 1991 were $(0.07) and $(0.07), respectively.
## Rowe Price-Fleming International, Inc. became the Portfolio's Adviser
effective January 3, 1995.
### Amount represents less than $0.01 per share.
(a) Average commission rate paid per share of securities purchased and sold
by the Portfolio.
-19-
<PAGE>
ENDEAVOR VALUE EQUITY PORTFOLIO*
<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>
Operating
Performance:
Net asset
value,
beginning of $17.21 $14.23 $10.69 $10.28 $10.00
===== ----- ----- ----- -----
period
Net investment
income# 0.20 0.20 0.15 0.09 0.05
Net realized
and unrealized
gain on 3.96 3.15 3.52 0.33 0.23
---- ---- ---- ---- ----
investments
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) --- ---
------ ------ ------ --- ---
-20-
<PAGE>
Total
distributions (0.67) (0.37) (0.13) (0.01) ---
------ ------ ------ ------ ---
Net asset
value, end of $20.70 $17.21 $14.23 $10.69 $10.28
===== ===== ===== ===== =====
period
Total return++ 24.81% 23.84% 34.59% 4.09% 2.80%
===== ===== ===== ==== ====
Ratios to
average net
assets/
supplemental
data:
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.
-21-
<PAGE>
Effective May 1, 1996, the name of the Quest for Value Equity Portfolio
was changed to Value Equity Portfolio. The Portfolio commenced
operations on May 27, 1993.
** Annualized expense ratio before waiver of fees by investment manager
for the period ended December 31, 1993 was 2.10%.
*** Annualized 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 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.
-22-
<PAGE>
DREYFUS SMALL CAP VALUE PORTFOLIO*
<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>
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) --- ---
------ ------ ------ --- ---
-23-
<PAGE>
Total
distributions (1.82) (0.60) (0.27) --- ---
------ ------ ------ --- ---
Net asset
value, end of
period $16.41 $14.69 $12.22 $10.98 $11.18
===== ===== ===== ===== =====
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 --- --- ---
-24-
<PAGE>
</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.
++ 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.
-25-
<PAGE>
DREYFUS U.S. GOVERNMENT SECURITIES PORTFOLIO*
<TABLE>
<CAPTION>
Year Year Year Period
Ended Ended Ended Ended
12/31/97 12/31/96+++ 12/31/95 12/31/94*+++
<S> <C> <C> <C> <C>
Operating
performance:
Net asset value,
beginning of period $11.23 $11.39 $9.96 $10.00
----- ----- ---- -----
Net investment 0.39 0.62 0.30 0.24
income#
Net realized and
unrealized
gain/(loss) on 0.61 (0.44) 1.25 (0.28)
---- ------
investments
Net
increase/(decrease)
in net assets
resulting from 1.00 0.18 1.55 (0.04)
---- ---- ---- ------
investment
operations
Distributions:
Dividends from net
investment income (0.36) (0.22) (0.12) ---
------ ---
Distributions from
net realized gains --- (0.12) --- ---
--- ------ --- ---
Total distributions (0.36) (0.34) 0.12) ---
------ ------ ----- ---
-26-
<PAGE>
Net asset value, end
of period $11.87 $11.23 $11.39 $9.96
===== ===== ===== ====
Total return++ 9.15% 1.81% 15.64% (0.40)%
==== ==== ===== =======
Ratios to average
net
assets/supplemental
data:
Net assets, end of
period (in 000's) $46,542 $24,727 $12,718 $3,505
Ratio of net
investment income to
average net assets 5.74% 5.68% 5.58% 4.14%+
Ratio of operating
expenses to average
net assets 0.80%*** 0.82% 0.84% 0.78%+**
Portfolio turnover 185% 222% 161% 100%
rate
</TABLE>
- ------------------------
* Effective May 1, 1996, the name of the U.S. Government
Securities Portfolio was changed to Dreyfus U.S. Government
Securities Portfolio. The Portfolio commenced operations on
May 13, 1994.
** Annualized operating expense ratio before waiver of fees and
reimbursement of expenses by investment manager for the period ended
December 31, 1994 was 1.83%.
*** Annualized operating expense ratio before credits allowed by the
custodian for the year ended December 31, 1997 was 0.91%.
+ Annualized.
++ Total return represents aggregate total return for the
periods indicated. The total return of the Portfolio does
-27-
<PAGE>
not reflect the charges against the separate accounts of PFL
or the Contracts.
+++ Per share amounts have been calculated using the monthly average share
method, which more appropriately presents the per share data for this
period since use of the undistributed method did not accord with
results of operations.
# Net investment income before fees waived and reimbursement of expenses
by investment manager for the period ended December 31, 1994 was $0.18.
-28-
<PAGE>
T. ROWE PRICE EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
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 year $15.49 $13.05 $10.00
----- ----- -----
Net investment income 0.24 0.41 0.34
Net realized and
unrealized gain on
investments 4.07 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) ---
====== ------ ---
Net asset value, end of
year $19.34 $15.49 $13.05
===== ===== =====
Total return++ 28.27% 19.88% 30.50%
===== ===== =====
-29-
<PAGE>
Ratios to average net
assets/supplemental data:
Net assets, end of year
(in 000's) $197,228 $78,251 $21,910
Ratio of net investment
income to average net 2.47%
assets 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.
+++ 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.
-30-
<PAGE>
T. ROWE PRICE GROWTH STOCK PORTFOLIO
<TABLE>
<CAPTION>
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 year $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 year $20.78 $16.29 $13.72
===== ===== =====
Total return++ 28.57% 20.77% 37.20%
===== ===== ======
-31-
<PAGE>
Ratios to average net
assets/supplemental
data:
Net assets, end of
year (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.
-32-
<PAGE>
ENDEAVOR OPPORTUNITY VALUE PORTFOLIO*
<TABLE>
<CAPTION>
Year Period
Ended Ended
12/31/97 12/31/96*
<S> <C> <C>
Operating performance:
Net asset value,
beginning of year $10.06 $10.00
----- -----
Net investment income/
(loss)# 0.07 0.00##
Net realized and
unrealized gain on
investments 1.62 0.06
---- ----
Net increase in net
assets resulting from
investment operations
1.69 0.06
---- ----
Distributions:
Dividends from net (0.00)## ---
investment income
0.00 ---
---- ---
Total distributions
Net asset value, end
of year $11.75 $10.06
===== =====
Total return++ 16.81% 0.60%
===== ====
Ratios to average net
assets/supplemental
data:
-33-
<PAGE>
Net assets, end of
year (in 000's)
$26,802 $701
Ratio of net
investment income/
(loss) to average
net assets 1.34% (1.09)%+
Ratio of operating
expenses to average 1.15%*** 1.30%+**
net assets
Portfolio turnover
rate 44% 0%
Average commission
rate (per share of
security) (a) $0.0572 $0.0600
</TABLE>
- -----------------
* Effective May 1, 1998, the Opportunity Value Portfolio
changed its name to Endeavor Opportunity Value Portfolio.
The Portfolio commenced operations on November 18, 1996.
** Annualized operating expense ratio before
waiver/reimbursement by investment manager for the period
ended December 31, 1996 was 12.69%.
*** Annualized operating expense ratio before credits allowed by the
custodian for the year ended December 31, 1997 was 1.16%.
+ 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.
# Net investment loss before waiver/reimbursement of expenses by
investment manager for the period ended December 31, 1996 was ($0.04).
-34-
<PAGE>
## Amount represents greater than $(0.01) per share.
(a) Average commission rate paid per share of securities purchased and sold
by the Portfolio.
-35-
<PAGE>
ENDEAVOR ENHANCED INDEX PORTFOLIO
<TABLE>
<CAPTION>
Period
Ended
12/31/97*
<S> <C>
Operating performance:
Net asset value,
beginning of period $10.00
Net investment income# 0.02
Net realized and
unrealized gain on
investments 2.27
Net increase in net
assets resulting from
investment operations 2.29
Net asset value, end
of period $12.29
Total return++ 22.90%
Ratios to average net
assets/supplemental
data:
Net assets, end of
period (in 000's) $19,811
Ratio of net
investment income to
average
net assets 0.55%+
-36-
<PAGE>
Ratio of operating
expenses to average
net assets** 1.30%+***
Portfolio turnover
rate 6%
Average commission
rate (per share of
security) (a) $0.0306
</TABLE>
- -----------------
* The Portfolio commenced operations on May 2, 1997.
** Annualized operating expense ratio before
waiver/reimbursement by investment manager for the period
ended December 31, 1997 was 1.56%.
*** Annualized operating expense ratio before waiver/reimbursement of fees
by investment manager and custody fee credits for the period ended
December 31, 1997 was 1.56%.
+ Annualized.
++ Total return represents aggregate total return for the period
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
# Net investment income before waiver/reimbursement of expenses by
investment manager for the period ended December 31, 1997 was $0.01.
(a) Average commission rate paid per share of securities purchased and sold
by the Portfolio.
-37-
<PAGE>
--------------------
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 Money Market - .99%,
Endeavor Asset Allocation - 1.25%, T. Rowe Price International Stock - 1.53%,
Endeavor Value Equity - 1.30%, Dreyfus Small Cap Value - 1.30%, Dreyfus U.S.
Government Securities - 1.00%, T. Rowe Price Equity Income - 1.30%, T. Rowe
Price Growth Stock - 1.30%, Endeavor Opportunity Value - 1.30%, Endeavor
Enhanced Index - 1.30% and Endeavor Select 50 Portfolio - 1.50%.
The offering of shares of the Endeavor Select 50 Portfolio commenced in
February, 1998. Accordingly, no financial highlight data is available for shares
of this Portfolio.
-38-
<PAGE>
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 Money Market Portfolio
The investment objective of the Endeavor Money Market Portfolio is to
provide current income, preservation of capital and liquidity through investment
in short-term money market securities.
The Portfolio seeks to maintain a constant net asset value of $1.00 per
share. If the Trustees believe that the extent of any deviation from a $1.00
price per share may result in material dilution or other unfair results to
shareholders, they will take such steps as they consider appropriate to
eliminate or reduce these consequences to the extent reasonably practicable.
This may include selling portfolio securities prior to maturity, shortening the
average maturity of the Portfolio, withholding or reducing dividends, redeeming
shares in kind, reducing the number of the Portfolio's outstanding shares
without monetary consideration, or utilizing a net asset value per share
determined by using available market quotations.
The Portfolio expects to invest in the following types of money market
securities:
o securities issued or guaranteed as to principal and
interest by the U.S. government or by its agencies or
instrumentalities ("U.S. government securities");
o certificates of deposit, bankers' acceptances and other
obligations issued or guaranteed by bank holding
companies in the United States and their subsidiaries;
-39-
<PAGE>
o U.S. dollar denominated obligations ("Eurodollar
obligations") of bank holding companies in the United
States, their subsidiaries and their foreign branches
or of the International Bank for Reconstruction and
Development (also known as the World Bank);
o commercial paper and other short-term obligations of,
and variable amount master demand notes and variable
rate notes issued by U.S. and foreign corporations; and
o repurchase agreements (see "Investment Strategies").
Investment Criteria. With respect to investments in money
market securities, in accordance with applicable regulations of
the SEC, the Portfolio will:
~ invest only in high quality money market instruments that
present minimal credit risks;
~ invest only in money market instruments with remaining or
implied maturities of thirteen months or less; and
~ maintain an average dollar weighted maturity of the
Portfolio's investments of 90 days or less.
The Portfolio will invest only in high quality money market
instruments, i.e., securities which have been assigned the highest quality
ratings by nationally recognized statistical rating organizations ("NRSROs")
such as "A-1" by Standard & Poor's Ratings Service, a division of McGraw-Hill
Companies, Inc. ("Standard & Poor's") or "Prime-1" by Moody's Investors Service,
Inc. ("Moody's"), or if not rated, determined to be of comparable quality by the
Portfolio's Adviser (as hereinafter defined); provided, that up to 5% of the
Portfolio's total assets may be invested in instruments assigned the second
highest quality ratings such as "A-2" or "Prime-2", or if not rated, determined
to be of comparable quality by the Portfolio's Adviser. For a description of the
NRSROs and their ratings, see the Appendix attached to the Statement of
Additional Information.
The Portfolio may not invest in the securities of any one issuer if,
immediately after such investment, more than 5% of the total assets of the
Portfolio (taken at current value) would be invested in the securities of such
issuer; provided, that this limitation does not apply to U.S. government
securities or to repurchase agreements secured by such securities and that with
respect to 25% of the Portfolio's total assets more than 5% may be invested in
securities of any one issuer for three business
-40-
<PAGE>
days after the purchase thereof if the securities have been assigned the highest
quality ratings by NRSROs, or if not rated, have been determined to be of
comparable quality by the Portfolio's Adviser. With respect to U.S. government
securities, the Portfolio will not invest more than 55% of its assets in
securities issued or guaranteed by the U.S. Treasury or any single U.S.
government agency or instrumentality. See "Investment Restrictions" in the
Statement of Additional Information for a further description of the Portfolio's
investment criteria.
U.S. Government Securities. Securities issued or guaranteed as to
principal and interest by the U.S. government or its agencies and
instrumentalities include U.S. Treasury obligations, consisting of bills, notes
and bonds, which principally differ in their interest rates, maturities and
times of issuance, and obligations issued or guaranteed by agencies and
instrumentalities which are supported by (i) the full faith and credit of the
U.S. Treasury (such as securities of the Small Business Administration), (ii)
the limited authority of the issuer to borrow from the U.S. Treasury (such as
securities of the Student Loan Marketing Association) or (iii) the authority of
the U.S. government to purchase certain obligations of the issuer (such as
securities of the Federal National Mortgage Association). No assurance can be
given that the U.S. government will provide financial support to U.S. government
agencies or instrumentalities as described in clauses (ii) or (iii) above in the
future, other than as set forth above, since it is not obligated to do so by
law.
Other Money Market Securities. Other money market securities in which
the Portfolio may invest include U.S. dollar denominated instruments (such as
bankers' acceptances, commercial paper, certificates of deposit and Eurodollar
obligations) issued or guaranteed by bank holding companies in the United
States, their subsidiaries and their foreign branches. These bank obligations
may be general obligations of the parent bank holding company or may be limited
to the issuing entity by the terms of the specific obligation or by government
regulation.
Obligations of the International Bank for Reconstruction and
Development (also known as the World Bank) are supported by subscribed but
unpaid commitments of its member countries. There can be no assurance that these
commitments will be undertaken or complied with in the future.
The other money market securities in which the Portfolio may invest
also include certain variable and floating rate
-41-
<PAGE>
instruments and participations in corporate loans to corporations in whose
commercial paper or other short-term obligations the Portfolio may invest.
Because the bank issuing the participations does not guarantee them in any way,
they are subject to the credit risks generally associated with the underlying
corporate borrower. To the extent that the Portfolio may be regarded as a
creditor of the issuing bank (rather than of the underlying corporate borrower
under the terms of the loan participation), the Portfolio may also be subject to
credit risks associated with the issuing bank. The secondary market, if any, for
these loan participations is extremely limited and any such participations
purchased by the Portfolio will be regarded as illiquid.
Other money market securities in which the Portfolio may invest also
include bonds and notes with remaining maturities of thirteen months or less,
variable rate notes and variable amount master demand notes. A variable amount
master demand note differs from ordinary commercial paper in that it is issued
pursuant to a written agreement between the issuer and the holder, its amount
may be increased from time to time by the holder (subject to an agreed maximum)
or decreased by the holder or the issuer, it is payable on demand, the rate of
interest payable on it varies with an agreed formula and it is typically not
rated by a rating agency. Transfer of such notes is usually restricted by the
issuer, and there is no secondary trading market for them. Any variable amount
master demand note purchased by the Portfolio will be regarded as an illiquid
security. See "Investment Restrictions" in the Statement of Additional
Information.
Foreign Securities. The Portfolio may invest up to 10% of its total
assets in the securities (payable in U.S. dollars) of foreign issuers in
developed countries and in the securities of foreign branches of U.S. banks such
as negotiable certificates of deposit (Eurodollars). Because the Portfolio may
invest in foreign securities, investment in the Portfolio involves investment
risks that are different in some respects from an investment in a fund which
invests only in debt obligations of U.S. domestic issuers. Such risks may
include adverse future political and economic developments, the possible
imposition of foreign withholding taxes on interest income payable on the
securities held in the Portfolio, possible seizure or nationalization of foreign
deposits, the possible establishment of exchange controls, or the adoption of
other foreign governmental restrictions which might adversely affect the payment
of principal and interest on securities in the Portfolio. There may also be less
publicly available information about a foreign issuer than about a domestic
issuer and foreign issuers are not generally subject to uniform accounting,
auditing and
-42-
<PAGE>
financial reporting standards, practices and requirements comparable to those
applicable to domestic issuers.
The Portfolio may employ certain investment strategies which are
described under the caption "Investment Strategies" below and in the Statement
of Additional Information.
Endeavor Asset Allocation Portfolio
The investment objective of the Endeavor Asset Allocation Portfolio is
to provide high total return through a managed asset allocation portfolio of
equity, fixed income and money market securities. The Portfolio seeks to achieve
its objective by investing primarily in securities issued by United States
companies.
The composition of the Portfolio's investments will be based on the
determination by the Portfolio's Adviser of the appropriate weighting for each
asset class and will be adjusted periodically. In making adjustments to the
asset allocation, the Portfolio's Adviser will use its asset allocation model
and will integrate its view of the expected returns for each asset class,
conditions in the stock, bond and money markets, interest rate and corporate
earnings growth trends, and economic conditions.
The asset class weightings may theoretically range from 0% to 100%,
although the Portfolio's Adviser expects these extremes to be reached rarely, if
at all, for any class. The Portfolio will be "rebalanced" or checked for
possible reallocation monthly or more often if market conditions demand.
The equity portion of the Portfolio will be invested in a diversified
selection of equity securities of established companies in sound financial
condition. The equity securities in which the Portfolio will be invested may
include common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks and warrants. The Portfolio's Adviser will strive
to achieve total returns from dividends and capital gains in excess of those
from broadly-based stock market indices, but will not incur excessive risk of
loss to do so.
The fixed income portion of the Portfolio will be invested in taxable
securities including securities issued or guaranteed by the U.S. government and
its agencies or instrumentalities, collateralized mortgage obligations that are
issued or guaranteed by the U.S. government or its agencies or instrumentalities
or that are collateralized by a portfolio of mortgages or mortgage-related
securities guaranteed by such an agency or
-43-
<PAGE>
instrumentality and high grade corporate and mortgage-backed bonds with
maturities typically ranging from 2 to 30 years. The weighted average maturity
of such investments will generally range from 3 to 10 years and securities will,
at time of purchase, have ratings within the four highest rating categories
established by Moody's, Standard & Poor's, or a similar NRSRO or if not rated,
be of comparable quality as determined by the Portfolio's Adviser. The NRSROs'
descriptions of these bond ratings are set forth in the Appendix to the
Statement of Additional Information. Securities rated in the fourth highest
category may have speculative characteristics; changes in economic or business
conditions are more likely to lead to a weakened capacity to make principal and
interest payments than in the case of higher grade bonds. Like the three highest
grades, however, these securities are considered investment grade.
Mortgage-backed bonds have yield and maturity characteristics
corresponding to the underlying mortgage loans. Thus, for example, unlike other
bonds, which pay a fixed rate of interest until maturity when the entire
principal amount comes due, payments on mortgage-backed bonds include both
interest and a partial repayment of principal. Fluctuating prepayments of
principal may result from the refinancing or foreclosure of the underlying
mortgage loans. Although maturities of the underlying mortgage loans range up to
30 years, such prepayments may shorten the effective maturities. Because of the
prepayment feature, mortgage-backed bonds may be less effective than other types
of securities as a means of "locking in" attractive long-term interest rates.
This is caused by the need to reinvest repayments of principal generally and the
possibility of significant unscheduled prepayments resulting from declines in
mortgage interest rates. As a result, mortgage-backed bonds may have less
potential for capital appreciation during periods of declining interest rates
than other investments of comparable maturities, while having a comparable risk
of decline during periods of rising interest rates.
Foreign Securities. The Portfolio may invest up to 10% of its total assets
in equity securities (payable in U.S. dollars) of foreign issuers in developed
countries. Because the Portfolio may invest in foreign securities, investment in
the Portfolio involves investment risks that are different in some respects from
an investment in a fund which invests only in securities of U.S. domestic
issuers. These risks are discussed below in the section of this Prospectus
describing the T. Rowe Price International Stock Portfolio.
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The cash portion of the Portfolio will be invested in the same
portfolio securities that are eligible for investment by the Endeavor Money
Market Portfolio described above. The Portfolio may employ certain investment
strategies which are discussed under the caption "Investment Strategies" below
and in the
Statement of Additional Information.
T. Rowe Price International Stock Portfolio
The T. Rowe Price International Stock Portfolio was formerly known as
the Global Growth Portfolio. Effective March 24, 1995, the name of the Global
Growth Portfolio was changed to T. Rowe Price International Stock Portfolio and
the Portfolio's investment objective was changed from seeking long-term capital
appreciation through a policy of investing in small capitalization common stocks
and their convertible equivalents on a global basis to the investment objective
and policies set forth below.
The investment objective of the T. Rowe Price International Stock
Portfolio is to seek long-term growth of capital through investments primarily
in common stocks of established non-U.S.
companies.
Over the last 30 years, many foreign economies have grown faster than
the United States' economy, and the return from equity investments in these
countries has often exceeded the return on similar investments in the United
States. Moreover, there has normally been a wide and largely unrelated variation
in performance between international equity markets over this period. Although
there can be no assurance that these conditions will continue, the Portfolio's
Adviser, within the framework of diversification, seeks to identify and invest
in companies participating in the faster growing foreign economies and markets.
The Adviser believes that investment in foreign securities offers significant
potential for long-term capital appreciation and an opportunity to achieve
investment diversification.
The Adviser intends to invest substantially all of the Portfolio's
assets outside the United States and diversify investments broadly among
countries throughout the world developed, newly industrialized and emerging - by
having at least five different countries represented in the Portfolio. The
Portfolio may invest in countries of the Far East and Europe as well as South
Africa, Australia, Canada, and other areas (including developing countries). In
addition, the Adviser will
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consider factors applicable to United States investors in making investment
decisions for the Portfolio.
In seeking its objective, the Portfolio invests primarily in common
stocks of established foreign companies which have, in the Adviser's opinion,
the potential for growth of capital. However, the Portfolio may also invest in a
variety of other equity related securities such as preferred stocks, warrants
and convertible securities, as well as corporate and governmental debt
securities, when considered consistent with the Portfolio's investment objective
and program. The Portfolio may also invest in investment funds which have been
authorized by the governments of certain countries specifically to permit
foreign investment in securities of companies listed and traded on the stock
exchanges in these respective countries. The Portfolio's investment in these
funds is subject to the provisions of the Investment Company Act of 1940 (the
"1940 Act"). If the Portfolio invests in such investment funds, the Portfolio's
shareholders will bear not only their proportionate share of the expenses of the
Portfolio (including operating expenses and the fees of the investment manager),
but also will bear indirectly similar expenses of the underlying investment
funds. In addition, the securities of these investment funds may trade at a
premium of their net asset value. Under normal conditions, the Portfolio's
investments in securities other than common stocks is limited to no more than
35% of its total assets.
In determining the appropriate distribution of investments among
various countries and geographic regions, the Portfolio's Adviser ordinarily
considers the following factors: prospects for relative economic growth between
foreign countries; expected levels of inflation; government policies influencing
business conditions; the outlook for currency relationships; and the range of
individual investment opportunities available to international investors.
In analyzing companies for investment, the Adviser ordinarily looks for
one or more of the following characteristics: an above-average earnings growth
per share; high return on invested capital; healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; efficient service; pricing flexibility; strength of management; and
general operating characteristics which will enable the companies to compete
successfully in their market place. While current dividend income is not a
prerequisite in the selection of portfolio companies, the companies in which the
Portfolio invests normally
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will have a record of paying dividends, and will generally be expected to
increase the amounts of such dividends in future years as earnings increase. It
is expected that the Portfolio's investments will ordinarily be traded on
exchanges located at least in the respective countries in which the various
issuers of such securities are principally based.
In the event that future economic or financial conditions abroad
adversely affect equity securities, or stocks are considered overvalued, or the
Portfolio's Adviser believes that investing for defensive purposes is
appropriate, or in order to meet anticipated redemption requests, the Portfolio
may invest part or all of its assets in U.S. government securities,
investment-grade debt obligations of U.S. companies and high quality (within the
two highest rating categories assigned by a NRSRO) short-term debt securities
(with remaining maturities of one year or less) including certificates of
deposit, bankers' acceptances, commercial paper, short-term corporate securities
and repurchase agreements.
The international objectives of the Portfolio allow investors an
opportunity to achieve potentially higher returns, reflecting participation in
countries and economies with higher growth rates than those available
domestically. However, foreign investments involve certain risks that are not
present in domestic securities. Because the Portfolio intends to purchase
securities denominated in foreign currencies, a change in the value of any such
currency against the U.S. dollar will result in a change in the U.S. dollar
value of the Portfolio's assets and the Portfolio's income. In addition,
although a portion of the Portfolio's investment income may be received or
realized in such currencies, the Portfolio will be required to compute and
distribute its income in U.S. dollars. Therefore, if the exchange rate for any
such currency declines after the Portfolio's income has been earned and computed
in U.S. dollars but before conversion and payment, the Portfolio could be
required to liquidate portfolio securities to make such distributions.
The values of foreign investments and the investment income derived
from them may also be affected unfavorably by changes in currency exchange
control regulations. Although the Portfolio will invest only in securities
denominated in foreign currencies that are fully exchangeable into U.S. dollars
without legal restriction at the time of investment, there can be no assurance
that currency controls will not be imposed subsequently. In addition, the values
of foreign fixed income investments will fluctuate in response to changes in
U.S. and foreign interest rates.
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There may be less information publicly available about a foreign issuer
than about a U.S. issuer, and foreign issuers are not generally subject to
accounting, auditing and financial reporting standards and practices comparable
to those in the United States. Foreign stock markets are generally not as
developed or efficient as, and may be more volatile than, those in the United
States. While growing in volume, they usually have substantially less volume
than U.S. markets and the Portfolio's investment securities may be less liquid
and subject to more rapid and erratic price movements than securities of
comparable U.S. companies. Equity securities may trade at price/earnings
multiples higher than comparable United States securities and such levels may
not be sustainable. There is generally less government supervision and
regulation of foreign stock exchanges, brokers and listed companies than in the
United States. Moreover, settlement practices for transactions in foreign
markets may differ from those in United States markets. Such differences may
include delays beyond periods customary in the United States and practices, such
as delivery of securities prior to receipt of payment, which increase the
likelihood of a "failed settlement." Failed settlements can result in losses to
the Portfolio. In less liquid and well developed stock markets, such as those in
some Asian and Latin American countries, volatility may be heightened by actions
of a few major investors. For example, substantial increases or decreases in
cash flows of mutual funds investing in these markets could significantly affect
stock prices and, therefore, share prices.
Foreign brokerage commissions, custodial expenses and other fees are
also generally higher than for securities traded in the United States.
Consequently, the overall expense ratios of international funds are usually
somewhat higher than those of typical domestic stock funds.
In addition, the economies, markets and political structures of a
number of the countries in which the Portfolio can invest do not compare
favorably with the United States and other mature economies in terms of wealth
and stability. Therefore, investments in these countries may be riskier, and
will be subject to erratic and abrupt price movements. Some economies are less
well developed and less diverse (for example, Latin America, Eastern Europe and
certain Asian countries), and more vulnerable to the ebb and flow of
international trade, trade barriers and other protectionist or retaliatory
measures (for example, Japan, southeast Asia and Latin America). Some countries,
particularly in Latin America, are grappling with severe inflation and high
levels of national debt. Investments in countries that have recently begun
moving away from central
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planning and state-owned industries toward free markets, such as the Eastern
European or Chinese economies, should be regarded as speculative.
Certain portfolio countries have histories of instability and upheaval
(Latin America) and internal politics that could cause their governments to act
in a detrimental or hostile manner toward private enterprise or foreign
investment. Any such actions, for example, nationalizing an industry or company,
could have a severe and adverse effect on security prices and impair the
Portfolio's ability to repatriate capital or income. The Portfolio's Adviser
will not invest the Portfolio's assets in countries where it believes such
events are likely to occur.
Income received by the Portfolio from sources within foreign countries
may be reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. The Portfolio's Adviser will attempt to minimize such
taxes, but there can be no assurance that such efforts will be successful. Any
such taxes paid by the Portfolio will reduce its net income available for
distribution to shareholders.
The Portfolio may employ certain investment strategies which are
discussed under the caption "Investment Strategies" below and in the Statement
of Additional Information.
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 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
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normal circumstances at least 65% of the Portfolio's assets will be invested in
common stocks or securities convertible into common stocks. The Portfolio will
invest primarily in stocks listed on the New York Stock Exchange. In addition,
it may also purchase securities listed on other domestic securities exchanges or
traded in the domestic over-the-counter market and foreign securities that are
listed on a domestic or foreign securities exchange, traded in the domestic or
foreign over-the-counter markets or represented by American Depositary Receipts.
In the event that future economic or financial conditions adversely
affect equity securities, or stocks are considered overvalued, or the
Portfolio's Adviser believes that investing for defensive purposes is
appropriate, or in order to meet anticipated redemption requests, the Portfolio
may invest part or all of its assets in U.S. government securities and high
quality short-term debt securities (with remaining maturities of one year or
less) including certificates of deposit, bankers' acceptances, commercial paper,
short-term corporate securities and repurchase agreements.
The Portfolio may invest in certain foreign securities which may
represent a greater degree of risk than investing in domestic securities. These
risks are discussed above in the section of this Prospectus describing the T.
Rowe Price International Stock Portfolio.
It is the present intention of the Portfolio's Adviser to invest no
more than 5% of the Portfolio's net assets in bonds rated below Baa3 by Moody's
or BBB by Standard & Poor's (commonly known as "junk bonds"). In the event that
the Portfolio's Adviser intends in the future to invest more than 5% of the
Portfolio's net assets in junk bonds, appropriate disclosures will be made to
existing and prospective shareholders. For information about the possible risks
of investing in junk bonds see "Investment 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,
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provided that under normal market conditions at least 75% of the Portfolio's
investments will be in equity securities of companies with capitalizations at
the time of purchase between $150 million and $1.5 billion.
Small-capitalization companies are often under-priced for the following
reasons: (i) institutional investors, which currently represent a majority of
the trading volume in the shares of publicly-traded companies, are often less
interested in such companies because in order to acquire an equity position that
is large enough to be meaningful to an institutional investor, such an investor
may be required to buy a large percentage of the company's outstanding equity
securities and (ii) such companies may not be regularly researched by stock
analysts, thereby resulting in greater discrepancies in valuation.
The Portfolio will invest in equity securities of domestic and foreign
(up to 5% of its total assets) issuers which would be characterized as "value"
companies according to criteria established by the Portfolio's Adviser. To
manage the Portfolio, the Portfolio's Adviser classifies issuers as "growth" or
"value" companies. In general, the Portfolio's Adviser believes that companies
with relatively low price to book ratios, low price to earnings ratios or higher
than average dividend payments in relation to price should be classified as
value companies. Alternatively, companies which have above average earnings or
sales growth and retention of earnings and command higher price to earnings
ratios fit the more classic growth description.
While seeking desirable equity investments, the Portfolio may invest in
money market instruments consisting of U.S. government securities, certificates
of deposit, time deposits, bankers' acceptances, short-term investment grade
corporate bonds and other short-term debt instruments, and repurchase
agreements. Under normal market conditions, the Portfolio does not expect to
have a substantial portion of its assets invested in money market instruments.
However, when the Portfolio's Adviser determines that adverse market conditions
exist, the Portfolio may adopt a temporary defensive posture and invest all of
its assets in money market instruments.
Equity securities consist of common stocks, preferred stocks and
securities convertible into common stocks. Securities purchased by the Portfolio
will be traded on the New York Stock Exchange, the American Stock Exchange or in
the over-the-counter market, and will also include options, warrants, bonds,
notes and debentures which are convertible into or exchangeable for, or
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which grant a right to purchase or sell, such securities. In addition, the
Portfolio may purchase securities issued by closed-end investment companies and
foreign securities that are listed on a domestic or foreign securities exchange,
traded in domestic or foreign over-the-counter markets or represented by
American Depositary Receipts.
The Portfolio is expected to have greater risk exposure and reward
potential than a fund which invests primarily in larger-capitalization
companies. The trading volumes of securities of smaller-capitalization companies
are normally less than those of larger-capitalization companies. This often
translates into greater price swings, both upward and downward. Since trading
volumes are lower, new demand for the securities of such companies could result
in disproportionately large increases in the price of such securities. The
waiting period for the achievement of an investor's objectives might be longer
since these securities are not closely monitored by research analysts and, thus,
it takes more time for investors to become aware of fundamental changes or other
factors which have motivated the Portfolio's purchase. Small-capitalization
companies often achieve higher growth rates and experience higher failure rates
than do larger-capitalization companies.
The Portfolio may invest in certain foreign securities which may
represent a greater degree of risk than investing in domestic securities. These
risks are discussed above in the section of this Prospectus describing the T.
Rowe Price International Stock Portfolio.
The Portfolio may employ certain investment strategies which are
discussed under the caption "Investment Strategies" below and in the Statement
of Additional Information.
Dreyfus U.S. Government Securities Portfolio
The investment objective of the Dreyfus U.S. Government Securities
Portfolio is to seek as high a level of total return as is consistent with
prudent investment strategies by investing under normal conditions at least 65%
of its assets in U.S. government debt obligations and mortgage-backed securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities
("U.S. Government Securities").
The Portfolio expects to invest in the following types of U.S. Government
Securities:
o U.S. Treasury obligations;
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o obligations issued or guaranteed by agencies or
instrumentalities of the U.S. government which are
backed by their own credit and may not be backed by the
full faith and credit of the U.S. government;
o mortgage-backed securities guaranteed by the Government
National Mortgage Association that are supported by the
full faith and credit of the U.S. government and which
are the "modified pass-through" type of mortgage-backed
security ("GNMA Certificates"). Such securities
entitle the holder to receive all interest and
principal payments due whether or not payments are
actually made on the underlying mortgages;
o mortgage-backed securities guaranteed by agencies or
instrumentalities of the U.S. government which are
supported by their own credit but not the full faith
and credit of the U.S. government, such as the Federal
Home Loan Mortgage Corporation and the Federal National
Mortgage Association; and
o collateralized mortgage obligations issued by private
issuers for which the underlying mortgage-backed
securities serving as collateral are backed (i) by the
credit alone of the U.S. government agency or
instrumentality which issues or guarantees the
mortgage-backed securities, or (ii) by the full faith
and credit of the U.S. government.
Mortgage-Backed Securities. The mortgage-backed securities in which the
Portfolio invests represent participation interests in pools of mortgage loans
which are guaranteed by agencies or instrumentalities of the U.S. government.
However, the guarantee of these types of securities runs only to the principal
and interest payments and not to the market value of such securities. In
addition, the guarantee only runs to the portfolio securities held by the
Portfolio and not the purchase of shares of the Portfolio.
Mortgage-backed securities are issued by lenders such as mortgage
bankers, commercial banks, and savings and loan associations. Such securities
differ from conventional debt securities which provide for periodic payment of
interest in fixed amounts (usually semiannually) with principal payments at
maturity or specified call dates. Mortgage-backed securities provide for monthly
payments which are, in effect, a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual borrowers
on
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the pooled mortgage loans. Principal prepayments result from the sale of the
underlying property or the refinancing or foreclosure of underlying mortgages.
The yield of mortgage-backed securities is based on the average life of
the underlying pool of mortgage loans, which is computed on the basis of the
maturities of the underlying instruments. The actual life of any particular pool
may be shortened by unscheduled or early payments of principal and interest. The
occurrence of prepayments is affected by a wide range of economic, demographic
and social factors and, accordingly, it is not possible to accurately predict
the average life of a particular pool. For pools of fixed rate 30-year
mortgages, it has been common practice to assume that prepayments will result in
a 12-year average life. The actual prepayment experience of a pool of mortgage
loans may cause the yield realized by the Portfolio to differ from the yield
calculated on the basis of the average life of the pool. In addition, if any of
these mortgage-backed securities are purchased at a premium, the premium may be
lost in the event of early prepayment which may result in a loss to the
Portfolio.
Prepayments tend to increase during periods of falling interest rates,
while during periods of rising interest rates prepayments will most likely
decline. Reinvestment by the Portfolio of scheduled principal payments and
unscheduled prepayments may occur at higher or lower rates than the original
investment, thus affecting the yield of the Portfolio. Monthly interest payments
received by the Portfolio have a compounding effect which will increase the
yield to shareholders as compared to debt obligations that pay interest
semiannually. Because of the reinvestment of prepayments of principal at current
rates, mortgage-backed securities may be less effective than Treasury bonds of
similar maturity at maintaining yields during periods of declining interest
rates. Also, although the value of debt securities may increase as interest
rates decline, the value of these pass-through type of securities may not
increase as much due to the prepayment feature.
