As filed with the Securities and Exchange Commission on March 19,
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. 23 X
------- --
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No. 26
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)
on ____________ pursuant to paragraph (a)(1)
X 75 days after filing pursuant to paragraph (a)(2)
on ____________ pursuant to paragraph (a)(2) of Rule 485
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
- -----------------------------------------
The Registrant hereby declares its intention to register an indefinite number of
shares of beneficial interest of its
<PAGE>
Endeavor High Yield Portfolio. 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.
<PAGE>
ENDEAVOR SERIES TRUST
Cross Reference Sheet
Pursuant to Rule 495(a)
<TABLE>
<CAPTION>
Part A
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
<PAGE>
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>
ENDEAVOR SERIES TRUST
Part A: The Prospectus to be dated May 1, 1998 is incorporated by
reference to Post-Effective Amendment No. 22 as filed with the Securities and
Exchange Commission (the "SEC") on February 27, 1998 as Accession
#0000908737-98-000222.
Part B: The Statement of Additional Information to be dated May 1, 1998
is incorporated by reference to Post-Effective Amendment No. 22 as filed with
the SEC on February 27, 1998 as Accession #0000908737-98-000222.
<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 Endeavor High Yield Portfolio offered by
the Fund (the "Portfolio").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Portfolio invests predominantly in lower rated bonds, commonly
referred to as "junk bonds." Bonds of this type are considered to be speculative
with regard to payment of interest and return of principal. Investors should
carefully assess the risks associated with an investment in this Portfolio. See
"Investment Objective and Policies - Risk Factors Relating To Investing in High
Yield Securities."
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, as
amended ___________, 1998 has been filed with the Securities and
<PAGE>
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 _____________, 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 twelve portfolios, one of which is
described in this Prospectus. The Trustees of the Fund may establish additional
portfolios at any time.
Shares of the Portfolio are issued and redeemed at their net asset
value without a sales load and currently are offered only to various separate
accounts of PFL Life Insurance Company and certain of its affiliates ("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 Portfolio are different from the rights of the owner of
a Contract. The terms "shareholder" or "shareholders" in this Prospectus refer
to PFL and not to any Contract owner.
The structure of the Fund permits Contract owners, within the
limitations described in the appropriate Contract, to allocate the amounts held
by PFL under the Contracts for investment in the various portfolios of the Fund.
See the prospectus and other material accompanying this Prospectus for a
description of the Contracts, which portfolios of the Fund are available to
Contract owners, and the relationship between increases or decreases in the net
asset value of shares of the portfolios (and any dividends and distributions on
such shares) and the benefits provided under the Contracts.
It is conceivable that in the future it may be disadvantageous for
scheduled premium variable life insurance separate accounts, flexible and single
premium variable life insurance separate accounts, and variable annuity separate
<PAGE>
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 Objective
The investment objective of the Portfolio is to seek high current income by
investing primarily in a professionally managed diversified portfolio of fixed
income securities some of which may involve equity features.
<PAGE>
FINANCIAL HIGHLIGHTS
The offering of shares of the Portfolio is expected to commence on or
about the date of this Prospectus. Accordingly, no financial highlight data is
available for shares of the Portfolio.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
The following is a brief description of the investment objectives and
policies of the Portfolio. The investment objective and the policies of the
Portfolio other than those listed under the caption "Investment Restrictions" in
the Statement of Additional Information are not fundamental policies and may be
changed by the Trustees of the Fund without the approval of shareholders.
Certain portfolio investments and techniques discussed below are described in
greater detail in the Statement of Additional Information. Due to the
uncertainty inherent in all investments, there can be no assurance that the
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
Portfolio will be able to achieve its investment objective.
The investment objective of the Portfolio is to seek high current
income by investing primarily in a professionally managed diversified portfolio
of fixed income securities, some of which may involve equity features. Capital
growth, if any, is a consideration incidental to the objective of the Portfolio
of high current income.
Fixed income securities offering the high current income sought by the
Portfolio normally include those fixed income securities which offer a current
yield above that generally available on debt securities in the three highest
rating categories of the recognized rating agencies (commonly known as "junk
bonds" if rated below the four highest categories of nationally recognized
statistical ratings organizations ("NRSROs")). The Portfolio may invest up to
100% of its net assets in such securities. For a description of these rating
categories, see the Appendix to the Statement of Additional Information.
However, since available yields and yield differentials vary over time, no
specific level of income or yield differential can ever be assured. Investors
should carefully review the section below entitled "Risk Factors Relating To
Investing in High Yield Securities."
Fixed income securities include preferred and preference stocks and all
types of debt obligations of both domestic and foreign issuers, such as bonds,
debentures, notes, equipment lease certificates, equipment trust certificates
(including interests in trusts or other entities representing such obligations),
conditional sales contracts, commercial paper and obligations issued or
guaranteed by the U.S. government, any foreign government or any of their
respective political subdivisions, agencies or instrumentalities (including
obligations, such as repurchase agreements, secured by such instruments).
Corporate debt securities may bear fixed, fixed and contingent, or
variable rates of interest and may involve equity features, such as conversion
or exchange rights or warrants for the acquisition of stock of the same or a
different issuer; participations based on revenues, sales or profits; or the
purchase of common stock in a unit transaction (where corporate debt securities
and common stock are offered as a unit). Under normal conditions,
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
not more than 25% of the value of the total assets of the Portfolio will be
invested in equity securities, including common stocks, warrants and rights.
Consistent with its investment objective and policies described above,
the Fund may also invest up to 50% (and generally expects to invest between 0%
and 20%) of its total assets in foreign securities which are not traded on a
U.S. securities exchange. Foreign securities may include securities of issuers
whose principal activities are located in emerging market countries. The
Portfolio has authority to invest up to 25% of its total assets in securities
issued or guaranteed by foreign governments or their agencies or
instrumentalities. See "Foreign Investment Risks" and "Emerging Market Risks"
below.
The Portfolio may invest up to 40% of the value of its total assets in
each of the electric utility and telephone industries, but will not invest more
than 25% in either of those industries unless yields available for four
consecutive weeks in the four highest rating categories on new issue bonds in
such industry (issue size of $50 million or more) have averaged in excess of
105% of yields of new issue long-term industrial bonds similarly rated (issue
size of $50 million or more) and, in the opinion of the Adviser (as defined
below), the relative return available from the electric utility or telephone
industry and the relative risk, marketability, quality and availability of
securities of such industry justifies such an investment.
When and if available, fixed income securities may be purchased at a
discount from face value. However, the Portfolio does not intend to hold such
securities to maturity for the purpose of achieving potential capital gains,
unless current yields on these securities remain attractive. From time to time
the Portfolio may purchase securities not paying interest at the time acquired
if, in the opinion of the Adviser, such securities have the potential for future
income or capital appreciation.
<PAGE>
Among other types of securities, the Portfolio may invest in the
following:
Zero Coupon Bonds, Deferred Interest Bonds and PIK Bonds. Zero coupon
and deferred interest bonds are debt obligations which are issued at a
significant discount from face value. The discount approximates the total amount
of interest the bonds will accrue and compound over the period until maturity or
the first interest payment date at a rate of interest reflecting the market rate
of the security at the time of issuance. While zero coupon bonds do not require
the periodic payment of interest, deferred interest bonds provide for a period
of delay before the regular payment of interest begins. Payment-in-kind ("PIK")
bonds are debt obligations which provide that the issuer thereof may, at its
option, pay interest on such bonds in cash or in the form of additional debt
obligations. Such investments benefit the issuer by mitigating its need for cash
to meet debt service, but also require a higher rate of return to attract
investors who are willing to defer receipt of such cash. Such investments may
experience greater volatility in market value due to changes in interest rates
than debt obligations which make regular payments of interest. The Portfolio
will accrue income on such investments for tax and accounting purposes, as
required, which is distributable to shareholders and which, because no cash is
received at the time of accrual, may require the liquidation of other portfolio
securities to satisfy the Portfolio's distribution obligations.
Mortgage-Backed Securities. The mortgage-backed securities in which the
Portfolio invests represent participation interests in pools of mortgage loans
which are guaranteed by agencies or instrumentalities of the U.S. government.
However, the guarantee of these types of securities runs only to the principal
and interest payments and not to the market value of such securities. In
addition, the guarantee only runs to the portfolio securities held by the
Portfolio and not the purchase of shares of the Portfolio.
Mortgage-backed securities are issued by lenders such as mortgage
bankers, commercial banks, and savings and loan associations. Such securities
differ from conventional debt securities which provide for periodic payment of
interest in fixed amounts (usually semiannually) with principal payments at
maturity or specified call dates. Mortgage-backed securities provide for monthly
payments which are, in effect, a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual borrowers
on the pooled mortgage loans. Principal prepayments result from the sale of the
underlying property or the refinancing or foreclosure of underlying mortgages.
The yield of mortgage-backed securities is based on the average life of
the underlying pool of mortgage loans, which is
<PAGE>
computed on the basis of the maturities of the underlying instruments. The
actual life of any particular pool may be shortened by unscheduled or early
payments of principal and interest. The occurrence of prepayments is affected by
a wide range of economic, demographic and social factors and, accordingly, it is
not possible to accurately predict the average life of a particular pool. For
pools of fixed rate 30-year mortgages, it has been common practice to assume
that prepayments will result in a 12-year average life. The actual prepayment
experience of a pool of mortgage loans may cause the yield realized by the
Portfolio to differ from the yield calculated on the basis of the average life
of the pool. In addition, if any of these mortgage-backed securities are
purchased at a premium, the premium may be lost in the event of early prepayment
which may result in a loss to the Portfolio.
Prepayments tend to increase during periods of falling interest rates,
while during periods of rising interest rates prepayments will most likely
decline. Reinvestment by the Portfolio of scheduled principal payments and
unscheduled prepayments may occur at higher or lower rates than the original
investment, thus affecting the yield of the Portfolio. Monthly interest payments
received by the Portfolio have a compounding effect which will increase the
yield to shareholders as compared to debt obligations that pay interest
semiannually. Because of the reinvestment of prepayments of principal at current
rates, mortgage-backed securities may be less effective than Treasury bonds of
similar maturity at maintaining yields during periods of declining interest
rates. Also, although the value of debt securities may increase as interest
rates decline, the value of these pass-through type of securities may not
increase as much due to the prepayment feature.
Collateralized Mortgage Obligations. Collateralized mortgage
obligations ("CMOs"), which are debt obligations collateralized by mortgage
loans or mortgage pass-through securities, provide the holder with a specified
interest in the cash flow of a pool of underlying mortgages or other
mortgage-backed securities. Issuers of CMOs frequently elect to be taxed as a
pass-through entity known as real estate mortgage investment conduits. CMOs are
issued in multiple classes, each with a specified fixed or floating interest
rate and a final distribution date. The relative payment rights of the various
CMO classes may be structured in many ways. In most cases, however, payments of
principal are applied to the CMO classes in the order of their respective stated
maturities, so that no principal payments will be made on a CMO class until all
other classes having an earlier stated maturity date are paid in full. The
classes may include accrual certificates (also known as "Z- Bonds"), which only
accrue interest at a specified rate until other specified classes have been
retired and are converted thereafter to interest-paying securities. They may
also include planned amortization classes which generally require, within
<PAGE>
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. Stripped mortgage- backed securities
("SMBS") in which the Portfolio invests 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
guaranteed by agencies or instrumentalities of the U.S. government.
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.
Non-Mortgage Asset-Backed Securities. Non-mortgage asset-backed
securities include interests in pools of receivables, such as motor vehicle
installment purchase obligations and credit card receivables. Such securities
are generally issued as pass-through certificates, which represent undivided
fractional ownership interests in the underlying pools of assets.
Non-mortgage 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.
<PAGE>
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 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.
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
Loans and Other Direct Indebtedness. By purchasing a loan, the Portfolio
acquires some or all of the interest of a bank or other lending institution in a
loan to a corporate borrower. Many such loans are secured, and most impose
restrictive covenants which must be met by the borrower. These loans are made
generally to finance internal growth, mergers, acquisitions, stock repurchases,
leveraged buy-outs and other corporate activities. Such loans may be in default
at the time of purchase. The Portfolio may also purchase trade or other claims
against companies, which generally represent money owed by the company to a
supplier of goods or services. These claims may also be purchased at a time when
the company is in default. Certain of the loans acquired by the Portfolio may
involve revolving credit facilities or other standby financing commitments which
obligate the Fund to pay additional cash on a certain date or on demand.
The highly leveraged nature of many such loans may make such loans
especially vulnerable to adverse changes in economic or market conditions. Loans
and other direct investments may not be in the form of securities or may be
subject to restrictions on transfer, and only limited opportunities may exist to
resell such instruments. As a result, the Portfolio may be unable to sell such
investments at an opportune time or may have to resell them at less than fair
market value.
