As filed with the Securities and Exchange Commission on February 22, 1999
Securities Act File No. 33-27352
Investment Company Act File No. 811-5780
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
Post-Effective Amendment No. 26 X
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REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No. 29
ENDEAVOR SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
2101 East Coast Highway, Suite 300
Corona del Mar, California 92625
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Are Code: (800) 854-8393
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Vincent J. McGuinness, Jr.
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President
Endeavor Series Trust
2101 East Coast Highway, Suite 300, Corona del Mar, California 92625
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(Name and Address of Agent for Service)
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Copies to:
Robert N. Hickey, Esq.
Sullivan & Worcester LLP
1025 Connecticut Avenue, N.W. Washington, D.C. 20036
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It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
on ____________ pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)(1)
on ____________ pursuant to paragraph (a)(1)
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<PAGE>
75 days after filing pursuant to paragraph (a)(2)
on ____________ pursuant to paragraph (a)(2) of
Rule 485
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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The Registrant has previously filed a declaration of indefinite registration of
shares of beneficial interest 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 ,
Endeavor Enhanced Index Portfolio, Endeavor Select 50 Portfolio, Endeavor High
Yield Portfolio and Endeavor Janus Growth 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 , Endeavor
Enhanced Index Portfolio, Endeavor Select 50 Portfolio and Endeavor High Yield
Portfolio for the fiscal year ended December 31, 1998 will be filed on or about
March 31, 1998. The Registrant did not sell shares of beneficial interest for
its Endeavor Janus Growth Portfolio during the fiscal year ended December 31,
1998 pursuant to such declaration and, therefore, will not file a Rule 24f-2
Notice for the fiscal year ended December 31, 1998 pursuant to Rule 24f-2(b) of
the 1940 Act.
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<PAGE>
ENDEAVOR SERIES TRUST
Cross Reference Sheet
Pursuant to Rule 495(a)
Part A
<TABLE>
<CAPTION>
Item Registration Statement
No. Caption in Prospectus
Caption
<S> <C> <C>
1. Front and Back Cover Front Cover; Back Cover
Pages
Risk/Return Summary: The Portfolios -
Investments, Risks and Investment Summary
2. Performance
3. Risk/Return Summary: Fee Not Applicable
Table
4. The
Portfolios -
Investment Investment Summary;
Objectives, Principal Additional Investment
Investment Strategies, Strategies
and Related Risks
5 Management's Discussion
of Fund Performance Not Applicable
.
6. Management, Organization Introduction -
and Capital Structure Understanding the Trust;
The
Portfolios -Management
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<PAGE>
Item Registration Statement
7. Shareholder Information Your Investment
8. Distribution Agreements Not Applicable
9. Financial Highlights
Financial
Highlights Information
PART B
Item Registration Statement Caption in Statement
No. Caption
of Additional
Information
10. Cover Page and Cover Page; Table of
Contents
Table of Contents
11. Fund Organization and
Capitalization of the
History Fund
12. Description of the Fund Investment Objectives and
and Its Investments and Policies; Investment
Risks Restrictions
13 Management of the Fund Management of the Fund
.
14 . Control Persons and
Principal Holders of
Securities Management of the Fund
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<PAGE>
Item Registration Statement Caption in Statement
15 . Investment Advisory and
Other Services
Investment Advisory
and Other Services
16. Brokerage Allocation and
Other Practices Portfolio Transactions
17 . Capital Stock and Other
Securities Organization and
Capitalization of the
Fund
18 . Purchase, Redemption and
Pricing of Shares Net Asset Value;
Redemption of Shares
19. Taxation Taxes
of the Fund
20. Underwriters Portfolio Transactions;
Management of the Fund
21 . Calculation of
Performance Data Performance Information
22 . 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.
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<PAGE>
[FRONT COVER]
ENDEAVOR
Series Trust
Endeavor Money Market Portfolio
T. Rowe Price International Stock Portfolio
Endeavor Value Equity Portfolio
Endeavor Opportunity Value Portfolio
Dreyfus Small Cap Value Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
Endeavor Enhanced Index Portfolio
Endeavor Select 50 Portfolio
Endeavor Janus Growth Portfolio
Dreyfus U.S. Government Securities Portfolio
Endeavor High Yield Portfolio
Endeavor Asset Allocation Portfolio
Prospectus
May 1, 1999
Like all securities, these securities have not been approved
or disapproved by the Securities and Exchange Commission, nor
has the Securities and Exchange
Commission passed upon the accuracy or adequacy of this
Prospectus. Any representation to the contrary is
a criminal offense.
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<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
INTRODUCTION......................................................................................................3
Understanding the Trust..................................................................................3
THE PORTFOLIOS....................................................................................................6
Investment Summary................................................................................................6
Investment Objectives, Investment Strategies, Risks and Past Performance for:
Endeavor Money Market Portfolio................................................................10
T. Rowe Price International Stock Portfolio....................................................13
Endeavor Value Equity Portfolio................................................................17
Endeavor Opportunity Value Portfolio...........................................................21
Dreyfus Small Cap Value Portfolio..............................................................25
T. Rowe Price Equity Income Portfolio..........................................................28
T. Rowe Price Growth Stock Portfolio...........................................................31
Endeavor Enhanced Index Portfolio.............................................................34
Endeavor Select 50 Portfolio...................................................................38
Endeavor Janus Growth Portfolio................................................................43
Dreyfus U.S. Government Securities Portfolio...................................................45
Endeavor High Yield Portfolio..................................................................49
Endeavor Asset Allocation Portfolio............................................................52
Additional Investment Strategies.................................................................................57
Management.......................................................................................................68
The Manager.............................................................................................68
The Advisers............................................................................................69
Brokerage Enhancement Plan..............................................................................76
Year 2000 Issue.........................................................................................77
Financial Highlights.............................................................................................78
YOUR INVESTMENT.................................................................................................109
Shareholder Information................................................................................109
Dividends, Distributions and Taxes.....................................................................109
Sales and Purchases of Shares..........................................................................109
GLOSSARY OF INVESTMENT TERMS....................................................................................111
FOR MORE INFORMATION............................................................................................117
</TABLE>
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INTRODUCTION
Understanding the Trust
Endeavor Series Trust (the "Trust") is an open-end management investment company
that offers a selection of thirteen managed investment portfolios or mutual
funds (the "Portfolios"). Each of these Portfolios has its own investment
objective designed to meet different investment goals. Please see the Investment
Summary section of this Prospectus for specific information on each Portfolio.
Certain terms are defined in the Glossary of Investment Terms in the back of
this Prospectus.
Investing Through a Variable Insurance Contract
Each Portfolio currently sells its shares only to separate accounts of
PFL Life Insurance Company and certain of its affiliates ("PFL") and, in the
future, may sell its shares to qualified pension and profit sharing plans. PFL
created the separate accounts to fund different insurance contracts
("Contracts") including:
o variable life insurance policies (scheduled premium, flexible premium
and single premium)
o variable annuity contracts
As a Contract owner, your premium payments are allocated to one or more of these
Portfolios in accordance with your Contract.
[SIDE BAR:
Please see the Contracts prospectus that accompanies this Prospectus for a
detailed explanation of your Contract.]
Understanding The Portfolios
After this Introduction you will find an Investment Summary for each Portfolio.
Each Investment Summary presents important facts about a Portfolio, including
information about its investment objective, principal investment strategy,
primary risks and past performance.
As the table below indicates, each of the thirteen Portfolios of the
Trust falls into one of four categories of funds. A particular type of Portfolio
may be more appropriate for you depending upon your investment needs.
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Type of Fund Portfolio
Money Market Endeavor Money Market Portfolio
International Equity T. Rowe Price International Stock Portfolio
Domestic Equity Endeavor Value Equity Portfolio
Endeavor Opportunity Value Portfolio
Dreyfus Small Cap Value Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
Endeavor Enhanced Index Portfolio
Endeavor Select 50 Portfolio
Endeavor Janus Growth Portfolio
Fixed Income Dreyfus U.S. Government Securities Portfolio
Endeavor High Yield Portfolio
Balanced Endeavor Asset Allocation Portfolio
(Equity and Fixed Income)
</TABLE>
Description of Types of Funds:
Money Market Funds
Money market funds try to maintain a share price of $1.00 while paying
income to shareholders. A stable share price protects your investment from loss.
Money market funds must follow strict rules as to the investment
quality, maturity, diversification and other features of the securities they
purchase and the average remaining maturity of the securities cannot be greater
than 90 days.
Equity Funds
Although they may involve more risk, historically, equity securities
such as common stocks have offered higher returns than bonds or other
investments over the long term.
Fixed Income Funds
Fixed income securities are securities that pay a specified rate of return.
Historically, fixed income funds are not as volatile as equity funds. These
funds may
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lend stability to a portfolio made up primarily of stocks. These funds, other
than those which invest substantially all of their assets in high yield, high
risk securities, may also be a good choice if you are a fairly cautious
investor.
Balanced Funds
Balanced funds are generally "middle-of-the-road" investments that seek
to provide some combination of growth, income, and conservation of capital by
investing in a mix of stocks, bonds, and/or money market instruments. Because
the prices of stocks and bonds do not tend to move in lockstep, balanced funds
are able to use rewards from one type of investment to help offset the risks
from another.
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THE PORTFOLIOS
Investment Summary
Each Portfolio's summary discusses the following :
o Investment Objective
What is the Portfolio's investment goal?
o Principal Investment Strategy
How does the Portfolio attempt to achieve its investment goal?
What types of investments does it contain? What style of
investing and investment philosophy does it follow?
o Primary Risks
What are the specific risks of investing in the Portfolio?
o Past Performance
How well has the Portfolio performed over time?
In addition to its principal investment strategy, each Portfolio may invest in
various types of securities and engage in various investment techniques and
practices which are not the principal focus of the Portfolio and therefore are
not described in this section of the Prospectus. These other securities and
investment techniques and practices in which a Portfolio may engage, together
with their risks, are briefly discussed in "Additional Investment Strategies" in
this Prospectus.
The Statement of Additional Information provides more detailed information
regarding the various types of securities that a Portfolio may purchase and
certain investment techniques and practices of its investment adviser. For
details about how to obtain a copy of the Statement of Additional Information
and other reports and information, see the back cover of this Prospectus.
The section below entitled "Primary Risks of Investing in the Portfolios" lists
some of the factors that may affect the value of a Portfolio's investments.
Primary Risks of Investing in the Portfolios
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[SIDE BAR: Each Portfolio in this Prospectus is a mutual fund: a pooled
investment that is professionally managed and that gives you the opportunity to
participate in financial markets. Each Portfolio strives to reach its stated
investment objective, which can be changed without shareholder approval. As with
all mutual funds, there is no guarantee that a Portfolio will achieve its
investment objective. You could lose money investing in a Portfolio, but you
also have the potential to make money.]
One or more of the following primary risks may apply to your Portfolio. Please
see the Investment Summary for your particular Portfolio to determine which
risks apply and for a discussion of other risks that may apply to the Portfolio.
Market Risk
A Portfolio's share price can fall because of weakness in the broad market, a
particular industry, or specific holdings. The market as a whole can decline for
many reasons, including disappointing corporate earnings, adverse political or
economic developments here or abroad, changes in investor psychology or heavy
institutional selling. The prospects for an industry or a company may
deteriorate. In addition, an assessment by a Portfolio's investment adviser of
particular companies may prove incorrect, resulting in losses or poor
performance by those holdings, even in a rising market.
Interest Rate Risk
The values of debt securities are subject to change when prevailing interest
rates change. When interest rates go up, the value of debt securities tends to
fall. If your Portfolio invests a significant portion of its assets in debt
securities and interest rates rise, then the value of your investment may
decline. Alternatively, when interest rates go down, the value of debt
securities may rise.
Interest rate risk will affect the price of a fixed income security more if the
security has a longer maturity because changes in interest rates are
increasingly difficult to predict over longer periods of time. Fixed income
securities with longer maturities will therefore be more volatile than other
fixed income securities with shorter maturities. Conversely, fixed income
securities with shorter maturities will be less volatile but generally provide
lower returns than fixed income securities with longer maturities. The average
maturity of a Portfolio's fixed income investments will affect the volatility of
the Portfolio's share price.
[SIDE BAR:
A fixed income security's term to maturity is the time until a fixed
income security provides its final payment.]
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Credit Risk
The value of debt securities is directly affected by an issuer's ability to pay
principal and interest on time. If your Portfolio invests in debt securities,
the value of your investment may be adversely affected when an issuer fails to
pay an obligation on a timely basis.
High Yield Debt Security Risk
High yield debt securities, or junk bonds, are securities which are rated below
"investment grade" or are not rated, but are of equivalent quality. High yield
debt securities range from those for which the prospect for repayment of
principal and interest is predominantly speculative to those which are currently
in default on principal or interest payments. A Portfolio with high yield debt
securities may be more susceptible to credit risk and market risk than a
Portfolio that invests only in higher quality debt securities because these
lower-rated debt securities are less secure financially and more sensitive to
downturns in the economy. In addition, the secondary market for such securities
may not be as liquid as that for more highly rated debt securities. As a result,
a Portfolio's investment adviser may find it more difficult to sell these
securities or may have to sell them at lower prices.
You should understand that high yield securities are not generally meant for
short-term investing. When a Portfolio invests in high yield securities it
generally seeks to receive a correspondingly higher return to compensate it for
the additional credit risk and market risk it has assumed.
Foreign Investment Risk
Investments in foreign securities involve risks relating to political, social
and economic developments abroad, as well as risks resulting from the
differences between the regulations to which U.S. and foreign issuers and
markets are subject:
o These risks may include the seizure by the government of
company assets, excessive taxation, withholding taxes on
dividends and interest, limitations on the use or transfer of
portfolio assets, and political or social instability.
o Enforcing legal rights may be difficult, costly and slow in
foreign countries, and there may be special problems enforcing
claims against foreign governments.
o Foreign companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there
may be less public information about their operations.
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o Foreign markets may be less liquid and more volatile than U.S.
markets.
o Foreign securities often trade in currencies other than the U.S.
dollar, and a Portfolio may directly hold foreign currencies and
purchase and sell foreign currencies. Changes in currency
exchange rates will affect a Portfolio's net asset value, the
value of dividends and interest earned, and gains and losses
realized on the sale of securities. An increase in the strength
of the U.S. dollar relative to these other currencies may cause
the value of a Portfolio to decline. Certain foreign currencies
may be particularly volatile, and foreign governments may
intervene in the currency markets, causing a decline in value or
liquidity of a Portfolio's foreign currency or securities
holdings.
o Costs of buying, selling and holding foreign securities,
including brokerage, tax and custody costs, may be higher than
those involved in domestic transactions.
A NOTE ON FEES
As an investor in any of the Portfolios, you will incur various
operating costs, including management expenses. You also will incur fees
associated with the Contracts which you purchase. Detailed information about the
cost of investing in a Portfolio is presented in the "Annuity Policy Fee Table"
section of the accompanying prospectus for the Contracts through which Portfolio
shares are offered to you.
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[Left side:]
Endeavor Money Market Portfolio
[SIDE BAR:
This Portfolio may be appropriate for you if you seek:
o a conservative investment
o current income
o preservation of capital]
Investment Objective
To provide current income, preservation of capital and liquidity
through investment in short-term money market securities.
Principal Investment Strategy
The Portfolio invests in the following types of high quality money
market securities that present minimal credit risks:
o U.S. government securities, including Treasuries and bonds and
notes issued by government agencies such as the Federal Home
Loan Bank, Government National Mortgage Association (GNMA or
"Ginnie Mae"), Federal National Mortgage Association (FNMA or
"Fannie Mae") and Student Loan Marketing Association (SLMA or
"Sallie Mae").
o Certificates of deposit, bankers' acceptances and other
obligations issued or guaranteed by bank holding companies in the
U.S. and their subsidiaries.
o U.S. dollar denominated obligations ("Eurodollar obligations") of
bank holding companies in the U.S., their subsidiaries and their
foreign branches or of the World Bank.
o Commercial paper and other short-term obligations issued by U.S.
and foreign corporations.
o Repurchase agreements
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[Right Side:]
Primary Risks:
The value of your investment in the Portfolio may be affected by one or
more of the following risks, any of which could cause the Portfolio's return to
decrease or could cause the Portfolio's yield to fluctuate:
o Interest rate risk
o Credit risk
In addition, an investment in the Portfolio is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Portfolio seeks to preserve the value of your investment at
$1 per share, it is still possible to lose money by investing in the Portfolio.
Past Performance:
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. As with all mutual
funds, past returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (4/8/91) and indicates how it has varied from
year to year. Note that these results do not include the effect of Contract
charges. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
Year-by-Year Total Return as of 12/31 of Each Year
2.90% 2.19% 3.41% 5.54% 4.91% 5.07% 4.96%
92 93 94 95 96 97 98
High Quarter: 2nd - 1995 +1.53%
Low Quarter: 1st - 1993 +0.53%
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The table below sets forth the Portfolio's average annual compounded
total returns for the 1-year period, 5-year period and since inception through
12/31/98. These figures do not include the effect of Contract charges.
Average Annual Total Return as of 12/31/98
-------------------------------------
Since
1 Year 5 Year Inception
------ ------ ---------
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4.96% 4.77% 4.24%
[SIDE BAR:
Portfolio Management:
o Morgan Stanley Asset Management
see page
o For financial highlights see page __]
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[Left Side:]
T. Rowe Price International Stock Portfolio
[SIDE BAR:
This Portfolio may be appropriate for you if you seek:
o to diversify your domestic stock portfolio
by adding foreign investments and are
comfortable with the risks accompanying
these investments
o long-term growth of capital]
Investment Objective
To provide long-term growth of capital through investments primarily in the
common stocks of established non-U.S. companies.
Principal Investment Strategy
The Portfolio's investment adviser expects to invest substantially all
of the Portfolio's assets in established companies located outside the United
States and to diversify broadly among developed and emerging countries
throughout the world. Stock selection reflects a growth style. The investment
adviser may purchase the equity securities (primarily common stocks) of
companies of any size, but the focus will typically be on large- and, to a
lesser extent, medium-sized companies.
The investment adviser employs in-depth fundamental research in an
effort to identify companies capable of achieving and sustaining above-average,
long-term earnings growth. The investment adviser seeks to purchase such stocks
at reasonable prices in relation to present or anticipated earnings, cash flow,
or book value, and valuation factors, such as price/earnings and price/cash flow
ratios. Valuation factors often influence the investment adviser's allocations
among large- or mid-cap companies.
While the investment adviser invests with an awareness of the global
economic backdrop and its outlook for individual countries, bottom-up stock
selection is the focus of decision-making. Country allocation is driven largely
by stock selection, though investments may be limited in markets that appear to
have poor overall prospects.
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[SIDE BAR:
When investment advisers use a "bottom- up" approach, they look
primarily at individual companies against the context of broader market or
country factors.]
[SIDE BAR:
Market capitalization is the most commonly used measure of the size and
value of a company. It is the total value of a company's stock in the
marketplace and is computed by multiplying the current market price of a share
of the company's stock by the total number of its shares outstanding. Generally,
large cap companies have market capitalizations in excess of $5 billion; mid-cap
companies have market capitalizations ranging from $1.5 billion to $5 billion;
and small cap companies have market capitalizations ranging from $150 million to
$1.5 billion.]
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[Right Side:]
Primary Risks:
The value of your investment in the Portfolio could be affected by one
or more of the following risks which could cause the Portfolio's return or the
price of its shares to decrease:
o Market risk
o Foreign investment risk
In addition, investments in emerging markets include all of the risks
of investments in foreign securities and are subject to abrupt and severe price
declines. The economic and political structures of developing nations, in most
cases, do not compare favorably with the U.S. or other developed countries in
terms of wealth and stability, and their financial markets often lack liquidity.
Such countries may have relatively unstable governments, immature economic
structures, national policies restricting investments by foreigners and
economies based on only a few industries. For these reasons, all of the risks of
investing in foreign securities are heightened by investing in emerging markets
countries. The markets of developing countries have been more volatile than the
markets of developed countries with more mature economies. These markets often
have provided significantly higher or lower rates of return than developed
markets, and significantly greater risks, to investors.
Past Performance
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. As with all mutual
funds, past returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (4/8/91) and indicates how it has varied from
year to year. Note that these results do not include the effect of Contract
charges. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
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Year-by-Year Total Return as of 12/31 of Each Year
(3.61)% 18.48% (5.67)% 10.37% 15.23% 2.54% 15.44%
92 93 94 95 96 97 98
High Quarter: _________ _________%
Low Quarter: _________ _________%
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period, 5-year period and from inception through
12/31/98 with the MSCI EAFE Index, a widely recognized index measuring the broad
market performance of equity securities throughout Europe, Australia and the Far
East and with the Lipper VA International Index. These figures do not include
the effect of Contract charges.
Average Annual Total Return as of 12/31/98
-------------------------------------
Since
1 Year 5 Year Inception
--------------------------------------
Portfolio 15.44% 7.28% 7.16%
MSCI EAFE Index _____% _____% _____%
Lipper VA International _____% _____% _____%
Index
[SIDE BAR:
Portfolio Management
o Rowe Price-Fleming International, Inc.
see page
o For financial highlights see page __]
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[Left Side:]
Endeavor Value Equity Portfolio
[SIDE BAR:
This Portfolio may be appropriate for you if you seek:
o a relatively conservative equity investment
o long-term growth of capital]
Investment Objective
To provide long-term capital growth through investment in securities of
"large cap" companies that are believed by the investment adviser to be
undervalued in the marketplace.
Principal Investment Strategy
The Portfolio invests mainly in equity securities (at least 65% of its
total assets under normal market conditions) of U.S. and foreign issuers that
the investment adviser believes are undervalued in the marketplace. Most of the
Portfolio's investments in equity securities will consist of common stock.
Although there is no limit on foreign securities, the Portfolio's investment in
foreign securities will normally not exceed 20% of its total assets.
[SIDE BAR:
The Portfolio can also buy debt securities for liquidity and cash
management purposes, such as money market instruments. Normally, such
investments will not exceed approximately 20% of the Portfolio's total assets.]
In selecting securities for purchase or sale by the Portfolio, the
Portfolio's investment adviser uses a "value" approach to investing, and
searches for securities of companies it believes to be undervalued in the
marketplace, in relation to factors such as a company's assets, earnings, growth
potential and cash flows. While this process and the inter-relationship of the
factors used may change over time and its implementation may vary in particular
cases, in general the selection process involves the following techniques:
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o A bottom-up analytical approach using fundamental research to
evaluate a company's characteristics, financial results and
management.
o Selection of securities of companies believed to be
undervalued and having a high return on capital, strong
management committed to shareholder value and positive cash
flows.
o Ongoing monitoring of issuers for fundamental changes in the
company that might alter the investment adviser's initial
expectations about the security.
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[Right Side:]
Primary Risks:
The value of your investment in the Portfolio may be affected by one or
more of the following risks, any of which could cause the Portfolio's return or
the price of its shares to decrease:
o Market risk
o Credit risk
o Interest rate risk
o Foreign investment risk
The Portfolio's value approach also carries the risk that the market
will not recognize a security's inherent value for a long time, or that a stock
judged to be undervalued may actually be appropriately priced.
Past Performance:
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. As with all mutual
funds, past returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (5/27/93), and indicates how it has varied
from year to year. Note that these results do not include the effect of Contract
charges. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
Year-by-Year Total Return as of 12/31 of Each Year
4.09% 34.59% 23.84% 24.81% 7.56%
94 95 96 97 98
High Quarter: 4th - 1998 +14.89%
Low Quarter: 3rd - 1998 -15.72%
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The table below compares the Portfolio's average annual compounded
total returns for the 1-year period, 5-year period and since inception through
12/31/98 with the S&P 500 Index, a widely recognized unmanaged index that
measures the stock performance of 500 large and medium-sized publicly traded
companies, and is often used to indicate the performance of the overall stock
market, and with the Lipper VA Capital Appreciation Index. These figures do not
include the effect of Contract charges.
Average Annual Total Return as of 12/31/98
-------------------------------------
Since
1 Year 5 Year Inception
------- ------ ---------
-------------------------------------
Portfolio 7.56% 18.41% 16.88%
S&P 500 Index 28.60% 19.46% 22.38%*
Lipper VA Capital
Appreciation
Index 21.35% 16.02% 15.95%*
* From 5/31/93
[SIDE BAR:
Portfolio Management
o OpCap Advisors
see page
o For financial highlights see page __]
-20-
<PAGE>
[Left Side:]
Endeavor Opportunity Value Portfolio
[SIDE BAR:
This Portfolio may be appropriate for you if you seek:
o growth of capital over the long term and are willing to assume
the risk of short-term share price fluctuations]
Investment Objective
To seek growth of capital.
Principal Investment Strategy
The Portfolio can invest in a variety of equity and debt securities.
Under normal conditions, the Portfolio normally invests mainly in equity
securities, primarily common stocks, but also securities convertible into common
stocks, of U.S. and foreign issuers that the Portfolio's investment adviser
believes are undervalued in the marketplace. The Portfolio can invest in equity
securities without limit. Although there is no limit on foreign securities, the
Portfolio's investments in foreign securities will normally not exceed 35% of
its total assets.
The Portfolio does not limit its investments in equity securities to
issuers having a market capitalization of a specified size or range, and
therefore may invest in securities of small-, mid- and large-capitalization
issuers. Normally, most of the Portfolio's equity investments will be in the
securities of large-capitalization issuers. At times, the Portfolio may focus
its equity investments in securities of one or more capitalization ranges, based
upon the investment adviser's judgment of where are the best market
opportunities to seek the Portfolio's objective.
In selecting securities for purchase or sale by the Portfolio, the
investment adviser uses a "value" approach to investing, and searches for
securities of companies believed to be undervalued in the market place, in
relation to factors such as a company's assets, earnings, growth potential and
cash flows. While this process and the inter-relationship of the factors used
may change over time and its implementation
-21-
<PAGE>
may vary in particular cases, in general the selection process includes the
following techniques:
o A "bottom up" analytical approach using fundamental research
to evaluate a company's characteristics, financial results and
management.
o Selection of securities of companies believed to be
undervalued and having a high return on capital, strong
management committed to shareholder value and positive cash
flows.
o Ongoing monitoring of issuers for fundamental changes in the
company that might alter the investment adviser's initial
expectations about the security.
The investment adviser allocates the Portfolio's investment among
equity and debt securities after assessing the relative values of these
different types of investments under prevailing market conditions. The Portfolio
might hold stocks, bonds and money market instruments in different combinations
at different times. The investment adviser might buy bonds and other fixed
income securities, instead of stocks, when it believes that:
o common stocks in general appear to be overvalued,
o debt securities present meaningful capital growth opportunities
relative to common stocks, or
o pending investment in other securities with capital growth
opportunities
[SIDE BAR:
Although current income is not an objective of the Portfolio, the
Portfolio can invest up to 100% of its assets in bonds and other debt
securities. Most of the Portfolio's investments in debt securities will be in
money market obligations, securities issued or guaranteed by the U.S.
government, federal agencies and government- sponsored entities and short-term
debt obligations of U.S. and foreign issuers.]
-22-
<PAGE>
[Right Side:]
Primary Risks:
The value of your investment in the Portfolio may be affected by one or
more of the following risks, any of which could cause the Portfolio's return or
the price of its shares to decrease:
o Market risk
o Interest rate risk
o Credit risk
o Foreign investment risk
The Portfolio's value approach also carries the risk that the market
will not recognize a security's inherent value for a long time, or that a stock
judged to be undervalued may actually be appropriately priced.
Past Performance:
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. As with all mutual
funds, past returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (11/18/96) and indicates how it has varied
from year to year. Note that these results do not include the effect of Contract
charges. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
Year-by-Year Total Return as of 12/31 of Each Year
16.81% 5.18%
97 98
High Quarter: 4th - 1998 +11.60%
Low Quarter: 3rd - 1998 -13.80%
-23-
<PAGE>
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period and since inception through 12/31/98 with
the S&P 500 Index, a widely recognized index that measures the stock performance
of 500 large and medium-sized publicly traded companies and is often used to
indicate the performance of the overall stock market and with the Lipper VA
Flexible Portfolio Index. These figures do not include the effect of Contract
charges.
Average Annual Total Return as of 12/31/98
-------------------------------------
Since
1 Year Inception
-------------------------------------
Portfolio 5.18% 16.52%
S&P 500 Index 28.60% 28.36%*
Lipper VA Flexible
Portfolio Index 14.40% 14.81%*
* From 11/30/96
[SIDE BAR:
Portfolio Management
o OpCap Advisors
see page
o For financial highlights
see page __]
-24-
<PAGE>
[Left Side:]
Dreyfus Small Cap Value Portfolio
[SIDE BAR:
This Portfolio may be appropriate for you if you seek:
o long-term growth of capital
o a less conservative investment with greater risk and reward
potential than a portfolio investing in large-capitalization
companies]
Investment Objective
To seek capital growth by investing in companies with a
median-capitalization of approximately $750 million, with at least 75% of the
Portfolio's investments in companies with capitalizations between $150 million
and $1.5 billion.
Principal Investment Strategy
The Portfolio normally invests in "value" companies. The investment
adviser uses its own research and computer models to identify by various
measures those companies that appear to be underpriced, but have good prospects
for capital growth and dividend growth.
In selecting investments, the investment adviser generally favors
companies with the following:
o relatively low price-to-book ratios
o low price to earnings ratios
o higher-than-average dividend payments in relation to price
Because a company could remain undervalued for years, value investors
search for factors that could trigger a rise in price, including new products or
markets, opportunities for greater market share and more effective management.
Most of the Portfolio's assets will be invested in equity securities,
primarily common stocks of U.S. issuers. Normally, the Portfolio will not invest
more than 20% of its total assets in foreign securities.
-25-
<PAGE>
[Right side:]
Primary Risks:
The value of your investment in the Portfolio may be affected by one or
more of the following risks, any of which could cause the Portfolio's return or
the price of its shares to decrease:
o Market risk
o Foreign investment risk
The Portfolio's value approach also carries the risk that the market
will not recognize a security's inherent value for a long time, or that a stock
judged to be undervalued may actually be appropriately priced.
The Portfolio's focus on small-cap stocks may expose shareholders to
additional risks. Small companies typically have more limited product lines,
markets and financial resources than larger companies, and their securities may
trade less frequently and in more limited volume than those of larger, more
mature companies. In addition, at times the market may favor or disfavor
securities of issuers of a particular capitalization range, and securities of
small capitalization issuers may be subject to greater price volatility in
general than securities of larger companies. As a result, small-cap stocks --
and therefore, the Portfolio's shares -- may fluctuate significantly more in
value than larger-cap stocks and mutual funds that focus solely on them.
Past Performance
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. As with all mutual
funds, past returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (5/4/93) and indicates how it has varied from
year to year. Note that these results do not include the effect of Contract
charges. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
-26-
<PAGE>
Year-by-Year Total Return as of 12/31 of Each Year
(1.79)% 14.05% 25.63% 25.56% (2.18)%
94 95 96 97 98
High Quarter: 4th - 1998 +27.96%
Low Quarter: 3rd - 1998 -27.73%
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period, 5-year period and since inception through
12/31/98 with the Russell 2000 Index, a widely recognized unmanaged index that
measures small company stock performance and with the Lipper VA Small-Cap Index.
