As filed with the Securities and Exchange Commission on February 29, 2000
Securities Act File No. 33-27352
Investment Company Act File No. 811-5780
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
--
Pre-Effective Amendment No.
Post-Effective Amendment No. 29 X
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REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
--
Amendment No. 31
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ENDEAVOR SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
2101 East Coast Highway, Suite 300
Corona del Mar, California 92625
------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Are Code: (800) 854-8393
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Vincent J. McGuinness, Jr.
-------------------------
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) 75 days after filing pursuant to
paragraph (a)(2)
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<PAGE>
on ____________ pursuant to paragraph (a)(2) of Rule 485
- ---
This post-effective amendment designates a new effective date for a
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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 (now known as the
Endeavor Select 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 Portfolio , Endeavor High Yield Portfolio and Endeavor Janus
Growth Portfolio for the fiscal year ended December 31, 1999 will be filed on or
about March 31, 2000.
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<PAGE>
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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 Portfolio
=========================
(formerly 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, 2000
====
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.
-4-
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
INTRODUCTION......................................................................................................4
Understanding the Trust..................................................................................4
THE PORTFOLIOS....................................................................................................7
Investment Summary................................................................................................7
Investment Objectives, Investment Strategies, Risks and Past Performance for:
Endeavor Money Market Portfolio.................................................................9
T. Rowe Price International Stock Portfolio....................................................12
Endeavor Value Equity Portfolio................................................................16
Endeavor Opportunity Value Portfolio...........................................................20
Dreyfus Small Cap Value Portfolio..............................................................24
T. Rowe Price Equity Income Portfolio..........................................................27
T. Rowe Price Growth Stock Portfolio...........................................................30
Endeavor Enhanced Index Portfolio..............................................................33
Endeavor Select Portfolio...................................................................37
Endeavor Janus Growth Portfolio................................................................42
Dreyfus U.S. Government Securities Portfolio...................................................44
Endeavor High Yield Portfolio..................................................................49
Endeavor Asset Allocation Portfolio............................................................52
Primary Risks of Investing in the Portfolios.....................................................................57
Additional Investment Strategies.................................................................................59
Management.......................................................................................................70
The Manager.............................................................................................70
The Investment Advisers.................................................................................71
Brokerage Enhancement Plan..............................................................................79
Financial Highlights.............................................................................................81
YOUR INVESTMENT.................................................................................................114
Shareholder Information................................................................................114
Dividends, Distributions and Taxes.....................................................................114
Sales and Purchases of Shares..........................................................................114
GLOSSARY OF INVESTMENT TERMS....................................................................................116
FOR MORE INFORMATION.....................................................................................Back Cover
</TABLE>
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<PAGE>
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 following table indicates, each of the thirteen Portfolios of
the Trust falls into one of five categories of funds. A particular type of
Portfolio may be more appropriate for you depending upon your investment needs.
-6-
<PAGE>
<TABLE>
<CAPTION>
Type of Fund Portfolio
<S> <C>
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 Janus Growth Portfolio
Global Equity Endeavor Select 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. 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 lend stability to a portfolio made up primarily of stocks. These
funds, other than those
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<PAGE>
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.
-8-
<PAGE>
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.
Following the Investment Summary is the section entitled "Primary Risks of
Investing in the Portfolios" which lists some of the factors that may affect the
value of a Portfolio's investments. Shares of a Portfolio are not deposits or
obligations of, or guaranteed by, any bank, and are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency of the U.S. government.
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.
-9-
<PAGE>
[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.]
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.
-10-
<PAGE>
[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 or government-sponsored
entities 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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<PAGE>
The investment adviser focuses primarily on the interest rate
environment in determining which securities to purchase for the Portfolio.
Generally, if the investment adviser believes that interest rates will rise, the
Portfolio will invest in securities with shorter maturities. If interest rates
are believed to be falling, the Portfolio will invest in securities with longer
maturities; however, the Portfolio will not acquire any security with a
remaining maturity of more than 397 days.
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<PAGE>
[Right Side:]
----------
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, 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
o Foreign investment 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
$1.00 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. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. 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. 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% 4.75%
92 93 94 95 96 97 98 99
== ==
High Quarter: 2nd - 1995 + 1.53%
Low Quarter: 1st - 1993 + 0.53%
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<PAGE>
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
12/31/99.
Average Annual Total Return as of
12/31/99
-------------------------------------
Since
1 Year 5 Year Inception
------ ------ ---------
4.75% 5.04% 4.30%
For up-to-date yield information, please call 1-800-525-6205.
[SIDE BAR:
--------
Portfolio Management:
o Morgan Stanley Asset Management
see page 72
o For financial highlights see page 81]
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<PAGE>
[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.
[SIDE BAR:
--------
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<PAGE>
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.]
-16-
<PAGE>
[Right Side:]
----------
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, any of
which could cause the Portfolio's return or the price of its shares to decrease:
o Market risk
o Foreign investment risk
o Investment style risk
o Market capitalization 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. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. 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. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
-17-
<PAGE>
Year-by-Year Total Return as of 12/31 of Each Year
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
(3.61)% 18.48% (5.67)% 10.37% 15.23% 2.54% 15.44% 32.35 %
92 93 94 95 96 97 98
==
99
High Quarter: 4th - 1999 + 23.26%
Low Quarter: 3rd - 1998 - 14.19%
</TABLE>
The table below compares the Portfolio's average annual compounded total
returns for the 1-year period, 5-year period, and from inception through
12/31/99 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, an equally weighted
performance index of international funds underlying 30 variable annuities. An
index does not include transaction costs associated with buying and selling
securities or any mutual fund expenses. It is not possible to invest directly in
an index.
Average Annual Total Return as of 12/31/99
========
-------------------------------------
Since
1 Year 5 Year Inception
--------------------------------------
Portfolio 32.35% 14.79% 9.78%
MSCI EAFE Index 26.96% 12.83% 13.11%*
Lipper VA International 36.66% 14.12% 15.46%**
Index
* From 3/31/91
** Since Index's inception on 12/31/91
[SIDE BAR:
--------
Portfolio Management
o Rowe Price-Fleming International, Inc.
see page 74
o For financial highlights see page 81]
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<PAGE>
[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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<PAGE>
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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<PAGE>
[Right Side:]
------------
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, 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 Investment style risk
o Foreign investment risk
o Market capitalization 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. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. 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. 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% (3.06)%
94 95 96 97 98 99
== ==
High Quarter: 4th - 1998 +14.89%
Low Quarter: 3rd - 1998 -15.72%
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<PAGE>
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period, 5-year period, and since inception through
12/31/99 with the Standard & Poor's 500 Composite Stock Price Index (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, an equally weighted performance index of
capital appreciation funds underlying 30 variable annuities. An index does not
include transaction costs associated with buying and selling securities or any
mutual fund expenses. It is not possible to invest directly in an index.
Average Annual Total Return as of 12/31/99
========
-------------------------------------
Since
1 Year 5 Year Inception
------- ------ ---------
-------------------------------------
Portfolio (3.06)% 16.74% 13.61%
S&P 500 Index 21.05% 28.54% 27.36%*
Lipper VA Capital
Appreciation
Index 38.57% 24.77% 19.13%*
* From 5/31/93
[SIDE BAR:
--------
Portfolio Management
o OpCap Advisors
see page 74
o For financial highlights see page 81]
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<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 may vary in particular cases, in
general the selection process includes the following techniques:
-23-
<PAGE>
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 investments 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.]
-24-
<PAGE>
[Right Side:]
----------
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, 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
o Investment style 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. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. 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. 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% 4.79%
97 98 99
== ==
High Quarter: 4th - 1998 + 11.60%
Low Quarter: 3rd - 1998 -13.85%
-25-
<PAGE>
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period and since inception through 12/31/99 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, an equally weighted performance index of flexible
portfolio funds underlying 30 variable annuities. An index does not include
transaction costs associated with buying and selling securities or any mutual
fund expenses. It is not possible to invest directly in an index.
Average Annual Total Return as of 12/31/99
========
-------------------------------------
Since
1 Year Inception
-------------------------------------
Portfolio 4.79% 8.65%
S&P 500 Index 21.03% 17.72%*
Lipper VA Flexible
Portfolio Index 11.86% 13.84%*
* From 11/30/96
[SIDE BAR:
--------
Portfolio Management
o OpCap Advisors
see page 74
o For financial highlights
see page 81]
-26-
<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.
-27-
<PAGE>
[Right side:]
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, any of
which could cause the Portfolio's return or the price of its shares to decrease:
o Market risk
o Investment style risk
o Foreign investment risk
o Market capitalization 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. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. 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. The Portfolio can also experience short-term performance swings as
indicated in the high and low quarter information at the bottom of the chart.
-28-
<PAGE>
Year-by-Year Total Return as of 12/31 of Each Year
(1.79)% 14.05% 25.63% 25.56% (2.18)% 29.39%
94 95 96 97 98 99
== ==
High Quarter: 2nd - 1999 +31.03%
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
12/31/99 with the Russell 2000 Index, a widely recognized unmanaged index that
measures small company stock performance, and with the Lipper VA Small-Cap
Index, an equally weighted performance index of small cap funds underlying 30
variable annuities. An index does not include transaction costs associated with
buying and selling securities or any mutual fund expenses. It is not possible to
invest directly in an index.
Average Annual Total Return as of 12/31/99
========
-------------------------------------
Since
1 Year 5 Year Inception
-------- ------ ---------
Portfolio 29.39% 17.88% 14.74%
Russell 2000 Index 21.26% 16.69% 14.66%*
Lipper VA Small-Cap
Index 43.03% 20.17% 16.57%*
* From 4/30/93
[SIDE BAR:
--------
Portfolio Management:
o The Dreyfus Corporation
-29-
<PAGE>
see page 75
o For financial highlights
see page 81]
-30-
<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.
-31-
<PAGE>
[Right side:]
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or more of
the following risks, which are described in detail on page 58, 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
o Market capitalization risk
o Investment style risk
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. Such securities may also
decline in value when interest rates rise sharply. Also, a company may reduce or
eliminate its dividend.
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. Note that the
results in each table do not include the effect of Contract charges. If these
Contract charges had been included, performance would have been lower. 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. 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% 3.47%
95 96 97 98 99
== ==
High Quarter: 2nd - 1999 +13.35%
Low Quarter: 3rd -1999 - 8.64%
-32-
<PAGE>
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period, 5-year period and since inception through
12/31/99 with the S&P 500 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, an index which measures the total returns earned
by 10 variable annuities investing in equity income funds. An index does not
include transaction costs associated with buying and selling securities or any
mutual fund expenses. It is not possible to invest directly in an index.
Average Annual Total Return as of 12/31/99
Since
1 Year 5 year Inception
Portfolio 3.47% 17.69% 17.73%
S&P 500 Index 21.03% 28.53% 28.53%*
Lipper VA Equity Income Index 5.41% N/A 15.20%**
* From 12/31/94
** Since Index's inception on 12/29/95
[SIDE BAR:
--------
Portfolio management:
o T. Rowe Price Associates, Inc.
see page 75
o For financial highlights
see page 81]
-33-
<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]
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).
-34-
<PAGE>
[Right side:]
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, any of
which could cause the Portfolio's return or the price of its shares to decrease:
o Market risk
o Foreign investment risk
o Investment style risk
o Market capitalization 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. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. 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. 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% 22.19%
95 96 97 98 99
== ==
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, 5-year period and since inception through
12/31/99 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, an equally weighted performance
index of
-35-
<PAGE>
growth funds underlying 30 variable annuities. An index does not include
transaction costs associated with buying and selling securities or any mutual
fund expenses. It is not possible to invest directly in an index.
Average Annual Total Return as of 12/31/99
========
Since
1 Year 5 Year Inception
-------- ====== ---------
Portfolio 22.19% 27.33% 27.38%
S&P 500 Index 21.03% 28.53% 28.53%*
Lipper VA Growth Index 25.78% 24.91% 24.91%*
* From 12/31/94
[SIDE BAR:
--------
Portfolio Management
o T. Rowe Price Associates, Inc.
see page 75
o For financial highlights see page 81]
-36-
<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 23 analysts with an
average of over ten years of experience
-37-
<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
-38-
<PAGE>
[Right Side:]
----------
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, any of
which could cause the Portfolio's return or the price of its shares to decrease:
o Market risk
o Market capitalization risk
o Investment style 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. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. 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) and indicates how it has varied from
year to year. 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
31.39% 18.16%
98 99
== ==
High Quarter: 4th - 1998 + 22.37%
Low Quarter: 3rd - 1998 - 9.63%
-39-
<PAGE>
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period and since inception through 12/31/99 with
the S&P 500 Index and with the Lipper VA Growth & Income Index, an equally
weighted performance index of growth and income funds underlying 10 variable
annuities. An index does not include transaction costs associated with buying
and selling securities or any mutual fund expenses. It is not possible to invest
directly in an index.
Average Annual Total Return as of 12/31/99
========
Since
1 Year Inception
Portfolio 18.16% 27.39%
S&P 500 Index 21.03% 27.36%*
Lipper VA Growth &
Income Index 11.61% 18.12%*
* From 4/30/97
[SIDE BAR:
--------
Portfolio management:
o J.P. Morgan Investment Management Inc.
see page 76
o For financial highlights see page 81]
-40-
<PAGE>
[Left Side:]
---------
Endeavor Select Portfolio
=========================
(formerly 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
three different investment styles
Investment Objective
To provide long-term capital growth by investing in at least 60
different equity securities of companies of all sizes throughout the world.
Principal Investment Strategy
Three of the investment adviser's portfolio management teams each
typically selects between 20 and 30, but never less than 20, 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 60 equity securities that is allocated
approximately equally among the investment adviser's three equity disciplines
and is well diversified with typically 33% allotted to U.S. securities of all
capitalization ranges and 67% allotted to foreign securities. The three
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
The Portfolio selects companies of any size, but will invest
at least 65% of its total assets in 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
-41-
<PAGE>
o Conduct in-depth analysis of each company's current
business and future prospects
o Analyze each company's price to determine whether its
growth prospects have been discovered by the market
o International Equity
Under normal conditions, the team invests in the common stocks
of companies outside the United States and will invest at
least 65% of its assets in those companies 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 (or twice the benchmark
index weightings used by the team, whichever is greater) in
any one
-42-
<PAGE>
country. The investment adviser currently expects that only
those investments in Japan could exceed that 40% limit.
The team seeks well-managed companies that it believes will be
able to increase their sales and corporate earnings on a
sustained basis. In addition, the team purchases shares of
companies that they consider 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, Columbia, Costa
Rica, Jamaica, Mexico, Peru, Trinidad and Tobago,
Uruguay and Venezuala)
- Asia (Bangladesh,
China/Hong Kong, India, Indonesia, South
Korea, Malaysia, Pakistan, the Phillipines, Singapore,
Taiwan, Thailand and Vietnam)
- Europe (Czech Republic, Greece,
Hungary, Kazakhstan,
Poland, Portugal, Romania, Russia,
Slovakia, Slovenia, Turkey and
Ukraine)
- The Middle East (Israel and Jordan)
- Africa (Egypt, Ghana, Ivory Coast, Kenya, Morocco,
Nigeria, South Africa, Tunisia and Zimbabwe)
No more than 50% of the total assets allocated to the team 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. The Portfolio allocates its assets among emerging
countries with stable or improving macro economic environments
and invests in companies within those countries that the team
believes have high capital appreciation potential without
excessive risk.
-43-
<PAGE>
[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.
-44-
<PAGE>
[Right side:]
----------
Primary Risks
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, 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. Growth Equity team's focus on growth stocks may expose
shareholders to investment style risk. To the extent that the International
Equity team invests in Japanese securities, shareholders may be exposed to
special risks. The Portfolio's share value may be more volatile than that of
mutual funds not sharing this geographic concentration. The value of the
Portfolio's shares may vary dramatically in response to political and economic
factors affecting companies in Japan.
The decline in the Japanese securities market since 1989 has contributed to a
weakness in the Japanese economy, and the impact of a further decline cannot be
ascertained. The common stocks of many Japanese companies continue to trade at
high price-earnings ratios in comparison with those in the United States, even
after that market decline. Differences in accounting methods make it difficult
to compare the earnings of Japanese companies with those of companies in other
countries, especially the United States.
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.
-45-
<PAGE>
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. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. As with all mutual
funds, past returns are not a predictor of future returns.
Prior to May 1, 2000, the Portfolio's assets were divided among five
investment disciplines which included the three investment disciplines discussed
above as well as the equity income and U.S. small capitalization companies
disciplines. Each respective portfolio management team selected approximately 10
equity securities for a concentrated portfolio of at least 50 equity securities.
Beginning on May 1, 2000, two of the Portfolio's investment disciplines were
eliminated and the Portfolio's assets were allocated among the three investment
disciplines discussed above.
The bar chart below shows you the Portfolio's performance for the full calendar
year since its inception (2/03/98). 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
47.84%
99
High Quarter: 4th - 1999 +31.01%
Low Quarter: 3rd - 1998 -17.92%
The table below compares the Portfolio's average annual compounded total returns
for the 1-year period and since inception through 12/31/99 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, with a blended index which
weights the different types of equity investments, and with the Lipper VA Global
Index, an equally weighted performance index of global funds underlying 10
variable annuities. An index does not include transaction costs associated with
buying and selling securities or any mutual fund expenses. It is not possible to
invest directly in an index.