Brady Bonds. Brady Bonds are securities created through the exchange of
existing commercial bank loans to public and private entities in certain
emerging markets for new bonds in connection with debt restructurings under a
debt restructuring plan introduced by former U.S. Secretary of the Treasury,
Nicholas F. Brady (the "Brady Plan"). Brady Plan debt restructurings have been
implemented to date in Argentina, Brazil, Bulgaria, Costa Rica, Croatia,
Dominican Republic, Ecuador, Jordan, Mexico, Morocco, Nigeria, Panama, Peru, the
Philippines, Poland, Slovenia, Uruguay and Venezuela. Brady Bonds have been
issued only recently, and for that reason do not have a long payment history.
Brady Bonds may be collateralized or uncollateralized, are issued in various
currencies (but primarily the U.S. dollar) and are actively traded in
over-the-counter secondary markets. U.S. dollar-denominated, collateralized
Brady Bonds, which may be fixed rate bonds or floating-rate bonds, are generally
collateralized in full as to principal by U.S. Treasury zero coupon bonds having
the same maturity as the bonds. Brady Bonds are often viewed as having three or
four valuation components: the collateralized repayment of principal at
maturity; the collateralized interest payments; the uncollateralized interest
payments; and any uncollateralized repayment of principal at maturity (the
uncollateralized amounts constituting the "residual risk"). In light of the
residual risk of Brady Bonds and the history of defaults of countries issuing
Brady Bonds with respect
<PAGE>
to commercial bank loans by public and private entities, investments in Brady
Bonds may be viewed as speculative.
Money Market Securities. The Portfolio may make money market
investments pending other investment or settlement for liquidity, or in adverse
market conditions. The money market investments permitted for the Portfolio
include: obligations of the U.S. government and its agencies and
instrumentalities; other debt securities; commercial paper; bank obligations;
certificates of deposit (including Eurodollar certificates of deposit); and
repurchase agreements.
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 the Portfolio's investments will be reflected in the Portfolio's net
asset value per share. The Adviser to the Portfolio considers both credit risk
and market risk in making investment decisions for the Portfolio. Investors
should carefully consider the relative risks of investing in high yield
securities and understand that such securities are not generally meant for
short-term investing.
The high yield market is still relatively new and its recent growth
parallels a long period of economic expansion and an increase in merger,
acquisition and leveraged buyout activity. Adverse economic developments may
disrupt the market for high yield securities, and severely affect the ability of
issuers, especially highly leveraged issuers, to service their debt obligations
or to repay their obligations upon maturity. In addition, the secondary market
for high yield securities, which is concentrated in relatively few market
makers, may not be as liquid as the secondary market for more highly rated
securities. As a result, the Adviser could find it more difficult to sell these
securities or may be able to sell the securities only at prices lower than if
such securities were widely traded. Prices realized upon the sale of lower rated
or unrated securities,
<PAGE>
under these circumstances, may be less than the prices used in calculating the
Portfolio's net asset value.
Prices for high yield securities may be affected by legislative and
regulatory developments. These developments could adversely affect the
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, the
Portfolio may have to replace the security with a lower yielding security,
resulting in a decreased return for investors. If the 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.
Foreign Investment Risks
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.
<PAGE>
There may be less information publicly available about a foreign issuer
than about a U.S. issuer, and foreign issuers are not generally subject to
accounting, auditing and financial reporting standards and practices comparable
to those in the United States. Foreign stock markets are generally not as
developed or efficient as, and may be more volatile than, those in the United
States. While growing in volume, they usually have substantially less volume
than U.S. markets and the Portfolio's investment securities may be less liquid
and subject to more rapid and erratic price movements than securities of
comparable U.S. companies. Equity securities may trade at price/earnings
multiples higher than comparable United States securities and such levels may
not be sustainable. There is generally less government supervision and
regulation of foreign stock exchanges, brokers and listed companies than in the
United States. Moreover, settlement practices for transactions in foreign
markets may differ from those in United States markets. Such differences may
include delays beyond periods customary in the United States and practices, such
as delivery of securities prior to receipt of payment, which increase the
likelihood of a "failed settlement." Failed settlements can result in losses to
the Portfolio. In less liquid and well developed stock markets, such as those in
some Asian and Latin American countries, volatility may be heightened by actions
of a few major investors. For example, substantial increases or decreases in
cash flows of mutual funds investing in these markets could significantly affect
stock prices and, therefore, share prices.
Foreign brokerage commissions, custodial expenses and other fees are
also generally higher than for securities traded in the United States.
Consequently, the overall expense ratios of international funds are usually
somewhat higher than those of typical domestic stock funds.
Emerging Market Risks
Investments in emerging market countries may be subject to potentially
higher risks than investments in developed countries. These risks include: (i)
volatile social, political and economic conditions; (ii) the small size of the
markets for such securities and the currently low or 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
<PAGE>
slowed or reversed by unanticipated political or social events in
such countries.
Certain emerging market countries have histories of instability and
upheaval (e.g., Latin America) and internal politics that could cause their
governments to act in a detrimental or hostile manner toward private enterprise
or foreign investment. Any such actions, (for example, nationalizing an industry
or company), could have a severe and adverse effect on security prices and
impair the Portfolio's ability to repatriate capital or income. The Portfolio's
Adviser will not invest the Portfolio's assets in countries where it believes
such events are likely to occur.
Income received by the Portfolio from sources within foreign countries
may be reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. The Portfolio's Adviser will attempt to minimize such
taxes by timing of transactions and other strategies, but there can be no
assurance that such efforts will be successful. Any such taxes paid by the
Portfolio will reduce its net income available for distribution to shareholders.
The Portfolio may employ certain investment strategies which are
discussed under the caption "Investment Strategies" below and in the Statement
of Additional Information.
Investment Strategies
In addition to making investments directly in securities, the Portfolio
may write covered call and put options and hedge its investments by purchasing
options and engaging in transactions in futures contracts and related options.
The Portfolio may engage in foreign currency exchange transactions to protect
against changes in future exchange rates , invest in American Depositary
Receipts, enter into repurchase agreements, make forward commitments to
<PAGE>
purchase securities, lend its portfolio securities and borrow funds under
certain limited circumstances.
The investment strategies referred to above and the risks related to them
are summarized below and certain of these strategies are described in more
detail in the Statement of Additional Information.
Options and Futures Transactions. The Portfolio may seek to increase
the current return on its investments by writing covered call or covered put
options. In addition, the Portfolio
may at times seek to hedge against either a decline in the value of its
portfolio securities or an increase in the price of securities which its Adviser
plans to purchase through the writing and purchase of options on securities and
any index of securities in which the Portfolio may invest, including municipal
bond indices and any other indices of fixed income securities that may become
available for trading and the purchase and sale of futures contracts and related
options. The Portfolio may also purchase and sell futures contracts and options
on futures contracts for non-hedging purposes, subject to applicable law, which
involves greater risk and could result in losses which are not offset by gains
or other portfolio assets.
The Adviser to the Portfolio may enter into interest rate futures
contracts and write and purchase put and call options on such futures contracts.
The Portfolio may purchase and sell interest rate futures contracts as a hedge
against changes in interest rates. A futures contract is an agreement between
two parties to buy and sell a security for a set price on a future date. Futures
contracts are traded on designated "contracts markets" which, through their
clearing corporations, guarantee performance of the contracts. Currently, there
are futures contracts based on securities such as long-term U.S. Treasury bonds,
U.S. Treasury notes, GNMA Certificates and three-month U.S. Treasury bills.
Generally, if market interest rates increase, the value of
outstanding debt securities declines (and vice versa). Entering
<PAGE>
into a futures contract for the sale of securities has an effect similar to the
actual sale of securities, although the sale of the futures contracts might be
accomplished more easily and quickly. For example, if the Portfolio holds
long-term debt securities and the Adviser anticipates a rise in long-term
interest rates, it could, in lieu of disposing of its portfolio securities,
enter into futures contracts for the sale of similar long-term securities. If
interest rates increased and the value of the Portfolio's securities declined,
the value of the Portfolio's futures contracts would increase, thereby
protecting the Portfolio by preventing the net asset value from declining as
much as it otherwise would have. Similarly, entering into futures contracts for
the purchase of securities has an effect similar to the actual purchase of the
underlying securities, but permits the continued holding of securities other
than the underlying securities. For example, if the Adviser expects long-term
interest rates to decline, the Portfolio might enter into futures contracts for
the purchase of long-term securities, so that it could gain rapid market
exposure that may offset anticipated increases in the cost of securities it
intends to purchase, while continuing to hold higher-yielding short-term
securities or waiting for the long-term market to stabilize.
The Portfolio also may purchase and sell listed put and call options on
futures contracts. An option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put), at a specified exercise price at any time during the option
period. When an option on a futures contract is exercised, delivery of the
futures position is accompanied by liquid assets representing the difference
between the current market price of the futures contract and the exercise price
of the option.
The Portfolio may purchase put options on interest rate futures
contracts in lieu of, and for the same purpose as, sale of a futures contract.
It also may purchase such put options in order to hedge a long position in the
underlying futures contract in the same manner as it purchases "protective puts"
on securities. The purchase of call options on interest rate futures contracts
is intended to serve the same purpose as the actual purchase of the futures
contract, and the Portfolio will set aside liquid assets sufficient to purchase
the amount of portfolio securities represented by the underlying futures
contracts.
<PAGE>
The Portfolio's Adviser generally expects that options and futures transactions
for the Portfolio will be conducted on securities and other exchanges. In
certain instances, however, the Portfolio may purchase and sell options in the
over-the-counter market. The staff of the SEC considers over-the-counter options
to be illiquid. The Portfolio's ability to terminate option positions
established in the over-the-counter market may be more limited than in the case
of exchange traded options and may also involve the risk that securities dealers
participating in such transactions would fail to meet their obligations to the
Portfolio. There can be no assurance that the Portfolio will be able to effect
closing transactions at any particular time or at an acceptable price. The use
of options and futures involves the risk of imperfect correlation between
movements in options and futures prices and movements in the prices of the
securities that are being hedged. Expenses and losses incurred as a result of
these hedging strategies will reduce the Portfolio's current return. In many
foreign countries, futures and options markets do not exist or are not
sufficiently developed to be effectively used by the Portfolio.
Foreign Currency Transactions. The Portfolio may purchase foreign
currency on a spot (or cash) basis, enter into contracts to purchase or sell
foreign currencies at a future date ("forward contracts"), purchase and sell
foreign currency futures contracts, and purchase exchange traded and
over-the-counter call and put options on foreign currency futures contracts and
on foreign currencies. The Adviser to the Portfolio may engage in these
transactions 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
Portfolio may write covered call options on foreign currencies to offset some of
the costs of hedging those currencies. The Portfolio will engage in
over-the-counter transactions only when appropriate exchange traded transactions
are unavailable and when, in the opinion of the Portfolio's Adviser, the pricing
mechanism and liquidity are satisfactory and the participants are responsible
parties likely to meet their contractual obligations. The Portfolio's ability to
engage in hedging and related option transactions may be limited by tax
considerations.
<PAGE>
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 Portfolio may enter into
various hedging transactions, such as interest rate swaps and the purchase or
sale of interest rate caps and floors. Interest rate swaps involve the exchange
by the Portfolio with another party of their respective commitments to pay or
receive interest, e.g., an exchange of floating rate payments for fixed rate
payments. The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a notional principal amount from the party selling such
interest rate cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a notional principal amount
from the party selling such interest rate floor. The Adviser to the Portfolio
expects to enter into these transactions on behalf of the Portfolio primarily to
preserve a return or spread on a particular investment or portion of its
portfolio or to protect against any increase in the price of securities the
Portfolio anticipates purchasing at a later date. The Portfolio intends to use
these transactions as a hedge and not as a speculative investment. The Portfolio
will not sell interest rate caps or floors that it does not own.
The Portfolio may enter into interest rate swaps, caps and floors on
either an asset-based or liability-based basis, depending on whether it is
hedging its assets or its liabilities, and will usually enter into interest rate
swaps on a net basis, i.e., the two payment streams are netted out, with the
Portfolio receiving or paying, as the case may be, only the net amount of the
two payments. Inasmuch as these hedging transactions are entered into for good
faith hedging purposes, the Adviser to the Portfolio and the Fund believe such
obligations do not constitute senior securities and accordingly, will not treat
them as being subject to the Portfolio's borrowing restrictions. The net amount
of the excess, if any, of the Portfolio's obligations over its entitlement with
respect to each interest rate swap will be accrued on a daily basis and an
amount of cash or liquid securities having an aggregate net asset value at least
equal to the accrued excess will be maintained in a segregated account by the
Portfolio's custodian.