These figures do not include the effect of Contract charges.
Average Annual Total Return as of 12/31/98
-------------------------------------
Since
1 Year 5 Year Inception
-------- ------ ---------
--------------------------------------------
Portfolio (2.18)% 11.56% 12.33%
Russell 2000 Index (2.55)% 11.58% 13.53%*
Lipper VA Small-Cap
Index 2.56% 10.96%% 12.43%*
From 4/30/93
[SIDE BAR:
Portfolio Management:
o The Dreyfus Corporation
see page
o For financial highlights
see page __]
-27-
<PAGE>
[Left side:]
T. Rowe Price Equity Income Portfolio
[SIDE BAR:
This Portfolio may be appropriate for you if you seek:
o a relatively conservative equity investment
o substantial dividend income along with long-term capital growth]
Investment Objective
To provide substantial dividend income as well as long-term growth of capital by
primarily investing in the dividend-paying common stocks of established
companies.
Principal Investment Strategy
The Portfolio's investment adviser primarily invests in common stocks of
well-established companies paying above-average dividends.
The investment adviser typically employs a "value" approach in selecting
investments. The investment adviser's in-house research team seeks companies
that appear to be undervalued by various measures and may be temporarily out of
favor, but have good prospects for capital appreciation and dividend growth.
In selecting investments, the investment adviser generally favors companies with
the following:
o An established operating history
o Above-average dividend yield relative to the S&P 500 Index o Low
price-to-earnings ratio relative to the S&P 500 Index o A sound balance sheet
and other positive financial characteristics
o Low stock price relative to a company's underlying value as measured by
assets, cash flow or business franchises
Most of the Portfolio's assets will be invested in U.S. common stocks. However,
the Portfolio may also invest in foreign securities (up to 25% of total assets)
and other securities, including debt securities, in keeping with its investment
objective.
-28-
<PAGE>
[Right side:]
Primary Risks:
The value of your investment in the Portfolio may be affected by one or more of
the following risks, any of which could cause the Portfolio's return or the
price of its shares to decrease or could cause the Portfolio's yield to
fluctuate:
o Market risk
o Foreign investment risk
The Portfolio's value approach also carries the risks that the market
will not recognize a security's intrinsic value for a long time, or that a stock
judged to be undervalued may actually be appropriately priced. In addition, the
Portfolio's emphasis on stocks of established companies paying high dividends
and its potential investments in fixed income securities may limit its potential
for appreciation in a broad market advance.
Past Performance
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume the reinvestment of dividends and distributions. As with all
mutual funds, past returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (1/3/95) and indicates how it has varied from
year to year. Note that these results do not include the effect of Contract
charges. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
Year-by-Year Total Return as of 12/31 of Each Year
30.50% 19.88% 28.27% 8.81%
95 96 97 98
High Quarter: 2nd - 1997 +11.25%
Low Quarter: 3rd - 1998 -7.53%
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period and since inception through 12/31/98 with
the S&P 500
-29-
<PAGE>
Index, a widely recognized unmanaged index of stock performance of 500 large and
medium-sized publicly traded companies and is often used to indicate the
performance of the overall stock market, and with the Lipper VA Equity Income
Index. These figures do not include the effect of Contract charges.
Average Annual Total Return as of 12/31/98
-------------------------------------
Since
1 Year Inception
-------------------------------------
Portfolio 8.81% 21.59%
S&P 500 Index 28.60% 19.44%*
Lipper VA Equity Income Index 11.05% 12.95%*
* From 12/31/95
[SIDE BAR:
Portfolio management:
o T. Rowe Price Associates, Inc.
see page
o For financial highlights
see page __]
-30-
<PAGE>
[Left Side:]
T. Rowe Price Growth Stock Portfolio
[SIDE BAR:
This Portfolio may be appropriate for you if you seek:
o a moderate risk investment
o long-term growth of capital]
Principal Investment Objective
To provide long-term capital growth and, secondarily, increasing
dividend income through investments in the common stocks of well-established
growth companies.
Principal Investment Strategy
The Portfolio invests primarily in the common stocks of a diversified
group of growth companies. The investment adviser normally (but not always)
seeks investments where dividends are expected to rise over time as earnings
increase. The investment adviser generally looks for companies with an
above-average rate of earnings growth and a lucrative niche in the economy that
gives them the ability to sustain earnings momentum even during times of slow
economic growth. As a growth investor, the investment adviser believes that when
a company's earnings grow faster than both inflation and the overall economy,
the market will eventually reward it with a higher stock price.
Most of the Portfolio's assets will be invested in U.S. common stocks.
The investment adviser may also invest in foreign securities (up to 30% of its
total assets).
-31-
<PAGE>
[Right side:]
Primary Investment Risks:
The value of your investment in the Portfolio may be affected by one or
more of the following risks, any of which could cause the Portfolio's return or
the price of its shares to decrease:
o Market risk
o Foreign investment risk
In addition, growth stocks can be volatile for several reasons. Since
they usually invest a high portion of earnings in their businesses, they may
lack the dividends of value stocks that can cushion stock prices in a falling
market. Also, earnings disappointments often lead to sharply falling prices
because investors buy growth stocks in anticipation of superior earnings growth.
Past Performance
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. As with all mutual
funds, past returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (1/3/95) and indicates how it has varied from
year to year. Note that these results do not include the effect of Contract
charges. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
Year-by-Year Total Return as of 12/31 of Each Year
37.20% 20.77% 28.57% 28.67%
95 96 97 98
High Quarter: 4th - 1998 +23.37%
Low Quarter: 3rd - 1998 -11.13%
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period and since inception through 12/31/98 with
the S&P 500 Index, a widely recognized unmanaged index that measures the stock
performance of 500 large and medium-sized publicly traded companies and is often
used to indicate
-32-
<PAGE>
the performance of the overall stock market, and with the Lipper VA Growth
Index. These figures do not include the effect of Contract charges.
Average Annual Total Return as of 12/31/98
-------------------------------------
Since
1 Year Inception
-------------------------------------
Portfolio 28.67% 28.72%
S&P 500 Index 28.60% 28.72%*
Lipper VA Growth Index 23.88% 24.69%*
* From 12/31/94
[SIDE BAR:
Portfolio Management
o T. Rowe Price Associates, Inc.
see page
o For financial highlights see page __]
-33-
<PAGE>
[Left Side:]
Endeavor Enhanced Index Portfolio
[SIDE BAR:
This Portfolio may be appropriate for you if you seek:
o a slightly higher return than the S&P 500 Index
with a comparable level of risk]
Investment Objective
To earn a total return modestly in excess of the total return
performance of the S&P 500 Index (including the reinvestment of dividends) while
maintaining a volatility of return similar to the S&P 500 Index.
Principal Investment Strategy
The Portfolio invests primarily in large- and medium-capitalization
U.S. companies but may invest in foreign companies included in the S&P 500
Index. Industry by industry, the Portfolio's weightings are similar to those of
the S&P 500 Index. The Portfolio does not look to overweight or underweight
industries. Holdings by industry sector will normally approximate those of the
S&P 500 Index.
[SIDE BAR:
The S&P 500 Index is a widely recognized unmanaged index that measures the stock
performance of 500 large and medium-sized publicly traded companies and is often
used to indicate the performance of the overall stock market.]
Within each industry, the Portfolio's investment adviser modestly
overweights stocks that are ranked as undervalued or fairly valued while
modestly underweighting or not holding stocks that appear overvalued. The
investment adviser employs a three- step process in valuing stocks:
o Research - The investment adviser takes an in-depth look at
company prospects over a relatively long period - often as
much as five years -- rather than focusing on near-term
expectations. The team of approximately 25 analysts with an
average of 12 years of experience
-34-
<PAGE>
follows over 900 large and medium-sized U.S. companies. The
research goal is to provide insight into a company's real growth
potential.
o Valuation - The research findings allow the investment adviser
to rank the companies in each industry group according to
their relative value. The greater a company's estimated worth
compared to the current market price of its stock, the more
undervalued the company. The valuation rankings are produced
with the help of a variety of models that quantify the
research team's findings.
o Stock Selection - The Portfolio's investment adviser uses
research and valuation rankings as a basis for choosing which
stocks to buy and sell. In general, the investment adviser
buys approximately 300 stocks that are identified as
undervalued and considers selling them when they appear
overvalued. Along with attractive valuation, the investment
adviser often considers a number of other criteria, including:
o catalysts that could trigger a rise in a stock's price
o high potential reward compared to potential risk
o temporary mispricings caused by market overreactions
The Portfolio invests at least 65% of its assets in equity securities,
primarily common stocks. During ordinary market conditions, the Portfolio's
investment adviser will keep the Portfolio as fully invested as practicable in
equity securities. The Portfolio may invest up to 35% of its assets in
short-term fixed income instruments including:
o U.S. government securities
o Bankers' acceptances, commercial paper,
certificates of deposit and Eurodollar
obligations issued or guaranteed by bank
holding companies in the U.S., their
subsidiaries and their foreign branches or
of the World Bank
o Commercial paper and other short-term obligations of,
and variable amount master demand notes and variable
rate notes issued by U.S. and foreign corporations
o Repurchase agreements
o Short-term bonds and notes with remaining maturities of
13 months or less
-35-
<PAGE>
[Right Side:]
Primary Risks:
The value of your investment in the Portfolio could be affected by one
or more of the following risks which could cause the Portfolio's return or the
price of its shares to decrease:
o Market risk
o Interest rate risk
o Credit risk
Past Performance:
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. As with all mutual
funds, past returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (5/2/97). Note that these results do not
include the effect of Contract charges. The Portfolio can also experience
short-term performance swings as indicated in the high and low quarter
information at the bottom of the chart.
Total Return as of 12/31
31.39%
98
High Quarter: 4th - 1998 +22.37%
Low Quarter: 3rd - 1998 -9.63%
-36-
<PAGE>
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period and since inception through 12/31/98 with
the S&P 500 Index and with the Lipper VA Growth & Income Index. These figures do
not include the effect of Contract charges.
Average Annual Total Return as of 12/31/98
-------------------------------------
Since
1 Year Inception
-------------------------------------
Portfolio 31.39% 33.27%
S&P 500 Index 28.60% 31.31%*
Lipper VA Growth &
Income Index 16.80% 22.20%*
* From 4/30/97
[SIDE BAR:
Portfolio management:
o J.P. Morgan Investment Management Inc.
see page
o For financial highlights see page __]
-37-
<PAGE>
[Left Side:]
Endeavor Select 50 Portfolio
[SIDE BAR:
This Portfolio may be appropriate for you if you seek:
o long-term growth of capital through concentrated
investments utilizing five different investment styles
Investment Objective
To provide long-term capital growth by investing in at least 50
different equity securities of companies of all sizes throughout the world.
Principal Investment Strategy
Five of the investment adviser's portfolio management teams each
selects approximately 10 equity securities, primarily common stocks, that they
believe may offer the greatest capital growth potential from their respective
areas of expertise or disciplines. The result is a concentrated portfolio of at
least 50 equity securities that is allocated approximately equally among the
investment adviser's five equity disciplines and is well diversified with
typically 60% allotted to U.S. securities of all capitalization ranges and 40%
allotted to foreign securities. The five investment disciplines currently are:
[SIDE BAR:
The Portfolio may at times invest up to 15% of its total assets in illiquid
securities.]
o U.S. Growth Equity
Targets those companies whose shares have a total market
capitalization of at least $1 billion. The team's strategy is
to identify well-managed U.S. companies whose share prices
appear to be undervalued relative to the firms' growth
potential. All prospective holdings are subject to the
following three steps of the investment process:
o Identify companies with improving business fundamentals
o In-depth analysis of each company's current business and
future prospects
-38-
<PAGE>
o Analyze each company's price to determine whether its growth
prospects have been discovered by the market
o U.S. Smaller Capitalization Companies
Seeks long-term capital growth by investing in growth-oriented
U.S. companies whose shares have a total market capitalization
of $1 billion or less. The team takes the same value approach
to investing as the U.S.
Growth Equity discipline.
o U.S. Equity Income
Seeks current income and long-term capital growth while
striving to minimize portfolio volatility by investing in
large, dividend-paying U.S. companies. This discipline seeks
to provide a greater yield than the average yield of the S&P
500 Index.
The team's strategy is to identify mature companies that have
a history of paying regular dividends to shareholders and
offer a dividend yield well above their historical average
and/or the market's average.
Investments in companies are typically made for two to four
years. The team will usually begin to reduce the Portfolio's
position in a company as its share price moves up and its
dividend yield drops to the lower end of its historical range.
It may also pare back or sell the Portfolio's position in a
company that reduces or eliminates its dividend, or if it
believes that the company is about to do so.
[SIDE BAR:
Dividend yield is calculated by dividing the dividend a company pays out per
share of common stock by the stock market price of those shares.]
o International Equity
The team invests in the common stocks of companies outside the
United States whose shares have a total market capitalization
of more than $1 billion. Currently investments are
concentrated in the stock markets of western Europe,
particularly the United Kingdom, France, Germany, Italy and
the Netherlands, as well as developed markets in Asia, such as
Japan and Hong Kong. Investments typically are made in at
least three countries outside the United States with no more
than 40% of its assets in any one country.
-39-
<PAGE>
The team seeks well-managed companies that it believes will be
able to increase their sales and corporate earnings on a
sustained basis. Shares of these companies must be considered
to be under-or reasonably valued relative to their long-term
prospects. The team favors companies that it believes have a
competitive advantage, offer innovative products or services
and may profit from such trends as deregulation and
privatization. On a strategic basis, investments may be
allocated among countries in an attempt to take advantage of
market trends.
o Emerging Markets
Seeks long-term capital growth by investing in common stocks
of companies based in emerging market countries. The team
currently considers the following to be emerging market
countries but may invest in others in the future:
- Latin America (Argentina, Brazil, Chile, Costa Rica, Jamaica,
Mexico, Peru)
- Asia (Bangladesh, China, India, Indonesia, Malaysia,
Pakistan)
- Southern and eastern Europe (Czech Republic, Greece,
Russia)
- The Middle East (Israel, Jordan)
- Africa (Egypt, Ivory Coast, Kenya, Morocco, South Africa,
Tunisia, Zimbabwe)
No more than 35% of its total assets may be invested in one
country.
The team's strategy combines computer-based screening
techniques and in-depth financial review and on-site analysis
of companies, countries and regions to identify potential
investments.
[SIDE BAR:
In an attempt to protect the Portfolio against unfavorable changes in
the value of the U.S. dollar versus foreign currencies, the Portfolio may also
invest in foreign currency transactions, particularly in foreign currency
forward contracts. It may also purchase or sell foreign currency on a spot basis
to facilitate trades.]
-40-
<PAGE>
[Right side:]
Primary Risks
The value of your investment in the Portfolio may be affected by one or
more of the following risks, any of which could cause the Portfolio's return or
the price of its shares to decrease:
o Market risk
o Foreign investment risk
The U.S. Smaller Capitalization team's focus on small-cap stocks may
expose shareholders to additional risks. Small companies typically have more
limited product lines, markets and financial resources than larger companies,
and their securities may trade less frequently and in more limited volume than
those of larger, more mature companies. In addition, at times the market may
favor or disfavor securities of issuers or a particular capitalization range,
and securities of small capitalization issuers may be subject to greater price
volatility in general than securities of larger companies. As a result,
small-cap stocks -- and therefore, the Portfolio's shares -- may fluctuate
significantly more in value than larger-cap stocks and the mutual funds that
focus solely on them.
The Emerging Market team's investments in emerging markets include all
of the risks of investments in foreign securities and are subject to abrupt and
severe price declines. The economic and political structures of developing
nations, in most cases, do not compare favorably with the U.S. or other
developed countries in terms of wealth and stability, and their financial
markets often lack liquidity. Such countries may have relatively unstable
governments, immature economic structures, national policies restricting
investments by foreigners and economies based on only a few industries. For
these reasons, all of the risks of investing in foreign securities are
heightened by investing in emerging markets countries. The markets of developing
countries have been more volatile than the markets of developed countries with
more mature economies. These markets often have provided significantly higher or
lower rates of return than developed markets, and significantly greater risks,
to investors.
Past Performance:
The Portfolio commenced operations in February 1998. As a result, it
does not have a significant operating history. For performance information for
the period ended December 31, 1998, see "Financial Highlights" and the Statement
of Additional Information.
[SIDE BAR:
Portfolio Management
-41-
<PAGE>
o Montgomery Asset Management, LLC
see page
o For financial highlights see page __]
-42-
<PAGE>
[Left Side:]
Endeavor Janus Growth Portfolio
[SIDE BAR:
This Portfolio may be appropriate for you if you seek:
o Long-term growth of capital and are willing to accept the risk of
potential sizeable stock market volatility]
Investment Objective:
To seek long-term growth of capital
Principal Investment Strategy:
The Portfolio invests substantially all of its assets in common stocks
selected for their growth potential. The Portfolio invests in industries and
companies that the investment adviser believes are experiencing favorable demand
for their products and services, and which operate in a favorable competitive
environment and regulatory climate. The investment adviser's analysis and
selection process focuses on stocks issued by companies with earnings growth
potential, especially those that may not be recognized by the market. The
Portfolio may also invest up to 25% of its total assets in foreign securities
including foreign debt securities.
The investment adviser applies a bottom-up approach in choosing
investments. In other words, it looks for companies with earnings growth
potential one at a time. Securities are selected solely for their growth
potential. Investment income and dividend payments are not a factor. If the
investment adviser is unable to find sufficient investments with earnings growth
potential, a significant portion of a Portfolio's assets may be in cash or
similar investments.
[SIDE BAR:
In an attempt to protect the Portfolio against unfavorable changes in
the value of the U.S. dollar versus foreign currencies, the Portfolio may also
engage in foreign currency transactions, particularly in foreign currency
forward contracts. It may also purchase or sell foreign currency on a spot basis
to facilitate trades.]
-43-
<PAGE>
[Right Side:]
Primary Risks:
The value of your investment in the Portfolio may be affected by one or
more of the following risks, any of which could cause the Portfolio's return or
the price of its shares to decrease:
o Market risk
o Foreign investment risk
Past Performance:
The Portfolio commenced operations in March, 1999. No performance
information is currently available.
[SIDE BAR:
Portfolio Management
o Janus Capital Corporation
See page __]
-44-
<PAGE>
[Left Side:]
Dreyfus U.S. Government Securities Portfolio
[SIDE BAR:
This Portfolio may be appropriate for you if you seek:
o a conservative investment
o long-term total return from dividend and capital
growth of primarily U.S. government securities]
Investment Objective:
To provide as high a level of total return as is consistent with
prudent investment strategies by investing under normal conditions at least 75%
of its assets in U.S. government debt obligations and mortgage-backed securities
issued or guaranteed by the U.S. government, its agencies or
government-sponsored entities.
Principal Investment Strategy:
The Portfolio invests under normal circumstances at least 75% of its assets
in U.S. government securities. These securities include:
o U.S. Treasury obligations
o obligations issued by or guaranteed by U.S. government agencies
or government-sponsored entities
o mortgage-backed securities guaranteed by Ginnie Mae or other U.S.
government agencies or government-sponsored entities such as
Sallie Mae or Fannie Mae
o collateralized mortgage obligations issued by private issuers for
which the underlying mortgage-backed securities serving as
collateral are backed by the U.S. government or its agencies and
government-sponsored entities
The average weighted maturity for these U.S. government security obligations
will generally range from three to seven years.
The Portfolio may invest the remaining portion of its assets in:
-45-
<PAGE>
o investment grade corporate bonds
o short-term corporate debt securities
o non-mortgage-backed securities such as motor vehicle
installment purchase obligations, credit card receivables,
corporate convertible and non-convertible fixed and variable
rate bonds
o high yield debt securities (up to 25% of Portfolio
investments) so long as they are consistent with the
Portfolio's objective. The weighted average maturity of such
obligations will generally range from 2 to 10 years.
o high quality money-market securities
o debt securities (up to 25% of its total assets), including
securities denominated in foreign currencies, of foreign
issuers (including foreign governments) in developed countries
o U.S. dollar-denominated obligations issued by foreign branches of
U.S. banks and domestic branches of foreign banks (up to 25% of
the Portfolio's total assets)
o Zero coupon bonds
The Portfolio invests in debt obligations that the investment adviser
believes offer attractive yields and are undervalued relative to issues of
similar credit quality and interest rate sensitivity. The investment adviser
uses a combination of quantitative and fundamental research, including
risk/reward and credit risk analyses, in choosing securities.
The Portfolio's investment adviser may also engage in options and
futures transactions and interest rate swap transactions in an attempt to hedge
the Portfolio's investments against adverse changes in interest rates. The
Portfolio may also purchase securities on a when-issued, delayed delivery or
forward commitment basis. The risks involved in these transactions are described
in "Additional Investment Strategies."
-46-
<PAGE>
[Right side:]
Primary Risks:
The value of your investment in the Portfolio may be affected by one or
more of the following risks, any of which could cause the Portfolio's return on
the price of its shares to decrease or could cause the Portfolio's yield to
fluctuate:
o Interest rate risk
o Credit risk
o High yield debt security risk
o Foreign investment risk
Like other debt securities, changes in interest rates generally affect
the value of a mortgage-backed security. Additionally, some mortgage-backed
securities may be structured so that they may be particularly sensitive to
interest rates.
Investments in mortgage-related securities are also subject to special
risks of prepayment. Prepayment risk occurs when the issuer of a security can
prepay the principal prior to the security's maturity. Securities subject to
prepayment risk, including the collateralized mortgage obligations and other
mortgage-related securities that the Portfolio can buy, generally offer less
potential for gains when prevailing interest rates decline, and have greater
potential for loss when interest rates rise. The impact of prepayments on the
price of a security may be difficult to predict and may increase the volatility
of the price. In addition, early repayment of mortgages underlying these
securities may expose the Portfolio to a lower rate of return when it reinvests
the principal. Further, the Portfolio may buy mortgage-related securities at a
premium. Accelerated prepayments on those securities could cause the Portfolio
to lose a portion of its principal investment represented by the premium the
Portfolio paid.
If interest rates rise rapidly, prepayments may occur at slower rates
than expected, which could have the effect of lengthening the expected maturity
of a short or medium-term security. That could cause its value to fluctuate more
widely in response to changes in interest rates. In turn, this could cause the
value of the Portfolio's shares to fluctuate more.
Non-mortgage asset-backed securities are not issued or guaranteed by
the U.S. government or its agencies or government-sponsored entities. In the
event of a failure of these securities to pay interest or repay principal, the
assets backing these securities such as automobiles or credit card receivables
may be insufficient to support the payments on the securities.
Past Performance:
The information below provides an indication of the risks of investing in
the Portfolio by showing the volatility of the Portfolio's returns. Both tables
assume
-47-
<PAGE>
reinvestment of dividends and distributions. As with all mutual funds, past
returns are not a prediction of future returns.
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (5/13/94) and indicates how it has varied from
year to year. Note that these results do not include the effect of Contract
charges. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
Year-by-Year Total Return as of 12/31 of Each Year
15.64% 1.81% 9.15% 7.38%
95 96 97 98
High Quarter: 2nd - 1995 +5.52%
Low Quarter: 1st - 1996 -2.63%
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period and since inception through 12/31/98 with
the Lehman Aggregate Bond Index, a widely recognized unmanaged index that
measures the market performance of government and government agency debt
securities, corporate securities, asset-backed securities and mortgage-backed
securities and with the Lipper VA General U.S. Government Index. These figures
do not include the effect of Contract charges.
Average Annual Total Return as of 12/31/98
1 Year Since Inception
---------------------------
Portfolio 7.38% 7.10%
Lehman Aggregate 8.69% 8.66%*
Bond Index
Lipper VA General U.S. Government 6.98% 6.66%*
Index
* From 4/30/94
[SIDE BAR:
Portfolio Management:
o The Dreyfus Corporation
see page
o For financial highlights
see page __]
-48-
<PAGE>
[Left Side:]
Endeavor High Yield Portfolio
[SIDE BAR:
This Portfolio may be appropriate for you if you seek:
o high current income and are willing to assume the risks of
investing in junk bonds]
Investment Objective
To provide 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 high current income.
Principal Investment Strategy
The Portfolio invests, under normal market conditions, at least 80% of
its total assets in high yield fixed income securities. Fixed income securities
offering the high current income sought by the Portfolio generally are lower
rated bonds. These bonds, commonly known as junk bonds, are assigned lower
credit ratings by credit rating agencies or are unrated and considered by the
investment adviser to be comparable to lower rated bonds. In analyzing debt
securities, the investment adviser may purchase securities of any maturity.
[SIDE BAR:
While the Portfolio focuses its investments on long and short-term
fixed, contingent or variable interest rate bonds issued by corporations or
other similar entities, it may invest in all types of debt and other fixed
income securities including:
o zero-coupon bonds, deferred interest bonds and pay-in-kind bonds
o mortgage-backed securities
o collateralized mortgage obligations
o convertible securities
o non-mortgage-backed securities (such as pools of motor vehicle
installment purchase obligations and credit card receivables)
o participations in bank loans to corporate borrowers
o U.S. Government securities including U.S. Treasury obligations
o Brady bonds
o Commercial paper and other short-term corporate obligations
o Eurodollar obligations
o Variable amount master demand notes and variable rate notes]
-49-
<PAGE>
The Portfolio may invest up to 25% of its net assets in foreign securities
including foreign debt securities such as Eurodollar bonds and Yankee bonds. The
Portfolio may invest in foreign securities of issuers located in emerging
markets (up to 5% of net assets). The Portfolio may also engage in foreign
currency transactions in order to attempt to hedge against adverse changes in
currency exchange rates.
In selecting fixed income investments for the Portfolio, the investment
adviser considers the views of its large group of fixed income portfolio
managers and research analysts. This group periodically assesses the three-month
total return outlook for various segments of the fixed income markets. This
three-month "horizon" outlook is used by the portfolio manager(s) of the
investment adviser's fixed income oriented funds (including the Portfolio) as a
tool in making or adjusting the Portfolio's asset allocations to various
segments of the fixed income markets. In assessing the credit quality of fixed
income securities, the investment adviser does not rely solely on the credit
ratings assigned by credit rating agencies, but rather performs its own
independent credit analysis.
-50-
<PAGE>
[Right side:]
Primary Risks
The value of your investment in the Portfolio may be affected by one or
more of the following risks, any of which could cause the Portfolio's return or
the price of its shares to decrease or could cause the Portfolio's yield to
fluctuate:
o Interest rate risk
o Credit risk
o High yield debt security risk
o Foreign investment risk
In addition, investments in emerging markets include all of the risks
of investments in foreign securities and are subject to severe price declines.
The economic and political structure of developing nations, in most cases, do
not compare favorably with the U.S. or other developed countries in terms of
wealth and stability, and their financial markets often lack liquidity. Such
countries may have relatively unstable governments, immature economic
structures, national policies restricting investments by foreigners and
economies based on only a few industries. For these reasons, all of the risks of
investing in foreign securities are heightened by investing in emerging markets.
The markets of developing countries have been more volatile than the markets of
developed countries with more mature economies. These markets often have
provided significantly higher or lower rates of return than developed markets,
and significantly greater risks, to investors.
Past Performance
The Portfolio commenced operations in May 1998. As a result, it does
not have a significant operating history. For performance information for the
period ended December 31, 1998, see "Financial Highlights" and the Statement of
Additional Information.
[SIDE BAR:
Portfolio Management
o Massachusetts Financial Services Company
see page
o For financial highlights
see page __]
-51-
<PAGE>
[Left Side:]
Endeavor Asset Allocation Portfolio
[SIDE BAR:
This Portfolio may be appropriate for you if you seek:
o a relatively conservative investment
o long-term growth of capital with reduced market
volatility through asset allocation]
Investment Objective
To provide high total return through a managed asset allocation
portfolio of equity, fixed income and money market securities.
Principal Investment Strategy
The Portfolio is made up of three asset classes:
Equity - A diverse selection of equity securities of established U.S.
companies in sound financial condition primarily make up the equity portion of
the Portfolio. The equity portion of the Portfolio is primarily invested in
common stocks. The Portfolio's investment adviser strives to achieve total
returns from dividends and capital gains that are greater than those from
broadly-based stock market indices, as long as there is not an excessive risk of
loss by doing so.
Fixed income - The following instruments make up the fixed income
portion of the Portfolio:
o U.S. government securities
o collateralized mortgage obligations ("CMOs") that are issued or
guaranteed by the U.S. government, its agencies or government-
sponsored entities or that are collateralized by a portfolio of
mortgages or mortgage-related securities guaranteed by such an
agency or entity
o CMOs that are not guaranteed by the U.S. government, its agencies
or government-sponsored entities
o high grade corporate and mortgage-backed bonds with maturities
typically ranging from 2 to 30 years.
-52-
<PAGE>
o short-term bonds and notes with remaining maturities of 13 months
or less.
o mortgage-backed securities, including GNMA certificates,
mortgage- backed bonds
o zero coupon bonds
[SIDE BAR:
The Portfolio may also invest in repurchase agreements, depositary
receipts, forward commitments and may purchase and sell interest rate futures
and options and futures on stock indices.]
The dollar-weighted average maturity of such investments will generally
range from 3 to 10 years and the securities will, at time of purchase, have
ratings within the four highest rating categories established by a nationally
recognized rating agency, or if not rated, be of comparable quality as
determined by the Portfolio's investment adviser.
Cash - This portion of the Portfolio is invested in high quality money
market securities including U.S. government securities.
The Portfolio's investment adviser determines the appropriate weighting
of each asset class and adjusts it periodically. There are no limits on the
amount of investments in each asset class. In making adjustments to the asset
allocation, the Portfolio's investment adviser uses its asset allocation model
and integrates its view of the expected returns for each asset class, and
factors in the stock, bond and money markets, interest rate and corporate
earnings growth trends, and economic conditions.
-53-
<PAGE>
[Right Side:]
Primary Risks:
The value of your investment in the Portfolio may be affected by one or
more of the following risks, any of which could cause the Portfolio's return or
the price of its shares to decrease or could cause the Portfolio's yield to
fluctuate:
o Market risk
o Interest rate risk
o Credit risk
Like other debt securities, changes in interest rates generally affect
the value of a mortgage-backed security. Additionally, some mortgage-backed
securities may be structured so that they may be particularly sensitive to
interest rates.
Investments in mortgage-related securities are also subject to special
risks of prepayment. Prepayment risk occurs when the issuer of a security can
prepay the principal prior to the security's maturity. Securities subject to
prepayment risk, including collateralized mortgage obligations and other
mortgage-related securities that the Portfolio can buy, generally offer less
potential for gains when prevailing interest rates decline, and have greater
potential for loss when interest rates rise. The impact of prepayments on the
price of a security may be difficult to predict and may increase the volatility
of the price. In addition, early repayment of mortgages underlying these
securities may expose the Portfolio to a lower rate of return when it reinvests
the principal. Further, the Portfolio may buy mortgage-related securities at a
premium. Accelerated prepayments on those securities could cause the Portfolio
to lose a portion of its principal investment represented by the premium the
Portfolio paid.