-46-
<PAGE>
Average Annual Total Return as of 12/31/99
Since
1 Year Inception
----------------------------------------------
Portfolio 47.84% 26.90%
S&P 500 Index 21.03% 25.20%*
Blended Index (40% S%P 500 Index, % %* 20% Russell 2000 Index, 20% MSCI EAFE
Index, 20% MSCI EMF Index) 34.52% 19.77%
Lipper VA Global Index 37.60% 26.09%*
*from 1/31/98
[SIDE BAR:
--------
Portfolio Management
o Montgomery Asset Management, LLC
see page 76
o For financial highlights see page 81]
-47-
<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.]
-48-
<PAGE>
[Right Side:]
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, any of
which could cause the Portfolio's return or the price of its shares to decrease:
o Market risk
o Investment style risk
o Foreign investment risk
Past Performance:
- ----------------
The Portfolio commenced operations on May 1, 1999. As a result, it does
not have a significant operating history. For performance information for the
period ended December 31, 1999, see "Financial Highlights" and the Statement of
Additional Information.
[SIDE BAR:
--------
Portfolio Management
o Janus Capital Corporation
See page 77]
-49-
<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:
o investment grade corporate bonds
-50-
<PAGE>
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 the Portfolio's total
assets) so long as they are consistent with the Portfolio's
objective (The weighted average maturity of such obligations
will generally range from two to ten 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. In choosing securities,
the investment adviser uses a combination of quantitative and fundamental
research, including analysis of the credit worthiness of issuers and the rates
of interest offered by various issuers.
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."
-51-
<PAGE>
[Right side:]
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, 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 reinvestment of dividends and distributions. Note that the results
in each table do not
-52-
<PAGE>
include the effect of Contract charges. If these Contract charges had been
included, performance would have been lower. 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. 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% (0.87)%
95 96 97 98 99
== ==
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, 5-year period and since inception through
12/31/99 with the Lehman Brothers 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, an equally weighted performance index of U.S. Government funds
underlying 30 variable annuities. An index does not include transaction costs
associated with buying and selling securities or any mutual fund expenses. It is
not possible to invest directly in an index.
Average Annual Total Return as of 12/31/99
1 Year 5 Year Since Inception
Portfolio (0.87%) 6.46% 5.64%
Lehman Brothers Aggregate 0.82% 7.73%* 6.93%
Bond Index
Lipper VA General U.S. Government (2.80)% 5.72%* 4.93%
Index
* From 4/30/94
[SIDE BAR:
--------
Portfolio Management:
o The Dreyfus Corporation
see page 75
-53-
<PAGE>
o For financial highlights
see page 81]
-54-
<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]
-55-
<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 managers 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.
-56-
<PAGE>
[Right side:]
Primary Risks
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, 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 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. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. 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 the full
calendar year since its inception (6/01/98). 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
-57-
<PAGE>
5.82
99
High Quarter: 1st - 1999 + 4.29%
Low Quarter: 3rd - 1999 - 0.47%
The table below compares the Portfolio's average annual compounded
total returns for the 1-year period and since inception through 12/31/99 with
the Lehman Brothers High Yield Index, which is an index composed of high current
yield bonds, and with the Lipper VA High Current Yield Index, an equally
weighted performance index of high current yield funds underlying 30 variable
annuities. An index does not include transaction costs associated with buying
and selling securities or any mutual fund expenses. It is not possible to invest
directly in an index.
Average Annual Total Return as of 12/31/99
1 Year Since Inception
---------------------------
Portfolio 5.82% 1.60%
========= ========= ==========
Lehman Brothers High Yield 2.39% 0.11%*
========================== ========= ==========
Index
=====
Lipper VA High Current Yield 2.45% (1.75)%*
================================= ========= ==========
Index
=====
* From 5/31/98
[SIDE BAR:
--------
Portfolio Management
o Massachusetts Financial Services Company
see page 76
o For financial highlights
see page 81]
-58-
<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 - The Portfolio's investment adviser seeks to maximize long-term capital
appreciation of the equity portion of the Portfolio by investing primarily in
equity securities of large U.S. companies that exhibit strong or accelerating
earnings growth. The universe of eligible companies generally includes those
with market capitalizations of $1 billion or more. The investment adviser
emphasizes individual security selection and may focus this portion of the
Portfolio's holdings within the limits permissible for a diversified fund.
In selecting securities for the equity portion of the Portfolio, the
Portfolio's investment adviser continually and rigorously studies company
developments, including business strategy, management focus and financial
results, to identify companies with earnings growth and business momentum. In
addition, the investment adviser closely monitors analysts' expectations to
identify issuers that have the potential for positive earnings surprises versus
consensus expectations. Valuation is of secondary importance and is viewed in
the context of prospects for sustainable earnings growth and the potential for
positive earnings surprises in relation to consensus expectations.
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 two to thirty years
-59-
<PAGE>
o short-term bonds and notes with remaining maturities of 13 months or
less.
o mortgage-backed securities, including GNMA certificates, and 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 three to ten 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. Although there is no minimum
or maximum maturity for any individual security in the fixed income portion of
the Portfolio, the Portfolio's investment adviser actively manages the interest
rate risk of this portion within a range relative to the benchmark.
The Portfolio's investment adviser relies upon value measures to guide its
decisions regarding sector and security selection for the fixed income portion
of the Portfolio, such as the relative attractiveness of the extra yield offered
by securities other than those issued by the U.S. Treasury. The investment
adviser also measures various types of risk, focusing on the level of real
interest rates, the shape of the yield curve, credit risk and prepayment risk.
The investment adviser may sell securities when it believes that expected
risk-adjusted return is low compared to other investment opportunities.
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.
-60-
<PAGE>
[Right Side:]
----------
Primary Risks:
- -------------
The value of your investment in the Portfolio may be affected by one or
more of the following risks, which are described in detail on page 58, 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
o Market capitalization risk
o Investment style 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. Note that the results
in each table do not include the effect of Contract charges. If these Contract
charges had been included, performance would have been lower. As with all mutual
funds, past returns are not a prediction of future returns.
-61-
<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. 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
9.01% 16.79% (5.28)% 22.91% 17.82% 20.14% 18.39% 26.39%
92 93 94 95 96 97 98 99
== ==
</TABLE>
High Quarter: 4th - 1999 +15.66%
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
12/31/99 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, an equally weighted performance index of
flexible portfolio funds underlying 30 variable annuities. An index does not
include transaction costs associated with buying and selling securities or any
mutual fund expenses. It is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Average Annual Total Return as of 12/31/99
Since
1 Year 5 Year Inception
<S> <C> <C> <C>
Portfolio 26.39% 21.09% 15.68%
S&P 500 Index 21.03% 28.54% 19.62%*
Blended Index (65%
S&P 500 Index, 30%
Lehman Brothers Aggregate
Bond Index, 5% 90 day
T-Bills) 8.32% 13.80% 15.22%*
Lipper VA Flexible
Portfolio Index 11.86% 16.41% 12.07%*
</TABLE>
* From 3/31/91
[SIDE BAR:
--------
Portfolio Management
-62-
<PAGE>
o Morgan Stanley Asset Management
see page 72
o For financial highlights see page 81]
-63-
<PAGE>
Primary Risks of Investing in the Portfolios
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. A Portfolio could also
miss attractive investment opportunities if its investment adviser underweights
fixed income markets or industries where there are significant returns, and
could lose value if the investment adviser overweights fixed income markets or
industries where there are significant declines.
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 and
certain dividend paying stocks tends to fall. If your Portfolio invests a
significant portion of its assets in debt securities or stocks purchased
primarily for dividend income and interest rates rise, then the value of your
investment may decline. Alternatively, when interest rates go down, the value of
debt securities and certain dividend paying stocks 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.]
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
-64-
<PAGE>
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.
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 foreign 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
-65-
<PAGE>
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.
Market Capitalization Risk
Stocks fall into three broad market capitalization categories--large, medium and
small. Investing primarily in one category carries the risk that due to current
market conditions that category may be out of favor. If valuations of large
capitalization companies appear to be greatly out of proportion to the
valuations of small or medium capitalization companies, investors may migrate to
the stocks of small and mid-sized companies causing a Portfolio that invests in
these companies to increase in value more rapidly than a Portfolio that invests
in larger, fully-valued companies. Investing in medium and small capitalization
companies may be subject to special risks associated with narrower product
lines, more limited financial resources, smaller management groups, and a more
limited trading market for their stocks as compared with larger companies.
Securities of smaller capitalization issuers may therefore be subject to greater
price volatility and may decline more significantly in market downturns than
securities of larger companies.
Investment Style Risk
Different investment styles tend to shift in and out of favor depending upon
market and economic conditions as well as investor sentiment. A Portfolio may
outperform or underperform other funds that employ a different investment style.
A Portfolio may also employ a combination of styles that impact its risk
characteristics. Examples of different investment styles include growth and
value investing. Growth stocks may be more volatile than other stocks because
they are more sensitive to investor perceptions of the issuing company's growth
of earnings potential. Also, since growth companies usually invest a high
portion of earnings in their business, growth stocks may lack the dividends of
value stocks that can cushion stock prices in a falling market. Growth oriented
funds will typically underperform when value investing is in favor. Value stocks
are those which are undervalued in comparison to their peers due to adverse
business developments or other factors. Value investing 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 or
overvalued. Value oriented funds will typically underperform when growth
investing is in favor.
Additional Investment Strategies
-66-
<PAGE>
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 not identified below
in connection with 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 112.
<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
Stock rate risk. Securities in
Endeavor Janus Growth developing countries are also
Endeavor High Yield subject to the additional risks
associated with emerging
markets.
U.S. Government All Portfolios U.S. government securities are
Securities subject to interest rate risk.
Credit risk is remote.
-67-
<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 derivatives should be offset by
Dreyfus U.S. Government gains in the hedged
Securities investment. While hedging can
Endeavor Asset Allocation 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 involve leverage could magnify
Endeavor Janus Growth losses.
Dreyfus U.S. Government
Securities Derivatives may also be used
Endeavor High Yield
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.
-68-
<PAGE>
High Quality Short- All Portfolios These instruments are
term Debt subject 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
-69-
<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 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 Stocks Endeavor Opportunity Preferred stocks are subject to
Value market risk. In addition,
T. Rowe Price Equity because preferred stocks pay
Income fixed dividends, an increase in
T. Rowe Price Growth interest rates may cause the
Stock price of a preferred stock to
Endeavor Select fall.
Endeavor Janus Growth
Dreyfus U.S. Government
Securities
Endeavor Asset Allocation
-70-
<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 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 risk and
Endeavor High Yield credit risk.
Endeavor Asset Allocation
-71-
<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 the right or warrant.
Endeavor Janus Growth
Endeavor High Yield
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
Endeavor Janus Growth
Endeavor Asset Allocation
Illiquid Securities Endeavor Enhanced Index The Portfolio could have
Endeavor Select 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
Endeavor Asset Allocation
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.
-73-
<PAGE>
PIK (pay-in-kind) Endeavor Janus Growth These securities are subject to
Debt Securities Endeavor High Yield
Endeavor Asset Allocation credit risk and interest rate 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 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. Reverse repurchase
agreements are considered a
form of borrowing by the Portfoliio
and, therefore,
are a form of leverage. Leverage may
cause any gains or losses of the
Portfolio to be magnified.
Municipal Dreyfus U.S. Government These investments are subject
Securities Securities to interest rate risk and credit
risk.
-74-
<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 bears the risk
Delayed Delivery Endeavor Janus Growth of market value fluctuations in
Securities 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 nominal)
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 risk 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
Endeavor Janus Growth
Dreyfus U.S. Government
Securities
Endeavor High Yield
Endeavor Asset Allocation
-75-
<PAGE>
Investments in T. Rowe Price International When the Portfolio invests in
Other Investment Stock another investment company, it
Companies Endeavor Janus Growth must bear the management
including Passive Endeavor High Yield
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
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 strategy. 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 Allocation Portfolio, Dreyfus Small Cap Value
Portfolio, Dreyfus U.S. Government
-76-
<PAGE>
Securities Portfolio, Endeavor Janus Growth Portfolio, and Endeavor Select
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 Portfolio generally will
have annual turnover rates 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.
-77-
<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 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 Trust and the Manager have received an exemptive order from the
Securities and Exchange Commission that permits 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 permits
disclosure of fees paid to multiple unaffiliated investment advisers of a
Portfolio on an aggregate basis only.
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.
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<PAGE>
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 &
Co., is each Portfolio's investment adviser. Morgan Stanley has been in the
investment management business since 1975. As of December 31, 1999, Morgan
Stanley, together with its affiliated institutional asset management companies,
managed assets of approximately $184.9 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 Managing Director 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 and a Portfolio
Manager in the Institutional Equity Group. Prior to joining Morgan
Stanley in 1995, he was an equity analyst at Icahn & Co. from 1986 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.
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:
-79-
<PAGE>
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,
1999, Rowe Price- Fleming managed over $42 billion in investments for
individual and institutional accounts.
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
-80-
<PAGE>
OpCap Advisors ("OpCap"), 1345 Avenue of the Americas, New York, New York
10105, 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 $52 billion under management
as of December 31, 1999.
o John Lindenthal - a senior equity
portfolio manager and analyst at
Oppenheimer Capital,
has managed the
Endeavor Value Equity Portfolio
since December, 1999. Mr.
Lindenthal has been with Oppenheimer
Capital since
1979 and has
been a Managing Director since 1985.
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 Oppenheimer 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. Dreyfus, established in 1951, is
one of the nation's leading fund companies, currently managing more than $125
billion in more than 160 mutual fund portfolios nationwide as of December 31,
1999. Dreyfus is a wholly-owned subsidiary of Mellon Bank Corporation, a global
financial services company with approximately $480 billion in assets under
management.
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, 1999, T. Rowe Price and its affiliates managed
approximately $179 billion in investments for more than 8 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. ("J.P. Morgan"), 522 Fifth Avenue,
New York, New York 10036, is the Portfolio's investment adviser. J.P. Morgan is
a subsidiary of J.P. Morgan & Co. Incorporated, which has approximately $349
billion in assets under management as of December 31, 1999.
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 Portfolio
Montgomery Asset Management, LLC ("Montgomery"), 101 California Street, San
Francisco, California 94111, is the Portfolio's investment adviser. As of
December 31, 1999, Montgomery and its affiliates managed approximately $11
billion of assets. Montgomery is a subsidiary of Commerzbank, AG, the third
largest publicly held commercial bank in Germany, which with its affiliates,
managed over $____billion in assets as of December 31, 1999. Montgomery may rely
on the expertise, research and resources of Commerzbank, AG and its worldwide
affiliates in managing the Portfolio.
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<PAGE>
o The investment adviser's three equity investment management teams make
the Portfolio's day-to-day investment decisions and are responsible for
coordinating and implementing allocation among the teams.
-83-
<PAGE>
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 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, 1999, MFS and its institutional
advisory affiliates had approximately $136.72 billion in assets under
management, of which approximately $20.8 billion consisted of assets in fixed
income funds.
o Bernard Scozzafava - a Senior Vice President of MFS, is the portfolio
manager for the Portfolio. Mr. Scozzafava has been a portfolio manager with
MFS since 1989.
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 long 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 12/31/99
with the Lehman Brothers High Yield Index, a widely recognized unmanaged index
that measures the performance of high current yield bonds, and with the Lipper
VA High Current Yield Index, an equally weighted performance index of high
current yield bonds underlying 30 variable annuities. An index does not include
transaction costs associated with buying and selling securities or any mutual
fund expenses. It is not possible to invest directly in an index. The
calculations of total return assume the reinvestment of all dividends and
capital gain distributions and the deduction of all recurring expenses that were
charged to shareholders. These figures do not include the effect of Contract
charges. If these Contract charges had been included, performance would have
been lower.
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<PAGE>
Average Annual Total Return as of 12/31/99
------------------------------------------ ========
1 Year 5 Year 10 Year
------ ------ -------
MFS High Income Fund
Class A shares (with sales
charge) 1.92% 8.91% 9.95%
MFS High Income Fund
Class A shares (without
sales charge) 7.00% 9.97% 10.49%
Lehman Brothers High Yield 2.39% 9.31% 10.72%
Index
Lipper VA High Current Yield
Index 2.45% 7.95% 8.84%
Endeavor Janus Growth Portfolio
Janus Capital Corporation ("Janus"), 100 Fillmore Street, Denver,
Colorado 80206-4928, is the Portfolio's investment adviser. Janus is a 29-year
old investment adviser to a group of mutual funds and individual investors. As
of December 31, 1999, Janus managed approximately $248.8 billion in assets.
The Portfolio's day-to-day investments are managed by Edward Keely, a Vice
President at Janus who also currently manages the Growth Portfolio of the WRL
Series Fund, Inc. ("WRL Growth Portfolio"). 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. Prior to January, 2000, Mr.
Keely co-managed the Portfolio and the WRL Growth Portfolio.