Collateralized Mortgage Obligations. Collateralized mortgage
obligations ("CMOs"), which are debt obligations collateralized by mortgage
loans or mortgage pass-through securities, provide the holder with a specified
interest in the cash flow of a pool of underlying mortgages or other
mortgage-backed securities. Issuers of CMOs frequently elect to be taxed as a
pass-through entity known as real estate mortgage investment conduits. CMOs are
issued in multiple classes, each with a specified fixed or floating interest
rate and a final
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distribution date. The relative payment rights of the various CMO classes may be
structured in many ways. In most cases, however, payments of principal are
applied to the CMO classes in the order of their respective stated maturities,
so that no principal payments will be made on a CMO class until all other
classes having an earlier stated maturity date are paid in full. The classes may
include accrual certificates (also known as "Z- Bonds"), which only accrue
interest at a specified rate until other specified classes have been retired and
are converted thereafter to interest-paying securities. They may also include
planned amortization classes which generally require, within certain limits,
that specified amounts of principal be applied on each payment date, and
generally exhibit less yield and market volatility than other classes.
Stripped Mortgage-Backed Securities. The Portfolio may also invest a
portion of its assets in stripped mortgage-backed securities ("SMBS"), which are
derivative multi-class mortgage securities. SMBS are usually structured with two
classes that receive different proportions of the interest and principal
distributions from a pool of mortgage assets. The Portfolio will only invest in
SMBS whose mortgage assets are U.S. Government Securities.
A common type of SMBS will be structured so that one class receives
some of the interest and most of the principal from the mortgage assets, while
the other class receives most of the interest and the remainder of the
principal. In the most extreme case, one class will receive all of the interest
(the interest-only or "IO" class) while the other class will receive all of the
principal (the principal-only or "PO" class). The yield to maturity on an IO
class is extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on the Portfolio's yield
to maturity from these securities. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, the Portfolio may fail to
fully recoup its initial investment in these securities even if the security is
in one of the highest rating categories.
The Portfolio may invest not more than 5% of its total assets in CMOs
deemed by its Adviser to be complex, such as floating rate and inverse floating
rate tranches and SMBS.
Non-Mortgage Asset-Backed Securities. The Portfolio may invest in
non-mortgage asset-backed securities including interests in pools of
receivables, such as motor vehicle
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installment purchase obligations and credit card receivables. Such securities
are generally issued as pass-through certificates, which represent undivided
fractional ownership interests in the underlying pools of assets.
Non-mortgage asset-backed securities are not issued or guaranteed by
the U.S. government or its agencies or instrumentalities; however, the payment
of principal and interest on such obligations may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities. In addition, such securities generally will have
remaining estimated lives at the time of purchase of five years or less.
The purchase of non-mortgage asset-backed securities raises
considerations peculiar to the financing of the instruments underlying such
securities. For example, most organizations that issue asset backed securities
relating to motor vehicle installment purchase obligations perfect their
interests in their respective obligations only by filing a financing statement
and by having the servicer of the obligations, which is usually the originator,
take custody thereof. In such circumstances, if the servicer were to sell the
same obligations to another party, in violation of its duty not to do so, there
is a risk that such party could acquire an interest in the obligations superior
to that of holders of the asset backed securities. Also, although most such
obligations grant a security interest in the motor vehicle being financed, in
most states the security interest in a motor vehicle must be noted on the
certificate of title to perfect such security interest against competing claims
of other parties. Due to the large number of vehicles involved, however, the
certificate of title to each vehicle financed, pursuant to the obligations
underlying the asset backed securities, usually is not amended to reflect the
assignment of the seller's security interest for the benefit of the holders of
the asset backed securities. Therefore, there is the possibility that recoveries
on repossessed collateral may not, in some cases, be available to support
payments on those securities. In addition, various state and federal laws give
the motor vehicle owner the right to assert against the holder of the owner's
obligation certain defenses such owner would have against the seller of the
motor vehicle. The assertion of such defenses could reduce payments on the
related asset backed securities. Insofar as credit card receivables are
concerned, credit card holders are entitled to the protection of a number of
state and federal consumer credit laws, many of which give such holders the
right to set off certain amounts against balances owed on the credit card,
thereby
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reducing the amounts paid on such receivables. In addition, unlike most other
asset backed securities, credit card receivables are unsecured obligations of
the card holder.
U.S. Treasury Obligations. U.S. Treasury obligations consist of bills,
notes and bonds which principally differ in their interest rates, maturities and
times of issuance. Obligations issued or guaranteed by agencies or
instrumentalities of the U.S. government are supported by (i) the full faith and
credit of the U.S. Treasury (such as securities of the Small Business
Administration), (ii) the limited authority of the issuer to borrow from the
U.S. Treasury (such as securities of the Student Loan Marketing Association) or
(iii) the authority of the U.S. government to purchase certain obligations of
the issuer (such as securities of the Federal National Mortgage Association). No
assurance can be given that the U.S. government will provide financial support
to U.S. government agencies or instrumentalities as described in clauses (ii) or
(iii) above in the future, other than as set forth above, since it is not
obligated to do so by law. The Portfolio will not invest more than 55% of the
value of its assets in GNMA Certificates or in securities issued or guaranteed
by any other single U.S. government agency or instrumentality.
Corporate and Other Obligations. In seeking to obtain its investment
objective, the Portfolio may also invest in a broad range of debt securities,
other than U.S. Government Securities, with varying maturities such as corporate
convertible and non-convertible debt obligations such as fixed and variable rate
bonds. The weighted average maturity of such investments will generally range
from 2 to 10 years. Debt securities may also include money market securities,
including bank certificates of deposit and time deposits, bankers' acceptances,
prime commercial paper, high-grade, short-term corporate obligations, and
repurchase agreements with respect to these instruments.
Investment-grade debt securities are securities rated Baa or higher by
Moody's or BBB or higher by Standard & Poor's, and unrated securities that are
of equivalent quality in the opinion of the Portfolio's Adviser. The NRSROs'
descriptions of these bond ratings are set forth in the Appendix to the
Statement of Additional Information. Securities rated in the fourth highest
category may have speculative characteristics; changes in economic conditions
are more likely to lead to a weakened capacity to make principal and interest
payments than in the case of higher grade bonds. Like the three highest grades,
however, these securities are considered investment grade.
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Lower-Rated Securities. The Portfolio may also invest a portion of its
assets, not to exceed 25%, in securities rated below Baa by Moody's or BBB by
Standard & Poor's (commonly known as "junk bonds"), so long as they are
consistent with the Portfolio's objective of seeking as high a level of total
return as is consistent with prudent investment strategies. Such securities may
include bonds rated as low as C by Moody's and by Standard & Poor's. See the
Appendix to the Statement of Additional Information. The Portfolio's Adviser
anticipates that a substantial portion of the Portfolio's lower-rated securities
will be in the higher end of these ratings.
Lower-rated and comparable unrated securities (collectively referred to
in this discussion as "lower-rated securities") will likely have some quality
and protective characteristics that, in the judgment of the rating organization,
are out-weighed by large uncertainties or major risk exposures to adverse
conditions; and are predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms of the
obligation. The risks of investing in lower- rated securities are discussed in
"Investment Strategies - Risk Factors Relating to Investing in High Yield
Securities."
Foreign Securities. The Portfolio may invest up to 15% of its total
assets in debt securities, including securities denominated in foreign
currencies of foreign issuers (including foreign governments) in developed
countries and emerging markets. Because the Portfolio may invest in foreign
securities, investment in the Portfolio involves investment risks that are
different in some respects from an investment in a fund which invests only in
securities of U.S. domestic issuers. These risks are discussed above in the
section of this Prospectus describing the T. Rowe Price International Stock
Portfolio and below in the section of this Prospectus describing the Endeavor
Select 50 Portfolio.
The Portfolio may invest up to 35% of its assets in U.S.
dollar-denominated obligations issued by foreign branches of domestic banks
("Eurodollar" obligations) and domestic branches of foreign banks ("Yankee
dollar" obligations).
The Portfolio may employ certain investment strategies which are
discussed under the caption "Investment Strategies" below and in the Statement
of Additional Information.
T. Rowe Price Equity Income Portfolio
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The investment objective of the T. Rowe Price Equity Income Portfolio
is to seek to provide substantial dividend income and also capital appreciation
by investing primarily in dividend-paying common stocks of established
companies. In pursuing its objective, the Portfolio emphasizes companies with
favorable prospects for increasing dividend income, and secondarily, capital
appreciation. Over time, the income component (dividends and interest earned) of
the Portfolio's investments is expected to be a significant contributor to the
Portfolio's total return. The Portfolio's yield is expected to be significantly
above that of the S&P 500 Index. Total return will consist primarily of dividend
income and secondarily of capital appreciation (or depreciation).
The investment program of the Portfolio is based on several premises.
First, the Portfolio's Adviser believes that, over time, dividend income can
account for a significant component of the total return from equity investments.
Second, dividends are normally a more stable and predictable source of return
than capital appreciation. While the price of a company's stock generally
increases or decreases in response to short-term earnings and market
fluctuations, its dividends are generally less volatile. Finally, the
Portfolio's Adviser believes that stocks which distribute a high level of
current income tend to have less price volatility than those which pay below
average dividends.
To achieve its objective, the Portfolio, under normal circumstances,
will invest at least 65% of its total assets in income-producing common stocks,
whose prospects for dividend growth and capital appreciation are considered
favorable by its Adviser. To enhance capital appreciation potential, the
Portfolio also uses a "value" approach and invests in stocks and other
securities its Adviser believes are temporarily undervalued by various measures,
such as price/earnings ratios. The Portfolio's investments will generally be
made in companies which share some of the following characteristics:
o established operating histories;
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
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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.
In the event that future economic or financial conditions adversely
affect equity securities, or stocks are considered overvalued, or the
Portfolio's Adviser believes that investing for defensive purposes is
appropriate, or in order to meet anticipated redemption requests, the Portfolio
may invest part or all of its assets in U.S. government securities and high
quality (within the two highest rating categories assigned by a NRSRO) U.S. and
foreign dollar-denominated money market securities including certificates of
deposit, bankers' acceptances, commercial paper, short-term corporate securities
and repurchase agreements.
The Portfolio may invest up to 25% of its total assets in foreign
securities. These include non-dollar denominated securities traded outside the
U.S. and dollar denominated securities traded in the U.S. (such as American
Depositary Receipts). Such investments increase a portfolio's diversification
and may enhance return, but they may represent a greater degree of risk than
investing in domestic securities. These risks are discussed above in the section
of this Prospectus describing the T. Rowe Price International Stock Portfolio.
The Portfolio may invest in debt securities of any type including
municipal securities, without regard to quality or rating. Such securities would
be purchased in companies which meet the investment criteria for the Portfolio.
The price of a bond fluctuates with changes in interest rates, rising when
interest rates fall and falling when interest rates rise. The Portfolio,
however, will not invest more than 10% of its total assets in securities rated
below Baa by Moody's or BBB by Standard & Poor's (commonly known as "junk
bonds"). Such securities may include bonds rated as low as C by Moody's and by
Standard & Poor's. See the Appendix to the Statement of Additional Information.
Investments in non-investment grade securities entail certain risks which are
discussed in "Investment Strategies - Risk Factors Relating to Investing in High
Yield Securities."
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The Portfolio may employ certain investment strategies which are
discussed under the caption "Investment Strategies" below and in the Statement
of Additional Information.
T. Rowe Price Growth Stock Portfolio
The investment objectives of the T. Rowe Price Growth Stock Portfolio
are to seek long-term growth of capital and to increase dividend income through
investment primarily in common stocks of well-established growth companies. A
growth company is defined by the Portfolio's Adviser as one which: (1) has
demonstrated historical growth of earnings faster than the growth of inflation
and the economy in general; and (2) has indications of being able to continue
this growth pattern in the future. Total return will consist primarily of
capital appreciation or depreciation and secondarily of dividend income.
More than fifty years ago, Thomas Rowe Price pioneered the Growth Stock
Theory of Investing. It is based on the premise that inflation represents a more
serious, long-term threat to an investor's portfolio than stock market
fluctuations or recessions. Mr. Price believed that when a company's earnings
grow faster than both inflation and the economy in general, the market will
eventually reward its long-term earnings growth with a higher stock price. In
addition, the company should be able to raise its dividend in line with its
growth in earnings.
Although corporate earnings can be expected to be lower during periods
of recession, it is the Portfolio Adviser's opinion that, over the long term,
the earnings of well-established growth companies will not be affected adversely
by unfavorable economic conditions to the same extent as the earnings of more
cyclical companies. However, investors should be aware that the Portfolio's
share value may not always reflect the long-term earnings trend of growth
companies.
The Portfolio will invest primarily in the common 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
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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 above in the section
of this Prospectus describing the T. Rowe Price International Stock Portfolio.
The Portfolio may employ certain investment strategies which are
discussed under the caption "Investment Strategies" below and in the Statement
of Additional Information.
Endeavor Opportunity Value Portfolio
The investment objective of the Endeavor Opportunity Value Portfolio is
to achieve growth of capital over time through investment in a portfolio
consisting of common stocks, bonds and cash equivalents, the percentages of
which will vary based on the Portfolio Adviser's assessments of the relative
outlook for such investments. In seeking to achieve its investment objective,
the types of equity securities in which the Portfolio may invest will be
securities of companies that are believed by the Portfolio's Adviser to be
undervalued in the marketplace in relation to factors such as the companies'
assets or earnings. It is the Adviser's intention to invest in securities of
companies which in its opinion possess one or more of the following
characteristics: undervalued assets, valuable consumer or commercial franchises,
securities valuation below peer companies, substantial and growing cash flow
and/or a favorable price to book value relationship. Investment policies aimed
at achieving the Portfolio's objective are set in a flexible framework of
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securities selection which primarily includes equity securities, such as common
stocks, preferred stocks, convertible securities, rights and warrants in
proportions which vary from time to time. The Portfolio will invest primarily in
stocks listed on the New York Stock Exchange. In addition, it may also purchase
securities of companies, including companies with small market capitalizations,
listed on other domestic securities exchanges, securities traded in the domestic
over-the-counter market and foreign securities provided that they are listed on
a domestic or foreign securities exchange or represented by American Depositary
Receipts listed on a domestic securities exchange or traded in domestic or
foreign over-the-counter markets.
Investing in foreign securities may present a greater degree of risk
than investing in domestic securities. These risks are discussed in the above
section of this Prospectus describing the T. Rowe Price International Stock
Portfolio. Investing in the securities of small capitalization companies
involves greater risk exposure and reward potential than investments in larger
capitalization companies. These risks are discussed above in the section of this
Prospectus describing the Dreyfus Small Cap Value Portfolio.
Debt securities are expected to be predominantly investment grade
intermediate to long-term U.S. government and corporate debt, although the
Portfolio will also invest in high quality short-term money market and cash
equivalent securities and may invest almost all of its assets in such securities
when the Portfolio's Adviser deems it advisable in order to preserve capital.
The Portfolio's debt securities may also include mortgage-backed securities
issued by the U.S. government, its agencies or instrumentalities and
collateralized mortgage obligations that are issued or guaranteed by the U.S.
government or its agencies or instrumentalities or that are collateralized by a
portfolio of mortgages or mortgage-related securities guaranteed by such an
agency or instrumentality.
The effective maturity of a mortgage-backed security may be shortened
by unscheduled or early payment of principal and interest on the underlying
mortgages, which may affect the effective yield of such securities. The
principal that is returned may be invested in instruments having a higher or
lower yield than the prepaid instruments depending on then-current market
conditions.
Investment grade securities will, at the time of purchase, have ratings
within the four highest rating categories established by Moody's, Standard &
Poor's, or a similar NRSRO or,
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if not rated, be of comparable quality as determined by the Portfolio's Adviser.
The NRSROs' descriptions of these bond ratings are set forth in the Appendix to
the Statement of Additional Information. Securities rated in the fourth highest
category may have speculative characteristics; changes in economic or business
conditions are more likely to lead to a weakened capacity to make principal and
interest payments than in the case of higher grade bonds. Like the three highest
grades, however, these securities are considered investment grade.
It is the present intention of the Portfolio's Adviser to invest no
more than 5% of the Portfolio's net assets in bonds rated below Baa3 by Moody's
or BBB by Standard & Poor's (commonly known as "junk bonds"). In the event that
the Portfolio's Adviser intends in the future to invest more than 5% of the
Portfolio's net assets in junk bonds, appropriate disclosures will be made to
existing and prospective shareholders. For information about the possible risks
of investing in junk bonds see "Investment Strategies - Risk Factors Relating to
Investing in High Yield Securities."
The allocation of the Portfolio's assets among the different types of
permitted investments will vary from time to time based upon the Portfolio
Adviser's evaluation of economic and market trends and its perception of the
relative values available from such types of securities at any given time. There
is neither a minimum nor a maximum percentage of the Portfolio's assets that
may, at any given time, be invested in any of the types of investments
identified above. Consequently, while the Portfolio will earn income to the
extent it is invested in bonds or cash equivalents, the Portfolio does not have
any specific income objective. Although there is neither a minimum nor maximum
percentage of the Portfolio's assets that may, at any given time, be invested in
any of the types of investments identified above, it is anticipated that most of
the time the substantial majority of the Portfolio's assets will be invested in
common stocks.
The Portfolio may employ certain investment strategies which are
discussed under the caption "Investment Strategies" below and in the Statement
of Additional Information.
Endeavor Enhanced Index Portfolio
The investment objective of the Endeavor Enhanced Index Portfolio is to
earn a total return modestly in excess of the total return performance of the
S&P 500 Index (including the reinvestment of dividends) while maintaining a
volatility of
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return similar to the S&P 500 Index. The Portfolio is appropriate for investors
who seek a modestly enhanced total return relative to that of large and medium
sized U.S. companies typically represented in the S&P 500 Index. The Portfolio
intends to invest in securities of approximately 300 issuers, which securities
are rated by the Portfolio's Adviser to have above average expected returns.
The Portfolio seeks to achieve its investment objective through
fundamental analysis, systematic stock valuation and disciplined portfolio
construction.
o Fundamental research: The Portfolio Adviser's
approximately 25 domestic equity analysts, each an
industry specialist with an average of approximately 12
years experience, follow over 900 predominantly large
and medium sized U.S. companies -- approximately 525 of
which form the universe for the Portfolio's
investments. A substantial majority of these companies
are issuers of securities which are included in the S&P
500 Index. The analysts' research goal is to forecast
normalized, longer term earnings and dividends for the
companies that they cover.
o Systematic valuation: The analysts' forecasts are
converted into comparable expected returns by a
dividend discount model, which calculates those
expected returns by solving for the rate of return that
equates the company's current stock price to the
present value of its estimated long-term earnings
power. Within each sector, companies are ranked by
their expected return and grouped into quintiles; those
with the highest expected returns (Quintile 1) are
deemed the most undervalued relative to their long-term
earnings power, while those with the lowest expected
returns (Quintile 5) are deemed the most overvalued.
o Disciplined portfolio construction: A diversified
portfolio is constructed using disciplined buy and sell
rules. Portfolio sector weightings will generally
approximate those of the S&P 500 Index. The Portfolio
will normally be principally comprised, based on the
dividend discount model, of stocks in the first three
Quintiles. Finally, the Portfolio holds a large number
of stocks to enhance its diversification.
Under normal market circumstances, the Portfolio's Adviser will invest
at least 65% of its net assets in equity securities
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consisting of common stocks and other securities with equity characteristics
such as trust interests, limited partnership interests, preferred stocks,
warrants, rights and securities convertible into common stock. The Portfolio's
primary equity investments will be the common stock of large and medium sized
U.S. companies with market capitalizations above $1 billion. Such securities
will be listed on a national securities exchange or traded in the
over-the-counter market. The Portfolio may invest in similar securities of
foreign corporations, provided that the securities of such corporations are
included in the S&P 500 Index.
The Portfolio intends to manage its portfolio actively in pursuit of
its investment objective. Since the Portfolio has a long-term investment
perspective, it does not intend to respond to short-term market fluctuations or
to acquire securities for the purpose of short-term trading; however, it may
take advantage of short-term trading opportunities that are consistent with its
objective.
During ordinary market conditions, the Portfolio's Adviser will keep
the Portfolio as fully invested as practicable in the equity securities
described above. In the event that future economic or financial conditions
adversely affect equity securities, or stocks are considered overvalued, or the
Portfolio's Adviser believes that investing for defensive purposes is
appropriate, or in order to meet anticipated redemption requests, the Portfolio
may invest part or all of its assets in U.S. government securities and high
quality (within the two highest rating categories assigned by a NRSRO) U.S.
dollar-denominated money market securities including certificates of deposit,
bankers' acceptances, commercial paper, short-term debt securities and
repurchase agreements.
Convertible bonds and other fixed income securities (other than money
market instruments) in which the Portfolio may invest will, at the time of
investment, have ratings within the four highest rating categories established
by Moody's, Standard & Poor's, or a similar NRSRO or, if not rated, be of
comparable quality as determined by the Portfolio's Adviser. The NRSROs'
descriptions of these bond ratings are set forth in the Appendix to the
Statement of Additional Information. Securities rated in the fourth highest
category may have speculative characteristics; changes in economic or business
conditions are more likely to lead to a weakened capacity to make principal and
interest payments than in the case of higher grade bonds. Like the three highest
grades, however, these securities are considered investment grade.
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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 above in the section of this Prospectus describing the T.
Rowe Price International Stock Portfolio.
The Portfolio may employ certain investment strategies which are
discussed under the caption "Investment Strategies" below and in the Statement
of Additional Information.
Endeavor Select 50 Portfolio
Generally
The investment objective of the Endeavor Select 50 Portfolio is capital
appreciation which, under normal conditions, it seeks by investing at least 65%
of its total assets in at least 50 different equity securities of companies of
all sizes throughout the world. The Portfolio invests primarily in 10 equity
securities selected by each of the Portfolio Adviser's (as hereinafter defined)
five different equity disciplines teams. These five disciplines currently
consist of U.S. Growth Equity, U.S. Smaller-Capitalization Companies, U.S.
Equity Income, International Equity and Emerging Markets. Each team is allocated
20% of the Portfolio's total assets. In the future, the number of the Adviser's
equity discipline teams may be more or less than five. See "Management of the
Fund." The Adviser's equity teams select those securities based on the potential
for capital appreciation.
The Portfolio generally invests the remaining 35% of its total assets
in the 50 or more different equity securities described above and may invest in
other equity and equity derivative securities the Adviser believes have the
potential for capital appreciation. These equity securities may include, but are
not limited to, common stock, preferred stock, convertible securities, joint
ventures cooperatives, partnerships, private placements and unlisted securities.
Equity derivative securities include, among other things, options on equity
securities, equity swaps, warrants and futures contracts on equity securities.
With respect to 35% of its total assets, the Portfolio may invest in
debt securities, including up to 5% of its total assets in debt securities rated
below investment grade (commonly known as junk bonds). Information about the
possible risks of investing in junk bonds are discussed in "Investment
Strategies -Risk
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Factors Relating to Investing in High Yield Securities." Debt securities, other
than junk bonds, will, at the time of purchase have ratings within the four
highest rating categories established by a NRSRO or, if not rated, be of
comparable quality as determined by the Portfolio's Adviser. The NRSROs'
descriptions of these bond ratings are set forth in the Appendix to the
Statement of Additional Information. Securities rated in the fourth highest
category may have speculative characteristics; changes in economic or business
conditions are more likely to lead to a weakened capacity to make principal and
interest payments than in the case of higher grade bonds. Like the three highest
grades, however, these securities are considered investment grade.
In the event that future economic or financial conditions adversely
affect equity securities, or stocks are considered overvalued, or the
Portfolio's Adviser believes that investing for defensive purposes is
appropriate, or in order to meet anticipated redemption requests, the Portfolio
may invest part or all of its assets in investment grade debt securities,
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities and high quality (within the two highest rating categories
assigned by a NRSRO) U.S. and foreign dollar-denominated money market securities
including certificates of deposit, bankers' acceptances, commercial paper,
short-term corporate securities and repurchase agreements.
The Portfolio may invest substantially in securities denominated in one
or more foreign currencies. Under normal conditions, it invests in at least
three different countries which may include the U.S., but no country other than
the U.S. may represent more than 40% of its total assets. The Adviser uses
financial expertise and research capabilities in markets throughout the world in
attempting to identify those countries, currencies and companies in which the
Portfolio may invest. Investments in foreign securities may represent a greater
degree of risk than investing in domestic securities. These risks are discussed
above in the section of this Prospectus describing the T. Rowe Price
International Stock Portfolio and "Emerging Market Risks" herein below.
U.S. Growth Equity
The Adviser's U.S. Growth Equity discipline ("Growth discipline")
targets primarily those domestic companies that have total market
capitalizations of $1 billion or more. The Growth discipline emphasizes
investments in common stock; however, other
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types of equity securities and equity derivative securities may be purchased.
Current income from dividends, interest and other sources is only incidental.
The Growth discipline seeks growth at a reasonable value, identifying
companies with sound fundamental value and potential for substantial growth. The
Growth discipline selects its investments based on a combination of quantitative
screening techniques and fundamental analysis. A universe of investment
candidates is initially identified by screening companies based on changes in
rates of growth and valuation ratios such as price- to-sales, price-to-earnings
and price-to-cash flows. Through this process, the Growth discipline seeks to
identify rapidly growing companies with reasonable valuations and accelerating
growth rates, or having low valuations and initial signs of growth. These
companies are then subjected to a rigorous fundamental analysis, focusing on
balance sheets and income statements; company visits and discussions with
management; contact with industry specialists and industry analysts; and review
of the competitive environments.
U.S. Smaller-Capitalization Companies
The Adviser's U.S. Smaller-Capitalization Companies discipline
("Smaller Cap discipline") focuses on domestic companies that have potential for
rapid growth and are smaller- capitalization companies, which the Adviser
currently considers to be companies having market capitalizations of less than
$1 billion. Currently, most of these companies have market capitalizations of
$600 million and less. Current income from dividends, interest and other sources
is only incidental.
The Smaller Cap discipline seeks to identify potential rapid-growth
companies at the early stages of the companies' developments, such as at the
introduction of new products, favorable management changes, new marketing
opportunities or increased market share for existing product lines. Early
identification of potential investments is a key to this discipline. Emphasis is
placed on in-house research, which includes discussions with company management.
Investing in the securities of smaller capitalization companies
involves greater risk exposure and reward potential than investments in larger
capitalization companies. These risks are discussed above in the section of this
Prospectus describing the Dreyfus Small Cap Value Portfolio.
U.S. Equity Income
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The Adviser's U.S. Equity Income discipline ("Equity Income
discipline") focuses on income-producing equity securities of domestic
companies, which include common stocks, preferred stocks and other securities,
and debt securities convertible into common stocks with the objective of
providing a significantly greater yield than the average yield offered by the
stocks of the S&P 500 Index and a low level of price volatility.
The Equity Income discipline emphasizes common stocks of U.S.
corporations having a total market capitalization of more than $1 billion that
regularly pay dividends, targeting companies with favorable long-term
fundamental characteristics with current yields at the upper end of their
historical ranges. The Equity Income discipline initially identifies a universe
of investment candidates by screening companies based on yield and targeting
companies with a minimum yield of 140% of the average yield of the S&P 500
Index. This yield strategy is used to assist in identifying undervalued
securities. The companies are usually in the maturing stages of development or
operating in slower growth areas of the economy, and have conservative
accounting, strong cash flows to maintain dividends, low financial leverage and
market leadership. Investments in these companies are usually held for a period
of two to four years, resulting in relatively low turnover. A position in a
company will usually begin to be reduced as the price moves up and yield drops
to the lower end of its historical range. In addition, an investment in a
company will usually be sold or reduced when that company reduces or eliminates
its dividend, or upon a significant fundamental change impairing a company's
ability to pay dividends.
International Equity
The Adviser's International Equity discipline focuses on equity
securities of companies of any size outside the United States. The International
Equity discipline targets companies with potential for above-average, long-term
growth in sales and earnings on a sustained basis with securities reasonably
priced at the time of purchase, in the Adviser's opinion, compared with the
potential for capital appreciation. In evaluating investments, the Adviser
considers a number of factors, including a company's per-share sales and
earnings growth, return on capital, balance sheet, financial and accounting
policies, overall financial strength, industry sector, competitive advantages
and disadvantages, research, product development and marketing, new technologies
or services, pricing flexibility, quality of management, and general operating
characteristics.
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Emerging Markets
The Adviser's Emerging Markets discipline focuses on the equity
securities of emerging market companies. The Adviser currently regards the
following to be emerging market countries: Latin America (Argentina, Brazil,
Chile, Colombia, Costa Rica, Jamaica, Mexico, Peru, Trinidad and Tobago,
Uruguay, Venezuela); Asia (Bangladesh, China, India, Indonesia, Korea, Malaysia,
Pakistan, the Philippines, Singapore, Sri Lanka, Taiwan, Thailand, Vietnam);
southern and eastern Europe (Czech Republic, Greece, Hungary, Poland, Portugal,
Russia, Turkey); the Middle East (Israel, Jordan); and Africa (Egypt, Ghana,
Ivory Coast, Kenya, Morocco, Nigeria, South Africa, Tunisia, Zimbabwe). In the
future, the Portfolio may invest in other emerging market countries.
The Adviser uses its proprietary, quantitative asset allocation model.
The Emerging Markets discipline employs "bottom-up" fundamental industry
analysis and stock selection based on original research, publicly available
information and company visits.
Investments may be made in certain debt securities issued by the
governments of emerging market countries that are, or may be eligible for,
conversion into investments in emerging market companies under debt conversion
programs sponsored by such governments. If such securities are convertible to
equity investments, the Adviser deems them to be equity derivative securities.
Other Investment Companies
In connection with its investments in accordance with the various
investment disciplines, the Portfolio may invest up to 10% of its total assets
in shares of other investment companies investing exclusively in securities in
which it may otherwise invest. Because of restrictions on direct investment by
U.S. entities in certain countries, other investment companies may provide the
most practical or only way for the Portfolio to invest in certain markets. Such
investments may involve the payment of substantial premiums above the net asset
value of those investment companies' portfolio securities and are subject to
limitations under the 1940 Act. The Portfolio also may incur tax liability to
the extent it invests in the stock of a foreign issuer that is a "passive
foreign investment company" regardless of whether such "passive foreign
investment company" makes distributions to the Portfolio.
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The Portfolio does not intend to invest in other investment companies
unless, in the Adviser's judgment, the potential benefits exceed associated
costs. As a shareholder in an investment company, the Portfolio bears its
ratable share of that investment company's expenses, including advisory and
administration fees. The Manager and the Adviser have agreed to waive their
respective own management and advisory fees with respect to the portion of the
Portfolio's assets invested in other open-end (but not closed-end) investment
companies.
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Emerging Market Risks
Investments in emerging market countries may be subject to potentially
higher risks than investments in developed countries. These risks include: (i)
volatile social, political and economic conditions; (ii) the small size of the
markets for such securities and the currently low or nonexistent volume of
trading, which result in a lack of liquidity and in greater price volatility;
(iii) the existence of national policies which may restrict the Portfolio's
investment opportunities, including restrictions on investment in issuers or
industries deemed sensitive to national interests; (iv) foreign taxation; (v)
the absence of developed structures governing private or foreign investment or
allowing for judicial redress for injury to private property; (vi) the absence,
until recently in certain emerging market countries, of a capital market
structure or market-oriented economy; and (vii) the possibility that recent
favorable economic developments in certain emerging market countries may be
slowed or reversed by unanticipated political or social events in such
countries.
Certain emerging market countries have histories of instability and
upheaval (e.g., Latin America) and internal
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politics that could cause their governments to act in a detrimental or hostile
manner toward private enterprise or foreign investment. Any such actions, (for
example, nationalizing an industry or company), could have a severe and adverse
effect on security prices and impair the Portfolio's ability to repatriate
capital or income. The Portfolio's Adviser will not invest the Portfolio's
assets in countries where it believes such events are likely to occur.
Income received by the Portfolio from sources within foreign countries
may be reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. The Portfolio's Adviser will attempt to minimize such
taxes by timing of transactions and other strategies, but there can be no
assurance that such efforts will be successful. Any such taxes paid by the
Portfolio will reduce its net income available for distribution to shareholders.
The Portfolio may employ certain investment strategies which are
discussed under the caption "Investment Strategies" below and in the Statement
of Additional Information.
Investment Strategies
In addition to making investments directly in securities, the
Portfolios (other than the Endeavor Money Market Portfolio) may write covered
call and put options and hedge their investments by purchasing options and
engaging in transactions in
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futures contracts and related options. The Adviser to the Endeavor Asset
Allocation Portfolio does not presently intend to utilize futures contracts and
related options but may do so in the future. The Advisers to the Dreyfus Small
Cap Value Portfolio and the Endeavor Opportunity Value Portfolio do not
currently intend to write covered call and put options or engage in transactions
in futures contracts and related options, but may do so in the future. The
Adviser to the Endeavor Select 50 Portfolio does not presently intend to write
covered put and call options but may do so in the future. The T. Rowe Price
International Stock, Dreyfus U.S. Government Securities, T. Rowe Price Equity
Income, T. Rowe Price Growth Stock, Endeavor Opportunity Value, Endeavor
Enhanced Index and Endeavor Select 50 Portfolios may engage in foreign currency
exchange transactions to protect against changes in future exchange rates . All
Portfolios except the Endeavor Money Market Portfolio 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, T.
Rowe Price Growth Stock, T. Rowe Price International Stock and Dreyfus U.S.
Government Securities Portfolios may invest in hybrid instruments. The
investment strategies referred to above and the risks related to them are
summarized below and certain of these strategies are described in more detail in
the Statement of Additional Information.
Options and Futures Transactions. A Portfolio (other than the Endeavor
Money Market Portfolio) may seek to increase the current return on its
investments by writing covered call or covered put options. The Advisers to the
Dreyfus Small Cap Value, Endeavor Opportunity Value and Endeavor Select 50
Portfolios have no present intention to engage in this strategy, but may do so
in the future.
In addition, a Portfolio (other than the Endeavor Money Market
Portfolio) may at times seek to hedge against either a decline in the value of
its portfolio securities or an increase in the price of securities which its
Adviser plans to purchase through the writing and purchase of options on
securities and any index of securities in which the Portfolio may invest and the
purchase and sale of futures contracts and related options.
The Advisers to the Endeavor Asset Allocation, Dreyfus Small Cap Value and
Endeavor
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Opportunity Value Portfolios have no present intention to use this strategy, but
may do so in the future.
The Adviser to the Dreyfus U.S. Government Securities Portfolio does
not presently intend to purchase or sell call or put options but may enter into
interest rate futures contracts and write and purchase put and call options on
such futures contracts. The Adviser to the Endeavor Select 50 Portfolio may
enter into interest rate futures contracts and write and purchase put and call
options on such futures contracts. 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, GNMA
Certificates and three-month U.S. Treasury bills.
Generally, if market interest rates increase, the value of outstanding
debt securities declines (and vice versa). Entering into a futures contract for
the sale of securities has an effect similar to the actual sale of securities,
although the sale of the futures contracts might be accomplished more easily and
quickly. For example, if 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 the Portfolio's securities declined, the value of the Portfolio's
futures contracts would increase, thereby protecting the Portfolio by preventing
the net asset value from declining as much as it otherwise would have.
Similarly, entering into futures contracts for the purchase of securities has an
effect similar to the actual purchase of the underlying securities, but permits
the continued holding of securities other than the underlying securities. For
example, if the Adviser expects long-term interest rates to decline, the
Portfolio might enter into futures contracts for the purchase of long-term
securities, so that it could gain rapid market exposure that may offset
anticipated increases in the cost of securities it intends to purchase, while
continuing to hold higher-yielding short-term securities or waiting for the
long-term market to stabilize.
A Portfolio (other than the Endeavor Money Market Portfolio) also may
purchase and sell listed put and call options on futures contracts. An option on
a futures contract
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gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract (a long position if the option is a call and a
short position if the option is a put), at a specified exercise price at any
time during the option period. When an option on a futures contract is
exercised, delivery of the futures position is accompanied by cash representing
the difference between the current market price of the futures contract and the
exercise price of the option.
The Dreyfus U.S. Government Securities and Endeavor Select 50
Portfolios may purchase put options on interest rate futures contracts in lieu
of, and for the same purpose as, sale of a futures contract. It also may
purchase such put options in order to hedge a long position in the underlying
futures contract in the same manner as it purchases "protective puts" on
securities. The purchase of call options on interest rate futures contracts is
intended to serve the same purpose as the actual purchase of the futures
contract, and the Portfolio will set aside cash or cash equivalents sufficient
to purchase the amount of portfolio securities represented by the underlying
futures contracts.
A Portfolio may not purchase futures contracts or related options if,
immediately thereafter, more than 33 1/3% (25% for the T. Rowe Price Equity
Income, the T. Rowe Price Growth Stock and the T. Rowe Price International 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 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
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are not sufficiently developed to be effectively used by a Portfolio.
Foreign Currency Transactions. The Dreyfus U.S. Government Securities,
T. Rowe Price Equity Income, T. Rowe Price Growth Stock, T. Rowe Price
International Stock, Endeavor Opportunity Value, Endeavor Enhanced Index and
Endeavor Select 50 Portfolios may purchase foreign currency on a spot (or cash)
basis, enter into contracts to purchase or sell foreign currencies at a future
date ("forward contracts"), purchase and sell foreign currency futures
contracts, and purchase exchange traded and over-the-counter call and put
options on foreign currency futures contracts and on foreign currencies. The
Adviser to a Portfolio may engage in these transactions to protect against
uncertainty in the level of future exchange rates in connection with the
purchase and sale of portfolio securities ("transaction hedging") and to protect
the value of specific portfolio positions ("position hedging").