<PAGE>
If there is a default by the other party to such a securities transaction, the
Portfolio will have contractual remedies pursuant to the agreements related to
the transactions. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps and floors are more recent innovations
for which standardized documentation has not yet been developed and,
accordingly, they are less liquid than swaps.
Dollar Roll Transactions. The 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 .
Indexed Securities. The Portfolio may invest in indexed securities
whose value is linked to foreign currencies, interest rates, commodities,
indices or other financial indicators. Most indexed securities are short to
intermediate term fixed-income securities whose values at maturity (i.e.,
principal value) or interest rates rise or fall according to changes in the
value of one or more specified underlying instruments. Indexed securities may be
positively or negatively indexed (i.e., their principal value or interest rates
may increase or decrease if the underlying instrument appreciates), and may have
return characteristics similar to direct investments in the underlying
instrument or to one or more options on the underlying instrument. Indexed
securities may be more volatile than the underlying instrument itself and could
involve the loss of all or a portion of the principal amount of, or interest on,
the instrument.
<PAGE>
Reverse Repurchase Agreements. The Portfolio is permitted to enter into
reverse repurchase agreements. In a reverse repurchase agreement, the Portfolio
sells a security and agrees to repurchase it at a mutually agreed upon date and
price, reflecting the interest rate effective for the term of the agreement. For
the purposes of the 1940 Act it is considered a form of borrowing by the
Portfolio and, therefore, is a form of leverage. Leverage may cause any gains or
losses of the Portfolio to be magnified.
Borrowings. The Portfolio may borrow from banks to take advantage of
investment opportunities and for temporary or emergency purposes and enter into
reverse repurchase agreements in an amount equal to up to 33 1/3% of the value
of its total assets (computed at the time the loan is made). The Portfolio may
also engage in dollar roll transactions.
<PAGE>
Depositary Receipts. The Portfolio may invest in American Depositary
Receipts ("ADRs") which are receipts typically issued by a U.S. bank or trust
company and evidence ownership of underlying securities issued by a foreign
corporation. Because ADRs trade on U.S. securities exchanges, the Adviser does
not treat them as foreign securities. However, they are subject to many of the
risks of foreign securities such as changes in exchange rates and more limited
information about foreign issuers.
Repurchase Agreements. The Portfolio may enter into repurchase
agreements with a bank, broker-dealer or other financial institution as a means
of earning a fixed rate of return on its cash reserves for periods as short as
overnight. A repurchase agreement is a contract pursuant to which the Portfolio,
against receipt of securities of at least equal value including accrued
interest, agrees to advance a specified sum to the financial institution which
agrees to reacquire the securities at a mutually agreed upon time (usually one
day) and price. Each repurchase agreement entered into by the Portfolio will
provide that the value of the collateral underlying the repurchase agreement
will always be at least equal to the repurchase price, including any accrued
interest. The Portfolio's right to liquidate such securities in the event of a
default by the seller could involve certain costs, losses or delays 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. The Portfolio may make contracts to purchase
securities for a fixed price at a future date beyond customary settlement time
("forward commitments") if it holds, and maintains until the settlement date in
a segregated account, cash or liquid assets in an amount sufficient to meet the
purchase price, or if it enters into offsetting contracts for the forward sale
of other securities it owns. Forward commitments may be considered securities in
themselves and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in value of the Portfolio's other assets. Where such
<PAGE>
purchases are made through dealers, the Portfolio relies on the dealer to
consummate the sale. The dealer's failure to do so may result in the loss to the
Portfolio of an advantageous yield or price.
Securities Loans. The Portfolio may seek to obtain additional income by
making secured loans of its portfolio securities with a value up to 33 1/3% of
its total assets. All securities loans will be made pursuant to agreements
requiring the loans to be continuously secured by collateral in cash or liquid
assets at least equal at all times to the market value of the loaned securities.
The borrower pays to the Portfolio an amount equal to any dividends or interest
received on loaned securities. The Portfolio retains all or a portion of the
interest received on investment of liquid assets or receives a fee from the
borrower. Lending portfolio securities involves risks of delay in recovery of
the loaned securities or in some cases loss of rights in the collateral should
the borrower fail financially.
Fixed-Income Securities - Downgrades. If any security invested in by
the Portfolio loses its rating or has its rating reduced after the Portfolio has
purchased it, unless required by law, the Portfolio is not required to sell or
otherwise dispose of the security, but may consider doing so.
Illiquid Securities. The Portfolio may invest up to
15%
of its net assets in illiquid
securities and other securities which are not readily marketable,
<PAGE>
including non-negotiable time deposits, certain restricted securities not deemed
by the Fund's Trustees to be liquid and repurchase agreements with maturities
longer than seven days. Securities eligible for resale pursuant to Rule 144A
under the Securities Act of 1933, which have been determined to be liquid, will
not be considered by the Portfolio's Adviser to be illiquid or not readily
marketable and, therefore, are not subject to the aforementioned 15% limit. The
inability of the Portfolio to dispose of illiquid or not readily marketable
investments readily or at a reasonable price could impair the Portfolio's
ability to raise cash for redemptions or other purposes. The liquidity of
securities purchased by the Portfolio which are eligible for resale pursuant to
Rule 144A will be monitored by the 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, the Portfolio's holdings will be reviewed to
determine what action, if any, is required to ensure that the retention of such
security does not result in the Portfolio having more than 15% of its assets
invested in illiquid or not readily marketable securities.
<PAGE>
MANAGEMENT OF THE FUND
The Trustees and officers of the Fund provide broad supervision over
the business and affairs of the Portfolio and the Fund.
The Manager
The Fund is managed by Endeavor Investment Advisers ("the Manager")
which, subject to the supervision and direction of the Trustees of the Fund, has
overall responsibility for the general management and administration of the
Fund. The Manager is a general partnership of which Endeavor Management Co. is
the managing partner. Endeavor Management Co., by whose employees all management
services performed under the management agreement are rendered to the Fund,
holds a 50.01% interest in the Manager and AUSA Financial Markets, Inc., an
affiliate of PFL, holds the remaining 49.99% interest therein. Vincent J.
McGuinness, a
<PAGE>
Trustee of the Fund, together with his family members and trusts for the benefit
of his family members, own all of Endeavor Management Co.'s outstanding common
stock. Mr. McGuinness is Chairman, Chief Executive Officer and President of
Endeavor Management Co.
The Manager is responsible for providing investment management and
administrative services to the Fund and in the exercise of such responsibility
selects an investment adviser for each of the Fund's portfolios (the "Adviser")
and monitors the Adviser's investment program and results, reviews brokerage
matters, oversees compliance by the Fund with various federal and state
statutes, and carries out the directives of the Trustees. The Manager is
responsible for providing the Fund with office space, office equipment, and
personnel necessary to operate and administer the Fund's business, and also
supervises the provision of services by third parties such as the Fund's
custodian and transfer agent. Pursuant to an administration agreement, First
Data Investor Services Group, Inc. ("Investor Services Group") assists the
Manager in the performance of its administrative responsibilities to the Fund.
As compensation for these management services the Fund pays the Manager
a monthly fee based on the annual rate of .775% of the Portfolio's average daily
net assets . The management fee, although higher than the fees paid by most
other investment companies in general, is believed to be comparable to
management fees paid for similar services by many investment companies with
similar investment objectives and policies. From the management fee, the Manager
pays the expenses of providing investment advisory services to the Portfolios,
including the fees of the Adviser of the 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 Portfolio 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
<PAGE>
the Portfolio, the Manager will pay Investor Services Group for the Portfolio,
which payment will be reimbursed by the Portfolio, an annual fee equal to
$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 Manager has agreed
to limit the Portfolio's total operating expenses to an annual rate of 1.30% of
the Portfolio's average daily net assets.
The Adviser
Pursuant to an investment advisory agreement with the Manager, the Adviser
to the Portfolio furnishes continuously an investment program for the Portfolio,
makes investment decisions on behalf of the Portfolio, places all orders for the
purchase and sale of investments for the Portfolio's account with brokers or
dealers selected by the Adviser and may perform certain limited related
administrative functions in connection therewith. For its services, the Manager
pays the Adviser a fee based on a percentage of the average daily net assets of
the Portfolio. The Adviser may place portfolio securities transactions with
broker-dealers who furnish it with certain services of value in advising the
Portfolio and other clients. In so doing, the Adviser may cause the Portfolio to
pay greater brokerage commissions than it might otherwise pay. In seeking the
most favorable price and execution available, the Adviser may, if permitted by
law, consider sales of the Contracts as a factor in the selection of
broker-dealers.
<PAGE>
See the Statement of Additional Information for a further discussion of
Portfolio trading.
Massachusetts Financial Services Company ("MFS") is the Adviser to the
Portfolio. As compensation for its services as investment adviser, the Manager
pays
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
<PAGE>
MFS a monthly fee at the annual rate of .375% of the average daily net assets of
the Portfolio. MFS is America's oldest mutual fund organization. MFS and its
predecessor organizations have a history of money management dating from 1924
and the founding of the first mutual fund in the United States. MFS is a
subsidiary of Sun Life of Canada (U.S.) Financial Services Holdings, Inc., which
in turn is an indirect wholly-owned subsidiary of Sun Life Assurance Company of
Canada.
<PAGE>
Robert J. Manning, a Senior Vice President of MFS, is the portfolio
manager for the Portfolio. Mr. Manning has been a portfolio manager with MFS
since 1984 and since 1994 has managed the MFS High Income Fund.
As of January 30, 1998, MFS and its institutional advisory affiliates
had approximately $72 billion in assets under management on behalf of
approximately 2.8 million investor accounts, of which approximately $20.8
billion consisted of assets in fixed income funds.
Brokerage Enhancement Plan
The Board of Trustees of the Fund, including all of the Trustees who
are not "interested persons" (as defined in the 1940 Act) of the Fund, the
Manager or Endeavor Group (the "Distributor") (hereinafter referred to as
"Independent Trustees"), have voted to adopt a Brokerage Enhancement Plan (the
"Plan") for the purpose of utilizing the Fund's brokerage commissions, to the
extent available, to promote the sale and distribution of the Fund's shares.
Neither the Fund nor any series of the Fund, including the Portfolio, would
incur any new fees or charges. As part of the Plan, the Fund and the Distributor
would enter into a Distribution Agreement. Under the Distribution Agreement, the
Distributor would become the principal underwriter of the Fund, with
responsibility for promoting sales of the shares of each series.
The Distributor, however, would not receive any additional compensation
from the Fund for performing this function. Instead, under the Plan, the Manager
would be authorized to direct that the adviser of each series effect brokerage
transactions in portfolio securities through certain broker-dealers, consistent
with each adviser's obligations to achieve best price and execution. It is
anticipated that these broker-dealers will agree that a percentage of the
commission will be directed to the Distributor, as an introducing broker. The
Distributor will use a small part of these directed commissions to defray
incidental costs associated with becoming and acting as an introducing broker.
The remainder of the commissions received by the Distributor will be used to
finance activities principally intended to result in the sale of shares of the
series. It is anticipated that these activities will include: holding or
participating in seminars and sales meetings designed to promote the sale of
Fund shares; paying marketing fees requested by broker-dealers who sell
Contracts; training sales personnel; 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.
<PAGE>
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 series, by vote of a majority of the
outstanding securities of a series on not more than 60 days' written notice; and
(E) that the Distribution Agreement terminates if it is assigned. The Plan may
not be amended to increase materially the amount to be 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 Portfolio, has approved the Plan
and the shareholders of the Fund's other series approved the Plan at a
shareholders' meeting held on February 23, 1998.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Portfolio intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code. By so qualifying, the Portfolio will
not be subject to federal income taxes to the extent that its net investment
income and net realized capital gains are distributed to shareholders.
It is the intention of the Portfolio to distribute substantially all
its net investment income. Although the Trustees of the Fund may decide to
declare dividends at other intervals, dividends from investment income of the
Portfolio are expected to be declared annually and will be distributed to the
various separate accounts of PFL and not to Contract owners in the form of
additional full and fractional shares of the Portfolio and not in cash. The
result is that the investment performance of the Portfolio, including the effect
of dividends, is reflected in the cash value of the Contracts. See the
prospectus for the Contracts accompanying this Prospectus.
<PAGE>
All net realized long- or short-term capital gains of the Portfolio, if
any, will be declared and distributed at least annually either during or after
the close of the Portfolio's fiscal year and will be reinvested in additional
full and fractional shares of the Portfolio. In certain foreign countries,
interest and dividends are subject to a tax which is withheld by the issuer.
U.S. income tax treaties with certain countries reduce the rates of these
withholding taxes. The Fund intends to provide the documentation necessary to
achieve the lower treaty rate of withholding whenever applicable or to seek
refund of amounts withheld in excess of the treaty rate.