Prior Experience With Comparable Fund
Because the Portfolio commenced operations on May 1, 1999, it does not have
a significant operating history. The Portfolio's investment adviser is the
investment adviser of the WRL Growth Portfolio. To date, shares of the WRL
Growth
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<PAGE>
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 April 30, 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 a pro rata portion of the assets of
the WRL Growth Portfolio was transferred to the Portfolio, past performance
information regarding the WRL Growth Portfolio is presented. For the year ended
December 31, 1999, the management fees and total operating expenses of the WRL
Growth Portfolio were the same as the fees and expenses incurred by the
Portfolio. This information should not be relied upon as
an indication of the future performance of the Portfolio.
The tables below assume the reinvestment of all dividends and capital
gain distributions and the deduction of all recurring expenses that were charged
to shareholder accounts. The tables do not include the effect of Contract
charges. If these Contract charges had been included, performance would have
been lower. 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. The
WRL Growth Portfolio has experienced short-term performance swings as indicated
in the high and low quarter information at the bottom of the chart.
<TABLE>
<CAPTION>
Year-by-Year Total Return as of 12/31 of Each Year
-86-
<PAGE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(0.22)% 59.79% 2.34% 3.99% (8.31)% 47.12% 17.96% 17.54% 64.48%
90 91 92 93 94 95 96 97 98
</TABLE>
99
High Quarter: ___ - 1999 ______%
======================================
Low Quarter: ___ - 1999 ______%
======================================
-87-
<PAGE>
The table below compares the WRL Growth Portfolio's average annual
compounded total returns for the 1-, 5- and 10-year periods through 12/31/99
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, an equally weighted performance index of growth
funds underlying 30 variable annuities. An index does not include transaction
costs associated with buying and selling securities or any mutual fund expense.
It is not possible to invest directly in an index.
Average Annual Total Return as of 12/31/99
1 Year 5 Year 10 Year
WRL Growth Portfolio % % %
S&P 500 Index % % %
Lipper VA Growth Index % % %
Brokerage Enhancement Plan
The Trust has adopted, in accordance with the substantive provisions of
Rule 12b-1 under the Investment Company Act of 1940, 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.
Under the Plan, the Trust is using recaptured commissions to pay for
distribution expenses. Except for recaptured commissions, unlike asset based
charges imposed by many mutual funds for sales expenses, the Portfolios do not
incur any asset based or additional 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 percentage of their commission from the sale and purchase
of securities to Transamerica Capital, Inc. (formerly known as Endeavor Group),
the distributor of the Trust's shares.
-88-
<PAGE>
Transamerica Capital, Inc. 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 its 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 prospective Contract holders
o creating and mailing advertising and sales literature
[SIDE BAR:
--------
If you would like to learn more about the Plan, including the amount of
commissions recaptured in 1999, please read the Statement of Additional
Information which discusses the legal terms and conditions of the Plan.]
-89-
<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 Ernst & Young LLP, whose report, along with each Portfolio's
financial statements, is included in the Trust's Annual Report, which is
available upon request.
-90-
<PAGE>
<TABLE>
<CAPTION>
ENDEAVOR MONEY MARKET PORTFOLIO*
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/99 12/31/98* 12/31/97 12/31/96 12/31/95
-------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating
performance:
Net asset value,
beginning of
year.......................... $1.00 $1.00 $1.00 $1.00 $1.00
---- ---- ---- ---- ----
Net investment
income........................ 0.0465 0.0485 0.0498 0.0479
====== ------ ------ ------
0.0540
Distributions:
Dividends from net
investment
income........................ (0.0465) (0.0485) (0.0498) (0.0479)
========
(0.0
====
540)
Distributions from
net realized gains............ --- --- --- --- -----
------- ----- ----- ----- --===
Total
distributions (0.0465) (0.0485) (0.0498) (0.0479) (0.0540)
-------- -------- -------- --------
Net asset value,
end of year................... $1.00 $1.00 $1.00 $1.00 $1.00
==== ==== ==== ==== ====
-91-
<PAGE>
Total return+................. 4.75% 4.96% 5.07% 4.91% 5.54%
===== ==== ==== ==== ====
Ratios to average net assets/supplemental data:
Net assets, end of
year (in 000's).............. $134,779 $100,932 $51,162 $41,545 $27,551
========
Ratio of net
investment income
to average net
assets........................ 4.67% 4.92% 4.99% 4.81%
=====
5.37%
Ratio of
net expenses to
average net
assets................. 0.55% 0.60% 0.60% 0.60%
=====
0.60%
Ratio of
expenses to
average net
assets..................... 0.55% 0.60% 0.60% 0.60% 0.60%
=====
</TABLE>
-92-
<PAGE>
* Effective May 1, 1998, the name of the TCW Money Market Portfolio was
changed to Endeavor Money Market Portfolio and Morgan Stanley Asset
Management 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.
-93-
<PAGE>
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO*
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/99 12/31/98++ 12/31/97 12/31/96++ 12/31/95*+++
<S> <C> <C> <C> <C> <C>
Operating
performance:
Net asset value,
beginning of
year......................... $16.19 $14.21 $13.95 $12.19 $11.31
=----- ----- ----- ----- -----
Net investment
income......... 0.10 0.12 0.10 0.09 0.09
======
Net realized and
unrealized
gain on investments..........
====
5.02 2.08 0.26 1.76 1.06
==== ---- ---- ---- ------
Net increase
========
in net assets
resulting from
investment
operations................... 5.12 2.20 0.36 1.85 1.15
---- ---- ---- ---- ------
Distributions:
Dividends from
net investment
income....................... (0.26) (0.11) (0.10) (0.09) ---
======
Distributions from net
realized gains............... (0.17) (0.11) --- --- (0.27)
===== ---- ----
Total distributions (0.43) (0.22) (0.10) (0.09) (0.27)
====== ------ ------ ------ -----
-94-
<PAGE>
Year Year Year Year Year
Net asset value, end
of year...................... $20.88 $16.19 $14.21 $13.95 $12.19
====== ===== ===== ===== =====
Total return+................ 32.35% 15.44% 2.54% 15.23% 10.37%
===== ===== ==== ===== ======
Ratios to average net assets/
supplemental data:
Net assets, end of
year (in 000's)....... $228,655 $184,856 $164,560 $134,435 $92,352
========
Ratio of net
investment
income
======
to average net
assets....................... 0.73% 0.76% 0.74% 0.73% 0.81%
=====
Ratio of net
expenses to average
net assets.................... 0.91% 0.98% 1.07% 1.18% 1.15%
=====
Ratio of expenses to
average net assets............ 1.00% 1.10% 1.12% 1.18% 1.15%
=====
Portfolio turnover rate......
30% 21% 19% 11% 111%
===
</TABLE>
- -----------------
* Effective March 24, 1995, the name of the Global Growth Portfolio was
changed to T. Rowe Price International Stock Portfolio, and the
investment
-95-
<PAGE>
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 investment
adviser effective January 3, 1995.
-96-
<PAGE>
<TABLE>
<CAPTION>
ENDEAVOR VALUE EQUITY PORTFOLIO*
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/99 12/31/98 12/31/97 12/31/96++ 12/31/95
-------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Operating
performance:
Net asset value,
beginning of
year.......................... $21.68 $20.70 $17.21 $14.23 $10.69
----- ----- ----- ----- -----
Net investment
income........................ 0.18 0.22 0.20 0.20 0.15
====
Net realized and
unrealized
gain/loss on (0.72) 1.36 3.96 3.15 3.52
====== ---- ---- ---- ----
investments...................
Net
increase/(decrease)
in net assets
resulting from
investment (0.54) 1.58 4.16 3.35 3.67
===== ---- ---- ---- ----
operations....................
Distributions:
Dividends from
net investment
income........................ (0.24) (0.22) (0.14) (0.13) (0.09)
======
Distributions
from net
realized gains................ (0.91) (0.38) (0.53) (0.24) (0.04)
==== ---- ---- ---- ----
Total distributions (1.15) (0.60) (0.67) (0.37) (0.13)
====== ------ ------ ------ ------
-97-
<PAGE>
Net asset value,
end of year................... $19.99 $21.68 $20.70 $17.21 $14.23
====== ===== ===== ===== =====
Total return+................. (3.06)% 7.56% 24.81% 23.84% 34.59%
======= ==== ===== ===== =====
Ratios to average net assets/ supplemental data:
Net assets, end of
year (in 000's)............... $209,653 $246,102 $216,039 $127,927 $68,630
========
Ratio of net
investment income
to average net
assets........................ 0.77% 1.10% 1.39% 1.29% 1.56%
=====
Ratio of net
expenses to
average net
assets ................. 0.88% 0.84% 0.89% 0.91% 0.86%
=====
Ratio of
expenses to
average net assets
......................... 0.95% 0.85% 0.89% 0.91% 0.86%
Porfolio turnover
rate.......................... 51% 19% 16% 27% 28%
===
</TABLE>
-98-
<PAGE>
- -----------------------
* Effective May 1, 1998, the name of the Value Equity Portfolio was
changed to Endeavor Value Equity Portfolio.
+ 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.
-99-
<PAGE>
<TABLE>
<CAPTION>
ENDEAVOR OPPORTUNITY VALUE PORTFOLIO*
Year Year Year Period
Ended Ended Ended Ended
12/31/99 12/31/98 12/31/97 12/31/96*
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period....................... $12.22 $11.75 $10.06 $10.00
====== ----- ----- -----
Net investment income/
(loss).................................... 0.18 0.11 0.07 ----
==== ====
Net realized and
unrealized gain on
investments............................... 0.41 0.50 1.62 0.06
==== ---- ---- ----
Net increase in net
assets resulting from
investment operations..................... 0.59 0.61 1.69 0.06
---- ---- ---- ----
Distributions:
Dividends from net
investment income......................... (0.13) (0.05) --- ---
Distributions from net
realized gains............................ (0.12) (0.09) --- ---
====== ------ ----- ---
Total distributions....................... (0.25) (0.14) --- ---
====== ------ ----- ----
Net asset value, end
of period................................. $12.56 $12.22 $11.75 $10.06
====== ===== ===== =====
Total return++............................ 4.79% 5.18% 16.81% 0.60%
===== ==== ===== ====
Ratios to average net assets/supplemental data:
-100-
<PAGE>
Net assets, end of
period (in 000's)......................... $44,900 $45,506 $26,802 $701
=======
Ratio of net
investment income/ (loss)
to average net assets..................... 1.34% 1.22% 1.34% (1.09)%+
=====
Ratio of net
expenses to average
net assets................................. 0.85% 0.98% 1.15% 1.30%+
=====
Ratio of expenses to
average net
assets.................................... 0.91% 1.00% 1.15% 1.30%+
====
Ratio of net expenses
to average net assets
before waivers........................... 0.91% 1.00% 1.16% 12.69%+
==== ==== ==== ====
Portfolio turnover
rate...................................... 48% 43% 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.
-101-
<PAGE>
<TABLE>
<CAPTION>
DREYFUS SMALL CAP VALUE PORTFOLIO
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/99 12/31/98 12/31/97 12/31/96++# 12/31/95
-------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Opera
ting
performance:
Net asset value,
beginning of
year......................... $14.14 $16.41 $14.69 $12.22
=----- ----- ----- -----
$10.98
Net investment
income/(loss)................ (0.04) (0.03) 0.02 0.12
======
0.15
====
Net realized and
unrealized
gain/(loss) on
investments.................. 4.00 (0.13) 3.52 2.95 1.36
==== ------ ---- ---- ----
Net
increase/
(decrease) in net
assets resulting
from investment 3.96 (0.16) 3.54 3.07 1.51
operations................... ==== ----- ---- ---- ====
Distributions:
Dividends from
net investment
income....................... --- (0.02) (0.10) (0.14) (0.10)
===
-102-
<PAGE>
Distributions
from net realized
gains........................ (1.59) (2.09) (1.72) (0.46) (0.17)
------ ------ ------ ------ ------
Total (1.59) (2.11) (1.82) (0.60) (0.27)
====== ------ ------ ------ ------
distributions
Net asset value,
end of year.................. $16.51 $14.14 $16.41 $14.69 $12.22
====== ===== ===== ===== =====
Total return+................ 29.39% (2.18)% 25.56% 25.63% 14.05%
====== ====== ===== ===== =====
Ratios to
average net
assets/
supplemental
data:
Net assets, end of
year (in 000's).............. $187,803 $158,662 $146,195 $85,803
========
$52,597
Ratio of net
investment
income/(loss) to
average net (0.28)% (0.23)% 0.20% 0.95% 1.56%
assets...................... =======
Ratio of net
expenses to
average
net assets.................. 0.90 0.86% 0.91% 0.92%
=====
0.87%
-103-
<PAGE>
Year Year Year Year Year
Ratio of
expenses to
average
net
assets................... 1.22% 0.94% 0.91% 0.92%
=====
0.87%
=====
Portfolio turnover
rate......................... 216% 183% 127% 171%
====
75%
</TABLE>
- -----------------------
+ 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 investment adviser
effective September 16, 1996.
-104-
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE EQUITY INCOME PORTFOLIO
Year Year Year Year Period
====
Ended Ended Ended Ended Ended
=====
12/31/99 12/31/98 12/31/97 12/31/96+++ 12/31/95*+++
======== -------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Operating
performance:
Net asset value,
beginning of period.................. $20.04 $19.34 $15.49 $13.05 $10.00
=----- ----- ----- ----- -----
Net investment
income............................... 0.38 0.35 0.25 0.41 0.34
====
Net realized and
unrealized gain on
investments.......................... 0.42 1.33 4.06 2.17 2.71
---- ---- ---- ---- ----
Net increase in net
assets resulting from
investment operations................ 0.80 1.68 4.31 2.58 3.05
---- ---- ---- ---- ----
Distributions:
Dividends from net
investment income.................... (0.40) (0.28) (0.19) (0.10) ---
======
Distributions from net
realized gains....................... (0.94) (0.70) (0.27) (0.04) ---
------ ------ ------ ------ ---
Total distributions.................. (1.34) (0.98) (0.46) (0.14) ---
====== ------ ------ ------ ---
Net asset value, end of
period............................... $19.50 $20.04 $19.34 $15.49 $13.05
====== ===== ===== ===== =====
Total return++....................... 3.47% 8.81% 28.27% 19.88% 30.50%
===== ==== ===== ===== =====
-105-
<PAGE>
Ratios to average net assets/ supplemental data:
Net assets, end of
period (in 000's).................... $264,718 $262,328 $197,228 $78,251 $21,910
========
Ratio of net investment
income to average net
assets............................... 1.89% 2.18% 2.47% 2.89% 3.24%+
=====
Ratio of net
expenses to average
net assets........................... 0.87% 0.85% 0.94% 0.96% 1.15%+
=====
Ratio of
expenses to
average
net assets........................... 0.88% 0.85% 0.94% 0.96% 1.15%+
=====
custodian............................
Portfolio turnover rate.............. 35% 20% 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.
-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>
<TABLE>
<CAPTION>
T. ROWE PRICE GROWTH STOCK PORTFOLIO
Year Year Year Year Period
Ended Ended Ended Ended Ended
12/31/99 12/31/98 12/31/97 12/31/96+++ 12/31/95*+++
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning
of period.................................. $25.60 $20.78 $16.29 $13.72 $10.00
=----- ----- ----- ----- -----
Net investment income...................... 0.03 0.06 0.04 0.11 0.08
====
Net realized and unrealized
gain on investments........................ 5.28 5.76 4.59 2.71 3.64
==== ---- ---- ---- ----
Net increase in net assets
resulting from investment
operations................................. 5.31 5.82 4.63 2.82 3.72
---- ---- ---- ---- ----
Distributions:
Dividends from net
investment income.......................... (0.07) (0.05) (0.03) (0.01) ---
======
Distributions from net
realized gains............................. (2.11) (0.95) (0.11) (0.24) ---
====== ------ ------ ------ ---
Total distributions........................ (2.18) (1.00) (0.14) (0.25) ---
====== ------ ------ ------ ---
Net asset value, end of
period..................................... $28.73 $25.60 $20.78 $16.29 $13.72
====== ===== ===== ===== =====
Total return++............................. 22.19% 28.67% 28.57% 20.77% 37.20%
====== ===== ===== ===== ======
-108-
<PAGE>
Ratios to average net assets/supplemental data:
Net assets, end of period (in
000's)..................................... $257,879 $194,301 $123,230 $59,732 $21,651
========
Ratio of net investment
income to average net
assets..................................... 0.21% 0.43% 0.38% 0.75% 0.69%+
=====
Ratio of net expenses
to average net assets...................... 0.87% 0.87% 0.96% 1.01% 1.26%+
=====
Ratio of expenses
to average net
assets.................................... 0.88% 0.87% 0.96% 1.01% 1.26%+
=====
Portfolio turnover rate.................... 66% 58% 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.