Hedging transactions involve costs and may result in losses. The
Dreyfus U.S. Government Securities, T. Rowe Price Equity Income, T. Rowe Price
Growth Stock, T. Rowe Price International Stock, Endeavor Opportunity Value,
Endeavor Enhanced Index and Endeavor Select 50 Portfolios may write covered call
options on foreign currencies to offset some of the costs of hedging those
currencies. A Portfolio will engage in over-the-counter transactions only when
appropriate exchange traded transactions are unavailable and when, in the
opinion of the Portfolio's Adviser, the pricing mechanism and liquidity are
satisfactory and the participants are responsible parties likely to meet their
contractual obligations. A Portfolio's ability to engage in hedging and related
option transactions may be limited by tax considerations.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Portfolio owns or intends to
purchase or sell. They simply establish a rate of exchange which one can achieve
at some future point in time. Additionally, although these techniques tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
they tend to limit any potential gain which might result from the increase in
the value of such currency.
Interest Rate Transactions. In order to attempt to protect the value of
its portfolio from interest rate fluctuations, the Dreyfus U.S. Government
Securities Portfolio may enter into various hedging transactions, such as
interest rate swaps and the purchase or sale of interest rate caps and floors.
Interest rate
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swaps involve the exchange by a Portfolio with another party of their respective
commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments. The purchase of an interest rate cap entitles
the purchaser, to the extent that a specified index exceeds a predetermined
interest rate, to receive payments of interest on a notional principal amount
from the party selling such interest rate cap. The purchase of an interest rate
floor entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate floor. The Adviser to
the Portfolio expects to enter into these transactions on behalf of the
Portfolio primarily to preserve a return or spread on a particular investment or
portion of its portfolio or to protect against any increase in the price of
securities the Portfolio anticipates purchasing at a later date. The Portfolio
intends to use these transactions as a hedge and not as a speculative
investment. The Portfolio will not sell interest rate caps or floors that it
does not own.
The Portfolio may enter into interest rate swaps, caps and floors on
either an asset-based or liability-based basis, depending on whether it is
hedging its assets or its liabilities, and will usually enter into interest rate
swaps on a net basis, i.e., the two payment streams are netted out, with the
Portfolio receiving or paying, as the case may be, only the net amount of the
two payments. Inasmuch as these hedging transactions are entered into for good
faith hedging purposes, the Adviser to the Portfolio and the Fund believe such
obligations do not constitute senior securities and accordingly, will not treat
them as being subject to the Portfolio's borrowing restrictions. The net amount
of the excess, if any, of the Portfolio's obligations over its entitlement with
respect to each interest rate swap will be accrued on a daily basis and an
amount of cash or liquid securities having an aggregate net asset value at least
equal to the accrued excess will be maintained in a segregated account by the
Portfolio's custodian. The Portfolio will not enter into any interest rate swap,
cap or floor transactions unless the unsecured senior debt or the claims-paying
ability of the other party thereto is rated in the highest category of at least
one NRSRO at the time of entering into such transaction. If there is a default
by the other party to such a securities transaction, the Portfolio will have
contractual remedies pursuant to the agreements related to the transactions. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps and floors
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are more recent innovations for which standardized documentation has not yet
been developed and, accordingly, they are less liquid than swaps.
Dollar Roll Transactions. The Dreyfus U.S. Government Securities
Portfolio may enter into dollar roll transactions with selected banks and
broker-dealers. Dollar roll transactions are comprised of the sale by the
Portfolio of mortgage-based securities, together with a commitment to purchase
similar, but not identical, securities at a future date. In addition, the
Portfolio is paid a fee as consideration for entering into the commitment to
purchase. Dollar rolls may be renewed after cash settlement and initially may
involve only a firm commitment agreement by the Portfolio to buy a security. If
the broker-dealer to whom the Portfolio sells the security becomes insolvent,
the Portfolio's right to purchase or repurchase the security may be restricted;
the value of the security may change adversely over the term of the dollar roll;
the security that the Portfolio is required to repurchase may be worth less than
the security that the Portfolio originally held, and the return earned by the
Portfolio with the proceeds of a dollar roll may not exceed transaction costs.
Dollar roll transactions are treated as borrowings for purposes of the 1940 Act,
and the aggregate of such transactions and all other borrowings of the Portfolio
(including reverse repurchase agreements) will be subject to the requirement
that the Portfolio maintain asset coverage of 300% for all borrowings.
Reverse Repurchase Agreements. Each Portfolio is permitted to enter
into reverse repurchase agreements. In a reverse repurchase agreement, the
Portfolio sells a security and agrees to repurchase it at a mutually agreed upon
date and price, reflecting the interest rate effective for the term of the
agreement. For the purposes of the 1940 Act it is considered a form of borrowing
by the Portfolio and, therefore, is a form of leverage. Leverage may cause any
gains or losses of the Portfolio to be magnified.
Borrowings. A Portfolio other than the Dreyfus U.S. Government Securities,
T. Rowe Price Equity Income, T. Rowe Price Growth Stock, T. Rowe Price
International Stock, Endeavor Opportunity Value and Endeavor Enhanced Index
Portfolios may borrow money for temporary purposes in amounts up to 5% of its
total assets. The Dreyfus U.S. Government Securities Portfolio may borrow from
banks and enter into reverse repurchase agreements or dollar rolls transactions
in an amount equal to up to 33 1/3% of the value of its net assets (computed at
the time the loan is made) to take advantage of investment opportunities
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and for temporary, extraordinary or emergency purposes. The Dreyfus U.S.
Government Securities Portfolio may pledge up to 33 1/3% of its total assets to
secure these borrowings. If the Portfolio's asset coverage for borrowings falls
below 300%, the Portfolio will take prompt action to reduce its borrowings.
The T. Rowe Price Equity Income, T. Rowe Price Growth Stock and T. Rowe
Price International Stock Portfolios may borrow money as a temporary measure for
emergency purposes, to facilitate redemption requests, or for other purposes
consistent with the Portfolio's investment objective and program in an amount up
to 33 1/3% of the Portfolio's net assets. Each Portfolio may pledge up to 33
1/3% of its total assets to secure these borrowings. These Portfolios may not
purchase additional securities when borrowings exceed 5% of total assets.
The Endeavor Opportunity Value and Endeavor Enhanced Index Portfolios
may borrow money from banks as a temporary measure for extraordinary or
emergency purposes in amounts up to 10% of their total assets. No Portfolio may
purchase additional securities when borrowings exceed 5% of total assets.
The Endeavor Select 50 Portfolio may borrow money as a temporary
measure for emergency purposes or to facilitate redemption requests in an amount
up to 33 1/3% of its net assets. The Portfolio may pledge up to 33 1/3% of its
total assets to secure these borrowings. The Portfolio may not purchase
additional securities when borrowings exceed 10% of total assets.
As a matter of operating policy, each of the Dreyfus U.S. Government
Securities, T. Rowe Price Equity Income, T. Rowe Price Growth Stock, T. Rowe
Price International Stock and Endeavor Select 50 Portfolios will limit all
borrowings to no more than 25% of such Portfolio's net assets.
Depositary Receipts. All Portfolios except the Endeavor Money Market
Portfolio may purchase foreign securities in the form of American Depositary
Receipts, European Depositary Receipts, Global Depositary Receipts or other
securities convertible into securities of corporations in which the 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.
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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
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cases loss of rights in the collateral should the borrower fail
financially.
Hybrid Instruments. The T. Rowe Price Equity Income, T. Rowe Price
Growth Stock and T. Rowe Price International Stock Portfolios may invest up to
10% of their total assets and the Dreyfus U.S. Government Securities Portfolio
may invest up to 5% of its total assets in hybrid instruments. Hybrid
instruments have recently been developed and combine the elements of futures
contacts or options with those of debt, preferred equity or a depository
instrument. Often these hybrid instruments are indexed to the price of a
commodity, particular currency, or a domestic or foreign debt or equity
securities index. Hybrid instruments may take a variety of forms, including, but
not limited to, debt instruments with interest or principal payments or
redemption terms determined by reference to the value of a currency or commodity
or securities index at a future point in time, preferred stock with dividend
rates determined by reference to the value of a currency, or convertible
securities with the conversion terms related to a particular commodity. Hybrid
instruments may bear interest or pay dividends at below market (or even
relatively nominal) rates. Under certain conditions, the redemption value of
such an instrument could be zero. Hybrid instruments can have volatile prices
and limited liquidity and their use by a Portfolio may not be successful.
Fixed-Income Securities - Downgrades. If any security invested in by
any of the Portfolios loses its rating or has its rating reduced after the
Portfolio has purchased it, unless required by law, the Portfolio is not
required to sell or otherwise dispose of the security, but may consider doing
so.
Illiquid Securities. Each Portfolio may invest up to 15% (10% with
respect to Endeavor Money Market and Dreyfus U.S. Government Securities
Portfolios) of its net assets in illiquid securities and other securities which
are not readily marketable, including non-negotiable time deposits, certain
restricted securities not deemed by the Fund's Trustees to be liquid and
repurchase agreements with maturities longer than seven days. Securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933,
which have been determined to be liquid, will not be considered by the
Portfolios' Advisers to be illiquid or not readily marketable and, therefore,
are not subject to the aforementioned 10% or 15% limits. The inability of a
Portfolio to dispose of illiquid or not readily marketable investments readily
or at a reasonable price could impair the Portfolio's ability to raise cash for
redemptions or other purposes. The liquidity of securities
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purchased by a Portfolio which are eligible for resale pursuant to Rule 144A
will be monitored by the Portfolios' Advisers on an ongoing basis, subject to
the oversight of the Trustees. In the event that such a security is deemed to be
no longer liquid, a Portfolio's holdings will be reviewed to determine what
action, if any, is required to ensure that the retention of such security does
not result in a Portfolio having more than 10% or 15%, as applicable, of its
assets invested in illiquid or not readily marketable securities.
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 the outlook for economic growth. When economic conditions
appear to be deteriorating, medium to lower rated securities may decline in
value due 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.
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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 realized upon the sale of lower rated or
unrated securities, 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 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
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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:
Endeavor Money Market Portfolio - .50%; Endeavor Asset Allocation Portfolio -
.75%; T. Rowe Price International Stock Portfolio - .90%; Value Equity Portfolio
- - .80%; Dreyfus Small Cap Value Portfolio - .80%; Dreyfus U.S. Government
Securities Portfolio - .65%; T. Rowe Price Equity Income Portfolio - .80%; T.
Rowe Price Growth Stock Portfolio - .80%; Endeavor Opportunity Value Portfolio -
.80%; Endeavor Enhanced Index Portfolio - .75%; Endeavor Select 50 Portfolio -
1.10%. The management fees paid by the Portfolios (other than the Endeavor Money
Market and Dreyfus U.S. Government Securities 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.
For all Portfolios of the Fund commencing operations prior to January 28,
1998, the Manager pays the fees and expenses of Investor Services Group pursuant
to the administrative agreement. For the Endeavor Select 50 Portfolio
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the Manager is entitled to be reimbursed for the Portfolio's portion of the fees
and expenses paid by the Manager to Investor Services Group with respect to the
Portfolio. For Portfolios other than the Endeavor Select 50 and Endeavor High
Yield Portfolios, 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. For the Endeavor Select 50 Portfolio, the Manager will pay Investor
Services Group for the Portfolio, which payment will be reimbursed by the
Portfolio, $30,000 plus 0.01% of the Portfolio's average daily net assets. These
fees are accrued daily and paid monthly.
In addition to the management fees and allocable administrative fees,
the Fund pays all expenses not assumed by the Manager, including, without
limitation, expenses for legal, accounting and auditing services, interest,
taxes, costs of printing and distributing reports to shareholders, proxy
materials and prospectuses, charges of its custodian, transfer agent and
dividend disbursing agent, registration fees, fees and expenses of the Trustees
who are not interested persons of the Fund, insurance, brokerage costs,
litigation, and other extraordinary or nonrecurring expenses. All general Fund
expenses are allocated among and charged to the assets of the Portfolios of the
Fund on a basis that the Trustees deem fair and equitable, which may be on the
basis of relative net assets of each Portfolio or the nature of the services
performed and relative applicability to each
Portfolio.
The Advisers
Pursuant to an investment advisory agreement with the Manager, 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
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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. and Rowe Price-Fleming
International, Inc. may utilize certain brokers indirectly related to them in
the capacity as broker in connection with the execution of transactions for the
T. Rowe Price Equity Income, T. Rowe Price Growth Stock and T. Rowe Price
International Stock Portfolios. J.P. Morgan Investment Management Inc. may
utilize certain brokers affiliated with it in connection with the execution of
transactions for the Endeavor Enhanced Index Portfolio. Morgan Stanley Asset
Management Inc. may utilize certain brokers affiliated with it in connection
with the execution of transactions for the Endeavor Money Market and Endeavor
Asset Allocation Portfolios. See the Statement of Additional Information for a
further discussion of Portfolio trading.
Morgan Stanley Asset Management Inc. ("Morgan Stanley") is the Adviser
to the Endeavor Money Market Portfolio and the Endeavor Asset Allocation
Portfolio. As compensation for its services as investment adviser, the Manager
pays Morgan Stanley a monthly fee at the annual rate of .25% of the average
daily net assets of the Endeavor Money Market Portfolio and .30% of the average
daily net assets of the Endeavor Asset Allocation Portfolio. Morgan Stanley
conducts a worldwide portfolio management business and provides a broad range of
portfolio management services to customers in the United States and abroad.
Morgan Stanley is a subsidiary of Morgan Stanley, Dean Witter, Discover & Co. As
of December 31, 1997, Morgan Stanley and its institutional investment advisory
affiliates had approximately $146 billion in assets under management.
Prior to May 1, 1998, TCW Funds Management, Inc. ("TCW") was the
Adviser to the Endeavor Money Market Portfolio (formerly, TCW Money Market
Portfolio) and the Endeavor Asset Allocation Portfolio (formerly, TCW Managed
Asset Allocation Portfolio). As compensation for its services as investment
adviser, the Manager paid TCW a monthly fee at the annual rate of .25% and
.375%, respectively, of the Endeavor Money Market and Endeavor Asset Allocation
Portfolios' average daily net assets.
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The strategic allocation decisions for the Endeavor Asset Allocation
Portfolio are made by an asset allocation team which includes Norman Ridley and
Horacio Valeiras. Mr. Ridley is a Vice President of Morgan Stanley and has been
a Vice President of Morgan Stanley & Co. Incorporated, an affiliate of Morgan
Stanley, since 1997. From 1985 to 1997, Mr. Ridley was a Senior Vice President
of Trust Company of the West and the portfolio manager responsible for the day
to day management of the equity portion of the Endeavor Asset Allocation
Portfolio. Mr. Valeiras, a Managing Director of Morgan Stanley & Co.
Incorporated, joined Miller Anderson & Sherrerd, LLP ("MAS"), an investment
advisory affiliate of Morgan Stanley, in 1992. He served as an International
Strategist from 1989 through 1992 for Credit Suisse First Boston and as
Director-Equity Research in 1992. He assumed responsibility for the
International Equity Portfolio 1992, the MAS Funds Emerging Markets Portfolio in
1993 and the MAS Funds Multi-Asset-Class Portfolio in 1994 and the Balanced
Portfolio in 1996. Mr. Ridley and Mr. Valeiras will consult on a regular basis
with the portfolio managers responsible for the day to day management of the
Endeavor Asset Allocation Portfolio regarding allocation decisions.
The day to day investment management decisions for the equity portion of
the Endeavor Asset Allocation Portfolio will be made by Kurt Feuerman and
Margaret K. Johnson. Kurt Feuerman joined Morgan Stanley in July 1993 as a
Managing Director in the Institutional Equity Group. Previously, Mr. Feuerman
was a Managing Director of Morgan Stanley & Co. Incorporated's Research
Department where he was responsible for emerging growth stocks, gaming and
restaurants. Before joining Morgan Stanley, Mr. Feuerman was a Managing Director
of Drexel Burnham Lambert, where he had been an equity analyst since 1984. Over
the years, he has been highly ranked in the Institutional Investor All American
Research Poll in four separate categories: packaged food, tobacco, emerging
growth and gaming. Margaret Johnson is a Principal of Morgan Stanley and a
Portfolio Manager in the Institutional Equity Group. She joined Morgan Stanley
in 1984 and worked as an Analyst in the Marketing and Fiduciary Advisor areas.
Ms. Johnson became an Equity Analyst in 1986 and a Portfolio Manager in 1989.
Mr. Feuerman and Ms. Johnson have had primary responsibility for managing the
equity portion of the Endeavor Asset Allocation Portfolio's assets since May 1,
1998.
The day to day investment management decisions for the fixed income portion
of the Endeavor Asset Allocation Portfolio will be made by Thomas L. Bennett,
Kenneth B. Dunn and Richard B. Worley. Thomas L. Bennett, a Managing Director of
Morgan Stanley & Co. Incorporated, joined MAS in 1984. He assumed responsibility
for
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the MAS Funds Fixed Income Portfolio in 1984, the MAS Funds Domestic Fixed
Income Portfolio in 1987, the MAS Funds High Yield Portfolio in 1985, the MAS
Funds Fixed Income Portfolio II in 1990, the MAS Funds Special Purpose Fixed
Income and Balanced Portfolios in 1992 and the MAS Funds Multi-Asset-Class
Portfolio in 1994. Kenneth B. Dunn, a Managing Director of Morgan Stanley & Co.
Incorporated, joined MAS in 1987. He assumed responsibility for the MAS Funds
Fixed Income and Domestic Fixed Income Portfolios in 1987, the MAS Funds Fixed
Income Portfolio in 1990, the MAS Funds Mortgage-Backed Securities and Special
Purpose Fixed Income Portfolios in 1992, and the MAS Funds Municipal and PA
Municipal Portfolios in 1994. Richard B. Worley, a Managing Director of Morgan
Stanley & Co. Incorporated, joined MAS in 1978. He assumed responsibility for
the MAS Funds Fixed Income Portfolio in 1984, the MAS Funds Domestic Fixed
Income Portfolio in 1987, the MAS Funds Fixed Income Portfolio II in 1990, the
MAS Funds Balanced and Special Purpose Fixed Income Portfolios in 1992, the MAS
Funds Global Fixed Income and International Fixed Income Portfolios in 1993 and
the MAS Funds Multi-Asset-Class Portfolio in 1994. Messrs. Bennett, Dunn, and
Worley have shared primary responsibility for managing the fixed income portion
of the Portfolio's assets since May 1, 1998.
OpCap Advisors ("OpCap") is the Adviser to the Endeavor Value Equity
Portfolio and the Endeavor Opportunity Value Portfolio. As compensation for its
services as investment adviser, the Manager pays OpCap a monthly fee at the
annual rate of .40% of the average daily net assets of each of the Endeavor
Value Equity and Endeavor Opportunity Value Portfolios.
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
Portfolios. On November 4, 1997, PIMCO Advisors L.P. ("PIMCO Advisers"), 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. formerly
Oppenheimer Capital, 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.
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. Richard J. Glasebrook II, Managing Director of
Oppenheimer Capital, is the portfolio manager for the Endeavor Opportunity Value
Portfolio. Mr. Glasebrook has been with Oppenheimer Capital since 1990. Mr.
Glasebrook was named by Morningstar, Inc. (an independent service that monitors
the performance of registered investment companies) as its 1995 Variable Fund
Manager of the Year.
The Dreyfus Corporation ("Dreyfus") is the Adviser to the Dreyfus U.S.
Government Securities Portfolio and the Dreyfus Small Cap Value Portfolio.
Dreyfus, which was formed in 1947, is a wholly-owned subsidiary of Mellon Bank,
N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation ("Mellon").
As of 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 .15% of the average daily net assets of the
Dreyfus U.S. Government Securities Portfolio and .375% of the average daily net
assets of the Dreyfus Small Cap Value Portfolio.
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.
Since February 9, 1998, Gerald E. Thunelius and William Howarth have been
the co-portfolio managers for the Dreyfus U.S. Government Securities Portfolio.
Mr. Thunelius, who has been with Dreyfus since 1989, is the Senior Portfolio
Manager for the Taxable Fixed Income area of Dreyfus. Mr. Howarth is a junior
portfolio manager who joined Dreyfus in 1992.
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, by Boston Company since June, 1991 and by Dreyfus since February, 1996.
T. Rowe Price Associates, Inc. ("T. Rowe Price") is the Adviser to the T.
Rowe Price Equity Income Portfolio and the T. Rowe Price Growth Stock Portfolio.
As compensation for its services as investment adviser, the Manager pays T. Rowe
Price a monthly fee at the annual rate of .40% of the 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, Stephen 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.
Rowe Price-Fleming International, Inc. ("Price-Fleming") is the Adviser to
the T. Rowe Price International Stock Portfolio (formerly the Global Growth
Portfolio). As compensation for its services as investment adviser, the Manager
pays Price-Fleming a monthly fee at an annual rate based on the Portfolio's
average daily net assets as follows: .75% up to $20 million; .60% in excess of
$20 million up to $50 million; and .50% of assets in excess of $50 million. At
such time as the net assets of the Portfolio exceed $200 million, the fee shall
be .50% of total average daily net assets.
Prior to January 1, 1995, Ivory & Sime International, Inc. ("I&S") and
Ivory & Sime plc acted as adviser and sub-adviser, respectively, for the Global
Growth Portfolio.
Price-Fleming was incorporated in Maryland in 1979 as a joint venture
between T. Rowe Price and Robert Fleming Holdings Limited ("Flemings"). Flemings
is a diversified investment organization which participates in a global network
of regional investment offices in New York, London, Zurich, Geneva, Tokyo, Hong
Kong, Manila, Kuala Lampur, Seoul, Taipei, Bombay, Jakarta, Singapore, Bangkok
and Johannesburg.
T. Rowe Price was incorporated in Maryland in 1947 as successor to the
investment counseling business founded by the late Thomas Rowe Price, Jr., in
1937. Flemings was incorporated in 1974 in the United Kingdom as successor to
the business founded by Robert Fleming in 1873. As of December 31, 1997, T. Rowe
Price and its affiliates managed more than $125 billion of assets of which
Price-Fleming managed the U.S. equivalent of approximately $30 billion.
The common stock of Price-Fleming is 50% owned by a wholly-owned
subsidiary of T. Rowe Price, 25% by a subsidiary of Fleming and 25% by Jardine
Fleming Group Limited ("Jardine Fleming"). (Half of Jardine Fleming is owned by
Flemings and half by Jardine Matheson Holdings Limited.) T. Rowe Price has the
right to elect a majority of the board of directors of Price-Fleming, and
Flemings has the right to elect the remaining directors, one of whom will be
nominated by Jardine Fleming.
Investment decisions with respect to the T. Rowe Price International Stock
Portfolio are made by an investment advisory group composed of the following
members: Martin G. Wade, Mark J. T. Edwards, John R. Ford, James B. M. Seddon,
Mark Bickford-Smith and David J. L. Warren.
Martin Wade joined Price-Fleming in 1979 and has 29 years of experience
with the Fleming Group in research, client service and investment management.
(Fleming Group includes Flemings and/or Jardine Fleming). Mark Edwards joined
Price-Fleming in 1987 and has 16 years of experience in financial analysis. John
Ford joined Price-Fleming in 1982 and has 18 years of experience with the
Fleming Group in research and portfolio management. James Seddon joined
Price-Fleming in 1987 and has 11 years of experience in investment management.
Mark Bickford-Smith joined Price-Fleming in 1995 and has 13 years of experience
with the Fleming Group in research and financial analysis. David Warren joined
Price-Fleming in 1984 and has 17 years of experience in equity research, fixed
income research and portfolio management.
In providing its services, Price-Fleming receives certain
administrative support from T. Rowe Price and investment research and
administrative support for equity investments from Fleming Investment Management
Limited and Jardine Fleming Investment
Holdings Limited.
J.P. Morgan Investment Management Inc. ("Morgan") is the Adviser to the
Enhanced Index Portfolio. As compensation for its services as investment adviser
the Manager pays Morgan a monthly fee at the annual rate of .35% of the average
daily net assets of the Endeavor Enhanced Index Portfolio.
Morgan is a wholly-owned subsidiary of J.P. Morgan Co. Incorporated
("J.P. Morgan"), a bank holding company. Through offices in New York City and
abroad, J.P. Morgan, through Morgan and other subsidiaries, including Morgan
Guaranty Trust Company of New York, offers a wide range of services to
governmental, institutional, corporate and individual customers and acts as
investment adviser to individual and institutional clients with combined assets
under management (as of December 31, 1997) of over $255 billion. J.P. Morgan has
a long history of service as adviser, underwriter and lender to an extensive
roster of major companies and as a financial adviser to national governments.
The firm, through its predecessor firms, has been in business for over a century
and has been managing investments since 1913.
Investment decisions with respect to the Enhanced Index Portfolio are made
by an investment advisory group composed of Frederic A. Nelson, III, James Wiess
and Timothy J. Devlin.
Mr. Nelson is a Managing Director of Morgan and is responsible for the U.S.
equity business, including active equity and structured strategies. Mr. Nelson
joined Morgan in 1994 after 14 years at Bankers Trust Company where he was part
of the Global Investment Management Group. Mr. Wiess, a Vice President of
Morgan, is a portfolio manager in the Equity and Balanced Accounts Group with
responsibility for portfolio rebalancing and product research and development in
structured equity strategies. Mr. Wiess joined Morgan in 1992 and from 1984 to
1991 was employed by Oppenheimer & Co. Mr. Devlin joined Morgan in 1996 and is a
member of the Structured Equity Group with the dual responsibilities of client
servicing and portfolio management. From 1988 to 1996, Mr. Devlin was at
Mitchell Hutchins where he managed quantitatively driven equity portfolios.
Montgomery Asset Management, LLC ("Montgomery") is the Adviser to the
Endeavor Select 50 Portfolio. As compensation for its services as investment
adviser the Manager pays Montgomery a monthly fee at the annual rate of .70% of
the average daily net assets of the Portfolio. Montgomery is a Delaware limited
liability company, and, with its predecessor, has provided investment advisory
services since 1990 to mutual funds and private accounts. As of December 31,
1997, Montgomery and its affiliates had more than $9.5 billion of assets under
management including more than $5.1 billion in mutual fund assets. Montgomery is
a wholly-owned subsidiary of Commerzbank AG ("Commerzbank"). Commerzbank, the
third largest publicly held commercial bank in Germany, and its affiliates had
over $497 billion in assets under management as of June 30, 1997.
Commerzbank's asset management operations involve more than 1,000 employees in
13 countries worldwide.
Investment decisions with respect to the Portfolio are made by the
Adviser's equity investment management teams. Kevin T. Hamilton, chairman of the
Adviser's Investment Oversight Committee and an Executive Vice President, is
responsible for coordinating and implementing the investment decisions of the
Adviser's equity teams. From 1985 until joining the Adviser in 1991, Mr.
Hamilton was a senior vice president responsible for investment oversight at
Analytic Investment Management in Irvine, California.
Brokerage Enhancement Plan
The Board of Trustees of the Fund, including all of the Trustees who
are not "interested persons" (as defined in the 1940 Act) of the Fund, the
Manager or Endeavor Group (the "Distributor") (hereinafter referred to as
"Independent Trustees"), have voted to adopt a Brokerage Enhancement Plan (the
"Plan") for the purpose of utilizing the Fund's brokerage commissions, to the
extent available, to promote the sale and distribution of the Fund's shares.
Neither the Fund nor any series of the Fund, including the Portfolios, would
incur any new fees or charges. As part of the Plan, the Fund and the Distributor
would enter into a Distribution Agreement. Under the Distribution Agreement, the
Distributor would become the principal underwriter of the Fund, with
responsibility for promoting sales of the shares of each Portfolio.
The Distributor, however, would not receive any additional compensation
from the Fund for performing this function. Instead, under the Plan, the Manager
would be authorized to direct that the Adviser of each Portfolio effect
brokerage transactions in portfolio securities through certain broker-dealers,
consistent with each s obligations to achieve best price and execution. It is
anticipated that these broker-dealers will agree that a percentage of the will
be directed to the Distributor, as an introducing broker. The Distributor will
use a small part of these directed commissions to defray incidental costs
associated with becoming and acting as an introducing broker. The remainder of
the commissions received by the Distributor will be used to finance activities
principally intended to result in the sale of shares of the 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, expect for a small amount to be used to defray the
incidental costs associated with becoming and acting as an introducing
broker-dealer. Accordingly, the Distributor will not make any profit from the
operation of the Plan.
Both the Plan and the Distribution Agreement provide (A) that they will
be subject to annual approval by the Trustees and the Independent Trustees; (b)
that any person authorized to make payments under the Plan or Distribution
Agreement must provide the Trustees a quarterly written report of payments made
and the purpose of the payments; (C) that the Plan may be terminated at any time
by the vote of a majority of the Independent Trustees; (D) that the Distribution
Agreement may be terminated without penalty at any time by a vote of a majority
of the Independent Trustees or, as to a 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 spend for
distribution without shareholder approval, and all material Plan amendments must
be approved by a vote of the Independent Trustees. In addition, the selection
and nomination of the Independent Trustees must be committed to the Independent
Trustees.
PFL, as the initial shareholder of the Endeavor Select 50
Portfolio, has approved the Plan and the shareholders of the other 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 (except with respect to the
Endeavor Money Market Portfolio where dividends will be declared daily and paid
monthly) and will be distributed to the various separate accounts of PFL and not
to Contract owners in the form of additional full and fractional shares of the
Portfolio and not in cash. The result is that the investment performance of the
Portfolios, including the effect of dividends, is reflected in the cash value of
the Contracts. See the prospectus for the Contracts accompanying this
Prospectus.
All net realized long- or short-term capital gains of each Portfolio,
if any, will be declared and distributed at least annually either during or
after the close of the Portfolio's fiscal year and will be reinvested in
additional full and fractional shares of the Portfolio. In certain foreign
countries, interest and dividends are subject to a tax which is withheld by the
issuer. U.S. income tax treaties with certain countries reduce the rates of
these withholding taxes. The Fund intends to provide the documentation necessary
to achieve the lower treaty rate of withholding whenever applicable or to seek
refund of amounts withheld in excess of the treaty rate.
The T. Rowe Price International Stock Portfolio may purchase the
securities of certain foreign investment funds or trusts called passive foreign
investment companies. Such trusts have been the only or primary way to invest in
certain countries. In addition to bearing their proportionate share of the
Portfolio's expenses (management fees and operating expenses), shareholders will
also indirectly bear similar expenses of such trusts. Capital gains on the sale
of such holdings are considered ordinary income regardless of how long the
Portfolio held its investment. In addition, the Portfolio may be subject to
corporate income tax and an interest charge on certain dividends and capital
gains earned from these investments, regardless of whether such income and gains
are distributed to shareholders.
To avoid such tax and interest, the T. Rowe Price International Stock
Portfolio's Adviser intends to treat these securities as sold on the last day of
its fiscal year and recognize any gains for tax purposes at that time; losses
will not be recognized. Such gains will be considered ordinary income, which the
Portfolio will be required to distribute even though it has not sold the
security.
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.
Endeavor Select 50 Portfolio will accept orders for the purchase of its
shares until total assets of the Portfolio equal $200 million; however, the
Portfolio may, with the agreement of the Manager and the Adviser, accept orders
for the purchase of its shares until its total assets equal $250 million. Once
the maximum offering has been sold, no additional shares will be sold other than
pursuant to the reinvestment of dividends and to Contract owners with existing
interests in the Portfolio.
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 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 Endeavor Money Market Portfolio are valued at amortized cost
and the assets of the other Portfolios are valued on the basis of their market
values or, in the absence of a market value with respect to any portfolio
securities, at fair value as determined by or under the direction of the Fund's
Board of Trustees including the employment of an independent pricing service, as
described in the Statement of Additional Information.
Shares of the Portfolios may be redeemed on any day on which the Fund
is open for business.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise the "average annual or
cumulative total return" of the Endeavor Asset Allocation, Endeavor Value
Equity, Dreyfus Small Cap Value, Dreyfus U.S. Government Securities, T. Rowe
Price Equity Income, T. Rowe Price Growth Stock, T. Rowe Price International
Stock, Endeavor Opportunity Value, Endeavor Enhanced Index and Endeavor Select
50 Portfolios or the "yield" and "effective yield" of the Endeavor Money Market
and Dreyfus U.S. Government Securities Portfolios and may compare the
performance of the Portfolios with that of other mutual funds with similar
investment objectives as listed in rankings prepared by Lipper Analytical
Services, Inc.,
or similar independent services monitoring mutual fund performance, and with
appropriate securities or other relevant indices. The "average annual total
return" of a Portfolio refers to the average annual compounded rate of return
over the stated period that would equate an initial investment in that Portfolio
at the beginning of the period to its ending redeemable value, assuming
reinvestment of all dividends and distributions and deduction of all recurring
charges other than charges and deductions which are, or may be, imposed under
the Contracts. Figures will be given for the recent one, five and ten year
periods and for the life of the Portfolio if it has not been in existence for
any such periods. When considering "average annual total return" figures for
periods longer than one year, it is important to note that a Portfolio's annual
total return for any given year might have been greater or less than its average
for the entire period. "Cumulative total return" represents the total change in
value of an investment in a Portfolio for a specified period (again reflecting
changes in Portfolio share prices and assuming reinvestment of Portfolio
distributions). The Endeavor Money Market Portfolio's "yield" refers to the
income generated by an investment in the Portfolio over a seven-day period
(which period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the
Portfolio is assumed to be reinvested. The "effective yield" will be slightly
higher than the "yield" because of the compounding effect of this assumed
reinvestment. The Dreyfus U.S. Government Securities Portfolio may advertise its
30-day yield. Such yield refers to the income that is generated over a stated
30-day (or one month) period (which period will be stated in the advertisement),
divided by the net asset value per share on the last day of the period. The
income is annualized by assuming that the income during the 30-day period
remains the same each month over one year and compounded semi-annually. The
methods used to calculate "average annual and cumulative total return" and
"yield" are described further in the Statement of Additional Information.
The performance of each Portfolio will vary from time to time in
response to fluctuations in market conditions, interest rates, the composition
of the Portfolio's investments and expenses. Consequently, a Portfolio's
performance figures are historical and should not be considered representative
of the performance of the Portfolio for any future period.
Prior Performance of Comparable Funds
Endeavor Enhanced Index Portfolio
Morgan is the investment manager of certain Private Accounts. The
Endeavor Enhanced Index Portfolio commenced operations on May 1, 1997 and,
consequently does not have a significant operating history. See "Financial
Highlights." However, these Private Accounts are substantially similar to the
Endeavor Enhanced Index Portfolio in that they have the same investment
objectives as the Endeavor Enhanced Index Portfolio and are managed using the
same investment strategies and techniques used for the Endeavor Enhanced Index
Portfolio.
Investors should not rely on the following financial information as an
indication of the future performance of the Endeavor Enhanced Index Portfolio.
The performance of the Endeavor Enhanced Index Portfolio may vary from the
Private Account composite information because the Portfolio will be actively
managed and its investments will vary from time to time and will not be
identical to the past portfolio investments of the Private Accounts. Moreover,
the Private Accounts are not registered under the 1940 Act and therefore are not
subject to certain investment restrictions that are imposed by the 1940 Act,
which, if imposed, could have adversely affected the Private Accounts'
performances. In addition, the Private Accounts are not subject to the
provisions of the Internal Revenue Code with respect to "regulated investment
companies," which provisions, if imposed, could have adversely affected the
Private Accounts' performances.
The chart below shows hypothetical performance information derived from
historical composite performance of the Private Accounts included in the
Structured Stock Selection Composite. The hypothetical performance figures
represent the actual performance results of the composite of comparable Private
Accounts, adjusted to reflect the deduction of the fees and expenses anticipated
to be paid by the Endeavor Enhanced Index Portfolio. The actual Private Account
composite performance figures are time-weighted rates of return which include
all income and accrued income and realized and unrealized gains or losses, but
do not reflect the deduction of investment advisory fees actually charged to the
Private Accounts.
Hypothetical Average Annual Total Return Information Derived from
Private Account Composite
<TABLE>
<CAPTION>
For the For the Five For the Period
Year Ended Years Ended From Inception
December 31, December 31, (November 1, 1989)
1997 1997 to December 31, 1997
------------ ------------ --------------------
<S> <C> <C> <C>
Structured
Stock
Selection
Composite 32.27% 19.62% 16.65%
</TABLE>
Endeavor Select 50 Portfolio
Montgomery is the investment adviser of the Montgomery Select 50 Fund,
a series of a registered open-end investment company whose shares are sold to
the public. The Montgomery Select 50 Fund is substantially similar to the
Endeavor Select 50 Portfolio in that it has the same investment objective as the
Endeavor Select 50 Portfolio and is managed by the same
investment personnel using the same investment strategies and
techniques as contemplated for the Endeavor Select 50 Portfolio.
The Endeavor Select 50 Portfolio commenced operations in February, 1997
and, consequently, does not have a significant operating history. Set forth
below is certain performance information regarding the Montgomery Select 50 Fund
which has been obtained from Montgomery. Investors should not rely on the
following financial information as an indication of the future performance of
the Portfolio.
Average Annual Total Return of Comparable Fund (1)
For the Period
For the Year from Inception
Ended December to December 31
31, 1997 1997 (2)
-------------- --------------
Montgomery Select
50 Fund 29.27% 30.01%
- ------------------
(1) Reflects waiver of all or a portion of the advisory fees and reimbursements
of other expenses. Without such waivers and reimbursements, the average annual
total return during the periods would have been lower.
(2) The Montgomery Select 50 Fund commenced operations on October 2, 1995.
------------------------
The calculations of total return assume the reinvestment of all
dividends and capital gain distributions on the reinvestment dates during the
period and the deduction of all recurring
expenses that were charged to shareholder accounts. The above tables do not
reflect charges and deductions which are, or may be, imposed under the
Contracts. For a description of such charges and deductions, see the prospectus
accompanying this Prospectus which describes the Contracts.