If interest rates rise rapidly, prepayments may occur at slower rates
than expected, which could have the effect of lengthening the expected maturity
of a short or medium-term security. That could cause its value to fluctuate more
widely in response to changes in interest rates. In turn, this could cause the
value of the Portfolio's shares to fluctuate more.
Past Performance:
The information below provides an indication of the risks of investing
in the Portfolio by showing the volatility of the Portfolio's returns. Both
tables assume reinvestment of dividends and distributions. As with all mutual
funds, past returns are not a prediction of future returns.
-54-
<PAGE>
The bar chart below shows you the Portfolio's performance for each full
calendar year since its inception (4/8/91) and indicates how it has varied from
year to year. Note that these results do not include the effect of Contract
charges. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
Year-by-Year Total Return as of 12/31 of Each Year
9.01% 16.79% (5.28)% 22.91% 17.82% 20.14% 18.39%
92 93 94 95 96 97 98
High Quarter: 4th - 1998 +15.13%
Low Quarter: 3rd - 1998 -9.59%
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period, 5-year period and since inception through
12/31/98 with the S&P 500 Index, a widely recognized unmanaged index that
measures the stock performance of 500 large and medium-sized publicly traded
companies and is often used to indicate the performance of the overall stock
market, a blended index which weights the different asset classes, and with the
Lipper VA Flexible Portfolio Index.
These figures do not include the effect of Contract charges.
Average Annual Total Return as of 12/31/98
-------------------------------------
Since
1 Year 5 Year Inception
------- ------ ---------
-------------------------------------
Portfolio 18.39% 14.30% 14.36%
S&P 500 Index 28.60% 24.05% 19.44%*
Blended Index (65%
S&P 500 Index, 30%
Lehman Brothers Aggregate
Bond Index, 5% 90 day
T-Bills) 23.97% 19.26% 16.23%*
Lipper VA Flexible
Portfolio Index 14.40% 12.91% 12.10%*
* From 3/31/91
[SIDE BAR:
Portfolio Management
-55-
<PAGE>
o Morgan Stanley Asset Management
see page
o For financial highlights see page __]
-56-
<PAGE>
Additional Investment Strategies
In addition to the principal investment strategies discussed in each
individual Portfolio's Investment Summary, a Portfolio, as indicated, may at
times invest a portion of its assets in the investment strategies and may engage
in certain investment techniques as described below. These strategies and
techniques may involve risks. Although a Portfolio that is excepted from a
particular strategy or technique generally has the ability to engage in such a
transaction, its investment adviser currently intends to invest little, if any,
of the Portfolio's assets in that strategy or technique. (Please note that some
of these strategies may be a principal investment strategy for a particular
Portfolio and consequently are also described in that Portfolio's Investment
Summary.)
For a description of each of these investment techniques and strategies, please
refer to the Glossary of Investment Terms on page ___.
<TABLE>
<CAPTION>
INVESTMENT
STRATEGY PORTFOLIO RISKS
<S> <C> <C>
Foreign Debt T. Rowe Price International Foreign debt securities may be
Securities Stock subject to foreign investment
T. Rowe Price Growth risk, credit risk and interest rate
Stock risk. Securities in developing
Endeavor Janus Growth countries are also subject to
Endeavor High Yield the additional risks associated
with emerging markets.
U.S. Government All Portfolios U.S. Government Securities
Securities are subject to interest rate risk.
Credit risk is remote.
-57-
<PAGE>
Derivatives Options Derivatives may be used to
hedge against an opposite
Endeavor Opportunity position that a Portfolio holds.
Value Any loss generated by the
Endeavor Select 50 derivatives should be offset by
Dreyfus U.S. Government gains in the hedged
Securities investment. While hedging can
reduce or eliminate losses, it
Futures can also reduce or eliminate
gains or result in losses or
T. Rowe Price International missed opportunities. In
Stock addition, derivatives that are
Endeavor Opportunity used for hedging the Portfolio
Value in specific securities may not
T. Rowe Price Equity fully offset the underlying
Income positions. The counterparty to
T. Rowe Price Growth a derivatives contract also
Stock could default. Derivatives that
Endeavor Select 50 involve leverage could magnify
Endeavor Janus Growth losses.
Dreyfus U.S. Government
Securities Derivatives may also be used
Endeavor Asset Allocation to maintain a Portfolio's
exposure to the market,
manage cash flows or to
attempt to increase income.
Using derivatives for purposes
other than hedging is
speculative and involves
greater risks. In many foreign
countries, futures and options
markets do not exist or are not
sufficiently developed to be
effectively used by a Portfolio
that invests in foreign
securities.
-58-
<PAGE>
High Quality Short- All Portfolios These instruments are subject
term Debt to credit risk and interest rate
Obligations risk.
including Bankers'
Acceptances,
Commercial Paper,
Certificates of
Deposit and
Eurodollar
Obligations issued
or Guaranteed by
Bank Holding
Companies in the
U.S., their
Subsidiaries and
Foreign Branches
or of the World
Bank; Variable
Amount Master
Demand Notes and
Variable Rate Notes
issued by U.S. and
Foreign
Corporations; and
Short-term
Corporate Bonds
-59-
<PAGE>
Foreign Currency T. Rowe Price International Foreign currency exchange
Transactions Stock rates may fluctuate significantly
T. Rowe Price Growth over short periods of time. A
Stock forward foreign currency
Endeavor Select 50 exchange contract reduces the
Endeavor Janus Growth Portfolio's exposure to changes
Endeavor High Yield in the value of the currency it
will deliver and increases its
exposure to changes in the
value of the currency it will
exchange into. Contracts to
sell foreign currency will limit
any potential gain which might
be realized by the Portfolio if
the value of the hedged
currency increases. In the
case of forward contracts
entered into for the purpose of
increasing return, the Portfolio
may sustain losses which will
reduce its gross income.
Forward foreign currency
exchange contracts also
involve the risk that the party
with which the Portfolio enters
the contract may fail to perform
its obligations to the Portfolio.
Preferred Stock Endeavor Opportunity Preferred stock is subject to
Value market risk. In addition,
T. Rowe Price Equity because preferred stock pays
Income fixed dividends, an increase in
T. Rowe Price Growth interest rates may cause the
Stock price of the preferred stock to
Endeavor Select 50 fall.
Endeavor Janus Growth
Dreyfus U.S. Government
Securities
Endeavor Asset Allocation
-60-
<PAGE>
Collateralized Endeavor Opportunity CMOs carry general fixed
Mortgage Value income securities risks, such
Obligations (CMOs) Dreyfus U.S. Government as credit risk and interest rate
Securities risk, and risks associated with
Endeavor High Yield mortgage-backed securities.
Endeavor Asset Allocation
These securities also involve
prepayment risk which is the
risk that the underlying
mortgages or other debt may
be refinanced or paid off prior
to their maturities during
periods of declining interest
rates. In that case, an
investment adviser may have
to reinvest the proceeds from
the securities at a lower rate.
Potential market gains on a
security subject to prepayment
risk may be more limited than
potential market gains on a
comparable security that is not
subject to prepayment risk.
Convertible Endeavor Opportunity Traditionally, convertible
Securities Value securities have paid dividends
Dreyfus Small Cap Value or interest rates higher than
T. Rowe Price Equity common stocks but lower than
Income nonconvertible securities.
T. Rowe Price Growth They generally participate in
Stock the appreciation or
Endeavor Enhanced Index depreciation of the underlying
Endeavor Select 50 stock into which they are
Endeavor Janus Growth convertible, but to a lesser
Dreyfus U.S. Government degree. These securities are
Securities also subject to market and
Endeavor High Yield credit risk.
Endeavor Asset Allocation
-61-
<PAGE>
Rights and T. Rowe Price International These investments carry the
Warrants Stock risk that they may be worthless
T. Rowe Price Equity to the Portfolio at the time it
Income may exercise its rights, due to
T. Rowe Price Growth the fact that the underlying
Stock securities have a market value
Endeavor Enhanced Index less than the exercise price of
Endeavor Select 50 the right or warrant.
Endeavor Janus Growth
Endeavor Asset Allocation
Mortgage-backed Endeavor Opportunity These securities carry general
Securities, Value fixed income security risks,
including GNMA Dreyfus U.S. Government such as credit risk and interest
Certificates, Securities rate risk, and risks associated
Mortgage-backed Endeavor High Yield with mortgage-backed
Bonds Endeavor Asset Allocation securities. These securities
also carry prepayment risk, as
described under CMOs, above.
Non-mortgage Dreyfus U.S. Government The value of some asset-
Asset-backed Securities backed securities may be
Securities Endeavor High Yield particularly sensitive to
Endeavor Asset Allocation changes in prevailing interest
rates, and like other fixed
income investments, the ability
of the Portfolio to successfully
use these instruments may
depend in part upon the ability
of an investment adviser to
forecast interest rates and
other economic factors
correctly.
Interest Rate Dreyfus U.S. Government There is the risk that the
Transactions Securities investment adviser may
Endeavor High Yield incorrectly predict the direction
Endeavor Asset Allocation of interest rates resulting in
losses to the Portfolio.
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<PAGE>
Depositary T. Rowe Price International These instruments are subject
Receipts Stock to market risk and foreign
T. Rowe Price Equity investment risk.
Income
T. Rowe Price Growth
Stock
Endeavor Enhanced Index
Endeavor Select 50
Endeavor Janus Growth
Endeavor Asset Allocation
Illiquid Securities Endeavor Enhanced Index The Portfolio could have
Endeavor Select 50 difficulty valuing these holdings
Endeavor Janus Growth precisely or could be unable to
Dreyfus U.S. Government sell those holdings at the time
Securities or price it desires.
Endeavor High Yield
Dollar Roll Dreyfus U.S. Government If the broker-dealer to whom
Transactions Securities 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.
-63-
<PAGE>
PIK (pay-in-kind) Endeavor Janus Growth These securities are subject to Debt
Securities Endeavor Asset Allocation credit risk and interest risk.
These investments also 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
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.
Repurchase Endeavor Money Market Repurchase agreements
Agreements Endeavor Enhanced Index involve the risk that the seller
Endeavor Select 50 will fail to repurchase the
Endeavor Janus Growth security, as agreed. In that
Dreyfus U.S. Government case, the Portfolio will bear the
Securities risk of market value
Endeavor High Yield fluctuations until the security
Endeavor Asset Allocation can be sold and may
encounter delays and incur
costs in liquidating the security.
Reverse Endeavor Money Market Reverse repurchase
Repurchase Endeavor Enhanced Index agreements will be used
Agreements Dreyfus U.S. Government primarily to provide cash to
Securities satisfy
unusually
high
redemption
requests,
or for
other
temporary
or
emergency
purposes.
Municipal Dreyfus U.S. Government These investments are subject
Securities Securities to interest rate risk and credit
risk
-64-
<PAGE>
Forward T. Rowe Price International The Portfolio does not earn
Commitments, Stock interest on such securities until
When-Issued and Endeavor Value Equity settlement and bear the risk of
Delayed Securities Endeavor Janus Growth market value fluctuations in
Dreyfus U.S. Government between the purchase and
Securities settlement dates.
Endeavor High Yield
Endeavor Asset Allocation
Zero-coupon Bonds Endeavor Opportunity These investments have the
Value same risks as those described
Endeavor Janus Growth for PIKs above.
Dreyfus U.S. Government
Securities
Endeavor High Yield
Endeavor Asset Allocation
Hybrid Instruments T. Rowe Price International Hybrids may bear interest or
Stock pay dividends at below market
T. Rowe Price Equity (or even relatively normal)
Income rates. Under certain
T. Rowe Price Growth conditions, the redemption
Stock value of the instrument could
Endeavor Janus Growth be zero. Hybrids can have
Endeavor Asset Allocation volatile prices and limited
liquidity and their use by the
Portfolio may not be
successful.
Investment Grade Endeavor Money Market Interest rate and credit risk.
Corporate Debt Endeavor Opportunity Securities rated in the fourth
Securities Value investment category by a
T. Rowe Price Equity nationally recognized rating
Income agency may have speculative
T. Rowe Price Growth characteristics.
Stock
Endeavor Enhanced Index
Endeavor Select 50
Endeavor Janus Growth
Dreyfus U.S. Government
Securities
Endeavor High Yield
Endeavor Asset Allocation
-65-
<PAGE>
Investments in T. Rowe Price International When a Portfolio invests in
Other Investment Stock another investment company, it
Companies Endeavor Janus Growth must bear the management
including Passive Endeavor Asset Allocation and other fees of the
Foreign Investment investment company, in
Companies addition to its own expenses.
As a result, the Portfolio may
be exposed to duplicate
expenses which could lower its
value. Investments in passive
foreign investment companies
also are subject to foreign
investment risk.
High Yield/High Endeavor Opportunity High yield/high risk debt
Risk Debt Value securities are subject to high
Securities T. Rowe Price Equity yield debt security risk.
Income
Endeavor Select 50
Endeavor Janus Growth
Endeavor High Yield
Dreyfus U.S. Government
Securities
</TABLE>
Defensive Investments
Under adverse market or economic conditions, a Portfolio could invest
for temporary defensive purposes some or all of its assets in money market
securities or utilize other investment strategies that may be inconsistent with
a Portfolio's principal investment strategies. Although a Portfolio would employ
these measures only in seeking to avoid losses, they could reduce the benefit
from an upswing in the market or prevent the Portfolio from meeting its
investment objective.
Portfolio Turnover
The Portfolios' investment advisers will sell a security when they
believe it is appropriate to do so, regardless of how long a Portfolio has owned
that security. Buying and selling securities generally involves some expense to
a Portfolio, such as commissions paid to brokers and other transaction costs.
Generally speaking, the higher a Portfolio's annual portfolio turnover rate, the
greater its brokerage costs. Increased brokerage costs may adversely affect a
Portfolio's performance. The Portfolios, with the exception of Endeavor Money
Market Portfolio, Endeavor Asset
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<PAGE>
Allocation Portfolio, Dreyfus Small Cap Value Portfolio, Dreyfus U.S. Government
Securities Portfolio, Endeavor Janus Growth Portfolio and Endeavor Select 50
Portfolio, generally intend to purchase securities for long term investment and
therefore have a relatively low turnover rate. Annual turnover rate of 100% or
more is considered high and will result in increased costs to the Portfolios.
Endeavor Money Market Portfolio, Endeavor Asset Allocation Portfolio, Dreyfus
Small Cap Value Portfolio, Dreyfus U.S. Government Securities Portfolio,
Endeavor Janus Growth Portfolio and Endeavor Select 50 Portfolio generally will
have annual turnover in excess of 100%.
The turnover rates for the Portfolios can be found in the Financial
Highlights section of this Prospectus, except for Endeavor Money Market
Portfolio whose turnover rate is not meaningful because of the very short-term
nature of its holdings.
Downgrades in Fixed Income Debt Securities
Unless required by applicable law, the Portfolios are not required to
sell or dispose of any debt security that either loses its rating or has its
rating reduced after a Portfolio purchases the security.
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<PAGE>
Management
The Manager
Endeavor Management Co. (the "Manager"), 2101 East Coast Highway, Suite 300,
Corona del Mar, California 92625, has overall responsibility for the general
management and administration of all of the Portfolios. The Manager selects and
pays the fees of the investment advisers for each of the Trust's Portfolios and
monitors each investment adviser's investment program.
The annual management fee, as a percentage of a Portfolio's average daily net
assets, that the Manager receives from each Portfolio for these services is as
follows:
<TABLE>
<CAPTION>
<S> <C>
Endeavor Money Market Portfolio - .50% T. Rowe Price Equity Income Portfolio - .80%
Endeavor Asset Allocation Portfolio - .75% T. Rowe Price Growth Stock Portfolio - .80%
T. Rowe Price International Stock Portfolio - .90% Endeavor Enhanced Index Portfolio - .75%
Endeavor Value Equity Portfolio- .80% Endeavor Select 50 Portfolio - 1.10%
Endeavor Opportunity Value Portfolio- .80% Endeavor High Yield Portfolio - .775%
Dreyfus Small Cap Value Portfolio - .80% Endeavor Janus Growth Portfolio - .80%*
Dreyfus U.S. Government Securities Portfolio - .65%
</TABLE>
* The Manager currently limits its annual fee to 0.775% of the
Portfolio's average daily net assets. This fee waiver will continue for
a period of at least one year. In addition, the Portfolio's total
operating expenses (excluding interest, taxes, brokerage fees,
commissions and extraordinary charges) for a period of at least one
year will not exceed 0.87% of the Portfolio's average daily net assets.
The Trust and the Manager have filed an exemptive application
requesting an exemptive order from the Securities and Exchange Commission that
will permit the Manager, subject to certain conditions, and without the approval
of shareholders to: (a) employ a new unaffiliated investment adviser for a
Portfolio pursuant to the terms of a new investment advisory agreement, in each
case either as a replacement for an existing investment adviser or as an
additional investment adviser; (b) change the terms of any investment advisory
agreement; and (c) continue the employment of an existing investment adviser on
the same advisory contract terms where a contract has been assigned because of a
change in control of the investment adviser. In such circumstances, shareholders
would receive notice of such action, including the information concerning the
investment adviser that normally is provided in a proxy statement. The exemptive
order also would permit disclosure of fees paid to multiple unaffiliated
investment advisers of a Portfolio on an aggregate basis only. There is no
assurance that the Securities and Exchange Commission will grant the Trust's and
the Manager's application.
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<PAGE>
The Investment Advisers
The investment adviser of each Portfolio makes day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages each Portfolio's investments.
Endeavor Money Market Portfolio
Endeavor Asset Allocation Portfolio
Morgan Stanley Asset Management ("Morgan Stanley"), 1221 Avenue of the
Americas, New York, New York 10020, a subsidiary of Morgan Stanley Dean Witter
Discover & Co., is each Portfolio's investment adviser. Morgan Stanley has been
in the investment management business since 1975. As of December 31, 1998,
Morgan Stanley, together with its affiliated institutional asset management
companies, managed assets of approximately $ 163.4 billion. On December 1, 1998,
Morgan Stanley Asset Management Inc. changed its name to Morgan Stanley Dean
Witter Investment Management Inc. but continues to do business in certain
circumstances using the name Morgan Stanley Asset Management.
An asset allocation team makes the allocation decisions between equity
and fixed income securities for the Endeavor Asset Allocation Portfolio.
The day to day investment management decisions for the equity portion
of the Endeavor Asset Allocation Portfolio are made by:
o Philip W. Friedman - a Managing Director of Morgan Stanley since
1997 and currently head of Morgan Stanley's Institutional Equity
Group. He has been a Managing Director of Morgan Stanley & Co.
Incorporated, a Morgan Stanley affiliate, since 1990. Mr.
Friedman has shared primary responsibility for managing the
Equity Growth Portfolio of the Morgan Stanley Dean Witter
Institutional Fund, Inc. since September, 1998.
o Margaret K. Johnson - a Principal of Morgan Stanley and a
Portfolio Manager in the Institutional Equity Group. She joined
Morgan Stanley in 1984 and became an Equity Analyst in 1986 and a
Portfolio Manager in 1989. Ms. Johnson has shared primary
responsibility for managing the Equity Growth Portfolio of the
Morgan Stanley Dean Witter Institutional Fund, Inc. since its
inception in April, 1991.
o William S. Auslander - a Principal of Morgan Stanley, which he
joined in 1995. Prior to that he was an equity analyst at Icahn &
Co. from 1985 to 1995. Mr. Auslander has shared primary
responsibility for managing the Equity Growth Portfolio of the
Morgan Stanley Dean Witter Institutional Fund, Inc. since
September, 1998.
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<PAGE>
Mr. Friedman and Mr. Auslander joined Ms. Johnson in assuming responsibility for
managing the equity portion of the Endeavor Asset Allocation Portfolio's assets
at the end of September, 1998.
The Portfolio's fixed income portion is managed by:
o Thomas L. Bennet - a Managing Director of Morgan Stanley & Co.
Incorporated. He joined Miller Anderson & Sherrerd, LLP ("MAS"),
an affiliated asset management company of Morgan Stanley, in
1984. He assumed responsibility for the MAS Funds Fixed Income
Portfolio in 1984, the MAS Funds Domestic Fixed Income Portfolio
in 1987, the MAS Funds High Yield Portfolio in 1985, the MAS
Funds Fixed Income II Portfolio in 1990, the MAS Funds Special
Purpose Fixed Income and Balanced Portfolios in 1992, the MAS
Funds Multi-Asset- Class Portfolio in 1994 and the MAS Funds
Multi-Market Fixed Income Portfolio in 1997.
o Kenneth B. Dunn - a Managing Director of Morgan Stanley & Co.
Incorporated. He joined MAS in 1987. He assumed responsibility
for the MAS Funds Fixed Income and Domestic Fixed Income
Portfolios in 1987, the MAS Funds Fixed Income II Portfolio in
1990, the MAS Funds Mortgage-Backed Securities and Special
Purpose Fixed Income Portfolios in 1992, and the MAS Funds Multi-
Market Fixed Income Portfolio in 1997.
o Richard B. Worley - a Managing Director of Morgan Stanley & Co.
Incorporated. He joined MAS in 1978. He assumed responsibility
for the MAS Funds Fixed Income Portfolio in 1984, the MAS Funds
Domestic Fixed Income Portfolio in 1987, the MAS Funds Fixed
Income II Portfolio in 1990, the MAS Funds Balanced and Special
Purpose Fixed Income Portfolios in 1992, the MAS Funds Global
Fixed Income and International Fixed Income Portfolios in 1993,
the MAS Funds Multi-Asset-Class Portfolio in 1994, the MAS Funds
Balanced Plus Portfolio in 1996 and the MAS Multi-Market Fixed
Income Portfolio in 1997. Mr. Worley is currently the President
of Morgan Stanley.
Messrs. Bennett, Dunn and Worley have shared primary responsibility for managing
the fixed income portion of the Portfolio since May 1, 1998.
T. Rowe Price International Stock Portfolio
Rowe Price-Fleming International, Inc. ("Rowe Price-Fleming"), 100 East
Pratt Street, Baltimore, Maryland 21202, a joint venture established in 1979
between T. Rowe Price Associates, Inc. and the London-based Robert Fleming
Holdings Limited, is the Portfolio's investment adviser. As of December 31,
1998, Rowe Price-Fleming managed approximately $32 billion in investments for
individual and institutional accounts.
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<PAGE>
o An investment advisory group makes the Portfolio's day-to-day
investment decisions. This Group also manages the T. Rowe Price
International Stock Fund and the Foreign Equity Fund.
Endeavor Value Equity Portfolio
Endeavor Opportunity Value Portfolio
OpCap Advisors ("OpCap"), One World Financial Center, New York, New
York 10281, is each Portfolio's investment adviser. OpCap is a subsidiary of
Oppenheimer Capital, an investment management firm dedicated to "value
investing." OpCap and its parent have been investment advisers to mutual funds
and other clients since 1968 and have approximately $63 billion under management
as of December 31, 1998.
o Eileen Rominger, a Managing Director of Oppenheimer Capital, is the
portfolio manager for the Endeavor Value Equity Portfolio. Ms. Rominger has
been with Oppenheimer Capital since 1981 and has managed the Oppenheimer
Quest Value Fund, Inc. since October, 1989.
o Richard Glasebrook II, a Managing Director of Oppenheimer Capital, is the
portfolio manager for the Endeavor Opportunity Value Portfolio. Mr.
Glasebrook has been with Oppenheimer Capital since 1990 and was named 1995
Variable Fund Manager of the Year by Morningstar, Inc. (an independent
service that monitors the performance of mutual funds). He has managed the
Quest Opportunity Value Fund since April, 1991.
Dreyfus Small Cap Value Portfolio
Dreyfus U.S. Government Securities Portfolio
The Dreyfus Corporation ("Dreyfus"), 200 Park Avenue, New York, New
York 10166, is each Portfolio's investment adviser. Founded in 1947, Dreyfus
manages the funds in one of the nation's leading mutual fund complexes, with
more than $120 billion in more than 175 mutual fund portfolios as of January 31,
1999. Dreyfus is the mutual fund business of Mellon Bank Corporation, a
broad-based financial services company with a bank at its core. Its mutual fund
companies place Mellon as the leading bank manager of mutual funds.
o Gerald E. Thunelius and William Howarth have been co-portfolio managers for
the Dreyfus U.S. Government Securities Portfolio since February 9, 1998.
Mr. Thunelius, who has been with Dreyfus since 1989, is the Senior
Portfolio Manager for the Taxable Fixed Income area of Dreyfus. Mr. Howarth
is a junior portfolio manager who joined Dreyfus in 1992.
o Peter I. Higgins is the portfolio manager for the Dreyfus Small Cap Value
Portfolio. Mr. Higgins has been employed by The Boston Company, Inc., a
subsidiary of Mellon Bank Corporation, since August 1988 and by Dreyfus
since
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<PAGE>
February, 1996. He has managed the Dreyfus Small Company Value Fund
since November, 1997.
T. Rowe Price Equity Income Portfolio
T. Rowe Price Growth Stock Portfolio
T. Rowe Price Associates, Inc.("T. Rowe Price"), 100 East Pratt Street,
Baltimore, Maryland 21202, each Portfolio's investment adviser, was founded in
1937. As of December 31, 1998, T. Rowe Price and its affiliates manage
approximately $147 billion in investments for more than 7 million individual and
institutional investor accounts.
o Brian C. Rogers, a Managing Director of T. Rowe Price, manages the T. Rowe
Price Equity Income Portfolio day-to-day and has been Chairman of the
Portfolio's Investment Advisory Committee since 1995. He joined T. Rowe
Price in 1982 and has been managing investments since 1983. Mr. Rogers has
managed the T. Rowe Price Equity Income Fund since 1993 and the T. Rowe
Price Value Fund since 1994.
o Robert W. Smith, a Managing Director of T. Rowe Price, manages the T. Rowe
Price Growth Stock Portfolio day-to-day and has been Chairman of the
Portfolio's Investment Advisory Committee since 1997. He joined T. Rowe
Price in 1992 as an equity analyst and has also managed the U.S. stock
portion of the T. Rowe Price Global Stock Fund since its inception in 1996.
Endeavor Enhanced Index Portfolio
J.P. Morgan Investment Management Inc., 522 Fifth Avenue, New York, New
York 10036, ("J.P. Morgan") is the Portfolio's investment adviser. J.P. Morgan
is a subsidiary of J.P. Morgan Co. Incorporated, which has more than $308
billion in assets under management as of December 31, 1998.
o An investment advisory group makes the Portfolio's day-to-day investment
decisions. The advisory group also manages the J.P. Morgan Smart Index
Fund.
Endeavor Select 50 Portfolio
Montgomery Asset Management, LLC ("Montgomery"), 101 California Street,
San Francisco, California 94111, is the Portfolio's investment adviser. As of
December 31, 1998, Montgomery and its affiliates managed approximately $9.3
billion of assets. Montgomery is a subsidiary of Commerzbank, the third largest
publicly held commercial bank in Germany, which with its affiliates, managed
over $120 billion in assets as of December 31, 1998.
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<PAGE>
o The investment adviser's five equity investment management teams make
the Portfolio's day-to-day investment decisions and are responsible for
coordinating and implementing allocation among the teams.
Prior Experience with Comparable Fund
Montgomery is also the investment adviser to the Montgomery Select 50
Fund. The Portfolio and the Montgomery Select 50 Fund have substantially similar
investment objectives, policies and strategies. Since the Portfolio commenced
operations in February 1998, it does not have a significant operating history.
In order to provide you with information regarding the investment capabilities
of Montgomery, performance information regarding the Montgomery Select 50 Fund
is presented. Such performance information should not be relied upon as an
indication of the future performance of the Portfolio.
The table below compares the Montgomery Select 50 Portfolio's average
annual compounded total returns for the 1-year period and since inception
(10/2/95) through 12/31/98 with the S&P 500 Index, a widely recognized unmanaged
index that measures the stock performance of 500 large and medium-sized publicly
traded companies and is often used to indicate the performance of the overall
stock market, a blended index reflecting the different markets in which the
Montgomery Select 50 Fund invests and with the Lipper VA Global Index. These
figures do not include the effect of Contract charges.
Average Annual Total Return as of 12/31/98
-------------------------------------
Since
1 Year Inception
----------------------------
Montgomery Select 50 Fund 9.40% 23.26%
S&P 500 Index 28.60% _____%
Blended Index (40% S&P 500 Index,
20% Russell 2000 Index, 20%
MSCI EAFE, 20% MSCI EM Free) _____% _____%*
Lipper VA Global Index _____% _____%*
* From 1/31/98
Endeavor High Yield Portfolio
Massachusetts Financial Services Company ("MFS"), 500 Boylston Street,
Boston, Massachusetts 02108, is the Portfolio's investment adviser. MFS is
America's oldest mutual fund organization. MFS and its predecessor organizations
have a history
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<PAGE>
of money management dating from 1924 and the founding of the first mutual fund
in the United States. MFS is an indirect subsidiary of Sun Life Assurance
Company of Canada. As of December 31, 1998, MFS and its institutional advisory
affiliates had approximately $98 billion in assets under management, of which
approximately $20.5 billion consisted of assets in fixed income funds.
o 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.
Prior Experience with Comparable Fund
The Portfolio and the MFS High Income Fund have substantially similar
investment objectives, policies and strategies. Since the Portfolio commenced
operations in May 1998, it does not have a significant operating history. In
order to provide you with information regarding the investment capabilities of
MFS, performance information regarding the MFS High Income Fund is presented.
Management fees paid by the MFS High Income Fund are less than the fees paid by
the Portfolio. If the same level of management fees charged to the Portfolio had
been charged to the MFS High Income Fund, the average annual return during the
periods would have been approximately .31% lower than the numbers set forth
below. This result assumes that the current management fee paid by the MFS High
Income Fund, as a percentage of average net assets, applied to all prior
periods. Such performance information should not be relied upon as an indication
of the future performance of the Portfolio.
The table below compares the MFS High Income Fund's average annual
compounded total returns for the 1-, 5- and 10-year periods through 12/31/98
with the Lehman High Yield Index, a widely recognized unmanaged index that
measures the performance of high yield debt securities comprised of publicly
issued, fixed-rate non-investment grade debt and with the Lipper VA High Current
Yield Index. These figures do not include the effect of Contract charges.
Average Annual Total Return as of 12/31/98
1 Year 5 Year 10 Year
---------------------------------------------
MFS High Income Fund
Class A shares (with sales
charge) (3.77)% 6.88% 9.00%
MFS High Income Fund
Class A shares (without
sales charge) 1.03% 7.92% 9.53%
Lehman High Yield Index 1.60% 8.52% _____%
Lipper VA High Current Yield
Index (1.46)% 6.50% _____%
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<PAGE>
Endeavor Janus Growth Portfolio
Janus Capital Corporation ("Janus"), 100 Fillmore Street, Denver,
Colorado 80206-4928, is the Portfolio's investment adviser. Janus is a 28-year
old investment adviser to a group of mutual funds and individual investors. As
of December 31, 1998, Janus managed approximately $108 billion in assets.
The Portfolio's day-to-day investments are co-managed by:
o Scott W. Schoelzel - serves as manager of other mutual funds including the
Janus Twenty Fund and the Growth Portfolio of WRL Series Fund Inc. Mr.