-109-
<PAGE>
<TABLE>
<CAPTION>
ENDEAVOR ENHANCED INDEX PORTFOLIO*
Year Year Period
Ended Ended Ended
12/31/99 12/31/98 12/31/97*
======== -------- ---------
<S> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period................................ $16.08 $12.29 $10.00
=----- ----- -----
Net investment income.............................. 0.08 0.04 0.02
====
Net realized and
unrealized gain on investments..................... 2.78 3.81 2.27
---- ---- ----
Net increase in net
assets resulting from
investment operations.............................. 2.86 3.85 2.29
---- ---- ----
Distributions:
Dividends from net investment
income............................................. (0.03) (0.02) ---
======
Distributions from net realized (0.75) (0.04) ---
------ ------
gains..............................................
Total distributions................................ (0.78) (0.06) ---
------ ------ ----
Net asset value, end
of period.......................................... $18.16 $16.08 $12.29
====== ===== =====
Total return++..................................... 18.16% 31.39% 22.90%
====== ===== =====
-110-
<PAGE>
Ratios to average net assets/supplemental data:
Net assets, end of
period (in 000's).................................. $153,967 $64,058 $19,811
========
Ratio of net
investment income to average
net assets......................................... 0.73% 0.48% 0.55%+
=====
Ratio of net
expenses to average
net assets.......................................... 0.78% 1.10% 1.30%+
=====
Ratio of expenses to
average net assets.................................. 0.78% 1.10% 1.30%+
=====
Ratio of net expenses to
average net assets
before waivers...................................... 0.78% 1.10% 1.56%+
Portfolio turnover
rate............................................... 56% 78% 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.
-111-
<PAGE>
<TABLE>
<CAPTION>
ENDEAVOR SELECT PORTFOLIO*
Year Period
====
Ended Ended
12/31/99 12/31/98*+++
======== ------------
<S> <C> <C>
Operating performance:
Net asset value, beginning of period............................ $10.06 $10.00
=----- -----
Net investment income/(loss)............................. (0.01) 0.07
=============
Net realized and unrealized gain on
investments..................................................... 5.12 0.59
---- ----
Net increase in net assets resulting from
investment operations........................................... 5.11 0.66
---- ----
Net asset value, end of period.................................. $15.77 $10.66
====== =====
Total return++.................................................. 47.84% 6.60%
====== ====
Ratios to average net assets/ supplemental
data:
Net assets, end of period (in 000's)............................ $40,770 $24,865
=======
Ratio of net investment income/(loss)
to average net assets........................................... (0.12)% 0.75%+
=======
Ratio of net expenses to average net
assets.......................................................... 1.48% 1.49%+
=====
Ratio of expenses to average net
assets.......................................................... 1.49% 1.49%+
=====
Ratio of net expenses to average
net assets before waivers....................................... 1.49% 1.55%+
Portfolio turnover rate......................................... 157% 128%
====
</TABLE>
- -----------------
* Effective May 1, 2000, the name of the Endeavor Select 50 Portfolio was
changed to Endeavor Select Portfolio and the investment policy was
changed to investing in U.S. growth stocks and foreign securities
including those of emerging market issuers. The Portfolio commenced
operations on February 3, 1998.
+ Annualized.
-112-
<PAGE>
++ Total return represents aggregate total return for the periods
indicated. The total return of the Portfolio does not reflect the
charges against the separate accounts of PFL or the Contracts.
+++ Per share amounts have been calculated using the 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.
-113-
<PAGE>
<TABLE>
<CAPTION>
ENDEAVOR JANUS GROWTH PORTFOLIO
Period
====
Ended
12/31/99
========
<S> <C>
Operating performance:
Net asset value, beginning of period............................ $69.88
-----
Net investment loss............................................. (0.04)
Net realized and unrealized gain on
investments..................................................... 25.53
----
Net increase in net assets resulting from
investment operations........................................... 25.49
----
Net asset value, end of period.................................. $95.37
======
Total return++.................................................. 36.48%
======
Ratios to average net assets/supplemental
data:
Net assets, end of period (in OOO's)............................. $1,065,191
Ratio of net investment loss to average net
assets.......................................................... (0.09)%+
Ratio of net expenses to average net assets..................... 0.83%+
Ratio of expenses to average net assets......................... 0.83%+
Ratio of net expenses to average net
assets before waivers........................................... 0.83%+
Portfolio turnover rate......................................... 43%
- --------------
* The Portfolio commenced operations on May 1, 1999
+ 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.
DREYFUS U.S. GOVERNMENT SECURITIES PORTFOLIO*
Year Year Year Year Year
====
Ended Ended Ended Ended Ended
=====
12/31/99 12/31/98 12/31/97 12/31/95
-------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
12/31/96++
Operating performance:
Net asset value,
beginning of year.................. $12.32 $11.87 $11.23 $11.39 $9.96
==== ---- ---- ---- ====
Net investment income................ 0.62 0.40 0.39 0.62 0.30
====
Net realized and
unrealized gain/(loss)
on investments....................... (0.73) 0.46 0.61 (0.44) 1.25
====== ---- ---- ------ ====
Net increase/(decrease) in net
assets resulting
from investment
operations........................... (0.11) 0.86 1.00 0.18 1.55
====== ---- ---- ---- ====
Distributions:
Dividends from net
investment income.................... (0.46) (0.41) (0.36) (0.22) (0.12)
======
Distributions from
net realized gains................... (0.22) --- --- (0.12) ----
Total distributions.................. (0.68) (0.41) (0.36) (0.34) (0.12)
====== ------ ------ ------ ------
Net asset value, end
of year.............................. $11.53 $12.32 $11.87 $11.23 $11.39
====== ===== ===== ===== =====
-114-
<PAGE>
Total (0.87)% 7.38% 9.15% 1.81% 15.64%
======= ==== ==== ==== =====
return+......................
=======
Ratios to
average net assets/
supplemental data:
Net assets, end of
period (in 000's).................... $83,777 $82,889 $46,542 $24,727
=======
$12,718
Ratio of net investment
income to average net
assets............................... 5.52% 5.21% 5.74% 5.68%
=====
5.58
%
Ratio of
net expenses
to average
net
assets............................... 0.73% 0.72% 0.80% 0.82%
=====
0.84
%
Ratio of expenses
to average
net
assets............................... 0.77% 0.73% 0.80% 0.82%
=====
0.84
%
Portfolio turnover
rate................................. 596% 615% 185% 222% 161%
====
- ------------------------
</TABLE>
-115-
<PAGE>
* Effective May 1, 1996, The Dreyfus Corporation 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.
<TABLE>
<CAPTION>
ENDEAVOR HIGH YIELD PORTFOLIO
Year Period
====
Ended Ended
12/31/99 12/31/98*
<S> <C> <C>
Operating performance:
Net asset value, beginning of period............................ $9.69 $10.00
=---- -----
Net investment income........................................... 0.47 0.25
====
Net realized and unrealized gain/(loss)
===========
on investments.................................................. 0.09 (0.56)
---- ------
Net increase/(decrease) in net
===================
assets resulting from investment (0.56) (0.31)
====== ------
operations......................................................
Distributions:
Dividends from net investment income. . . . (0.16) ---
------ ---
. . .
Total distributions. . . . . . . . . . . . . . . . . . . . . (0.16) ---
------ ---
. .
Net asset value, end of period.................................. $10.09 $9.69
====== ====
Total return++.................................................. 5.82% (3.10)%
===== ======
Ratios to average net assets/ supplemental
data:
-116-
<PAGE>
Net assets, end of period (in 000's)............................ $20,015 $9,819
=======
Ratio of net investment income to average
net assets...................................................... 7.07% 6.43%+
=====
Ratio of net expenses to average net
assets.......................................................... 1.22% 1.30%+
====
Ratio of expenses to average net
assets.......................................................... 1.25% 1.43%+
====
Ratio of net expenses to
average net assets
before waivers.................................................. 1.27% 1.58%+
Portfolio turnover rate......................................... 77% 26%
===
</TABLE>
- -----------------
* The Portfolio commenced operations on June 1, 1998.
+ 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.
-117-
<PAGE>
<TABLE>
<CAPTION>
ENDEAVOR ASSET ALLOCATION PORTFOLIO*
Year Year Year Year Year
Ended Ended Ended Ended Ended
12/31/99 12/31/98* 12/31/97 12/31/96 12/31/95
-------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Opera
ting
performance:
Net asset value,
beginning of
year......................... $23.89 $22.34 $18.84 $16.28
=----- ----- ----- -----
$13.48
Net investment
income....................... 0.34 0.43 0.32 0.27 0.33
====
Net realized
and unrealized
gain on
====
investments.................. 4.80 3.50 3.45 2.61 2.72
==== ---- ---- ---- ----
Net
increase
========
in net
assets resulting
from investment 5.14 3.93 3.77 2.88
---- ---- ---- ----
operations................... 3.05
------ ====
Distributions:
Dividends from
net investment
income....................... (0.43) (0.32) (0.27) (0.32) (0.25)
=====
-118-
<PAGE>
Distributions from
net realized gains........... (5.71) (2.06) --- ---
====== ------ ----- -----
---
----
Total distributions.......... (6.14) (2.38) (0.27) (0.32) (0.25)
====== ====== ====== ====== ======
Net asset
value, end of year........... $22.89 $23.89 $22.34 $18.84
====== ===== ===== =====
$16.28
Total return+................ 26.39% 18.39% 20.14% 17.82% 22.91%
====== ===== ===== ===== =====
Ratios to
average net
assets/
supplemental
data:
Net assets, end of
year (in 000's).............. $414,926 $353,001 $303,102 $240,210
========
$198,876
Ratio of net
investment
income to average
net assets................... 1.58% 1.97% 1.61% 1.59%
=====
2.12%
Ratio of net
expenses
to
average
net
assets........................ 0.84% 0.78% 0.84% 0.85%
===
0.84%
-119-
<PAGE>
Ratio of
expenses
to
average
net
assets........................ 0.87% 0.80% 0.84% 0.85%
=====
0.84%
Portfolio turnover
rate......................... 220% 262% 67% 58% 93%
====
</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.
-120-
<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 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.
-121-
<PAGE>
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.
Transamerica Capital Inc., an affiliate of the Manager, serves as the
distributor for the Trust. Transamerica Capital Inc.'s office is located at 2101
East Coast Highway, Suite 300, Corona del Mar, California 92625.
-122-
<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 Statement of Additional Information 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
one 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 interest. Variable and floating rate securities carry interest
rates that may be adjusted periodically to reflect changes in interest rates.
-123-
<PAGE>
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 Investment Company
Act of 1940, 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 stocks, preferred stocks, 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 coupon 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 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.
-124-
<PAGE>
Foreign debt securities are issued by foreign corporations and governments. They
may include Eurodollar obligations and Yankee bonds.
Forward commitments, when-issued and delayed delivery 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 Ratings Services ("Standard & Poor's"), and Ba or lower by Moody's
Investors Service, Inc. ("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 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
-125-
<PAGE>
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 corporate 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.
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 stocks 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
-126-
<PAGE>
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.
-127-
<PAGE>
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
-128-
<PAGE>
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,
2000 (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
Portfolio (formerly known as 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.
The date of this Statement of Additional Information is May 1, 2000.
EndeavorSM is a registered service mark of Endeavor Management Co.
-129-
<PAGE>
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..................................................................................................15
Hybrid Instruments...................................................................................................15
Illiquid Securities..................................................................................................16
Indexed Securities...................................................................................................16
Short Sales..........................................................................................................17
Special Situations...................................................................................................17
High Yield/High Risk Debt Securities.................................................................................17
Options and Futures Strategies.......................................................................................18
Foreign Currency Transactions........................................................................................24
Repurchase Agreements................................................................................................28
Forward Commitments, When-Issued and Delayed Delivery Securities.....................................................28
Securities Loans.....................................................................................................29
Interest Rate Transactions...........................................................................................29
Dollar Roll Transactions.............................................................................................31
Municipal Fixed-Income Securities....................................................................................32
Portfolio Turnover...................................................................................................34
INVESTMENT RESTRICTIONS.......................................................................................................34
Other Policies.......................................................................................................37
PERFORMANCE INFORMATION.......................................................................................................39
Total Return.........................................................................................................39
Yield ............................................................................................................42
Non-Standardized Performance.........................................................................................44
PORTFOLIO TRANSACTIONS........................................................................................................44
Brokerage Enhancement Plan...........................................................................................47
MANAGEMENT OF THE FUND........................................................................................................49
Trustees and Officers................................................................................................49
INVESTMENT ADVISORY AND OTHER SERVICES........................................................................................54
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The Manager..........................................................................................................55
The Investment Advisers..............................................................................................58
Custodian............................................................................................................63
Transfer Agent.......................................................................................................63
Legal Matters........................................................................................................63
Independent Auditors.................................................................................................63
REDEMPTION OF SHARES..........................................................................................................63
NET ASSET VALUE...............................................................................................................63
TAXES .....................................................................................................................65
Federal Income Taxes.................................................................................................65
ORGANIZATION AND CAPITALIZATION OF THE FUND...................................................................................68
FINANCIAL STATEMENTS..........................................................................................................70
APPENDIX ......................................................................................................................1
</TABLE>
----------------------
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.
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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 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.
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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.
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
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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)
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
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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 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.
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The purchase of non-mortgage asset-backed securities raises
considerations peculiar to the financing of the instruments underlying such
securities. For example, most organizations that issue asset- backed securities
relating to motor vehicle installment purchase obligations perfect their
interests in their respective obligations only by filing a financing statement
and by having the servicer of the obligations, which is usually the originator,
take custody thereof. In such circumstances, if the servicer were to sell the
same obligations to another party, in violation of its duty not to do so, there
is a risk that such party could acquire an interest in the obligations superior
to that of holders of the asset-backed securities. Also, although most such
obligations grant a security interest in the motor vehicle being financed, in
most states the security interest in a motor vehicle must be noted on the
certificate of title to perfect such security interest against competing claims
of other parties. Due to the large number of vehicles involved, however, the
certificate of title to each vehicle financed, pursuant to the obligations
underlying the asset-backed securities, usually is not amended to reflect the
assignment of the seller's security interest for the benefit of the holders of
the asset- backed securities. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on those securities. In addition, various state and federal
laws give the motor vehicle owner the right to assert against the holder of the
owner's obligation certain defenses such owner would have against the seller of
the motor vehicle. The assertion of such defenses could reduce payments on the
related asset-backed securities. Insofar as credit card receivables are
concerned, credit card holders are entitled to the protection of a number of
state and federal consumer credit laws, many of which give such holders the
right to set off certain amounts against balances owed on the credit card,
thereby reducing the amounts paid on such receivables. In addition, unlike most
other asset-backed securities, credit card receivables are unsecured obligations
of the card holder.
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
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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
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 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
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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 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)
- ------------------
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 Value Equity and Dreyfus Small Cap Value
Portfolios)
Debt securities are rated by national bond ratings agencies. Securities
rated BBB by Standard & Poor's or Baa by Moody's are considered investment grade
securities, but are somewhat riskier than higher rated 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
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speculative. See the Appendix to this Statement of Additional
Information 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 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
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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.
Other Investment Companies (All Portfolios except Endeavor Money Market,
- --------------------------
Endeavor Value Equity and Endeavor Opportunity Value 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
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company's expenses, including advisory and administration fees. The Manager and
the investment adviser to the Endeavor Select 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.
It is expected that the T. Rowe Price International Stock Portfolio, T.
Rowe Price Equity Income Portfolio and T. Rowe Price Growth Stock Portfolio will
each invest its cash reserves primarily in a money market fund established for
the exclusive use of the T. Rowe Price family of mutual funds and other clients
of the Portfolios' investment advisers. The Reserve Investment Fund ("RIF") is a
series of Reserve Investment Funds, Inc. Additional series may be created in the
future. The RIF was created and operates under an exemptive order issued by the
Securities and Exchange Commission.
The RIF must comply with the requirements of Rule 2a-7 under the 1940
Act governing money market funds. The RIF invests at least 95% of its total
assets in prime money market instruments receiving the highest credit rating.
The RIF provides a very efficient means of managing the cash reserves
of the Portfolios. While the RIF does not pay an advisory fee to its investment
adviser, it will incur other expenses. However, the RIF is expected by its
investment adviser to operate at a very low expense ratio. Each Portfolio will
only invest in RIF to the extent it is consistent with its objective and
program.
In addition to the above, pursuant to an exemptive order issued by the
Securities and Exchange Commission, each Portfolio may invest its uninvested
cash in shares of the Endeavor Money Market Portfolio if, in the opinion of the
Portfolio's investment adviser, such investment is in the Portfolio's best
interests.
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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
-------------------
Portfolio)
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. Although there are no percentage limitations
on the amount of assets that may be invested in hybrid instruments, the
investment advisers to the Endeavor High Yield, Endeavor Asset Allocation and
Endeavor Janus Growth Portfolios do not anticipate that such investments will
exceed 5% of each Portfolio's total assets. 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,
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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 Portfolio) 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)
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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.
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 , 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
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is generally less 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 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 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
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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.
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A Portfolio will receive a premium from writing an option, which
increases the Portfolio's return in the event the option expires unexercised or
is terminated at a profit. The amount of the premium will reflect, among other
things, the relationship of the market price of the underlying security to the
exercise price of the option, the term of the option, and the volatility of the
market price of the underlying security. By writing a call option, a Portfolio
will limit its opportunity to profit from any increase in the market value of
the underlying security above the exercise price of the option. By writing a put
option, a Portfolio will assume the risk that it may be required to purchase the
underlying security for an exercise price higher than its then current market
price, resulting in a potential capital loss if the purchase price exceeds the
market price plus the amount of the premium received.