For a discussion of the impact on Contract owners of income taxes PFL
may owe as a result of (i) its ownership of shares of the Portfolio, (ii) its
receipt of dividends and distributions thereon, and (iii) its gains from the
purchase and sale thereof, reference should be made to the prospectus for the
Contracts accompanying this Prospectus.
<PAGE>
SALE AND REDEMPTION OF SHARES
The Fund continuously offers shares of the Portfolio only to separate
accounts of PFL, but may at any time offer shares to a separate account of any
other insurer approved by the Trustees.
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 the Portfolio based
on, among other things, the amount of net Contract premiums or purchase payments
transferred to the separate accounts, transfers to or from a separate account
investment division, policy loans, loan repayments, and benefit payments to be
effected on a given date pursuant to the terms of the Contracts. Such orders are
effected, without sales charge, at the net asset value per share for the
Portfolio determined as of the close of regular trading on the New York Stock
Exchange (currently 4:00 p.m., New York City time), 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 the Portfolio for the purpose of
pricing orders for the purchase and redemption of shares is determined as of the
close of the New York Stock Exchange, Monday through Friday, exclusive of
national business holidays. Net asset value per share is computed by dividing
the value of all assets of the Portfolio (including accrued interest and
dividends), less all liabilities of the Portfolio (including accrued expenses
and dividends payable), by the number of outstanding shares of the Portfolio.
The assets of the Portfolio are valued on the basis of their market values or,
in the absence of a market value with respect to any portfolio securities, at
fair value as determined by or under the direction of the Fund's Board of
Trustees including the employment of an independent pricing service, as
described in the Statement of Additional Information.
Shares of the Portfolio may be redeemed on any day on which the Fund is
open for business.
<PAGE>
PERFORMANCE INFORMATION
From time to time, the Fund may advertise the "average annual or
cumulative total return" of the Portfolio or its "yield" and "effective yield"
and may compare the performance of the Portfolio with that of other mutual funds
with similar investment objectives as listed in rankings prepared by Lipper
Analytical Services, Inc., or similar independent services monitoring mutual
fund performance, and with appropriate securities or other relevant indices. The
"average annual total return" of the Portfolio refers to the average annual
compounded rate of return over the stated period that would equate an initial
investment in the Portfolio at the beginning of the period to its ending
redeemable value, assuming reinvestment of all dividends and distributions and
deduction of all recurring charges other than charges and deductions which are,
or may be, imposed under the Contracts. Figures will be given for the recent
one, five and ten year periods and for the life of the Portfolio if it has not
been in existence for any such periods. When considering "average annual total
return" figures for periods longer than one year, it is important to note that
the Portfolio's annual total return for any given year might have been greater
or less than its average for the entire period. "Cumulative total return"
represents the total change in value of an investment in the Portfolio for a
specified period (again reflecting changes in Portfolio share prices and
assuming reinvestment of Portfolio distributions). The 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"
<PAGE>
and "yield" are described further in the Statement of Additional
Information.
The performance of the Portfolio will vary from time to time in
response to fluctuations in market conditions, interest rates, the composition
of the Portfolio's investments and expenses. Consequently, the Portfolio's
performance figures are historical and should not be considered representative
of the performance of the Portfolio for any future period.
Prior Performance of Comparable Fund
<PAGE>
MFS is the investment adviser of the MFS High Income Fund, a series of a
registered open-end investment company whose shares are sold to the public. The
MFS High Income Fund is substantially similar to the Portfolio in that it has
the same investment objective as the Portfolio and is managed by the same
investment personnel using the same investment strategies and techniques as
contemplated for the Portfolio.
As of December 31, 1997 and as of the date of this Prospectus the
Portfolio had not commenced operations. Set forth below is certain performance
information regarding the MFS High Income Fund which has been obtained from MFS.
Management fees paid by the MFS High Income Fund are less than the fees to be
paid by the Portfolio. If the same level of fees had been charged, the average
annual return during the periods would have been lower. 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)
<PAGE>
<TABLE>
<CAPTION>
For the For the
Five Years For the Ten Period from
Ended Years Ended Inception to
December December December 31,
For 31, 1997 31, 1997 1997 (2)
---------- ----------- --------
the Year
Ended
December
--
<S> <C> <C> <C> <C>
31, 1997
MFS High 11.59% 10.70% 11.46%
Income
Fund 12.86%
</TABLE>
- ------------------
(1) Reflects waiver of all or a portion of the advisory fees and reimbursements
of other expenses. Without such waivers and reimbursements, the average annual
total return during the periods would have been lower.
(2) The MFS High Income Fund commenced operations on December 15, 1977.
------------------------
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 twelve
series of shares, one for each of the Fund's twelve portfolios, including the
Portfolio offered by this Prospectus. Shares are freely transferable, are
entitled to dividends as declared by the Trustees, and in liquidation are
<PAGE>
entitled to receive the net assets of their respective portfolios, but not the
net assets of the other portfolios.
Fund shares are entitled to vote at any meeting of shareholders. The
Fund does not generally hold annual meetings of shareholders and will do so only
when required by law. Matters submitted to a shareholder vote must be approved
by each portfolio of the Fund separately except (i) when required by the 1940
Act, shares will be voted together as a single class and (ii) when the Trustees
have determined that the matter does not affect all portfolios, then only
shareholders of the affected portfolio will be entitled to vote on the matter.
Owners of the Contracts have certain voting interests in respect of
shares of the Portfolio. See "Voting Rights" in the prospectus for the Contracts
accompanying this Prospectus for a description of the rights granted Contract
owners to instruct voting of shares.
ADDITIONAL INFORMATION
Transfer Agent and Custodian
All cash and securities of the Fund are held by Boston Safe Deposit and
Trust Company as custodian. 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.
<PAGE>
TABLE OF CONTENTS
Page
The Fund ENDEAVOR SERIES TRUST
Financial Highlights
Investment Objective and Policies 2101 East Coast Highway,
Suite 300
Corona del Mar, California 92625
(800) 854-8393
Manager
Endeavor Investment Advisers
2101 East Coast Highway
Suite 300
Corona del Mar, California 92625
Investment Adviser
Investment Strategies
Management of the Fund
The Manager MFS Financial
The Adviser Services Company
Brokerage Enhancement Plan
Dividends, Distributions and Taxes
Sale and Redemption of Shares
Performance Information
Prior Performance of Comparable Fund
Organization and Capitalization
of the Fund
Additional Information 500 Boylston Street
Transfer Agent and Custodian Boston, Massachusetts 02116
Independent Auditors
Custodian
Boston Safe Deposit and Trust
Company
One Boston Place
Boston, Massachusetts 02108
--------------
No person has been authorized to give any
information or to make any representation not
contained in this Prospectus and, if given or
made, such information or representation must
not be relied upon as having been authorized.
This Prospectus does not constitute an
offering of any securities other than the
registered securities to which it relates or
an offer to any person in any state or
jurisdiction of the United States or any
country where such offer would be unlawful.
<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, as amended
___________, 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) , the Endeavor Select 50 Portfolio (formerly, Select 50 Portfolio)
and the Endeavor High Yield 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.
<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
Interest Rate Transactions................... 15
Dollar Roll Transactions..................... 16
Portfolio Turnover........................... 17
Investment Restrictions........................... 18
Other Policies............................... 21
Performance Information........................... 23
Total Return................................. 23
Yield....................................... 26
Non-Standardized Performance................. 27
Portfolio Transactions............................ 28
Management of the Fund............................ 31
Trustees and Officers........................ 31
The Manager.................................. 37
The Advisers................................. 39
Redemption of Shares.............................. 44
Net Asset Value................................... 44
Taxes............................................. 47
Federal Income Taxes......................... 47
Organization and Capitalization of the Fund....... 49
Legal Matters..................................... 51
Custodian......................................... 51
Financial Statements.............................. 51
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, as
amended ___________, 1998.
<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
, Montgomery Asset Management, LLC as investment adviser for the Endeavor Select
50 Portfolio and Massachusetts Financial Services Company as investment adviser
for the Endeavor High Yield 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
<PAGE>
it is permitted to invest from time to time as its Adviser determines is
appropriate in seeking to attain the Portfolio's investment objective. Call
options written by a Portfolio give the holder the right to buy the underlying
security from the Portfolio at a stated exercise price; put options give the
holder the right to sell the underlying security to the Portfolio at a stated
price.
A Portfolio may only write call options on a covered basis or for
cross-hedging purposes and will only write covered put options. A put option
would be considered "covered" if the Portfolio owns an option to sell the
underlying security subject to the option having an exercise price equal to or
greater than the exercise price of the "covered" option at all times while the
put option is outstanding. A call option is covered if the Portfolio owns or has
the right to acquire the underlying securities subject to the call option (or
comparable securities satisfying the cover requirements of securities exchanges)
at all times during the option period. A call option is for cross-hedging
purposes if it is not covered, but is designed to provide a hedge against
another security which the Portfolio owns or has the right to acquire. In the
case of a call written for cross-hedging purposes or a put option, the Portfolio
will maintain in a segregated account at the Fund's custodian bank liquid assets
with a value equal to or greater than the Portfolio's obligation under the
option. A Portfolio may also write combinations of covered puts and covered
calls on the same underlying security.
A Portfolio will receive a premium from writing an option, which
increases the Portfolio's return in the event the option expires unexercised or
is terminated at a profit. The amount of the premium will reflect, among other
things, the relationship of the market price of the underlying security to the
exercise price of the option, the term of the option, and the volatility of the
market price of the underlying security. By writing a call option, a Portfolio
will limit its opportunity to profit from any increase in the market value of
the underlying security above the exercise price of the option. By writing a put
option, a Portfolio will assume the risk that it may be required to purchase the
underlying security for an exercise price higher 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
<PAGE>
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.
<PAGE>
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 fixed income securities or indices of
such securities, including municipal indices and any other indices of fixed
income securities that may become available for trading either for the purpose
of hedging its portfolio securities against the adverse effects of anticipated
movements in interest rates or for other investment purposes.
A Portfolio may sell interest rate futures contracts in anticipation of
an increase in the general level of interest rates. Generally, as interest rates
rise, the market value of the securities held by a Portfolio will fall, thus
reducing the net asset value of the Portfolio. This interest rate risk can be
reduced without employing futures as a hedge by selling such securities and
either reinvesting the proceeds in securities with shorter maturities or by
holding assets in cash. However, this strategy entails increased transaction
costs in the form of dealer spreads and brokerage commissions and would
typically reduce the Portfolio's average yield as a result of the shortening of
maturities.
The sale of interest rate futures contracts provides a means of hedging
against rising interest rates. As rates increase, the value of a Portfolio's
short position in the futures contracts will also tend to increase thus
offsetting all or a portion of the depreciation in the market value of the
Portfolio's investments that are being hedged. While the Portfolio will incur
commission expenses in selling and closing out futures positions (which is done
by taking an opposite position in the futures contract), commissions on futures
transactions are lower than transaction costs incurred in the purchase and sale
of portfolio securities.
A Portfolio may purchase interest rate futures contracts in anticipation
of a decline in interest rates when it is not fully invested. As such purchases
are made, it is expected that an equivalent amount of futures contracts will be
closed out.
A Portfolio will enter into futures contracts which are traded on
national or foreign futures exchanges, and are standardized as to maturity date
and the underlying financial instrument. Futures exchanges and trading in the
United
<PAGE>
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
<PAGE>
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 , Endeavor Select
50 and Endeavor High Yield 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
<PAGE>
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
<PAGE>
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
<PAGE>
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)
<PAGE>
Each of the Portfolios may pay reasonable finders', administrative and
custodial fees in connection with loans of its portfolio securities. Although
voting rights or the right to consent accompanying loaned securities pass to the
borrower, a Portfolio retains the right to call the loan at any time on
reasonable notice, and will do so in order that the securities may be voted by
the Portfolio with respect to matters materially affecting the investment. A
Portfolio may also call a loan in order to sell the securities involved. Loans
of portfolio securities will only be made to borrowers considered by a
Portfolio's Adviser to be creditworthy under guidelines adopted by the Trustees
of the Fund.
Interest Rate Transactions (Dreyfus U.S. Government Securities and
Endeavor High Yield Portfolios)
Among the strategic transactions into which the Dreyfus U.S. Government
Securities and Endeavor High Yield Portfolios may enter are interest rate swaps
and the purchase or sale of related caps and floors. A 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. A 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 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
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.
A 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 Advisers to the
Portfolios 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.
A 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
<PAGE>
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, a 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, a 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 and Endeavor High
Yield Portfolios)
The Dreyfus U.S. Government Securities and Endeavor High Yield
Portfolios may enter into "dollar roll" transactions, which consist of the sale
by the Portfolio to a bank or broker-dealer (the "counterparty") of Government
National Mortgage Association 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. A 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 a
Portfolio agrees to buy a security on a future date.