Schoelzel is a Vice President of Janus where he has been employed since
1994.
o Edward Keely - a Vice President at Janus and currently co-manages the
Growth Portfolio of the WRL Series Fund, Inc. Prior to joining Janus in
1998, Mr. Keely was Senior Vice President of Investments at Founders
Asset Management ("Founders") where he was also the portfolio manager
of Founders Growth Fund from 1994 to 1998. Prior to managing Founders
Growth Fund, he was Assistant Portfolio manager of both Founders
Discovery and Frontier Funds. Mr. Keely joined Founders in 1989 as a
financial analyst.
The Portfolio commenced operations in _____, 1999. As a result, it does
not have a significant operating history. The Portfolio's investment adviser is
the investment adviser of the Growth Portfolio, a series of WRL Series Fund,
Inc. ("WRL Growth Portfolio"). To date, shares of the WRL Growth Portfolio have
only been sold to the separate accounts of PFL to fund benefits under certain
variable life insurance policies and variable annuity contracts including the
Contracts. On ____, 1999, a portion of the assets underlying the shares of the
WRL Growth Portfolio was transferred to the Portfolio.
The WRL Growth Portfolio commenced operations on October 2, 1986. The
Portfolio and the WRL Growth Portfolio have substantially identical investment
objectives, policies and strategies. Since the WRL Growth Portfolio is, in
effect, the Portfolio's predecessor, past performance information regarding the
WRL Growth Portfolio is presented. This information should not be relied upon as
an indication of the future performance of the Portfolio.
The information below provides an indication of the risks of investing
in the WRL Growth Portfolio by showing the volatility of the WRL Growth
Portfolio's returns. Both tables assume reinvestment of dividends and
distributions. As with all mutual funds, past returns are not a prediction of
future returns.
The bar chart below shows you the WRL Growth Portfolio's performance
for the last ten years and indicates how it has varied from year to year. Note
that these results
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<PAGE>
do not include the effect of Contract charges. The WRL Growth Portfolio can also
experience short-term performance swings as indicated in the high and low
quarter information at the bottom of the chart.
Year-by-Year Total Return as of 12/31 of Each Year
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
47.04% (0.22)% 59.79% 2.34% 3.99% (8.31)% 47.12% 17.96% 17.54% 64.48%
89 90 91 92 93 94 95 96 97 98
High Quarter: 4th - 1998 +26.76%
Low Quarter: 3rd - 1990 -17.46%
</TABLE>
The table below compares the WRL Growth Portfolio's average annual
compounded total returns for the 1-, 5- and 10-year periods with the S&P 500
Index, a widely recognized unmanaged index that measures the stock performance
of 500 large and medium-sized publicly traded companies and is often used to
indicate the performance of the overall stock market and with the Lipper VA
Growth Index. These figures do not include the effect of Contract charges.
Average Annual Total Return as of 12/31/98
-------------------------------------
1 Year 5 Year 10 Year
-------- ------ -------
-------------------------------------
WRL Growth Portfolio 64.48% 25.20% 22.61%
S&P 500 Index 28.60% 24.05% _____%
Lipper VA Growth Index 23.88% 18.69% _____%
Brokerage Enhancement Plan
The Trust has adopted a Brokerage Enhancement Plan (the "Plan") for
each of its Portfolios. The Plan uses available brokerage commissions to promote
the sale and distribution of each Portfolio's shares. Unlike asset based charges
imposed by many mutual funds for sales expenses, the Portfolios do not incur any
asset based or other fees or charges under the Plan.
How the Plan Works
Under the Plan, the Manager is authorized to direct investment advisers
to use certain broker-dealers for securities transactions. (The duty of best
price and execution still applies to these transactions.) These broker-dealers
have agreed to give a
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<PAGE>
percentage of their commission from the sale and purchase of securities to
Endeavor Group, the distributor of the Trust's shares.
Endeavor Group will not make any profit from participating in the Plan.
It is obligated to use any money given to it under the Plan for distribution
expenses (other than a minimal amount to defray the legal and administrative
costs). The rest will be spent on activities that are meant to result in the
sale of the Portfolios' shares, including:
o holding or participating in seminars and sales meetings promoting
the sale of the Portfolios' shares
o paying marketing fees requested by broker-dealers who sell
Contracts
o training sales personnel
o compensating broker-dealers and/or registered representatives in
connection with the allocation of cash values and premiums of the
Contracts to the Trust
o printing and mailing Trust prospectuses, statements of additional
information and shareholder reports to existing and prospective
Contract holders
o creating and mailing advertising and sales literature
[SIDE BAR:
If you would like to learn more about the Plan, please read the
Statement of Additional Information which discusses the legal terms and
conditions of the Plan.]
Year 2000 Issue
The Trust and its service providers depend on the smooth operation of
their computer systems. Many computer and software systems in use today cannot
recognize the Year 2000, but revert to 1900 or some other date, due to the
manner in which dates were encoded and calculated. That failure could have a
negative impact on the handling of securities trades, pricing and account
services, as well as on the companies in which the Portfolios will invest. The
Manager is monitoring the efforts of the investment advisers and service
providers to prepare their systems for the Year 2000 and expects that each
Portfolio's investment adviser and service providers will be compliant before
that date. There can be no guarantee, however, that the Manager, investment
advisers or service providers will be successful or that the steps taken by the
Trust will be sufficient to avoid any adverse impact to the Trust and each of
its Portfolios.
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<PAGE>
Financial Highlights
The following financial highlights tables are intended to help you
understand each Portfolio's financial performance for the past 5 years (or for
its period of operation in the case of Portfolios that have operated for less
than 5 years). Certain information reflects financial results for a single
Portfolio share. Total return in each table shows how much an investment in a
Portfolio would have increased (or decreased) during each period (assuming
reinvestment of all dividends and distributions). This information has been
audited by ______________, whose report, along with each Portfolio's financial
statements, is included in the Trust's Annual Report, which is available upon
request.
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<PAGE>
ENDEAVOR MONEY MARKET PORTFOLIO*
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/98* 12/31/97 12/31/96 12/31/95 12/31/94
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating
performance:
Net asset value,
beginning of
year.......................... $ $1.00 $1.00 $1.00 $1.00
--------- ---- ---- ---- ----
Net investment
income........................ 0.0498 0.0479 0.0540 0.0337
---------- ------ ------ ------ ------
Distributions:
Dividends from net
investment
income........................ (0.0498) (0.0479) (0.0540) (0.0336)
Distributions from
net realized gains............ --- --- ----- (0.0001)
------ ----- ----- ----- --------
Total
distributions (0.0498) (0.0479) (0.0540) (0.0337)
----------- -------- -------- -------- --------
Net asset value,
end of year................... $ $1.00 $1.00 $1.00 $1.00
========= ==== ==== ==== ====
Total return+................. % 5.07% 4.91% 5.54% 3.41%
========== ==== ==== ==== ====
Ratios to average
net assets/supple-
mental data:
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<PAGE>
Year Year Year Year Year
Net assets, end of
year (in 000's)............... $ $51,162 $41,545 $27,551 $20,766
Ratio of net
investment income
to average net
assets........................ % 4.99% 4.81% 5.37% 3.58%
Ratio of operating
expenses to
average net
assets........................ % 0.60% 0.60% 0.60% 0.85%
Ratio of operating
expenses to
average net assets
before credits
allowed by the
custodian..................... % 0.60% 0.60% 0.60% 0.60%
- ------------------
</TABLE>
* Effective May 1, 1998, the name of the TCW Money Market Portfolio was
changed to Endeavor Money Market Portfolio and Morgan Stanley Asset
Management became the Portfolio's investment adviser.
+ Total return represents the aggregate total return for the years
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
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<PAGE>
ENDEAVOR ASSET ALLOCATION PORTFOLIO*
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/98* 12/31/97 12/31/96 12/31/95 12/31/94++
--------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Operating
performance:
Net asset value,
beginning of
year......................... $ $18.84 $16.28 $13.48 $14.30
---------- ----- ----- ----- -----
Net investment
income....................... 0.32 0.27 0.33 0.28
Net realized and
unrealized
gain/(loss) on
investments.................. 3.45 2.61 2.72 (1.03)
---------- ---- ---- ---- ------
Net increase/
(decrease) in net
assets resulting
from investment
operations................... 3.77 2.88 3.05 (0.75)
------------- ---- ---- ---- ------
Distributions:
Dividends from
net investment
income....................... (0.27) (0.32) (0.25) (0.07)
Distributions from
net realized gains........... --- --- --- ---
-------------- ----- ----- ----- ----
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<PAGE>
Total distributions.......... (0.27) (0.32) (0.25) (0.07)
============ ====== ====== ====== ======
Net asset value,
end of year.................. $ $22.34 $18.84 $16.28 $13.48
=========== ===== ===== ===== =====
Total return+................ % 20.14% 17.82% 22.91% (5.28)%
=========== ===== ===== ===== ======
Ratios to
average net
assets/
supplemental
data:
Net assets, end of
year (in 000's).............. $ $303,102 $240,210 $198,876 $172,449
Ratio of net
investment income
to average net
assets....................... % 1.61% 1.59% 2.12% 2.03%
Ratio of operating
expenses to
average net
assets....................... % 0.84% 0.85% 0.84% 0.90%
Ratio of operating
expenses to
average net assets
before credits
allowed by the
custodian.................... % 0.84% 0.85% 0.84% 0.90%
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<PAGE>
Portfolio turnover
rate......................... % 67% 58% 93% 67%
</TABLE>
- ---------------
* Effective May 1, 1998, the name of the TCW Managed Asset Allocation
Portfolio was changed to Endeavor Asset Allocation Portfolio and Morgan
Stanley Asset Management became the Portfolio's investment adviser.
+ Total return represents aggregate total return for the years indicated.
The total return of the Portfolio does not reflect the charges against
the separate accounts of PFL or the Contracts.
++ Per share amounts have been calculated using the average share method
which more appropriately presents the per share data for the year since
use of the undistributed method did not accord with results of
operations.
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<PAGE>
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO*
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/98++ 12/31/97 12/31/96++ 12/31/95# 12/31/94
---------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Operating
performance:
Net asset value,
beginning of
year........................... $ $13.95 $12.19 $11.31 $11.99
------------ ----- ----- ----- -----
Net investment
income/(loss).................. 0.10 0.09 0.09 (0.02)
Net realized and
unrealized
gain/(loss) on
investments.................... 0.26 1.76 1.06 (0.66)
---------- ---- ---- ---- ------
Net increase/
(decrease) in net
assets
resulting from
investment
operations..................... 0.36 1.85 1.15 (0.68)
------------ ---- ---- ---- ------
Distributions:
Dividends from
net investment
income......................... (0.10) (0.09) --- ---
Distributions from net
realized gains................. --- (0.00)## (0.27) ---
---------- --- -------- ------ ---
-84-
<PAGE>
Total distributions (0.10) (0.09) (0.27) ---
---------- ------ ------ ------ ---
Net asset value, end
of period...................... $ $14.21 $13.95 $12.19 $11.31
========== ===== ===== ===== =====
Total return+.................. % 2.54% 15.23% 10.37% (5.67)%
============ ==== ===== ===== ======
Ratios to average net assets/ supplemental data:
Net assets, end of
year (in 000's)................ $ $164,560 $134,435 $92,352 $84,102
Ratio of net
investment
income/(loss) to
average net
assets......................... % 0.74% 0.73% 0.81% (0.16)%
Ratio of operating
expenses to average
net assets..................... % 1.07% 1.18% 1.15% 1.16%
Ratio of operating
expenses to average
net assets before
credits allowed by
the custodian.................. % 1.12% 1.18% 1.15% 1.16%
Portfolio turnover
rate........................... % 19% 11% 111% 88%
-85-
<PAGE>
</TABLE>
- -----------------
* Effective March 24, 1995, the name of the Global Growth Portfolio was
changed to T. Rowe Price International Stock Portfolio and the
investment objective was changed from investment on a global basis to
investment on an international basis (i.e., in non-U.S. companies).
+ Total return represents aggregate total return for the years indicated.
The total return of the Portfolio does not reflect the charges against
the separate accounts of PFL or the Contracts.
++ Per share amounts have been calculated using the average share method
which more appropriately presents the per share data for the year since
use of the undistributed method did not accord with results of
operations.
# Rowe Price-Fleming International, Inc. became the Portfolio's Adviser
effective January 3, 1995.
## Amount represents less than $(0.01) per share.
-86-
<PAGE>
ENDEAVOR VALUE EQUITY PORTFOLIO*
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/98 12/31/97 12/31/96++ 12/31/95 12/31/94
-------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating
performance:
Net asset value,
beginning of
year.......................... $_____ $17.21 $14.23 $10.69 $10.28
----- ----- ----- -----
Net investment
income........................ 0.20 0.20 0.15 0.09
Net realized and
unrealized gain on
investments................... 3.96 3.15 3.52 0.33
----------- ---- ---- ---- ----
Net increase in net
assets
resulting from
investment
operations.................... 4.16 3.35 3.67 0.42
----------- ---- ---- ---- ----
Distributions:
Dividends from
net investment
income........................ (0.14) (0.13) (0.09) (0.01)
Distributions
from net
realized gains................ (0.53) (0.24) (0.04) ---
-------------- ------ ------ ------ ---
Total distributions (0.67) (0.37) (0.13) (0.01)
------------- ------ ------ ------ ------
-87-
<PAGE>
Net asset value,
end of year................... $ $20.70 $17.21 $14.23 $10.69
========== ===== ===== ===== =====
Total return+................. % 24.81% 23.84% 34.59% 4.09%
=========== ===== ===== ===== ====
Ratios to average net assets/
supplemental data:
Net assets, end of
year (in 000's)............... $ $216,039 $127,927 $68,630 $32,776
Ratio of net
investment income
to average net
assets........................ % 1.39% 1.29% 1.56% 1.31%
Ratio of operating
expenses to
average net
assets........................ % 0.89% 0.91% 0.86% 1.02%
Ratio of operating
expenses to
average net assets
before credits
allowed by the
custodian..................... % 0.89% 0.91% 0.86% 1.02%
Portfolio turnover
rate.......................... % 16% 27% 28% 56%
</TABLE>
- -----------------------
* Effective May 1, 1998, the name of the Value Equity Portfolio was
changed to Endeavor Value Equity Portfolio.
-88-
<PAGE>
+ Total return represents aggregate total return for the years indicated.
The total return of the Portfolio does not reflect the charges against
the separate accounts of PFL or the Contracts.
++ Per share amounts have been calculated using the average share method
which more appropriately presents the per share data for the year since
use of the undistributed method did not accord with results of
operations.
-89-
<PAGE>
DREYFUS SMALL CAP VALUE PORTFOLIO
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/98 12/31/97 12/31/96++# 12/31/95 12/31/94++
-------- -------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
Operating
performance:
Net asset value,
beginning of
year......................... $ $14.69 $12.22 $10.98 $11.18
----------- ----- ----- ----- -----
Net investment
income/(loss)................ 0.02 0.12 0.15 0.10
Net realized and
unrealized
gain/(loss) on
investments.................. 3.52 2.95 1.36 (0.30)
------------ ---- ---- ---- ------
Net increase/
(decrease) in net
assets resulting
from investment
operations................... 3.54 3.07 1.51 (0.20)
----------- ---- ---- ---- ------
Distributions:
Dividends from
net investment
income....................... (0.10) (0.14) (0.10) ---
Distributions from
net realized
gains........................ (1.72) (0.46) (0.17) ---
---------- ------ ------ ------ ---
Total distributions (1.82) (0.60) (0.27) ---
---------- ------ ------ ------ ---
-90-
<PAGE>
Net asset value,
end of year.................. $ $16.41 $14.69 $12.22 $10.98
========== ===== ===== ===== =====
Total return+................ % 25.56% 25.63% 14.05% (1.79)%
========= ===== ===== ===== ======
Ratios to average net assets/
supplemental data:
Net assets, end of
year (in 000's).............. $ $146,195 $85,803 $52,597 $35,966
Ratio of net
investment
income/(loss) to
average net assets........... % 0.20% 0.95% 1.56% 0.89%
Ratio of operating
expenses to
average net
assets....................... % 0.91% 0.92% 0.87% 1.03%
Ratio of operating
expenses to
average net assets
before credits
allowed by the
custodian.................... % 0.91% 0.92% 0.87% 1.03%
Portfolio turnover
rate......................... % 127% 171% 75% 77%
- -----------------------
</TABLE>
-91-
<PAGE>
+ Total return represents aggregate total return for the years indicated.
The total return of the Portfolio does not reflect the charges against
the separate accounts of PFL or the Contracts.
++ Per share amounts have been calculated using the average share method
which more appropriately presents the per share data for the year since
use of the undistributed method did not accord with results of
operations.
# The Dreyfus Corporation became the Portfolio's Adviser effective September
16, 1996.
-92-
<PAGE>
DREYFUS U.S. GOVERNMENT SECURITIES PORTFOLIO*
<TABLE>
<CAPTION>
Year Year Year Year Period
Ended Ended Ended Ended Ended
12/31/98+++ 12/31/97 12/31/96+++ 12/31/95 12/31/94*+++
----------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period................ $ $11.23 $11.39 $9.96 $10.00
--------- ----- ----- ---- -----
Net investment income..............
0.39 0.62 0.30 0.24#
Net realized and
unrealized gain/(loss)
on investments..................... 0.61 (0.44) 1.25 (0.28)
--------- ---- ------ ---- ------
Net increase/
(decrease) in net
assets resulting
from investment
operations......................... 1.00 0.18 1.55 (0.04)
--------- ---- ---- ---- ------
Distributions:
Dividends from net
investment income.................. (0.36) (0.22) (0.12) ---
Distributions from net
realized gains..................... ## --- (0.12) --- ---
--------- --- ------ --- ---
Total distributions................ (0.36) (0.34) (0.12) ---
------------ ------ ------ ------ ---
Net asset value, end of
period............................. $ $11.87 $11.23 $11.39 $9.96
============ ===== ===== ===== ====
-93-
<PAGE>
Total return++..................... % 9.15% 1.81% 15.64% (0.40)%
============= ==== ==== ===== =======
Ratios to average net
assets/ supplemental
data:
Net assets, end of
period (in 000's).................. $ $46,542 $24,727 $12,718 $3,505
Ratio of net investment
income to average net
assets............................. % 5.74% 5.68% 5.58% 4.14%+
Ratio of operating
expenses to average
net assets......................... % 0.80% 0.82% 0.84% 0.78%+
Ratio of operating
expenses to average
net assets before
waivers/reimbursement
and credits allowed by % 0.80% 0.82% 0.84% 1.83%+
the custodian......................
Portfolio turnover
rate............................... % 185% 222% 161% 100%
</TABLE>
- ------------------------
* Effective May 1, 1996, The Dreyfus Corporation became the Portfolio's
investment adviser. The Portfolio commenced operations on May 13, 1994.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
-94-
<PAGE>
+++ Per share amounts have been calculated using the average share method
which more appropriately presents the per share data for the period
since use of the undistributed method did not accord with results of
operations.
# Net investment income before fees waived and reimbursement of expenses
by investment manager for the period ended December 31, 1994 was $0.18.
## Amount represents less than $(0.01) per share.
-95-
<PAGE>
T. ROWE PRICE EQUITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
Year Year Year Period
Ended Ended Ended Ended
12/31/98+++ 12/31/97 12/31/96+++ 12/31/95*+++
<S> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period.................. $ $15.49 $13.05 $10.00
---------- ----- ----- -----
Net investment
income............................... 0.25 0.41 0.34
Net realized and
unrealized gain on
investments.......................... 4.06 2.17 2.71
---------- ---- ---- ----
Net increase in net
assets resulting from
investment operations................ 4.31 2.58 3.05
---------- ---- ---- ----
Distributions:
Dividends from net
investment income.................... (0.19) (0.10) ---
Distributions from net
realized gains....................... (0.27) (0.04) ---
----------- ------ ------ ---
Total distributions.................. (0.46) (0.14) ---
---------- ------ ------ ---
Net asset value, end of
period............................... $ $19.34 $15.49 $13.05
========== ===== ===== =====
-96-
<PAGE>
Total return++....................... % 28.27% 19.88% 30.50%
=========== ===== ===== =====
Ratios to average net
assets/ supplemental
data:
Net assets, end of period
(in 000's)........................... $ $197,228 $78,251 $21,910
Ratio of net investment
income to average net
assets............................... % 2.47% 2.89% 3.24%+
Ratio of operating
expenses to average net
assets............................... % 0.94% 0.96% 1.15%+
Ratio of operating
expenses to average net
assets before credits
allowed by the custodian............. % 0.94% 0.96% 1.15%+
Portfolio turnover rate.............. % 23% 19% 16%
</TABLE>
- --------------------------
* The Portfolio commenced operations on January 3, 1995.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
-97-
<PAGE>
+++ Per share amounts have been calculated using the average share method
which more appropriately presents the per share data for the period
since use of the undistributed method did not accord with results of
operations.
-98-
<PAGE>
T. ROWE PRICE GROWTH STOCK PORTFOLIO
<TABLE>
<CAPTION>
Year Year Year Period
Ended Ended Ended Ended
12/31/98+++ 12/31/97 12/31/96+++ 12/31/95*+++
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of
period..................................... $ $16.29 $13.72 $10.00
----------- ----- ----- -----
Net investment income...................... 0.04 0.11 0.08
Net realized and unrealized
gain on investments........................ 4.59 2.71 3.64
------------ ---- ---- ----
Net increase in net assets
resulting from investment
operations................................. 4.63 2.82 3.72
------------- ---- ---- ----
Distributions:
Dividends from net
investment income.......................... (0.03) (0.01) ---
Distributions from net realized
gains...................................... (0.11) (0.24) ---
------------ ------ ------ ---
Total distributions........................ (0.14) (0.25) ---
------------- ------ ------ ---
Net asset value, end of
period..................................... $ $20.78 $16.29 $13.72
============ ===== ===== =====
Total return++............................. % 28.57% 20.77% 37.20%
============= ===== ===== ======
-99-
<PAGE>
Ratios to average net assets/
supplemental data:
Net assets, end of period (in
000's)..................................... $ $123,230 $59,732 $21,651
Ratio of net investment
income to average net
assets..................................... % 0.38% 0.75% 0.69%+
Ratio of operating expenses
to average net assets...................... % 0.96% 1.01% 1.26%+
Ratio of operating expenses
to average net assets before
credits allowed by the
custodian.................................. % 0.96% 1.01% 1.26%+
Portfolio turnover rate.................... % 41% 44% 64%
</TABLE>
- --------------------
* The Portfolio commenced operations on January 3, 1995.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
+++ Per share amounts have been calculated using the average share method
which more appropriately presents the per share data for the period
since use of the undistributed method did not accord with results of
operations.
-100-
<PAGE>
ENDEAVOR OPPORTUNITY VALUE PORTFOLIO*
<TABLE>
<CAPTION>
Year Year Period
Ended Ended Ended
12/31/98+++ 12/31/97 12/31/96*
<S> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period....................... $ $10.06 $10.00
------------ ----- -----
Net investment income/
(loss)#................................... 0.07 (0.00)##
Net realized and
unrealized gain on
investments............................... 1.62 0.06
------------- ---- ----
Net increase in net
assets resulting from
investment operations..................... 1.69 0.06
--------------- ---- ----
Distributions:
Dividends from net
investment income......................... (0.00)## ---
Distributions from net
realized gains............................ --- ---
------------ ----- ----
Total distributions....................... 0.00 ---
------------ ---- ----
Net asset value, end
of period................................. $ $11.75 $10.06
=========== ===== =====
Total return++............................ % 16.81% 0.60%
============= ===== ====
-101-
<PAGE>
Ratios to average net
assets/supplemental
data:
Net assets, end of
period (in 000's)......................... $ $26,802 $701
Ratio of net
investment income/ (loss) to
average net assets........................ % 1.34% (1.09)%+
Ratio of operating
expenses to average
net assets................................ % 1.15% 1.30%+
Ratio of operating expenses
to average net assets before
waivers/reimbursement and
credits allowed by the % 1.16% 12.69%+
custodian.................................
Portfolio turnover
rate...................................... % 44% 0%
</TABLE>
- -----------------
* Effective May 1, 1998, the Opportunity Value Portfolio changed its name to
Endeavor Opportunity Value Portfolio. The Portfolio commenced operations on
November 18, 1996.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
+++ Per share amounts have been calculated using the average share method
which more appropriately presents the per share data for the year since
use of the undistributed method did not accord with results of
operations.
-102-
<PAGE>
# Net investment loss before waiver/reimbursement of expenses by
investment manager for the period ended December 31, 1996 was ($0.04).
## Amount represents less than $(0.01) per share.
-103-
<PAGE>
ENDEAVOR ENHANCED INDEX PORTFOLIO*
<TABLE>
<CAPTION>
Year Period
Ended Ended
12/31/98 12/31/97*
<S> <C> <C>
Operating performance:
Net asset value,
beginning of period................................ $ $10.00
---------- -----
Net investment income.............................. 0.02#
Net realized and
unrealized gain on investments..................... 2.27
---------- ----
Net increase in net
assets resulting from
investment operations.............................. 2.29
----------- ----
Distributions:
Dividends from net investment
income............................................. ---
Distributions from net realized gains.............. ---
-----------
Total distributions................................ ---
---------- ----
Net asset value, end
of period.......................................... $ $12.29
============ =====
Total return++..................................... % 22.90%
============= =====
-104-
<PAGE>
Ratios to average net
assets/supplemental
data:
Net assets, end of
period (in 000's).................................. $ $19,811
Ratio of net
investment income to average
net assets......................................... % 0.55%+
Ratio of operating
expenses to average
net assets......................................... % 1.30%+
Ratio of operating expenses to
average net assets before
waivers/reimbursement and credits % 1.56%+
allowed by the custodian...........................
Portfolio turnover
rate............................................... % 6%
</TABLE>
- -----------------
* Effective May 1, 1998, the Enhanced Index Portfolio changed its name to
Endeavor Enhanced Index Portfolio. The Portfolio commenced operations on
May 2, 1997.
+ Annualized.
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
# Net investment income before waiver/reimbursement of expenses by
investment manager for the period ended December 31, 1997 was $0.01.
-105-
<PAGE>
ENDEAVOR SELECT 50 PORTFOLIO
Period
Ended
12/31/98*+++
Operating performance:
Net asset value, beginning of period............................ $
Net investment income...........................................
Net realized and unrealized gain on
investments.....................................................
Net increase in net assets resulting from
investment operations...........................................
Net asset value, end of period.................................. $
Total return++.................................................. %
===========
Ratios to average net assets/ supplemental
data:
Net assets, end of period (in 000's)............................ $
Ratio of net investment income to average net
assets.......................................................... %+
Ratio of operating expenses to average net
assets.......................................................... %+
Ratio of operating expenses to average net
assets before waivers/reimbursement and
credits allowed by the custodian................................ %+
Portfolio turnover rate......................................... %
- -----------------
* The Portfolio commenced operations on February 3, 1998.
+ Annualized.
++ Total return represents aggregate total return for the period
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
-106-
<PAGE>
+++ Per share amounts have been calculated using the average share method
which more appropriately presents the per share data for the period
since use of the undistributed method did not accord with results of
operations.
-107-
<PAGE>
ENDEAVOR HIGH YIELD PORTFOLIO
Period
Ended
12/31/98*
Operating performance:
Net asset value, beginning of period............................ $
Net investment income...........................................
Net realized and unrealized loss on
investments.....................................................
Net decrease in net assets resulting from
investment operations...........................................
Net asset value, end of period.................................. $
Total return++.................................................. %
===========
Ratios to average net assets/ supplemental
data:
Net assets, end of period (in 000's)............................ $
Ratio of net investment income to average net
assets.......................................................... %+
Ratio of operating expenses to average net
assets.......................................................... %+
Ratio of operating expenses to average net
assets before waivers/reimbursement and
credits allowed by the custodian................................ %+
Portfolio turnover rate......................................... %
- -----------------
* The Portfolio commenced operations on June 1, 1998.
+ Annualized.
++ Total return represents aggregate total return for the period
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
-108-
<PAGE>
YOUR INVESTMENT
Shareholder Information
The separate accounts of PFL are the record owners of the Portfolios'
shares. Any reference to the shareholder in this Prospectus technically refers
to PFL's separate accounts and not to you, the Contract owner. The legal rights
of you, the Contract owner, are different from the legal rights of PFL.
However, PFL is required to solicit instructions from the Contract
owners when voting on shareholder issues. Any voting by PFL as shareholder would
therefore reflect the actual votes of Contract owners. Please see "Voting
Rights" in the prospectus for the Contracts accompanying this Prospectus for
more information on your voting rights.
Dividends, Distributions and Taxes
Each Portfolio distributes its dividends from its net investment income
to PFL's separate accounts once a year (except in the case of the Endeavor Money
Market Portfolio whose dividends are declared daily and paid monthly) and not to
you, the Contract owner. These distributions are in the form of additional
shares of stock and not cash. The result is that a Portfolio's investment
performance, including the effect of dividends, is reflected in the cash value
of the Contracts. Please see the Contracts prospectus accompanying this
Prospectus for more information.
All net realized long- or short-term capital gains of each Portfolio
are also declared once a year and reinvested in the Portfolio.
Please see the Contracts prospectus accompanying this Prospectus for a
discussion of the tax impact on you resulting from the income taxes PFL owes as
a result of its ownership of a Portfolio's shares and its receipt of dividends
and capital gains.
Sales and Purchases of Shares
The Trust does not sell its shares directly to the public. The Trust
continuously sells shares of each Portfolio only to PFL's separate accounts and
may in the future offer its shares to qualified pension and profit-sharing
plans. It could also offer shares to other separate accounts of other insurers
if approved by the Board of Trustees.
AFSG Securities Corporation ("AFSG Securities"), an affiliate of PFL,
is the principal underwriter and distributor of the Contracts. AFSG Securities
places orders for the purchase or redemption of shares of each Portfolio based
on, among other things, the amount of net Contract premiums or purchase payments
transferred to the separate accounts, transfers to or from a separate account
investment division and
-109-
<PAGE>
benefit payments to be effected on a given date pursuant to the terms of the
Contracts. Such orders are effected, without sales charge, at the net asset
value per share for each Portfolio determined on that same date.
The net asset value per share of each Portfolio for the purpose of
pricing orders for the purchase and sale of shares is generally calculated as of
the close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
time) every day the Exchange is open. Net asset value per share is computed by
dividing the value of all assets of a Portfolio (including accrued interest and
dividends), less all liabilities of the Portfolio (including accrued expenses
and dividends payable), by the number of outstanding shares of the Portfolio.
The assets of the Endeavor Money Market Portfolio are valued on a basis
(amortized cost) designed to maintain the net asset value at $1.00 per share.
Each other Portfolio's investments are valued based on market value, or where
market quotations are not readily available, based on fair value as determined
in good faith by the Trust's Board of Trustees. Amortized cost is also used to
value the short-term (60 days or less) assets of the Trust's other Portfolios.
Endeavor Group, an affiliate of the Manager, serves as the distributor
for the Trust. Endeavor Group's office is located at 2101 East Coast Highway,
Suite 300, Corona del Mar, California 92625.