A Portfolio may terminate an option which it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. The Portfolio will
realize a profit (or loss) from such transaction if the cost of such transaction
is less (or more) than the premium received from the writing of the option.
Because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the repurchase of a call option may be offset in whole or in part by
unrealized appreciation of the underlying security owned by the Portfolio.
Purchasing Put and Call Options on Securities. A Portfolio may purchase
put options to protect its portfolio holdings in an underlying security against
a decline in market value. This protection is provided during the life of the
put option since the Portfolio, as holder of the put, is able to sell the
underlying security at the exercise price regardless of any decline in the
underlying security's market price. For the purchase of a put option to be
profitable, the market price of the underlying security must decline
sufficiently below the exercise price to cover the premium and transaction
costs. By using put options in this manner, any profit which the Portfolio might
otherwise have realized on the underlying security will be reduced by the
premium paid for the put option and by transaction costs.
A Portfolio may also purchase a call option to hedge against an
increase in price of a security that it intends to purchase. This protection is
provided during the life of the call option since the Portfolio, as holder of
the call, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. For the
purchase of a call option to be profitable, the market price of the underlying
security must rise sufficiently above the exercise price to cover the premium
and transaction costs. By using call options in this manner, any profit which
the Portfolio might have realized had it bought the underlying security at the
time it purchased the call option will be reduced by the premium paid for the
call option and by transaction costs.
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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.
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
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that decrease would be offset in part by the increase in the value of the
Portfolio's position in such put option or futures contract.
Purchase and Sale of Interest Rate Futures. A Portfolio may purchase
and sell interest rate futures contracts on fixed income securities or indices
of such securities, including municipal indices and any other indices of fixed
income securities that may become available for trading either for the purpose
of hedging its portfolio securities against the adverse effects of anticipated
movements in interest rates or for other investment purposes.
A Portfolio may sell interest rate futures contracts in anticipation of
an increase in the general level of interest rates. Generally, as interest rates
rise, the market value of the securities held by a Portfolio will fall, thus
reducing the net asset value of the Portfolio. This interest rate risk can be
reduced without employing futures as a hedge by selling such securities and
either reinvesting the proceeds in securities with shorter maturities or by
holding assets in cash. However, this strategy entails increased transaction
costs in the form of dealer spreads and brokerage commissions and would
typically reduce the Portfolio's average yield as a result of the shortening of
maturities.
The sale of interest rate futures contracts provides a means of hedging
against rising interest rates. As rates increase, the value of a Portfolio's
short position in the futures contracts will also tend to increase thus
offsetting all or a portion of the depreciation in the market value of the
Portfolio's investments that are being hedged. While the Portfolio will incur
commission expenses in selling and closing out futures positions (which is done
by taking an opposite position in the futures contract), commissions on futures
transactions are lower than transaction costs incurred in the purchase and sale
of portfolio securities.
A Portfolio may purchase interest rate futures contracts in
anticipation of a decline in interest rates when it is not fully invested. As
such purchases are made, it is expected that an equivalent amount of futures
contracts will be closed out.
A Portfolio will enter into futures contracts which are traded on
national or foreign futures exchanges, and are standardized as to maturity date
and the underlying financial instrument. Futures exchanges and trading in the
United 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
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put options or write call options on stock index futures or interest rate
futures, rather than selling futures contracts, in anticipation of a decline in
general stock market prices or rise in interest rates, respectively, or purchase
call options or write put options on stock index or interest rate futures,
rather than purchasing such futures, to hedge against possible increases in the
price of equity securities or debt securities, respectively, which the Portfolio
intends to purchase.
In connection with transactions in stock index options, stock index
futures, interest rate futures and related options on such futures, a Portfolio
will be required to deposit as "initial margin" an amount of cash and short-term
U.S. government securities. The current initial margin requirement per contract
is approximately 2% of the contract amount. Thereafter, subsequent payments
(referred to as "variation margin") are made to and from the broker to reflect
changes in the value of the futures contract. Brokers may establish deposit
requirements higher than exchange minimums.
Limitations. A Portfolio will not purchase or sell futures contracts or
options on futures contracts or stock indices for non-hedging purposes if, as a
result, the sum of the initial margin deposits on its existing futures contracts
and related options positions and premiums paid for options on futures contracts
or stock indices would exceed 5% of the net assets of the Portfolio.
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 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.
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Foreign Currency Transactions (Dreyfus U.S. Government Securities, T.
- -----------------------------
Rowe Price Growth Stock, T. Rowe Price International Stock, Endeavor
Opportunity Value, Endeavor Select, Endeavor High Yield, Endeavor
Janus Growth and Endeavor Asset Allocation 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 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
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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 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
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future delivery of a specified amount of a foreign currency at a future date at
a price set at the time of the contract. Foreign currency futures contracts
traded in the United States are designed by and traded on exchanges regulated by
the CFTC, such as the New York Mercantile Exchange. A Portfolio would enter into
foreign currency futures contracts solely for hedging or other appropriate
investment purposes as defined in CFTC regulations.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the maturity date
of a forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in any
given month. Forward contracts may be in any amounts agreed upon by the parties
rather than predetermined amounts. Also, forward foreign exchange contracts are
traded directly between currency traders so that no intermediary is required. A
forward contract generally requires no margin or other deposit.
At the maturity of a forward or futures contract, a Portfolio may
either accept or make delivery of the currency specified in the contract, or at
or prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
Positions in foreign currency futures contracts may be closed out only
on an exchange or board of trade which provides a secondary market in such
contracts. Although a Portfolio intends to purchase or sell foreign currency
futures contracts only on exchanges or boards of trade where there appears to be
an active secondary market, there can be no assurance that a secondary market on
an exchange or board of trade will exist for any particular contract or at any
particular time. In such event, it may not be possible to close a futures
position and, in the event of adverse price movements, a Portfolio would
continue to be required to make daily cash payments of variation margin.
Foreign Currency Options. Options on foreign currencies operate similarly
to options on securities, and are traded primarily in the over-the-counter
market, although options on foreign currencies have recently been listed on
several exchanges. Such options will be purchased or written only when a
Portfolio's 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 investment adviser for the Endeavor High
Yield Portfolio does not intend to engage in foreign currency options.
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
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substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options markets.
Foreign Currency Conversion. Although foreign exchange dealers do not
charge a fee for currency conversion, they do realize a profit based on the
difference (the "spread") between prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to a
Portfolio at one rate, while offering a lesser rate of exchange should a
Portfolio desire to resell that currency to the dealer.
Repurchase Agreements (All Portfolios)
- ---------------------
Each of the Portfolios may enter into repurchase agreements with a bank,
broker-dealer, or other financial institution but no Portfolio may invest more
than 15% (10% with respect to the Endeavor Money Market Portfolio) of its net
assets in illiquid securities, including 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. 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
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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.
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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.
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
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Price International Stock, T. Rowe Price Growth Stock, Endeavor Asset
Allocation, Endeavor High Yield and Endeavor Janus Growth Portfolios)
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Among the strategic transactions into which the 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 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 or
Moody's or has an equivalent rating from an 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 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.
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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, Endeavor Janus Growth and T.
Rowe Price International Stock Portfolios may enter into "dollar roll"
transactions, which consist of the sale by the Portfolio to a bank or
broker-dealer (the "counterparty") of Government National Mortgage Association
certificates or other mortgage-backed securities together with a commitment to
purchase from the counterparty similar, but not identical, securities at a
future date. The counterparty receives all principal and interest payments,
including prepayments, made on the security while it is the holder. A Portfolio
receives a fee from the counterparty as consideration for entering into the
commitment to purchase. Dollar rolls may be renewed over a period of several
months with a different repurchase price and a cash settlement made at each
renewal without physical delivery of securities. Moreover, the transaction may
be preceded by a firm commitment agreement pursuant to which a Portfolio agrees
to buy a security on a future date.
A Portfolio will not use such transactions for leveraging purposes and,
accordingly, will segregate cash, U.S. government securities or other liquid
assets in an amount sufficient to meet its purchase obligations under the
transactions. The Dreyfus U.S. Government Securities Portfolio will also
maintain asset coverage of at least 300% for all outstanding firm commitments,
dollar rolls and other borrowings.
Dollar rolls are treated for purposes of the 1940 Act as borrowings of
a Portfolio because they involve the sale of a security coupled with an
agreement to repurchase. Like all borrowings, a dollar roll involves costs to a
Portfolio. For example, while a Portfolio receives a fee as consideration for
agreeing to repurchase the security, the Portfolio forgoes the right to receive
all principal and interest payments while the counterparty holds the security.
These payments to the counterparty may exceed the fee received by a Portfolio,
thereby effectively charging the Portfolio interest on its borrowing. Further,
although a Portfolio can estimate the 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,
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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.
A 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 Standard & Poor's, Moody's and
Fitch IBCA, Inc. 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
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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
Fund's Board of Trustees may recommend changes in the Portfolio's investment
objectives and policies.
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
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 Portfolio and Endeavor Janus Growth Portfolio anticipate that portfolio
turnover will generally not exceed 150% per year. The investment adviser to the
Endeavor Asset Allocation Portfolio anticipates that portfolio turnover will
generally not exceed 250% per year. The investment adviser to the Dreyfus U.S.
Government Securities Portfolio anticipates that portfolio turnover may exceed
500% 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 200%. 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.
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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 , Endeavor High Yield and
Endeavor Janus Growth Portfolios and restriction number 11 with respect to the
T. Rowe Price International Stock, Endeavor Asset Allocation, Dreyfus U.S.
Government Securities and Dreyfus Small Cap Value Portfolios (which restrictions
are not fundamental policies), the following investment restrictions (numbers 1
through 12) are fundamental policies, which may not be changed without the
approval of a majority of the outstanding shares of the Portfolio, and apply to
each of the Portfolios except as otherwise indicated. As provided in the 1940
Act, a vote of a majority of the outstanding shares necessary to amend a
fundamental policy means the affirmative vote of the lesser of (1) 67% or more
of the shares present at a meeting, if the holders of more than 50% of the
outstanding shares of the Portfolio are present or represented by proxy, or (2)
more than 50% of the outstanding shares of the Portfolio.
A Portfolio may not:
1. Borrow money
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, except to the extent permitted by applicable law.
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
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purchase or sell financial futures contracts and related options. For purposes
of this restriction, currency contracts or hybrid investments shall not be
considered commodities.
8. Make loans, except by purchase of debt obligations in which the Portfolio
may invest consistently with its investment policies, by entering into
repurchase agreements or through the lending of its portfolio securities.
9. Invest in the securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the Portfolio (taken at current
value) would be invested in the securities of such issuer or acquire more than
10% of the outstanding voting securities of any issuer, provided that this
limitation does not apply to obligations issued or guaranteed as to principal
and interest by the U.S. government or its agencies and 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) 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
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been assigned the highest quality rating by NRSROs, or if not rated, have been
determined to be of comparable quality. These limitations apply to time
deposits, including certificates of deposit, bankers' acceptances, letters of
credit and similar instruments; they do not apply to demand deposit accounts.
For a description of the NRSROs' ratings, see the Appendix.
In addition, the Endeavor Money Market Portfolio may not purchase any
security that matures more than thirteen months (397 days) from the date of
purchase or which has an implied maturity of more than thirteen months (397
days) except as provided in (1) below. For the purposes of satisfying this
requirement, the maturity of a portfolio instrument shall be deemed to be the
period remaining until the date noted on the face of the instrument as the date
on which the principal amount must be paid, or in the case of an instrument
called for redemption, the date on which the redemption payment must be made,
except that:
1. An instrument that is issued or guaranteed by the U.S. government or any
agency thereof which has a variable rate of interest readjusted no less
frequently than every 25 months (762 days) may be deemed to have a maturity
equal to the period remaining until the next readjustment of the interest rate.
2. A variable rate instrument, the principal amount of which is scheduled on
the face of the instrument to be paid in thirteen months (397 days) or less, may
be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate.
3. A variable rate instrument that is subject to a demand feature may be
deemed to have a maturity equal to the longer of the period remaining until the
next readjustment of the interest rate or the period remaining until the
principal amount can be recovered through demand.
4. A floating rate instrument that is subject to a demand feature may be
deemed to have a maturity equal to the period remaining until the principal
amount can be recovered through demand.
5. A repurchase agreement may be deemed to have a maturity equal to the period
remaining until the date on which the repurchase of the underlying securities is
scheduled to occur, or where no date is specified, but the agreement is subject
to demand, the notice period applicable to a demand for the repurchase of the
securities.
6. A portfolio lending agreement may be treated as having a maturity equal to
the period remaining until the date on which the loaned securities are scheduled
to be returned, or where no date is specified, but the agreement is subject to
demand, the notice period applicable to a demand for the return of the loaned
securities.
Each of the Endeavor Value Equity and Dreyfus Small Cap Value
Portfolios may not invest more than 5% of the value of its total assets in
warrants not listed on either the New York or American Stock Exchange. Each of
the Endeavor Opportunity Value and Endeavor Enhanced Index Portfolios will not
invest in warrants if, as a result thereof,
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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
Portfolios will not invest in 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.
With respect to borrowing, in general, under the 1940 Act, a Portfolio
may not borrow money except that (1) a Portfolio may borrow from banks or enter
into reverse repurchase agreements, in amounts up to 331/3% of its total assets
(including the amount borrowed); and (2) a Portfolio may borrow up to an
additional 5% of its total assets for temporary purposes.
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 , Endeavor High Yield and Endeavor Janus Growth
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
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Portfolio was known as the Global Growth Portfolio. Subsequent to such time, the
Portfolio's investment objective was changed from investments in small
capitalization companies on a global basis to investments in a broad range of
established companies on an international basis (i.e., non-U.S. companies).
Average annual total return information for the period from January 1, 1995 to
December 31, 1998 is available upon written request to the Fund.
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<TABLE>
<CAPTION>
For the One For the Five For Period From
Year Period Year Period Inception to
Ended December Ended December December 31,
31, 1999 31, 1999 1999
==== ==== ====
<S> <C> <C> <C>
Endeavor Asset
Allocation(1)...... 26.39% 21.09% 15.68%/15.67%*
T. Rowe Price
International
Stock(1)........... 32.35% 14.79% 14.79%
Endeavor Value
Equity(2)..........
(3.06)% 16.74% 13.61%/13.60%*
Dreyfus Small
Cap Value(3)....... 29.39% 17.88% 14.74%/14.73%*
T.Rowe Price
Equity Income(4)... 3.47% N/A 17.73%
T. Rowe Price Growth
Stock(4)............ 22.19% N/A 27.38%
Dreyfus U.S.
Government
Securities(5)...... (0.87)% 6.46% 5.64%/5.63%*
Endeavor Opportunity
Value(6)........... 4.79% N/A 8.65%/8.65%*
Endeavor Enhanced
Index (7).......... 18.16% N/A 27.39%/27.38%*
Endeavor Select
(8)............... 47.84% N/A 26.90%/26.88%*
Endeavor High
Yield (9)......... 5.82% N/A 1.60%/1.57%*
=== ============
Endeavor Janus N/A N/A
36.48%/36.46%*
Growth (10).......
</TABLE>
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* 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.
(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.
(10) The Portfolio commenced operations on May 1, 1999.
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
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account at the beginning of the period to obtain the base period return; and (c)
annualizing the results (i.e., multiplying the base period return by 365/7). The
net change in the value of the account reflects the value of additional shares
purchased with dividends declared on the original share and any such additional
shares, but does not include realized gains and losses or unrealized
appreciation and depreciation. In addition, the Endeavor Money Market Portfolio
may calculate a compound effective annualized yield by adding 1 to the base
period return (calculated as described above), raising the sum to a power equal
to 365/7 and subtracting 1.
The Dreyfus U.S. Government Securities Portfolio's and the Endeavor
High Yield Portfolio's 30-day yield will be calculated according to a formula
prescribed by the Securities and Exchange Commission. The formula can be
expressed as follows:
YIELD = 2[(a-b+1)6-1]
---
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursement)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the net asset value per share on the last day of the
period
For the purpose of determining the interest earned (variable "a" in the formula)
on debt obligations that were purchased by the Portfolio at a discount or
premium, the formula generally calls for amortization of the discount or
premium; the amortization schedule will be adjusted monthly to reflect changes
in the market values of the debt obligations.
Yield information is useful in reviewing a Portfolio's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in a Portfolio's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in the Portfolios'
investment portfolios, portfolio maturity, operating expenses and market
conditions.
It should be recognized that in periods of declining interest rates the
yields will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the yields will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to a
Portfolio from the continuous sale of its shares will likely be invested in
instruments producing lower yields than the balance of the Portfolio's
investments, thereby reducing the current yield of the Portfolio. In periods of
rising interest rates, the opposite can be expected to occur.
-168-
<PAGE>
Non-Standardized Performance
In addition to the performance information described above, the Fund
may provide total return information with respect to the Portfolios for
designated periods, such as for the most recent six months or most recent twelve
months. This total return 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, 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 Prospectus a factor in the selection of broker-dealers.