A 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 Dreyfus U.S. Government Securities 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 a
Portfolio because they involve the sale of a security coupled with an agreement
to repurchase. Like all borrowings, a dollar roll involves costs to a Portfolio.
For example, while a 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 a Portfolio, thereby
effectively charging the Portfolio interest on its borrowing. Further, although
a Portfolio can estimate the
<PAGE>
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, a Portfolio's right to purchase
from the counterparty might be restricted. Additionally, the value of such
securities may change adversely before a 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 a 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 a 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 , Endeavor Select 50 and Endeavor High Yield
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.
<PAGE>
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; 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; and
except that the Endeavor High Yield Portfolio may borrow money from banks to
take advantage of investment opportunities and 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 and the
Endeavor High Yield Portfolio may engage in dollar rolls transactions.
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.
<PAGE>
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; provided,
however, that the Endeavor High Yield Portfolio may hold and sell real estate
acquired as a result of the ownership of securities.
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
<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.
<PAGE>
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 , the Dreyfus U.S. Government Securities Portfolio's and the
Endeavor High Yield 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 and the Endeavor
High Yield 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
<PAGE>
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
<PAGE>
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
<PAGE>
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 $525,982,
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
<PAGE>
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.
<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).
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.
<PAGE>
Principal
Position(s) Occupation(s)
Held with During Past
Name, Age and Address Registrant 5 Years
*Halbert D. Lindquist (52)
1650 E. Fort Lowell Road Trustee President, Lindquist
Tucson, Arizona 85719-2324 Enterprises, Inc.
(financial services) and
since December, 1987
Tucson Asset Management,
Inc. (financial services),
and since November, 1987,
Presidio Government
Securities, Incorporated
(broker-dealer).
R. Daniel Olmstead, Jr. (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 Jamison, Eaton &
Wood (investment adviser)
and from 1972
to December, President of
Ivory & Sime
International, Inc.
(investment adviser)
Trustee President, PFL Life
*William L. Busler (55) Insurance Company
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499
<PAGE>
Principal
Position(s) Occupation(s)
Held with During Past
Name, Age and Address Registrant 5 Years
Michael J. Roland (39) Chief Since June, 1996, Chief
Financial Financial Officer of
Officer Endeavor Group and
(Treasurer) Endeavor Management Co;
from
January,
1995
to
April,
1997,
Senior
Vice
President,
Treasurer
and
Chief
Financial
Officer
of
Pilgrim
America
Group,
Pilgrim
America
Investments,
Inc.,
Pilgrim
America
Securities
and
of
each
of
the
funds
in
the
Pilgrim
America
Group
of
Funds;
from
July,
1994
to
December,
1994,
partner
at
the
consulting
firm
of
Corporate
Savings
Group;
from
March,
1992
to
June,
1994,
Vice
President
of
PIMCO
Advisors,
LP
and
of
the
PIMCO
Institutional
Funds.
Pamela A. Shelton (48) Secretary Since October, 1993,
Executive Secretary to
Chairman of the Board and
Chief Executive Officer
of, and since April, 1996,
Secretary of McGuinness &
Associates, Endeavor
Group, VJM Corporation,
McGuinness Group (until
July, 1996) and Endeavor
Management Co.; from July,
1992 to October, 1993,
Administrative Secretary,
Mayor and City Council,
City of Laguna Niguel,
California.
</TABLE>
* An "interested person" of the Fund as defined in the 1940 Act.
*+ Vincent J. McGuinness, Jr. is the son of Vincent J. McGuinness.
<PAGE>
No remuneration will be paid by the Fund to any Trustee or officer of
the Fund who is affiliated with the Manager or the Advisers. Each Trustee who is
not an affiliated person of the Manager or the Advisers will be reimbursed for
out-of-pocket expenses and currently receives an annual fee of $10,000 and $500
for attendance at each Trustees' Board or committee meeting. Set forth below for
each of the Trustees of the Fund is the aggregate compensation paid to such
Trustees for the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
COMPENSATION TABLE
Total
Compensation
From Fund
Aggregate and Fund
Name of Compensation Complex
Person From Fund Paid to Trustees
<S> <C> <C>
Vincent J. McGuinness $ - $ -
Timothy A. Devine 8,125 8,125
Thomas J. Hawekotte 8,125 8,125
Steven L. Klosterman 8,125 8,125
Halbert D. Lindquist 8,125 8,125
R. Daniel Olmstead 8,125 8,125
Keith H. Wood 2,375 2,375
Vincent J. McGuinness, Jr. - -
William L. Busler - -
</TABLE>
The Agreement and Declaration of Trust of the Fund provides that the
Fund will indemnify its Trustees and officers against liabilities and expenses
incurred in connection with litigation in which they may be involved because of
their offices with the Fund, except if it is determined in the manner specified
in the Agreement and Declaration of Trust that they have not acted in good faith
in the reasonable belief that their actions were in the best interests of the
Fund or that such indemnification would relieve any officer or Trustee of any
liability to the Fund or its shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of his duties. The Fund, at its
expense, provides liability insurance for the benefit of its Trustees and
officers.
As of the date of this Statement of Additional Information, the
officers and Trustees of the Fund as a group owned less than 1% of the
outstanding shares of the Fund.
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
<PAGE>
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. With respect to the Endeavor High Yield 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)
on May 11, 1998 and by PFL Life Insurance Company, the sole shareholder of the
Endeavor High Yield Portfolio, on May , 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, May , 1998
with respect to the Endeavor High Yield 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
<PAGE>
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
April 21, 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. The Investment Advisory
Agreement between the Manager and Massachusetts Financial Services Company 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 May 11,
<PAGE>
1998 and by PFL Life Insurance Company as sole shareholder of the Endeavor High
Yield Portfolio on May , 1998. 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 , January 30, 1998 with respect to the Endeavor Select
50 Portfolio and May , 1998 with respect to the Endeavor High Yield 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
, Endeavor Select 50 and Endeavor High Yield 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.
<PAGE>
<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 -- --
<PAGE>
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>
- ---------------
<PAGE>
* 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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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 twelve 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.
<PAGE>
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
<PAGE>
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: 0.02% of the Dreyfus Small Cap
Value Portfolio; 0.05% of the T. Rowe Price International Stock Portfolio; and
1.46% 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
<PAGE>
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.
<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
<PAGE>
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.
<PAGE>
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.
<PAGE>
ENDEAVOR SERIES TRUST
PART C
Other Information
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Incorporated by reference 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
Statement of Changes in Net Assets
Notes to Financial Statements
Incorporated by reference in Part C:
Consent of Independent Auditors .
(b) Exhibits:
-4-
<PAGE>
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").
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibits
<S> <C>
(1)(a) Agreement and Declaration
of Trust is incorporated
by reference to
Post-Effective Amendment
No. 14 to the
Registration Statement as
filed with the SEC on
April 29, 1996 ("Post-
Effective Amendment No.
14").
(1)(b) Amendment No. 1 to Agreement and Declaration of
Trust is incorporated by reference to Post-
Effective Amendment No. 14.
(1)(c) Amendment No. 2 to Agreement and Declaration of
Trust is incorporated by reference to Post-
Effective Amendment No. 14.
(1)(d) Amendment No. 3 to Agreement and Declaration of
Trust is incorporated by reference to Post-
Effective Amendment No. 14.
(1)(e) Amendment No. 4 to Agreement and Declaration of
Trust is incorporated by reference to Post-
Effective Amendment No. 14
(1)(f) Amendment No. 5 to Agreement and Declaration of
Trust is incorporated by reference to Post-
Effective Amendment No. 14.
(1)(g) Amendment No. 6 to Agreement and Declaration of
Trust is incorporated by reference to Post-
Effective Amendment No. 14.
(1)(h) Amendment No. 7 to Agreement and Declaration of
Trust is 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 incorporated by reference
to Post-Effective Amendment No. 22 to the
Registration Statement as filed with the SEC on
February 27, 1998 ("Post-Effective Amendment No.
22").
-5-
<PAGE>
(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. 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.
-6-
<PAGE>
(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 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").
(4)(n) Speciment certificate for shares of beneficial
interest of the Endeavor High Yield Portfolio is
filed herein.
(5)(a) Management Agreement
dated November 23, 1992
between Registrant and
Endeavor Investment
Advisers is incorporated
by reference to Post-
Effective Amendment No.
14.
(5)(a)(1) Supplement dated April
29, 1993 to Management
Agreement between
Registrant and Endeavor
Investment Advisers with
respect to Quest for
Value Equity Portfolio
and Quest for Value Small
Cap Portfolio is
incorporated by reference
to Post-Effective
Amendment No. 14.
(5)(a)(2) Supplement dated March
25, 1994 to Management
Agreement between
Registrant and Endeavor
Investment Advisers with
respect to U.S.
Government Securities
Portfolio is incorporated
by reference to
Post-Effective Amendment
No. 14.
(5)(a)(3) Supplement dated December
28, 1994 to Management
Agreement between
Registrant and Endeavor
Investment Advisers with
respect to the T. Rowe
Price Equity Income
Portfolio and T. Rowe
Price Growth Stock
Portfolio is incorporated
by reference to
Post-Effective Amendment
No. 14.
(5)(a)(4) Supplement to Management Agreement between
Registrant and Endeavor Investment Advisers with
respect to Opportunity Value Portfolio and
-7-
<PAGE>
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
incorporated by reference
to Post- Effective
Amendment No. 22.
(5)(a)(6) Amendment dated January
28, 1998 to Management
Agreement between
Registrant and Endeavor
Investment Advisers is
incorporated by reference
to Post-Effective
Amendment No. 22.
(5)(a)(7) Form of Supplement to
Management Agreement
between Registrant and
Endeavor Investment
Advisers with respect to
Endeavor High Yield
Portfolio 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
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.
-8-
<PAGE>
(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) Investment Advisory Agreement between
J.P. Morgan Investment Management Inc. and
Endeavor Investment Advisers with respect to the
Enhanced Index Portfolio is
filed herein.
(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
incorporated by reference
to Post- Effective
Amendment No. 22.
(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
incorporated by reference to Post-Effective
Amendment No. 22.
(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
incorporated by reference to Post-Effective
Amendment No. 22.
(5)(q) Form of Investment Advisory Agreement between
Massachusetts Financial Services Company and
-9-
<PAGE>
Endeavor Investment
Advisers with respect to
Endeavor High Yield
Portfolio is filed
herein.
(6) Participation Agreement between Registrant,
Endeavor Management Co. and PFL Life Insurance
Company is incorporated by reference to Post-
Effective Amendment No. 14.
(7) Not Applicable.
(8)(a) Custody Agreement between Registrant and Boston
Safe Deposit and Trust Company is incorporated
by reference to Post-Effective Amendment No. 14.
(8)(b) Supplement dated April
19, 1993 to Custody
Agreement between
Registrant and Boston
Safe Deposit and Trust
Company with respect to
the Quest for Value
Equity Portfolio and
Quest for Value Small Cap
Portfolio is incorporated
by reference to
Post-Effective Amendment
No. 14.
(8)(c) Supplement dated December
30, 1994 to Custody
Agreement between
Registrant and Boston
Safe Deposit and Trust
Company with respect to
the T. Rowe Price Equity
Income Portfolio and T.
Rowe Price Growth Stock
Portfolio is incorporated
by reference to
Post-Effective Amendment
No. 14.
(8)(d) Supplement dated March
25, 1994 to Custody
Agreement between
Registrant and Boston
Safe Deposit and Trust
Company with respect to
the U.S. Government
Securities Portfolio is
incorporated by reference
to Post-Effective
Amendment No. 14.
(8)(e) 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.
(8)(g) Form of Supplement to
Custody Agreement between
Registrant and Boston
Safe Deposit and Trust
Company with respect to
Endeavor High Yield
Portfolio is filed
herein.
-10-
<PAGE>
(9)(a) Transfer Agency and Registrar Agreement between
Registrant and The Shareholder Services Group,
Inc. (now known as First Data Investor Services
Group, Inc.) is incorporated by reference to
Post-Effective Amendment No. 14.
(9)(b) License Agreement between Endeavor Management
Co. and Registrant is incorporated by reference
to Post-Effective Amendment No. 14.
(9)(b)(1) Amendment to License Agreement between Endeavor
Management Co. and Registrant is incorporated by
reference to Post-Effective Amendment No. 14.
(9)(c) Administration Agreement between Endeavor
Management Co. and The Boston Company Advisors,
Inc. is incorporated by reference to Post-
Effective Amendment No. 14.