-110-
<PAGE>
GLOSSARY OF INVESTMENT TERMS
This glossary provides a more detailed description of some of the types
of securities in which the Portfolios may invest. The Portfolios may invest in
these securities to the extent permitted by their investment objectives and
policies. The Portfolios are not limited by this discussion and may invest in
any other types of securities not precluded by the policies discussed elsewhere
in this Prospectus. Please refer to the SAI for a more detailed discussion of
certain of these and other securities.
Bonds are also called debt securities or debt obligations. The issuer of the
bond, which could be the U.S. government, a corporation, or a city or state,
borrows money from investors and agrees to pay back the loan amount (the
principal) on a certain date (the maturity date). Usually, the issuer also
agrees to pay interest on certain dates during the period of the loan. Some
bonds, such as zero coupon bonds, do not pay interest, but instead pay back more
at maturity than the original loan. Most bonds pay a fixed rate of interest (or
income), but some bonds' interest rates may change based on market or other
factors.
Brady Bonds are fixed income 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.
Collateralized mortgage obligations (CMOs) are fixed income securities secured
by mortgage loans and other mortgage-backed securities and are generally
considered to be derivatives.
Commercial paper is a short-term debt obligation with a maturity ranging from 1
to 270 days issued by banks, corporations and other borrowers to investors
seeking to invest idle cash.
Common stocks are equity securities representing shares of ownership in a
company and usually carry voting rights and earn dividends. Unlike preferred
stock, dividends on common stock are not fixed but are declared at the
discretion of the issuer's board of directors.
Convertible securities are preferred stocks or bonds that pay a fixed dividend
or interest payment and are convertible into common stock at a specified price
or conversion ratio.
Debt securities are securities representing money borrowed that must be repaid
at a later date. Such securities have specific maturities and usually a specific
rate of interest or an original purchase discount. They include bonds and high
yield debt securities (junk bonds). Some debt securities have variable or
floating rates of
-111-
<PAGE>
interest. Variable and floating rate securities carry interest rates that may be
adjusted periodically to reflect changes in interest rates.
Depositary receipts are receipts for shares of a foreign-based corporation that
entitle the holder to dividends and capital gains on the underlying security.
Receipts include those issued by domestic banks (American Depositary Receipts),
foreign banks (Global or European Depositary Receipts) and broker-dealers
(depositary shares).
Derivatives are used to limit risk in a Portfolio or to enhance investment
return, and have a return tied to a formula based upon an interest rate, index,
price of a security, or other measurement. Derivatives include options, futures,
forward contracts and related products.
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. Dollar roll
transactions are treated as borrowings for purposes of the 1940 Act, and the
aggregate of such transactions and all other borrowings of the Portfolio
(including reverse repurchase agreements) will be subject to the requirement
that the Portfolio maintain asset coverage of 300% for all borrowings.
Equity Securities include common stock, preferred stock, convertible securities,
warrants and other rights to purchase common stock.
Eurodollar obligations are dollar-denominated securities issued outside the U.S.
by foreign corporations and financial institutions and by foreign branches of
U.S. corporations and financial institutions.
Fixed income securities are securities that pay a specified rate of return. The
term generally includes short- and long-term government, corporate and municipal
obligations that pay a specified rate of interest or coupons for a specified
period of time, and preferred stock, which pays fixed dividends. Coupon and
dividend rates may be fixed for the life of the issue or, in the case of
adjustable and floating rate securities, for a shorter period.
Foreign currency transactions are entered into for the purpose of hedging
against foreign exchange risk arising from the Portfolio's investment or
anticipated investment in securities denominated in foreign currencies. The
Portfolio also may enter into these contracts for purposes of increasing
exposure to a foreign currency or to shift exposure to foreign currency
fluctuations from one country to another. Foreign currency transactions include
the purchase of foreign currency on a spot (or cash) basis, contracts to
purchase or sell foreign currencies at a future date (forward contracts), the
purchase and sale of foreign currency futures contracts, and the purchase of
exchange
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traded and over-the-counter call and put options on foreign currency futures
contracts and on foreign currencies.
These hedging transactions 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 can be achieved
at some future point in time.
Foreign debt securities are issued by foreign corporations and governments. They
may include Eurodollar bonds and Yankee bonds.
Forward commitments, when-Issued and delayed securities generally involve the
purchase of a security with payment and delivery at some time in the future -
i.e., beyond normal settlement. The Portfolios do not earn interest on such
securities until settlement and bear the risk of market value fluctuations in
between the purchase and settlement dates. New issues of stocks and bonds,
private placements and U.S. government securities may be sold in this manner.
Forward contracts are contracts to purchase or sell a specified amount of a
financial instrument for an agreed upon price at a specified time.
Futures are contracts that obligate the buyer to receive and the seller to
deliver an instrument or money at a specified price on a specified date.
GNMA certificates are debt securities representing an interest in one or a pool
of mortgages that are insured by the Federal Housing Administration or the
Farmers Home Administration or guaranteed by the Veterans Administration. The
certificates are guaranteed as to timely payment of principal and interest by
Ginnie Mae.
High yield/high risk debt securities are securities that are rated below
investment grade by the primary rating agencies (e.g., BB or lower by Standard &
Poor's and Ba or lower by Moody's). Other terms commonly used to describe such
securities include "lower rated bonds," "noninvestment grade bonds" and "junk
bonds."
Hybrid Instruments were recently developed and combine the elements of futures
contracts or options with those of debt, preferred equity or a depositary
instrument. They are often indexed to the price of a commodity, particular
currency, or a domestic or foreign debt or equity security index. Examples of
hybrid instruments include debt instruments with interest or principal payments
or redemption terms determined by reference to the value of a currency or
commodity or securities index at a future point in time or preferred stock with
dividend rates determined by reference to the value of a currency.
Interest rate transactions are hedging transactions such as interest rate swaps
and the purchase or sale of interest rate caps and floors. They are used by a
Portfolio in an attempt to protect the value of its investments from interest
rate fluctuations. Interest
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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 investment adviser to the Portfolio enters 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 will not sell interest rate caps or floors that it does not own.
Investment grade debt securities are securities rated in one of the four highest
rating categories by Standard & Poor's, Moody's or other nationally recognized
rating agency. Securities rated in the fourth category (e.g., BBB by Standard &
Poor's and Baa by Moody's) may have some speculative characteristics.
Illiquid securities are securities that cannot be disposed of quickly in the
normal course of business.
Mortgage-backed securities include securities backed by Ginnie Mae and Fannie
Mae. These securities represent collections (pools) of commercial and
residential mortgages. These securities are generally pass-through securities,
which means that principal and interest payments on the underlying securities
(less servicing fees) are passed through to shareholders on a pro rata basis.
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. This means that principal and interest payments on the underlying
securities (less servicing fees) are passed through to shareholders on a pro
rata basis.
Notes are debt securities with shorter-term obligations than bonds.
Options are the right, but not the obligation, to buy or sell a specified amount
of securities or other assets on or before a fixed date at a predetermined
price.]
Passive foreign investment companies are any foreign corporations which generate
certain amounts of passive income or hold certain amounts of assets for the
production of passive income. Passive income includes dividends, royalties, rent
and annuities.
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PIK debt securities are debt obligations which provide that the issuer 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.
Preferred stock are equity securities that generally pay dividends at a
specified rate and have preference over common stock in the payment of dividends
and liquidation.
Preferred stock generally does not carry voting rights.
Repurchase agreements involve the purchase of a security by a Portfolio and a
simultaneous agreement by the seller (generally a bank or dealer) to repurchase
the security from the Portfolio at a specified date or upon demand. This
technique offers a method of earning income on idle cash.
Reverse repurchase agreements involve the sale of a security by a Portfolio to
another party (generally a bank or dealer) in return for cash and an agreement
by the Portfolio to buy the security back at a specified price and time.
U.S. government securities include direct obligations of the U.S. government
that are supported by its full faith and credit, like Treasury bills. Treasury
bills have initial maturities of less than one year, Treasury notes have initial
maturities of one to ten years and Treasury bonds may be issued with any
maturity but generally have maturities of at least ten years. U.S. government
securities also include indirect obligations of the U.S. government that are
issued by federal agencies and government-sponsored entities, like bonds and
notes issued by the Federal Home Loan Bank, Ginnie Mae, Fannie Mae and Sallie
Mae. Unlike Treasury securities, agency securities generally are not backed by
the full faith and credit of the U.S. government. Some agency securities are
supported by the right of the issuer to borrow from the Treasury, others are
supported by the discretionary authority of the U.S. government to purchase the
agency's obligations and others are supported only by the credit of the
sponsoring agency.
Variable amount master demand notes differ from ordinary commercial paper in
that they are issued pursuant to a written agreement between the issuer and the
holder, their amounts may be increased from time to time by the holder (subject
to an agreed maximum) or decreased by the holder or the issuer, they are payable
on demand, the rate of interest payable on them varies with an agreed formula
and they are typically not rated by a rating agency. Transfer of such notes is
usually restricted by the issuer, and there is no secondary trading market for
them. Any variable amount master demand note purchased by a Portfolio will be
regarded as an illiquid security.
Warrants are securities, typically issued with preferred stock or bonds, that
give the holder the right to buy a proportionate amount of common stock at a
specified price, usually at a price that is higher than the market price at the
time of issuance of the warrant. The right may last for a period of years or
indefinitely.
Yankee bonds are dollar-denominated securities issued in the U.S. by foreign
issuers.
Zero-coupon bonds are bonds that provide for no current interest payment and are
sold at a discount.
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FOR MORE INFORMATION
If you would like more information about a Portfolio, the following documents
are available to you free upon request:
Annual/ Semi-annual Reports
Contain additional information about a Portfolio's
performance. In a Portfolio's annual report, you will find a
discussion of the market conditions and investment strategies
that significantly affected the Portfolio's performance during
its last fiscal year.
Statement of Additional Information ("SAI")
Provides a fuller technical and legal description of the
Portfolio's policies, investment restrictions and business
structure. The SAI is legally considered to be a part of this
Prospectus.
If you would like a copy of the current versions of these documents, or other
information about a Portfolio, contact:
ENDEAVOR SERIES TRUST
2101 East Coast Highway, Suite 300
Corona del Mar, California 92625
1-800-854-8393
Information about a Portfolio, including the Annual and Semi-annual Reports and
SAI, may also be obtained from the Securities and Exchange Commission ('SEC"):
o In person Review and copy documents in the SEC's Public Reference Room in
Washington, D.C. (for information call 1-800-SEC-0330).
o On line Retrieve information from the SEC's web site at:
http://www.sec.gov.
o By mail Request documents, upon payment of a duplicating fee, by writing
to SEC, Public Reference Section, Washington, D.C. 20549.
SEC FILE # 811-5780
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STATEMENT OF ADDITIONAL INFORMATION
ENDEAVORSM SERIES TRUST
This Statement of Additional Information provides supplementary
information pertaining to shares of the thirteen investment portfolios
("Portfolios") of Endeavor Series Trust (the "Fund"), a diversified, open-end,
management investment company. This Statement of Additional Information is not a
prospectus and should be read in conjunction with the Prospectus dated May 1,
1999 (the "Prospectus") for the Endeavor Money Market Portfolio, the Endeavor
Asset Allocation Portfolio, the T. Rowe Price International Stock Portfolio, the
Endeavor Value Equity Portfolio, the Dreyfus Small Cap Value Portfolio, the
Dreyfus U.S. Government Securities Portfolio, the T. Rowe Price Equity Income
Portfolio, the T. Rowe Price Growth Stock Portfolio, the Endeavor Opportunity
Value Portfolio, the Endeavor Enhanced Index Portfolio, the Endeavor Select 50
Portfolio, the Endeavor High Yield Portfolio and the Endeavor Janus Growth
Portfolio, which may be obtained by writing the Fund at 2101 East Coast Highway,
Suite 300, Corona del Mar, California 92625 or by calling (800) 854-8393. Unless
otherwise defined herein, capitalized terms have the meanings given to them in
the Prospectus.
EndeavorSM is a registered service mark of Endeavor Management Co.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES................................................................................4
U.S. Government Securities...............................................................................4
Money Market Securities..................................................................................4
Mortgage-Backed Securities...............................................................................5
Collateralized Mortgage Obligations......................................................................6
Stripped Mortgage-Backed Securities......................................................................7
Non-Mortgage Asset-Backed Securities.....................................................................8
Preferred Stocks.........................................................................................9
Rights and Warrants......................................................................................9
Convertible Securities..................................................................................10
Foreign Securities......................................................................................11
Investment Grade Corporate Debt Securities..............................................................11
Zero Coupon Bonds, Deferred Interest Bonds
and PIK Bonds........................................................................................12
Loans and Other Direct Indebtedness.....................................................................12
Brady Bonds.............................................................................................13
Other Investment Companies..............................................................................13
Reverse Repurchase Agreements...........................................................................14
Depositary Receipts.....................................................................................14
Hybrid Instruments......................................................................................15
Illiquid Securities.....................................................................................15
Indexed Securities......................................................................................16
Short Sales.............................................................................................16
Special Situations......................................................................................16
High Yield/High Risk Debt Securities....................................................................17
Options and Futures Strategies....................................................................... 18
Foreign Currency Transactions........................................................................ 23
Repurchase Agreements................................................................................ 27
Forward Commitments , When-Issued and Delayed Delivery
Securities.....................................................................................28
Securities Loans..................................................................................... 29
Interest Rate Transactions........................................................................... 29
Dollar Roll Transactions..............................................................................30
Municipal Fixed-Income Securities.......................................................................32
Portfolio Turnover................................................................................... 33
INVESTMENT RESTRICTIONS....................................................................................... 34
Other Policies....................................................................................... 37
PERFORMANCE INFORMATION....................................................................................... 38
Total Return......................................................................................... 39
Yield ............................................................................................ 41
Non-Standardized Performance......................................................................... 43
PORTFOLIO TRANSACTIONS........................................................................................ 43
Brokerage Enhancement Plan........................................................................... 46
MANAGEMENT OF THE FUND........................................................................................ 47
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Trustees and Officers................................................................................ 47
INVESTMENT ADVISORY AND OTHER SERVICES........................................................................ 52
The Manager.......................................................................................... 53
The Investment Advisers.............................................................................. 55
Custodian............................................................................................ 60
Transfer Agent....................................................................................... 61
Legal Matters........................................................................................ 61
Independent Auditors................................................................................. 61
REDEMPTION OF SHARES.......................................................................................... 61
NET ASSET VALUE............................................................................................... 61
TAXES ..................................................................................................... 63
Federal Income Taxes................................................................................. 63
ORGANIZATION AND CAPITALIZATION OF THE FUND................................................................... 66
FINANCIAL STATEMENTS.......................................................................................... 68
APPENDIX .......................................................................................................A-1
</TABLE>
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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, 1999.
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INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of the investment
objectives and policies of the Portfolios in the Prospectus.
U.S. Government Securities (All Portfolios)
Securities issued or guaranteed as to principal and interest by the
U.S. government or its agencies and government-sponsored entities include U.S.
Treasury obligations, consisting of bills, notes and bonds, which principally
differ in their interest rates, maturities and times of issuance, and
obligations issued or guaranteed by agencies and government-sponsored entities
which are supported by (i) the full faith and credit of the U.S. Treasury (such
as securities of the Small Business Administration), (ii) the limited authority
of the issuer to borrow from the U.S. Treasury (such as securities of the
Student Loan Marketing Association) or (iii) the authority of the U.S.
government to purchase certain obligations of the issuer (such as securities of
the Federal National Mortgage Association). No assurance can be given that the
U.S. government will provide financial support to U.S. government agencies or
government- sponsored entities as described in clauses (ii) or (iii) above in
the future, other than as set forth above, since it is not obligated to do so by
law.
Money Market Securities (All Portfolios)
Money market securities in which the Portfolios may invest include U.S.
government securities, U.S. dollar denominated instruments (such as bankers'
acceptances, commercial paper, domestic or Yankee certificates of deposit and
Eurodollar obligations) issued or guaranteed by bank holding companies in the
United States, their subsidiaries and their foreign branches. These bank
obligations may be general obligations of the parent bank holding company or may
be limited to the issuing entity by the terms of the specific obligation or by
government regulation.
Obligations of the International Bank for Reconstruction and
Development (also known as the World Bank) are supported by subscribed but
unpaid commitments of its member countries. There can be no assurance that these
commitments will be undertaken or complied with in the future.
Other money market securities in which a Portfolio may invest also
include certain variable and floating rate instruments and participations in
corporate loans to corporations in whose commercial paper or other short-term
obligations a Portfolio may invest. Because the bank issuing the participations
does not guarantee them in any way, they are subject to the
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credit risks generally associated with the underlying corporate borrower. To the
extent that a Portfolio may be regarded as a creditor of the issuing bank
(rather than of the underlying corporate borrower under the terms of the loan
participation), the Portfolio may also be subject to credit risks associated
with the issuing bank. The secondary market, if any, for these loan
participations is extremely limited and any such participations purchased by a
Portfolio will be regarded as illiquid.
A Portfolio may also invest in bonds and notes with remaining
maturities of thirteen months or less, variable rate notes and variable amount
master demand notes. A variable amount master demand note differs from ordinary
commercial paper in that it is issued pursuant to a written agreement between
the issuer and the holder, its amount may be increased from time to time by the
holder (subject to an agreed maximum) or decreased by the holder or the issuer,
it is payable on demand, the rate of interest payable on it varies with an
agreed formula and it is typically not rated by a rating agency. Transfer of
such notes is usually restricted by the issuer, and there is no secondary
trading market for them. Any variable amount master demand note purchased by a
Portfolio will be regarded as an illiquid security.
The Portfolios will invest only in high quality money market
instruments, i.e., securities which have been assigned the highest quality
ratings by nationally recognized statistical rating organizations ("NRSROs")
such as "A-1" by Standard & Poor's Ratings Services ("Standard & Poor's") or
"Prime-1" by Moody's Investors Service, Inc. ("Moody's"), or if not rated,
determined to be of comparable quality by the Portfolio's investment adviser.
With respect to the Endeavor Money Market Portfolio, no more than 5% of the
Portfolio's total assets may be invested in instruments assigned the second
highest quality ratings such as "A-2" or "Prime-2", or if not rated, determined
to be of comparable quality by the Portfolio's investment adviser.
Mortgage-Backed Securities (Endeavor Asset Allocation, Dreyfus U.S.
Government Securities, Endeavor High Yield , T. Rowe Price Equity Income,
Endeavor Janus Growth and T. Rowe Price International Stock Portfolios)
The mortgage-backed securities in which a 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.
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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 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 (Endeavor Asset
Allocation, Dreyfus U.S. Government Securities, Endeavor High Yield, Endeavor
Value Equity and Endeavor Janus Growth
Portfolios)
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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 certain limits, that
specified amounts of principal be applied on each payment date, and generally
exhibit less yield and market volatility than other classes. Generally, CMOs are
issued or guaranteed by the U.S. government or its agencies or instrumentalities
or maybe collateralized by a portfolio of mortgages or mortgage-related
securities guaranteed by such an agency or instrumentality. Certain CMOs in
which a Portfolio may invest are not guaranteed by the U.S. government or its
agencies or instrumentalities.
Stripped Mortgage-Backed Securities (Endeavor Asset
Allocation, Dreyfus U.S. Government Securities, T. Rowe Price International
Stock and Endeavor Janus Growth Portfolios)
Stripped mortgage-backed securities ("SMBS") 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. A Portfolio will only invest in SMBS whose mortgage assets are
guaranteed by agencies of the U.S. government or government-sponsored entities.
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
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payments may have a material adverse effect on a Portfolio's yield to maturity
from these securities. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, a Portfolio may fail to fully recoup its
initial investment in these securities even if the security is in one of the
highest rating categories.
The Endeavor Asset Allocation Portfolio may invest not more than 5% of
its total assets in CMOs deemed by its investment adviser to be complex, such as
floating rate and inverse floating rate tranches and SMBS.
Non-Mortgage Asset-Backed Securities (Endeavor Asset
Allocation, Dreyfus U.S. Government Securities, Endeavor High
Yield, T. Rowe Price International Stock and Endeavor
Janus Growth Portfolios)
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 government- sponsored entities; however,
the payment of principal and interest on such obligations may be guaranteed up
to certain amounts and for a certain time period by a letter of credit issued by
a financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities. In addition, such securities generally will have
remaining estimated lives at the time of purchase of five years or less.
The purchase of non-mortgage asset-backed securities raises
considerations peculiar to the financing of the instruments underlying such
securities. For example, most organizations that issue asset-backed securities
relating to motor vehicle installment purchase obligations perfect their
interests in their respective obligations only by filing a financing statement
and by having the servicer of the obligations, which is usually the originator,
take custody thereof. In such circumstances, if the servicer were to sell the
same obligations to another party, in violation of its duty not to do so, there
is a risk that such party could acquire an interest in the obligations superior
to that of holders of the asset-backed securities. Also, although most such
obligations grant a security interest in the motor vehicle being financed, in
most states the security interest in a motor vehicle must be noted on the
certificate of title to perfect such security interest against competing claims
of other parties. Due to the large number of vehicles involved, however, the
certificate of title to each vehicle financed, pursuant to
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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.
Preferred Stocks (All Portfolios except Endeavor Money
Market and Dreyfus Small Cap Value Portfolios)
A Portfolio may purchase preferred stock. Preferred stock, unlike
common stock, has a stated dividend rate payable from the corporation's
earnings. Preferred stock dividends may be cumulative or non-cumulative,
participating, or auction rate. "Cumulative" dividend provisions require all or
a portion of prior unpaid dividends to be paid.
If interest rates rise, the fixed dividend on preferred stocks may be
less attractive, causing the price of preferred stocks to decline. Preferred
stock may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, which can be a negative feature when interest
rates decline. Preferred stock also generally has a preference over common stock
on the distribution of a corporation's assets in the event of liquidation of the
corporation. Preferred stock may be "participating" stock, which means that it
may be entitled to a dividend exceeding the stated dividend in certain cases.
The rights of preferred stock on distribution of a corporation's assets in the
event of a liquidation are generally subordinate to the rights associated with a
corporation's debt securities.
Rights and Warrants (All Portfolios except Endeavor Money Market, Endeavor
Value Equity, Dreyfus Small Cap Value, T. Rowe Price Equity Income and Dreyfus
U.S. Government Securities Portfolios)
A Portfolio may purchase rights and warrants. Warrants basically are
options to purchase equity securities at specific prices valid for a specific
period of time. Their prices do not necessarily move parallel to the prices of
the underlying
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securities. Rights are similar to warrants, but normally have a short duration
and are distributed directly by the issuer to its shareholders. Rights and
warrants have no voting rights, receive no dividends and have no rights with
respect to the assets of the issuer. These investments carry the risk that they
may be worthless to the Portfolio at the time it may exercise its rights, due to
the fact that the underlying securities have a market value less than the
exercise price.
Convertible Securities (All Portfolios except Endeavor Money Market and
Endeavor Value Equity Portfolios)
A Portfolio may invest in convertible securities of domestic and,
subject to the Portfolio's investment strategy, foreign issuers. The convertible
securities in which a Portfolio may invest include any debt securities or
preferred stock which may be converted into common stock or which carry the
right to purchase common stock. Convertible securities entitle the holder to
exchange the securities for a specified number of shares of common stock,
usually of the same company, at specified prices within a certain period of
time.
Convertible securities may be converted at either a stated price or
stated rate into underlying shares of common stock. Although to a lesser extent
than with fixed-income securities, the market of convertible securities tends to
decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion feature, the
market value of convertible securities tends to vary with fluctuations in the
market value of the underlying common stock. A unique feature of convertible
securities is that as the market price of the underlying common stock declines,
convertible securities tend to trade increasingly on a yield basis, and so may
not experience market value declines to the same extent as the underlying common
stock. When the market price of the underlying common stock increases, the
prices of the convertible securities tend to rise as a reflection of the value
of the underlying common stock. While no securities investments are without
risk, investments in convertible securities generally entail less risk than
investments in common stock of the same issuer.
Convertible securities are investments that provide for a stable stream
of income with generally higher yields than common stocks. There can be no
assurance of current income because the issuers of the convertible securities
may default on their obligations. A convertible security, in addition to
providing fixed income, offers the potential for capital appreciation through
the conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance of
capital appreciation, however, because securities prices fluctuate. Convertible
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securities, however, generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.
Foreign Securities (All Portfolios except Endeavor Asset Allocation
Portfolio)
A Portfolio may invest in foreign equity and debt securities or U.S.
securities traded in foreign markets. In addition to securities issued by
foreign companies, permissible investments may also consist of obligations of
foreign branches of U.S. banks and of foreign banks, including European
certificates of deposit, European time deposits, Canadian time deposits, Yankee
certificates of deposit, Eurodollar bonds and Yankee bonds. The Portfolio may
also invest in Canadian commercial paper and Europaper. These instruments may
subject the Portfolio to additional investment risks from those related to
investments in obligations of U.S. issuers. See the prospectus for a discussion
of the risks of investing in foreign securities. In addition, foreign branches
of U.S. banks and foreign banks may be subject to less stringent reserve
requirements than those applicable to domestic branches of U.S. banks.
The debt obligations of foreign governments and entities may or may not
be supported by the full faith and credit of the foreign government. A Portfolio
may buy securities issued by certain "supra-national" entities, which include
entities designated or supported by governments to promote economic
reconstruction or development, international banking organizations and related
government agencies. Examples are the International Bank for Reconstruction and
Development (commonly called the "World Bank"), the Asian Development bank and
the Inter-American Development Bank.
The governmental members of these supranational entities are
"stockholders" that typically make capital contributions and may be committed to
make additional capital contributions if the entity is unable to repay its
borrowings. A supra-national entity's lending activities may be limited to a
percentage of its total capital, reserves and net income. There can be no
assurance that the constituent foreign governments will continue to be able or
willing to honor their capitalization commitments for those entities.
Investment Grade Corporate Debt Securities (All Portfolios except Endeavor
Money Market, Endeavor Value Equity and Dreyfus Small Cap Value Portfolios)
Debt securities are rated by national bond ratings agencies. Securities
rated BBB by Standard & Poor ("S&P") or Baa by Moody's Investors Services, Inc.
("Moody's") are considered investment grade securities, but are somewhat riskier
than higher rated
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investment grade obligations because they are regarded as having only an
adequate capacity to pay principal and interest, and are considered to lack
outstanding investment characteristics and may be speculative. See the Appendix
to this SAI for a description of the various securities ratings.
Zero Coupon Bonds, Deferred Interest Bonds and PIK Bonds (Endeavor Asset
Allocation, Dreyfus U.S. Government Securities, T. Rowe Price International
Stock, Endeavor High Yield and Endeavor Opportunity Value Portfolios)
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. A 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.
Loans and Other Direct Indebtedness (Endeavor High Yield , Dreyfus U.S.
Government Securities, T. Rowe Price International Stock and Endeavor Janus
Growth Portfolios)
By purchasing a loan, a 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. A 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 a Portfolio may involve
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revolving credit facilities or other standby financing commitments which
obligate the Portfolio 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, a 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 (Endeavor High Yield Portfolio)
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 to commercial bank loans by public and private entities, investments in
Brady Bonds may be viewed as speculative.
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Other Investment Companies (All Portfolios except Endeavor Money Market,
Endeavor Value Equity, Endeavor Opportunity Value, T. Rowe Price Equity Income
and T. Rowe Price Growth Stock Portfolios)
In connection with its investments in accordance with the various
investment disciplines, a Portfolio may invest up to 10% of its total assets in
shares of other investment companies investing exclusively in securities in
which it may otherwise invest. Because of restrictions on direct investment by
U.S. entities in certain countries, other investment companies may provide the
most practical or only way for a Portfolio to invest in certain markets. Such
investments may involve the payment of substantial premiums above the net asset
value of those investment companies' portfolio securities and are subject to
limitations under the Investment Company Act of 1940, as amended ("1940 Act"). A
Portfolio also may incur tax liability to the extent it invests in the stock of
a foreign issuer that is a "passive foreign investment company" regardless of
whether such "passive foreign investment company" makes distributions to the
Portfolio.
Each Portfolio does not intend to invest in other investment companies
unless, in the investment adviser's judgment, the potential benefits exceed
associated costs. As a shareholder in an investment company, a Portfolio bears
its ratable share of that investment company's expenses, including advisory and
administration fees. The Manager and the investment adviser to the Endeavor
Select 50 Portfolio have agreed to waive their respective own management and
advisory fees with respect to the portion of the Portfolio's assets invested in
other open-end (but not closed-end) investment companies. If the Endeavor Janus
Growth Portfolio invests in a Janus money market fund, the Portfolio's
investment adviser will remit to the Portfolio the fees it receives from the
Janus money market fund to the extent such fees are based on the Portfolio's
assets.
Reverse Repurchase Agreements (All Portfolios)
Each Portfolio is permitted to enter into reverse repurchase
agreements. In a reverse repurchase agreement, the Portfolio sells a security
and agrees to repurchase it at a mutually agreed upon date and price, reflecting
the interest rate effective for the term of the agreement. For the purposes of
the 1940 Act it is considered a form of borrowing by the Portfolio and,
therefore, is a form of leverage. Leverage may cause any gains or losses of the
Portfolio to be magnified.
Depositary Receipts (All Portfolios except Endeavor Money
Market , Endeavor Value Equity, Endeavor Opportunity Value, Dreyfus Small Cap
Value, T. Rowe Price Equity Income and Endeavor High Yield Portfolios)
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A Portfolio may purchase foreign securities in the form of American
Depositary Receipts, European Depositary Receipts, Global Depositary Receipts or
other securities convertible into securities of corporations in which the
Portfolio is permitted to invest pursuant to its investment objectives and
policies. These securities may not necessarily be denominated in the same
currency into which they may be converted. Depositary receipts are receipts
typically issued by a U.S. or foreign bank or trust company and evidence
ownership of underlying securities issued by a foreign corporation. The Endeavor
High Yield Portfolio will only invest in American Depositary Receipts. Because
American Depositary Receipts are listed on a U.S. securities exchange, the
Portfolio's investment adviser does not treat them as foreign securities.
However, like other depositary receipts, American Depositary Receipts are
subject to many of the risks of foreign securities such as changes in exchange
rates and more limited information about foreign issuers.
Hybrid Instruments (T. Rowe Price Equity Income, T. Rowe Price Growth
Stock, T. Rowe Price International Stock , Dreyfus U.S. Government Securities,
Endeavor High Yield, Endeavor Asset Allocation and Endeavor Janus Growth
Portfolios)
The T. Rowe Price Equity Income, T. Rowe Price Growth Stock and T. Rowe
Price International Stock Portfolios may invest up to 10% of their total assets
and the Dreyfus U.S. Government Securities Portfolio may invest up to 5% of its
total assets in hybrid instruments. Hybrid instruments have recently been
developed and combine the elements of futures contracts or options with those of
debt, preferred equity or a depository instrument. Often these hybrid
instruments are indexed to the price of a commodity, particular currency, or a
domestic or foreign debt or equity securities index. Hybrid instruments may take
a variety of forms, including, but not limited to, debt instruments with
interest or principal payments or redemption terms determined by reference to
the value of a currency or commodity or securities index at a future point in
time, preferred stock with dividend rates determined by reference to the value
of a currency, or convertible securities with the conversion terms related to a
particular commodity. Hybrid instruments may bear interest or pay dividends at
below market (or even relatively nominal) rates. Under certain conditions, the
redemption value of such an instrument could be zero. Hybrid instruments can
have volatile prices and limited liquidity and their use by a Portfolio may not
be successful.