-169-
<PAGE>
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 and Endeavor
Janus Growth Portfolios may execute portfolio transactions through certain of
their affiliated brokers, acting as agent in accordance with the procedures
established by the Fund's Board of Trustees, but will not purchase any
securities from or sell any securities to such affiliate acting as principal for
its own account.
For the year ended December 31, 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
-170-
<PAGE>
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 Securities, Ltd., 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 $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.
For the year ended December 31, 1999, the Endeavor Money Market Portfolio
and the Endeavor High Yield Portfolio did not pay any brokerage commissions
while the Endeavor Asset Allocation Portfolio paid $323,182 in brokerage
commissions. For the year ended December 31, 1999, the T. Rowe Price
International Stock Portfolio, the Endeavor Value Equity Portfolio and the
Dreyfus Small Cap Value Portfolio paid $193,255, $296,817 and $1,384,644
respectively, in brokerage commissions of which $3,858 (2.00%) and $1,260
(0.65%) with respect to the T. Rowe Price International
-171-
<PAGE>
Stock Portfolio was paid to Robert Fleming Holdings Limited and Jardine Fleming
Group Limited, respectively. For the year ended December 31, 1999, the T. Rowe
Price Equity Income Portfolio and the T. Rowe Price Growth Stock Portfolio paid
$187,277 and $285,487 respectively, in brokerage commissions of which $2,845
(1.00%) with respect to the T. Rowe Price Growth Stock Portfolio was paid to
Robert Fleming Holdings Limited. For the year ended December 31, 1999, the
Dreyfus U.S. Government Securities Portfolio, the Endeavor Opportunity Value
Portfolio and the Endeavor Enhanced Index Portfolio paid $44,456, $44,461 and
$89,427, respectively, in brokerage commissions. For the fiscal year ended
December 31, 1999, the Endeavor Select Portfolio paid $156,177 in brokerage
commissions of which $33 (0.02%) was paid to Montgomery Securities, Inc. For the
fiscal year ended December 31, 1999 the Endeavor Janus Growth Portfolio paid
$393,997 in brokerage commissions.
For 1999, the percentage of each Portfolio's aggregate dollar amount of
commissionable transactions effected through an affiliated broker is as follows:
T. Rowe Price International Stock Portfolio - 2.53% (Robert
===
Fleming Holdings Limited)
T. Rowe Price International Stock Portfolio - 1.44% (Jardine
===
Fleming Group Limited)
T. Rowe Price Growth Stock Portfolio - 0.52% (Robert Fleming
===
Holdings Limited)
Endeavor Select Portfolio - 0.13% (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 Transamerica Capital, Inc. (formerly known as Endeavor Group)
(the "Distributor") (hereinafter referred to as "Independent Trustees"), and
each Portfolio's shareholders, have voted pursuant to the substantive provisions
of Rule 12b-1 under the 1940 Act 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.
Under the Plan, the Fund is using recaptured commissions to pay for distribution
expenses. However, under the Plan, except for recaptured commissions, neither
the Fund nor any series of the Fund, including the Portfolios, will incur any
additional fees or charges. As part of the Plan, the Fund and the Distributor
have entered
-172-
<PAGE>
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 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, 1999, the Distributor received an
aggregate of $829,876 pursuant to the Plan, of which $519,184 was attributable
to the Dreyfus Small Cap Value
-173-
<PAGE>
Portfolio, $26,151 to the Endeavor Opportunity Value Portfolio, $175,545 to the
Endeavor Value Equity Portfolio, $76,797 to the Endeavor Asset Allocation
Portfolio, $23,039 to the T. Rowe Price Equity Income Portfolio and $9,160 to
the T. Rowe Price Growth Stock Portfolio. In 1999, $888,475 was utilized to pay
the costs of seminars and sales meetings .
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 Portfolios' 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 are set forth below. Unless
otherwise indicated, the business address of each is 2101 East Coast Highway,
Suite 300, Corona del Mar, California 92625.
-174-
<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
and
since
June,
1998,Chief
Financial
Officer
(Treasurer)
of
Registrant;
from
February,
1997
to
December,
1997,
Executive
Vice-
President,
Chief
of
Operations,
from
March,
1997
to
October,
1999,
Director,
from
December,
1997
to
October,
1999,
Chief
Operating
Officer,
and
from
June,
1998
to
October,
1999,
Chief
Financial
Officer,
from
July,
1999
to
October,
1999,
Chief
Executive
Officer
of
Endeavor
Group;
from
September,
1996
to
June,
1997,
and
from
June,
1998
to
October,
1999,
Chief
Financial
Officer,
since
May,
1996,
Director
and
from
June,
1997
to
October,
1998,
Executive
Vice
President
-
Administration,
from
October,
1998
to
October,
1999,
Chief
-175-
<PAGE>
Principal
Executive
Officer,
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
Group;
since
May,
1996,
Chief
Financial
Officer
of
McGuinness
&
Associates
.
-176-
<PAGE>
Principal
*Vincent J. McGuinness Trustee Until December 31,
==================
(65) 1999, Director of
1901 Ocean Way Endeavor Group and
Laguna Beach, California Endeavor Management
92651 Co.; President of VJM
corporation
(oil
and
gas);
until
July,
1999,
Chairman,
Chief
Executive
Officer
and
Director
of
McGuinness
&
Associates
and
VJM
Corporation;
until
July,
1996,
Chairman,
Chief
Executive
Officer
and
Director
of
McGuinness
Group
(insurance
marketing)
;
from
September,
1988
to
July,
1999,
Chief
Executive
Officer
of
Endeavor
Management
Co.;
until
October,
1998,
President
of
Endeavor
Management
Co. Manager, PFL
Endeavor Target
Account and AUSA
Endeavor Target
Account.
Trustee President,
Chief Executive
===============
Timothy A. Devine (65) Officer, Devine
==== ===============
1424 Dolphin Terrace Properties, Inc.
==========
Corona del Mar, California (landscape contracting
92625 and maintenance);
=
Consultant, Plant
Control, Inc. Manager,
PFL Endeavor Target
Account and AUSA
Endeavor Target Account.
Thomas J. Hawekotte (64) Trustee President, Thomas J.
====
6007 North Sheridan Road Hawekotte, P.C. (law
Chicago, Illinois 60660 practice).Manager, PFL
Endeavor Target Account
and AUSA Endeavor
Target Account.
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<PAGE>
Principal
Steven L. Klosterman
(48) 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. Manager, PFL
Endeavor Target Account
and AUSA Endeavor Target
Account.
Trustee President, Lindquist
Halbert D. Lindquist and Associates
(53) (investment
====
1650 E. Fort Lowell Road adviser) and since
Suite 203 December, 1987 Tucson
Tucson, Arizona 85719-2324 Asset Management, Inc.
(commodity
trading
adviser),
and
since
November,
1987,
Presidio
Securities, Inc.
(broker-dealer),
and from January,
1998 to January, 1999
Chief Investment Officer
and since January, 1999,
Consultant,
Blackstone
Alternative
Asset
Management. Manager, PFL
Endeavor Target Account
and AUSA Endeavor Target
Account.
Keith H. Wood (63) 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);
since
1999,
President,
Wood
&
Anthony,
LLC
(investment
adviser). Manager,
PFL Endeavor Target
Account and AUSA
Endeavor Target
Account.
-178-
<PAGE>
Principal
Peter F. Muratore (67) 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.
Manager,
PFL Endeavor Target
Account and AUSA
Endeavor Target
Account.
P. Michael Pond (46) Executive Since November 1, 1998,
====
Vice-President Executive Vice-
- President -
Administration Administration and
and Compliance Compliance of Endeavor
Group; from November 1,
==================
1998 to October, 1999,
======================
Executive Vice
==============
President -
===========
Administration and
==============
Compliance and Chief
====================
Investment Officer of
=====================
Endeavor Management
Co.; since October,
================
1999, President, Chief
======================
Executive Officer 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.
-179-
<PAGE>
Principal
Gail A. Secretary Since
====
Hanson(57)
==========
September,
1994,
Vice President
for PFPC Inc.
(formerly
known
as
First
Data
Services
Investor
Group,
Inc.)
(mutual
fund
administration).
</TABLE>
* May be deemed an "interested person" of the Fund as defined in the
================
1940 Act.
+ Vincent J. McGuinness, Jr. is the son of Vincent J. McGuinness.
No remuneration will be paid by the Fund to any Trustee or officer of the
Fund who is affiliated with the Manager or the 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
$18,000 and $2,500 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, 1999.
-180-
<PAGE>
<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 $18,000 $19,400
Thomas J. Hawekotte $18,500 $19,900
Steven L. Klosterman $19,000 $20,400
Halbert D. Lindquist $18,000 $19,300
Keith H. Wood $18,500 $19,000
Peter F. Muratore $18,500 $19,900
Vincent J. McGuinness, Jr. - -
</TABLE>
- ---------------
The Agreement and Declaration of Trust of the Fund provides that the
Fund will indemnify its Trustees and officers against liabilities and expenses
incurred in connection with litigation in which they may be involved because of
their offices with the Fund, except if it is determined in the manner specified
in the Agreement and Declaration of Trust that they have not acted in good faith
in the reasonable belief that their actions were in the best interests of the
Fund or that such indemnification would relieve any officer or Trustee of any
liability to the Fund or its shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of his duties. The Fund, at its
expense, provides liability insurance for the benefit of its Trustees and
officers.
As of the date of this Statement of Additional Information, the
officers and Trustees of the Fund as a group owned less than 1% of the
outstanding shares of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
The Manager
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<PAGE>
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. AUSA
Holding Company ("AUSA"), an affiliate of PFL Life Insurance Company, owns all
of the outstanding common shares of the Manager and Transamerica Capital, Inc.
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, PFPC Inc. 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
-182-
<PAGE>
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.
The Manager pays the fees and expenses of PFPC Inc. pursuant to the
administration agreement and the Manager is entitled to be reimbursed for each
Portfolio's portion of the fees and expenses paid by the Manager to PFPC Inc.
with respect to each Portfolio. For Portfolios other than the Endeavor Select,
Endeavor High Yield and Endeavor Janus Growth Portfolios, the Manager pays 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 , Endeavor High Yield and
Endeavor Janus Growth Portfolios, the Manager pays PFPC Inc., $40,000 ($30,000
in the case of Endeavor Select Portfolio in its first year of operation) 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.
-183-
<PAGE>
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 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%
_____________________
* 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.
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<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 - 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 , 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.
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.
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<PAGE>
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,
1997, December 31, 1998 and December 31, 1999.
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<PAGE>
<TABLE>
<CAPTION>
1999
Investment Investment
Management Management Other
Fee Fee Expenses
Paid Waived Reimbursed
<S> <C> <C> <C>
Endeavor Money Market
Portfolio.......... $580,293 $ -- $ --
Endeavor Asset
Allocation
Portfolio.......... $2,772,660 -- --
T. Rowe Price
International
Stock Portfolio.... $1,697,527 -- --
Endeavor Value Equity
Portfolio.......... $1,856,971 -- --
Dreyfus Small
Cap Value
Portfolio.......... $1,300,689 -- --
Dreyfus U.S.
Government
Securities
Portfolio.......... $560,715 -- --
T. Rowe Price
Equity Income
Portfolio.......... $2,160,124 -- --
T. Rowe Price
Growth Stock
Portfolio.......... $1,712,439 -- --
Endeavor Opportunity
Value Portfolio $364,453 -- --
Endeavor Enhanced Index
Portfolio.......... $782,584 -- --
Endeavor Select
Portfolio.......... $291,700 $ 834 --
Endeavor High Yield
Portfolio.......... $120,397 $ 4,167 --
Endeavor Janus Growth
Portfolio*.......... -- $4,168,779 $158,179
1998
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<PAGE>
Investment
Management Investment Other
Fee Management Expenses
Paid Fee Waived Reimbursed
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......... 419,748 --- ---
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
Portfolio**........ 197,853 9,166 ---
=
Endeavor High Yield
Portfolio***....... 29,230 5,833 ---
=
1997
Investment
Management Investment Other
Fee Management Expenses
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<PAGE>
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>
- ---------------
* The information presented with
respect to the Endeavor Janus Growth
Portfolio is for the period from May
1, 1999 (commencement of operations)
to December 31, 1999.
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<PAGE>
** The information presented with respect to the Endeavor Select 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.
- ---------------------------
For the year ended December 31, 1999, the following Portfolios
reimbursed, after waivers, the Manager for administrative expenses incurred by
the Manager on behalf of the Portfolios:
Endeavor Money Market - $16,387 T. Rowe Price Growth Stock - $42,322
============
$
Endeavor Asset Allocation - $75,318 Endeavor Opportunity Value - $2,281
T. Rowe Price International Endeavor Enhanced Index - $9,860
Stock - $16,229
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<PAGE>
Endeavor Value Equity - $45,114 Endeavor Select - $ 39,167
Dreyfus Small Cap Value - $34,255 Endeavor High Yield - $ 35,833
=
Dreyfus U.S. Government Endeavor Janus Growth - $20,137
Securities - $16,347
T. Rowe Price Equity Income - $53,809
Custodian
Boston Safe Deposit and Trust Company, located at One Boston Place,
Boston, Massachusetts 02108, serves as the custodian of the Fund. Under the
custody agreement, Boston Safe holds the Portfolios' securities and keeps all
necessary records and documents.
Transfer Agent
PFPC Inc., 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.
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<PAGE>
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 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
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<PAGE>
for its portfolio securities pursuant to regulations of the Securities and
Exchange Commission. This method may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Portfolio
would receive if it sold the instrument. The net asset value per share would be
subject to fluctuation upon any significant changes in the value of the
Portfolio's securities. The value of debt securities, such as those in the
Portfolio, usually reflects yields generally available on securities of similar
yield, quality and duration. When such yields decline, the value of a portfolio
holding such securities can be expected to decline. Although the Portfolio seeks
to maintain the net asset value per share of the Portfolio at $1.00, there can
be no assurance that net asset value will not vary.
The Trustees of the Fund have undertaken to establish procedures
reasonably designed, taking into account current market conditions and the
Portfolio's investment objective, to stabilize the net asset value per share for
purposes of sales and redemptions at $1.00. These procedures include the
determination, at such intervals as the Trustees deem appropriate, of the
extent, if any, to which the net asset value per share calculated by using
available market quotations deviates from $1.00 per share. In the event such
deviation exceeds one half of one percent, the Trustees are required to promptly
consider what action, if any, should be initiated.
With respect to the Portfolios other than the Endeavor Money Market
Portfolio, foreign securities traded outside the United States are generally
valued as of the time their trading is complete, which is usually different from
the close of the New York Stock Exchange. Occasionally, events affecting the
value of such securities may occur between such times and the close of the New
York Stock Exchange that will not be reflected in the computation of the
Portfolio's net asset value. If events materially affecting the value of such
securities occur during such period, these securities will be valued at their
fair value according to procedures decided upon in good faith by the Fund's
Board of Trustees. All securities and other assets of a Portfolio initially
expressed in foreign currencies will be converted to U.S. dollar values at the
mean of the bid and offer prices of such currencies against U.S. dollars last
quoted on a valuation date by any recognized dealer.
TAXES
Federal Income Taxes
Each Portfolio intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"). By so
qualifying, a Portfolio will not be subject to federal income taxes to the
extent that its net investment income and net realized capital gains are
distributed.
In order to so qualify, a Portfolio must, among other things, (1)
derive at least 90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stocks or securities or foreign
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<PAGE>
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.
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.
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<PAGE>
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 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.
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<PAGE>
The assets received from the sale of shares of a Portfolio, and all
income, earnings, profits and proceeds thereof, subject only to the rights of
creditors, constitute the underlying assets of the Portfolio. The underlying
assets of a Portfolio are required to be segregated on the Fund's books of
account and are to be charged with the expenses with respect to that Portfolio.
Any general expenses of the Fund not readily attributable to a Portfolio will be
allocated by or under the direction of the Trustees in such manner as the
Trustees determine to be fair and equitable, taking into consideration, among
other things, the nature and type of expense and the relative sizes of the
Portfolio and the other Portfolios.
Each share has one vote, with fractional shares voting proportionately.
Shareholders of a Portfolio are not entitled to vote on any matter that requires
a separate vote of the shares of another Portfolio but which does not affect the
Portfolio. The Agreement and Declaration of Trust does not require the Fund to
hold annual meetings of shareholders. Thus, there will ordinarily be no annual
shareholder meetings, unless otherwise required by the 1940 Act. The Trustees of
the Fund may appoint their successors until fewer than a majority of the
Trustees have been elected by shareholders, at which time a meeting of
shareholders will be called to elect Trustees. Under the Agreement and
Declaration of Trust, any Trustee may be removed by vote of two-thirds of the
outstanding shares of the Fund, and holders of 10% or more of the outstanding
shares can require the Trustees to call a meeting of shareholders for the
purpose of voting on the removal of one or more Trustees. If ten or more
shareholders who have been such for at least six months and who hold in the
aggregate shares with a net asset value of at least $25,000 inform the Trustees
that they wish to communicate with other shareholders, the Trustees either will
give such shareholders access to the shareholder lists or will inform them of
the cost involved if the Fund forwards materials to the shareholders on their
behalf. If the Trustees object to mailing such materials, they must inform the
Securities and Exchange Commission and thereafter comply with the requirements
of the 1940 Act.