(9)(c)(1) Supplement dated April
19, 1993 to
Administration Agreement
between Endeavor
Investment Advisers and
The Boston Company
Advisors, Inc., with
respect to the Quest for
Value Equity Portfolio
and Quest for Value 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 incorporated by
reference to Post-Effective Amendment No. 22.
(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.
-11-
<PAGE>
(9)(c)(5) Supplement dated March 25, 1994 to
Administration Agreement between Endeavor
Investment Advisers and 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
incorporated by reference
to Post- Effective
Amendment No. 22.
(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
incorporated by reference to Post-Effective
Amendment No. 22.
(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
incorporated by reference to Post-Effective
Amendment No. 22.
(9)(c)(10) Supplemented dated January 28, 1998 to
Administration Agreement between Endeavor
Investment Advisers and First Data Investor
Services Group, Inc. with respect to Endeavor
Select 50 Portfolio is
incorporated by reference to Post-Effective
Amendment No. 22.
(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 incorporated by
reference to Post-Effective Amendment No. 22.
-12-
<PAGE>
(9)(c)(12) Form of Amendment No. 1
to Amended and Restated
Administration Agreement
dated as of July 1, 1997
with respect to Endeavor
High Yield Portfolio is
filed herein.
(10) Not Applicable.
(11) Consent of Independent Auditors is
incorporated by reference to Post-Effective
Amendment No. 22.
(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
filed herein.
(16) Not Applicable.
(17) Not Applicable.
(18) Financial Data Schedule is
incorporated by reference to Post-Effective
Amendment No. 22.
(19) Powers of Attorney are
incorporated by reference
to Post-Effective
Amendment Nos. 14, 16, 18
, 20 and 22.
</TABLE>
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
-13-
<PAGE>
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 February 28,
1998, of the shares of beneficial interest of the Registrant.
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
-14-
<PAGE>
Shares of Beneficial Interest of the
Endeavor Select 50 Portfolio..............................1
Shares of Beneficial Interest of the
Endeavor High Yield Portfolio.............................0
Item 27. INDEMNIFICATION
Reference is made to the following documents:
Agreement and Declaration of Trust, as amended, as filed as
Exhibits 1(a) - 1(j) hereto;
Amended and Restated By-Laws as filed as Exhibit 2 hereto; and
Participation Agreement between Registrant, Endeavor Management
Co. and PFL Life Insurance Company as filed as Exhibit 6 hereto.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act") may be permitted to Trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by any such
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
The Registrant, its Trustees and officers, Endeavor Investment Advisers
(the "Manager"), and persons affiliated with them are insured under a policy of
insurance maintained by the Registrant and the Manager within the limits and
subject to the limitations of the policy, against certain expenses in connection
with the defense of actions suits or proceedings, and certain liabilities that
might me imposed as a result of such actions, suits or proceedings, to which
they are parties by reason of being or having been such Trustees or officers.
The policy expressly excludes coverage for any Trustee or officer whose personal
dishonesty, fraudulent breach of trust, lack of good faith, or intention to
deceive or defraud has been finally adjudicated or may be established or who
willfully fails to act prudently.
Item 28. (a) Business and Other Connections of the Investment Adviser
Investment Adviser - Endeavor Investment Advisers
-15-
<PAGE>
The Manager is a registered investment adviser providing
investment management and administrative services to the Registrant.
The list required by this Item 28 of partners and their
officers and directors of the Manager together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years is incorporated by
reference to Schedule B and D of Form ADV filed by the Manager pursuant to the
Investment Advisers Act of 1940 (SEC 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
----------------------------------------------------
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.
-16-
<PAGE>
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 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
-17-
<PAGE>
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 28 (a) Business and Other Connections of Investment Adviser
----------------------------------------------------
Investment Adviser - Massachusetts Financial Services Company
Massachusetts Financial Services Company ("MFS") serves as
investment manager to a variety of individual and institutional investors,
including other mutual funds.
The list required by this Item 28 of officers and directors of
MFS 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 MFS pursuant to the Investment Advisers Act of 1940 (SEC file
No. 801-17352).
Item 29 Principal Underwriter
(a) Inapplicable
(b) Officers and Directors of Endeavor Group
<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
-18-
<PAGE>
Positions and Positions and
Name and Principal Offices With Offices with
Business Address Underwriter Registrant
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
Roseann Morrison Vice President, ---
National Accounts
Coordinator
-19-
<PAGE>
Positions and Positions and
Name and Principal Offices With Offices with
Business Address Underwriter Registrant
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;
Massachusetts Financial Services Company, 500 Boylston Street, Boston,
Massachusetts 02116; 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
None
Item 32 Undertakings
(a) Inapplicable
(b) The Registrant undertakes to file a post-effective
amendment, using financial statements for its Endeavor High Yield Portfolio,
-20-
<PAGE>
which financial statements need not be certified, within four to six months from
the commencement of operations of the Portfolio.
(c) The Registrant will furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
-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 18th day
of March, 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 March
- ------------------------------
Vincent J. McGuinness, Jr. (Principal executive 19, 1998
officer)
/s/Michael J. Roland* Chief Financial
Michael J. Roland Officer March 19, 1998
(Treasurer) (principal
financial and
accounting officer)
/s/Vincent J. McGuinness* Trustee
Vincent J. McGuinness March 19, 1998
/s/Timothy A. Devine* Trustee
Timothy A. Devine March 19, 1998
/s/Thomas J. Hawekotte* Trustee
Thomas J. Hawekotte March 19, 1998
-22-
<PAGE>
Signature Title Date
/s/Steven L. Klosterman* Trustee
Steven L. Klosterman March 19, 1998
/s/Halbert D. Lindquist* Trustee
Halbert D. Lindquist March 19, 1998
/s/R. Daniel Olmstead* Trustee
R. Daniel Olmstead March 19, 1998
/s/Keith H. Wood* Trustee
Keith H. Wood March 19, 1998
/s/William L. Busler* Trustee
Wiliam L. Busler March 19, 1998
</TABLE>
* By: /s/Robert N. Hickey
Robert N. Hickey
Attorney-in-fact
-23-
<PAGE>
This Specimen Certificate is in landscape position.
NUMBER The Commonwealth of Massachusetts SHARES
-0- (There is a picture of the Capitol - 0 -
and an eagle between two pillars here)
ENDEAVOR SERIES TRUST
Endeavor High Yield Portfolio
no par value
This Certifies that -Specimen- of is the owner of
-0- Shares in the Endeavor High Yield Portfolio of Endeavor Series Trust,
created by a Declaration of Trust dated November 18, 1988 and recorded with the
Secretary of State of The Commonwealth of Massachusetts which shares are fully
paid and non-assessable, and subject to the provisions of this Trust, are
transferable by assignment endorsed thereon, and, the surrender of this
certificate.
IN WITNESS WHEREOF, the Trustees hereunto set their hands and have caused their
seal to be affixed hereto this day of A.D. 19 .
President (There is a Seal Here) Chief Financial Officer
(Treasurer)
<PAGE>
This Side of The Certificate is in Landscape Position.
ENDEAVOR SERIES TRUST
Endeavor High Yield
Portfolio
(There is a Torch of
Fire Here)
Certificate
for
-0-
ISSUED TO
Specimen
DATED
(The following Text is Enclosed in the Border
to the Left of the Above Text Reading
in the Opposite Direction)
For Value Received, hereby sell, assign and transfer unto
Shares of the Capital represented by the
within Certificate, and do hereby irrevocably constitute and appoint
Attorney to transfer the said Shares on the books of the within named
Organization with full power of substitution in the premises.
Dated 19 .
In presence of
<PAGE>
SUPPLEMENT TO MANAGEMENT AGREEMENT
ENDEAVOR HIGH YIELD PORTFOLIO
Date: May , 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, as amended
on January 28, 1998 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
ENDEAVOR HIGH YIELD 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:
---------------------
Authorized Officer
Accepted:
ENDEAVOR INVESTMENT ADVISERS
By: Endeavor Management Co.,
Managing Partner
By:
-----------------------------
Authorized Officer
<PAGE>
AMENDMENT TO
SCHEDULE A
ENDEAVOR HIGH YIELD PORTFOLIO .775% of average daily net
assets
ENDEAVOR INVESTMENT ADVISERS ENDEAVOR SERIES TRUST
By: Endeavor Management Co.,
Managing Partner
By: By:
---------------------------- ------------------
Chairman President
Date: May , 1998 Date: May , 1998
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 30th day of April, 1997, by and between J.P. Morgan
Investment Management Inc., a Delaware corporation (the "Adviser"), and Endeavor
Investment Advisers, a California general partnership (the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
and administrator of Endeavor Series Trust (the "Trust"), a Massachusetts
business trust which has filed a registration statement under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933
(the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is the Enhanced Index Portfolio (the "Portfolio"); and
WHEREAS, the Manager desires to avail itself of the services of an
investment adviser to assist the Manager in performing services for the
Portfolio; and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment
advisory services to investment companies and desires to provide such services
to the Manager;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Adviser. The Manager hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Portfolio, subject
to the control and direction of the Trust's Board of Trustees, for the period
and on the terms hereinafter set forth. The Adviser hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth for the compensation herein provided. The
Adviser shall for all purposes herein be deemed to be an independent contractor
and shall, except as expressly provided or authorized (whether herein or
otherwise), have no authority to act for or represent the Manager, the Portfolio
or the Trust in any way.
2. Obligations of and Services to be Provided by the Adviser. The
Adviser undertakes to provide the following services and to assume the following
obligations:
a. The Adviser shall manage the investment and reinvestment of
the portfolio assets of the Portfolio, all without prior consultation with the
Manager, subject to and in accordance with the respective investment objectives
and policies of the Portfolio set forth in the Trust's Registration Statement,
as such Registration Statement may be amended from time to time, and any written
instructions which the Manager or the Trust's Board of Trustees may issue from
time-to-time in
<PAGE>
-2-
accordance therewith. The Manager has delivered copies of the Trust's
Declaration of Trust, as amended to date (the "Charter Document") to the
Adviser. The Manager agrees, on an ongoing basis, to provide the Adviser as
promptly as practicable copies of all amendments to the Registration Statement
and Charter Document and supplements to the Prospectus. In pursuance of the
foregoing, the Adviser shall make all determinations with respect to the
purchase and sale of portfolio securities and shall take such action necessary
to implement the same. The Adviser shall render regular reports to the Trust's
Board of Trustees and the Manager concerning the investment activities of the
Portfolio. The Manager agrees to cause to be delivered to a person designated in
writing for such purpose by the Adviser within three days after the end of each
month a written report dated the date of its delivery (the "Report") with
respect to the Portfolio's compliance for its current fiscal year wth the short-
three test set forth in Section 851(b)(3) of the Internal Revenue Code of 1986,
as amended (the "Code")(the "short-three test"). The Report shall include in
chart form the Portfolio's gross income (within the meaning of Section 851 of
the Code) from the beginning of the current fiscal year to the date of the
Report and its cumulative income and gains described in Section 851(b(3) of the
Code for such period. If the Report is not timely delivered, the Adviser shall
be permitted to rely on the most recent Report delivered to it. The Manager
agrees that its Adviser may rely on the Report without independent verification
of its accuracy.
b. To the extent provided in the Trust's Registration
Statement, as such Registration Statement may be amended from time to time, the
Adviser shall, in the name of the Portfolio, place orders for the execution of
portfolio transactions with or through such brokers, dealers or banks as it may
select including affiliates of the Adviser and, complying with Section 28(e) of
the Securities Exchange Act of 1934, may pay a commission on transactions in
excess of the amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for the
execution of the portfolio transactions of the Portfolio, the Adviser shall
create and maintain all necessary records pertaining to the purchase and sale of
securities by the Adviser on behalf of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act. All records shall be the property of
the Trust and shall be available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Trust, the Manager or any person retained by
the Trust. Where applicable, such records shall be maintained by the Adviser for
the periods and in the places required by Rule 31a-2 under the 1940 Act.
<PAGE>
-3-
d. The Adviser shall bear its expenses of providing services
pursuant to this Agreement. The Adviser will not bear any other expenses in the
operation of the Portfolio.
3. Compensation of the Adviser. In consideration of services rendered
pursuant to this Agreement, the Manager will pay the Adviser a fee at the annual
rate of the value of the Portfolio's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon as
practicable after the end of each month. If the Adviser shall serve for less
than the whole of any month, the foregoing compensation shall be prorated. For
the purpose of determining fees payable to the Adviser, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the Adviser hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others and to engage in other activities, so long as the services
rendered hereunder are not impaired.