ORGANIZATION AND CAPITALIZATION OF THE FUND
The Fund was established in November 1988 as a business trust under
Massachusetts law. The Fund has authorized an unlimited number of shares of
beneficial interest which may, without shareholder approval, be divided into an
unlimited number of series. Shares of the Fund are presently divided into eleven
series of shares, one for each of the Fund's eleven Portfolios. 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.
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.
-90-
<PAGE>
TABLE OF CONTENTS
Page
The Fund ENDEAVOR SERIES TRUST
Financial Highlights 2101 East Coast Highway,
Suite 300
Investment Objectives and Policies Corona del Mar, California 92625
Endeavor Money Market Portfolio (800) 854-8393
Endeavor Asset Allocation
Portfolio Manager
T. Rowe Price International Stock
Portfolio Endeavor Investment Advisers
Endeavor Value Equity Portfolio 2101 East Coast Highway
Dreyfus Small Cap Value Portfolio Suite 300
Dreyfus U.S. Government Securities Corona del Mar, California 92625
Portfolio
T. Rowe Price Equity Income Investment Advisers
Portfolio
T. Rowe Price Growth Stock Morgan Stanley Asset Management Inc.
Portfolio 1221 Avenue of the Americas
Endeavor Opportunity Value Portfolio New York, New York 10020
Endeavor Enhanced Index Portfolio
Endeavor Select 50 Portfolio OpCap Advisors
Investment Strategies One World Financial Center
Management of the Fund New York, New York 10281
The Manager The Dreyfus Corporation
200 Park Avenue
The Advisers New York, New York 10166
Brokerage Enhancement Plan
Dividends, Distributions and Taxes T. Rowe Price Associates, Inc.
Sale and Redemption of Shares 100 East Pratt Street
Performance Information Baltimore, Maryland 21202
Prior Performance of Comparable Funds
Organization and Capitalization Rowe Price-Fleming International,
of the Fund Inc.
100 East Pratt Street
Additional Information Baltimore, Maryland 21202
Transfer Agent and Custodian
J.P. Morgan Investment
Independent Auditors Management Inc.
522 Fifth Avenue
-------------- New York, New York 10036
No person has been authorized to give any Montgomery Asset Management, LLC
information or to make any representation not 101 California Street
contained in this Prospectus and, if given or San Francisco, California 94111
made, such information or representation must
not be relied upon as having been authorized. Custodian
This Prospectus does not constitute an
offering of any securities other than the Boston Safe Deposit and Trust
registered securities to which it relates or Company
an offer to any person in any state or One Boston Place
jurisdiction of the United States or any Boston, Massachusetts 02108
country where such offer would be unlawful.
<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
Money Market Portfolio (formerly, TCW Money Market Portfolio), the Endeavor
Asset Allocation Portfolio (formerly, TCW Managed Asset Allocation Portfolio),
the T. Rowe Price International Stock Portfolio (formerly, Global Growth
Portfolio), the Endeavor Value Equity Portfolio (formerly, Value Equity
Portfolio), the Dreyfus Small Cap Value Portfolio (formerly, Value Small Cap
Portfolio), the Dreyfus U.S. Government Securities Portfolio (formerly, U.S.
Government Securities Portfolio), the T. Rowe Price Equity Income Portfolio, the
T. Rowe Price Growth Stock Portfolio, the Endeavor Opportunity Value Portfolio
(formerly, Opportunity Value Portfolio), the Endeavor Enhanced Index Portfolio
(formerly, Enhanced Index Portfolio) and the Endeavor Select 50 Portfolio
(formerly, Select 50 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.
-1-
<PAGE>
TABLE OF CONTENTS
Page
Investment Objectives and Policies................ 3
Options and Futures Strategies............... 3
Foreign Currency Transactions................ 9
Repurchase Agreements........................ 14
Forward Commitments.......................... 14
Securities Loans............................. 14
Lower Rated Bonds ........................... 15
Interest Rate Transactions................... 16
Dollar Roll Transactions..................... 17
Portfolio Turnover........................... 18
Investment Restrictions........................... 19
Other Policies............................... 22
Performance Information........................... 24
Total Return................................. 24
Yield.......................................27
Non-Standardized Performance................. 28
Portfolio Transactions............................ 28
Management of the Fund............................ 32
Trustees and Officers........................ 32
The Manager.................................. 39
The Advisers................................. 41
Redemption of Shares.............................. 46
Net Asset Value................................... 46
Taxes............................................. 49
Federal Income Taxes......................... 49
Organization and Capitalization of the Fund....... 50
Legal Matters..................................... 53
Custodian......................................... 53
Financial Statements.............................. 53
Appendix.......................................... A-1
----------------------
No person has been authorized to give any information or to make any
representation not contained in this Statement of Additional Information or in
the Prospectus and, if given or made, such information or representation must
not be relied upon as having been authorized. This Statement of Additional
Information does not constitute an offering of any securities other than the
registered securities to which it relates or an offer to any person in any state
or other jurisdiction of the United States or any country where such offer would
be unlawful.
The date of this Statement of Additional Information is May 1, 1998.
-2-
<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 Morgan
Stanley Asset Management Inc. as investment adviser for the Endeavor Money
Market Portfolio and the Endeavor Asset Allocation Portfolio, Rowe Price-Fleming
International, Inc. as investment adviser for the T. Rowe Price International
Stock Portfolio, OpCap Advisors as investment adviser for the Endeavor Value
Equity Portfolio and Endeavor Opportunity Value Portfolio, The Dreyfus
Corporation as investment adviser for the Dreyfus U.S. Government Securities
Portfolio and the Dreyfus Small Cap Value Portfolio, T. Rowe Price Associates,
Inc. as investment adviser for the T. Rowe Price Equity Income Portfolio and the
T. Rowe Price Growth Stock Portfolio, J.P. Morgan Investment Management Inc. as
investment adviser for the Endeavor Enhanced Index Portfolio and Montgomery
Asset Management, LLC as investment adviser for the Endeavor Select 50
Portfolio.
Options and Futures Strategies (All Portfolios except Endeavor Money Market
Portfolio)
A Portfolio may seek to increase the current return on its investments
by writing covered call or covered put options. In addition, a Portfolio may at
times seek to hedge against either a decline in the value of its portfolio
securities or an increase in the price of securities which its Adviser plans to
purchase through the writing and purchase of options including options on stock
indices and the purchase and sale of futures contracts and related options. A
Portfolio may utilize options or futures contracts and related options for other
than hedging purposes to the extent that the aggregate initial margins and
premiums do not exceed 5% of the Portfolio's net asset value. The Advisers to
the Dreyfus Small Cap Value Portfolio and the Endeavor Asset Allocation
Portfolio do not presently intend to utilize options or futures contracts and
related options but may do so in the future. The Adviser to the Endeavor
Opportunity Value Portfolio does not currently intend to write covered put and
call options or engage in transactions in futures contracts and related options,
but may do so in the future. The Adviser to the Endeavor Select 50 Portfolio
does not currently intend to write covered put and call options, but may do so
in the future. Expenses and losses incurred as a result of such hedging
strategies will reduce a Portfolio's current return.
The ability of a Portfolio to engage in the options and futures
strategies described below will depend on the availability of liquid markets in
such instruments. Markets in options and futures with respect to stock indices
and U.S. government securities are relatively new and still developing. It is
impossible to predict the amount of trading interest that may exist in various
types of options or futures. Therefore no assurance can be given that a
Portfolio will be able to utilize these instruments effectively for the purposes
stated below.
Writing Covered Options on Securities. A Portfolio may write covered
call options and covered put options on optionable securities of the types in
which it is permitted to invest from time to time as its Adviser determines is
appropriate in seeking to attain the Portfolio's investment objective. Call
options written by a Portfolio give the holder the right to buy the underlying
security from the Portfolio at a stated exercise price; put options give the
holder the right to sell the underlying security to the Portfolio at a stated
price.
A Portfolio may only write call options on a covered basis or for
cross-hedging purposes and will only write covered put options. A put option
would be considered "covered" if the Portfolio owns an option to sell the
underlying security subject to the option having an exercise price equal to or
greater than the exercise price of the "covered" option at all times while the
put option is outstanding. A call option is covered if the Portfolio owns or has
the right to acquire the underlying securities subject to the call option (or
comparable securities satisfying the cover requirements of securities exchanges)
at all times during the option period. A call option is for cross-hedging
purposes if it is not covered, but is designed to provide a hedge against
another security which the Portfolio owns or has the right to acquire. In the
case of a call written for cross-hedging purposes or a put option, the Portfolio
will maintain in a segregated account at the Fund's custodian bank cash or
short-term U.S. government securities with a value equal to or greater than the
Portfolio's obligation under the option. A Portfolio may also write combinations
of covered puts and covered calls on the same underlying security.
A Portfolio will receive a premium from writing an option, which
increases the Portfolio's return in the event the option expires unexercised or
is terminated at a profit. The amount of the premium will reflect, among other
things, the relationship of the market price of the underlying security to the
exercise price of the option, the term of the option, and the volatility of the
market price of the underlying security. By writing a call option, a Portfolio
will limit its opportunity to profit from any increase in the market value of
the underlying security above the exercise price of the option. By writing a put
option, a Portfolio will assume the risk that it may be required to purchase the
underlying security for an exercise price higher than its then current market
price, resulting in a potential capital loss if the purchase price exceeds the
market price plus the amount of the premium received.
A Portfolio may terminate an option which it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. The Portfolio will
realize a profit (or loss) from such transaction if the cost of such transaction
is less (or more) than the premium received from the writing of the option.
Because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the repurchase of a call option may be offset in whole or in part by
unrealized appreciation of the underlying security owned by the Portfolio.
Purchasing Put and Call Options on Securities. A Portfolio may 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.
Purchase and Sale of Options and Futures on Stock Indices. A Portfolio
may purchase and sell options on stock indices and stock index futures contracts
either as a hedge against movements in the equity markets or for other
investment purposes.
Options on stock indices are similar to options on specific securities
except that, rather than the right to take or make delivery of the specific
security at a specific price, an option on a stock index gives the holder the
right to receive, upon exercise of the option, an amount of cash if the closing
level of that stock index is greater than, in the case of a call, or less than,
in the case of a put, the exercise price of the option. This amount of cash is
equal to such difference between the closing price of the index and the exercise
price of the option expressed in dollars times a specified multiple. The writer
of the option is obligated, in return for the premium received, to make delivery
of this amount. Unlike options on specific securities, all settlements of
options on stock indices are in cash and gain or loss depends on general
movements in the stocks included in the index rather than price movements in
particular stocks. Currently options traded include the Standard & Poor's 500
Composite Stock Price Index, the NYSE Composite Index, the AMEX Market Value
Index, the National Over-The-Counter Index, the Nikkei 225 Stock Average Index,
the Financial Times Stock Exchange 100 Index and other standard broadly based
stock market indices. Options are also traded in certain industry or market
segment indices such as the Pharmaceutical Index.
A stock index futures contract is an agreement in which one party
agrees to deliver to the other an amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock index at the
close of the last trading day of the contract and the price at which the
agreement is made. No physical delivery of securities is made.
If a Portfolio's Adviser expects general stock market prices to rise,
it might purchase a call option on a stock index or a futures contract on that
index as a hedge against an increase in prices of particular equity securities
it wants ultimately to buy
for the Portfolio. If in fact the stock index does rise, the price of the
particular equity securities intended to be purchased may also increase, but
that increase would be offset in part by the increase in the value of the
Portfolio's index option or futures contract resulting from the increase in the
index. If, on the other hand, the Portfolio's Adviser expects general stock
market prices to decline, it might purchase a put option or sell a futures
contract on the index. If that index does in fact decline, the value of some or
all of the equity securities held by the Portfolio may also be expected to
decline, but that decrease would be offset in part by the increase in the value
of the Portfolio's position in such put option or futures contract.
Purchase and Sale of Interest Rate Futures. A Portfolio may purchase
and sell interest rate futures contracts on U.S. Treasury bills, notes and bonds
and Government National Mortgage Association ("GNMA") certificates either for
the purpose of hedging its portfolio securities against the adverse effects of
anticipated movements in interest rates or for other investment purposes.
A Portfolio may sell interest rate futures contracts in anticipation of
an increase in the general level of interest rates. Generally, as interest rates
rise, the market value of the securities held by a Portfolio will fall, thus
reducing the net asset value of the Portfolio. This interest rate risk can be
reduced without employing futures as a hedge by selling such securities and
either reinvesting the proceeds in securities with shorter maturities or by
holding assets in cash. However, this strategy entails increased transaction
costs in the form of dealer spreads and brokerage commissions and would
typically reduce the Portfolio's average yield as a result of the shortening of
maturities.
The sale of interest rate futures contracts provides a means of hedging
against rising interest rates. As rates increase, the value of a Portfolio's
short position in the futures contracts will also tend to increase thus
offsetting all or a portion of the depreciation in the market value of the
Portfolio's investments that are being hedged. While the Portfolio will incur
commission expenses in selling and closing out futures positions (which is done
by taking an opposite position in the futures contract), commissions on futures
transactions are lower than transaction costs incurred in the purchase and sale
of portfolio securities.
A Portfolio may purchase interest rate futures contracts in
anticipation of a decline in interest rates when it is not fully invested. As
such purchases are made, it is expected that an equivalent amount of futures
contracts will be closed out.
A Portfolio will enter into futures contracts which are traded on
national or foreign futures exchanges, and are standardized as to maturity date
and the underlying financial instrument. Futures exchanges and trading in the
United States are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission ("CFTC"). Futures are traded in London at the London
International Financial Futures Exchange, in Paris, at the MATIF, and in Tokyo
at the Tokyo Stock Exchange.
Options on Futures Contracts. A Portfolio may purchase and write call
and put options on stock index and interest rate futures contracts. A Portfolio
may use such options on futures contracts in connection with its hedging
strategies in lieu of purchasing and writing options directly on the underlying
securities or stock indices or purchasing or selling the underlying futures. For
example, a Portfolio may purchase put options or write call options on stock
index futures or interest rate futures, rather than selling futures contracts,
in anticipation of a decline in general stock market prices or rise in interest
rates, respectively, or purchase call options or write put options on stock
index or interest rate futures, rather than purchasing such futures, to hedge
against possible increases in the price of equity securities or debt securities,
respectively, which the Portfolio intends to purchase.
In connection with transactions in stock index options, stock index
futures, interest rate futures and related options on such futures, a Portfolio
will be required to deposit as "initial margin" an amount of cash and short-term
U.S. government securities. The current initial margin requirement per contract
is approximately 2% of the contract amount. Thereafter, subsequent payments
(referred to as "variation margin") are made to and from the broker to reflect
changes in the value of the futures contract. Brokers may establish deposit
requirements higher than exchange minimums.
Limitations. A Portfolio will not purchase or sell futures contracts or
options on futures contracts or stock indices for non-hedging purposes if, as a
result, the sum of the initial margin deposits on its existing futures contracts
and related options positions and premiums paid for options on futures contracts
or stock indices would exceed 5% of the net assets of the Portfolio unless the
transaction meets certain "bona fide hedging" criteria.
Risks of Options and Futures Strategies. The effective use of options
and futures strategies depends, among other things, on a Portfolio's ability to
terminate options and futures positions at times when its Adviser deems it
desirable to do so. Although a Portfolio will not enter into an option or
futures position unless its Adviser believes that a liquid market exists for
such option or future, there can be no assurance that a Portfolio will be able
to effect closing transactions at any particular time or at an acceptable price.
The Advisers generally expect that options and futures transactions for the
Portfolios will be conducted on recognized exchanges. In certain instances,
however, a Portfolio may purchase and sell options in the over-the-counter
market. The staff of the Securities and Exchange Commission considers
over-the-counter options to be illiquid. A Portfolio's ability to terminate
option positions established in the over-the-counter market may be more limited
than in the case of exchange traded options and may also involve the risk that
securities dealers participating in such transactions would fail to meet their
obligations to the Portfolio.
The use of options and futures involves the risk of imperfect
correlation between movements in options and futures prices and movements in the
price of the securities that are the subject of the hedge. The successful use of
these strategies also depends on the ability of a Portfolio's Adviser to
forecast correctly interest rate movements and general stock market price
movements. This risk increases as the composition of the securities held by the
Portfolio diverges from the composition of the relevant option or futures
contract.
Foreign Currency Transactions (Dreyfus U.S. Government Securities, T. Rowe Price
Equity Income, T. Rowe Price Growth Stock, T. Rowe Price International Stock,
Endeavor Opportunity Value, Endeavor Enhanced Index and Endeavor Select 50
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 currencies. A put option on a futures contract
gives a Portfolio the right to assume a short position in the futures contract
until expiration of the option. A put option on currency gives a Portfolio the
right to sell a currency at an exercise price until the expiration of the
option. A call option on a futures contract gives a Portfolio the right to
assume a long position in the futures contract until the expiration of the
option. A call option on currency gives a Portfolio the right to purchase a
currency at the exercise price until the expiration of the option.
A Portfolio may engage in "position hedging" to protect against a
decline in the value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the value of
currency for securities which the Portfolio intends to buy, when it holds cash
reserves and short-term investments). For position hedging purposes, a Portfolio
may purchase or sell foreign currency futures contracts and foreign currency
forward contracts, and may purchase put or call options on foreign currency
futures contracts and on foreign currencies on exchanges or over-the-counter
markets. In connection with position hedging, a Portfolio may also purchase or
sell foreign currency on a spot basis.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary for a Portfolio to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security or securities being hedged is less
than the amount of foreign currency the Portfolio is obligated to deliver and if
a decision is made to sell the security or securities and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security or
securities if the market value of such security or securities exceeds the amount
of foreign currency the Portfolio is obligated to deliver.
Hedging transactions involve costs and may result in losses. A
Portfolio may write covered call options on foreign currencies to offset some of
the costs of hedging those currencies. A Portfolio will engage in
over-the-counter transactions only when appropriate exchange-traded transactions
are unavailable and when, in the opinion of the Portfolio's Adviser, the pricing
mechanism and liquidity are satisfactory and the participants are responsible
parties likely to meet their contractual obligations. A Portfolio's ability to
engage in hedging and related option transactions may be limited by tax
considerations.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which a Portfolio owns or intends to
purchase or sell. They simply establish a rate of exchange which one can achieve
at some future point in time. Additionally, although these techniques tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
they tend to limit any potential gain which might result from the increase in
the value of such currency.
Currency Forward and Futures Contracts. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract as agreed by the parties, at a price set at the time of the contract.
In the case of a cancelable forward contract, the holder has the unilateral
right to cancel the contract at maturity by paying a specified fee. The
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are designed by and traded on exchanges
regulated by the CFTC, such as the New York Mercantile Exchange. A Portfolio
would enter into foreign currency futures contracts solely for hedging or other
appropriate investment purposes as defined in CFTC regulations.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the maturity date
of a forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in any
given month. Forward contracts may be in any amounts agreed upon by the parties
rather than predetermined amounts. Also, forward foreign exchange contracts are
traded directly between currency traders so that no intermediary is required. A
forward contract generally requires no margin or other deposit.
At the maturity of a forward or futures contract, a Portfolio may
either accept or make delivery of the currency specified in the contract, or at
or prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
Positions in foreign currency futures contracts may be closed out only
on an exchange or board of trade which provides a secondary market in such
contracts. Although a Portfolio intends to purchase or sell foreign currency
futures contracts only on exchanges or boards of trade where there appears to be
an active secondary market, there can be no assurance that a secondary market on
an exchange or board of trade will exist for any particular contract or at any
particular time. In such event, it may not be possible to close a futures
position and, in the event of adverse price movements, a Portfolio would
continue to be required to make daily cash payments of variation margin.
Foreign Currency Options. Options on foreign currencies operate
similarly to options on securities, and are traded primarily in the
over-the-counter market, although options on foreign currencies have recently
been listed on several exchanges. Such options will be purchased or written only
when a Portfolio's Adviser believes that a liquid secondary market exists for
such options. There can be no assurance that a liquid secondary market will
exist for a particular option at any specific time. Options on foreign
currencies are affected by all of those factors which influence foreign exchange
rates and investments generally.
The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options markets.
Foreign Currency Conversion. Although foreign exchange dealers do not
charge a fee for currency conversion, they do realize a profit based on the
difference (the "spread") between prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to a
Portfolio at one rate, while offering a lesser rate of exchange should a
Portfolio desire to resell that currency to the dealer.
Repurchase Agreements (All Portfolios)
Each of the Portfolios may enter into repurchase agreements with a
bank, broker-dealer, or other financial institution but no Portfolio may invest
more than 15% (10% with respect to each of the Endeavor Money Market and Dreyfus
U.S. Government Securities Portfolios) of its net assets in repurchase
agreements having maturities of greater than seven days. A Portfolio may enter
into repurchase agreements, provided the Fund's custodian always has possession
of securities serving as collateral whose market value at least equals the
amount of the repurchase obligation. To minimize the risk of loss a Portfolio
will enter into repurchase agreements only with financial institutions which are
considered by its Adviser to be creditworthy under guidelines adopted by the
Trustees of the Fund. If an institution enters an insolvency proceeding, the
resulting delay in liquidation of the securities serving as collateral could
cause a Portfolio some loss, as well as legal expense, if the value of the
securities declines prior to liquidation.
Forward Commitments (All Portfolios)
Each of the Portfolios may enter into forward commitments to purchase
securities. An amount of cash or other liquid assets equal to the Portfolio's
commitment will be deposited in a segregated account at the Fund's custodian
bank to secure the Portfolio's obligation. Although a Portfolio will generally
enter into forward commitments to purchase securities with the intention of
actually acquiring the securities for its portfolio (or for delivery pursuant to
options contracts it has entered into), the Portfolio may dispose of a security
prior to settlement if its Adviser deems it advisable to do so. The Portfolio
may realize short-term gains or losses in connection with such sales.
Securities Loans (All Portfolios)
Each of the Portfolios may pay reasonable finders', administrative and
custodial fees in connection with loans of its portfolio securities. Although
voting rights or the right to consent accompanying loaned securities pass to the
borrower, a Portfolio retains the right to call the loan at any time on
reasonable notice, and will do so in order that the securities may be voted by
the Portfolio with respect to matters materially affecting the investment. A
Portfolio may also call a loan in order to sell the securities involved. Loans
of portfolio securities will only be made to borrowers considered by a
Portfolio's Adviser to be creditworthy under guidelines adopted by the Trustees
of the Fund.
Interest Rate Transactions (Dreyfus U.S. Government Securities Portfolio)
Among the strategic transactions into which the Dreyfus U.S. Government
Securities Portfolio may enter are interest rate swaps and the purchase or sale
of related caps and floors. The Portfolio expects to enter into these
transactions primarily to preserve a return or spread on a particular investment
or portion of its portfolio, to protect against currency fluctuations, as a
duration management technique or to protect against any increase in the price of
securities the Portfolio anticipates purchasing at a later date. The Portfolio
intends to use these transactions as hedges and not as speculative investments
and will not sell interest rate caps or floors where it does not own securities
or other instruments providing the income stream the Portfolio may be obligated
to pay. Interest rate swaps involve the exchange by the Portfolio with another
party of their respective commitments to pay or receive interest, e.g., an
exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser, to the extent that a specific index
exceeds a predetermined interest rate, to receive payments of interest on a
notional principal amount from the party selling such cap. The purchase of a
floor entitles the purchaser to receive payments on a notional principal amount
from the party selling such floor to the extent that a specified index falls
below a predetermined interest rate or amount.
The Portfolio will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Portfolio receiving or paying, as the case
may be, only the net amount of the two payments. Inasmuch as these swaps, caps
and floors are entered into for good faith hedging purposes, the Adviser to the
Portfolio and the Fund believe such obligations do not constitute senior
securities under the Investment Company Act of 1940 (the "1940 Act") and,
accordingly, will not treat them as being subject to its borrowing restrictions.
The Portfolio will not enter into any swap, cap and floor transaction unless, at
the time of entering into such transaction, the unsecured long-term debt of the
counterparty, combined with any credit enhancements, is rated at least "A" by
Standard & Poor's Ratings Service, a division of McGraw - Hill Companies, Inc.
("Standard & Poor's") or Moody's Investors Service Inc. ("Moody's") or has an
equivalent rating from a nationally recognized statistical rating organization
("NRSRO") or is determined to be of equivalent credit quality by the Adviser.
For a description of the NRSROs and their ratings, see the Appendix. If there is
a default by the counterparty, the Portfolio may have contractual remedies
pursuant to the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been fully developed and, accordingly, they are less liquid than
swaps.
With respect to swaps, the Portfolio will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect to each
swap on a daily basis and will segregate an amount of cash or liquid high grade
securities having a value equal to the accrued excess. Caps and floors require
segregation of assets with a value equal to the Portfolio's net obligations, if
any.
Dollar Roll Transactions (Dreyfus U.S. Government Securities Portfolio)
The Dreyfus U.S. Government Securities Portfolio may enter into "dollar
roll" transactions, which consist of the sale by the Portfolio to a bank or
broker-dealer (the "counterparty") of GNMA certificates or other mortgage-backed
securities together with a commitment to purchase from the counterparty similar,
but not identical, securities at a future date. The counterparty receives all
principal and interest payments, including prepayments, made on the security
while it is the holder. The Portfolio receives a fee from the counterparty as
consideration for entering into the commitment to purchase. Dollar rolls may be
renewed over a period of several months with a different repurchase price and a
cash settlement made at each renewal without physical delivery of securities.
Moreover, the transaction may be preceded by a firm commitment agreement
pursuant to which the Portfolio agrees to buy a security on a future date.
The Portfolio will not use such transactions for leveraging purposes and,
accordingly, will segregate cash, U.S. government securities or other liquid
assets in an amount sufficient to meet its purchase obligations under the
transactions. The Portfolio will also maintain asset coverage of at least 300%
for all outstanding firm commitments, dollar rolls and other borrowings.
Dollar rolls are treated for purposes of the 1940 Act as borrowings of
the Portfolio because they involve the sale of a security coupled with an
agreement to repurchase. Like all borrowings, a dollar roll involves costs to
the Portfolio. For example, while the Portfolio receives a fee as consideration
for agreeing to repurchase the security, the Portfolio forgoes the right to
receive all principal and interest payments while the counterparty holds the
security. These payments to the counterparty may exceed the fee received by the
Portfolio, thereby effectively charging the Portfolio interest on its borrowing.
Further, although the Portfolio can estimate the amount of expected principal
prepayment over the term of the dollar roll, a variation in the actual amount of
prepayment could increase or decrease the cost of the Portfolio's borrowing.
The entry into dollar rolls involves potential risks of loss that are
different from those related to the securities underlying the transactions. For
example, if the counterparty becomes insolvent, the Portfolio's right to
purchase from the counterparty might be restricted. Additionally, the value of
such securities may change adversely before the Portfolio is able to purchase
them. Similarly, the Portfolio may be required to purchase securities in
connection with a dollar roll at a higher price than may otherwise be available
on the open market. Since, as noted above, the counterparty is required to
deliver a similar, but not identical, security to the Portfolio, the security
that the Portfolio is required to buy under the dollar roll may be worth less
than an identical security. Finally, there can be no assurance that the
Portfolio's use of the cash that it receives from a dollar roll will provide a
return that exceeds borrowing costs.
Portfolio Turnover
While it is impossible to predict portfolio turnover rates,
the Advisers to the Portfolios other than the Dreyfus U.S. Government Securities
Portfolio, Dreyfus Small Cap Value Portfolio, Endeavor Select 50 Portfolio and
the Endeavor Money Market Portfolio anticipate that portfolio turnover will
generally not exceed 100% per year. The Adviser to the Endeavor Select 50
Portfolio anticipates that portfolio turnover will generally not exceed 150% per
year. The Adviser to the Dreyfus U.S. Government Securities Portfolio
anticipates that portfolio turnover may exceed 200% per year, exclusive of
dollar roll transactions. The Adviser to the Dreyfus Small Cap Value Portfolio
anticipates that the Portfolio's portfolio turnover rate will generally not
exceed 175%. With respect to the Endeavor Money Market Portfolio, although the
Portfolio intends normally to hold its investments to maturity, the short
maturities of these investments are expected by the Portfolio's Adviser to
result in a relatively high rate of portfolio turnover. Higher portfolio
turnover rates usually generate additional brokerage commissions and expenses.
INVESTMENT RESTRICTIONS
Except for restriction numbers 2, 3, 4, 11 and 12 with respect to the
T. Rowe Price Equity Income, T. Rowe Price Growth Stock, Endeavor Opportunity
Value, Endeavor Enhanced Index and Endeavor Select 50 Portfolios and restriction
number 11 with respect to the T. Rowe Price International Stock, Endeavor Asset
Allocation and Dreyfus Small Cap Value Portfolios (which restrictions are not
fundamental policies), the following investment restrictions (numbers 1 through
12) are fundamental policies, which may not be changed without the approval of a
majority of the outstanding shares of the Portfolio, and apply to each of the
Portfolios except as otherwise indicated. As provided in the 1940 Act, a vote of
a majority of the outstanding shares necessary to amend a fundamental policy
means the affirmative vote of the lesser of (1) 67% or more of the shares
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Portfolio are present or represented by proxy, or (2) more than 50% of
the outstanding shares of the Portfolio.
A Portfolio may not:
1. Borrow money or issue senior securities (as defined in the 1940 Act),
provided that a Portfolio may borrow amounts not exceeding 5% of the value of
its total assets (not including the amount borrowed) for temporary purposes;
except that the Dreyfus U.S. Government Securities Portfolio may borrow from
banks or through reverse repurchase agreements or dollar roll transactions in an
amount equal to up to 33 1/3% of the value of its total assets (calculated when
the loan is made) for temporary, extraordinary or emergency purposes and to take
advantage of investment opportunities and may pledge up to 33 1/3% of the value
of its total assets to secure those borrowings; except that the T. Rowe Price
Equity Income Portfolio, the T. Rowe Price Growth Stock Portfolio and T. Rowe
Price International Stock Portfolio may (i) borrow for non-leveraging, temporary
or emergency purposes and (ii) engage in reverse repurchase
agreements and make other investments or engage in other transactions, which may
involve a borrowing, in a manner consistent with each Portfolio's investment
objective and program, provided that the combination of (i) and (ii) shall not
exceed 33 1/3% of the value of each Portfolios's total assets (including the
amount borrowed) less liabilities (other than borrowings) and may pledge up to
33 1/3% of the value of its total assets to secure those borrowings; except that
the Endeavor Opportunity Value Portfolio and the Endeavor Enhanced Index
Portfolio may borrow money from banks or through reverse repurchase agreements
for temporary or emergency purposes in amounts up to 10% of each Portfolio's
total assets; and except that the Endeavor Select 50 Portfolio may borrow money
from banks for temporary or emergency purposes, or pursuant to reverse
repurchase agreements in an amount up to 33 1/3% of the value of its total
assets, provided that immediately after such borrowings there is asset coverage
of at least 300% of all borrowings.
2. Pledge, hypothecate, mortgage or otherwise encumber its assets, except to
secure borrowings permitted by restriction 1 above. Collateral arrangements with
respect to margin for futures contracts and options are not deemed to be pledges
or other encumbrances for purposes of this restriction.
3. Purchase securities on margin, except a Portfolio may obtain such
short-term credits as may be necessary for the clearance of securities
transactions and may make margin deposits in connection with transactions in
options, futures contracts and options on such contracts.
4. Make short sales of securities or maintain a short position for the account
of the Portfolio, unless at all times when a short position is open the
Portfolio owns an equal amount of such securities or owns securities which,
without payment of any further consideration, are convertible or exchangeable
for securities of the same issue as, and in equal amounts to, the securities
sold short.
5. Underwrite securities issued by other persons, except to the extent that
in connection with the disposition of its portfolio investments it may be deemed
to be an underwriter under federal securities laws.
6. Purchase or sell real estate, although a Portfolio may purchase securities
of issuers which deal in real estate, securities which are secured by interests
in real estate and securities representing interests in real estate.
7. Purchase or sell commodities or commodity contracts, except that all
Portfolios other than the Endeavor Money Market Portfolio may purchase or sell
financial futures contracts and related options. For purposes of this
restriction, currency contracts or hybrid investments shall not be considered
commodities.
8. Make loans, except by purchase of debt obligations in which the Portfolio
may invest consistently with its investment policies, by entering into
repurchase agreements or through the lending of its portfolio securities.
9. Invest in the securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the Portfolio (taken at current
value) would be invested in the securities of such issuer or acquire more than
10% of the outstanding voting securities of any issuer, provided that this
limitation does not apply to obligations issued or guaranteed as to principal
and interest by the U.S. government or its agencies and instrumentalities or to
repurchase agreements secured by such obligations and that up to 25% of the
Portfolio's total assets (taken at current value) may be invested without regard
to this limitation.
10. Invest more than 25% of the value of its total assets in any one industry,
provided that this limitation does not apply to obligations issued or guaranteed
as to interest and principal by the U.S. government, its agencies and
instrumentalities, and repurchase agreements secured by such obligations, and in
the case of the Endeavor Money Market Portfolio obligations of domestic branches
of United States banks.
11. Invest more than 15% (10% with respect to the Endeavor Money Market
Portfolio and Dreyfus U.S. Government Securities Portfolio) of its net assets
(taken at current value at the time of each purchase) in illiquid securities
including repurchase agreements maturing in more than seven days.
12. Purchase securities of any issuer for the purpose of exercising control or
management.
All percentage limitations on investments will apply at the time of the
making of an investment and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and partially or completely as a
result of such investment.
Other Policies
The Endeavor Money Market Portfolio may not invest in the securities of
any one issuer if, immediately after such investment, more than 5% of the total
assets of the Portfolio (taken at current value) would be invested in the
securities of such issuer, provided that this limitation does not apply to
obligations issued or guaranteed as to principal and interest by the U.S.
government or its agencies and instrumentalities or to repurchase agreements
secured by such obligations and that with respect to 25% of the Portfolio's
total assets more than 5% may be invested in securities of any one issuer for
three business days after the purchase thereof if the securities have been
assigned the highest quality rating by NRSROs, or if not rated, have been
determined to be of comparable quality. These limitations apply to time
deposits, including certificates of deposit, bankers' acceptances, letters of
credit and similar instruments; they do not apply to demand deposit accounts.
For a description of the NRSROs' ratings, see the Appendix.
In addition, the Endeavor Money Market Portfolio may not purchase any
security that matures more than thirteen months (397 days) from the date of
purchase or which has an implied maturity of more than thirteen months (397
days) except as provided in (1) below. For the purposes of satisfying this
requirement, the maturity of a portfolio instrument shall be deemed to be the
period remaining until the date noted on the face of the instrument as the date
on which the principal amount must be paid, or in the case of an instrument
called for redemption, the date on which the redemption payment must be made,
except that:
1. An instrument that is issued or guaranteed by the U.S. government or any
agency thereof which has a variable rate of interest readjusted no less
frequently than every 25 months (762 days) may be deemed to have a maturity
equal to the period remaining until the next readjustment of the interest rate.
2. A variable rate instrument, the principal amount of which is scheduled on
the face of the instrument to be paid in thirteen months (397 days) or less, may
be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate.
3. A variable rate instrument that is subject to a demand feature may be
deemed to have a maturity equal to the longer of the period remaining until the
next readjustment of the interest rate or the period remaining until the
principal amount can be recovered through demand.
4. A floating rate instrument that is subject to a demand feature may be
deemed to have a maturity equal to the period remaining until the principal
amount can be recovered through demand.
5. A repurchase agreement may be deemed to have a maturity equal to the period
remaining until the date on which the repurchase of the underlying securities is
scheduled to occur, or where no date is specified, but the agreement is subject
to demand, the notice period applicable to a demand for the repurchase of the
securities.
6. A portfolio lending agreement may be treated as having a maturity equal to
the period remaining until the date on which the loaned securities are scheduled
to be returned, or where no date is specified, but the agreement is subject to
demand, the notice period applicable to a demand for the return of the loaned
securities.
Each of the Endeavor Value Equity and Dreyfus Small Cap Value
Portfolios may not invest more than 5% of the value of its total assets in
warrants not listed on either the New York or American Stock Exchange. Each of
the Endeavor Opportunity Value and Endeavor Enhanced Index Portfolios will not
invest in warrants if, as a result thereof, more than 2% of the value of the
total assets of the Portfolio would be invested in warrants which are not listed
on the New York Stock Exchange, the American Stock Exchange, or a recognized
foreign exchange, or more than 5% of the value of the total assets of the
Portfolio would be invested in warrants whether or not so listed. However, the
acquisition of warrants attached to other securities is not subject to this
restriction. Each of the T. Rowe Price Equity Income, T. Rowe Price Growth
Stock, T. Rowe Price International Stock and Endeavor Select 50 Portfolios will
not invest in warrants if, as a result thereof, the Portfolio will have more
than 5% of the value of its total assets invested in warrants; provided that
this restriction does not apply to warrants acquired as a result of the purchase
of another security.
PERFORMANCE INFORMATION
Total return and yield will be computed as described below.
Total Return
Each Portfolio's "average annual total return" figures described and
shown in the Prospectus are computed according to a formula prescribed by the
Securities and Exchange Commission.
The formula can be expressed as follows:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1000 payment
made at the beginning of the 1, 5, or 10 years (or other) periods at the end of
the 1, 5, or 10 years (or other) periods (or fractional portion thereof)
The table below shows the average annual total return for the Endeavor
Asset Allocation, Endeavor Value Equity, Dreyfus Small Cap Value, Dreyfus U.S.