Illiquid Securities (All Portfolios)
Each Portfolio may invest up to 15% (10% with respect to Endeavor Money
Market and Dreyfus U.S. Government Securities Portfolios) of its net assets in
illiquid securities and other securities which are not readily marketable,
including non-negotiable time deposits, certain restricted securities not deemed
by the Fund's Trustees to be liquid and repurchase agreements with maturities
longer than seven days. Securities eligible for resale pursuant to Rule 144A
under the Securities Act of 1933, which have been determined to be liquid, will
not be considered by the Portfolios' investment advisers to be illiquid or not
readily marketable and, therefore, are not subject to the aforementioned 10% or
15% limits. The inability of a Portfolio to dispose of illiquid or not readily
marketable investments readily or at a reasonable price could impair the
Portfolio's ability to raise cash for redemptions or other purposes. The
liquidity of securities purchased by a Portfolio which are eligible for resale
pursuant to Rule 144A will be monitored by the Portfolios' investment advisers
on an ongoing basis, subject to the oversight of the Trustees. In the event that
such a security is deemed to be no longer liquid, a Portfolio's holdings will be
reviewed to determine what action, if any, is required to ensure that the
retention of such security does not result in a Portfolio having more than 10%
or 15%, as applicable, of its assets invested in illiquid or not readily
marketable securities.
Indexed Securities (Endeavor High Yield and Endeavor Janus Growth
Portfolios)
A 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.
Short Sales (Endeavor High Yield, Endeavor Janus Growth, T. Rowe Price
International Stock, Dreyfus U.S. Government Securities and Endeavor Enhanced
Index Portfolios)
A Portfolio may sell securities "short against the box." A short sale
is the sale of a security that the Portfolio does not own. A short sale is
"against the box" if at all times when the short position is open, the Portfolio
owns an equal amount of the securities sold short or securities convertible
into, or exchangeable without further consideration for, securities of the same
issue as the securities sold short.
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Special Situations (Endeavor Janus Growth Portfolio)
The Portfolio may invest in "special situations" from time to time. A
special situation arises when, in the opinion of the investment adviser, the
securities of a particular issuer will be recognized and appreciate in value due
to a specific development with respect to that issuer. Developments creating a
special situation might include, among others, a new product or process, a
management change, a technological breakthrough, or other extraordinary
corporate event, or differences in market supply and demand for the security.
Investment in special situations may carry an additional risk of loss
in the event that the anticipated development does not occur or does not attract
the expected attention. The impact of this strategy on the Portfolio will depend
on the Portfolio's size and the extent of the holdings of the special situation
issuer relative to its total assets.
High Yield/High Risk Debt Securities (T. Rowe Price International Stock,
Endeavor Opportunity Value, T. Rowe Price Equity Income, Endeavor Select 50,
Endeavor Janus Growth, Endeavor High Yield and Dreyfus U.S. Government
Securities Portfolios)
Certain lower rated securities purchased by a Portfolio, such as those
rated Ba or B by Moody's or BB or B by Standard & Poor's (commonly known as junk
bonds), may be subject to certain risks with respect to the issuing entity's
ability to make scheduled payments of principal and interest and to greater
market fluctuations. While generally providing greater income than investments
in higher quality securities, lower quality fixed income securities involve
greater risk of loss of principal and income, including the possibility of
default or bankruptcy of the issuers of such securities, and have greater price
volatility, especially during periods of economic uncertainty or change. These
lower quality fixed income securities tend to be affected by economic changes
and short-term corporate and industry developments to a greater extent than
higher quality securities, which react primarily to fluctuations in the general
level of interest rates. To the extent that a Portfolio invests in such lower
quality securities, the achievement of its investment objective may be more
dependent on the investment adviser's own credit analysis.
Lower quality fixed income securities are affected by the market's
perception of their credit quality, especially during times of adverse
publicity, and the outlook for economic growth. Economic downturns or an
increase in interest rates may cause a higher incidence of default by the
issuers of these securities, especially issuers that are highly leveraged. The
market for these lower quality fixed income securities is generally less
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liquid than the market for investment grade fixed income securities. It may be
more difficult to sell these lower rated securities to meet redemption requests,
to respond to changes in the market, or to value accurately a Portfolio's
portfolio securities for purposes of determining the Portfolio's net asset
value.
In determining suitability of investment in a particular unrated
security, the investment adviser takes into consideration asset and debt service
coverage, the purpose of the financing, history of the issuer, existence of
other rated securities of the issuer, and other relevant conditions, such as
comparability to other issuers.
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 investment
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 investment advisers to the Endeavor Value Equity Portfolio and
Dreyfus Small Cap Value Portfolio do not presently intend to utilize options or
futures contracts and related options but may do so in the future. The
investment adviser to the T. Rowe Price International Stock Portfolio, T. Rowe
Price Equity Income Portfolio, T. Rowe Price Growth Stock Portfolio and Endeavor
Enhanced Index Portfolio do not presently intend to write or purchase put or
call options, but may do so in the future. The investment adviser to the
Endeavor Select 50 Portfolio does not currently intend to purchase and sell
interest rate futures or options on future contracts, 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
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exist in various types of options or futures. Therefore no assurance can be
given that a Portfolio will be able to utilize these instruments effectively for
the purposes stated below.
Writing Covered Options on Securities. A Portfolio may write covered
call options and covered put options on optionable securities of the types in
which it is permitted to invest from time to time as its investment 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.
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A Portfolio may terminate an option which it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. The Portfolio will
realize a profit (or loss) from such transaction if the cost of such transaction
is less (or more) than the premium received from the writing of the option.
Because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the repurchase of a call option may be offset in whole or in part by
unrealized appreciation of the underlying security owned by the Portfolio.
Purchasing Put and Call Options on Securities. A Portfolio may purchase
put options to protect its portfolio holdings in an underlying security against
a decline in market value. This protection is provided during the life of the
put option since the Portfolio, as holder of the put, is able to sell the
underlying security at the exercise price regardless of any decline in the
underlying security's market price. For the purchase of a put option to be
profitable, the market price of the underlying security must decline
sufficiently below the exercise price to cover the premium and transaction
costs. By using put options in this manner, any profit which the Portfolio might
otherwise have realized on the underlying security will be reduced by the
premium paid for the put option and by transaction costs.
A Portfolio may also purchase a call option to hedge against an
increase in price of a security that it intends to purchase. This protection is
provided during the life of the call option since the Portfolio, as holder of
the call, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. For the
purchase of a call option to be profitable, the market price of the underlying
security must rise sufficiently above the exercise price to cover the premium
and transaction costs. By using call options in this manner, any profit which
the Portfolio might have realized had it bought the underlying security at the
time it purchased the call option will be reduced by the premium paid for the
call option and by transaction costs.
Except for the Endeavor Janus Growth Portfolio, 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. There are no specific limitations on the
Endeavor Janus Growth Portfolio's purchasing options on securities.
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.
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Options on stock indices are similar to options on specific securities
except that, rather than the right to take or make delivery of the specific
security at a specific price, an option on a stock index gives the holder the
right to receive, upon exercise of the option, an amount of cash if the closing
level of that stock index is greater than, in the case of a call, or less than,
in the case of a put, the exercise price of the option. This amount of cash is
equal to such difference between the closing price of the index and the exercise
price of the option expressed in dollars times a specified multiple. The writer
of the option is obligated, in return for the premium received, to make delivery
of this amount. Unlike options on specific securities, all settlements of
options on stock indices are in cash and gain or loss depends on general
movements in the stocks included in the index rather than price movements in
particular stocks. Currently options traded include the Standard & Poor's 500
Composite Stock Price Index, the NYSE Composite Index, the AMEX Market Value
Index, the National Over-The-Counter Index, the Nikkei 225 Stock Average Index,
the Financial Times Stock Exchange 100 Index and other standard broadly based
stock market indices. Options are also traded in certain industry or market
segment indices such as the Pharmaceutical Index.
A stock index futures contract is an agreement in which one party
agrees to deliver to the other an amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock index at the
close of the last trading day of the contract and the price at which the
agreement is made. No physical delivery of securities is made.
If a Portfolio's investment 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
investment 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
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become available for trading either for the purpose of hedging its portfolio
securities against the adverse effects of anticipated movements in interest
rates or for other investment purposes.
A Portfolio may sell interest rate futures contracts in anticipation of
an increase in the general level of interest rates. Generally, as interest rates
rise, the market value of the securities held by a Portfolio will fall, thus
reducing the net asset value of the Portfolio. This interest rate risk can be
reduced without employing futures as a hedge by selling such securities and
either reinvesting the proceeds in securities with shorter maturities or by
holding assets in cash. However, this strategy entails increased transaction
costs in the form of dealer spreads and brokerage commissions and would
typically reduce the Portfolio's average yield as a result of the shortening of
maturities.
The sale of interest rate futures contracts provides a means of hedging
against rising interest rates. As rates increase, the value of a Portfolio's
short position in the futures contracts will also tend to increase thus
offsetting all or a portion of the depreciation in the market value of the
Portfolio's investments that are being hedged. While the Portfolio will incur
commission expenses in selling and closing out futures positions (which is done
by taking an opposite position in the futures contract), commissions on futures
transactions are lower than transaction costs incurred in the purchase and sale
of portfolio securities.
A Portfolio may purchase interest rate futures contracts in
anticipation of a decline in interest rates when it is not fully invested. As
such purchases are made, it is expected that an equivalent amount of futures
contracts will be closed out.
A Portfolio will enter into futures contracts which are traded on
national or foreign futures exchanges, and are standardized as to maturity date
and the underlying financial instrument. Futures exchanges and trading in the
United States are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission ("CFTC"). Futures are traded in London at the London
International Financial Futures Exchange, in Paris, at the MATIF, and in Tokyo
at the Tokyo Stock Exchange.
Options on Futures Contracts. A Portfolio may purchase and write call
and put options on stock index and interest rate futures contracts. A Portfolio
may use such options on futures 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
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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 investment adviser
deems it desirable to do so. Although a Portfolio will not enter into an option
or futures position unless its investment 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 investment advisers generally expect that options and
futures transactions for the Portfolios will be conducted on recognized
exchanges. In certain instances, however, a Portfolio may purchase and sell
options in the over-the-counter market. The staff of the Securities and Exchange
Commission considers over-the-counter options to be illiquid. A Portfolio's
ability to terminate option positions established in the over-the-counter market
may be more limited than in the case of exchange traded options and may also
involve the risk that securities dealers participating in such transactions
would fail to meet their obligations to the Portfolio.
The use of options and futures involves the risk of imperfect
correlation between movements in options and futures prices and movements in the
price of the securities that are the
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subject of the hedge. The successful use of these strategies also depends on the
ability of a Portfolio's investment 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
Growth Stock, T. Rowe Price International Stock, Endeavor Opportunity Value,
Endeavor Select 50, Endeavor High
Yield and Endeavor Janus Growth 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 investment 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 or
exposed to 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
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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, quoted or exposed (or an increase in the
value of currency for securities which the Portfolio intends to buy, when it
holds cash reserves and short-term investments). For position hedging purposes,
a Portfolio may purchase or sell foreign currency futures contracts and foreign
currency forward contracts, and may purchase put or call options on foreign
currency futures contracts and on foreign currencies on exchanges or
over-the-counter markets. In connection with position hedging, a Portfolio may
also purchase or sell foreign currency on a spot basis.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary for a Portfolio to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security or securities being hedged is less
than the amount of foreign currency the Portfolio is obligated to deliver and if
a decision is made to sell the security or securities and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security or
securities if the market value of such security or securities exceeds the amount
of foreign currency the Portfolio is obligated to deliver.
Hedging transactions involve costs and may result in losses. A
Portfolio may write covered call options on foreign currencies to offset some of
the costs of hedging those currencies. A Portfolio will engage in
over-the-counter transactions only when appropriate exchange-traded transactions
are unavailable and when, in the opinion of the Portfolio's investment 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
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hedging and related option transactions may be limited by tax
considerations.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which a Portfolio owns or intends to
purchase or sell. They simply establish a rate of exchange which one can achieve
at some future point in time. Additionally, although these techniques tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
they tend to limit any potential gain which might result from the increase in
the value of such currency.
Currency Forward and Futures Contracts. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract as agreed by the parties, at a price set at the time of the contract.
In the case of a cancelable forward contract, the holder has the unilateral
right to cancel the contract at maturity by paying a specified fee. The
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are designed by and traded on exchanges
regulated by the CFTC, such as the New York Mercantile Exchange. A Portfolio
would enter into foreign currency futures contracts solely for hedging or other
appropriate investment purposes as defined in CFTC regulations.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the maturity date
of a forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in any
given month. Forward contracts may be in any amounts agreed upon by the parties
rather than predetermined amounts. Also, forward foreign exchange contracts are
traded directly between currency traders so that no intermediary is required. A
forward contract generally requires no margin or other deposit.
At the maturity of a forward or futures contract, a Portfolio may
either accept or make delivery of the currency specified in the contract, or at
or prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities
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<PAGE>
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 investment adviser believes that a liquid secondary market
exists for such options. There can be no assurance that a liquid secondary
market will exist for a particular option at any specific time. Options on
foreign currencies are affected by all of those factors which influence foreign
exchange rates and investments generally.
The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options markets.
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<PAGE>
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 or sub-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 investment 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, When-Issued and Delayed Delivery Securities (All
Portfolios)
A Portfolio may purchase securities on a when-issued or delayed
delivery basis and may purchase or sell securities on a forward commitment
basis. Settlement of such transactions normally occurs within a month or more
after the purchase or sale commitment is made.
A Portfolio may purchase securities under such conditions only with the
intention of actually acquiring them, but may enter into a separate agreement to
sell the securities before the settlement date. Since the value of securities
purchased may fluctuate prior to settlement, the Portfolio may be required to
pay more at settlement than the security is worth. In addition, the purchaser is
not entitled to any of the interest earned prior to settlement.
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<PAGE>
Upon making a commitment to purchase a security on a when- issued,
delayed delivery or forward commitment basis the Portfolio will hold liquid
assets in a segregated account at the Portfolio's custodian bank worth at least
the equivalent of the amount due. The liquid assets will be monitored on a daily
basis and adjusted as necessary to maintain the necessary value.
Purchases made under such conditions may involve the risk that yields
secured at the time of commitment may be lower than otherwise available by the
time settlement takes place, causing an unrealized loss to the Portfolio. In
addition, when the Portfolio engages in such purchases, it relies on the other
party to consummate the sale. If the other party fails to perform its
obligations, the Portfolio may miss the opportunity to obtain a security at a
favorable price or yield. Although a Portfolio will generally enter into forward
commitments to purchase securities with the intention of actually acquiring the
security 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 investment adviser deems it advisable to do so. The Portfolio may realize
short-term gains or losses in connection with such sales.
Securities Loans (All Portfolios)
Each Portfolio may lend its portfolio securities to qualified
institutional buyers for the purpose of realizing additional income. Each of the
Portfolios may pay reasonable finders', administrative and custodial fees in
connection with loans of its portfolio securities. Such loans must be
continuously secured by liquid assets at least equal to the market value of the
securities loaned. 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 investment adviser to be creditworthy
under guidelines adopted by the Trustees of the Fund. Securities lending may
involve some credit risk to a Portfolio if the borrower defaults and the
Portfolio is delayed or prevented from recovering the collateral.
Interest Rate Transactions (Dreyfus U.S. Government Securities, T. Rowe
Price International Stock, T. Rowe Price Growth Stock, Endeavor Asset
Allocation, Endeavor High Yield and
Endeavor Janus Growth Portfolios)
Among the strategic transactions into which the Dreyfus U.S. Government
Securities, Endeavor High Yield and Endeavor Janus
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<PAGE>
Growth 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 investment
advisers to the Portfolios and the Fund believe such obligations do not
constitute senior securities under 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
Services ("Standard & Poor's") or Moody's Investors Service Inc. ("Moody's") or
has an equivalent rating from a nationally recognized statistical rating
organization ("NRSRO") or is determined to be of equivalent credit quality by
the investment 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
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<PAGE>
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 , Endeavor
Janus Growth and T. Rowe Price International Stock 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
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effectively charging the Portfolio interest on its borrowing. Further, although
a Portfolio can estimate the amount of expected principal prepayment over the
term of the dollar roll, a variation in the actual amount of prepayment could
increase or decrease the cost of the Portfolio's borrowing.
The entry into dollar rolls involves potential risks of loss that are
different from those related to the securities underlying the transactions. For
example, if the counterparty becomes insolvent, 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.
Municipal Fixed-Income Securities (T. Rowe Price International Stock and
Dreyfus U.S. Government Securities Portfolios)
A Portfolio may invest in municipal bonds of any state, territory or
possession of the United States ("U.S."), including the District of Columbia.
The Portfolio may also invest in municipal bonds of any political subdivision,
agency or instrumentality (e.g., counties, cities, towns, villages, districts,
authorities) of the U.S. or its possessions. Municipal bonds are debt
instruments issued by or for a state or local government to support its general
financial needs or to pay for special projects such as airports, bridges,
highways, public transit, schools, hospitals, housing and water and sewer works.
Interest payments received by holders of these securities are generally
tax-free. Municipal bonds may also be issued to refinance public debt.
Municipal bonds are mainly divided between "general obligation" and
"revenue" bonds. General obligation bonds are backed by the full faith and
credit of governmental issuers with the power to tax. They are repaid from the
issuer's general revenues. Payment, however, may be dependent upon legislative
approval and may be subject to limitations on the issuer's taxing power.
Enforcement of payments due under general obligation bonds varies according to
the law applicable to the issuer. In contrast, revenue bonds are supported only
by the revenues generated by the project or facility.
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<PAGE>
The Portfolio may also invest in industrial development bonds. Such
bonds are usually revenue bonds issued to pay for facilities with a public
purpose operated by private corporations. The credit quality of industrial
development bonds is usually directly related to the credit standing of the
owner or user of the facilities. To qualify as a municipal bond, the interest
paid on an industrial development bond must qualify as fully exempt from federal
income tax. However, the interest paid on an industrial development bond may be
subject to the federal alternative minimum tax.
The yields on municipal bonds depend on such factors as market
conditions, the financial condition of the issuer and the issue's size, maturity
date and rating. Municipal bonds are rated by S&P, Moody's and Fitch. Such
ratings, however, are opinions, not absolute standards of quality. Municipal
bonds with the same maturity, interest rates and rating may have different
yields, while municipal bonds with the same maturity and interest rate, but
different ratings, may have the same yield. Once purchased by the Portfolio, a
municipal bond may cease to be rated or receive a new rating below the minimum
required for purchase by the Portfolio. Neither event would require the
Portfolio to sell the bond, but the Portfolio's investment adviser would
consider such events in determining whether the Portfolio should continue to
hold it.
The ability of the Portfolio to achieve its investment objective
depends upon the continuing ability of the issuers of municipal bonds to pay
interest and principal when due. Municipal bonds are subject to the provisions
of bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors. Such laws extend the time for payment of principal and/or interest,
and may otherwise restrict the Portfolio's ability to enforce its rights in the
event of default. Since there is generally less information available on the
financial condition of municipal bond issuers compared to other domestic issuers
of securities, the Portfolio's investment adviser may lack sufficient knowledge
of an issue's weaknesses. Other influences, such as litigation, may also
materially affect the ability of an issuer to pay principal and interest when
due. In addition, the market for municipal bonds is often thin and can be
temporarily affected by large purchases and sales, including those by the
Portfolio.
From time to time, Congress has considered restricting or eliminating
the federal income tax exemption for interest on municipal bonds. Such actions
could materially affect the availability of municipal bonds and the value of
those already owned by the Portfolio. If such legislation were passed, the
Trust's Board of Trustees may recommend changes in the Portfolio's investment
objectives and policies.
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Portfolio Turnover
While it is impossible to predict portfolio turnover rates, the
investment advisers to the Portfolios other than the Dreyfus U.S. Government
Securities Portfolio, Dreyfus Small Cap Value Portfolio, Endeavor Select 50
Portfolio, Endeavor Money Market Portfolio, Endeavor Asset Allocation Portfolio
and Endeavor Janus Growth Portfolio anticipate that portfolio turnover will
generally not exceed 100% per year. The investment advisers to the Endeavor
Select 50 Portfolio, Endeavor Asset Allocation Portfolio and Endeavor Janus
Growth Portfolio anticipate that portfolio turnover will generally not exceed
150% per year. The investment adviser to the Dreyfus U.S. Government Securities
Portfolio anticipates that portfolio turnover may exceed 200% per year,
exclusive of dollar roll transactions. The investment 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 investment adviser to result in a relatively high rate of portfolio
turnover. Higher portfolio turnover rates usually generate additional brokerage
commissions and expenses.
For calendar year 1998, the Endeavor Asset Allocation Portfolio's
turnover rate was 263% as compared to 67% for calendar year 1997. A substantial
portion of this increase was due to the changes in the Portfolio's investments
in connection with the change in investment advisers, which was effective May 1,
1998.
For calendar year 1998, the Dreyfus Small Cap Value Portfolio's
turnover rate was 183% as compared to 127% for calendar year 1997. A substantial
portion of this increase was due to the market volatility of small cap stocks in
1998.
For calendar year 1998, the Dreyfus U.S. Government Securities
Portfolio's turnover rate was 615% as compared to 185% for calendar year 1997.
The increase in the Portfolio's turnover rate was due to the financial markets
extreme volatility in 1998. Changes were made in sector allocations between U.S.
Treasuries, corporate bonds and mortgage-backed securities.
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, Endeavor High Yield and
Endeavor Janus Growth Portfolios and restriction number 11 with respect to the
T. Rowe Price International Stock, Endeavor Asset Allocation and Dreyfus
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Small Cap Value Portfolios (which restrictions are not fundamental policies),
the following investment restrictions (numbers 1 through 12) are fundamental
policies, which may not be changed without the approval of a majority of the
outstanding shares of the Portfolio, and apply to each of the Portfolios except
as otherwise indicated. As provided in the 1940 Act, a vote of a majority of the
outstanding shares necessary to amend a fundamental policy means the affirmative
vote of the lesser of (1) 67% or more of the shares present at a meeting, if the
holders of more than 50% of the outstanding shares of the Portfolio are present
or represented by proxy, or (2) more than 50% of the outstanding shares of the
Portfolio.
A Portfolio may not:
1. Borrow money or issue senior securities (as defined in the 1940 Act),
provided that a Portfolio may borrow amounts not exceeding 5% of the value of
its total assets (not including the amount borrowed) for temporary purposes;
except that the Dreyfus U.S. Government Securities Portfolio may borrow from
banks or through reverse repurchase agreements or dollar roll transactions in an
amount equal to up to 33 1/3% of the value of its total assets (calculated when
the loan is made) for temporary, extraordinary or emergency purposes and to take
advantage of investment opportunities and may pledge up to 33 1/3% of the value
of its total assets to secure those borrowings; except that the T. Rowe Price
Equity Income Portfolio, the T. Rowe Price Growth Stock Portfolio and T. Rowe
Price International Stock Portfolio may (i) borrow for non-leveraging, temporary
or emergency purposes and (ii) engage in reverse repurchase agreements and make
other investments or engage in other transactions, which may involve a
borrowing, in a manner consistent with each Portfolio's investment objective and
program, provided that the combination of (i) and (ii) shall not exceed 33 1/3%
of the value of each Portfolios's total assets (including the amount borrowed)
less liabilities (other than borrowings) and may pledge up to 33 1/3% of the
value of its total assets to secure those borrowings; except that the Endeavor
Opportunity Value Portfolio and the Endeavor Enhanced Index Portfolio may borrow
money from banks or through reverse repurchase agreements for temporary or
emergency purposes in amounts up to 10% of each Portfolio's total assets; 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;
except that the Endeavor High Yield 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 the
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<PAGE>
Endeavor High Yield Portfolio may engage in dollar rolls transactions; and
except that the Endeavor Janus Growth Portfolio may borrow money from banks for
temporary or emergency purposes or pursuant to reverse repurchase agreements in
an amount up to 25% of the value of its total assets.
2. Pledge, hypothecate, mortgage or otherwise encumber its assets, except to
secure borrowings permitted by restriction 1 above. Collateral arrangements with
respect to margin for futures contracts and options are not deemed to be pledges
or other encumbrances for purposes of this restriction.
3. Purchase securities on margin, except a Portfolio may obtain such
short-term credits as may be necessary for the clearance of securities
transactions and may make margin deposits in connection with transactions in
options, futures contracts and options on such contracts.
4. Make short sales of securities or maintain a short position for the account
of the Portfolio, unless at all times when a short position is open the
Portfolio owns an equal amount of such securities or owns securities which,
without payment of any further consideration, are convertible or exchangeable
for securities of the same issue as, and in equal amounts to, the securities
sold short.
5. Underwrite securities issued by other persons, except to the extent that in
connection with the disposition of its portfolio investments it may be deemed to
be an underwriter under federal securities laws.
6. Purchase or sell real estate, although a Portfolio may purchase securities
of issuers which deal in real estate, securities which are secured by interests
in real estate and securities representing interests in real estate; 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
-35-
<PAGE>
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 government-sponsored entities 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
government-sponsored entities, and repurchase agreements secured by such
obligations, and in the case of the Endeavor Money Market Portfolio obligations
of domestic branches of United States banks.
11. Invest more than 15% (10% with respect to the Endeavor Money Market
Portfolio and Dreyfus U.S. Government Securities Portfolio) of its net assets
(taken at current value at the time of each purchase) in illiquid securities
including repurchase agreements maturing in more than seven days.
12. Purchase securities of any issuer for the purpose of exercising control or
management.
All percentage limitations on investments will apply at the time of the
making of an investment and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and partially or completely as a
result of such investment.
Other Policies
The Endeavor Money Market Portfolio may not invest in the securities of
any one issuer if, immediately after such investment, more than 5% of the total
assets of the Portfolio (taken at current value) would be invested in the
securities of such issuer, provided that this limitation does not apply to
obligations issued or guaranteed as to principal and interest by the U.S.
government or its agencies and government-sponsored entities 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.
-36-
<PAGE>
In addition, the Endeavor Money Market Portfolio may not purchase any
security that matures more than thirteen months (397 days) from the date of
purchase or which has an implied maturity of more than thirteen months (397
days) except as provided in (1) below. For the purposes of satisfying this
requirement, the maturity of a portfolio instrument shall be deemed to be the
period remaining until the date noted on the face of the instrument as the date
on which the principal amount must be paid, or in the case of an instrument
called for redemption, the date on which the redemption payment must be made,
except that:
1. An instrument that is issued or guaranteed by the U.S. government or any
agency thereof which has a variable rate of interest readjusted no less
frequently than every 25 months (762 days) may be deemed to have a maturity
equal to the period remaining until the next readjustment of the interest rate.
2. A variable rate instrument, the principal amount of which is scheduled on
the face of the instrument to be paid in thirteen months (397 days) or less, may
be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate.
3. A variable rate instrument that is subject to a demand feature may be
deemed to have a maturity equal to the longer of the period remaining until the
next readjustment of the interest rate or the period remaining until the
principal amount can be recovered through demand.
4. A floating rate instrument that is subject to a demand feature may be
deemed to have a maturity equal to the period remaining until the principal
amount can be recovered through demand.
5. A repurchase agreement may be deemed to have a maturity equal to the period
remaining until the date on which the repurchase of the underlying securities is
scheduled to occur, or where no date is specified, but the agreement is subject
to demand, the notice period applicable to a demand for the repurchase of the
securities.
6. A portfolio lending agreement may be treated as having a maturity equal to
the period remaining until the date on which the loaned securities are scheduled
to be returned, or where no date is specified, but the agreement is subject to
demand, the notice period applicable to a demand for the return of the loaned
securities.
Each of the Endeavor Value Equity and Dreyfus Small Cap Value Portfolios
may not invest more than 5% of the value of its total assets in warrants not
listed on either the New York or American Stock Exchange. Each of the Endeavor
Opportunity Value
-37-
<PAGE>
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 listed or unlisted
warrants if, as a result thereof, the Portfolio will have more than 10% 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, T. Rowe Price International Stock, 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, Endeavor
Enhanced Index, Endeavor Select 50 and Endeavor High Yield 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
investment 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
-38-
<PAGE>
investment objective was changed from investments in small capitalization
companies on a global basis to investments in a broad range of established
companies on an international basis (i.e., non-U.S. companies). Average annual
total return information for the period from January 1, 1995 to December 31,
1998 is available upon written request to the Fund.
-39-
<PAGE>
<TABLE>
<CAPTION>
For the One For the Five For Period From
Year Period Year Period Inception to
Ended December Ended December December 31, 1998
31, 1998 31, 1998
<S> <C> <C> <C>
Endeavor Asset
Allocation(1)...... 18.39% 14.30%
14.36%/14.15%*
T. Rowe Price
International
Stock(1)........... 15.44% 7.28% 7.16%
Endeavor Value
Equity(2).......... 7.56% 18.41%
16.88%/16.79%*
Dreyfus Small
Cap Value(3)....... (2.18)% 11.56%
12.33%/12.27%*
T. Rowe Price
Equity Income(4)... 8.81% N/A 21.59%
T. Rowe Price Growth
Stock(4)............ 28.67% N/A 28.72%
Dreyfus U.S.
Government
Securities(5)...... 7.38% N/A 7.10%/7.03%*
Endeavor Opportunity
Value(6)........... 5.18% N/A 10.52%/10.32%*
Endeavor Enhanced
Index (7).......... 31.39% N/A
33.27%/33.26%*
Endeavor Select
50(8)............. N/A N/A 6.60%/6.55%*
Endeavor High
Yield (9)......... N/A N/A (3.10)%/(3.26)%*
- ------------------------
</TABLE>
* The figure shows what the Portfolio's performance would have been in
the absence of fee waivers and/or reimbursement of other expenses, if
any.
(1) The Portfolio commenced operations on April 8, 1991.
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<PAGE>
(2) The Portfolio commenced operations on May 27, 1993.
(3) The Portfolio commenced operations on May 4, 1993.
(4) The Portfolio commenced operations on January 3, 1995.
(5) The Portfolio commenced operations on May 13, 1994.
(6) The Portfolio commenced operations on November 18, 1996.
(7) The Portfolio commenced operations on May 2, 1997.
(8) The Portfolio commenced operations on February 3, 1998.
(9) The Portfolio commenced operations on June 1, 1998.
The calculations of total return assume the reinvestment of all
dividends and capital gain distributions on the reinvestment dates during the
period and the deduction of all recurring expenses that were charged to
shareholders' accounts. The above table does not reflect charges and deductions
which are, or may be, imposed under the Contracts.
The performance of each Portfolio will vary from time to time in
response to fluctuations in market conditions, interest rates, the composition
of the Portfolio's investments and expenses. Consequently, a Portfolio's
performance figures are historical and should not be considered representative
of the performance of the Portfolio for any future period.