5. Use of Names. The Manager shall not use the name of the Adviser or
its parent, J.P. Morgan & Co., Incorporated, in any prospectus, sales literature
or other material relating to the Trust in any manner not approved prior thereto
by the Adviser; provided, however, that the Adviser shall approve all uses of
its name which merely refer in accurate terms to its appointment hereunder with
no more prominence than other relationships described in the materials and all
uses of its name and that of its parent which are required by the SEC or a state
securities commission. The Adviser shall not use the name of the Trust or the
Manager in any material relating to the Adviser in any manner not approved prior
thereto by the Manager; provided, however, that the Manager shall approve all
uses of its or the Trust's name which merely refer in accurate terms to the
appointment of the Adviser hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld.
The Manager recognizes that from time to time directors, officers and
employees of the Adviser may serve as directors, trustees, partners, officers
and employees of other corporations, business trusts, partnerships or other
entities (including other investment companies) and that such other entities may
include the name "J.P. Morgan" as part of their name, and that the Adviser or
its affiliates may enter into investment advisory, administration or other
agreements with such other entities.
6. Liability of the Adviser; Indemnification of the Adviser. Absent
willful misfeasance, bad faith, gross negligence, or reckless disregard of
obligations or duties hereunder on the part
<PAGE>
-4-
of the Adviser (each such act or omission shall be referred to as "Disqualifying
Conduct"), the Adviser shall not be liable for any act or omission in the course
of, or connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, holding or sale of any security. Nothing herein
shall constitute a waiver of any rights or remedies which the Trust may have
under any federal or state securities laws.
The Manager agrees to indemnify and hold harmless the Adviser from
and against any and all claims, losses, liabilities or damages (including
reasonable attorneys' fees and other related expenses), howsoever arising, from
or in connection with this Agreement or the performance by the Adviser of its
duties hereunder; provided, however, that nothing contained herein shall require
that the Adviser be indemnified for Disqualifying Conduct.
7. Limitation of Trust's Liability. The Adviser acknowledges that it
has received notice of and accepts the limitations upon the Trust's liability
set forth in its Agreement and Declaration of Trust. The Adviser agrees that any
of the Trust's obligations shall be limited to the assets of the Portfolio and
that the Adviser shall not seek satisfaction of any such obligation from the
shareholders of the Trust nor from any Trust officer, employee or agent of the
Trust.
8. Renewal, Termination and Amendment. This Agreement shall continue in
effect, unless sooner terminated as hereinafter provided, for a period of two
years from the date hereof and shall continue in full force and effect for
successive periods of one year thereafter, but only so long as each such
continuance as to the Portfolio is specifically approved at least annually by
vote of the holders of a majority of the outstanding voting securities of the
Portfolio or by vote of a majority of the Trust's Board of Trustees; and further
provided that such continuance is also approved annually by the vote of a
majority of the Trustees who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. This Agreement may be terminated as to the Portfolio at
any time, without payment of any penalty, by the Trust's Board of Trustees, by
the Manager, or by a vote of the majority of the outstanding voting securities
of the Portfolio upon 60 days' prior written notice to the Adviser, or by the
Adviser upon 90 days' prior written notice to the Manager, or upon such shorter
notice as may be mutually agreed upon. This Agreement shall terminate
automatically and immediately upon termination of the Management Agreement dated
November 23, 1992 between the Manager and the Trust, provided that the Adviser
receives prior written notice of the termination of the Management Agreement.
This Agreement shall terminate automatically and immediately in the event of its
assignment. The terms "assignment" and "vote of a majority of
<PAGE>
-5-
the outstanding voting securities" shall have the meaning set forth for such
terms in the 1940 Act. This Agreement may be amended at any time by the Adviser
and the Manager, subject to approval by the Trust's Board of Trustees and, if
required by applicable SEC rules and regulations, a vote of a majority of the
Portfolio's outstanding voting securities.
9. Confidential Relationship. Any information and advice furnished by
either party to this Agreement to the other shall be treated as confidential and
shall not be disclosed to third parties except as required by law.
10. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
11. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of California. The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the parties.
<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
Authorized Officer
J.P. MORGAN INVESTMENT MANAGEMENT INC.
BY: /s/Diane J. Minardi
Authorized Officer
<PAGE>
-7-
SCHEDULE A
Enhanced Index
Portfolio .35% of average daily net
assets
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 1st day of May, 1998, by and between Massachusetts
Financial Services Company, 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 High Yield 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 investment advisory services for the Portfolio;
and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), 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. The Adviser may execute account documentation,
agreements, contracts and other documents requested by brokers, dealers,
counterparties and other persons in connection with its management of the assets
of the
<PAGE>
-2-
Portfolio, provided the Adviser receives the express agreement and consent of
the Manager and/or the Trust's Board of Trustees to execute such documentation,
agreements, contracts and other documents. In such respect, and only for this
limited purpose, the Adviser shall act as the Manager's and the Trust's agent
and attorney-in-fact.
Copies of the Trust's Registration Statement, as it relates to the
Portfolio (the "Registration Statement"), and the Trust's Declaration of Trust
and Bylaws (collectively, the "Charter Documents"), each as currently in effect,
have been delivered to the Adviser. The Manager agrees, on an ongoing basis, to
notify the Adviser of each change in the fundamental and non-fundamental
investment policies and restrictions of the Portfolio and to provide to the
Adviser as promptly as practicable copies of all amendments and supplements to
the Registration Statement and amendments to the Charter Documents. The Manager
will promptly provide the Adviser with any procedures applicable to the Adviser
adopted from time to time by the Trust's Board of Trustees and agrees to
promptly provide the Adviser copies of all amendments thereto. The Adviser will
not be bound to follow any change in the investment policies, restrictions or
procedures of the Portfolio or Trust, however, until it has received written
notice of any such change from the Manager.
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 and the Charter
Documents, as such Registration Statement and Charter Documents may be amended
from time to time, in compliance with the requirements applicable to registered
investment companies under applicable laws and those requirements applicable to
both regulated investment companies and segregated asset accounts under
Subchapters M and L of the Internal Revenue Code of 1986, as amended (the
"Code") 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 such reports to the Trust's
Board of Trustees and the Manager as they may reasonably request concerning the
investment activities of the Portfolio. Unless the Manager gives the Adviser
written instructions to the contrary, the Adviser shall, in good faith and in a
manner which it reasonably believes best
<PAGE>
-3-
serves the interests of the Portfolio's shareholders, direct the Portfolio's
custodian as to how to vote such proxies as may be necessary or advisable in
connection with any matters submitted to a vote of shareholders of securities
held by 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 other financial
institutions 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.
e. The Adviser and the Manager acknowledge that the Adviser is
not the compliance agent for the Portfolio or for the Manager, and does not have
access to all of the Portfolio's books and records necessary to perform certain
compliance testing. To the extent that the Adviser has agreed to perform the
services specified in this Section 2 in accordance with the Trust's Registration
Statement and Charter Documents, written instructions of the Manager and any
policies adopted by the Trust's Board of Trustees applicable to the Portfolio
(collectively, the "Charter Requirements"), and in accordance with applicable
law (including sub-chapters M and L of the Code, the Investment Company Act and
the Advisers Act ("Applicable Law")), the Adviser shall perform such services
based upon its books and records with respect to the Portfolio (as specified in
Section 2.c. hereof), which comprise a portion of each Portfolio's books and
records, and upon information and written instructions received from the Trust,
the Manager or the Trust's administrator, and shall not be held responsible
under this Agreement so long as it performs such services in accordance with
<PAGE>
-4-
this Agreement, the Charter Requirements and Applicable Law based upon such
books and records and such information and instructions provided by the Trust,
the Manager or the Trust's administrator.
3. Compensation of the Adviser. In consideration of services rendered
pursuant to this Agreement, the Manager will pay the Adviser a fee at the annual
rate of the value of the Portfolio's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon as
practicable after the end of each month. If the Adviser shall serve for less
than the whole of any month, the foregoing compensation shall be prorated. For
the purpose of determining fees payable to the Adviser, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the Adviser hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others and to engage in other activities, so long as the services
rendered hereunder are not impaired.
5. Use of Names. The Manager shall not use the name of the Adviser or
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. 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.
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 "Massachusetts Financial Services" or any derivative or
abbreviation thereof 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
<PAGE>
-5-
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, 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.
<PAGE>
-6-
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
Commonwealth of Massachusetts. 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>
-7-
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
MASSACHUSETTS FINANCIAL SERVICES COMPANY
BY:
-------------------------------
Authorized Officer
<PAGE>
SCHEDULE A
Endeavor High Yield .375% of average daily
Portfolio net assets
<PAGE>
SUPPLEMENT TO CUSTODY AGREEMENT
, 1998
Boston Safe Deposit and Trust Company
One Boston Place
Boston, Massachusetts 02108
Ladies and Gentlemen:
ENDEAVOR SERIES TRUST, an unincorporated business trust organized under
the laws of the Commonwealth of Massachusetts (the "Trust"), hereby supplements
its agreement with BOSTON SAFE DEPOSIT AND TRUST COMPANY, a trust company
organized under the laws of the Commonwealth of Massachusetts (the "Custodian"),
as follows:
1. Compensation. Pursuant to Section 3(b) of the Custody Agreement
dated March 28, 1991 (the "Agreement"), the Trust and the Custodian hereby agree
that the Endeavor High Yield Portfolio (the "Portfolio"), a new portfolio series
of the Trust, created and designated in accordance with the Trust's Agreement
and Declaration of Trust, shall be, considered Portfolios of the Trust under the
terms of the Agreement, and that the Domestic and Global Fee Schedules currently
in effect, and as may be amended from time to time, under the Agreement shall
apply to the Portfolios, as of the date and year first written above.
2. Limitation of Liability. The term "Endeavor Series Trust" means and
refers to the Trustees from time to time serving under the Agreement and
Declaration of Trust dated November 18, 1988, as the same may subsequently
thereto have been, or subsequently hereto be, amended. It is expressly agreed
that the obligations of the Trust hereunder shall not be binding upon any of the
Trustees, shareholders, nominees, officers, agents or employees of the Trust,
personally, but bind only the trust property of the Trust, as provided in the
Agreement and Declaration of Trust. The execution and delivery of this
-1-
<PAGE>
Agreement have been authorized by the Trustees of the Trust and signed by an
authorized officer of the Trust, acting as such, and neither such authorization
by such Trustees nor such execution and delivery by such officer shall be deemed
to have been made by any of them individually or to impose any liability on any
of them personally, but shall bind only the trust property of the Trust as
provided in its Agreement and Declaration of Trust.
If the foregoing is acceptable to you, kindly indicate your acceptance
by signing and returning the enclosed copy of this Supplement.
Very truly yours,
ENDEAVOR SERIES TRUST
By:
-------------------------
Vincent J. McGuinness, Jr.
Title: President
---------------------
Accepted and Agreed to:
BOSTON SAFE DEPOSIT AND TRUST COMPANY
By:
----------------------------
Title: Senior Vice President
-------------------------
-2-
<PAGE>
AMENDMENT NO. 1 TO THE
AMENDED AND RESTATED ADMINISTRATION AGREEMENT
This Amendment No. 1 dated as of February, 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, and which Agreement was
further amended and restated by the parties on July 1, 1997;
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. 1
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
High Yield Fund
<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.
In addition the Company shall pay Investor Services Group the following fees for
servicing the High Yield Fund:
[TO BE INSERTED]
o Investor Services Group shall be entitled to collect all out-of-pocket fees
described in Schedule C to Amendment No. 4.
<PAGE>
DISTRIBUTION AGREEMENT
AGREEMENT made this day of , 1998, between Endeavor Series Trust, a
Massachusetts business trust, (the "Trust"), and Endeavor Group, a California
corporation (the "Distributor") each with offices at 2101 East Coast Highway,
Suite 300, Corona del Mar, California 92625.
WHEREAS, the Trust is a registered open-end management investment
company, which currently offers shares of its common stock in eleven series,
each as set forth on Schedule A hereto (the "Existing Funds"), and the Trust may
offer shares of one or more additional Funds in the future;
WHEREAS, the Trust was originally organized to act as the funding
vehicle for certain individual variable life insurance policies and individual
and group variable annuity contracts offered by PFL Life Insurance Company
("PFL") or life insurance companies affiliated with PFL through separate
accounts of such life insurance companies; and
WHEREAS, in the future, the Trust may also offer its shares to life
insurance companies unaffiliated with PFL (together with PFL and its affiliated
life insurance companies, the "Life Companies") as a funding vehicle for
variable life insurance policies and variable annuity contracts (together with
the variable life insurance policies and variable annuity contracts offered by
PFL and its affiliated life insurance companies, (collectively referred to
herein as "Variable Contracts"), and/or to qualified pension and retirement
plans (the "Qualified Plans"); and
WHEREAS, from time to time, the Trust may enter into sales agreements
with Life Companies that have or will establish one or more separate accounts to
offer Variable Contracts, pursuant to which one or more Funds of the Trust
serves as the underlying funding vehicle for such Variable Contracts; and, under
certain circumstances, may enter into sales agreements with the Qualified Plans;
and
WHEREAS, it is contemplated that, in addition to entering into sales
agreements with Life Companies and/or Qualified Plans, the Distributor shall
engage in certain promotional and sales efforts on behalf of the Trust, as
described in the Brokerage Enhancement Plan pursuant to Rule 12b-1 adopted by
the Trust.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. (a) The Trust proposes to issue and sell shares of common stock of
the Fund (the "Shares") to separate accounts of Life Companies and to the
Qualified Plans as may be permitted by applicable law and subject to the Trust's
obtaining any necessary regulatory approvals. The Trust hereby appoints the
Distributor as agent to sell the Shares and the Distributor hereby accepts such
appointment. The Shares will
-1-
<PAGE>
be distributed under such terms as are set by the Trust and will be sold to the
separate accounts and the Qualified Plans permitted to buy the Shares as
specified by the Trust's Board of Trustees.