PFL Life Insurance Company will vote shares of the Fund as described
under the caption "Voting Rights" in the prospectus or other material for the
Contracts which accompanies the Prospectus.
As of January 31, 2000, the PFL Endeavor Variable Annuity Account owned
of record the following approximate percentages of the outstanding shares of
each Portfolio: 64.82% of the Endeavor Money Market Portfolio; 88.80% of the
Endeavor Asset Allocation Portfolio; 79.48% of the T. Rowe Price International
Stock Portfolio; 81.38% of the Endeavor Value Equity Portfolio; 80.37% of the
Dreyfus Small Cap Value Portfolio; 76.69% of the Dreyfus U.S. Government
Securities Portfolio; 79.69% of the T. Rowe Price Equity Income Portfolio;
74.91% of the T. Rowe Price Growth Stock Portfolio; 81.21% of the Endeavor
Opportunity Value Portfolio; 66.20% of the Endeavor Enhanced Index Portfolio;
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<PAGE>
68.65% of the Endeavor Select Portfolio; 77.45% of the Endeavor High Yield
Portfolio; and 81.95% of the Endeavor Janus Growth Portfolio. As of January 31,
2000, the PFL Endeavor Platinum Variable Annuity Account owned of record the
following approximate percentages of the outstanding shares of each Portfolio:
21.01% of the Endeavor Money Market Portfolio; 9.36% of the Endeavor Asset
Allocation Portfolio; 18.28% of the T. Rowe Price International Stock Portfolio;
14.31% of the Endeavor Value Equity Portfolio; 13.92% of the Dreyfus Small Cap
Value Portfolio; 19.78% of the Dreyfus U.S. Government Securities Portfolio;
14.98% of the T. Rowe Price Equity Income Portfolio; 17.75% of the T. Rowe Price
Growth Stock Portfolio; 15.64% of the Endeavor Opportunity Value Portfolio;
25.75% of the Endeavor Enhanced Index Portfolio; 30.25% of the Endeavor Select
Portfolio; 22.42% of the Endeavor High Yield Portfolio; and 14.82% of the
Endeavor Janus Growth Portfolio. As of January 31, 2000, the AUSA Life Insurance
Variable Annuity Account owned of record the following approximate percentages
of the outstanding shares of each Portfolio: 0.55% of the Endeavor Value Equity
Portfolio; 0.61% of the Dreyfus Small Cap Value Portfolio; 2.17% of the T. Rowe
Price Equity Income Portfolio; and 3.53% of the T. Rowe Price Growth Stock
Portfolio. As of January 31, 2000, the People's Benefit Life Insurance Company
Separate Account V owned of record the following approximate percentages of the
outstanding shares of each Portfolio: 1.31% of the Dreyfus Small Cap Value
Portfolio; 2.24% of the T. Rowe Price International Stock Portfolio; and 4.63%
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
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<PAGE>
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 Portfolio ,
Endeavor High Yield Portfolio and Endeavor Janus Growth Portfolio for the fiscal
period ended December 31, 1999, including notes to the financial statements and
financial highlights and the Report of Ernst & Young LLP, 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 Report of Independent Auditors) included in the Annual
Report are incorporated herein by reference.
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<PAGE>
APPENDIX
SECURITIES RATINGS
Standard & Poor's Bond Ratings
A Standard & Poor's corporate debt rating is a current assessment of
the creditworthiness of an obligor with respect to a specific obligation. Debt
rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong. Debt rated "AA" has a very
strong capacity to pay interest and to repay principal and differs from the
highest rated issues only in small degree. Debt rated "A" has a strong capacity
to pay interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
debt of a higher rated category. Debt rated "BBB" is regarded as having an
adequate capacity to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
to repay principal for debt in this category than for higher rated categories.
Bonds rated "BB", "B", "CCC" and "CC" are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "CC" the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. The rating "C" is reserved for income bonds on which no interest is
being paid. Debt rated "D" is in default, and payment of interest and/or
repayment of principal is in arrears. The ratings from "AA" to "B" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
Moody's Bond Ratings
Bonds which are rated "Aaa" are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds which are rated
"Aa" are judged to be of high quality by all standards. Together with the Aaa
group they comprise what are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may not be as large as
in Aaa securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities. Moody's applies numerical
modifiers 1, 2 and 3 in the Aa and A rating categories. The modifier 1 indicates
that the security ranks at a higher end of the rating category, modifier 2
indicates a mid-range rating and the modifier 3 indicates that the issue ranks
at the lower
A-1
<PAGE>
end of the rating category. Bonds which are rated "A" possess many favorable
investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future. Bonds which are rated "Baa" are considered as
medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Bonds which are rated "Ba" are judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. Bonds which are rated
"B" generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small. Bonds which are rated "Caa" are of
poor standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest. Bonds which are rated "Ca"
represent obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings. Bonds which are rated "C"
are the lowest rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Standard & Poor's Commercial Paper Ratings
"A" is the highest commercial paper rating category utilized by
Standard & Poor's, which uses the numbers "1+", "1", "2" and "3" to denote
relative strength within its "A" classification. Commercial paper issuers rated
"A" by Standard & Poor's have the following characteristics. Liquidity ratios
are better than industry average. Long-term debt rating is "A" or better. The
issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow are in an upward trend. Typically, the issuer is a strong
company in a well-established industry and has superior management. Issues rated
"B" are regarded as having only an adequate capacity for timely payment.
However, such capacity may be damaged by changing conditions or short-term
adversities. The rating "C" is assigned to short-term debt obligations with a
doubtful capacity for repayment. An issue rated "D" is either in default or is
expected to be in default upon maturity.
Moody's Commercial Paper Ratings
"Prime-1" is the highest commercial paper rating assigned by Moody's,
which uses the numbers "1", "2" and "3" to denote relative strength within its
highest classification of Prime. Commercial paper issuers rated Prime by Moody's
have the following characteristics. Their short-term debt obligations carry the
smallest degree of investment risk. Margins of support for current indebtedness
are large or stable with cash flow and asset protection well assured. Current
liquidity
A-2
<PAGE>
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 as graduations, viewing for example
Standard & Poor's rating of A-1+ and A-1 as being in Standard & Poor's highest
rating category.
A-3
<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
(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.
-4-
<PAGE>
Exhibit No. Description of Exhibits
(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").
(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.
-5-
<PAGE>
Exhibit No. Description of Exhibits
- -----------
(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.
(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.
-6-
<PAGE>
Exhibit No. Description of Exhibits
- -----------
(c)(11) Specimen certificate for shares of
beneficial interest of the Select 50
Portfolio (now known as Endeavor Select
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").
(d)(1) Management Agreement dated
July 22, 1999 between Registrant
=============
and Endeavor
Management Co. is
==============
filed herein.
=============
(d)(2)
Investment Advisory Agreement
===================
between OpCap Advisors and
==============
Endeavor Management
==========
Co. with respect to the
=== ===
Endeavor Value Equity Portfolio
========
is
filed
=====
herein.
=======
-7-
<PAGE>
Exhibit No. Description of Exhibits
(d)(3)
Investment Advisory Agreement
===================
between The Dreyfus
===========
Corporation and Endeavor
===========
Management Co. with respect to
==============
the Dreyfus U.S. Government Securities
===========
Portfolio is
filed herein.
-8-
<PAGE>
Exhibit No. Description of Exhibits
- -----------
(d)(4) Investment Advisory Agreement between T.
Rowe Price Associates, Inc. and Endeavor
Management Co. with
==============
respect to the T. Rowe Price Equity
Income Portfolio is
filed herein.
=============
(d)(5) Investment Advisory Agreement between T.
Rowe Price Associates, Inc. and Endeavor
Management Co. with
==============
respect to the T. Rowe Price Growth
Stock Portfolio is
filed herein.
=============
(d)(6) Investment Advisory Agreement between
Rowe Price-Fleming, International, Inc.
and Endeavor
Management Co. with respect to the
==============
T. Rowe Price
=============
International Stock Portfolio is
===================
filed herein.
=============
(d)(7) Investment Advisory Agreement between
The Dreyfus Corporation and Endeavor
Management Co. with
==============
respect to the Dreyfus Small Cap Value
Portfolio is
filed herein.
=============
(d)(8) Investment Advisory Agreement between
OpCap Advisors and Endeavor
Management Co. with respect to
==============
the Endeavor Opportunity Value Portfolio
========
is
filed herein.
=============
(d)(9) Investment Advisory Agreement between
J.P. Morgan Investment Management Inc.
and Endeavor
Management Co. with respect to the
==============
Endeavor Enhanced Index Portfolio is
========
filed herein.
=============
-9-
<PAGE>
Exhibit No. Description of Exhibits
- -----------
(d)(10) Investment Advisory Agreement between
Montgomery Asset Management, LLC and
Endeavor Management
==========
Co. with respect to the Endeavor Select
=== ========
50 Portfolio (now known as Endeavor
Select Portfolio) is
filed herein.
=============
(d)(11) Investment Advisory Agreement between
Morgan Stanley Dean Witter Asset
===========
Management Inc. and Endeavor
Management Co. with respect to
==============
Endeavor Money Market Portfolio is
filed herewith.
===============
(d)(12) Investment Advisory Agreement between
Morgan Stanley Dean Witter Asset
===========
Management Inc. and Endeavor
Management Co. with respect to
==============
Endeavor Asset Allocation Portfolio is
filed herein.
=============
(d)(13) Investment Advisory Agreement between
Massachusetts Financial Services Company
and Endeavor
Management Co. with respect to Endeavor
==============
High Yield Portfolio is
filed herein.
=============
(d)(14) Investment Advisory Agreement between
Janus Capital Corporation and Endeavor
Management Co. with respect to Endeavor
Janus Growth Portfolio is
filed
=====
herein.
======
-10-
<PAGE>
Exhibit No. Description of Exhibits
(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.
(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.
-11-
<PAGE>
Exhibit No. Description of Exhibits
- -----------
(g)(6) Supplement to Custody Agreement between
Registrant and Boston Safe Deposit and Trust Company
with respect to the Endeavor Select Portfolio
(formerly known as Endeavor Select 50 Portfolio and
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 incorporated
by reference to Post-Effective Amendment
No. 26 as filed with the SEC on February
=================================
22, 1999 ("Post-Effective Amendment No.
=======================================
26").
====
(h)(1) Transfer Agency and Registrar Agreement
between Registrant and The Shareholder
Services Group, Inc. (now known as
PFPC
====
Inc.) is incorporated by reference to
Post-Effective Amendment No. 14.
(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.
-12-
<PAGE>
Exhibit No. Description of Exhibits
(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
PFPC 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
PFPC 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.
(h)(9) Supplement dated March 25, 1994 to
Administration Agreement between
Endeavor Investment Advisers and The
Boston Company Advisors, Inc. (currently
known as
PFPC Inc.) with respect to the
====
U.S. Government Securities Portfolio is
incorporated by reference to Post-
Effective Amendment No. 14.
-13-
<PAGE>
Exhibit No. Description of Exhibits
- -----------
(h)(10) Amendment No. 3 dated July 1, 1996 to
Administration Agreement between
Endeavor Investment Advisers and First
Data Investor Services Group, Inc.
(currently known as PFPC 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.
(currently known as PFPC 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.
(currently known as PFPC 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.
(currently known as PFPC 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.
(currently known as PFPC Inc.) with
===============================
respect to Endeavor Select 50 Portfolio
is incorporated by reference to Post-
Effective Amendment No. 22.
-14-
<PAGE>
Exhibit No. Description of Exhibits
- -----------
(h)(15) Amendment No. 5 to Administration
Agreement dated January 28, 1998 between
Endeavor Investment Advisers and First
Data Investor Services Group, Inc.
(currently known as PFPC 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 (now known as Endeavor Select
=============================
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
incorporated by reference to Post-
Effective Amendment No. 26.
(i) Not Applicable.
(j) Consent of Independent Auditors is filed
herein.
(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.
(n)
Not Applicable.
==============
(o) Not Applicable.
(p) Codes of Ethics (to be filed by
===============================
amendment).
(q) Powers of Attorney are incorporated by
reference to Post-Effective Amendment
Nos. 14, 16, 18, 20 (as filed with the
==================
SEC on October 28, 1997), 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.
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.
-15-
<PAGE>
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.
Item 26. (a) Business and Other Connections of the Investment Adviser
--------------------------------------------------------
Investment Adviser - Endeavor Management Co.
The Manager, a wholly-owned subsidiary of AUSA Holding
Company, an affiliate of PFL Life Insurance Company, 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
Morgan Stanley Asset Management ("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
-16-
<PAGE>
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 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.
-17-
<PAGE>
Rowe Price-Fleming International, Inc. ("Price-Fleming") is a
joint venture between T. Rowe Price and Robert Fleming Holdings Limited
("Flemings"). Flemings is a diversified investment organization which
participates in a global network of regional investment offices in New York,
London, Zurich, Geneva, Tokyo, Hong Kong, Manila, Kuala Lumpur, Seoul, Teipi,
Bombay, Jakarta, Singapore, Bangkok 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
----------------------------------------------------
Investment Adviser - Massachusetts Financial Services Company
-18-
<PAGE>
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 Transamerica
---------------------------------------- ============
Capital, Inc.
<TABLE>
<CAPTION>
<PAGE>
Positions and Positions and
Name and Principal Offices With Offices with
Business Address Underwriter Registrant
David Bullock Chairman, Chief Executive ---
============= ===
<S> <C> <C>
Officer, President and
Director
Larry Norman Director ---
Bart Herbert Director ---
George F. Veazey, III Executive Vice President ---
Charles Edwards Executive Vice ---
President
Michael Carpenter Executive Vice President ---
Guillermo Nordarse Senior Vice ---
President
<PAGE>
Matthew Coben Senior Vice President ---
Michael Brandsma Senior Vice President ---
Richard Cardall Senior Vice President ---
Mark Schofield Senior Vice President ---
Richard Alvarez Senior Vice President ---
Kevin Grant Senior Vice President ---
Joel Z. Horsager Vice President, ---
Chief Financial
Officer
Roseann Morrison Vice President ---
Carl Spicer Vice President ---
Frank Camp Secretary ---
</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
------------------------------
-20-
<PAGE>
The Registrant maintains the records required by Section 31(a)
of the 1940 Act and Rules 31a-1 to 31a-3 inclusive thereunder at its principal
office, located at 2101 East Coast Highway, Suite 300, Corona del Mar,
California 92625 as well as at the offices of its investment advisers and
administrator: Morgan Stanley Asset Management Inc., 1999 Avenue of the Stars,
Los Angeles, California 90067; OpCap Advisors, c/o Oppenheimer Capital, 1345
Avenue of the Americas, New York, New York 10105; 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 PFPC Inc. (formerly, First Data Investor Services Group, Inc.),
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
(a) Inapplicable
(b) Inapplicable
(c) The Registrant will furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, as amended, the Registrant, ENDEAVOR SERIES
TRUST, has duly caused this Post-Effective Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Corona del Mar, State of California on the 28th day
of February, 2000.
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 28, 2000
=================
Chief Financial
Officer (Treasurer)
(principal financial
and accounting
officer), Trustee
/s/Vincent J. McGuinness* Trustee
- -------------------------
Vincent J. McGuinness February 28, 2000
=================
/s/Timothy A. Devine* Trustee
- ---------------------
Timothy A. Devine February 28, 2000
=================
/s/Thomas J. Hawekotte* Trustee
- -----------------------
Thomas J. Hawekotte February 28, 2000
=================
/s/Steven L. Klosterman* Trustee
- ------------------------
Steven L. Klosterman February 28, 2000
=================
-22-
<PAGE>
Signature Title Date
- ---------
/s/Halbert D. Lindquist* Trustee
- ------------------------
Halbert D. Lindquist February 28, 2000
=================
/s/Keith H. Wood* Trustee
- -----------------
Keith H. Wood February 28, 2000
=================
/s/Peter F. Muratore* Trustee
- ---------------------
Peter F. Muratore February 28, 2000
=================
</TABLE>
* By: /s/Robert N. Hickey
Robert N. Hickey
Attorney-in-fact
-23-
<PAGE>
MANAGEMENT AGREEMENT
July 22, 1999
Endeavor Management Co.
Suite 300
2101 East Coast Highway
Corona del Mar, CA 92625
Dear Sirs:
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 confirms its
agreement with Endeavor Management Co., a California corporation, (the
"Manager") as follows:
1. Investment Description; Appointment
The Trust desires to employ its capital by investing and reinvesting in
investments of the kind and in accordance with the limitations specified in its
Agreement and Declaration of Trust, as amended from time to time, and in its
registration statement filed with the Securities and Exchange Commission ("SEC")
on Form N-1A, as amended from time to time (the "Registration Statement"), and
in such manner and to such extent as may from time to time be approved by the
Board of Trustees. The Trust has designated the separate investment portfolios
set forth in Schedule A. The Trust may in the future designate additional
separate investment portfolios. Such existing and future portfolios are
hereinafter referred to as the "Portfolios." Copies of the Registration
Statement and the Trust's Agreement and Declaration of Trust, as amended, have
been or will be submitted to the Manager. The Trust desires to employ the
Manager to act as its investment manager and administrator. The Trust
acknowledges and agrees that the Manager intends to appoint a person to act as
investment adviser ("Adviser") to render investment advice to each of the
Portfolios. Such Adviser shall make all determinations with respect to the
Portfolio's assets for which it has responsibility. The Manager accepts this
appointment and agrees to furnish the services for the compensation set forth
below.