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
-41-
<PAGE>
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 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
-42-
<PAGE>
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 investment 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 investment 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 investment adviser considers the
firm's reliability, the quality of its execution services on a continuing basis
and its financial condition. When more than one firm is believed to meet these
criteria, preference may be given to brokers that provide the Portfolios or
their investment advisers with brokerage and research services within the
meaning of Section 28(e) of the Securities Exchange Act of 1934. Each
Portfolio's investment adviser is of the opinion that,
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<PAGE>
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
investment adviser's research. In seeking the most favorable price and execution
available, an investment adviser may, if permitted by law, consider sales of the
Contracts as described in the Prospectuses a factor in the selection of
broker-dealers.
An investment 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 investment adviser in servicing all of its accounts;
not all such services may be used in connection with the Portfolio. In the
opinion of each investment 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 investment 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
investment adviser, however, the results of such procedures will, on the whole,
be in the best interest of each of the accounts.
The investment advisers to the Endeavor Money Market, Endeavor Asset
Allocation, T. Rowe Price International Stock, T. Rowe Price Equity Income, T.
Rowe Price Growth Stock, Endeavor Enhanced Index, Endeavor Select 50 and
Endeavor Janus Growth Portfolios may execute portfolio transactions through
certain of their affiliated brokers, acting as agent in accordance with
procedures established by the Fund's Board of Trustees, but will not purchase
any securities from or sell any securities to any such affiliate acting as
principal for its own account.
For the year ended December 31, 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
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<PAGE>
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 Limited 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 Portfolio paid $9,494 in brokerage
commissions.
For the year ended December 31, 1998, the Endeavor Money Market
Portfolio and the Endeavor High Yield Portfolio did not pay any brokerage
commissions while the Endeavor Asset Allocation Portfolio paid $699,420 in
brokerage commissions of which $288 (0.04%) was paid to Morgan Stanley & Co.,
Inc. For the year ended December 31, 1998, the T. Rowe Price International Stock
Portfolio, the Endeavor Value Equity Portfolio and the Dreyfus Small Cap Value
Portfolio paid $121,001, $142,104 and $889,611, respectively, in brokerage
commissions of which $1,917 (1.58%), $10,301 (8.51%) and $759 (0.63%) with
respect to the T. Rowe Price International Stock Portfolio was paid to Robert
Fleming Holdings Limited , Jardine Fleming Group Limited, and Ord Minnett
Securities, Ltd., respectively. For the year ended December 31, 1998, the T.
Rowe Price Equity Income Portfolio and the T. Rowe Price Growth Stock Portfolio
paid
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<PAGE>
$122,431 and $21,866, respectively, in brokerage commissions of which $2,964
(1.37%) with respect to the T. Rowe Price Growth Stock Portfolio was paid to
Robert Fleming Holdings Limited. For the year ended December 31, 1998, the
Dreyfus U.S. Government Securities Portfolio, the Endeavor Opportunity Value
Portfolio and the Endeavor Enhanced Index Portfolio paid $67,575, $43,947 and
$46,321, respectively, in brokerage commissions. For the fiscal year ended
December 31, 1998, the Endeavor Select 50 Portfolio paid $177,608 in brokerage
commissions of which $1,356 (0.76%) was paid to Montgomery Securities, Inc.
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, Endeavor
Management Co. or Endeavor Group (the "Distributor") (hereinafter referred to as
"Independent Trustees"), and each Portfolio's shareholders, have voted to adopt
a Brokerage Enhancement Plan (the "Plan") for the purpose of utilizing the
Fund's brokerage commissions, to the extent available, to promote the sale and
distribution of the Fund's shares. Neither the Fund nor any series of the Fund,
including the Portfolios, will incur any new fees or charges. As part of the
Plan, the Fund and the Distributor have entered into a Distribution Agreement.
Under the Distribution Agreement, the Distributor is the principal underwriter
of the Fund, with responsibility for promoting sales of the shares of each
Portfolio.
The Distributor, however, does not receive any additional compensation
from the Fund for performing this function. Instead, under the Plan, the Manager
is authorized to direct that the investment adviser of each Portfolio effect
brokerage transactions in portfolio securities through certain broker-dealers,
consistent with each investment adviser's obligations to achieve best price and
execution. It is anticipated that these broker-dealers will agree that a
percentage of the commission will be directed to the Distributor. The
Distributor will use a part of these directed commissions to defray legal and
administrative costs associated with implementation of the Plan. These expenses
are expected to be minimal. The remainder of the commissions received by the
Distributor will be used to finance activities principally intended to result in
the sale of shares of the Portfolios. 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
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<PAGE>
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 prospective Contract
holders; and creating and mailing advertising and sales literature.
The Distributor is obligated to use all of the funds directed to it for
distribution expenses, except for a small amount to be used to defray the
incidental costs associated with implementation of the Plan. Accordingly, the
Distributor will not make any profit from the operation of the Plan.
Both the Plan and the Distribution Agreement provide (A) that they will
be subject to annual approval by the Trustees and the Independent Trustees; (B)
that any person authorized to make payments under the Plan or Distribution
Agreement must provide the Trustees a quarterly written report of payments made
and the purpose of the payments; (C) that the Plan may be terminated at any time
by the vote of a majority of the Independent Trustees; (D) that the Distribution
Agreement may be terminated without penalty at any time by a vote of a majority
of the Independent Trustees or, as to a Portfolio, by vote of a majority of the
outstanding securities of the Portfolio on not more than 60 days' written
notice; and (E) that the Distribution Agreement terminates if it is assigned.
The Plan may not be amended to increase materially the amount to be spent for
distribution without shareholder approval, and all material Plan amendments must
be approved by a vote of the Independent Trustees. In addition, the selection
and nomination of the Independent Trustees must be committed to the Independent
Trustees.
For the year ended December 31, 1998, the Distributor received an aggregate
of $229,711 pursuant to the Plan, $32,000 of which in 1998 was utilized to pay
the costs of seminars and sales meetings and the mailings of marketing
materials.
MANAGEMENT OF THE FUND
The Fund is supervised by a Board of Trustees that is responsible for
representing the interests of shareholders. The Trustees meet periodically
throughout the year to oversee the Portfolio's activities, reviewing, among
other things, each Portfolio's performance and its contractual arrangements with
various service providers.
Trustees and Officers
The Trustees and executive officers of the Fund, their ages and their
principal occupations during the past five years
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<PAGE>
are set forth below. Unless otherwise indicated, the business address of each is
2101 East Coast Highway, Suite 300, Corona del Mar, California 92625.
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<PAGE>
<TABLE>
<CAPTION>
Principal
Position(s) Occupation(s)
Held with During Past
Name, Age and Address Registrant 5 Years
<S> <C> <C>
*+Vincent J. McGuinness, Jr. President, From July, 1997 to
(34) Chief November, 1997,
Financial Executive Vice
Officer President -
(Treasurer), Administration of
Trustee Registrant; from
September,
1996
to
June,
1997,
Chief
Financial
Officer
(Treasurer)
of
Registrant;
from
February,
1997
to
December,
1997,
Executive
Vice-
President,
Chief
of
Operations,
since
March,
1997,
Director,
since
December,
1997,
Chief
Operating
Officer,
and
since
June,
1998,
Chief
Financial
Officer
of
Endeavor
Group;
from
September,
1996
to
June,
1997,
and
since
June,
1998,
Chief
Financial
Officer,
since
May,
1996,
Director
and
from
June,
1997
to
October,
1998,
Executive
Vice
President
Administration,
and
since
October,
1998,
President
of
Endeavor
Management
Co.;
since
August,
1996,
Chief
Financial
Officer
of
VJM
Corporation
(oil
and
gas);
from
May,
1996
to
January,
1997,
Executive
Vice
President
and
Director
of
Sales,
Western
Division
of
Endeavor
-49-
<PAGE>
Principal
Group;
since
May,
1996,
Chief
Financial
Officer
of
McGuinness
&
Associates;
from
July,
1993
to
August,
1995,
Rocky
Mountain
Regional
Marketing
Director
for
Endeavor
Group.
*Vincent J. McGuinness (64) Trustee Chairman, Chief
Executive Officer and
Director of McGuinness
& Associates, Endeavor
Group, VJM Corporation,
until July, 1996,
McGuinness Group
(insurance marketing)
and since September,
1988, Endeavor
Management Co.;
President of VJM
Corporation and until
October, 1998, Endeavor
Management Co. and,
since February, 1996,
McGuinness &
Associates.
Timothy A. Devine (63) Trustee Vice President, Plant
1424 Dolphin Terrace Control, Inc.
Corona del Mar, California (landscape contracting
92625 and maintenance).
Thomas J. Hawekotte (63) Trustee President, Thomas J.
6007 North Sheridan Road Hawekotte, P.C. (law
Chicago, Illinois 60660 practice).
-50-
<PAGE>
Principal
Steven L. Klosterman (47) 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.
Trustee President, Lindquist
Halbert D. Lindquist (52) Stephenson & White,
1650 E. Fort Lowell Road Inc. (investment
Suite 203 adviser) and since
Tucson, Arizona 85719-2324 December, 1987 Tucson
Asset Management, Inc.
(commodity trading
adviser), and since
November, 1987,
Presidio Government
Securities,
Incorporated (broker-
dealer), and since
January, 1998, Chief
Investment Officer of
Blackstone Alternative
Asset Management.
Keith H. Wood (62) Trustee Since 1972, Chairman
39 Main Street and Chief Executive
Chatham, New Jersey 07928 Officer of Jamison,
Eaton
&
Wood
(investment
adviser)
and
from
1978
to
December,
1997,
President
of
Ivory
&
Sime
International,
Inc.
(investment
adviser).
-51-
<PAGE>
Principal
Peter F. Muratore (66) Trustee From June, 1989 to
Too Far March, 1998, President
Posthouse Road of OCC Distributors
Morristown, New Jersey 07960 (broker-dealer), a
subsidiary of
Oppenheimer Capital.
P. Michael Pond (45) Executive Since November 1, 1998,
Vice-President Executive Vice-
- President -
Administration Administration and
and Compliance Compliance of Endeavor
Group and Endeavor
Management Co. and
Chief Investment
Officer of Endeavor
Management Co.; from
November, 1991 to
November, 1996,
Chairman and President
of The Preferred Group
of Mutual Funds; from
October, 1989 to
December, 1996,
President of
Caterpillar Securities
Inc. and Caterpillar
Investment Manager Ltd.
Pamela A. Shelton (49) Secretary 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.
</TABLE>
* An "interested person" of the Fund as defined in the 1940 Act.
+ Vincent J. McGuinness, Jr. is the son of Vincent J.
McGuinness.
-52-
<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 investment advisers. Each
Trustee who is not an affiliated person of the Manager or the investment
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, 1998.
<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 12,375 13,075
Thomas J. Hawekotte 12,375 13,075
Steven L. Klosterman 12,375 13,075
Halbert D. Lindquist 7,875 8,225
R. Daniel Olmstead* 12,375 13,075
Keith H. Wood 12,375 13,075
Peter F. Muratore 6,000 6,700
Vincent J. McGuinness, Jr. - -
</TABLE>
- ---------------
* Former Trustee - retired as of December 31, 1998.
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.
INVESTMENT ADVISORY AND OTHER SERVICES
-53-
<PAGE>
The Manager
The Fund is managed by Endeavor Management Co. (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. Prior to January 1, 1999, Endeavor Investment Advisers ("EIA") managed the
Fund. Effective January 1, 1999, the Management Agreement between the Fund and
EIA was transferred to the Manager.
The Manager is responsible for providing investment management and
administrative services to the Fund and in the exercise of such responsibility
selects the investment advisers for the Fund's Portfolios and monitors the
investment advisers' investment programs and results, reviews brokerage matters,
oversees compliance by the Fund with various federal and state statutes, and
carries out the directives of the Trustees. The Manager is responsible for
providing the Fund with office space, office equipment, and personnel necessary
to operate and administer the Fund's business, and also supervises the provision
of services by third parties such as the Fund's custodian and transfer agent.
Pursuant to an administration agreement, First Data Investor Services Group,
Inc. ("Investor Services Group") assists the Manager in the performance of its
administrative responsibilities to the Fund.
As compensation for these services the Fund pays the Manager a monthly
fee at the following annual rates of each Portfolio's average daily net assets:
Endeavor Money Market Portfolio - .50%; Endeavor Asset Allocation Portfolio -
.75%; T. Rowe Price International Stock Portfolio - .90%; Endeavor Value Equity
Portfolio - .80%; Dreyfus Small Cap Value Portfolio - .80%; Dreyfus U.S.
Government Securities Portfolio - .65%; T. Rowe Price Equity Income Portfolio -
.80%; T. Rowe Price Growth Stock Portfolio - .80%; Endeavor Opportunity Value
Portfolio - .80%; Endeavor Enhanced Index Portfolio - .75%; Endeavor Select 50
Portfolio - 1.10%; Endeavor High Yield Portfolio - .775%; Endeavor Janus Growth
Portfolio - .80%. The management fees paid by the Portfolios (other than the
Endeavor Money Market and Dreyfus U.S. Government Securities Portfolios),
although higher than the fees paid by most other investment companies in
general, are comparable to management fees paid for similar services by many
investment companies with similar investment objectives and policies. From the
management fees, the Manager pays the expenses of providing investment advisory
services to the Portfolios, including the fees of the investment adviser of each
Portfolio.
For all Portfolios of the Fund commencing operations prior to January
28, 1998, the Manager pays the fees and expenses of Investor Services Group
pursuant to the administrative agreement. For the Endeavor Select 50, Endeavor
High Yield and Endeavor Janus Growth Portfolios the Manager is entitled to be
reimbursed
-54-
<PAGE>
for each Portfolio's portion of the fees and expenses paid by the Manager to
Investor Services Group with respect to the Portfolio. For Portfolios other than
the Endeavor Select 50, Endeavor High Yield and Endeavor Janus Growth
Portfolios, the Manager pays Investor Services Group an annual fee equal to
$650,000 plus 0.01% of the Fund's average daily net assets in excess of $1
billion. For the Endeavor Select 50, Endeavor High Yield and Endeavor Janus
Growth Portfolios, the Manager will pay Investor Services Group, which payment
will be reimbursed by each Portfolio, $40,000 ($30,000 in the case of Endeavor
Select 50 Portfolio) per year 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 affiliated persons of the Manager, 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 voluntarily undertaken, until terminated by the
Manager, to pay expenses on behalf of the Endeavor Select 50 Portfolio and the
Endeavor High Yield Portfolio to the extent normal operating expenses (including
investment advisory fees but excluding interest, brokerage fees, commissions and
extraordinary charges) exceed, as a percentage of each Portfolio's average daily
net assets, 1.50% and 1.30%, respectively.
The Manager had also voluntarily undertaken, for a period of at least
one year, to pay expenses on behalf of the Endeavor Janus Growth Portfolio to
the extent normal operating expenses (including investment advisory fees but
excluding interest, taxes, brokerage fees, commissions and extraordinary
charges) exceed, as a percentage of the Portfolio's average daily net assets,
0.87%. The Manager has voluntarily undertaken, for a period of at least one
year, to waive a portion of the investment advisory fees payable by the Endeavor
Janus Growth Portfolio such that total investment advisory fees payable by the
Portfolio will equal .775% of the average daily net assets of the Portfolio.
The Management Agreement continues in force for two years from its
commencement date, with respect to each Portfolio, and from year to year
thereafter, but only so long as its
-55-
<PAGE>
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
Independent Trustees, by votes cast in person at a meeting called for the
purpose of voting on such approval. The Management Agreement provides that it
shall terminate automatically if assigned, and that it may be terminated as to
any Portfolio without penalty by the Trustees of the Fund or by vote of a
majority of the outstanding voting securities of the Portfolio upon 60 days'
prior written notice to the Manager, or by the Manager upon 90 days' prior
written notice to the Fund, or upon such shorter notice as may be mutually
agreed upon. In the event the Manager ceases to be the Manager of the Fund, the
right of the Fund to use the identifying name of "Endeavor" may be withdrawn.
The Investment Advisers
Pursuant to an investment advisory agreement with the Manager, each
investment adviser to a Portfolio furnishes continuously an investment program
for the Portfolio, makes investment decisions on behalf of the Portfolio, places
all orders for the purchase and sale of investments for the Portfolio's account
with brokers or dealers selected by such investment adviser and may perform
certain limited related administrative functions in connection therewith. For
its services, the Manager pays each investment adviser a fee based on a
percentage of the average daily net assets of the Portfolios as follows:
Endeavor Money Market - Morgan Stanley Asset Management
-.25%
Endeavor Asset Allocation - Morgan Stanley Asset Management
- .30%
T. Rowe Price International Stock - Rowe Price-Fleming International,
Inc. - .75% up to $20 million; .60% in excess of $20 million up to $50 million;
and .50% of assets in excess of $50 million. At such time as net assets exceed
$200 million, .50% of total net assets.
Endeavor Value Equity - OpCap Advisors - .40%
Endeavor Opportunity Value - OpCap Advisors - .40%
Dreyfus U.S. Government Securities - The Dreyfus Corporation
- - .15%
Dreyfus Small Cap Value - The Dreyfus Corporation - .375%
-56-
<PAGE>
T. Rowe Price Equity Income - T. Rowe Price Associates, Inc.
- - .40%
T. Rowe Price Growth Stock - T. Rowe Price Associates, Inc.
- - .40%
Endeavor Enhanced Index - J.P. Morgan Investment Management
Inc. - .35%
Endeavor Select 50 - Montgomery Asset Management, LLC - .70%
Endeavor High Yield - Massachusetts Financial Services
Company - .375%
Endeavor Janus Growth - Janus Capital Corporation - .50% (voluntarily
waived to .40%)
Effective May 1, 1998, Morgan Stanley Asset Management became the
investment adviser of the Endeavor Money Market Portfolio and Endeavor Asset
Allocation Portfolio; effective January 1, 1995, Price-Fleming became the
investment adviser of the T. Rowe Price International Stock Portfolio; effective
May 1, 1996 The Dreyfus Corporation became the investment adviser of the Dreyfus
U.S. Government Securities Portfolio; and effective September 16, 1996, The
Dreyfus Corporation became the investment adviser of the Dreyfus Small Cap Value
Portfolio. The investment adviser to each other Portfolio has managed the
Portfolio since its inception date.
Each investment advisory agreement will continue in force for two years
from its commencement date, 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
Independent Trustees 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 investment adviser or by the
investment 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, Endeavor High Yield and Endeavor Janus Growth Portfolios)
prior written notice to the Manager, or upon such shorter notice as may be
mutually agreed upon.
-57-
<PAGE>
Each investment advisory agreement provides that the investment 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 investment adviser.
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,
1996, December 31, 1997 and December 31, 1998.
-58-
<PAGE>
<TABLE>
<CAPTION>
1998
Investment
Management Investment Other
Fee Management Expenses
Paid Fee Waived Reimbursed
<S> <C> <C> <C>
Endeavor Money Market
Portfolio......... $ 387,793 $--- $ ---
Endeavor Asset
Allocation
Portfolio......... 2,449,659 --- ---
T. Rowe Price
International
Stock Portfolio... 1,603,389 --- ---
Endeavor Value
Equity Portfolio. 1,901,572 --- ---
Dreyfus Small
Cap Value
Portfolio......... 1,207,117 --- ---
Dreyfus U.S.
Government
Securities
Portfolio......... 422,963 3,215 ---
T. Rowe Price
Equity Income
Portfolio......... 1,866,844 --- ---
T. Rowe Price Growth
Stock Portfolio... 1,255,157 --- ---
Endeavor Opportunity
Value Portfolio... 303,103 --- ---
Endeavor Enhanced Index
Portfolio......... 284,833 --- ---
Endeavor Select 50
Portfolio*........ 197,853
Endeavor High Yield
Portfolio**....... 30,074
-59-
<PAGE>
1997
Investment
Management Investment Other
Fee Management Expenses
Paid Fee Waived Reimbursed
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
Equity 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
-60-
<PAGE>
Portfolio.......... 1,639,338 -- --
T. Rowe Price
International
Stock Portfolio.... 1,015,179 -- --
Endeavor Value Equity
Portfolio.......... 768,579 -- --
Dreyfus Small
Cap Value
Portfolio.......... 535,895 -- --
Dreyfus U.S.
Government
Securities
Portfolio.......... 122,058 -- --
T. Rowe Price
Equity Income
Portfolio.......... 369,356 -- --
T. Rowe Price
Growth Stock
Portfolio.......... 313,356 -- --
Endeavor Opportunity
Value Portfolio**** 197 -- 2,802
</TABLE>
- ---------------
* The information presented with respect to the Endeavor Select 50
Portfolio is for the period from February 3, 1998 (commencement of
operations) to December 31, 1998.
** The information presented with respect to the Endeavor High Yield
Portfolio is for the period from June 1, 1998 (commencement of
operations) to December 31, 1998.
*** 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.
---------------------------
For the year ended December 31, 1998, the following Portfolios
reimbursed, after waivers, the Manager for administrative expenses incurred by
the Manager on behalf of the Portfolios:
Endeavor Select 50 - $25,000
Endeavor High Yield - $17,500
Custodian
-61-
<PAGE>
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.
Transfer Agent
Investors Services Group, located at 4400 Computer Drive, Westborough,
Massachusetts 01581, serves as transfer agent for the Fund.
Legal Matters
Certain legal matters are passed on for the Fund by Sullivan &
Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036.
Independent Auditors
Ernst & Young LLP, located at Two Commerce Square, 2001 Market Street,
Suite 4000, Philadelphia, Pennsylvania 19103, serves as the Fund's independent
auditors.
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), each day the Exchange is open for trading. Currently, the
Exchange is closed on: 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
-62-
<PAGE>
on the NASDAQ System will be valued at the last sale price on the day of
valuation or, if there was no sale that day, at the last reported bid price,
using prices as of the close of trading. Portfolio securities not quoted on the
NASDAQ System that are actively traded in the over-the-counter market, including
listed securities for which the primary market is believed to be
over-the-counter, will be valued at the most recently quoted bid price provided
by the principal market makers.
In the case of any securities which are not actively traded, reliable
market quotations may not be considered to be readily available. These
investments are stated at fair value as determined under the direction of the
Trustees. Such fair value is expected to be determined by utilizing information
furnished by a pricing service which determines valuations for normal,
institutional-size trading units of such securities using methods based on
market transactions for comparable securities and various relationships between
securities which are generally recognized by institutional traders.
If any securities held by a Portfolio are restricted as to resale,
their fair value will be determined following procedures approved by the
Trustees. The fair value of such securities is generally determined as the
amount which the Portfolio could reasonably expect to realize from an orderly
disposition of such securities over a reasonable period of time. The valuation
procedures applied in any specific instance are likely to vary from case to
case. However, consideration is generally given to the financial position of the
issuer and other fundamental analytical data relating to the investment and to
the nature of the restrictions on disposition of the securities (including any
registration expenses that might be borne by the Portfolio in connection with
such disposition). In addition, specific factors are also generally considered,
such as the cost of the investment, the market value of any unrestricted
securities of the same class (both at the time of purchase and at the time of
valuation), the size of the holding, the prices of any recent transactions or
offers with respect to such securities and any available analysts' reports
regarding the issuer.
Notwithstanding the foregoing, short-term debt securities with
maturities of 60 days or less will be valued at amortized cost.
The Endeavor Money Market Portfolio's investment policies and method of
securities valuation are intended to permit the Portfolio generally to maintain
a constant net asset value of $1.00 per share by computing the net asset value
per share to the nearest $.01 per share. The Portfolio is permitted to use the
amortized cost method of valuation for its portfolio securities pursuant to
regulations of the Securities and Exchange Commission. This method may result in
periods during which value,
-63-
<PAGE>
as determined by amortized cost, is higher or lower than the price the Portfolio
would receive if it sold the instrument. The net asset value per share would be
subject to fluctuation upon any significant changes in the value of the
Portfolio's securities. The value of debt securities, such as those in the
Portfolio, usually reflects yields generally available on securities of similar
yield, quality and duration. When such yields decline, the value of a portfolio
holding such securities can be expected to decline. Although the Portfolio seeks
to maintain the net asset value per share of the Portfolio at $1.00, there can
be no assurance that net asset value will not vary.
The Trustees of the Fund have undertaken to establish procedures
reasonably designed, taking into account current market conditions and the
Portfolio's investment objective, to stabilize the net asset value per share for
purposes of sales and redemptions at $1.00. These procedures include the
determination, at such intervals as the Trustees deem appropriate, of the
extent, if any, to which the net asset value per share calculated by using
available market quotations deviates from $1.00 per share. In the event such
deviation exceeds one half of one percent, the Trustees are required to promptly
consider what action, if any, should be initiated.
With respect to the Portfolios other than the Endeavor Money Market
Portfolio, foreign securities traded outside the United States are generally
valued as of the time their trading is complete, which is usually different from
the close of the New York Stock Exchange. Occasionally, events affecting the
value of such securities may occur between such times and the close of the New
York Stock Exchange that will not be reflected in the computation of the
Portfolio's net asset value. If events materially affecting the value of such
securities occur during such period, these securities will be valued at their
fair value according to procedures decided upon in good faith by the Fund's
Board of Trustees. All securities and other assets of a Portfolio initially
expressed in foreign currencies will be converted to U.S. dollar values at the
mean of the bid and offer prices of such currencies against U.S. dollars last
quoted on a valuation date by any recognized dealer.
TAXES
Federal Income Taxes
Each Portfolio intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"). By so
qualifying, a Portfolio will not be subject to federal income taxes to the
extent that its net investment income and net realized capital gains are
distributed.
-64-
<PAGE>
In order to so qualify, a Portfolio must, among other things, (1)
derive at least 90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stocks or securities or foreign currencies, or other income
(including but not limited to gains from options, futures or forward contracts)
derived with respect to its business of investing in such stocks or securities;
and (2) diversify its holdings so that, at the end of each quarter of the
Portfolio's taxable year, (a) at least 50% of the market value of the
Portfolio's assets is represented by cash, government securities and other
securities limited in respect of any one issuer to 5% of the value of the
Portfolio's assets and to not more than 10% of the voting securities of such
issuer, and (b) not more than 25% of the value of its assets is invested in
securities of any one issuer (other than government securities).
As a regulated investment company, a Portfolio will not be subject to
federal income tax on net investment income and capital gains (short- and
long-term), if any, that it distributes to its shareholders if at least 90% of
its net investment income and net short-term capital gains for the taxable year
are distributed, but will be subject to tax at regular corporate rates on any
income or gains that are not distributed. In general, dividends will be treated
as paid when actually distributed, except that dividends declared in October,
November or December and made payable to shareholders of record in such a month
will be treated as having been paid by the Portfolio (and received by
shareholders) on December 31, provided the dividend is paid in the following
January. Each Portfolio intends to satisfy the distribution requirement in each
taxable year.
The Portfolios will not be subject to the 4% federal excise tax imposed
on registered investment companies that do not distribute all of their income
and gains each calendar year because such tax does not apply to a registered
investment company whose only shareholders are segregated asset accounts of life
insurance companies held in connection with variable annuity and/or variable
life insurance policies.
The Fund intends to comply with section 817(h) of the Code and the
regulations issued thereunder. As required by regulations under that section,
the only shareholders of the Fund and its Portfolios will be life insurance
company segregated asset accounts (also referred to as separate accounts) that
fund variable life insurance or annuity contracts and the general account of PFL
Life Insurance Company which provided the initial capital for the Portfolios of
the Fund. See the prospectus or other material for the Contracts for additional
discussion of the taxation of segregated asset accounts and of the owner of the
particular Contract described therein.
-65-
<PAGE>
Section 817(h) of the Code and Treasury Department regulations
thereunder impose certain diversification requirements on the segregated asset
accounts investing in the Portfolios of the Fund. These requirements, which are
in addition to the diversification requirements applicable to the Fund under the
1940 Act and under the regulated investment company provisions of the Code, may
limit the types and amounts of securities in which the Portfolios may invest.
Failure to meet the requirements of section 817(h) could result in current
taxation of the owner of the Contract on the income of the Contract.
The Fund may therefore find it necessary to take action to ensure that
a Contract continues to qualify as a Contract under federal tax laws. The Fund,
for example, may be required to alter the investment objectives of a Portfolio
or substitute the shares of one Portfolio for those of another. No such change
of investment objectives or substitution of securities will take place without
notice to the shareholders of the affected Portfolio and the approval of a
majority of such shareholders and without prior approval of the Securities and
Exchange Commission, to the extent legally required.
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.
Portfolios that invest in foreign securities may purchase the
securities of certain foreign investment funds or trusts called passive foreign
investment companies. Such trusts have been the only or primary way to invest in
certain countries. In addition to bearing their proportionate share of a
Portfolio's expenses (management fees and operating expenses), shareholders will
also indirectly bear similar expenses of such trusts. Capital gains on the sale
of such holdings are considered ordinary income regardless of how long a
Portfolio held its investment. In addition, a Portfolio could be subject to
corporate income tax and an interest charge on certain dividends and capital
gains earned from these investments, regardless of whether such income and gains
are distributed to shareholders.
To avoid such tax and interest, a Portfolio's investment adviser intends to
treat these securities as sold on the last day of its fiscal year and recognize
any gains for tax purposes at that time; deductions for losses are allowable
only to the extent of any gains resulting from these deemed sales for prior
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taxable years. Such gains will be considered ordinary income, which a Portfolio
will be required to distribute even though it has not sold the security.
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 thirteen series. Each
series of shares represents the beneficial interest in a separate Portfolio of
assets of the Fund, which is separately managed and has its own investment
objective and policies. The Trustees of the Fund have authority, without the
necessity of a shareholder vote, to establish additional portfolios and series
of shares. The shares outstanding are, and those offered hereby when issued will
be, fully paid and nonassessable by the Fund. The shares have no preemptive,
conversion or subscription rights and are fully transferable.
The assets received from the sale of shares of a Portfolio, and all
income, earnings, profits and proceeds thereof, subject only to the rights of
creditors, constitute the underlying assets of the Portfolio. The underlying
assets of a Portfolio are required to be segregated on the Fund's books of
account and are to be charged with the expenses with respect to that Portfolio.
Any general expenses of the Fund not readily attributable to a Portfolio will be
allocated by or under the direction of the Trustees in such manner as the
Trustees determine to be fair and equitable, taking into consideration, among
other things, the nature and type of expense and the relative sizes of the
Portfolio and the other Portfolios.
Each share has one vote, with fractional shares voting proportionately.
Shareholders of a Portfolio are not entitled to vote on any matter that requires
a separate vote of the shares of another Portfolio but which does not affect the
Portfolio. The Agreement and Declaration of Trust does not require the Fund to
hold annual meetings of shareholders. Thus, there will ordinarily be no annual
shareholder meetings, unless otherwise required by the 1940 Act. The Trustees of
the Fund may appoint their successors until fewer than a majority of the
Trustees have been elected by shareholders, at which time a meeting of
shareholders will be called to elect Trustees. Under the Agreement and
Declaration of Trust, any Trustee may be removed by vote of two-thirds of the
outstanding shares of the Fund, and holders of
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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 Prospectuses.