Government Securities, T. Rowe Price Equity Income, T. Rowe Price Growth Stock,
Endeavor Opportunity Value and Endeavor Enhanced Index Portfolios for the
specific periods.
With respect to the T. Rowe Price International Stock Portfolio which
commenced operation April 8, 1991, effective January 1, 1995, the Portfolio's
Adviser was changed to Rowe Price-Fleming International, Inc. ("Price-Fleming").
Prior to March 24, 1995, the Portfolio was known as the Global Growth Portfolio.
Subsequent to such time, the Portfolio's investment objective was changed from
investments in small capitalization companies on a global basis to investments
in a broad range of established companies on an international basis (i.e.,
non-U.S. companies). Because of the change of the Portfolio's Adviser,
performance information for the period from inception to December 31, 1995 is
not presented. Such information is not reflective of Price-Fleming's ability to
manage the Portfolio. Information with respect to the Portfolio's per share
income and capital changes from inception through December 31, 1997 is set forth
in the Prospectus. Average annual total return information for the period from
inception to December 31, 1994 is available upon written request to the Fund.
<TABLE>
<CAPTION>
For Period
For the One For the Five From Incep-
Year Period Year Period tion (1) to
Ended December Ended December December 31,
31, 1997 31, 1997 1997
<S> <C> <C> <C>
Endeavor Asset
Allocation(2)...... 20.14%/20.14%* 13.99%/13.99% 13.79%/13.53%*
T. Rowe Price
International
Stock.............. 2.54%/2.54%* N/A 10.14%/10.14%*
Endeavor Value
Equity(3).......... 24.81%/24.81%* N/A 19.03%/18.90%*
Dreyfus Small
Cap Value(4)....... 25.56%/25.56%* N/A 15.74%/15.64%*
T. Rowe Price
Equity Income(5)... 28.27%/28.27%* N/A 26.21%/26.21%*
T. Rowe Price Growth
Stock(5)............ 28.57%/28.57%* N/A 37.20%/37.20%*
Dreyfus U.S.
Government
Securities(6)...... 9.15%/9.15%* N/A 7.03%/6.93%*
Endeavor Opportunity
Value(7)........... 16.81%/16.81%* N/A 15.55%/15.14%*
Endeavor Enhanced
Index (8).......... N/A N/A 22.90%/22.79%*
</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) With respect to T. Rowe Price International Stock Portfolio, period
commenced on January 1, 1995.
(2) The Portfolio commenced operations on April 8, 1991.
(3) The Portfolio commenced operations on May 27, 1993.
(4) The Portfolio commenced operations on May 4, 1993.
(5) The Portfolio commenced operations on January 3, 1995.
(6) The Portfolio commenced operations on May 13, 1994.
(7) The Portfolio commenced operations on November 18, 1996.
(8) The Portfolio commenced operations on May 2, 1997.
The calculations of total return assume the reinvestment of all
dividends and capital gains distributions on the reinvestment dates during the
period and the deduction of all recurring
expenses that were charged to shareholders accounts. The above table does not
reflect charges and deductions which are, or may be, imposed under the
Contracts.
The performance of each Portfolio will vary from time to time in
response to fluctuations in market conditions, interest rates, the composition
of the Portfolio's investments and expenses. Consequently, a Portfolio's
performance figures are historical and should not be considered representative
of the performance of the Portfolio for any future period.
Yield
From time to time, the Fund may quote the Endeavor Money Market
Portfolio's and the Dreyfus U.S. Government Securities Portfolio's yield and
effective yield in advertisements or in reports or other communications to
shareholders. Yield quotations are expressed in annualized terms and may be
quoted on a compounded basis.
The annualized current yield for the Endeavor Money Market Portfolio is
computed by: (a) determining the net change in the value of a hypothetical
pre-existing account in the Portfolio having a balance of one share at the
beginning of a seven calendar day period for which yield is to be quoted; (b)
dividing the net change by the value of the account at the beginning of the
period to obtain the base period return; and (c) annualizing the results (i.e.,
multiplying the base period return by 365/7). The net change in the value of the
account reflects the value of additional shares purchased with dividends
declared on the original share and any such additional shares, but does not
include realized gains and losses or unrealized appreciation and depreciation.
In addition, the Endeavor Money Market Portfolio may calculate a compound
effective annualized yield by adding 1 to the base period return (calculated as
described above), raising the sum to a power equal to 365/7 and subtracting 1.
The Dreyfus U.S. Government Securities Portfolio's 30-day yield will be
calculated according to a formula prescribed by the Securities and Exchange
Commission. The formula can be expressed as follows:
YIELD = 2[(a-b+1)6-1]
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursement)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the net asset value per share on the last day of the period
For the purpose of determining the interest earned (variable "a" in the formula)
on debt obligations that were purchased by the Portfolio at a discount or
premium, the formula generally calls for amortization of the discount or
premium; the amortization schedule will be adjusted monthly to reflect changes
in the market values of the debt obligations.
Yield information is useful in reviewing a Portfolio's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in a Portfolio's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in the Portfolios'
investment portfolios, portfolio maturity, operating expenses and market
conditions.
It should be recognized that in periods of declining interest rates the
yields will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the yields will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to a
Portfolio from the continuous sale of its shares will likely be invested in
instruments producing lower yields than the balance of the Portfolio's
investments, thereby reducing the current yield of the Portfolio. In periods of
rising interest rates, the opposite can be expected to occur.
Non-Standardized Performance
In addition to the performance information described above, the Fund
may provide total return information with respect to the Portfolios for
designated periods, such as for the most recent
six months or most recent twelve months. This total return information is
computed as described under "Total Return" above except that no annualization is
made.
PORTFOLIO TRANSACTIONS
Subject to the supervision and control of the Manager and the Trustees
of the Fund, each Portfolio's Adviser is responsible for decisions to buy and
sell securities for its account and for the placement of its portfolio business
and the negotiation of commissions, if any, paid on such transactions. Brokerage
commissions are paid on transactions in equity securities traded on a securities
exchange and on options, futures contracts and options thereon. Fixed income
securities and certain equity securities in which the Portfolios invest are
traded in the over-the-counter market. These securities are generally traded on
a net basis with dealers acting as principal for their own account without a
stated commission, although prices of such securities usually include a profit
to the dealer. In over-the-counter transactions, orders are placed directly with
a principal market maker unless a better price and execution can be obtained by
using a broker. In underwritten offerings, securities are usually purchased at a
fixed price which includes an amount of compensation to the underwriter
generally referred to as the underwriter's concession or discount. Certain money
market securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. U.S. government securities are generally
purchased from underwriters or dealers, although certain newly-issued U.S.
government securities may be purchased directly from the U.S. Treasury or from
the issuing agency or instrumentality. Each Portfolio's Adviser is responsible
for effecting its portfolio transactions and will do so in a manner deemed fair
and reasonable to the Portfolio and not according to any formula. The primary
consideration in all portfolio transactions will be prompt execution of orders
in an efficient manner at a favorable price. In selecting broker-dealers and
negotiating commissions, an Adviser considers the firm's reliability, the
quality of its execution services on a continuing basis and its financial
condition. When more than one firm is believed to meet these criteria,
preference may be given to brokers that provide the Portfolios or their Advisers
with brokerage and research services within the meaning of Section 28(e) of the
Securities Exchange Act of 1934. Each Portfolio's Adviser is of the opinion
that, because this material must be analyzed and reviewed, its receipt and use
does not tend to reduce expenses but may benefit the Portfolio by supplementing
the Adviser's research. In seeking the most favorable price and
execution available, an Adviser may, if permitted by law, consider sales of the
Contracts as described in the Prospectus a factor in the selection of
broker-dealers.
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 International Stock, T. Rowe Price
Equity Income and T. Rowe Price Growth Stock Portfolios may execute portfolio
transactions through certain affiliates of Robert Fleming Holdings Limited and
Jardine Fleming Group Limited, persons indirectly related to the Adviser, acting
as agent in accordance with procedures established by the Fund's Board of
Trustees, but will not purchase any securities from or sell any securities to
any such affiliate acting as principal for its own account.
The Advisers to the Endeavor Enhanced Index and Endeavor Select 50
Portfolios may execute portfolio transactions through certain of their
affiliated brokers, acting as agent in accordance with the procedures
established by the Fund's Board of Trustees, but will not purchase any
securities from or sell any securities to such affiliate acting as principal for
its own account.
For the year ended December 31, 1995, the Endeavor Money Market Portfolio
and the Dreyfus U.S. Government Securities Portfolio did not pay any brokerage
commissions, while the Endeavor Asset Allocation Portfolio paid $187,103 in
brokerage commissions. For the year ended December 31, 1995, the T. Rowe Price
International Stock Portfolio, the Endeavor Value Equity Portfolio and the
Dreyfus Small Cap Value Portfolio paid $395,753, $57,800, and $101,885,
respectively, in brokerage commissions of which $33,338 (8.42%) and $15,101
(3.82%) with respect to the T. Rowe Price International Stock Portfolio was paid
to Robert Fleming Holdings Limited and Jardine Fleming Group Limited, and Ord
Minnett, respectively. 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 Dreyfus U.S. Government
Securities Portfolio did not pay any brokerage commissions, while the Endeavor
Money Market Portfolio and the Endeavor Asset Allocation Portfolio paid $2,724
and $93,009 in brokerage commissions, respectively. For the year ended December
31, 1996, the T. Rowe Price International Stock Portfolio, the Endeavor Value
Equity Portfolio and the Dreyfus Small Cap Value Portfolio paid $136,536,
$90,589 and $398,554, respectively, in brokerage commissions of which $4,462
(3.27%) and $2,908 (2.13%) with respect to the T. Rowe Price International Stock
Portfolio was paid to Robert Fleming Holdings Limited and Jardine Fleming Group
Limited, and Ord Minnett, respectively. 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 fiscal period ended
December 31, 1996, the Endeavor Opportunity Value Portfolio paid $291 in
brokerage commissions.
For the year ended December 31, 1997, the Endeavor Money Market Portfolio
and the Dreyfus U.S. Government Securities Portfolio did not pay any brokerage
commissions, while the Endeavor Asset Allocation Portfolio paid $214,145 in
brokerage commissions. For the year ended December 31, 1997, the T. Rowe Price
International Stock Portfolio, the Endeavor Value Equity Portfolio and the
Dreyfus Small Cap Value Portfolio paid $205,850, $75,870 and $14,665,
respectively, in brokerage commissions of which $14,665 (7.13%) and $608 (.30%)
with respect to the T. Rowe Price International Stock Portfolio was paid to
Robert Fleming Holdings and Jardine Fleming Group Limited, and Ord Minnett,
respectively. 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. For the fiscal
year ended December 31, 1997, the Endeavor Opportunity Value Portfolio paid
$23,636 in brokerage commissions and for the fiscal period ended December 31,
1997, the Endeavor Enhanced Index paid $9,494 in brokerage commissions.
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.
<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.
-3-
<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 (63) Trustee President, Thomas J.
1200 Lake Shore Drive Hawekotte, P.C. (law
Chicago, Illinois 60610 practice).
-4-
<PAGE>
Principal
Position(s) Occupation(s)
Held with During Past
Name, Age and Address Registrant 5 Years
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.
*Halbert D. Lindquist (52) Trustee President, Lindquist
1650 E. Fort Lowell Road Enterprises, Inc.
Tucson, Arizona 85719-2324 (financial services) and
since December, 1987
Tucson Asset Management,
Inc. (financial services),
and since November, 1987,
Presidio Government
Securities, Incorporated
(broker-dealer).
R. Daniel Olmstead, Jr. (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
since 1979, President of
Ivory & Sime
International, Inc.
(investment adviser)
-5-
<PAGE>
Principal
Position(s) Occupation(s)
Held with During Past
Name, Age and Address Registrant 5 Years
*William L. Busler (55) Trustee President, PFL Life
4333 Edgewood Road NE Insurance Company
Cedar Rapids, Iowa 52499
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.
-6-
<PAGE>
Principal
Position(s) Occupation(s)
Held with During Past
Name, Age and Address Registrant 5 Years
Pamela A. Shelton (48) Secretary Since October, 1993,
Executive Secretary to
Chairman of the Board and
Chief Executive Officer
of, and since April, 1996,
Secretary of McGuinness &
Associates, Endeavor
Group, VJM Corporation,
McGuinness Group (until
July, 1996) and Endeavor
Management Co.; from July,
1992 to October, 1993,
Administrative Secretary,
Mayor and City Council,
City of Laguna Niguel,
California.
</TABLE>
* An "interested person" of the Fund as defined in the 1940 Act.
*+ Vincent J. McGuinness, Jr. is the son of Vincent J.
McGuinness.
No remuneration will be paid by the Fund to any Trustee or officer of
the Fund who is affiliated with the Manager or the Advisers. Each Trustee who is
not an affiliated person of the Manager or the 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 8,125.00 8,125.00
Thomas J. Hawekotte 8,125.00 8,125.00
Steven L. Klosterman 8,125.00 8,125.00
Halbert D. Lindquist 8,125.00 8,125.00
uR. Daniel Olmstead 8,125.00 8,125.00
Keith H. Wood 2,375.00 2,375.00
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.
The Manager
The Management Agreement between the Fund and the Manager with respect to
the Endeavor Money Market, Endeavor Asset Allocation and T. Rowe Price
International Stock Portfolios was approved by the Trustees of the Fund
(including all of the Trustees who are not "interested persons" [as defined in
the 1940 Act] of the Manager) on July 20, 1992, and by the shareholders of the
Fund on November 23, 1992. With respect to the Endeavor Value Equity and Dreyfus
Small Cap Value Portfolios, the Management Agreement was approved by the
Trustees of the Fund (including all of the Trustees who are not "interested
persons" of the Manager) on April 19, 1993 and by PFL Life Insurance Company,
the sole shareholder of the Endeavor Value Equity and Dreyfus Small Cap Value
Portfolios, on April 19, 1993. With respect to the Dreyfus U.S. Government
Securities Portfolio, the Management Agreement was approved by the Trustees of
the Fund (including all of the Trustees who are not "interested persons" of the
Manager) on January 24, 1994 and by PFL Life Insurance Company, the sole
shareholder of the Dreyfus U.S. Government Securities Portfolio, on March 7,
1994. With respect to the T. Rowe Price Equity Income and T. Rowe Price Growth
Stock Portfolios, the Management Agreement was approved by the Trustees of the
Fund (including all of the Trustees who are not "interested persons" of the
Manager) on October 24, 1994 and by PFL Life Insurance Company, the sole
shareholder of the T. Rowe Price Equity Income and T. Rowe Price Growth Stock
Portfolios, on November 1, 1994. With respect to the Endeavor Opportunity Value
and Endeavor Enhanced Index Portfolios, the Management Agreement was approved by
the Trustees of the Fund (including all of the Trustees who are not "interested
persons" of the Manager) on August 13, 1996 and by PFL Life Insurance Company,
the sole shareholder of the Endeavor Opportunity Value and Endeavor Enhanced
Index Portfolios, on August 26, 1996. With respect to the Endeavor Select 50
Portfolio, the Management Agreement, as amended, was approved by the Trustees of
the Fund (including all of the Trustees who are not "interested persons" of the
Manager) at meetings held on August 4, 1997 and January 12, 1998 and by PFL Life
Insurance Company, the sole shareholder of the Endeavor Select 50 Portfolio, on
January 18, 1998. See "Organization and Capitalization of the Fund."
The Management Agreement will continue in force for two years from its
date, November 23, 1992 with respect to the Endeavor Money Market, Endeavor
Asset Allocation and T. Rowe Price International Stock Portfolios, April 19,
1993 with respect to the Endeavor Value Equity and Dreyfus Small Cap Value
Portfolios, March 25, 1994 with respect to the Dreyfus U.S. Government
Securities Portfolio, December 28, 1994 with respect to the T. Rowe Price Equity
Income and T. Rowe Price Growth Stock Portfolios, August 26, 1996 with respect
to the Endeavor Opportunity Value and Endeavor Enhanced Index Portfolios,
January 30, 1998, with respect to the Endeavor Select 50 Portfolio and from year
to year thereafter, but only so long as its continuation as to each Portfolio is
specifically approved at least annually (i) by the Trustees or by the vote of a
majority of the outstanding voting securities of the Portfolio, and (ii) by the
vote of a majority of the Trustees who are not parties to the Management
Agreement or "interested persons" of any such party, by votes cast in person at
a meeting called for the purpose of voting on such approval. The Management
Agreement provides that it shall terminate automatically if assigned, and that
it may be terminated as to any Portfolio without penalty by the Trustees of the
Fund or by vote of a majority of the outstanding voting securities of the
Portfolio upon 60 days' prior written notice to the Manager, or by the Manager
upon 90 days' prior written notice to the Fund, or upon such shorter notice as
may be mutually agreed upon. In the event the Manager ceases to be the Manager
of the Fund, the right of the Fund to use the identifying name of "Endeavor" may
be withdrawn.
The
Advisers
Effective May 1, 1998, Morgan Stanley Asset Management Inc. became the
Adviser of the Endeavor Money Market Portfolio and Endeavor Asset Allocation
Portfolio. The Investment Advisory Agreements between the Manager and Morgan
Stanley Asset Management Inc. were approved by the Trustees of the Fund
(including all the Trustees who are not "interested persons" of the Manager or
of the Adviser) on February 23, 1998, and by the shareholders of the Fund on
__________, 1998. The Investment Advisory Agreements between the Manager and
OpCap Advisors were 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 the
Endeavor Opportunity Value Portfolio and by the shareholders of each Portfolio
on June 18, 1997.
The Investment Advisory Agreement between the Manager and The Boston
Company Asset Management, Inc. was approved by the Trustees of the Fund
(including all of the Trustees who are not "interested persons" of the Manager
or of the Adviser) on January 24, 1994 and by PFL Life Insurance Company as sole
shareholder of the Dreyfus U.S. Government Securities Portfolio on March 7,
1994. The Investment Advisory Agreement was transferred to The Dreyfus
Corporation effective May 1, 1996. The Investment Advisory Agreements between
the Manager and T. Rowe Price Associates, Inc. were approved by the Trustees of
the Fund (including all of the Trustees who are not "interested persons" of the
Manager or of the Adviser) on October 24, 1994 and by PFL Life Insurance Company
as sole shareholder of the T. Rowe Price Equity Income and T. Rowe Price Growth
Stock Portfolios on November 1, 1994. The Investment Advisory Agreement between
the Manager and J.P. Morgan Investment Management Inc. was approved by the
Trustees of the Fund (including all of the Trustees who are not "interested
persons" of the Manager or of the Adviser) on August 13, 1996 and by PFL Life
Insurance Company as sole shareholder of the Endeavor Enhanced Index Portfolio
on August 26, 1996. The Investment Advisory Agreement between the Manager and
Montgomery Asset Management, LLC was approved by the Trustees of the Fund
(including all of the Trustees who are not "interested persons" of the Manager
or of the Adviser) on August 4, 1997 and by PFL Life Insurance Company as sole
shareholder of the Endeavor Select 50 Portfolio on January 18, 1998. Effective
January 1, 1995, Price-Fleming became the Adviser of the T. Rowe Price
International Stock Portfolio. The Investment Advisory Agreement with
Price-Fleming for the T. Rowe Price International Stock Portfolio was approved
by the Trustees of the Fund (including all of the Trustees who are not
"interested persons" of the Manager or of the Adviser) on December 19, 1994 and
by shareholders of the Portfolio on March 24, 1995. Effective September 16,
1996, The Dreyfus Corporation became the Adviser of the Dreyfus Small Cap Value
Portfolio. The Investment Advisory Agreement with The Dreyfus Corporation was
approved by the Trustees of the Fund (including all of the Trustees who are not
"interested persons" of the Manager or of the Adviser) on August 13, 1996 and by
the shareholders of the Portfolio on October 29, 1996. See "Organization and
Capitalization of the Fund."
Each agreement will continue in force for two years from its date,
April 30, 1998 with respect to the Endeavor Money Market and Endeavor Asset
Allocation Portfolios, April 19, 1993 with respect to the Endeavor Value Equity
Portfolio, March 25, 1994 with respect to the Dreyfus U.S. Government Securities
Portfolio, December 28, 1994 with respect to the T. Rowe Price Equity Income and
T. Rowe Price Growth Stock Portfolios, January 1, 1995 with respect to the T.
Rowe Price International Stock Portfolio, September 16, 1996 with respect to the
Dreyfus Small Cap Value Portfolio, November 4, 1996 with respect to the Endeavor
Opportunity Value Portfolio, April 30, 1997 with respect to the Endeavor
Enhanced Index Portfolio and January 30, 1998 with respect to the Endeavor
Select 50 Portfolio, and from year to year thereafter, but only so long as its
continuation as to a Portfolio is specifically approved at least annually (i) by
the Trustees or by the vote of a majority of the outstanding voting securities
of the Portfolio, and (ii) by the vote of a majority of the Trustees who are not
parties to the agreement or "interested persons" of any such party, by votes
cast in person at a meeting called for the purpose of voting on such approval.
Each Investment Advisory Agreement provides that it shall terminate
automatically if assigned or if the Management Agreement with respect to the
related Portfolio terminates, and that it may be terminated as to a Portfolio
without penalty by the Manager, by the Trustees of the Fund or by vote of a
majority of the outstanding voting securities of the Portfolio on not less than
60 days' prior written notice to the Adviser or by the Adviser on not less than
150 days' (90 days' with respect to the Endeavor Money Market, Endeavor Asset
Allocation, Endeavor Enhanced Index and Endeavor Select 50 Portfolios) 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 Money Market
Portfolio........ $258,744 $--- $---
Endeavor Asset
Allocation
Portfolio....... 2,057,590 --- ---
T. Rowe Price
International
Stock Portfolio. 1,404,553 --- ---
Endeavor Value
Equity Portfolio. 1,367,432 ---
Dreyfus Small
Cap Value
Portfolio....... 920,244 --- ---
Dreyfus U.S.
Government
Securities
Portfolio....... 227,037
T. Rowe Price Income
Portfolio........ 1,073,258
T. Rowe Price Growth
Stock Portfolio... 710,554
Endeavor Opportunity
Value Portfolio... 97,611
Endeavor Enhanced Index
Portfolio.......... 50,159 17,349
</TABLE>
<TABLE>
<CAPTION>
1996
Investment Investment
Management Management Other
Fee Fee Expenses
Paid Waived Reimbursed
<S> <C> <C> <C>
Endeavor Money Market
Portfolio....... $ 165,212 $ -- --
Endeavor Asset
Allocation
Portfolio....... 1,639,338 -- --
T. Rowe Price
International
Stock Portfolio. 1,015,179 -- --
Endeavor Value Equity
Portfolio....... 768,579 -- --
Dreyfus Small
Cap Value
Portfolio....... 535,895 -- --
Dreyfus U.S.
Government
Securities
Portfolio....... 122,058 -- --
T. Rowe Price
Equity Income
Portfolio....... 369,356 -- --
T. Rowe Price
Growth Stock
Portfolio....... 313,356 -- --
Endeavor Opportunity
Value Portfolio*... 197 -- 2,802
</TABLE>
<TABLE>
<CAPTION>
1995***
Investment Investment
Management Management Other
Fee Fee Expenses
Paid Waived Reimbursed
<S> <C> <C> <C>
Endeavor Money Market
Portfolio....... $ 117,465 $ --- ---
Endeavor Asset
Allocation
Portfolio....... 1,388,652 --- ---
T. Rowe Price
International
Stock Portfolio. 759,830 --- ---
Endeavor Value Equity
Portfolio....... 395,205 --- ---
Dreyfus Small Cap
Value Portfolio. 339,672 --- ---
Dreyfus U.S.
Government
Securities
Portfolio....... 42,531 --- ---
T. Rowe Price
Equity Income
Portfolio....... 70,664 --- ---
T. Rowe Price
Growth Stock
Portfolio....... 75,681 --- ---
</TABLE>
- ---------------
* The information presented with respect to the Endeavor Enhanced Index
Portfolio is for the period from May 2, 1997 (commencement of
operations) to December 31, 1997.
** The information presented with respect to the Endeavor Opportunity
Value Portfolio is for the period from November 18, 1996 (commencement
of operations) to December 31, 1996.
*** The information presented for the T. Rowe Price Equity Income and T.
Rowe Price Growth Stock Portfolios is for 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 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 from case to
case. However, consideration is generally given to the financial position of the
issuer and other fundamental analytical data relating to the investment and to
the nature of the restrictions on disposition of the securities (including any
registration expenses that might be borne by the Portfolio in connection with
such disposition). In addition, specific factors are also generally considered,
such as the cost of the investment, the market value of any unrestricted
securities of the same class (both at the time of purchase and at the time of
valuation), the size of the holding, the prices of any recent transactions or
offers with respect to such securities and any available analysts' reports
regarding the issuer.
Notwithstanding the foregoing, short-term debt securities with
maturities of 60 days or less will be valued at amortized cost.
The Endeavor Money Market Portfolio's investment policies and method of
securities valuation are intended to permit the Portfolio generally to maintain
a constant net asset value of $1.00 per share by computing the net asset value
per share to the nearest $.01 per share. The Portfolio is permitted to use the
amortized cost method of valuation for its portfolio securities pursuant to
regulations of the Securities and Exchange Commission. This method may result in
periods during which value, as determined by amortized cost, is higher or lower
than the price the Portfolio would receive if it sold the instrument. The net
asset value per share would be subject to fluctuation upon any significant
changes in the value of the Portfolio's securities. The value of debt
securities, such as those in the Portfolio, usually reflects yields generally
available on securities of similar yield, quality and duration. When such yields
decline, the value of a portfolio holding such securities can be expected to
decline. Although the Portfolio seeks to maintain the net asset value per share
of the Portfolio at $1.00, there can be no assurance that net asset value will
not vary.
The Trustees of the Fund have undertaken to establish procedures
reasonably designed, taking into account current market conditions and the
Portfolio's investment objective, to stabilize the net asset value per share for
purposes of sales and redemptions at $1.00. These procedures include the
determination, at such intervals as the Trustees deem appropriate, of the
extent, if any, to which the net asset value per share calculated by using
available market quotations deviates from $1.00 per share. In the event such
deviation exceeds one half of one percent, the Trustees are required to promptly
consider what action, if any, should be initiated.
With respect to the Portfolios other than the Endeavor Money Market
Portfolio, foreign securities traded outside the United States are generally
valued as of the time their trading is complete, which is usually different from
the close of the New York Stock Exchange. Occasionally, events affecting the
value of such securities may occur between such times and the close of the New
York Stock Exchange that will not be reflected in the computation of the
Portfolio's net asset value. If events
materially affecting the value of such securities occur during such period,
these securities will be valued at their fair value according to procedures
decided upon in good faith by the Fund's Board of Trustees. All securities and
other assets of a Portfolio initially expressed in foreign currencies will be
converted to U.S. dollar values at the mean of the bid and offer prices of such
currencies against U.S. dollars last quoted on a valuation date by any
recognized dealer.
TAXES
Federal Income Taxes
Each Portfolio intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"). By so
qualifying, a Portfolio will not be subject to federal income taxes to the
extent that its net investment income and net realized capital gains are
distributed.
In order to so qualify, a Portfolio must, among other things, (1)
derive at least 90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stocks or securities or foreign currencies, or other income
(including but not limited to gains from options, futures or forward contracts)
derived with respect to its business of investing in such stocks or securities;
(2) diversify its holdings so that, at the end of each quarter of the
Portfolio's taxable year, (a) at least 50% of the market value of the
Portfolio's assets is represented by cash, government securities and other
securities limited in respect of any one issuer to 5% of the value of the
Portfolio's assets and to not more than 10% of the voting securities of such
issuer, and (b) not more than 25% of the value of its assets is invested in
securities of any one issuer (other than government securities).
As a regulated investment company, a Portfolio will not be subject to
federal income tax on net investment income and capital gains (short- and
long-term), if any, that it distributes to its shareholders if at least 90% of
its net investment income and net short-term capital gains for the taxable year
are distributed, but will be subject to tax at regular corporate rates on any
income or gains that are not distributed. In general, dividends will be treated
as paid when actually distributed, except that dividends declared in October,
November or December and made payable to shareholders of record in such a month
will be treated as having been paid by the Portfolio (and
received by shareholders) on December 31, provided the dividend is paid in the
following January. Each Portfolio intends to satisfy the distribution
requirement in each taxable year.
The Portfolios will not be subject to the 4% federal excise tax imposed
on registered investment companies that do not distribute all of their income
and gains each calendar year because such tax does not apply to a registered
investment company whose only shareholders are segregated asset accounts of life
insurance companies held in connection with variable annuity and/or variable
life insurance policies.
The Fund intends to comply with section 817(h) of the Code and the
regulations issued thereunder. As required by regulations under that section,
the only shareholders of the Fund and its Portfolios will be life insurance
company segregated asset accounts (also referred to as separate accounts) that
fund variable life insurance or annuity contracts and the general account of PFL
Life Insurance Company which provided the initial capital for the Portfolios of
the Fund. See the prospectus or other material for the Contracts for additional
discussion of the taxation of segregated asset accounts and of the owner of the
particular Contract described therein.
Section 817(h) of the Code and Treasury Department regulations
thereunder impose certain diversification requirements on the segregated asset
accounts investing in the Portfolios of the Fund. These requirements, which are
in addition to the diversification requirements applicable to the Fund under the
1940 Act and under the regulated investment company provisions of the Code, may
limit the types and amounts of securities in which the Portfolios may invest.
Failure to meet the requirements of section 817(h) could result in current
taxation of the owner of the Contract on the income of the Contract.
The Fund may therefore find it necessary to take action to ensure that
a Contract continues to qualify as a Contract under federal tax laws. The Fund,
for example, may be required to alter the investment objectives of a Portfolio
or substitute the shares of one Portfolio for those of another . No such change
of investment objectives or substitution of securities will take place without
notice to the shareholders of the affected Portfolio and the approval of a
majority of such shareholders and without prior approval of the Securities and
Exchange Commission, to the extent legally required.
ORGANIZATION AND CAPITALIZATION OF THE FUND
The Fund is a Massachusetts business trust organized on November 18,
1988. A copy of the Fund's Agreement and Declaration of Trust, as amended, which
is governed by Massachusetts law, is on file with the Secretary of State of The
Commonwealth of Massachusetts.
The Trustees of the Fund have authority to issue an unlimited number of
shares of beneficial interest without par value of one or more series.
Currently, the Trustees have established and designated eleven series . Each
series of shares represents the beneficial interest in a separate Portfolio of
assets of the Fund, which is separately managed and has its own investment
objective and policies. The Trustees of the Fund have authority, without the
necessity of a shareholder vote, to establish additional portfolios and series
of shares. The shares outstanding are, and those offered hereby when issued will
be, fully paid and nonassessable by the Fund. The shares have no preemptive,
conversion or subscription rights and are fully transferable.
The assets received from the sale of shares of a Portfolio, and all
income, earnings, profits and proceeds thereof, subject only to the rights of
creditors, constitute the underlying assets of the Portfolio. The underlying
assets of a Portfolio are required to be segregated on the Fund's books of
account and are to be charged with the expenses with respect to that Portfolio.
Any general expenses of the Fund not readily attributable to a Portfolio will be
allocated by or under the direction of the
Trustees in such manner as the Trustees determine to be fair and equitable,
taking into consideration, among other things, the nature and type of expense
and the relative sizes of the Portfolio and the other Portfolios.
Each share has one vote, with fractional shares voting proportionately.
Shareholders of a Portfolio are not entitled to vote on any matter that requires
a separate vote of the shares of another Portfolio but which does not affect the
Portfolio. The Agreement and Declaration of Trust does not require the Fund to
hold annual meetings of shareholders. Thus, there will ordinarily be no annual
shareholder meetings, unless otherwise required by the 1940 Act. The Trustees of
the Fund may appoint their successors until fewer than a majority of the
Trustees have been elected by shareholders, at which time a meeting of
shareholders will be called to elect Trustees. Under the Agreement and
Declaration of Trust, any Trustee may be removed by vote of two-thirds of the
outstanding shares of the Fund, and holders of 10% or more of the outstanding
shares can require the Trustees to call a meeting of shareholders for the
purpose of voting on the removal of one or more Trustees. If ten or more
shareholders who have been such for at least six months and who hold in the
aggregate shares with a net asset value of at least $25,000 inform the Trustees
that they wish to communicate with other shareholders, the Trustees either will
give such shareholders access to the shareholder lists or will inform them of
the cost involved if the Fund forwards materials to the shareholders on their
behalf. If the Trustees object to mailing such materials, they must inform the
Securities and Exchange Commission and thereafter comply with the requirements
of the 1940 Act.
PFL will vote shares of the Fund as described under the caption "Voting
Rights" in the prospectus or other material for the Contracts which accompanies
the Prospectus.
As of January 31, 1998, the PFL Endeavor Variable Annuity Account owned of
record the following approximate percentages of the outstanding shares of each
Portfolio: 67.05% of the Endeavor Money Market Portfolio; 92.87% of the Endeavor
Asset Allocation Portfolio; 86.22% of the T. Rowe Price International Stock
Portfolio; 82.54% of the Endeavor Value Equity Portfolio; 85.22% of the Dreyfus
Small Cap Value Portfolio; 81.21% of the Dreyfus U.S. Government Securities
Portfolio; 83.03% of the T. Rowe Price Equity Income Portfolio; 79.00% of the T.
Rowe Price Growth Stock Portfolio; 80.31% of the Endeavor Opportunity Value
Portfolio; and 77.66% of the Endeavor Enhanced Index 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:
31.63% of the Endeavor Money Market Portfolio; 5.76% of the Endeavor Asset
Allocation Portfolio; 10.02% of the T. Rowe Price International Stock Portfolio;
14.50% of the Endeavor Value Equity Portfolio; 11.58% of the Dreyfus Small Cap
Value Portfolio; 16.00% of the Dreyfus U.S. Government Securities Portfolio;
13.86% of the T. Rowe Price Equity Income Portfolio; 17.46% of the T. Rowe Price
Growth Stock Portfolio; 15.69% of the Endeavor Opportunity Value Portfolio; and
18.16% of the Endeavor Enhanced Index 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: 1.32% of the Endeavor
Money Market Portfolio; 1.37% of the Endeavor Asset Allocation Portfolio; 3.61%
of the T. Rowe Price International Stock Portfolio; 2.90% of the Endeavor Value
Equity Portfolio; 2.99% of the Dreyfus Small Cap Value Portfolio; 2.79% of the
Dreyfus U.S. Government Securities Portfolio; 2.92% of the T. Rowe Price Equity
Income Portfolio; 3.30% of the T. Rowe Price Growth Stock Portfolio; 4.00% of
the Endeavor Opportunity Value Portfolio; and 2.72% of the Endeavor Enhanced
Index Portfolio. As of January 31, 1998, the Providian Life and Health Insurance
Company Separate Account V owned of record the following approximate percentages
of the outstanding shares of each Portfolio: __% of the Dreyfus Small Cap Value
Portfolio; __% of the T. Rowe Price International Stock Portfolio; and __% of
the Endeavor Enhanced Index Portfolio. As of January 31, 1998, the Providian
Life and Health Insurance Company Separate Account C owned of record the
following approximate percentages of the outstanding shares of each Portfolio:
__% of the Dreyfus Small Cap Value Portfolio; and __% of the Endeavor Enhanced
Index 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 Money Market Portfolio, Endeavor
Asset Allocation Portfolio, T. Rowe Price International Stock Portfolio,
Endeavor Value Equity Portfolio, Dreyfus Small Cap Value Portfolio, Dreyfus U.S.
Government Securities Portfolio, T. Rowe Price Equity Income Portfolio, T. Rowe
Price Growth Stock Portfolio, Endeavor Opportunity Value Portfolio and Endeavor
Enhanced Index 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.
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<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 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 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 short-term rating ("TBW-1", "TBW-2", "TBW-3", or
"TBW-4") to each class of debt (e.g., commercial paper or non-convertible debt),
having a maturity of one-year or less, issued by a holding company structure or
an entity within the holding company structure that is rated by BankWatch.
Additionally, BankWatch will assign an issuer rating ("A", "A/B", "B", "B/C",
"C", "C/D", "D", "D/E", and "E") to each issuer that it rates.
Various of the NRSROs utilize rankings within rating categories
indicated by a + or -. The Portfolios, in accordance with industry practice,
recognize such rankings within categories as graduations, viewing for example
Standard & Poor's rating of A-1+ and A-1 as being in Standard & Poor's highest
rating category.
A-1
<PAGE>
ENDEAVOR SERIES TRUST
PART C
Other Information
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in Part A:
Audited Financial Highlights for the
Endeavor Money Market Portfolio
(formerly, TCW Money Market
Portfolio), Endeavor Asset
Allocation Portfolio( formerly, TCW
Managed Asset Allocation Portfolio),
Endeavor Value Equity Portfolio
(formerly, Value Equity Portfolio),
Dreyfus Small Cap Value Portfolio,
Dreyfus U.S. Government Securities
Portfolio, T. Rowe Price
International Stock Portfolio, T.
Rowe Price Equity Income Portfolio,
T. Rowe Price Growth Stock
Portfolio, Endeavor Opportunity
Value Portfolio (formerly,
Opportunity Value Portfolio) and
Endeavor Enhanced Index Portfolio
(formerly, Enhanced Index Portfolio)
for the period ended December 31,
1997.
Incorporated by reference in Part B:
The following audited Financial
Statements for the Endeavor Money
Market Portfolio, Endeavor Asset
Allocation Portfolio, Endeavor Value
Equity Portfolio, Dreyfus Small Cap
Value Portfolio, Dreyfus U.S.