(b) In the event that the Trust from time to time designates
one or more Funds in addition to the Existing Funds ("Additional Funds"), it
shall notify the Distributor. If the Distributor is willing to perform services
hereunder for the Additional Funds, it shall so notify the Trust. Thereafter,
the Trust and the Distributor shall mutually agree to amend Schedule A to this
Agreement in writing to add the Additional Funds and the Additional Funds shall
be subject to this Agreement, subject to the approval of the Board of Trustees
as set forth in Section 7.(a) below.
2. (a) The Distributor agrees that (i) all Shares sold by the
Distributor shall be sold at the net asset value as described in the Trust's
prospectus, and (ii) the Trust shall receive 100% of such net asset value.
(b) The Shares will be sold in accordance with any sales
agreements between the Trust and Life Companies and, where applicable, the Trust
and Qualified Plans. The Existing Funds and all Additional Funds subject to this
Agreement are referred to collectively as "Funds."
3. (a) All sales literature and advertisements used by the Distributor
in connection with sales of Shares shall be subject to approval by the Trust.
The Trust authorizes the Distributor, in connection with the sales or arranging
for the sale of Shares, to provide only such information and to make only such
statements or representations as are contained in the Trust's then-current
Prospectus or in sales literature or advertisements approved by the Trust or in
such financial and other statements which are furnished in writing to the
Distributor pursuant to the next paragraph. The Trust shall not be responsible
in any way for any information provided or statements or representations made by
the Distributor or its representatives or agents other than the information,
statements and representations described in the preceding sentence. The
Distributor shall review all materials submitted to it by Life Companies and
Qualified Plans that describe the Trust, the Shares or the Trust's investment
manager and investment advisers. The Distributor shall not be responsible for
any information provided or statements or representations made by Life Companies
or Qualified Plans, representatives or agents of Life Companies or Qualified
Plans, or any other persons or entities other than the Distributor's
representatives or agents.
(b) The Trust shall keep the Distributor fully informed with
regard to its affairs, shall furnish the Distributor with a certified copy of
all financial statements and a signed copy of each report prepared by its
independent certified public accountants, and shall cooperate fully in the
efforts of the Distributor to sell the Shares and in the performance by the
Distributor of all its duties under this Agreement.
4. (a) The Trust will pay or cause to be paid:
-2-
<PAGE>
(i) registration fees for registering its shares
under the Securities Act of 1933 (the "1933 Act") as
required;
(ii) the expenses, including counsel fees, of
preparing registration statements and such other
documents as the Trust believes are necessary for
registering the Shares with the Securities and
Exchange Commission (the "SEC") and such states as
are deemed necessary or appropriate;
(iii) expenses incident to preparing amendments to
registration statements of the Trust under the 1933
Act and the Investment Company Act of 1940, as
amended (the "1940 Act");
(iv) expenses for preparing and setting in type all
prospectuses and the expense of supplying them to the
then existing shareholders or beneficial owners of
Shares (including owners of Variable Contracts whose
Contracts use one or more Funds as their funding
vehicle); and
(v) expenses incident to the issuance of its Shares
such as the cost of stock certificates, if any, taxes
and fees of the transfer agent for establishing
shareholder record accounts and confirmations.
(b) The Distributor shall pay all of its own costs and
expenses connected with the offer and sale of Shares
("Distribution Expenses"), except that certain
Distribution Expenses may be reimbursed to the
Distributor as provided in Section 5 hereof.
5. (a) Pursuant to a Brokerage Enhancement Plan (the "Plan") adopted by
the Board of Trustees of the Trust in accordance with Section 12(b) of the 1940
Act, Rule 12b-1 and other rules and regulations promulgated thereunder, as the
same may be, from time to time, issued or amended, the Trust, on behalf of a
Fund that has approved the Plan pursuant to Section 5 thereof, may reimburse the
Distributor, for Distribution Expenses as described in Section 5(b) hereof.
Reimbursements shall be payable only from brokerage commissions paid by the Fund
in connection with its portfolio transactions which have been made available for
use by the Fund as described in the Plan. Reimbursements to the Distributor
shall be payable on a monthly basis. Such reimbursement may be made only for the
one year period commencing on the date hereof and for each twelve month period
(or portion thereof) thereafter, in which the Plan is in effect for that Fund.
(b) Distribution Expenses reimbursable hereunder shall
include, but not necessarily be limited to, the following costs:
-3-
<PAGE>
(i) printing and mailing of Trust prospectuses,
statements of additional information, any supplements
thereto and shareholder reports for existing and
prospective Variable Contract owners;
(ii) development, preparation, printing and mailing
of Trust advertisements, sale literature and other
promotional materials describing and/or relating to
the Funds and including materials intended for use
within the Life Company, or for broker-dealer only
use or retail use;
(iii) holding or participating in seminars and sales
meetings designed to promote the distribution of
Trust Shares;
(iv) marketing fees requested by broker-dealers who
sell Variable Contracts;
(v) obtaining information and providing explanations
to Variable Contract owners regarding Trust
investment objectives and policies and other
information about the Trust and the Funds, including
the performance of the Funds;
(vi) training sales personnel regarding sales of
Variable Contracts and underlying Shares of the
Trust;
(vii) compensating broker-dealers and/or their
registered representatives in connection with the
allocation of cash values and premiums of the
Variable Contracts to the Trust;
(viii) personal service and/or maintenance of
Variable Contract owner accounts with respect to
Trust Shares attributable to such accounts; and
(ix) financing any other activity that the Trust's
Board of Trustees determines is primarily intended to
result in the sale of Shares.
(c) The Distributor shall submit annual reimbursable
Distribution Expense budgets to the Board of Trustees of the Trust. As soon as
practicable after the end of each calendar quarter, the Distributor shall submit
to the Board of Trustees for ratification reports of Distribution Expenses
reimbursed as to each Fund for that quarter. The Board of Trustees will consider
each report at its next regular meeting after such report is submitted, and the
Distributor shall only retain those reimbursements that are approved by the
Board of Trustees, including a majority of the "Disinterested Trustees" (as that
term is defined in Section 7 hereof).
-4-
<PAGE>
6. (a) The Trust shall maintain a currently effective Registration
Statement on Form N-1A and shall file with the SEC such reports and other
documents as may be required under the 1933 Act and the 1940 Act or by the rule
and regulations of the SEC thereunder.
(b) The Trust represents and warrants that its Registration
Statement, post-effective amendments, Prospectus and Statement of Additional
Information (excluding statements based upon written information furnished by
the Distributor expressly for inclusion therein) shall not contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that all statements or information furnished to the Distributor, pursuant to
Section 3(b) hereof shall be true and correct in all material respects.
7. (a) This Agreement shall take effect on the date set forth above,
provided it has been approved by a vote of the majority of Trustees of the Trust
and those Trustees of the Trust who are not "interested persons" of the Trust
and who have no direct or indirect financial interest in the operation of the
Plan or this Agreement (the "Disinterested Trustees"), cast in person at a
meeting called for the purpose of voting on this Agreement. This Agreement shall
remain in full force and effect until , 1999, and may be continued for twelve
month periods (or portions thereof) thereafter; provided that such continuance
shall be specifically approved annually by a majority of the Board of Trustees
of the Trust and by a majority of the Disinterested Trustees. This Agreement may
be amended, with respect to any Fund, with the approval of a majority of the
Board of Trustees and by a majority of the Disinterested Trustees.
(b) This Agreement, with respect to any Fund, may be
terminated, at any time without payment of any penalty, by vote of a majority of
the Disinterested Trustees or by vote of a majority of the outstanding voting
securities of that Fund, or may be terminated by the Distributor, in either case
on not more than 60 days' written notice delivered personally by registered
mail, postage prepaid, to the other party.
(c) This Agreement shall automatically terminate in the event
of its assignment.
(d) The terms "interested persons," "assignment" and "vote of
a majority of the outstanding voting securities" as used herein shall have the
meanings given to them in the 1940 Act.
8. In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties ("disabling conduct") hereunder
on the part of the Distributor (and its officers, directors, agents, employees,
controlling persons, shareholders and any other person or entity affiliated with
the Distributor or retained by it to perform or assist in the performance of its
obligations under this Agreement) the Distributor shall not be subject to
liability to the Trust or to any shareholder of the Funds
-5-
<PAGE>
of the Trust for any act or omission in the course of, or connected with,
rendering services hereunder, or for any loss suffered by any of them in
connection with the matters to which this Agreement relates.
9. (a) The Trust shall indemnify and hold harmless the Distributor and
each person, if any, who controls the Distributor within the meaning of Section
15 of the Securities Act against any loss, liability, claim, damage or expense
(including the reasonable cost of investigating or defending any alleged loss,
liability, claim, damage or expense and reasonable counsel fees incurred in
connection therewith), which the Distributor or such controlling person may
incur under the Securities Act or under common law or otherwise, arising out of
or based upon any untrue statement, or alleged untrue statement, of a material
fact contained in the Registration Statement, as from time to time amended or
supplemented, any prospectus or annual or interim report to shareholders of the
Trust, or arising out of or based upon any omission, or alleged omission, to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished to the Trust in
connection therewith by or on behalf of the Distributor; provided, however, that
in no case (i) is the indemnity of the Trust in favor of the Distributor and any
such controlling persons to be deemed to protect such Distributor or any such
controlling persons thereof against any liability to the Trust or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of their duties or by reason of the reckless disregard of their
obligations and duties under this Agreement; or (ii) is the Trust to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Distributor or any such controlling persons, unless the
Distributor or such controlling persons, as the case may be, shall have notified
the Trust in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Trust of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Trust will be entitled to participate
at its own expense in the defense, or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if the Trust elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
or defendants in the suit. In the event the Trust elects to assume the defense
of any such suit and retain such counsel, the Distributor or such controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case the Trust does
not elect to assume the defense of any such suit, it will reimburse the
Distributor or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
The Trust shall promptly notify the
-6-
<PAGE>
Distributor of the commencement of any litigation or proceeding against it or
any of its officers or directors in connection with the issuance or sale of any
of the Shares.
(b) The Distributor shall indemnify and hold harmless the
Trust and each of its trustees and officers and each person, if any, who
controls the Trust against any loss, liability, claim, damage or expense
described in the foregoing indemnity contained in paragraph 4.1, but only with
respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Trust in writing by or on behalf of the
Distributor for use in connection with the Registration Statement, as from time
to time amended, or the annual or interim reports to shareholders. In case any
action shall be brought against the Trust or any persons so indemnified, in
respect of which indemnity may be sought against the Distributor, the
Distributor shall have the rights and duties given to the Trust, and the Trust
and each person so indemnified shall have the rights and duties given to the
Distributor by the provisions of paragraph 4.1.
10. This Agreement is made by the Trust, on behalf of each Fund,
pursuant to authority granted by the Board of Trustees, and the obligations
created hereby are not binding on any of the Trustees or shareholders of the
Trust individually, but bind only the property of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed by their duly authorized officers and under their respective
seals on the day and year first above written.
ENDEAVOR SERIES TRUST
Attest:
By:
Secretary James R. McInnis, President
ENDEAVOR GROUP
Attest:
By:
Secretary Vincent J. McGuinness,
Chief Executive Officer
-7-
<PAGE>
SCHEDULE A
As of May 1, 1998, the Distributor shall act as distributor for shares of the
following Funds of Endeavor Series Trust:
Endeavor Money Market Portfolio
Endeavor Managed Asset Allocation Portfolio
T. Rowe Price International Stock Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
Dreyfus Small Cap Value Portfolio
Dreyfus U.S. Government Securities Portfolio
Endeavor Value Equity Portfolio
Endeavor Opportunity Value Portfolio
Endeavor Enhanced Index Portfolio
Endeavor Select 50 Portfolio
Endeavor High Yield Portfolio
-1-
<PAGE>