As of January 31, 1999, the PFL Endeavor Variable Annuity Account owned
of record the following approximate percentages of the outstanding shares of
each Portfolio: 69.55% of the Endeavor Money Market Portfolio; 90.86% of the
Endeavor Asset Allocation Portfolio; 83.65% of the T. Rowe Price International
Stock Portfolio; 81.41% of the Endeavor Value Equity Portfolio; 80.51% of the
Dreyfus Small Cap Value Portfolio; 77.51% of the Dreyfus U.S. Government
Securities Portfolio; 80.75% of the T. Rowe Price Equity Income Portfolio;
76.27% of the T. Rowe Price Growth Stock Portfolio; 80.78% of the Endeavor
Opportunity Value Portfolio; 65.14% of the Endeavor Enhanced Index Portfolio;
66.14% of the Endeavor Select 50 Portfolio; and 76.26% of the Endeavor High
Yield Portfolio. As of January 31, 1999, the PFL Endeavor Platinum Variable
Annuity Account owned of record the following approximate percentages of the
outstanding shares of each Portfolio: 29.31% of the Endeavor Money Market
Portfolio; 7.52% of the Endeavor Asset Allocation Portfolio; 11.24% of the T.
Rowe Price International Stock Portfolio; 14.89% of the Endeavor Value Equity
Portfolio; 13.66% of the Dreyfus Small Cap Value Portfolio; 19.66% of the
Dreyfus U.S. Government Securities Portfolio; 14.84% of the T. Rowe Price Equity
Income Portfolio; 18.13% of the T. Rowe Price Growth Stock Portfolio; 16.68% of
the Endeavor Opportunity Value Portfolio; 26.09% of the Endeavor Enhanced Index
Portfolio; 33.86% of the Endeavor Select 50 Portfolio; and 23.72% of the
Endeavor High Yield Portfolio. As of January 31, 1999, the AUSA Life Insurance
Variable Annuity Account owned of record the following approximate percentages
of the outstanding shares of each Portfolio: 1.14% of the Endeavor Money Market
Portfolio; 1.62% of the Endeavor Asset Allocation Portfolio; 4.26% of the T.
Rowe Price International Stock Portfolio; 3.34% of the Endeavor Value Equity
Portfolio; 3.35% of the Dreyfus Small Cap
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Value Portfolio; 2.83% of the Dreyfus U.S. Government Securities Portfolio;
3.05% of the T. Rowe Price Equity Income Portfolio; 3.77% of the T. Rowe Price
Growth Stock Portfolio; 2.54% of the Endeavor Opportunity Value Portfolio; and
3.09% of the Endeavor Enhanced Index Portfolio . As of January 31, 1999, the
People's Benefit Life Insurance Company Separate Account V owned of record the
following approximate percentages of the outstanding shares of each Portfolio:
1.92% of the Dreyfus Small Cap Value Portfolio; 0.83% of the T. Rowe Price
International Stock Portfolio; and 5.60% 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.
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, Endeavor Enhanced Index Portfolio, Endeavor Select 50 Portfolio and
Endeavor High Yield Portfolio for the fiscal period ended December 31, 1998,
including notes to the financial statements and financial highlights and the
Report of _____________________, Independent Auditors 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 of Independent Auditors) included in the Annual
Report are incorporated herein by reference.
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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
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elements present which make the long-term risks appear somewhat larger than in
Aaa securities. Moody's applies numerical modifiers 1, 2 and 3 in the Aa and A
rating categories. The modifier 1 indicates that the security ranks at a higher
end of the rating category, modifier 2 indicates a mid-range rating and the
modifier 3 indicates that the issue ranks at the lower end of the rating
category. Bonds which are rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Bonds which are rated "Baa" are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds which are rated "Ba" are
judged to have speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class. Bonds
which are rated "B" generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small. Bonds which are rated
"Caa" are of poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest. Bonds which
are rated "Ca" represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings. Bonds which
are rated "C" are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
Standard & Poor's Commercial Paper Ratings
"A" is the highest commercial paper rating category utilized by
Standard & Poor's, which uses the numbers "1+", "1", "2" and "3" to denote
relative strength within its "A" classification. Commercial paper issuers rated
"A" by Standard & Poor's have the following characteristics. Liquidity ratios
are better than industry average. Long-term debt rating is "A" or better. The
issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow are in an upward trend. Typically, the issuer is a strong
company in a well-established industry and has superior management. Issues rated
"B" are regarded as having only an adequate capacity for timely payment.
However, such capacity may be damaged by changing conditions or short-term
adversities. The rating "C" is assigned to short-term
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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.
Fitch IBCA, Inc. 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
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as graduations, viewing for example Standard & Poor's rating of A-1+ and A-1 as
being in Standard & Poor's highest rating category.
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<PAGE>
ENDEAVOR SERIES TRUST
PART C
Other Information
Item 23. EXHIBITS
All references are to the Registrant's registration statement
on Form N-1A as filed with the SEC on March 7, 1989, File Nos.
33-27352 and 811-5780 (the "Registration Statement").
Exhibit No. Description of Exhibits
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<PAGE>
(a)(1) 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").
(a)(2) Amendment No. 1 to Agreement and
Declaration of Trust is incorporated by
reference to Post-Effective Amendment
No. 14.
(a)(3) Amendment No. 2 to Agreement and
Declaration of Trust is incorporated by
reference to Post-Effective Amendment
No. 14.
(a)(4) Amendment No. 3 to Agreement and
Declaration of Trust is incorporated by
reference to Post-Effective Amendment
No. 14.
(a)(5) Amendment No. 4 to Agreement and
Declaration of Trust is incorporated by
reference to Post-Effective Amendment
No. 14
(a)(6) Amendment No. 5 to Agreement and
Declaration of Trust is incorporated by
reference to Post-Effective Amendment
No. 14.
(a)(7) Amendment No. 6 to Agreement and
Declaration of Trust is incorporated by
reference to Post-Effective Amendment
No. 14.
(a)(8) 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").
(a)(9) 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").
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(a)(10) 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").
(b) Amended and Restated By-Laws are
incorporated by reference to Post-
Effective Amendment No. 14.
(c)(1) 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.
(c)(2) 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.
(c)(3) 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.
(c)(4) 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.
(c)(5) 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.
(c)(6) 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.
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(c)(7) 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.
(c)(8) 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.
(c)(9) 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").
(c)(10) 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.
(c)(11) 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").
(c)(12) Specimen certificate for shares of beneficial
interest of the Endeavor High Yield Portfolio is
incorporated by reference to Post-Effective
Amendment No. 23 as filed with the SEC on March 18,
1998 ("Post-Effective Amendment No.
23").
(c)(13) Specimen certificate for shares of beneficial
interest of the Endeavor Janus Growth Portfolio is
incorporated by reference to Post-Effective
Amendment No. 24 as filed with the SEC on November
25, 1998 ("Post-Effective Amendment No.
24").
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(d)(1) Management Agreement dated November 23,
1992 between Registrant and Endeavor
Investment Advisers is incorporated by
reference to Post-Effective Amendment
No. 14.
(d)(2) Supplement dated April 19, 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.
(d)(3) 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.
(d)(4) 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.
(d)(5) Supplement to Management Agreement
between Registrant and Endeavor
Investment Advisers with respect to
Opportunity Value Portfolio and Enhanced
Index Portfolio is incorporated by
reference to Post-Effective Amendment
No. 16.
(d)(6) 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.
(d)(7) Amendment dated January 28, 1998 to
Management Agreement between Registrant
and Endeavor Investment Advisers is
incorporated by reference to Post-
Effective Amendment No. 22.
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(d)(8) Supplement to Management Agreement
between Registrant and Endeavor
Investment Advisers with respect to
Endeavor High Yield Portfolio is
incorporated by reference to Post-
Effective Amendment No. 24.
(d)(9) Transfer and Assumption of Management
Agreement among Endeavor Investment
Advisers, Endeavor Management Co. and
the Registrant is filed herein.
(d)(10) Supplement to Management Agreement
between Registrant and Endeavor
Management Co. with respect to Endeavor
Janus Growth Portfolio is filed herein.
(d)(11) Investment Advisory Agreement between
OpCap Advisors and Endeavor Investment
Advisers with respect to the Value
Equity Portfolio is incorporated by
reference to Post-Effective Amendment
No. 24.
(d)(12) 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.
(d)(13) 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.
(d)(14) 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.
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(d)(15) 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.
(d)(16) 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.
(d)(17) 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.
(d)(18) 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.
(d)(19) Investment Advisory Agreement between
J.P. Morgan Investment Management Inc.
and Endeavor Investment Advisers with
respect to the Enhanced Index Portfolio
is incorporated by reference to Post-
Effective Amendment No. 24.
(d)(20) 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.
(d)(21) 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. 24.
(d)(22) 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. 24.
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(d)(23) Investment Advisory Agreement between
Massachusetts Financial Services Company
and Endeavor Investment Advisers with
respect to Endeavor High Yield Portfolio
is incorporated by reference to Post-
Effective Amendment No. 24.
(d)(24) Investment Advisory Agreement between
Janus Capital Corporation and Endeavor
Management Co. with respect to Endeavor
Janus Growth Portfolio is filed herein.
(d)(25) Form of Transfer and Assumption of
Investment Advisory Agreement is
incorporated by reference to Post-
Effective Amendment No. 24.
(e)(1) Participation Agreement between
Registrant, Endeavor Management Co. and
PFL Life Insurance Company is
incorporated by reference to Post-
Effective Amendment No. 14.
(e)(2) Distribution
Agreement between the Registrant and Endeavor Group
is incorporated by reference to Post- Effective
Amendment No. 24.
(f) Not Applicable.
(g)(1) Custody Agreement between Registrant and
Boston Safe Deposit and Trust Company is
incorporated by reference to Post-
Effective Amendment No. 14.
(g)(2) 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.
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(g)(3) 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.
(g)(4) 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.
(g)(5) 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.
(g)(6) Supplement to Custody Agreement between
Registrant and Boston Safe Deposit and
Trust Company with respect to the
Endeavor Select 50 Portfolio (formerly
known as Montgomery Select 50 Portfolio)
is incorporated by reference to Post-
Effective Amendment No. 24.
(g)(7) Supplement to Custody Agreement between
Registrant and Boston Safe Deposit and
Trust Company with respect to Endeavor
High Yield Portfolio is incorporated by
reference to Post-Effective Amendment
No. 24.
(g)(8) Supplement to Custody Agreement between
Registrant and Boston Safe Deposit and
Trust Company with respect to Endeavor
Janus Growth Portfolio is filed herein.
(h)(1) 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-
<PAGE>
(h)(2) License Agreement between Endeavor
Management Co. and Registrant is
incorporated by reference to Post-
Effective Amendment No. 14.
(h)(3) Amendment to License Agreement between
Endeavor Management Co. and Registrant
is incorporated by reference to Post-
Effective Amendment No. 14.
(h)(4) Administration Agreement between
Endeavor Management Co. and The Boston
Company Advisors, Inc. is incorporated
by reference to Post-Effective Amendment
No. 14.
(h)(5) 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.
(h)(6) 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.
(h)(7) 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
(h)(8) 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.
-10-
<PAGE>
(h)(9) 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.
(h)(10) 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.
(h)(11) 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.
(h)(12) 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.
(h)(13) 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.
(h)(14) Supplement 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.
-11-
<PAGE>
(h)(15) 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.
(h)(16) Amendment No. 1 to Amended and Restated
Administration Agreement dated June 1,
1998 with respect to Endeavor Select 50 Portfolio
and Endeavor High Yield Portfolio is incorporated by
reference to Post-Effective Amendment No. 24.
(h)(17) Amendment No. 2 to Amended and Restated
Administration Agreement dated as of
February 1, 1999 with respect to
Endeavor Janus Growth Portfolio is filed
herein.
(i) Not Applicable.
(j) Consent of Independent Auditors (to be
filed by Amendment).
(k) Not Applicable.
(l) Subscription Agreement between
Registrant and PFL Life Insurance
Company is incorporated by reference to
Post-Effective Amendment No. 14.
(m) Brokerage Enhancement Plan incorporated
by reference to Post-Effective Amendment
No. 21.
-12-
<PAGE>
(n) Financial Data Schedule is incorporated
by reference to Post-Effective Amendment
No. 22.
(o) Not Applicable.
(p) Powers of Attorney are incorporated by
reference to Post-Effective Amendment
Nos. 14, 16, 18, 20 , 22 and
24.
Item 24. 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, and one of People's Benefit Life Insurance Company's separate
accounts, People's Benefit Life Insurance Company Separate Account V, held all
the outstanding shares of the Registrant. PFL Life Insurance Company, a stock
life insurance company organized under the laws of the State of Iowa, AUSA Life
Insurance Company, a stock life insurance company organized under the laws of
the State of New York, and People's Benefit Life Insurance Company, a stock life
insurance company organized under the laws of Missouri, 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.
-13-
<PAGE>
-14-
<PAGE>
Item 25. INDEMNIFICATION
Reference is made to the following documents:
Agreement and Declaration of Trust, as amended, as filed as
Exhibits (a)(1) - (a)(10) 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 (e)(1) 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 Management Co. (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.
-15-
<PAGE>
Item 26. (a) Business and Other Connections of the
-------------------------------------
Investment Adviser
Investment Adviser - Endeavor Management Co.
The Manager is a registered investment adviser providing
investment management and administrative services to the Registrant.
The list required by this Item 26 of 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 A
and D of Form ADV filed by the Manager pursuant to the Investment Advisers Act
of 1940 (SEC File No. 801-34064).
Item 26. (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 26 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 26 (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 26 of the officers and
directors of OpCap, together with information as to any other business,
profession, vocation or employment of a substantial
-16-
<PAGE>
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 26 (a) Business and Other Connections of Investment
--------------------------------------------
Adviser
Investment Adviser - The Dreyfus Corporation
The Dreyfus Corporation ("Dreyfus") is a wholly owned
subsidiary of Mellon Bank, N.A. Dreyfus is a registered investment adviser
founded in 1947 providing a variety of investment management services for
clients.
The list required by this Item 26 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 26 (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 26 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 26 (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
-17-
<PAGE>
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 26 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 26 (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 26 of officers and directors of
Morgan, together with information as to any other business, profession, vocation
or employment of a substantial nature engaged in by such officers and directors
during the past two years is incorporated by reference to Schedules A and D of
Form ADV filed by Morgan pursuant to the Investment Advisers Act of 1940 (SEC
file No. 801-21011).
Item 26 (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 26 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 26 (a) Business and Other Connections of Investment
--------------------------------------------
Adviser
-18-
<PAGE>
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 26 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 26 (a) Business and Other Connections of Investment
--------------------------------------------
Adviser
Investment Adviser - Janus Capital Corporation
Janus Capital Corporation ("Janus") is a majority-owned
subsidiary of Kansas City Southern Industries, Inc. Janus provides investment
management and related services to mutual funds, individual, corporate,
charitable and retirement accounts.
The list required by this Item 26 of officers and directors of
Janus, 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 Janus pursuant to the Investment Advisers Act of 1940 (SEC
file No. 801-13991).
Item 27 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
-19-
<PAGE>
Vincent J. McGuinness,
Jr. Chief Operating President,
Officer, Chief Chief
Financial Officer, Financial
Director Officer,
Trustee
Executive Vice Executive Vice
P. Michael Pond President - President -
Administration and Administration
Compliance and Compliance
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
-20-
<PAGE>
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 28 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; Janus Capital Corporation, 100 Fillmore Street, Denver, CO
80206; 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 29 Management Services
-------------------
None
Item 30 Undertakings
------------
-21-
<PAGE>
(a) Inapplicable
(b) Inapplicable
(c) The Registrant will furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
-22-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, as amended, the Registrant, ENDEAVOR SERIES
TRUST, has duly caused this Post-Effective Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Corona del Mar, State of California on the 19th day
of February, 1999.
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 (principal
- ------------------------------
Vincent J. McGuinness, Jr. executive officer), February 19, 1999
Chief Financial
Officer (Treasurer)
(principal financial
and accounting
officer), Trustee
/s/Vincent J. McGuinness* Trustee
- -------------------------
Vincent J. McGuinness February 19, 1999
/s/Timothy A. Devine* Trustee
- ---------------------
Timothy A. Devine February 19, 1999
/s/Thomas J. Hawekotte* Trustee
- -----------------------
Thomas J. Hawekotte February 19, 1999
/s/Steven L. Klosterman* Trustee
- ------------------------
Steven L. Klosterman February 19, 1999
-23-
<PAGE>
/s/Halbert D. Lindquist* Trustee February 19, 1999
- ------------------------
Halbert D. Lindquist
/s/Keith H. Wood* Trustee
- -----------------
Keith H. Wood February 19, 1999
/s/Peter F. Muratore* Trustee
- ---------------------
Peter F. Muratore February 19, 1999
* By: /s/Robert N. Hickey
Robert N. Hickey
Attorney-in-fact
</TABLE>
-24-
<PAGE>
TRANSFER AND ASSUMPTION
OF
MANAGEMENT AGREEMENT
REGARDING
ENDEAVOR SERIES TRUST
TRANSFER AND ASSUMPTION OF MANAGEMENT AGREEMENT, made as of
December 31, 1998, by and among Endeavor Series Trust, a Massachusetts business
trust (the "Trust"), Endeavor Investment Advisers, a California general
partnership ("EIA"), and Endeavor Management Co., a California corporation
("EMC").
RECITALS
The Trust is registered with the Securities and Exchange Commission as
an open-end management investment company under the Investment Company Act of
1940, as amended (the "Act").
The Trust consists of several distinct investment portfolios listed on
Schedule A hereto (the "Funds").
EMC holds a 50.01% interest in EIA and, as the managing partner of EIA,
is responsible for its control and management, and EMC is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended.
EIA entered into a Management Agreement with the Trust dated November
23, 1992, as amended and supplemented (the "Management Agreement"), under which
EIA serves as the investment manager (the "Manager") for the Funds.
EIA and the Trust desire that EIA's interest, rights, responsibilities
and obligations in and under the Management Agreement be transferred to EMC, and
EMC desires to assume EIA's interest, rights, responsibilities and obligations
in and under the Management Agreement.
This Agreement does not result in a change of actual control or
management of the Manager for the Funds and, therefore, is neither an
"assignment" as defined in Section 2(a)(4) of the Act nor an "assignment" for
purposes of Section 15(a)(4) of the Act, and does not constitute a termination
of the Management Agreement.
AGREEMENTS
In consideration of the mutual covenants set forth in this Agreement
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereby agree as follows:
1. Transfer. Effective as of December 31, 1998 (the "Effective Date"),
EIA hereby transfers to EMC all of EIA's interest, rights, responsibilities and
obligations in and under the Management Agreement.
-1-
<PAGE>
2. Assumption and Performance of Duties. As of the Effective Date, EMC
hereby accepts all of EIA's interest and rights, and assumes and agrees to
perform all of EIA's responsibilities and obligations in and under the
Management Agreement; EMC agrees to be subject to all of the terms and
conditions of said Agreement.
3. Consent. The Trust hereby consents to this transfer by EIA to EMC of
EIA's interest, rights, responsibilities and obligations in and under the
Management Agreement and to the acceptance and assumption by EMC of the same.
The Trust agrees, subject to the terms and conditions of said Agreement, to look
solely to EMC for the performance of the Manager's responsibilities and
obligations under said Agreement from and after the Effective Date, and to
recognize as inuring solely to EMC the interest and rights heretofore held by
EIA thereunder.
4. Limitation of Liability of Trustees, Officers and Shareholders. 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 shall bind only the trust property of
the Trust, as provided in the Agreement and Declaration of Trust of the Trust.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and this Agreement has been executed by the President 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.
5. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers hereunto as of the date first above
written.
ENDEAVOR SERIES TRUST
By: /s/Vincent J. McGuinness, Jr.
-------------------------------------
Title: President
ENDEAVOR INVESTMENT ADVISERS
By: Endeavor Management Co.,
Managing Partner
By: /s/Vincent J. McGuinness
----------------------------------------
Title: CEO
ENDEAVOR MANAGEMENT CO.
By: /s/Vincent J. McGuinness
----------------------------------------
Title: CEO
-3-
<PAGE>
SCHEDULE A
PORTFOLIOS OF ENDEAVOR SERIES TRUST
AS OF DECEMBER 31, 1998
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
Endeavor Enhanced Index Portfolio
Endeavor Select 50 Portfolio
Endeavor High Yield Portfolio
-4-
<PAGE>
SUPPLEMENT TO MANAGEMENT AGREEMENT
ENDEAVOR JANUS GROWTH PORTFOLIO
Date: February 9, 1999
Endeavor Management Co.
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 (which Agreement was
transferred, effective January 1, 1999, to Endeavor Management Co., a California
corporation (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 JANUS GROWTH 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.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning to us the enclosed copy
hereof.
<PAGE>
Endeavor Management Co.
Page 2
Very truly yours,
ENDEAVOR SERIES TRUST
By: /s/Vincent J. McGuinness, Jr.
-----------------------------
Authorized Officer
Accepted:
ENDEAVOR MANAGEMENT CO.
By: /s/Vincent J. McGuinness, Jr.
-----------------------------
Authorized Officer
<PAGE>
AMENDMENT TO
SCHEDULE A
ENDEAVOR JANUS GROWTH PORTFOLIO .80% of average daily net
assets
ENDEAVOR MANAGEMENT CO. ENDEAVOR SERIES TRUST
By: /s/Vincent J. McGuinness, Jr. By: Vincent J. McGuinness, Jr.
----------------------------- --------------------------
Chairman President
Date: February 9, 1999 Date: February 9, 1999
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 9th day of February, 1999, by and between Janus
Capital Corporation, a Colorado corporation (the "Adviser"), and Endeavor
Management Co., a California
corporation (the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
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 Janus Growth 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 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,
<PAGE>
-2-
which consent shall not be unreasonably withheld. 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 before they become
effective and to provide to the Adviser as promptly as practicable copies of all
amendments and supplements to the Registration Statement before filing with the
Securities and Exchange Commission ("SEC") 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.
The Manager shall timely furnish the Adviser with such additional
information as may be reasonably necessary for or requested by the Adviser to
perform its responsibilities pursuant to this Agreement. The Manager shall
cooperate with the Adviser in setting up and maintaining brokerage accounts and
other accounts the Adviser deems advisable to allow for the purchase or sale of
various forms of securities pursuant to this Agreement.
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
<PAGE>
-3-
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, provided that the Adviser shall not be responsible for Portfolio
accounting. 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 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 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, but shall not be obligated to pay any expenses of
the Manager, the Trust, or the Portfolio, including without limitation: (a)
interest and taxes; (b) brokerage commissions and other costs in connection with
the purchase or sale of securities or other investment instruments for the
Portfolio; and (c) custodian fees and expenses. Any reimbursement of fees paid
to the Manager required by any expense limitation provision and any liability
arising out of a violation of Section 36(b) of the 1940 Act shall be the sole
responsibility of the Manager.
<PAGE>
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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 the 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
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. The Adviser shall have no
responsibility to monitor certain limitations or restrictions for which the
Adviser has not been provided sufficient information in accordance with Section
1 of this Agreement or otherwise. All such monitoring shall be the
responsibility of the Manager.
f. The Adviser makes no representation or warranty, express or
implied, that any level of performance or investment results will be achieved by
the Portfolio or that the Portfolio will perform comparably with any standard or
index, including other clients of the Adviser, whether public or private.
g. The Adviser shall be responsible for the preparation and
filing of Schedule 13G and Form 13F on behalf of the Portfolio. The Adviser
shall not be responsible for the preparation or filing of any other reports
required of the Portfolio by any governmental or regulatory agency, except as
expressly agreed to in writing.
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
<PAGE>
-5-
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.
The Adviser shall be subject to a written code of ethics adopted by it
pursuant to Rule 17j-1(b) of the 1940 Act, and shall not be subject to any other
code of ethics, including the Manager's code of ethics, unless specifically
adopted by the Adviser.
5. Use of Names. The Adviser hereby consents to the Portfolio being
named the Endeavor Janus Growth Portfolio. The Manager shall not use the name or
mark "Janus" or disclose information related to the business of the Adviser or
any of its affiliates in any prospectus, sales literature or other material
relating to the Trust in any manner not approved prior thereto by the Adviser;
provided, however, that the Adviser shall approve all uses of its name and that
of its affiliates which merely refer in accurate terms to its appointment
hereunder or which are required by the SEC or a state securities commission; and
provided, further, that in no event shall such approval be unreasonably
withheld. The Adviser shall not use the name of the Trust or the Manager in any
material relating to the Adviser in any manner not approved prior thereto by the
Manager; provided, however, that the Manager shall approve all uses of its or
the Trust's name which merely refer in accurate terms to the appointment of the
Adviser hereunder or which are required by the SEC or a state securities
commission; and, provided, further, that in no event shall such approval be
unreasonably withheld.
The Manager recognizes that from time to time directors, officers and
employees of the Adviser may serve as directors, trustees, partners, officers
and employees of other corporations, business trusts, partnerships or other
entities (including other investment companies) and that such other entities may
include the name "Janus" 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.
Upon termination of this Agreement for any reason, the Manager shall
immediately cease and cause the Portfolio to immediately cease all use of the
name and mark "Janus."
6. Liability. Except as may otherwise be provided by the 1940 Act, or
other federal securities laws, neither the
<PAGE>
-6-
Adviser nor any of its affiliates, officers, directors, shareholders, employees,
or agents shall be liable for any loss, liability, cost, damage, or expense
(including reasonable attorneys' fees and costs) (collectively referred to in
this Agreement as "Losses"), except for Losses resulting from the Adviser's
gross negligence, bad faith, or willful misconduct or reckless disregard of its
obligations and duties under this Agreement. The Manager shall hold harmless and
indemnify the Adviser, its affiliates, directors, officers, shareholders,
employees or agents for any Loss not resulting from the Adviser's gross
negligence, bad faith, or willful misconduct or reckless disregard of its
obligations and duties under this Agreement. The obligations contained in this
Section 6 shall survive termination of this Agreement.
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
<PAGE>
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Act. This Agreement may be amended at any time by the Adviser and the Manager,
subject to approval by the Trust's Board of Trustees and, if required by
applicable SEC rules and regulations, a vote of a majority of the Portfolio's
outstanding voting securities.
9. Confidential Relationship. Any information and advice furnished by
either party to this Agreement to the other shall be treated as confidential and
shall not be disclosed to third parties without the consent of the other party
hereto except as required by law, rule or regulation.
The Manager hereby consents to the disclosure to third parties of (i)
investment results and other data of the Manager or the Portfolio in connection
with providing composite investment results of the Adviser and (ii) investments
and transactions of the Manager or the Portfolio 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. Custodian. The Portfolio assets shall be maintained in the custody
of its custodian. Any assets added to the Portfolio shall be delivered directly
to such custodian. The Adviser shall have no liability for the acts or omissions
of any custodian of the Portfolio's assets. The Adviser shall have no
responsibility for the segregation requirement of the 1940 Act or other
applicable law other than to notify the custodian of investments that require
segregation and appropriate assets for segregation.
12. Representations and Warranties.
The Manager represents and warrants the following:
(i) The Manager has been duly incorporated and is
validly existing and in good standing as a
corporation under the laws of the state of
California.
(ii) The Manager has all requisite corporate power and
authority under the laws of California and federal
securities laws to execute, deliver and to perform
this
Agreement.
(iii) All necessary corporate proceedings of the Manager
have been duly taken to authorize the execution,
delivery and performance of this Agreement by the
Manager.
<PAGE>
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(iv) The Manager is a registered investment adviser
under the Advisers Act and is in compliance with
all other registrations required.
(v) The Manager has complied, in all material respects,
with all registrations required by, and will
comply, in all material respects, with all
applicable rules and regulations of, the SEC.
(vi) The Manager has authority under the Management
Agreement to execute, deliver and perform this
Agreement.
13. 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.
14. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of California. The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the parties.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
ENDEAVOR MANAGEMENT CO.
BY: /s/Vincent J. McGuinness, Jr.
-----------------------------
Authorized Officer
JANUS CAPITAL CORPORATION
BY: /s/Bonnie Howe
-------------------------------
Authorized Officer
Assistant Vice President
<PAGE>
SCHEDULE A
Endeavor Janus Growth 0.50% of average daily net
Portfolio assets
<PAGE>
SUPPLEMENT TO CUSTODY AGREEMENT
February 9, 1999
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 Janus Growth 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 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
-1-
<PAGE>
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:/s/Vincent J. McGuinness, Jr.
-----------------------------
Title: President
---------------------
Accepted and Agreed to:
BOSTON SAFE DEPOSIT AND TRUST COMPANY
By: /s/Chris Healy
------------------------
Title: Senior Vice President
-------------------------
-2-
<PAGE>
AMENDMENT NO. 2 TO
AMENDED AND RESTATED ADMINISTRATION AGREEMENT
This Amendment No. 2 dated as of February 9, 1999, is entered into by
ENDEAVOR MANAGEMENT CO. (the "Company") and FIRST DATA INVESTOR SERVICES GROUP,
INC. ("Investor Services Group").
WHEREAS, Endeavor Investment Advisers ("EIA") and Investor Services
Group entered into an Amended and Restated Administration Agreement dated as of
July 1, 1997 (the "Agreement");
WHEREAS, EIA, effective January 1, 1999, assigned all of its rights and
obligations under the Agreement to the Company;
WHEREAS, the Company and Investor Services Group wish to amend the
Agreement to revise certain Schedules to the Agreement;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, hereby agree as follows:
I. Schedule A to the Agreement shall be deleted in its entirety and:
replaced with the attached Schedule A.
II. Schedule B to the Agreement shall be deleted in its entirety 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.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date and year first written above.
ENDEAVOR MANAGEMENT CO.
By: /s/Vincent J. McGuinness, Jr.
------------------------------
Vincent J. McGuinness, Jr.
FIRST DATA INVESTOR SERVICES
GROUP, INC.
By: /s/Barbara L. Worthen
------------------------------
<PAGE>
SCHEDULE A
Endeavor Money Market Portfolio
Endeavor Asset Allocation Portfolio
T. Rowe Price International Stock Portfolio
Endeavor 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
Endeavor Opportunity Value Portfolio
Endeavor Enhanced Index Portfolio
Endeavor Select 50 Portfolio
Endeavor High Yield Portfolio
Endeavor Janus Growth Portfolio
<PAGE>
SCHEDULE B
FEE SCHEDULE
The Company shall pay Investor Services Group the following fees for servicing
the Existing Portfolios (as hereinafter defined):
o a flat fee of $650,000 per annum, provided that the aggregate net
assets of the Existing Portfolios do not exceed $1 billion.
o if the aggregate net assets of the Existing Portfolios exceed $1
billion, Investor Services Group shall also be entitled to receive a
fee of .01% of any net assets in excess of $1 billion in addition to
the flat fee of $650,000.
o if the aggregate net assets of the Existing Portfolios fall below $850
million, the foregoing fees will be subject to renegotiation.
The "Existing Portfolios" shall consist of 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.
In addition the Company shall pay Investor Services Group the following fees for
servicing the Endeavor Select 50 Portfolio, the Endeavor High Yield Portfolio
and the Endeavor Janus Growth Portfolio:
Flat fee:
$40,000 per fund 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 (with
respect to the Endeavor Select 50 Portfolio only).
Asset Based Fee:
An additional fee of .01% on the net assets of the Endeavor
Select 50 Portfolio, the Endeavor High Yield Portfolio and the Endeavor Janus
Growth Portfolio will be charged.
o Investor Services Group shall be entitled to collect all out-of-pocket
fees described in Schedule C to the Agreement.
<PAGE>