Government Securities Portfolio, T.
Rowe Price International Stock
Portfolio, T. Rowe Price Equity
Income Portfolio, T. Rowe Price
Growth Stock Portfolio, Endeavor
Opportunity Value Portfolio and
Endeavor Enhanced Index Portfolio
for the period ended December 31,
1997 are incorporated by reference:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
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<PAGE>
Statement of Changes in Net Assets
Notes to Financial Statements
Included in Part C:
Consent of Independent Auditors is
filed herein.
(b) Exhibits:
All references are to the Registrant's
registration statement on Form N-1A as filed
with the SEC on March 7, 1989, File Nos. 33-
27352 and 811-5780 (the "Registration
Statement").
Exhibit No. Description of Exhibits
(1)(a) Agreement and Declaration
of Trust is incorporated
by reference to
Post-Effective Amendment
No. 14 to the
Registration Statement as
filed with the SEC on
April 29, 1996
("Post-Effective
Amendment No. 14").
(1)(b) Amendment No. 1 to Agreement and
Declaration of Trust is
incorporated by reference to Post-
Effective Amendment No. 14.
(1)(c) Amendment No. 2 to Agreement and
Declaration of Trust is
incorporated by reference to Post-
Effective Amendment No. 14.
(1)(d) Amendment No. 3 to Agreement and
Declaration of Trust is
incorporated by reference to Post-
Effective Amendment No. 14.
(1)(e) Amendment No. 4 to Agreement and
Declaration of Trust is
incorporated by reference to Post-
Effective Amendment No. 14
(1)(f) Amendment No. 5 to Agreement and
Declaration of Trust is
incorporated by reference to Post-
Effective Amendment No. 14.
(1)(g) Amendment No. 6 to Agreement and
Declaration of Trust is
-2-
<PAGE>
incorporated by reference to Post-
Effective Amendment No. 14.
(1)(h) Amendment No. 7 to Agreement and
Declaration of Trust is
incorporated by reference to Post-
Effective Amendment No. 16 to the
Registration Statement as filed
with the SEC on February 14, 1997
("Post-Effective Amendment No.
16").
(1)(i) Amendment No. 8 to Agreement and
Declaration of Trust is
incorporated by reference to Post-
Effective Amendment No. 21 to the
Registration Statement as filed
with the SEC on December 19, 1997
("Post-Effective Amendment No.
21").
(1)(j) Amendment No. 9 to Agreement and
Declaration of Trust is filed
herein.
(2) Amended and Restated By-Laws are
incorporated by reference to Post-
Effective Amendment No. 14.
(3) Not Applicable.
(4)(a) Specimen certificate for
shares of beneficial
interest of the Domestic
Money Market Portfolio
(now known as Endeavor
Money Market Portfolio)
is incorporated by
reference to
Post-Effective Amendment
No. 14.
(4)(b) Deleted
(4)(c) Specimen certificate for
shares of beneficial
interest of the Domestic
Managed Asset Allocation
Portfolio (now known as
Endeavor Asset Allocation
Portfolio) is
incorporated by reference
to Post-Effective
Amendment No. 14.
(4)(d) Deleted
(4)(e) Specimen certificate for
shares of beneficial
interest of the Global
Growth Portfolio (now
known as T.
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<PAGE>
Rowe Price International Stock
Portfolio) is incorporated by
reference to Post-Effective
Amendment No. 14.
(4)(f) Specimen certificate for
shares of beneficial
interest of the Quest for
Value Equity Portfolio
(now known as Endeavor
Value Equity Portfolio)
is incorporated by
reference to
Post-Effective Amendment
No. 14.
(4)(g) Specimen certificate for
shares of beneficial
interest of the Quest for
Value Small Cap Portfolio
(now known as Dreyfus
Small Cap Value
Portfolio) is
incorporated by reference
to Post-Effective
Amendment No. 14.
(4)(h) Specimen certificate for
shares of beneficial
interest of the U.S.
Government Securities
Portfolio (now known as
Dreyfus U.S. Government
Securities Portfolio) is
incorporated by reference
to Post-Effective
Amendment No. 14.
(4)(i) Specimen certificate for shares of
beneficial interest of the T. Rowe
Price Equity Income Portfolio is
incorporated by reference to Post-
Effective Amendment No. 14.
(4)(j) Specimen certificate for shares of
beneficial interest of the T. Rowe
Price Growth Stock Portfolio is
incorporated by reference to Post-
Effective Amendment No. 14.
(4)(k) Specimen certificate for
shares of beneficial
interest of the
Opportunity Value
Portfolio (now known as
Endeavor Opportunity
Value Portfolio) is
incorporated by reference
to Post-Effective
Amendment No. 15 to the
Registration Statement as
filed with the SEC on
August 21, 1996
("Post-Effective
Amendment No.
15").
(4)(l) Specimen certificate for shares of
beneficial interest of the
-4-
<PAGE>
Enhanced Index Portfolio (now
known as Endeavor Enhanced Index
Portfolio)is incorporated by
reference to Post-Effective
Amendment No. 15.
(4)(m) Specimen certificate for
shares of beneficial
interest of the Select 50
Portfolio (now known as
Endeavor Select 50
Portfolio) is
incorporated by reference
to Post-Effective
Amendment No. 18 to the
Registration Statement as
filed with the SEC on
July 18, 1997
("Post-Effective
Amendment No.
18").
(5)(a) Management Agreement
dated November 23, 1992
between Registrant and
Endeavor Investment
Advisers is incorporated
by reference to
Post-Effective Amendment
No. 14.
(5)(a)(1) Supplement dated April
29, 1993 to Management
Agreement between
Registrant and Endeavor
Investment Advisers with
respect to Quest for
Value Equity Portfolio
and Quest for Value Small
Cap Portfolio is
incorporated by reference
to Post- Effective
Amendment No. 14.
(5)(a)(2) Supplement dated March
25, 1994 to Management
Agreement between
Registrant and Endeavor
Investment Advisers with
respect to U.S.
Government Securities
Portfolio is incorporated
by reference to Post-
Effective Amendment No.
14.
(5)(a)(3) Supplement dated December
28, 1994 to Management
Agreement between
Registrant and Endeavor
Investment Advisers with
respect to the T. Rowe
Price Equity Income
Portfolio and T. Rowe
Price Growth Stock
Portfolio is incorporated
by reference to
Post-Effective Amendment
No. 14.
(5)(a)(4) Supplement to Management Agreement
between Registrant and Endeavor
Investment Advisers with respect
-5-
<PAGE>
to Opportunity Value Portfolio and
Enhanced Index Portfolio is
incorporated by reference to Post-
Effective Amendment No. 16.
(5)(a)(5) Supplement to Management
Agreement between
Registrant and Endeavor
Investment Advisers with
respect to Endeavor
Select 50 Portfolio
(formerly known as Select
50 Portfolio) is filed
herein.
(5)(a)(6) Amendment dated January
28, 1998 to Management
Agreement between
Registrant and Endeavor
Investment Advisers is
filed herein.
(5)(b) Deleted
(5)(c) Deleted
(5)(d) Deleted
(5)(e) Deleted
(5)(f) Investment Advisory
Agreement between Quest
for Value Advisors and
Endeavor Investment
Advisers with respect to
Quest for Value Equity
Portfolio is incorporated
by reference to
Post-Effective Amendment
No. 14.
(5)(g) Investment Advisory Agreement
between The Boston Company Asset
Management, Inc. and Endeavor
Investment Advisers with respect
to the U.S. Government Securities
Portfolio is incorporated by
reference to Post-Effective
Amendment No. 14.
(5)(g)(1) Transfer and Assumption of
Investment Advisory Agreement
among The Boston Company Asset
-6-
<PAGE>
Management, Inc., The Dreyfus
Corporation, Endeavor Investment
Advisers and Registrant with
respect to the Dreyfus U.S.
Government Securities Portfolio is
incorporated by reference to Post-
Effective Amendment No. 14.
(5)(h) Investment Advisory Agreement
between T. Rowe Price Associates,
Inc. and Endeavor Investment
Advisers with respect to the T.
Rowe Price Equity Income Portfolio
is incorporated by reference to
Post-Effective Amendment No. 14.
(5)(i) Investment Advisory Agreement
between T. Rowe Price Associates,
Inc. and Endeavor Investment
Advisers with respect to the T.
Rowe Price Growth Stock Portfolio
is incorporated by reference to
Post-Effective Amendment No. 14.
(5)(j) Investment Advisory Agreement
between Rowe Price-Fleming,
International, Inc. and Endeavor
Investment Advisers with respect
to the Global Growth Portfolio is
incorporated by reference to Post-
Effective Amendment No. 14.
(5)(k) Investment Advisory
Agreement between The
Dreyfus Corporation and
Endeavor Investment
Advisers with respect to
the Dreyfus Small Cap
Value Portfolio is
incorporated by reference
to Post- Effective
Amendment No. 16.
(5)(l) Investment Advisory
Agreement between OpCap
Advisors and Endeavor
Investment Advisers with
respect to the
Opportunity Value
Portfolio is incorporated
by reference to
Post-Effective Amendment
No. 16.
(5)(m) Form of Investment Advisory
Agreement between J.P. Morgan
Investment Management Inc. and
Endeavor Investment Advisers with
respect to the Enhanced Index
Portfolio is incorporated by
-7-
<PAGE>
reference to Post-Effective
Amendment No. 15.
(5)(n) Investment Advisory
Agreement between
Montgomery Asset
Management, LLC and
Endeavor Investment
Advisers with respect to
the Select 50 Portfolio
(now known as Endeavor
Select 50 Portfolio) is
filed herein.
(5)(o) Form of Investment Advisory
Agreement between Morgan Stanley
Asset Management Inc. and Endeavor
Investment Advisers with respect
to Endeavor Money Market Portfolio
is filed herein.
(5)(p) Form of Investment Advisory
Agreement between Morgan Stanley
Asset Management Inc. and Endeavor
Investment Advisers with respect
to Endeavor Asset Allocation
Portfolio is filed herein.
(6) Participation Agreement
between Registrant,
Endeavor Management Co.
and PFL Life Insurance
Company is incorporated
by reference to
Post-Effective Amendment
No. 14.
(7) Not Applicable.
(8)(a) Custody Agreement between
Registrant and Boston Safe Deposit
and Trust Company is incorporated
by reference to Post-Effective
Amendment No. 14.
(8)(b) Supplement dated April
19, 1993 to Custody
Agreement between
Registrant and Boston
Safe Deposit and Trust
Company with respect to
the Quest for Value
Equity Portfolio and
Quest for Value Small Cap
Portfolio is incorporated
by reference to Post-
Effective Amendment No.
14.
(8)(c) Supplement dated December 30, 1994
to Custody Agreement between
Registrant and Boston Safe Deposit
-8-
<PAGE>
and Trust Company with respect to
the T. Rowe Price Equity Income
Portfolio and T. Rowe Price Growth
Stock Portfolio is incorporated by
reference to Post-Effective
Amendment No. 14.
(8)(d) Supplement dated March
25, 1994 to Custody
Agreement between
Registrant and Boston
Safe Deposit and Trust
Company with respect to
the U.S. Government
Securities Portfolio is
incorporated by reference
to Post-Effective
Amendment No. 14.
(8)(e) Supplement dated November
4, 1996 to Custody
Agreement between
Registrant and Boston
Safe Deposit and Trust
Company with respect to
the Opportunity Value
Portfolio and Enhanced
Index Portfolio is
incorporated by reference
to Post- Effective
Amendment No. 16.
(8)(f) Form of Supplement to
Custody Agreement between
Registrant and Boston
Safe Deposit and Trust
Company with respect to
the Select 50 Portfolio
(formerly known as
Montgomery Select 50
Portfolio) is
incorporated by reference
to Post- Effective
Amendment No. 18.
(9)(a) Transfer Agency and
Registrar Agreement
between Registrant and
The Shareholder Services
Group, Inc. (now known as
First Data Investor
Services Group, Inc.) is
incorporated by reference
to Post- Effective
Amendment No. 14.
(9)(b) License Agreement between Endeavor
Management Co. and Registrant is
incorporated by reference to Post-
Effective Amendment No. 14.
(9)(b)(1) Amendment to License Agreement
between Endeavor Management Co.
and Registrant is incorporated by
reference to Post-Effective
Amendment No. 14.
-9-
<PAGE>
(9)(c) Administration Agreement between
Endeavor Management Co. and The
Boston Company Advisors, Inc. is
incorporated by reference to Post-
Effective Amendment No. 14.
(9)(c)(1) Supplement dated April
19, 1993 to
Administration Agreement
between Endeavor
Investment Advisers and
The Boston Company
Advisors, Inc., with
respect to the Quest for
Value Equity Portfolio
and Quest for Value Small
Cap Portfolio is
incorporated by reference
to Post- Effective
Amendment No. 14.
(9)(c)(2) Amendment No. 2 dated April 1,
1994 to Administration Agreement
between Endeavor Investment
Advisers and The Boston Company
Advisors, Inc. is filed herein.
(9)(c)(3) Consent to Assignment of
Administration Agreement dated May
4, 1994 between Endeavor
Investment Advisers and The Boston
Company Advisors, Inc. to The
Shareholder Services Group, Inc.
(currently known as First Data
Investor Services Group, Inc.) is
incorporated by reference to Post-
Effective Amendment No. 14
(9)(c)(4) Supplement dated October 24, 1994
to Administration Agreement
between Endeavor Investment
Advisers and The Shareholder
Services Group, Inc. (currently
known as First Data Investor
Services Group, Inc.) with respect
to the T. Rowe Price Equity Income
Portfolio and T. Rowe Price Growth
Stock Portfolio is incorporated by
reference to Post-Effective
Amendment No. 14.
(9)(c)(5) Supplement dated March 25, 1994 to
Administration Agreement between
Endeavor Investment Advisers and
-10-
<PAGE>
The Boston Company Advisors,
Inc. (currently known as First
Data Investor Services Group,
Inc.) with respect to the U.S.
Government Securities Portfolio is
incorporated by reference to Post-
Effective Amendment No. 14.
(9)(c)(6) Amendment No. 3 dated July 1, 1996
to Administration Agreement
between Endeavor Investment
Advisers and First Data
Investor Services Group, Inc. is
incorporated by reference to Post-
Effective Amendment No. 16.
(9)(c)(7) Supplement dated November
4, 1996 to Administration
Agreement between
Endeavor Investment
Advisers and First Data
Investor Services Group,
Inc. with respect to
Opportunity Value
Portfolio and Enhanced
Index Portfolio is filed
herein.
(9)(c)(8) Amendment No. 4 dated July 1, 1997
to Administration Agreement
between Endeavor Investment
Advisers and First Data Investor
Services Group, Inc. is filed
herein.
(9)(c)(9) Amended and Restated
Administration Agreement dated as
of July 1, 1997 between Endeavor
Investment Advisers and First Data
Investor Services Group, Inc. is
filed herein.
(9)(c)(10) Supplemented dated January 28,
1998 to Administration Agreement
between Endeavor Investment
Advisers and First Data Investor
Services Group, Inc. with respect
-11-
<PAGE>
to Endeavor Select 50 Portfolio is
filed herein.
(9)(c)(11) Amendment No. 5 to Administration
Agreement dated January 28, 1998
between Endeavor Investment
Advisers and First Data Investor
Services Group, Inc. is filed
herein.
(10) Not Applicable.
(11) Consent of Independent
Auditors is filed herein.
(12) Not Applicable.
(13) Subscription Agreement
between Registrant and
PFL Life Insurance
Company is incorporated
by reference to
Post-Effective Amendment
No. 14.
(14) Not Applicable.
(15)(a) Brokerage Enhancement
Plan incorporated by
reference to Post-
Effective Amendment No.
21.
(15)(b) Form of Distribution Agreement
between the Registrant and
Endeavor Group is
incorporated by reference to Post-
Effective Amendment No. 21.
(16) Not Applicable.
(17) Not Applicable.
(18) Financial Data
Schedule is filed herein.
(19) Powers of Attorney are
incorporated by reference
to Post- Effective
Amendment Nos. 14, 16, 18
and 20 and are filed
herein.
-12-
<PAGE>
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
As of the effective date of this Post-Effective Amendment, PFL Life
Insurance Company's separate accounts, PFL Endeavor Variable Annuity Account ,
PFL Endeavor Platinum Variable Annuity Account and PFL Variable Annuity Account
A, AUSA Life Insurance Company's separate account, AUSA Endeavor Variable
Annuity Account, one of Providian Life and Health Insurance Company's separate
accounts, Providian Life and Health Insurance Company Separate Account V, and
one of First Providian Life and Health Insurance Company's separate accounts,
First Providian Life and Health Insurance Company Separate Account C, held all
the outstanding shares of the Registrant. PFL Life Insurance Company, a stock
life insurance company organized under the laws of the State of Iowa, AUSA Life
Insurance Company, a stock life insurance company organized under the laws of
the State of New York, Providian Life and Health Insurance Company, a stock life
insurance company organized under the laws of Missouri, and First Providian Life
and Health Insurance Company, a stock life insurance company organized under the
laws of New York, are each wholly-owned indirect subsidiaries of AEGON USA,
Inc., an Iowa corporation. All of the stock of AEGON USA, Inc. is indirectly
owned by AEGON n.v. of The Netherlands.
Item 26. NUMBER OF HOLDERS OF SECURITIES
Set forth below are the number of record holders, as of January 31,
1998, of the shares of beneficial interest of the Registrant.
-13-
<PAGE>
Number of
Record
Title of Class Holders
Shares of Beneficial Interest of the
Endeavor Money Market Portfolio.....................3
Shares of Beneficial Interest of the
Endeavor Asset Allocation
Portfolio...............................................3
Shares of Beneficial Interest of the
Endeavor Value Equity Portfolio.........................3
Shares of Beneficial Interest of the
Dreyfus Small Cap Value Portfolio................. 5
Shares of Beneficial Interest of the
Dreyfus U.S. Government Securities
Portfolio...............................................3
Shares of Beneficial Interest of the
T. Rowe Price International Stock
Portfolio............................................... 4
Shares of Beneficial Interest of the
T. Rowe Price Equity Income Portfolio...................3
Shares of Beneficial Interest of the
T. Rowe Price Growth Stock Portfolio....................3
Shares of Beneficial Interest of the
Endeavor Opportunity Value Portfolio....................3
Shares of Beneficial Interest of the
Endeavor Enhanced Index Portfolio. . . . . 4
Shares of Beneficial Interest of the
Endeavor Select 50 Portfolio............................ 1
Item 27. INDEMNIFICATION
Reference is made to the following documents:
Agreement and Declaration of Trust, as amended, as
filed as Exhibits 1(a) - 1(j) hereto;
Amended and Restated By-Laws as filed as Exhibit 2
hereto; and
-14-
<PAGE>
Participation Agreement between Registrant, Endeavor
Management Co. and PFL Life Insurance Company as filed
as Exhibit 6 hereto.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act") may be permitted to Trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by any such
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
The Registrant, its Trustees and officers, Endeavor Investment Advisers
(the "Manager"), and persons affiliated with them are insured under a policy of
insurance maintained by the Registrant and the Manager within the limits and
subject to the limitations of the policy, against certain expenses in connection
with the defense of actions suits or proceedings, and certain liabilities that
might me imposed as a result of such actions, suits or proceedings, to which
they are parties by reason of being or having been such Trustees or officers.
The policy expressly excludes coverage for any Trustee or officer whose personal
dishonesty, fraudulent breach of trust, lack of good faith, or intention to
deceive or defraud has been finally adjudicated or may be established or who
willfully fails to act prudently.
Item 28. (a) Business and Other Connections of the Investment
Adviser
Investment Adviser - Endeavor Investment Advisers
The Manager is a registered investment adviser providing
investment management and administrative services to the Registrant.
The list required by this Item 28 of partners and their
officers and directors of the Manager together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors
-15-
<PAGE>
during the past two years is incorporated by reference to Schedule B and D of
Form ADV filed by the Manager pursuant to the Investment Advisers Act of 1940
(SEC File No. 801-41827).
Item 28. (a) Business and Other Connections of Investment
Adviser
Investment Adviser - Morgan
Stanley Asset Management Inc.
Morgan Stanley Asset Management Inc. ("Morgan Stanley") is a wholly-owned
subsidiary of Morgan Stanley, Dean Witter, Discover and Co. Morgan Stanley
provides a broad range of portfolio management services to customers in the
United States and abroad.
The list required by this Item 28 of officers and directors of
Morgan Stanley, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years is incorporated by reference to Schedules A
and D of Form ADV filed by Morgan Stanley pursuant to the Investment Advisers
Act of 1940 (SEC file No.
801- 15757).
Item 28 (a) Business and Other Connections of Investment
--------------------------------------------
Adviser
-------
Investment Adviser - OpCap Advisors
OpCap Advisors ("OpCap") is an indirect subsidiary of PIMCO
Advisors L.P., a registered investment adviser, which provides a variety of
investment management services for clients. OpCap manages registered investment
companies other than certain Portfolios of the Registrant.
The list required by this Item 28 of the officers and
directors of OpCap, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years is incorporated by reference to
Schedules D and F of Form ADV filed by OpCap pursuant to the Investment Advisers
Act of 1940 (SEC file No. 801-27180).
Item 28 (a) Business and Other Connections of Investment
--------------------------------------------
Adviser
-------
-16-
<PAGE>
Investment Adviser - The Dreyfus Corporation
The Dreyfus Corporation ("Dreyfus") is a wholly owned
subsidiary of Mellon Bank, N.A. Dreyfus is a registered investment adviser
founded in 1947 providing a variety of investment management services for
clients.
The list required by this Item 28 of the officers and
directors of Dreyfus, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years is incorporated by reference to
Schedules A and D of Form ADV filed by Dreyfus pursuant to the Investment
Advisers Act of 1940 (SEC file No. 801-8147).
Item 28 (a) Business and Other Connections of Investment
--------------------------------------------
Adviser
-------
Investment Adviser - T. Rowe Price Associates, Inc.
T. Rowe Price Associates, Inc. ("T. Rowe Price") serves as
investment manager to a variety of individual and institutional investors,
including limited and real estate partnerships and other mutual funds.
The list required by this Item 28 of officers and directors of
T. Rowe Price together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years is incorporated by reference to Schedules A
and D of Form ADV filed by T. Rowe Price pursuant to the Investment Advisers Act
of 1940 (SEC file No. 801-856).
Item 28 (a) Business and Other Connections of Investment
--------------------------------------------
Adviser
-------
Investment Adviser - Rowe Price-Fleming International,
Inc.
Rowe Price-Fleming International, Inc. ("Price- Fleming") is
a joint venture between T. Rowe Price and Robert Fleming Holdings Limited
("Flemings"). Flemings is a diversified investment organization which
participates in a global network of regional investment offices in New York,
London, Zurich, Geneva, Tokyo, Hong Kong, Manila, Kuala Lumpur, Seoul, Teipi,
Bombay, Jakarta, Singapore, Bankok and Johannesburg.
The list required by this Item 28 of officers and directors of
Price-Fleming, together with information as to any other business, profession,
vocation or employment of a
-17-
<PAGE>
substantial nature engaged in by such officers and directors during the past two
years is incorporated by reference to Schedules A and D of Form ADV filed by
Price-Fleming pursuant to the Investment Advisers Act of 1940 (SEC file No.
801-14714).
Item 28 (a) Business and Other Connections of Investment
--------------------------------------------
Adviser
-------
Investment Adviser - J.P. Morgan Investment Management
Inc.
J.P. Morgan Investment Management Inc. ("Morgan") manages
employee benefit funds of corporations, labor unions and state and local
governments and the accounts of other institutional investors, including
investment companies.
The list required by this Item 28 of officers and directors of
Morgan, together with information as to any other business, profession, vocation
or employment of a substantial nature engaged in by such officers and directors
during the past two years is incorporated by reference to Schedules A and D of
Form ADV filed by Morgan pursuant to the Investment Advisers Act of 1940 (SEC
file No. 801-21011).
Item 28 (a) Business and Other Connections of Investment
--------------------------------------------
Adviser
-------
Investment Adviser - Montgomery Asset Management, LLC
Montgomery Asset Management, LLC ("Montgomery") serves as
investment manager to a variety of individual and institutional investors,
including limited partnerships and other mutual funds.
The list required by this Item 28 of officers and directors of
Montgomery together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years is incorporated by reference to Schedules B
and D of Form ADV filed by Montgomery pursuant to the Investment Advisers Act of
1940 (SEC file No. 801-36790).
Item 29 Principal Underwriter
(a) Inapplicable
(b) Officers and Directors of Endeavor
Group
-18-
<PAGE>
<TABLE>
<CAPTION>
Positions and Positions and
Name and Principal Offices With Offices with
Business Address Underwriter Registrant
<S> <C> <C>
Vincent J. McGuinness Chairman, Chief Trustee
Executive Officer,
Director
Vincent J. McGuinness, Chief Operating President,
Jr. Officer, Director Trustee
Michael J. Roland Chief Financial Chief
Officer Financial
Officer
(Treasurer)
Pamela A. Shelton Secretary Secretary
George F. Veazey, III President, National ---
Distribution
Stephen Clifford Executive Vice ---
President, Director
of Sales - Eastern
Division
Ernst Bergman Senior Vice ---
President, Western
Division
Gullermo Nodarse Senior Vice ---
President, Director
- National Partner
Companies
Joel Z. Horsager Vice President, ---
Chief Marketing
Officer
-19-
<PAGE>
Positions and Positions and
Name and Principal Offices With Offices with
Business Address Underwriter Registrant
Roseann Morrison Vice President, ---
National Accounts
Coordinator
Kevin J. Grant Vice President and ---
Chief Information
Officer
</TABLE>
The principal business address of each officer and director is 2101
East Coast Highway, Suite 300, Corona del Mar, California
92625.
(c) Inapplicable
Item 30 Location of Accounts and Records
--------------------------------
The Registrant maintains the records required by Section 31(a)
of the 1940 Act and Rules 31a-1 to 31a-3 inclusive thereunder at its principal
office, located at 2101 East Coast Highway, Suite 300, Corona del Mar,
California 92625 as well as at the offices of its investment advisers and
administrator: Morgan Stanley Asset Management Inc., 1999 Avenue of the Stars,
Los Angeles, California 90067; OpCap Advisors, c/o Oppenheimer Capital, One
World Financial Center, New York, New York 10281; The Dreyfus Corporation, 200
Park Avenue, New York, New York 10166; T. Rowe Price Associates, Inc., 100 East
Pratt Street, Baltimore, Maryland 21202; Rowe Price-Fleming International, Inc.,
100 East Pratt Street, Baltimore, Maryland 21202; J.P. Morgan Investment
Management Inc., 522 Fifth Avenue, New York, New York 10036; Montgomery Asset
Management, LLC, 101 California Street, San Francisco, California 94111 and
First Data Investor Services Group, Inc. ("Investor Services Group") (formerly,
The Shareholder Services Group, Inc.), a subsidiary of First Data Corporation,
located at 53 State Street, One Exchange Place, Boston, Massachusetts 02109.
Certain records, including records relating to the Registrant's shareholders and
the physical possession of its securities, may be maintained pursuant to Rule
31a-3 at the main office of the Registrant's transfer agent and dividend
disbursing agent, Investor Services Group and the Registrant's custodian, Boston
Safe Deposit and Trust Company, located at One Boston Place, Boston,
Massachusetts 02108.
Item 31 Management Services
-20-
<PAGE>
None
Item 32 Undertakings
(a) Inapplicable
(b)
Inapplicable
(c) The Registrant will furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, as amended, the Registrant, ENDEAVOR SERIES
TRUST, has duly caused this Post-Effective Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Corona del Mar, State of California on the 26th day
of February, 1998.
ENDEAVOR SERIES TRUST
Registrant
By: /s/Vincent J. McGuinness, Jr.*
Vincent J. McGuinness, Jr.
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities and on the date(s) indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/Vincent J. McGuinness, Jr.* President
- ------------------------------
Vincent J. McGuinness, Jr. (Principal executive February 26, 1998
officer)
/s/Michael J. Roland* Chief Financial
- ---------------------
Michael J. Roland Officer February 26, 1998
(Treasurer) (principal
financial and
accounting officer)
/s/Vincent J. McGuinness* Trustee
- -------------------------
Vincent J. McGuinness February 26, 1998
/s/Timothy A. Devine* Trustee
- ---------------------
Timothy A. Devine February 26, 1998
/s/Thomas J. Hawekotte* Trustee
- -----------------------
Thomas J. Hawekotte February 26, 1998
-22-
<PAGE>
Signature Title Date
- --------- ----- ----
/s/Steven L. Klosterman* Trustee
- ------------------------
Steven L. Klosterman February 26, 1998
/s/Halbert D. Lindquist* Trustee
- ------------------------
Halbert D. Lindquist February 26, 1998
/s/R. Daniel Olmstead* Trustee
R. Daniel Olmstead February 26, 1998
/s/Keith H. Wood* Trustee
- -----------------
Keith H. Wood February 26, 1998
/s/William L. Busler* Trustee February 26, 1998
William L. Busler
</TABLE>
* By: /s/Robert N. Hickey
Robert N. Hickey
Attorney-in-fact
-23-
<PAGE>
ENDEAVOR SERIES TRUST
AMENDMENT NO. 9
TO AGREEMENT AND DECLARATION OF TRUST
Change of Names of Series of the Trust
from TCW Money Market Portfolio to Endeavor Money Market Portfolio,
TCW Managed Asset Allocation Portfolio to Endeavor Asset Allocation Portfolio,
Value Equity Portfolio to Endeavor Value Equity Portfolio,
Opportunity Value Portfolio to Endeavor Opportunity Value Portfolio,
Enhanced Index Portfolio to Endeavor Enhanced Index Portfolio, and
Select 50 Portfolio to Endeavor Select 50 Portfolio
The undersigned, Secretary of Endeavor Series Trust (the "Trust"), does
hereby certify that pursuant to Article VIII, Section 8.3 of the Trust's
Agreement and Declaration of Trust (the "Declaration of Trust") dated November
18, 1988, as amended, the following votes were duly adopted by at least a
majority of the Trustees of the Trust at a meeting held on February 23, 1998:
VOTED: That the names of the following Series of the Trust
previously established and designated in accordance
with Article III of the Declaration of Trust, be
changed, effective May 1, 1998, as indicated below:
Old Name New Name
-------- --------
TCW Money Market Portfolio Endeavor Money Market Portfolio
TCW Managed Asset Allocation Portfolio Endeavor Asset Allocation Portfolio
Value Equity Portfolio Endeavor Value Equity Portfolio
Opportunity Value Portfolio Endeavor Opportunity Value Portfolio
Enhanced Index Portfolio Endeavor Enhanced Index Portfolio
Select 50 Portfolio Endeavor Select 50 Portfolio
FURTHER
VOTED: That the proper officers of the Trust be, and each hereby is,
authorized and empowered to execute all instruments and
documents and to take all actions, including the filing of an
Amendment to the Trust's Declaration of Trust with the Secretary
of State of the Commonwealth of Massachusetts and the Clerk of
the City of Boston, Massachusetts, as they or any one of them in
his or her sole discretion deems necessary or appropriate to carry
out the intents and purposes of the foregoing vote.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand this 23rd
day of February, 1998.
/s/Pamela A. Shelton
-----------------------
Pamela A. Shelton
Secretary
<PAGE>
SUPPLEMENT TO MANAGEMENT AGREEMENT
MONTGOMERY SELECT 50 PORTFOLIO
Date: January 30, 1998
Endeavor Management Co.
Managing Partner
Endeavor Investment Advisers
Suite 300
2101 East Coast Highway
Corona del Mar, California 92625
Ladies and Gentlemen:
Endeavor Series Trust (the "Trust"), a Massachusetts business trust
created pursuant to an Agreement and Declaration of Trust filed with the
Secretary of State of The Commonwealth of Massachusetts, herewith supplements
its Management Agreement (the "Agreement") dated November 23, 1992 with Endeavor
Investment Advisers, a California general partnership (the "Manager"), as
follows:
1. Investment Description; Appointment. Pursuant to Section 1 of the
Agreement the Trust hereby notifies the Manager that it has established one
additional investment portfolio (the "New Investment Portfolio"), namely the
SELECT 50 PORTFOLIO and that the New Investment Portfolio should be included as
"Portfolios" as that term is defined in the Agreement.
2. Limitation of Liability. A copy of the Declaration of Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts and notice
is hereby given that this Agreement is executed on behalf of the Trustees of the
Trust as trustees and not individually and that the obligations of this
Agreement are not binding upon the Trustees or holders of shares of the Trust
individually but are binding only upon the assets and property of the Trust.
<PAGE>
Endeavor Management Co., Managing Partner
Endeavor Investment Advisers
Page 2
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning to us the enclosed copy
hereof.
Very truly yours,
ENDEAVOR SERIES TRUST
By: /s/Vincent J. McGuinness, Jr.
-----------------------------
Authorized Officer
Accepted:
ENDEAVOR INVESTMENT ADVISERS
By: Endeavor Management Co.,
Managing Partner
By: /s/Vincent J. McGuinness C.E.O.
-------------------------------
Authorized Officer
<PAGE>
AMENDMENT TO
SCHEDULE A
SELECT 50 PORTFOLIO 1.10% of average daily net assets
ENDEAVOR INVESTMENT ADVISERS ENDEAVOR SERIES TRUST
By: Endeavor Management Co.,
Managing Partner
By: /s/Vincent J. McGuinness By: /s/Vincent J. McGuinness, Jr.
------------------------ ---------------------------------
Chairman President
Date: January 30, 1998 Date: January 30, 1998
<PAGE>
AMENDMENT TO MANAGEMENT AGREEMENT
This Amendment to the Management Agreement (the "Agreement") dated
November 23, 1992 by and between Endeavor Series Trust and Endeavor Investment
Advisers (the "Manager") is entered into effective the 28th day of January,
1998.
WHEREAS the Agreement provides for the Manager to provide certain services
to the Trust for which the Manger is to receive agreed upon fees; and
WHEREAS the Manager and the Trust desire to make certain changes to the
Agreement; NOW, THEREFORE, the Manager and the Trust hereby agree that the
Agreement is amended as follows:
1. Section 3 of the Agreement entitled "Compensation" is amended by the
addition of a second paragraph as follows:
"For Portfolios of the Trust commencing operations on or after January 28,
1998, each Portfolio shall reimburse the Manager for such Portfolio's allocable
share of third party administration expenses incurred pursuant to an
administration agreement between the Manager and a third party administrator."
2. All other terms and conditions of the Agreement shall remain in full
force and effect. IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed on the 28th day of January, 1998.
ENDEAVOR SERIES TRUST
By:
Name:
Title:
<PAGE>
ENDEAVOR INVESTMENT ADVISERS
By:
Name:
Title:
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 30th day of January,1998, by and between Montgomery
Asset Management, LLC, a Delaware limited liability company (the "Adviser"), and
Endeavor Investment Advisers, a California general partnership (the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
and administrator of Endeavor Series Trust (the "Trust"), a Massachusetts
business trust which has filed a registration statement under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933
(the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is the Select 50 Portfolio (the "Portfolio"); and
WHEREAS, the Manager desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser to
assist the Manager in performing services for the Portfolio; and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment
advisory services to investment companies and other institutional clients and
desires to provide such services to the Manager;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Adviser. The Manager hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Portfolio, subject
to the control and direction of the Trust's Board of Trustees, for the period
and on the terms hereinafter set forth. The Adviser hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth for the compensation herein provided. The
Adviser shall for all purposes herein be deemed to be an independent contractor
and shall, except as expressly provided or authorized (whether herein or
otherwise), have no authority to act for or represent the Manager, the Portfolio
or the Trust in any way.
<PAGE>
-2-
2. Obligations of and Services to be Provided by the Adviser. The
Adviser undertakes to provide the following services and to assume the following
obligations:
a. The Adviser shall manage the investment and reinvestment of
the portfolio assets of the Portfolio, all without prior consultation with the
Manager, subject to and in accordance with the investment objective and policies
of the Portfolio set forth in the Trust's Registration Statement, as such
Registration Statement may be amended from time to time, and any written
instructions which the Manager or the Trust's Board of Trustees may issue from
time-to-time in accordance therewith. In pursuance of the foregoing, the Adviser
shall make all determinations with respect to the purchase and sale of portfolio
securities and shall take such action necessary to implement the same. The
Adviser shall render regular reports to the Trust's Board of Trustees and the
Manager concerning the investment activities of the Portfolio.
b. To the extent provided in the Trust's Registration
Statement, as such Registration Statement may be amended from time to time, the
Adviser shall, in the name of the Portfolio, place orders for the execution of
portfolio transactions with or through such brokers, dealers or banks as it may
select including affiliates of the Adviser and, complying with Section 28(e) of
the Securities Exchange Act of 1934, may pay a commission on transactions in
excess of the amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for the
execution of the portfolio transactions of the Portfolio, the Adviser shall
create and maintain all necessary records pertaining to the purchase and sale of
securities by the Adviser on behalf of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act. All records shall be the property of
the Trust and shall be available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Trust, the Manager or any person retained by
the Trust. Where applicable, such records shall be maintained by the Adviser for
the periods and in the places required by Rule 31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of providing services
pursuant to this Agreement.
3. Compensation of the Adviser. In consideration of services rendered
pursuant to this Agreement, the Manager will pay the Adviser a fee at the annual
rate of the value of the Portfolio's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon
<PAGE>
-3-
as practicable after the end of each month. If the Adviser shall serve for less
than the whole of any month, the foregoing compensation shall be prorated. For
the purpose of determining fees payable to the Adviser, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the Adviser hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others and to engage in other activities, so long as the services
rendered hereunder are not impaired; provided, however, that for a period from
the date hereof until the later of (i) one year from the date hereof and (ii)
only if the Portfolio's assets equal or exceed $200 million one year from the
date hereof, the term of this Agreement for so long as the Portfolio's net
assets equal or exceed $200 million (disregarding fluctuations below $200
million because of investment performance), the Adviser shall not provide
investment advisory services with respect to a fund substantially similar to the
Portfolio which is an investment option for a variable annuity or variable life
contract issued by an insurance company other than PFL Life Insurance Company.
5. Use of Names. The Adviser hereby consents to the Portfolio being
named the "Select 50 Portfolio." The Manager shall not use the name of the
Adviser or any of its affiliates in any prospectus, sales literature or other
material relating to the Trust in any manner not approved prior thereto by the
Adviser; provided, however, that the Adviser shall approve all uses of its name
and that of its affiliates which merely refer in accurate terms to its
appointment hereunder or which are required by the SEC or a state securities
commission; and, provided, further, that in no event shall such approval be
unreasonably withheld. The Adviser shall not use the name of the Trust or the
Manager in any material relating to the Adviser in any manner not approved prior
thereto by the Manager; provided, however, that the Manager shall approve all
uses of its or the Trust's name which merely refer in accurate terms to the
appointment of the Adviser hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld.
The Manager recognizes that from time to time directors, officers and
employees of the Adviser may serve as directors, trustees, partners, officers
and employees of other corporations, business trusts, partnerships or other
entities (including other investment companies) and that such other entities may
include the name "Montgomery" as part of their name, and that the Adviser or its
affiliates may enter into investment advisory, administration or other
agreements with such other entities.
<PAGE>
-4-
6. Liability of the Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Adviser, the Adviser shall not be liable for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
Nothing herein shall constitute a waiver of any rights or remedies which the
Trust may have under any federal or state securities laws.
7. Limitation of Trust's Liability. The Adviser acknowledges that it
has received notice of and accepts the limitations upon the Trust's liability
set forth in its Agreement and Declaration of Trust. The Adviser agrees that any
of the Trust's obligations shall be limited to the assets of the Portfolio and
that the Adviser shall not seek satisfaction of any such obligation from the
shareholders of the Trust nor from any Trust officer, employee or agent of the
Trust.
8. Renewal, Termination and Amendment. This Agreement shall continue in
effect, unless sooner terminated as hereinafter provided, for a period of two
years from the date hereof and shall continue in full force and effect for
successive periods of one year thereafter, but only so long as each such
continuance as to the Portfolio is specifically approved at least annually by
vote of the holders of a majority of the outstanding voting securities of the
Portfolio or by vote of a majority of the Trust's Board of Trustees; and further
provided that such continuance is also approved annually by the vote of a
majority of the Trustees who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. This Agreement may be terminated as to the Portfolio at
any time, without payment of any penalty, by the Trust's Board of Trustees, by
the Manager, or by a vote of the majority of the outstanding voting securities
of the Portfolio upon 60 days' prior written notice to the Adviser, or by the
Adviser upon 90 days' prior written notice to the Manager, or upon such shorter
notice as may be mutually agreed upon. This Agreement shall terminate
automatically and immediately upon termination of the Management Agreement dated
November 23, 1992 between the Manager and the Trust. This Agreement shall
terminate automatically and immediately in the event of its assignment. The
terms "assignment" and "vote of a majority of the outstanding voting securities"
shall have the meaning set forth for such terms in the 1940 Act. This Agreement
may be amended at any time by the Adviser and the Manager, subject to approval
by the Trust's Board of Trustees and, if required by applicable SEC rules and
regulations, a vote of a majority of the Portfolio's outstanding voting
securities.
<PAGE>
-5-
9. Confidential Relationship. Any information and advice furnished by
either party to this Agreement to the other shall be treated as confidential and
shall not be disclosed to third parties except as required by law.
The Manager hereby consents to the disclosure to third parties of (i)
investment results and other data of the Manager or the Portfolio (other than
the identity of the Manager or the Trust) in connection with providing composite
investment results of the Adviser and (ii) investments and transactions of the
Manager or the Portfolio (other than the identify of the Manager or the Trust)
in connection with providing composite information of clients of the Adviser.
10. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
11. Information. The Manager hereby acknowledges that it and the
Trustees of the Trust have been provided with all information necessary in
connection with the services to be provided by the Adviser hereunder, including
a copy of Part II of the Adviser's Form ADV at least 48 hours prior to the
Manager's execution of this Agreement, and any other information that the
Manager or the Trustees deem necessary.
12. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of California. The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the parties.
<PAGE>
-6-
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
ENDEAVOR INVESTMENT ADVISERS
BY: Endeavor Management Co.,
Managing Partner
BY: /s/Vincent J. McGuinness C.E.O.
-------------------------------
Authorized Officer
MONTGOMERY ASSET MANAGEMENT, LLC
BY: /s/Kevin Hamilton
-------------------------------
Authorized Officer
<PAGE>
SCHEDULE A
Select 50 Portfolio .70% of average
daily net assets.
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 1st day of May, 1998, by and between Morgan Stanley
Asset Management Inc., a Delaware corporation (the "Adviser"), and Endeavor
Investment Advisers, a California general partnership (the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
and administrator of Endeavor Series Trust (the "Trust"), a Massachusetts
business trust which has filed a registration statement under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933
(the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is the Endeavor Money Market Portfolio (the
"Portfolio"); and
WHEREAS, the Manager desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser to
assist the Manager in performing services for the Portfolio; and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment
advisory services to investment companies and other institutional clients and
desires to provide such services to the Manager;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Adviser. The Manager hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Portfolio, subject
to the control and direction of the Trust's Board of Trustees, for the period
and on the terms hereinafter set forth. The Adviser hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth for the compensation herein provided. The
Adviser shall for all purposes herein be deemed to be an independent contractor
and shall, except as expressly provided or authorized (whether herein or
otherwise), have no authority to act for or represent the Manager, the Portfolio
or the Trust in any way.
<PAGE>
-2-
2. Obligations of and Services to be Provided by the Adviser. The
Adviser undertakes to provide the following services and to assume the following
obligations:
a. The Adviser shall manage the investment and reinvestment of
the portfolio assets of the Portfolio, all without prior consultation with the
Manager, subject to and in accordance with the investment objective and policies
of the Portfolio set forth in the Trust's Registration Statement, as such
Registration Statement may be amended from time to time, and any written
instructions which the Manager or the Trust's Board of Trustees may issue from
time-to-time in accordance therewith. In pursuance of the foregoing, the Adviser
shall make all determinations with respect to the purchase and sale of portfolio
securities and shall take such action necessary to implement the same. The
Adviser shall render regular reports to the Trust's Board of Trustees and the
Manager concerning the investment activities of the Portfolio.
b. To the extent provided in the Trust's Registration
Statement, as such Registration Statement may be amended from time to time, the
Adviser shall, in the name of the Portfolio, place orders for the execution of
portfolio transactions with or through such brokers, dealers or banks as it may
select including affiliates of the Adviser and, complying with Section 28(e) of
the Securities Exchange Act of 1934, may pay a commission on transactions in
excess of the amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for the
execution of the portfolio transactions of the Portfolio, the Adviser shall
create and maintain all necessary records pertaining to the purchase and sale of
securities by the Adviser on behalf of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act. All records shall be the property of
the Trust and shall be available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Trust, the Manager or any person retained by
the Trust at all reasonable times. Where applicable, such records shall be
maintained by the Adviser for the periods and in the places required by Rule
31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of providing services
pursuant to this Agreement.
3. Compensation of the Adviser. In consideration of services rendered
pursuant to this Agreement, the Manager will pay the Adviser a fee at the annual
rate of the value of the Portfolio's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon
<PAGE>
-3-
as practicable after the end of each month. If the Adviser shall serve for less
than the whole of any month, the foregoing compensation shall be prorated. For
the purpose of determining fees payable to the Adviser, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the Adviser hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others and to engage in other activities, so long as the services
rendered hereunder are not impaired.
5. Use of Names. The Manager shall not use the name of the Adviser or
any of its affiliates in any prospectus, sales literature or other material
relating to the Trust in any manner not approved prior thereto by the Adviser;
provided, however, that the Adviser shall approve all uses of its name and that
of its affiliates which merely refer in accurate terms to its appointment
hereunder or which are required by the SEC or a state securities commission;
and, provided, further, that in no event shall such approval be unreasonably
withheld. The Adviser shall not use the name of the Trust or the Manager in any
material relating to the Adviser in any manner not approved prior thereto by the
Manager; provided, however, that the Manager shall approve all uses of its or
the Trust's name which merely refer in accurate terms to the appointment of the
Adviser hereunder or which are required by the SEC or a state securities
commission; and, provided further, that in no event shall such approval be
unreasonably withheld.
The Manager recognizes that from time to time directors, officers and
employees of the Adviser may serve as directors, trustees, partners, officers
and employees of other corporations, business trusts, partnerships or other
entities (including other investment companies) and that such other entities may
include the name "Morgan Stanley" as part of their name, and that the Adviser or
its affiliates may enter into investment advisory, administration or other
agreements with such other entities.
6. Liability of the Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Adviser, the Adviser shall not be liable for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
Nothing herein shall constitute a waiver of any rights or remedies which the
Trust may have under any federal or state securities laws.
<PAGE>
-4-
7. Limitation of Trust's Liability. The Adviser acknowledges that it
has received notice of and accepts the limitations upon the Trust's liability
set forth in its Agreement and Declaration of Trust. The Adviser agrees that any
of the Trust's obligations shall be limited to the assets of the Portfolio and
that the Adviser shall not seek satisfaction of any such obligation from the
shareholders of the Trust nor from any Trust officer, employee or agent of the
Trust.
8. Renewal, Termination and Amendment. This Agreement shall continue in
effect, unless sooner terminated as hereinafter provided, for a period of two
years from the date hereof and shall continue in full force and effect for
successive periods of one year thereafter, but only so long as each such
continuance as to the Portfolio is specifically approved at least annually by
vote of the holders of a majority of the outstanding voting securities of the
Portfolio or by vote of a majority of the Trust's Board of Trustees; and further
provided that such continuance is also approved annually by the vote of a
majority of the Trustees who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. This Agreement may be terminated as to the Portfolio at
any time, without payment of any penalty, by the Trust's Board of Trustees, by
the Manager, or by a vote of the majority of the outstanding voting securities
of the Portfolio upon 60 days' prior written notice to the Adviser, or by the
Adviser upon 90 days' prior written notice to the Manager, or upon such shorter
notice as may be mutually agreed upon. This Agreement shall terminate
automatically and immediately upon termination of the Management Agreement dated
November 23, 1992, as amended, between the Manager and the Trust. This Agreement
shall terminate automatically and immediately in the event of its assignment.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meaning set forth for such terms in the 1940 Act.
This Agreement may be amended at any time by the Adviser and the Manager,
subject to approval by the Trust's Board of Trustees and, if required by
applicable SEC rules and regulations, a vote of a majority of the Portfolio's
outstanding voting securities.
9. Confidential Relationship. Any information and advice furnished by
either party to this Agreement to the other shall be treated as confidential and
shall not be disclosed to third parties without the consent of the other party
hereto except as required by law, rule or regulation.
The Manager hereby consents to the disclosure to third parties of (i)
investment results and other data of the Manager or the Portfolio (other than
the identity of the Manager or the Trust) in connection with providing composite
investment results
<PAGE>
-5-
of the Adviser and (ii) investments and transactions of the Manager or the
Portfolio (other than the identify of the Manager or the Trust) in connection
with providing composite information of clients of the Adviser.
10. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
11. Information. The Manager hereby acknowledges that it and the
Trustees of the Trust have been provided with all information necessary in
connection with the services to be provided by the Adviser hereunder, including
a copy of Part II of the Adviser's Form ADV at least 48 hours prior to the
Manager's execution of this Agreement, and any other information that the
Manager or the Trustees deem necessary.
12. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of California. The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the parties.
<PAGE>
-6-
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
ENDEAVOR INVESTMENT ADVISERS
BY: Endeavor Management Co.,
Managing Partner
BY:
-------------------------------
Authorized Officer
MORGAN STANLEY ASSET MANAGEMENT INC.
BY:
-------------------------------
Authorized Officer
<PAGE>
SCHEDULE A
Endeavor Money Market .25% of average daily net
Portfolio assets
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 1st day of May, 1998, by and between Morgan Stanley
Asset Management Inc., a Delaware corporation (the "Adviser"), and Endeavor
Investment Advisers, a California general partnership (the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
and administrator of Endeavor Series Trust (the "Trust"), a Massachusetts
business trust which has filed a registration statement under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933
(the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is the Endeavor Asset Allocation Portfolio (the
"Portfolio"); and
WHEREAS, the Manager desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser to
assist the Manager in performing services for the Portfolio; and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment
advisory services to investment companies and other institutional clients and
desires to provide such services to the Manager;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Adviser. The Manager hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Portfolio, subject
to the control and direction of the Trust's Board of Trustees, for the period
and on the terms hereinafter set forth. The Adviser hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth for the compensation herein provided. The
Adviser shall for all purposes herein be deemed to be an independent contractor
and shall, except as expressly provided or authorized (whether herein or
otherwise), have no authority to act for or represent the Manager, the Portfolio
or the Trust in any way.
<PAGE>
-2-
2. Obligations of and Services to be Provided by the Adviser. The
Adviser undertakes to provide the following services and to assume the following
obligations:
a. The Adviser shall manage the investment and reinvestment of
the portfolio assets of the Portfolio, all without prior consultation with the
Manager, subject to and in accordance with the investment objective and policies
of the Portfolio set forth in the Trust's Registration Statement, as such
Registration Statement may be amended from time to time, and any written
instructions which the Manager or the Trust's Board of Trustees may issue from
time-to-time in accordance therewith. In pursuance of the foregoing, the Adviser
shall make all determinations with respect to the purchase and sale of portfolio
securities and shall take such action necessary to implement the same. The
Adviser shall render regular reports to the Trust's Board of Trustees and the
Manager concerning the investment activities of the Portfolio.
b. To the extent provided in the Trust's Registration
Statement, as such Registration Statement may be amended from time to time, the
Adviser shall, in the name of the Portfolio, place orders for the execution of
portfolio transactions with or through such brokers, dealers or banks as it may
select including affiliates of the Adviser and, complying with Section 28(e) of
the Securities Exchange Act of 1934, may pay a commission on transactions in
excess of the amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for the
execution of the portfolio transactions of the Portfolio, the Adviser shall
create and maintain all necessary records pertaining to the purchase and sale of
securities by the Adviser on behalf of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act. All records shall be the property of
the Trust and shall be available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Trust, the Manager or any person retained by
the Trust at all reasonable times. Where applicable, such records shall be
maintained by the Adviser for the periods and in the places required by Rule
31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of providing services
pursuant to this Agreement.
3. Compensation of the Adviser. In consideration of services rendered
pursuant to this Agreement, the Manager will pay the Adviser a fee at the annual
rate of the value of the Portfolio's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon
<PAGE>
-3-
as practicable after the end of each month. If the Adviser shall serve for less
than the whole of any month, the foregoing compensation shall be prorated. For
the purpose of determining fees payable to the Adviser, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the Adviser hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others and to engage in other activities, so long as the services
rendered hereunder are not impaired.
5. Use of Names. The Manager shall not use the name of the Adviser or
any of its affiliates in any prospectus, sales literature or other material
relating to the Trust in any manner not approved prior thereto by the Adviser;
provided, however, that the Adviser shall approve all uses of its name and that
of its affiliates which merely refer in accurate terms to its appointment
hereunder or which are required by the SEC or a state securities commission;
and, provided, further, that in no event shall such approval be unreasonably
withheld. The Adviser shall not use the name of the Trust or the Manager in any
material relating to the Adviser in any manner not approved prior thereto by the
Manager; provided, however, that the Manager shall approve all uses of its or
the Trust's name which merely refer in accurate terms to the appointment of the
Adviser hereunder or which are required by the SEC or a state securities
commission; and, provided further, that in no event shall such approval be
unreasonably withheld.
The Manager recognizes that from time to time directors, officers and
employees of the Adviser may serve as directors, trustees, partners, officers
and employees of other corporations, business trusts, partnerships or other
entities (including other investment companies) and that such other entities may
include the name "Morgan Stanley" as part of their name, and that the Adviser or
its affiliates may enter into investment advisory, administration or other
agreements with such other entities.
6. Liability of the Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Adviser, the Adviser shall not be liable for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
Nothing herein shall constitute a waiver of any rights or remedies which the
Trust may have under any federal or state securities laws.
<PAGE>
-4-
7. Limitation of Trust's Liability. The Adviser acknowledges that it
has received notice of and accepts the limitations upon the Trust's liability
set forth in its Agreement and Declaration of Trust. The Adviser agrees that any
of the Trust's obligations shall be limited to the assets of the Portfolio and
that the Adviser shall not seek satisfaction of any such obligation from the
shareholders of the Trust nor from any Trust officer, employee or agent of the
Trust.
8. Renewal, Termination and Amendment. This Agreement shall continue in
effect, unless sooner terminated as hereinafter provided, for a period of two
years from the date hereof and shall continue in full force and effect for
successive periods of one year thereafter, but only so long as each such
continuance as to the Portfolio is specifically approved at least annually by
vote of the holders of a majority of the outstanding voting securities of the
Portfolio or by vote of a majority of the Trust's Board of Trustees; and further
provided that such continuance is also approved annually by the vote of a
majority of the Trustees who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. This Agreement may be terminated as to the Portfolio at
any time, without payment of any penalty, by the Trust's Board of Trustees, by
the Manager, or by a vote of the majority of the outstanding voting securities
of the Portfolio upon 60 days' prior written notice to the Adviser, or by the
Adviser upon 90 days' prior written notice to the Manager, or upon such shorter
notice as may be mutually agreed upon. This Agreement shall terminate
automatically and immediately upon termination of the Management Agreement dated
November 23, 1992, as amended, between the Manager and the Trust. This Agreement
shall terminate automatically and immediately in the event of its assignment.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meaning set forth for such terms in the 1940 Act.
This Agreement may be amended at any time by the Adviser and the Manager,
subject to approval by the Trust's Board of Trustees and, if required by
applicable SEC rules and regulations, a vote of a majority of the Portfolio's
outstanding voting securities.
9. Confidential Relationship. Any information and advice furnished by
either party to this Agreement to the other shall be treated as confidential and
shall not be disclosed to third parties without the consent of the other party
hereto except as required by law, rule or regulation.
The Manager hereby consents to the disclosure to third parties of (i)
investment results and other data of the Manager or the Portfolio (other than
the identity of the Manager or the Trust) in connection with providing composite
investment results
<PAGE>
-5-
of the Adviser and (ii) investments and transactions of the Manager or the
Portfolio (other than the identify of the Manager or the Trust) in connection
with providing composite information of clients of the Adviser.
10. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
11. Information. The Manager hereby acknowledges that it and the
Trustees of the Trust have been provided with all information necessary in
connection with the services to be provided by the Adviser hereunder, including
a copy of Part II of the Adviser's Form ADV at least 48 hours prior to the
Manager's execution of this Agreement, and any other information that the
Manager or the Trustees deem necessary.
12. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of California. The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the parties.
<PAGE>
-6-
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
ENDEAVOR INVESTMENT ADVISERS
BY: Endeavor Management Co.,
Managing Partner
BY:
-------------------------------
Authorized Officer
MORGAN STANLEY ASSET MANAGEMENT INC.
BY:
-------------------------------
Authorized Officer
<PAGE>
SCHEDULE A
Endeavor Asset Allocation .30% of average daily net
Portfolio assets
<PAGE>
AMENDMENT NO. 2 TO ADMINISTRATION AGREEMENT
As of April 1, 1994, THE BOSTON COMPANY ADVISORS, INC., a Massachusetts
corporation ("Boston Advisors") and ENDEAVOR INVESTMENT ADVISERS, a California
general partnership (the "Company"), hereby amend the Administration Agreement
dated March 28, 1991 (the "Agreement") as follows:
In consideration for the services which Boston Advisors shall perform
for the Company and the Company's Money Market Portfolio, Managed Asset
Allocation Portfolio, Global Growth Portfolio, Quest for Value Equity Portfolio,
Quest for Value Small Cap Portfolio and U.S. Government Securities Portfolio
(collectively, the "Portfolios"), pursuant to the Agreement, the Company hereby
agrees to pay Boston Advisors an aggregate monthly fee, under the foregoing
Agreement at the annual rate of:
.15% of 1% of the average daily net assets of the Portfolios, subject
to an annual minimum fee of $40,000 per Portfolio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized officers as of the date
first written above.
THE BOSTON COMPANY ADVISORS, INC.
By: /s/ George A. Rio
Title: Senior Vice President
ENDEAVOR INVESTMENT ADVISERS
By: /s/ James A. Shepherdson, III
Title: Vice Chairman
<PAGE>
SUPPLEMENT TO ADMINISTRATION AGREEMENT
Date: November 4, 1996
Endeavor Investment Advisers, a California general partnership (the
"Company"), hereby supplements its agreement with First Data Investors Services
Group, Inc., a Massachusetts corporation ("FDISG"), as follows:
1. Appointment. Pursuant to Section 1 of the Administration Agreement
dated as of March 28, 1991 ( the "Agreement"), the Company and FDISG hereby
agree that the OPPORTUNITY VALUE PORTFOLIO AND ENHANCED INDEX PORTFOLIO, two new
series of the Endeavor Series Trust (the "Trust"), created and designated in
accordance with the Trust's Agreement and Declaration of Trust, shall be
considered "Series" of the Trust under the terms of the Agreement.
2. Compensation. The Company shall compensate FDISG for its services
rendered to the Company in accordance with Amendment No. 3 to the Agreement
dated as of July 1, 1996.
Such fees do not include out-of-pocket disbursements of FDISG for which
FDISG shall be entitled to bill separately. Out-of-pocket disbursements shall
include, but shall not be limited to the items specified in Schedule A to the
Agreement, which Schedule may be modified by FDISG upon not less than thirty
days' prior written notice to the Company.
IN WITNESS WHEREOF, the parties here to have caused this instrument to
be duly executed and delivered by their duly authorized officers as of the date
first written above.
ENDEAVOR INVESTMENT
ADVISERS
By: Endeavor Management Co.,
Managing General Partner
/s/ Vincent J. McGuinness
Title: Chairman and CEO
FIRST DATA INVESTOR SERVICES
GROUP, INC.
/s/ Vincent Fabiani
Title
ENDEAVOR SERIES TRUST
/s/ James R. McInnis
Title: President
<PAGE>
EXHIBIT A
Out-of-Pocket Expenses
Administration Agreement
I. Out-of-pocket expenses include, but are not limited to, the following:
Postage (including overnight covering services) Telephone
Telecommunications charges (including FAX) Duplicating Pricing services
Forms and supplies
Travel (including all expenses incurred in meeting with representatives
or Trustees of the Trust outside the City of Boston, Massachusetts)
<PAGE>
AMENDMENT NO. 4 TO THE
AMENDED AND RESTATED ADMINISTRATION AGREEMENT
This Amendment No. 4 dated as of July 1, 1997, is entered into by ENDEAVOR
INVESTMENT ADVISERS (the "Company") and FIRST DATA INVESTOR SERVICES GROUP, INC.
("FDISG").
WHEREAS, the Company and The Boston Company Advisors, Inc. entered into
an Administration Agreement dated as of March 28, 1991 which agreement was
assigned to FDISG on April 24, 1994 (the "Administration Agreement");
WHEREAS, the Company and FDISG wish to amend the Administration
Agreement to amend certain provisions of the Administration Agreement;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, hereby agree as follows:
I. The Fee Schedule referred to in Section 4 of the Administration
Agreement is hereby deleted in full and replaced with the following:
The Company shall pay FDISG the following fees for servicing the Existing
Portfolios (as hereinafter defined):
o a flat fee of $650,000 per annum, provided that the aggregate
net assets of the Existing Portfolios do not exceed $1 billion.
o if the aggregate net assets of the Existing Portfolios exceed $1
billion, FDISG shall also be entitled to receive a fee of .01% of
any net assets in excess of $1 billion in addition to the flat fee
of $650,000. x o if aggregate net assets of the Existing
Portfolios fall below $850 million, the foregoing fees will be
subject to renegotiation.
The "Existing Portfolios" shall consist of TCW Money Market Portfolio, TCW
Managed Asset Allocation Portfolio, T. Rowe Price International Stock Portfolio,
Value Equity Portfolio, Dreyfus Small Cap Value Portfolio, Dreyfus U.S.
Government Securities Portfolio, T. Rowe Price Equity Income Portfolio, T. Rowe
Price Growth Stock Portfolio, Opportunity Value Portfolio and Enhanced Index
Portfolio. The fees to be paid by the Company to FDISG for servicing any
additional Portfolios shall be those fees agreed to by FDISG and the Company in
writing prior to the commencement of services for such Portfolios.
III. The Schedule A referred to in Section 4 of the Administration
Agreement is hereby deleted in full and replaced with the following:
<PAGE>
Out-of-Pocket Expenses
A billing for the recovery of applicable out-of-pocket
expenses will be made as of the end of each month. Out-of-pocket
expenses include, but are not limited to the following:
- Courier services
- Pricing services used by the Company
- Customized programming requests at $100 per hour
- Printing for shareholder reports and SEC filings
- External legal fees, audit fees and other professional fees
- Telephone, telecommunications and fax
- Travel and lodging for Board, Shareholder and Operations meetings
- Independent Auditor's Report (SAS 70)
- Forms and supplies for the preparation of Board meeting and
other materials for the Trust - Duplicating charges with
respect to filings with Federal and state authorities and
Board meeting materials - Postage of Board meetings materials
and other materials to the Trust's Board members and service
providers (including overnight or other courier services)
- Such other expenses as are agreed to by FDISG and the Company
IV. Except to the extent amended hereby, the Administration Agreement shall
remain unchanged and in full force and effect and is hereby ratified and
confirmed in all respects as amended hereby.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 4 as
of the date and year first written above.
ENDEAVOR INVESTMENT ADVISERS
By: __________________________
FIRST DATA INVESTOR SERVICES
GROUP, INC.
By: __________________________
<PAGE>
AMENDED AND RESTATED
ADMINISTRATION AGREEMENT
The ADMINISTRATION AGREEMENT by and between FIRST DATA INVESTOR SERVICES
GROUP, INC., a Massachusetts corporation ("Investor Services Group"), and
ENDEAVOR INVESTMENT ADVISERS, a California general partnership (the "Company")
dated March 28, 1991, as amended and supplemented from time to time, is hereby
amended and restated as of July 1, 1997, in its entirety to read as follows (as
amended and restated, the "Agreement").
WHEREAS, Endeavor Series Trust (the "Trust") and the Company have entered
into a management agreement pursuant to which the Company has agreed to provide
certain administrative services to the Trust; and
WHEREAS, the Company desires to retain Investor Services Group to render
certain administrative services with respect to each investment portfolio of the
Trust managed by the Company listed in Schedule A hereto, as the same may be
amended from time to time by the parties hereto (collectively, the "Funds"), and
Investor Services Group is willing to render such services;
WITNESSETH:
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints Investor Services Group to
provide certain administrative services required by the Trust on the terms set
forth in this Agreement. Investor Services Group accepts such appointment and
agrees to render the services herein set forth for the compensation herein
provided. In the event that the Company decides to retain Investor Services
Group to provide the administrative services hereunder with respect to one or
more portfolios other than the Funds, the Company shall notify Investor Services
Group in writing. If Investor Services Group is willing to render such services,
it shall notify the Company in writing whereupon such portfolio shall become a
Fund hereunder.
2. Delivery of Documents. The Company has furnished Investor Services
Group with copies properly certified or authenticated of each of the following:
(a) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Company as Manager of the Trust and the Company's appointment
of Investor Services Group to provide certain administrative services required
by the Trust for each Fund and approving this Agreement;
(b) The Trust's Declaration of Trust (the "Declaration of Trust")
filed with the Commonwealth of Massachusetts and all amendments thereto;
<PAGE>
(c) The Trust's By-Laws and all amendments thereto (the
"By-Laws");
(d) Each investment advisory agreement or management agreement
between the Company and an investment adviser or investment manager (the
"Advisers") with respect to the Funds (the "Advisory Agreements");
(e) The Custody Agreement between Boston Safe Deposit and Trust
Company (the "Custodian") and the Company dated as of March 28, 1991 and all
amendments thereto (the "Custody Agreement");
(f) The Transfer Agency and Registrar Agreement between First
Data Investor Services Group, Inc. (the "Transfer Agent") and the Trust dated as
of March 28, 1991 and all amendments thereto;
(g) The Participation Agreement among PFL Life Insurance Company
("PFL"), the Company and the Trust dated as of March 28, 1991 and all amendments
thereto;
(h) The Trust's Registration Statement on Form N-1A (the
"Registration Statement") under the Securities Act of 1933 and under the 1940
Act (File Nos. 33-27352 and 811-5780), as declared effective by the Securities
and Exchange Commission ("SEC") on March 7, 1991, relating to shares of
beneficial interest of the Trust no par value (the "Shares"), and all amendments
thereto; and
(i) Each Fund's most recent prospectus and Statement of
Additional Information and all amendments and supplements thereto (collectively,
the "Prospectuses").
The Company will furnish Investor Services Group from time to time with
copies, properly certified or authenticated, of all amendments of or supplements
to the foregoing. Furthermore, the Company will provide Investor Services Group
with any other documents that Investor Services Group may reasonably request and
will notify Investor Services Group as soon as possible of any matter materially
affecting the performance of Investor Services Group of its services under this
Agreement.
3. Duties as Administrator. Subject to the supervision and direction of
the Company, Investor Services Group will assist in supervising various aspects
of the Trust's administrative operations and undertakes to perform the following
specific services:
(a) Maintaining office facilities (which may be in the offices of
Investor Services Group or a corporate affiliate) and furnishing corporate
officers for the Trust;
(b) Performing the functions ordinarily performed by a mutual
fund group's internal legal department as described in Schedule D to this
Agreement, furnishing data processing services, clerical services, and executive
and administrative services and standard stationery and office supplies in
connection with the foregoing;
(c) Accounting and bookkeeping services (including the
maintenance of such accounts, books and records of the Trust as may be required
by Section 31(a) of the 1940 Act and the rules thereunder);
(d) Internal auditing;
<PAGE>
(e) Performing all functions ordinarily performed by the office
of a corporate treasurer, and furnishing the services and facilities ordinarily
incident thereto, including calculating the net asset value of the shares in
conformity with the fund(s) prospectus;
(f) Preparing reports to the Trust's shareholders of record and
the SEC including, but not necessarily limited to, Annual Reports and
Semi-Annual Reports on Form N-SAR;
(g) Preparing and filing various reports or other documents
required by federal, state and other applicable laws and regulations, other than
those filed or required to be filed by the Custodian or Transfer Agent;
(h) Preparing and filing the Trust's tax returns;
(i) Assisting each Adviser, at the Adviser's request, in
monitoring and developing compliance procedures for the Trust which will
include, among other matters, procedures to assist the Advisers in monitoring
compliance with each Fund's investment objective, policies, restrictions, tax
matters and applicable laws and regulations;
(j) Performing all functions ordinarily performed by the office of
a corporate secretary, and furnishing the services and facilities incident
thereto, including all functions pertaining to matters organic to the
organization, existence and maintenance of the corporate franchise of the Trust,
including preparation for, conduct of, and recording trustees' meetings and
shareholder meetings;
(k) Furnishing all other services identified on Schedule B annexed
hereto and incorporated herein which are not otherwise specifically set forth
above.
In performing its duties under this Agreement, Investor Services Group:
(a) will act in accordance with the Declaration of Trust, By-Laws, Prospectuses
and with the instructions and directions of the Company and will conform to and
comply with the requirements of the 1940 Act and all other applicable federal or
state laws and regulations; and (b) will consult with legal counsel to the
Company, as necessary and appropriate. Furthermore, Investor Services Group
shall not have or be required to have any authority to supervise the investment
or reinvestment of the securities or other properties which comprise the assets
of the Trust or any of its Funds and shall not provide any investment advisory
services to the Trust or any of its Funds.
4. Compensation and Allocation of Expenses. Investor Services Group shall
bear all expenses in connection with the performance of its services under this
Agreement, except as indicated below.
(a) Investor Services Group will from time to time employ or
associate with itself such person or persons as Investor Services Group may
believe to be particularly suited to assist it in performing services under this
Agreement. Such person or persons may be officers and employees who are employed
by both Investor Services Group and the Trust. The compensation of such person
<PAGE>
or persons shall be paid by Investor Services Group and no obligation shall be
incurred on behalf of the Trust or the Company in such respect.
(b) Investor Services Group shall not be required to pay any of
the following expenses incurred by the Trust: membership dues in the Investment
Company Institute or any similar organization; investment advisory expenses;
costs of printing and mailing stock certificates, prospectuses, reports and
notices; interest on borrowed money; brokerage commissions; stock exchange
listing fees; taxes and fees payable to Federal, state and other governmental
agencies; fees of Trustees of the Trust who are not affiliated with Investor
Services Group; outside auditing expenses; outside legal expenses; or other
expenses not specified in this Section 4 which may be properly payable by the
Trust or the Company.
(c) The Company will compensate Investor Services Group for the
performance of its obligations hereunder in accordance with the fees set forth
in the written Fee Schedule annexed hereto as Schedule B and incorporated
herein. Schedule B may be amended to add fee schedules for any additional Funds
for which Investor Services Group has been retained as Administrator. In no
event shall the Trust be responsible for the payment of any fees payable to
Investor Services Group as set forth in Schedule B hereto.
(d) The Company will compensate Investor Services Group for its
services rendered pursuant to this Agreement in accordance with the fees set
forth above. Such fees do not include out-of-pocket disbursements of Investor
Services Group for which Investor Services Group shall be entitled to bill
separately. Out-of-pocket disbursements shall include, but shall not be limited
to, the items specified in Schedule B, annexed hereto and incorporated herein,
which schedule may be modified by Investor Services Group upon not less than
thirty days' prior written notice to the Company and the Special Projects
outlined in Schedule D hereto.
(e) Investor Services Group will bill the Company as soon as
practicable after the end of each calendar month, and said billings will be
detailed in accordance with the out-of-pocket schedule. The Company will pay to
Investor Services Group the amount of such billing by Federal Funds Wire within
fifteen (15) business days after the Company's receipt of said bill. In
addition, Investor Services Group may charge a service fee equal to the lesser
of (i) one and one half percent (1-1/2%) per month or (ii) the highest interest
rate legally permitted on any past due billed amount.
(f) The Company acknowledges that the fees that Investor Services
Group charges the Company under this Agreement reflect the allocation of risk
between the parties, including the disclaimer of warranties in Section 7 and the
limitations on liability in Section 5. Modifying the allocation of risk from
what is stated here would affect the fees that Investor Services Group charges,
and in consideration of those fees, the Company agrees to the stated allocation
of risk.
5. Limitation of Liability.
(a) Investor Services Group shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Company or the Trust in
connection with the performance of its
<PAGE>
obligations and duties under this Agreement, except a loss resulting from
Investor Services Group's willful misfeasance, bad faith or negligence in the
performance of such obligations and duties, or by reason of its reckless
disregard thereof.
(b) Neither party may assert any cause of action against the other party
under this Agreement that accrued more than two (2) years prior to the filing of
the suit (or commencement of arbitration proceedings) alleging such cause of
action.
(c) Each party shall have the duty to mitigate damages for which the
other party may become responsible.
(d) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO
EVENT SHALL INVESTOR SERVICES GROUP, ITS AFFILIATES OR ANY OF ITS OR THEIR
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY
THEORY OF TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY
FOR LOST PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE
PARTIES REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER EITHER
PARTY OR ANY ENTITY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
6. Indemnification.
(a) The Company shall indemnify and hold Investor Services Group
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against Investor Services Group or for
which Investor Services Group may be held to be liable in connection with this
Agreement or Investor Services Group's performance hereunder (a "Claim"), unless
such Claim resulted from a negligent act or omission to act or bad faith by
Investor Services Group in the performance of its duties hereunder.
(b) Investor Services Group shall indemnify and hold the Company
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against the Company or for which the
Company may be held to be liable in connection with this Agreement (a "Claim"),
provided that such Claim resulted from a negligent act or omission to act, bad
faith, willful misfeasance or reckless disregard by Investor Services Group in
the performance of its duties hereunder.
(c) In any case in which one party (the "Indemnifying Party") may
be asked to indemnify or hold the other party (the "Indemnified Party")
harmless, the Indemnified Party will notify the Indemnifying Party promptly
after identifying any situation which it believes presents or appears likely to
present a claim for indemnification against the Indemnifying Party although the
failure to do so shall not prevent recovery by the Indemnified Party and shall
keep the Indemnifying Party advised with respect to all developments concerning
such situation. The Indemnifying Party
<PAGE>
shall have the option to defend the Indemnified Party against any Claim which
may be the subject of this indemnification, and, in the event that the
Indemnifying Party so elects, such defense shall be conducted by counsel chosen
by the Indemnifying Party and satisfactory to the Indemnified Party, and
thereupon the Indemnifying Party shall take over complete defense of the Claim
and the Indemnified Party shall sustain no further legal or other expenses in
respect of such Claim. The Indemnified Party will not confess any Claim or make
any compromise in any case in which the Indemnifying Party will be asked to
provide indemnification, except with the Indemnifying Party's prior written
consent. The obligations of the parties hereto under this Section 6 shall
survive the termination of this Agreement.
7. EXCLUSION OF WARRANTIES. THIS IS A SERVICE AGREEMENT. EXCEPT AS
EXPRESSLY PROVIDED IN THIS AGREEMENT, INVESTOR SERVICES GROUP DISCLAIMS ALL
OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE FUND OR ANY
OTHER PERSON, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY,
SUITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE
(IRRESPECTIVE OF ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY
SERVICES OR ANY GOODS PROVIDED INCIDENTAL TO SERVICES PROVIDED UNDER THIS
AGREEMENT. INVESTOR SERVICES GROUP DISCLAIMS ANY WARRANTY OF TITLE OR
NON-INFRINGEMENT EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT.
8. Termination of Agreement.
(a) This Agreement shall be effective on the date first written
above and shall continue for a period of two (2) years (the "Initial Term"),
unless earlier terminated pursuant to the terms of this Agreement. Thereafter,
this Agreement shall automatically be renewed for successive terms of two (2)
years ("Renewal Terms") each.
(b) Either party may terminate this Agreement at the end of the
Initial Term or at the end of any subsequent Renewal Term upon not than less
than ninety (90) days or more than one hundred-eighty (180) days prior written
notice to the other party.
(c) In the event a termination notice is given by the Company,
all expenses associated with movement of records and materials and conversion
thereof will be borne by the Company.
(d) If a party hereto is guilty of a material failure to perform
its duties and obligations hereunder (a "Defaulting Party") resulting in a
material loss to the other party, such other party (the "Non-Defaulting Party")
may give written notice thereof to the Defaulting Party, and if such material
breach shall not have been remedied within thirty (30) days after such written
notice is given, then the Non-Defaulting Party may terminate this Agreement by
giving thirty (30) days written notice of such termination to the Defaulting
Party. If Investor Services Group is the Non-Defaulting Party, its termination
of this Agreement shall not constitute a waiver of any other rights or remedies
of Investor Services Group with respect to services performed prior to such
termination or rights of Investor Services Group to be reimbursed for
out-of-pocket expenses. In all cases, termination by
<PAGE>
the Non-Defaulting Party shall not constitute a waiver by the Non-Defaulting
Party of any other rights it might have under this Agreement or otherwise
against the Defaulting Party.
9. Modifications and Waivers. No change, termination, modification, or
waiver of any term or condition of the Agreement shall be valid unless in
writing signed by each party. No such writing shall be effective as against
Investor Services Group unless said writing is executed by a Senior Vice
President, Executive Vice President or President of Investor Services Group. A
party's waiver of a breach of any term or condition in the Agreement shall not
be deemed a waiver of any subsequent breach of the same or another term or
condition.
10. No Presumption Against Drafter. Investor Services Group and the
Company have jointly participated in the negotiation and drafting of this
Agreement. The Agreement shall be construed as if drafted jointly by the Company
and Investor Services Group, and no presumptions arise favoring any party by
virtue of the authorship of any provision of this Agreement.
11. Publicity. Neither Investor Services Group nor the Company shall
release or publish news releases, public announcements, advertising or other
publicity relating to this Agreement or to the transactions contemplated by it
without prior review and written approval of the other party; provided, however,
that either party may make such disclosures as are required by legal, accounting
or regulatory requirements after making reasonable efforts in the circumstances
to consult in advance with the other party.
12. Severability. The parties intend every provision of this Agreement to
be severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.
13. Miscellaneous.
(a) Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Company, the Trust or Investor Services
Group shall be sufficiently given if addressed to the party and received by it
at its office set forth below or at such other place as it may from time to time
designate in writing.
To the Company or the Trust:
Endeavor Investment Advisers
2101 East Coast Highway, Suite 300
Corona del Mar, California 92625
Attn: Michael Roland
<PAGE>
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
Attention: President
with a copy to Investor Services Group's General Counsel
(b) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns and
is not intended to confer upon any other person any rights or remedies
hereunder. This Agreement may not be assigned or otherwise transferred by either
party hereto, without the prior written consent of the other party, which
consent shall not be unreasonably withheld; provided, however, that Investor
Services Group may, in its sole discretion, assign all its right, title and
interest in this Agreement to an affiliate, parent or subsidiary. Investor
Services Group may, in its sole discretion, engage subcontractors to perform any
of the obligations contained in this Agreement to be performed by Investor
Services Group.
(c) The laws of the Commonwealth of Massachusetts, excluding the
laws on conflicts of laws, shall govern the interpretation, validity, and
enforcement of this Agreement. All actions arising from or related to this
Agreement shall be brought in the state and federal courts sitting in the City
of Boston, and Investor Services Group, the Company and the Trust hereby submit
themselves to the exclusive jurisdiction of those courts.
(d) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and which collectively shall be
deemed to constitute only one instrument.
(e) The captions of this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
<PAGE>
14. Confidentiality.
(a) The parties agree that the Proprietary Information (defined
below) and the contents of this Agreement (collectively "Confidential
Information") are confidential information of the parties and their respective
licensers. The Company and Investor Services Group shall exercise reasonable
care to safeguard the confidentiality of the Confidential Information of the
other. The Company and Investor Services Group may each use the Confidential
Information only to exercise its rights or perform its duties under this
Agreement. The Company and Investor Services Group shall not duplicate, sell or
disclose to others the Confidential Information of the other, in whole or in
part, without the prior written permission of the other party. The Company and
Investor Services Group may, however, disclose Confidential Information to its
employees who have a need to know the Confidential Information to perform work
for the other, provided that each shall use reasonable efforts to ensure that
the Confidential Information is not duplicated or disclosed by its employees in
breach of this Agreement. The Company and Investor Services Group may also
disclose the Confidential Information to independent contractors, auditors and
professional advisors, provided they first agree in writing to be bound by the
confidentiality obligations substantially similar to this Section 14.
Notwithstanding the previous sentence, in no event shall either the Company or
Investor Services Group disclose the Confidential Information to any competitor
of the other without specific, prior written consent.
(b) Proprietary Information means:
(i) any data or information that is completely sensitive
material, and not generally known to the public, including, but not limited to,
information about product plans, marketing strategies, finance, operations,
customer relationships, customer profiles, sales estimates, business plans, and
internal performance results relating to the past, present or future business
activities of the Company or Investor Services Group, their respective
subsidiaries and affiliated companies and the customers, clients and suppliers
of any of them;
(ii) any scientific or technical information, design,
process, procedure, formula,
or improvement that is commercially valuable and secret in the sense that its
confidentiality affords the Company or Investor Services Group a competitive
advantage over its competitors; and
(iii) all confidential or proprietary concepts,
documentation, reports, data,
specifications, computer software, source code, object code, flow charts,
databases, inventions, know-how, show-how and trade secrets, whether or not
patentable or copyrightable.
(c) Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.
(d) The Company acknowledges that breach of the restrictions on
use, dissemination or disclosure of any Confidential Information would result in
immediate and irreparable harm, and
<PAGE>
money damages would be inadequate to compensate Investor Services Group for that
harm. Investor Services Group shall be entitled to equitable relief, in addition
to all other available remedies, to redress any such breach.
15. Force Majeure. No party shall be liable for any default or delay in
the performance of its obligations under this Agreement if and to the extent
such default or delay is caused, directly or indirectly, by (i) fire, flood,
elements of nature or other acts of God; (ii) any outbreak or escalation of
hostilities, war, riots or civil disorders in any country, (iii) any act or
omission of the other party or any governmental authority; (iv) any labor
disputes (whether or not the employees' demands are reasonable or within the
party's power to satisfy); or (v) nonperformance by a third party or any similar
cause beyond the reasonable control of such party, including without limitation,
failures or fluctuations in telecommunications or other equipment. In any such
event, the non-performing party shall be excused from any further performance
and observance of the obligations so affected only for so long as such
circumstances prevail and such party continues to use commercially reasonable
efforts to recommence performance or observance as soon as practicable.
16. Entire Agreement. This Agreement, including all Schedules hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed and delivered by their duly authorized officers as of the date
first written above.
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: /s/ J.L. Fox
Name: James L.Fox
Title: Chief Operating Officer
ENDEAVOR INVESTMENT ADVISERS
By: Endeavor Management Co.,
Managing General Partner
By: /s/Michael J. Roland
Name: Michael J. Roland
Title:
ACKNOWLEDGED AND AGREED TO:
ENDEAVOR SERIES TRUST
By:
Name:
Title:
<PAGE>
SCHEDULE A
TCW Money Market Portfolio
TCW Managed Asset Allocation Portfolio
T. Rowe Price International Stock Portfolio
Value Equity Portfolio
Value Small Cap Portfolio
Dreyfus U.S. Government Securities Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
Opportunity Value Portfolio
Enhanced Index Portfolio
<PAGE>
SCHEDULE B
FEE SCHEDULE
The Company shall pay Investor Services Group the following fees for servicing
the Existing Portfolios (as hereinafter defined):
o a flat fee of $650,000 per annum, provided that the aggregate
net assets of the Existing Portfolios do not exceed $1 billion.
o if the aggregate net assets of the Existing Portfolios exceed $1
billion, Investor Services Group shall also be entitled to receive
a fee of .01% of any net assets in excess of $1 billion in
addition to the flat fee of $650,000.
o if the aggregate net assets of the Existing Portfolios fall
below $850 million, the foregoing fees will be subject to
renegotiation.
The "Existing Portfolios" shall consist of TCW Money Market Portfolio, TCW
Managed Asset Allocation Portfolio, T. Rowe Price International Stock Portfolio,
Value Equity Portfolio, Dreyfus Small Cap Value Portfolio, Dreyfus U.S.
Government Securities Portfolio, T. Rowe Price Equity Income Portfolio, T. Rowe
Price Growth Stock Portfolio, Opportunity Value Portfolio and Enhanced Index
Portfolio. The fees to be paid by the Company to Investor Services Group for
servicing any additional Portfolios shall be those fees agreed to by Investor
Services Group and the Company in writing prior to the commencement of services
for such Portfolios.
o Investor Services Group shall be entitled to collect all
out-of-pocket fees described in Schedule C. x
<PAGE>
SCHEDULE C
OUT-OF-POCKET EXPENSES
Out-of-pocket expenses include, but are not limited to, the following:
- Courier services
- Pricing services used by the Company
- Customized programming requests at $100 per hour
- Telephone, telecommunications and fax
- Travel and lodging for Board, Shareholder and Operations meetings
- Independent Auditor's Report (SAS 70)
- Forms and supplies for the preparation of Board meetings and other
materials for the Trust
- Duplicating charges with respect to filings with Federal and state
authorities and Board meeting materials
- Postage of Board meetings materials and other materials to the
Trust's Board members and service providers (including
overnight or other courier services)
- Such other expenses as are agreed to by Investor Services Group and
the Company
<PAGE>
SCHEDULE D
Fund Accounting and Administrative Services
Routine Projects
o Daily, Weekly, and Monthly Reporting o Portfolio and General Ledger Accounting
o Daily Pricing of all Securities o Daily Valuation and NAV Calculation o
Comparison of NAV to market movement o Review of price tolerance/fluctuation
report
o Research items appearing on the price exception report
o Weekly cost monitoring along with market-to-market valuations in accordance
with Rule 2a7
o Preparation of monthly ex-dividend monitor
o Daily cash reconciliation with the custodian bank
o Daily updating of price and rate information to the Transfer Agent/Insurance
Agent
o Daily support and report delivery to Portfolio Management
o Daily calculation of fund advisor fees and waivers
o Daily calculation of distribution rates
o Daily maintenance of each fund's general ledger including expense accruals
o Daily price notification to other vendors as required
o Calculation of 30-day adjusted SEC yields
o Preparation of month-end reconciliation package
o Monthly reconciliation of fund expense records
o Preparation of monthly pay down gain/loss summaries
o Preparation of all annual and semi-annual audit work papers
o Preparation and Printing of Financial Statements
o Providing Shareholder Tax Information to Transfer Agent
o Producing Drafts of IRS and State Tax Returns
o Treasury Services including:
Provide Officer for the Trust
Expense Accrual Monitoring
Determination of Dividends
Prepare materials for review by the board, e.g., 2a-7,10f-3, 17a-7,
17e-1, Rule 144a Tax and Financial Counsel
o Monthly Compliance Testing including Section 817H
<PAGE>
Legal, Regulatory and Board of Trustees Support
Routine Legal Services
Corporate Secretarial
o Assist in maintaining corporate records and good standing status of Trust
in its state of organization o Provide Secretary/Assistant Secretary for
Fund o Develop and maintain calendar of annual and quarterly board
approvals and regulatory filings o Prepare notice, agenda, memoranda,
resolutions and background materials for legal approval (including
additional Funds of the Trust) at quarterly board meetings; attend
meetings; make presentations where appropriate; prepare minutes; follow up
on issues o Provide support for one special board meeting per year and
written consent votes where needed o Provide support for one shareholder
meeting per year year including preparation of proxy materials
Regulatory/Filings
o Review Post-Effective Amendments
o Prepare and file Rule 24f-2 Notice
o Review and file Form N-SAR
o Review and file Annual and Semi-Annual Financial Reports o Prepare
prospectus supplements as needed o Review proxy materials for special
shareholder meetings
Miscellaneous Routine Legal Services
o Communicate significant regulatory or legislative developments to Trust
management and trustees and provide related planning assistance where
needed o Consult with Trust management regarding portfolio compliance and
corporate and regulatory issues as needed o Maintain effective
communication with outside counsel and review legal bills of outside
counsel o Coordinate the printing and mailing process with outside printers
for all shareholder publications o Arrange D&O/E&O insurance and fidelity
bond coverage for Trust o Assist in monitoring Code of Ethics reporting and
provide such reports to Adviser
Special Legal Services (billed separately)*
<PAGE>
o Assist in managing SEC audits of Funds o Review sales material and
advertising for Funds, SEC and NASD compliance o Assist in conversion
Coordinate time and responsibility schedules Draft notice, agenda,
memoranda, resolutions and background materials for board approval o Assist
in new investment company start-up (to the extent requested) Coordinate
time and responsibility schedules Prepare corporate documents (MTA/by-laws)
Draft/file registration statement (including investment objectives/policies
and prospectuses) Respond to and negotiate SEC comments Draft notice,
agenda and resolutions for organizational meeting; attend board meeting;
make presentations where appropriate; prepare minutes and follow up on
issues o Develop compliance manual for Funds o Prepare notice, agenda,
memoranda and background materials for special board meetings, make
presentations where appropriate, prepare minutes and follow up on issues
(in excess of one per year) o Prepare proxy material for special
shareholder meetings (in excess of one per year ) o Prepare PEA for special
purposes (e.g., new funds or classes, changes in advisory relationships,
mergers, restructurings) o Assist in extraordinary non-recurring projects,
including consultative legal services as needed, e.g.: Arrange CDSC
financial programs Prospectus simplification Profile prospectuses Exemptive
order applications
* Special Legal Services shall be billed at a rate of $185 per hour subject to
certain project caps as may be agreed to by Investor Services Group and the
Company. No Special Legal Services shall be undertaken by Investor Services
Group without the prior written consent of the Company.
<PAGE>
SUPPLEMENT TO ADMINISTRATION AGREEMENT
Date: January 28, 1998
Endeavor Investment Advisers, a California general partnership (the
"Company"), hereby supplements its agreement with First Data Investors Services
Group, Inc., a Massachusetts corporation ("Investor Services Group"), as
follows:
1. Appointment. Pursuant to Section 1 of the Administration Agreement
dated as of March 28, 1991 ( the "Agreement"), the Company and Investor Services
Group hereby agree that the SELECT 50 PORTFOLIO, a new series of the Endeavor
Series Trust (the "Trust"), created and designated in accordance with the
Trust's Agreement and Declaration of Trust, shall be considered "Series" of the
Trust under the terms of the Agreement.
2. Compensation. The Company shall compensate Investor Services Group for
its services rendered to the Company in accordance with Amendment No. 5 to the
Agreement dated as of January 28, 1998.
Such fees do not include out-of-pocket disbursements of Investor
Services Group for which Investor Services Group shall be entitled to bill
separately. Out-of-pocket disbursements shall include, but shall not be limited
to the items specified in Schedule A to the Agreement, which Schedule may be
modified by Investor Services Group upon not less than thirty days' prior
written notice to the Company.
IN WITNESS WHEREOF, the parties here to have caused this instrument to
be duly executed and delivered by their duly authorized officers as of the date
first written above.
ENDEAVOR INVESTMENT ADVISERS
By: Endeavor Management Co.,
Managing General Partner
-------------------------
Title:
FIRST DATA INVESTOR SERVICES
GROUP, INC.
/s/ Barbara L. Worthen
Title: Executive Vice President &
General Counsel
ENDEAVOR SERIES TRUST
--------------------------
Title:
<PAGE>
EXHIBIT A
Out-of-Pocket Expenses
Administration Agreement
I. Out-of-pocket expenses include, but are not limited to, the following:
Postage (including overnight covering services) Telephone
Telecommunications charges (including FAX) Duplicating Pricing services
Forms and supplies
o Travel (including all expenses incurred in meeting with representatives
or Trustees of the Trust outside the City of Boston, Massachusetts)
<PAGE>
AMENDMENT NO. 5 TO THE
ADMINISTRATION AGREEMENT
This Amendment No. 5 dated as of January 28, 1998, is entered into by
ENDEAVOR INVESTMENT ADVISERS (the "Company") and FIRST DATA INVESTOR SERVICES
GROUP, INC. ("Investor Services Group").
WHEREAS, the Company and The Boston Company Advisors, Inc. entered into an
Administration Agreement dated as of March 28, 1991 which agreement was assigned
to Investor Services Group on April 24, 1994;
WHEREAS, the Company and Investor Services Group wish to amend the
Agreement to revise certain schedules;
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
hereby agree as follows:
I. Schedule A to the Agreement is hereby deleted in full and replaced with
the attached Schedule A.
II. Schedule B to the Agreement is hereby deleted in full and replaced with
the attached Schedule B.
III. Except to the extent amended hereby, the Agreement shall remain
unchanged and in full force and effect and is hereby ratified and confirmed in
all respects as amended hereby.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 5
as of the date and year first written above.
ENDEAVOR INVESTMENT ADVISERS
By: __________________________
FIRST DATA INVESTOR SERVICES
GROUP, INC.
By: __________________________
<PAGE>
SCHEDULE A
TCW Money Market Portfolio
TCW Managed Asset Allocation Portfolio
T. Rowe Price International Stock Portfolio
Value Equity Portfolio
Dreyfus Small Value Cap Portfolio
Dreyfus U.S. Government Securities Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
Opportunity Value Portfolio
Enhanced Index Portfolio
Select 50 Portfolio
<PAGE>
SCHEDULE B
FEE SCHEDULE
The Company shall pay Investor Services Group the following fees for servicing
the Existing Portfolios (as hereinafter defined):
o a flat fee of $650,000 per annum, provided that the aggregate
net assets of the Existing Portfolios do not exceed $1 billion.
o if the aggregate net assets of the Existing Portfolios exceed $1
billion, Investor Services Group shall also be entitled to receive
a fee of .01% of any net assets in excess of $1 billion in
addition to the flat fee of $650,000.
o if the aggregate net assets of the Existing Portfolios fall
below $850 million, the foregoing fees will be subject to
renegotiation.
The "Existing Portfolios" shall consist of TCW Money Market Portfolio, TCW
Managed Asset Allocation Portfolio, T. Rowe Price International Stock Portfolio,
Value Equity Portfolio, Dreyfus Small Cap Value Portfolio, Dreyfus U.S.
Government Securities Portfolio, T. Rowe Price Equity Income Portfolio, T. Rowe
Price Growth Stock Portfolio, Opportunity Value Portfolio and Enhanced Index
Portfolio.
In addition the Company shall pay Investor Services Group the following fees for
servicing the Select 50 Portfolio:
Flat fee :
$40,000 per annum which will be added to the flat fee of $650,000
per annum
First year flat fee will be reduced by $10,000 per annum.
Asset Based Fee:
An additional fee of .01% on the Select 50 Portfolio's net assets will be
charged.
o Investor Services Group shall be entitled to collect all
out-of-pocket fees described in Schedule C to Amendment
No. 4.
x
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" and "Independent Auditors" in the Prospectus and "Financial
Statements" in the Statement of Additional Information in Post-Effective
Amendment No. 22 to the Registration Statement (Form N-1A, No. 33-27352) of
Endeavor Series Trust.
We also consent to the incorporation by reference of our report dated February
11, 1998, with respect to the financial statements included in the Annual Report
of Endeavor Series Trust (consisting of the Dreyfus Small Cap Value Portfolio,
Dreyfus U.S. Government Securities Portfolio, Enhanced Index Portfolio,
Opportunity Value Portfolio, Value Equity Portfolio, TCW Managed Asset
Allocation Portfolio, TCW Money Market Portfolio, T. Rowe Price Equity Income
Portfolio, T. Rowe Price Growth Stock Portfolio, and T. Rowe Price International
Stock Portfolio) for the year ended December 31, 1997.
ERNST & YOUNG LLP
Boston, Massachusetts
February 23, 1998
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute and appoint Robert N. Hickey and
David M. Leahy, each of them singly, my true and lawful attorneys and agents,
with full power to them and each of them to sign for me and in my name and in my
capacity as a Manager of the PFL Endeavor Target Account, any and all
Registration Statements on Form N-3 of the PFL Endeavor Target Account, and any
and all amendments thereto, and to file the same, with all exhibits thereto and
other documents in connection thereunder with the Securities and Exchange
Commission, granting unto said attorney and agent full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
connection therewith as fully to all intents and purposes as I might or could do
in person, with full power of substitution and revocation; and I do hereby
ratify and confirm all that said attorneys and agents may lawfully do or cause
to be done by virtue of this power of attorney.
WITNESS my hand as of the 23rd day of February, 1998.
/s/Wiliam L. Busler
-------------------
William L. Busler
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME>ENDEAVOR ENHANCED INDEX PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 19,492,549
<INVESTMENTS-AT-VALUE> 20,733,112
<RECEIVABLES> 35,382
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 24,125
<TOTAL-ASSETS> 20,792,619
<PAYABLE-FOR-SECURITIES> 927,181
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 54,152
<TOTAL-LIABILITIES> 981,333
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18,437,485
<SHARES-COMMON-STOCK> 1,611,913
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 40,282
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 92,956
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,240,563
<NET-ASSETS> 19,811,286
<DIVIDEND-INCOME> 109,883
<INTEREST-INCOME> 13,920
<OTHER-INCOME> 0
<EXPENSES-NET> 86,854
<NET-INVESTMENT-INCOME> 36,949
<REALIZED-GAINS-CURRENT> 92,956
<APPREC-INCREASE-CURRENT> 1,240,563
<NET-CHANGE-FROM-OPS> 1,370,468
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,676,961
<NUMBER-OF-SHARES-REDEEMED> (65,048)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 19,811,286
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 50,159
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 104,203
<AVERAGE-NET-ASSETS> 10,004,319
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 2.27
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.29
<EXPENSE-RATIO> 1.30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> ENDEAVOR SERIES MANAGED ASSET ALLOCATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 225,038,225
<INVESTMENTS-AT-VALUE> 301,633,569
<RECEIVABLES> 1,490,068
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 313,042
<TOTAL-ASSETS> 303,436,679
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 334,531
<TOTAL-LIABILITIES> 334,531
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 194,103,670
<SHARES-COMMON-STOCK> 13,567,600
<SHARES-COMMON-PRIOR> 12,747,254
<ACCUMULATED-NII-CURRENT> 4,396,467
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 28,006,667
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 76,595,344
<NET-ASSETS> 303,102,148
<DIVIDEND-INCOME> 2,050,395
<INTEREST-INCOME> 4,674,756
<OTHER-INCOME> 0
<EXPENSES-NET> 2,310,039
<NET-INVESTMENT-INCOME> 4,415,112
<REALIZED-GAINS-CURRENT> 34,569,832
<APPREC-INCREASE-CURRENT> 10,307,208
<NET-CHANGE-FROM-OPS> 49,292,152
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,471,255)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,736,406
<NUMBER-OF-SHARES-REDEEMED> (1,086,805)
<SHARES-REINVESTED> 170,745
<NET-CHANGE-IN-ASSETS> 62,892,521
<ACCUMULATED-NII-PRIOR> 3,467,344
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (6,577,899)
<GROSS-ADVISORY-FEES> 2,057,590
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,310,039
<AVERAGE-NET-ASSETS> 274,345,345
<PER-SHARE-NAV-BEGIN> 18.84
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> 3.45
<PER-SHARE-DIVIDEND> (0.27)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 22.34
<EXPENSE-RATIO> 0.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> ENDEAVOR SERIES OPPORTUNITY VALUE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 25,603,802
<INVESTMENTS-AT-VALUE> 26,816,191
<RECEIVABLES> 32,885
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 26,250
<TOTAL-ASSETS> 26,875,326
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 73,356
<TOTAL-LIABILITIES> 73,356
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,148,439
<SHARES-COMMON-STOCK> 2,280,049
<SHARES-COMMON-PRIOR> 69,713
<ACCUMULATED-NII-CURRENT> 167,809
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 273,333
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,212,389
<NET-ASSETS> 26,801,970
<DIVIDEND-INCOME> 103,222
<INTEREST-INCOME> 200,679
<OTHER-INCOME> 0
<EXPENSES-NET> 140,333
<NET-INVESTMENT-INCOME> 163,568
<REALIZED-GAINS-CURRENT> 273,333
<APPREC-INCREASE-CURRENT> 1,212,229
<NET-CHANGE-FROM-OPS> 1,649,130
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (851)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,313,198
<NUMBER-OF-SHARES-REDEEMED> (102,942)
<SHARES-REINVESTED> 80
<NET-CHANGE-IN-ASSETS> 26,100,845
<ACCUMULATED-NII-PRIOR> 292
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 97,611
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 140,333
<AVERAGE-NET-ASSETS> 12,214,427
<PER-SHARE-NAV-BEGIN> 10.06
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 1.62
<PER-SHARE-DIVIDEND> (0.00)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.75
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 05
<NAME> ENDEAVOR SERIES VALUE EQUITY
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 159,117,584
<INVESTMENTS-AT-VALUE> 216,324,178
<RECEIVABLES> 347,126
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 5,683
<TOTAL-ASSETS> 216,676,987
<PAYABLE-FOR-SECURITIES> 421,515
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 216,894
<TOTAL-LIABILITIES> 638,409
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 152,251,326
<SHARES-COMMON-STOCK> 10,434,879
<SHARES-COMMON-PRIOR> 7,433,805
<ACCUMULATED-NII-CURRENT> 2,368,638
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,211,990
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 57,206,624
<NET-ASSETS> 216,038,578
<DIVIDEND-INCOME> 2,034,859
<INTEREST-INCOME> 1,857,066
<OTHER-INCOME> 0
<EXPENSES-NET> 1,520,604
<NET-INVESTMENT-INCOME> 2,371,321
<REALIZED-GAINS-CURRENT> 4,215,649
<APPREC-INCREASE-CURRENT> 30,856,935
<NET-CHANGE-FROM-OPS> 37,443,905
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,246,683)
<DISTRIBUTIONS-OF-GAINS> (4,562,514)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,232,180
<NUMBER-OF-SHARES-REDEEMED> (557,099)
<SHARES-REINVESTED> 325,993
<NET-CHANGE-IN-ASSETS> 88,111,283
<ACCUMULATED-NII-PRIOR> 1,243,970
<ACCUMULATED-GAINS-PRIOR> 4,558,885
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,367,432
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,520,604
<AVERAGE-NET-ASSETS> 170,928,927
<PER-SHARE-NAV-BEGIN> 17.21
<PER-SHARE-NII> 0.20
<PER-SHARE-GAIN-APPREC> 3.96
<PER-SHARE-DIVIDEND> (0.14)
<PER-SHARE-DISTRIBUTIONS> (0.53)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 20.70
<EXPENSE-RATIO> 0.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> ENDEAVOR SERIES DOMESTIC MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 52,070,373
<INVESTMENTS-AT-VALUE> 52,070,373
<RECEIVABLES> 548,875
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 39,398
<TOTAL-ASSETS> 52,658,646
<PAYABLE-FOR-SECURITIES> 1,402,696
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 94,320
<TOTAL-LIABILITIES> 1,497,016
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51,162,734
<SHARES-COMMON-STOCK> 51,162,734
<SHARES-COMMON-PRIOR> 41,546,250
<ACCUMULATED-NII-CURRENT> 20
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1,124)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 51,161,630
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,893,990
<OTHER-INCOME> 0
<EXPENSES-NET> 310,022
<NET-INVESTMENT-INCOME> 2,583,968
<REALIZED-GAINS-CURRENT> (146)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,583,822
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,583,948)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 60,627,400
<NUMBER-OF-SHARES-REDEEMED> (53,594,899)
<SHARES-REINVESTED> 2,583,983
<NET-CHANGE-IN-ASSETS> 9,616,358
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (978)
<GROSS-ADVISORY-FEES> 258,744
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 310,022
<AVERAGE-NET-ASSETS> 51,748,819
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> (0.00)
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 08
<NAME> ENDEAVOR SERIES T..ROWE PRICE EQUITY INC
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 169,989,092
<INVESTMENTS-AT-VALUE> 199,431,065
<RECEIVABLES> 747,145
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 9,925
<TOTAL-ASSETS> 200,188,135
<PAYABLE-FOR-SECURITIES> 2,708,264
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 251,772
<TOTAL-LIABILITIES> 2,960,036
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 156,319,894
<SHARES-COMMON-STOCK> 10,199,760
<SHARES-COMMON-PRIOR> 5,053,104
<ACCUMULATED-NII-CURRENT> 3,262,979
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,203,212
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29,442,014
<NET-ASSETS> 197,228,099
<DIVIDEND-INCOME> 3,640,538
<INTEREST-INCOME> 928,257
<OTHER-INCOME> 0
<EXPENSES-NET> 1,255,666
<NET-INVESTMENT-INCOME> 3,313,129
<REALIZED-GAINS-CURRENT> 8,157,837
<APPREC-INCREASE-CURRENT> 21,564,992
<NET-CHANGE-FROM-OPS> 33,035,958
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,330,453)
<DISTRIBUTIONS-OF-GAINS> (1,924,151)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,318,386
<NUMBER-OF-SHARES-REDEEMED> (367,672)
<SHARES-REINVESTED> 195,942
<NET-CHANGE-IN-ASSETS> 118,977,243
<ACCUMULATED-NII-PRIOR> 1,329,442
<ACCUMULATED-GAINS-PRIOR> 1,918,047
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,073,258
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,255,666
<AVERAGE-NET-ASSETS> 134,157,129
<PER-SHARE-NAV-BEGIN> 15.49
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> 4.06
<PER-SHARE-DIVIDEND> (0.19)
<PER-SHARE-DISTRIBUTIONS> (0.27)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 19.34
<EXPENSE-RATIO> 0.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 09
<NAME> ENDEAVOR SERIES T.ROWE PRICE GR STOCK
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 98,803,956
<INVESTMENTS-AT-VALUE> 122,991,561
<RECEIVABLES> 663,738
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 8,325
<TOTAL-ASSETS> 123,663,624
<PAYABLE-FOR-SECURITIES> 274,277
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 159,832
<TOTAL-LIABILITIES> 434,109
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 92,321,546
<SHARES-COMMON-STOCK> 5,930,419
<SHARES-COMMON-PRIOR> 3,667,172
<ACCUMULATED-NII-CURRENT> 301,437
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,419,081
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 24,187,451
<NET-ASSETS> 123,229,515
<DIVIDEND-INCOME> 906,270
<INTEREST-INCOME> 278,345
<OTHER-INCOME> 0
<EXPENSES-NET> 850,970
<NET-INVESTMENT-INCOME> 333,645
<REALIZED-GAINS-CURRENT> 6,355,972
<APPREC-INCREASE-CURRENT> 15,152,190
<NET-CHANGE-FROM-OPS> 21,841,807
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (153,147)
<DISTRIBUTIONS-OF-GAINS> (486,466)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,718,480
<NUMBER-OF-SHARES-REDEEMED> (490,826)
<SHARES-REINVESTED> 35,593
<NET-CHANGE-IN-ASSETS> 63,497,122
<ACCUMULATED-NII-PRIOR> 237,483
<ACCUMULATED-GAINS-PRIOR> 430,691
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 710,554
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 850,970
<AVERAGE-NET-ASSETS> 88,819,255
<PER-SHARE-NAV-BEGIN> 16.29
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 4.59
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> (0.11)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 20.78
<EXPENSE-RATIO> 0.96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> ENDEAVOR SERIES T.ROWE PRICE INT'L EQUITY
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 136,692,159
<INVESTMENTS-AT-VALUE> 156,164,218
<RECEIVABLES> 226,717
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 8,437,137
<TOTAL-ASSETS> 164,828,072
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 267,848
<TOTAL-LIABILITIES> 267,848
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 143,170,326
<SHARES-COMMON-STOCK> 11,582,604
<SHARES-COMMON-PRIOR> 9,639,260
<ACCUMULATED-NII-CURRENT> 697,873
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,237,508
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,454,517
<NET-ASSETS> 164,560,224
<DIVIDEND-INCOME> 2,801,316
<INTEREST-INCOME> 36,965
<OTHER-INCOME> 0
<EXPENSES-NET> 1,675,865
<NET-INVESTMENT-INCOME> 1,162,416
<REALIZED-GAINS-CURRENT> 3,713,928
<APPREC-INCREASE-CURRENT> (1,972,757)
<NET-CHANGE-FROM-OPS> 2,903,587
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,046,567)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,814,522
<NUMBER-OF-SHARES-REDEEMED> (941,417)
<SHARES-REINVESTED> 70,239
<NET-CHANGE-IN-ASSETS> 30,124,977
<ACCUMULATED-NII-PRIOR> 734,537
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (2,628,933)
<GROSS-ADVISORY-FEES> 1,404,553
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,675,865
<AVERAGE-NET-ASSETS> 156,061,493
<PER-SHARE-NAV-BEGIN> 13.95
<PER-SHARE-NII> 0.10
<PER-SHARE-GAIN-APPREC> 0.27
<PER-SHARE-DIVIDEND> (0.10)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.21
<EXPENSE-RATIO> 1.07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 07
<NAME> ENDEAVOR SERIES DREYFUS US GOVT SECURITIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 46,431,189
<INVESTMENTS-AT-VALUE> 47,667,705
<RECEIVABLES> 811,824
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 10,426
<TOTAL-ASSETS> 48,489,955
<PAYABLE-FOR-SECURITIES> 1,902,788
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 45,186
<TOTAL-LIABILITIES> 1,947,974
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43,307,042
<SHARES-COMMON-STOCK> 3,919,711
<SHARES-COMMON-PRIOR> 2,201,546
<ACCUMULATED-NII-CURRENT> 1,990,775
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,648
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,236,516
<NET-ASSETS> 46,541,981
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,282,717
<OTHER-INCOME> 0
<EXPENSES-NET> 278,419
<NET-INVESTMENT-INCOME> 2,004,298
<REALIZED-GAINS-CURRENT> 275,682
<APPREC-INCREASE-CURRENT> 1,065,295
<NET-CHANGE-FROM-OPS> 3,345,275
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,063,251)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,054,139
<NUMBER-OF-SHARES-REDEEMED> (432,109)
<SHARES-REINVESTED> 96,135
<NET-CHANGE-IN-ASSETS> 21,814,779
<ACCUMULATED-NII-PRIOR> 1,061,012
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (279,318)
<GROSS-ADVISORY-FEES> 227,037
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 278,419
<AVERAGE-NET-ASSETS> 34,928,812
<PER-SHARE-NAV-BEGIN> 11.23
<PER-SHARE-NII> 0.39
<PER-SHARE-GAIN-APPREC> 0.61
<PER-SHARE-DIVIDEND> (0.36)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.87
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 06
<NAME> ENDEAVOR SERIES DREYFUS SMALL CAP VALUE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 138,498,177
<INVESTMENTS-AT-VALUE> 148,456,346
<RECEIVABLES> 735,752
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2,511
<TOTAL-ASSETS> 149,194,609
<PAYABLE-FOR-SECURITIES> 2,858,673
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 140,815
<TOTAL-LIABILITIES> 2,999,488
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 116,212,102
<SHARES-COMMON-STOCK> 8,909,917
<SHARES-COMMON-PRIOR> 5,838,975
<ACCUMULATED-NII-CURRENT> 227,013
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 19,797,837
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,958,169
<NET-ASSETS> 146,195,121
<DIVIDEND-INCOME> 1,039,292
<INTEREST-INCOME> 239,903
<OTHER-INCOME> 0
<EXPENSES-NET> 1,051,152
<NET-INVESTMENT-INCOME> 228,043
<REALIZED-GAINS-CURRENT> 19,822,899
<APPREC-INCREASE-CURRENT> 3,374,069
<NET-CHANGE-FROM-OPS> 23,425,011
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (635,811)
<DISTRIBUTIONS-OF-GAINS> (11,059,249)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,854,599
<NUMBER-OF-SHARES-REDEEMED> (579,781)
<SHARES-REINVESTED> 796,124
<NET-CHANGE-IN-ASSETS> 60,391,673
<ACCUMULATED-NII-PRIOR> 634,795
<ACCUMULATED-GAINS-PRIOR> 11,031,711
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 920,244
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,051,152
<AVERAGE-NET-ASSETS> 115,030,483
<PER-SHARE-NAV-BEGIN> 14.69
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 3.52
<PER-SHARE-DIVIDEND> (0.10)
<PER-SHARE-DISTRIBUTIONS> (1.72)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 16.41
<EXPENSE-RATIO> 0.91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