2. Services as Investment Manager and Administrator
(a) Subject to the supervision and direction of the Board of Trustees
of the Trust, the Manager will have (i) overall supervisory responsibility for
the general management and investment of the Portfolios' assets, and (ii) full
investment discretion to make all determinations with respect to the investment
of a Portfolio's assets not then managed by an investment adviser. In connection
with its responsibilities set forth under (i) above, Trust acknowledges and
agrees that the Manager will select a person to act as investment adviser (an
"Adviser") to render investment advice to each of the Portfolios. Each such
Adviser shall make all determinations with respect to the Portfolio's assets for
which it has responsibility. In addition, the Manager will conduct a program of
evaluations of the Advisers' performance, review the activities of the Advisers
for compliance with the Portfolios' investment objectives and policies and will
keep the
<PAGE>
Trust informed of developments materially affecting the Portfolios and shall, on
its own initiative, furnish to the Trust from time to time whatever information
the Manager believes appropriate for this purpose.
(b) Subject to the supervision and direction of the Board of Trustees
of the Trust, the Manager will also (1) supply the Trust with office facilities
(which may be in Manager's own offices), statistical and research data, data
processing services, clerical, accounting and bookkeeping services, including,
but not limited to, the calculation of the net asset value of shares of the
Trust, internal auditing and legal services, internal executive and
administrative services, and stationery and office supplies; and (2) prepare
reports to shareholders of the Trust, tax returns, and reports to and filings
with the SEC and state blue sky authorities. The Manager may contract with any
other person or persons to provide to the Trust any of the services contemplated
in this paragraph under such terms as it deems reasonable and shall have the
authority to direct the activities of such other person or persons in the manner
it deems appropriate. In connection with such administrative services, the
Manager shall be responsible for creating and maintaining all necessary
administrative records of the Trust in accordance with all applicable laws,
rules and regulations, including but not limited to records required by Section
31(a) of the Investment Company Act of 1940 (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 or any person retained by the Trust. Where applicable, such
records shall be maintained by the Manager for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
The services of the Manager to the Trust hereunder are not to be deemed
exclusive, and the Manager shall be free to render similar services to others
and to engage in other activities, so long as the services rendered to the Trust
are not impaired.
3. Compensation
In consideration of services rendered pursuant to this Agreement, the
Trust will pay the Manager a fee at the respective annual rates of the value of
each Portfolio's average daily net asset set forth in Schedule A hereto as such
schedule may be amended from time to time. Such fees shall be accrued daily and
paid monthly as soon as practicable after the end of each month. If the Manager
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 Manager,
the value of the Portfolios' net assets shall be computed at the times and in
the manner specified in the Registration Statement.
Each Portfolio shall reimburse the Manager for such Portfolio's
allocable share of third party, administration expenses incurred pursuant to an
administration agreement between the Manager and a third party administrator.
4. Expenses
The Trust shall pay all expenses other than those expressly assumed by
the Manager herein, which expenses payable by the Trust shall include, but are
not limited to:
a. Fees to the Manager;
<PAGE>
b. Legal and audit expenses;
c. Fees and expenses related to the registration and qualification of the
Trust and its shares for distribution under federal and state securities laws;
d. Expenses of the Trust's transfer agent, registrar, custodian, dividend
disbursing agent and shareholder servicing agent;
e. Salaries, fees and expenses of Trustees and executive officers of the
Trust who are not "affiliated persons" of the Manager or the Advisers within the
meaning of the 1940 Act;
f. Taxes (including the expenses related to preparation of tax returns) and
corporate or other fees levied against the Trust;
g. Brokerage commissions and other expenses associated with the purchase
and sale of portfolio securities for the Trust;
h. Expenses, including interest, of borrowing money;
i. Expenses incidental to meetings of the Trust's shareholders, Board of
Trustees and the maintenance of the Trust's organizational existence;
j. Expenses of printing certificates representing shares of the Trust and
expenses of preparing, printing and mailing notices, proxy material, reports to
regulatory bodies and reports to shareholders of the Trust;
k. Expenses of preparing and typesetting of prospectuses of the Trust;
l. Expenses of printing and distributing prospectuses to shareholders of
the Trust;
m. Association membership dues;
n. Premiums for fidelity insurance, directors and officers liability
insurance and other coverage;
o. Charges of an independent pricing service to value the Portfolio's
assets;
p. Expenses related to the purchase or redemption of the Trust's shares;
and
q. Such nonrecurring expenses as may arise, including those associated
with actions, suits, or proceedings to which the Trust is a party and arising
from any legal obligation which the Trust may have to indemnify its officers and
Trustees with respect thereto.
5. Reduction of Fee or Reimbursement to the Trust
If in any fiscal year the aggregate expenses of any Portfolio of the
Trust (including fees pursuant to this Agreement but excluding interest, taxes,
brokerage, distribution fees and
<PAGE>
extraordinary expenses) exceed the expense limitations of any state having
jurisdiction over the Trust, the Manager will reduce its fees or reimburse the
Portfolio for the amount of such excess, limited to the amount of its fees
hereunder. Such reduction in fees or expense reimbursement, if any, will be
estimated, reconciled and paid, in the case of reimbursement, on a monthly
basis.
6. Standard of Care
The Manager shall exercise its best judgment in rendering the services
hereunder. The Manager shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust in connection with the matters to
which this Agreement relates, provided that nothing herein shall be deemed to
protect or purport to protect the Manager against liability to the Trust or to
the shareholders of the Trust to which the Manager would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of the Manager's reckless disregard of
its obligations and duties under this Agreement. Any person, even though an
officer, director, employee or agent of the Manager, who may be or become an
officer, Trustee, employee or agent of the Trust, shall be deemed, when
rendering services to the Trust or when acting on any business of the Trust, to
be rendering such services to or to be acting solely for the Trust and not as an
officer, director, employee or agent, or one under the control or direction of
the Manager, even though paid by it.
7. Term
This Agreement shall continue in effect, unless sooner terminated as
hereinafter provided, for a period of two years from the date hereof and
indefinitely thereafter provided that its continuance after such two year period
as to each Portfolio shall be specifically approved at least annually by vote of
a majority of the outstanding voting securities of such 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 the Trust or the
Manager, cast in person at a meeting called for the purpose of voting on such
approval. This Agreement may be terminated as to any Portfolio at any time,
without payment of any penalty, by the Trust's Board of Trustees or by a vote of
a majority of the outstanding voting securities of such Portfolio upon 60 days'
prior written notice to the Manager, or by the Manager upon 90 days' prior
written notice to the Trust, or upon such shorter notice as may be mutually
agreed upon. This Agreement may be amended at any time by the Manager and the
Trust, 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 Trust's
outstanding voting securities. This Agreement shall terminate automatically and
immediately in the event of its assignment. The terms "assignment" and "vote of
a majority of the outstanding voting securities" shall have the meaning set
forth for such terms in the 1940 Act.
8. Limitation of Trust's Liability
The Manager 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 Manager agrees that the Trust's obligations hereunder
in any case shall be limited to the Trust and to its assets and that the Manager
shall not seek satisfaction of any such obligation from the shareholders of the
Trust nor from any Trustee, officer, employee or agent of the Trust.
<PAGE>
9. Force Majeure
The Manager shall not be liable for delays or errors occurring by
reason of circumstances beyond its control, including but not limited to acts of
civil or military authority, national emergencies, work stoppages, fire, flood,
catastrophe, acts of God, insurrection, war, riot, or failure of communication
or power supply. In the event of equipment breakdowns beyond its control, the
Manager shall take reasonable steps to minimize service interruptions but shall
have no liability with respect thereto.
10. Severability
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
11. Miscellaneous
This Agreement constitutes the full and complete agreement of the
parties hereto with respect to the subject matter hereof. Each party agrees to
perform such further actions and execute such further documents as are necessary
to effectuate the purposes hereof. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of California.
The captions in this Agreement are included for convenience only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all the parties.
12. 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.
Very truly yours,
ENDEAVOR SERIES TRUST
By: /s/ Vincent J. McGuinness Jr.
-----------------------------
Accepted:
ENDEAVOR MANAGEMENT CO.
By: /s/ Vincent J. McGuinness
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
Percentage of
Portfolio daily net assets
- --------- ----------------
<S> <C>
Endeavor Money Market Portfolio .50% of average
daily net assets
Endeavor Asset Allocation Portfolio .75% of average
daily net assets
T. Rowe Price International Stock Portfolio .90% of average
daily net assets
Endeavor Value Equity Portfolio .80% of average
daily net assets
Dreyfus Small Cap Portfolio .80% of average
daily net assets
Dreyfus U.S. Government Securities Portfolio .65% of average
daily net assets
T. Rowe Price Equity Income Portfolio .80% of average daily net
assets
T. Rowe Price Growth Stock Portfolio .80% of average
daily net assets
Endeavor Opportunity Value Portfolio .80% of average
daily net assets
Endeavor Enhanced Index Portfolio .75% of average
daily net assets
Endeavor Select 50 Portfolio 1.10% of average
daily net assets
Endeavor High Yield Portfolio .775% of average
daily net assets
Endeavor Janus Growth Portfolio 0.80% of average daily net
assets
</TABLE>
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 23rd day of July, 1999, by and between OpCap
Advisors, a Delaware general partnership (the "Adviser"), and Endeavor
Management Co., a California corporation (the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
and administrator of Endeavor Series Trust (the "Trust"), a Massachusetts
business trust, which has filed a registration statement under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933,
as amended (the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is the Endeavor Value Equity Portfolio (the
"Portfolio"); and
WHEREAS, the Manager desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser to
assist the Manager in performing services for the Portfolio; and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment
advisory services to investment companies and other institutional clients and
desires to provide such services to the Manager;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Adviser. The Manager hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Portfolio, subject
to the control and direction of the Trust's Board of Trustees, for the period
and on the terms hereinafter set forth. The Adviser hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth for the compensation herein provided. The
Adviser shall for all purposes herein be deemed to be an independent contractor
and shall, except as expressly provided or authorized (whether herein or
otherwise), have no authority to act for or represent the Manager, the Portfolio
or the Trust in any way.
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:
-1-
<PAGE>
a. The Adviser shall manage the investment and
reinvestment of the portfolio assets of the Portfolio, all without
prior consultation with the Manager, subject to and in accordance with
the respective investment objectives and policies of the Portfolio set
forth in the Trust's Registration Statement, as such Registration
Statement may be amended from time to time, and any written
instructions which the Manager or the Trust's Board of Trustees may
issue from time-to-time in accordance therewith. In pursuance of the
foregoing, the Adviser shall make all determinations with respect to
the purchase and sale of portfolio securities and shall take such
action necessary to implement the same. The Adviser shall render
regular reports to the Trust's Board of Trustees and the Manager
concerning the investment activities of the Portfolio.
b. To the extent provided in the Trust's Registration
Statement, as such Registration Statement may be amended from time to
time, the Adviser shall, in the name of the Portfolio, place orders for
the execution of portfolio transactions with or through such brokers,
dealers or banks as it may select including affiliates of the Adviser
and, complying with Section 28(e) of the Securities Exchange Act of
1934, may pay a commission on transactions in excess of the amount of
commission another broker-dealer would have charged.
c. In connection with the placement of orders for the
execution of the portfolio transactions of the Portfolio, the Adviser
shall create and maintain all necessary records pertaining to the
purchase and sale of securities by the Adviser on behalf of the
Portfolio in accordance with all applicable laws, rules and
regulations, including but not limited to records required by Section
31(a) of the 1940 Act. All records shall be the property of the Trust
and shall be available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Trust, the Manager or any person
retained by the Trust. Where applicable, such records shall be
maintained by the Adviser for the periods and in the places required by
Rule 31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of
providing services pursuant to this Agreement.
3. Compensation of the Adviser. In consideration of services
rendered pursuant to this Agreement, the Manager will pay the
Adviser a fee at the annual rate of the value of the Portfolio's
-2-
<PAGE>
average daily net assets set forth in Schedule A hereto. Such fee shall be
accrued daily and paid monthly as soon as practicable after the end of each
month. If the Adviser shall serve for less than the whole of any month, the
foregoing compensation shall be prorated. For the purpose of determining fees
payable to the Adviser, the value of the Portfolio's net assets shall be
computed at the times and in the manner specified in the Trust's Registration
Statement.
4. Activities of the Adviser. The services of the Adviser hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others and to engage in other activities, so long as the services
rendered hereunder are not impaired.
5. Use of Names. The Manager shall not use the name of the Adviser or
its parent 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
parent 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.
6. Liability of the Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Adviser, the Adviser shall not be liable for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
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.
-3-
<PAGE>
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 150 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
July 22, 1999 between the Manager and the Trust. This Agreement shall terminate
automatically and immediately in the event of its assignment. The terms
"assignment" and "vote of a majority of the outstanding voting securities" shall
have the meaning set forth for such terms in the 1940 Act. This Agreement may be
amended at any time by the Adviser and the Manager, subject to approval by the
Trust's Board of Trustees and, if required by applicable SEC rules and
regulations, a vote of a majority of the Portfolio's outstanding voting
securities.
9. Confidential Relationship. Any information and advice
furnished by either party to this Agreement to the other shall be
treated as confidential and shall not be disclosed to third
parties except as required by law.
10. Severability. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
11. Miscellaneous. This Agreement constitutes the full and
complete agreement of the parties hereto with respect to the
subject matter hereof. Each party agrees to perform such further
actions and execute such further documents as are necessary to
effectuate the purposes hereof. This Agreement shall be construed
and enforced in accordance with and governed by the laws of the
State of California. The captions in this Agreement are included
-4-
<PAGE>
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
---------------------------
Authorized Officer
OPCAP ADVISORS
BY: /s/ Deborah Kaback
----------------------------
Authorized Officer
-5-
<PAGE>
SCHEDULE A
Endeavor Value Equity
Portfolio .40% of average daily net
assets
<PAGE>
-1-
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 23rd day of July, 1999, by and between The Dreyfus
Corporation, a New York corporation (the "Adviser"), and Endeavor Management
Co., a California corporation (the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
and administrator of Endeavor Series Trust (the "Trust"), a Massachusetts
business trust which has filed a registration statement under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933
(the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate
investment portfolios, one of which is the Dreyfus U.S.
Government Securities Portfolio (the "Portfolio"); and
WHEREAS, the Manager desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser to
assist the Manager in performing services for the Portfolio; and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment
advisory services to investment companies and other institutional clients and
desires to provide such services to the Manager;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Adviser. The Manager hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Portfolio, subject
to the control and direction of the Trust's Board of Trustees, for the period
and on the terms hereinafter set forth. The Adviser hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth for the compensation herein provided. The
Adviser shall for all purposes herein be deemed to be an independent contractor
and shall, except as expressly provided or authorized (whether herein or
otherwise), have no authority to act for or represent the Manager, the Portfolio
or the Trust in any way.
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
<PAGE>
-2-
without prior consultation with the Manager, subject to and in accordance with
the respective investment objectives and policies of the Portfolio set forth in
the Trust's Registration Statement, as such Registration Statement may be
amended from time to time, and any written instructions which the Manager or the
Trust's Board of Trustees may issue from time-to-time in accordance therewith.
In pursuance of the foregoing, the Adviser shall make all determinations with
respect to the purchase and sale of portfolio securities and shall take such
action necessary to implement the same. The Adviser shall render regular reports
to the Trust's Board of Trustees and the Manager concerning the investment
activities of the Portfolio.
b. To the extent provided in the Trust's Registration
Statement, as such Registration Statement may be amended from time to time, the
Adviser shall, in the name of the Portfolio, place orders for the execution of
portfolio transactions with or through such brokers, dealers or banks as it may
select including affiliates of the Adviser and, complying with Section 28(e) of
the Securities Exchange Act of 1934, may pay a commission on transactions in
excess of the amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for the
execution of the portfolio transactions of the Portfolio, the Adviser shall
create and maintain all necessary records pertaining to the purchase and sale of
securities by the Adviser on behalf of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act. All records shall be the property of
the Trust and shall be available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Trust, the Manager or any person retained by
the Trust. Where applicable, such records shall be maintained by the Adviser for
the periods and in the places required by Rule 31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of providing
services pursuant to this Agreement.
3. Compensation of the Adviser. In consideration of services rendered
pursuant to this Agreement, the Manager will pay the Adviser a fee at the annual
rate of the value of the Portfolio's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon as
practicable after the end of each month. If the Adviser shall serve for less
than the whole of any month, the foregoing compensation shall be prorated. For
the purpose of determining fees payable to the Adviser, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the Adviser
-------------------------
hereunder are not to be deemed exclusive, and the Adviser shall
be free to render similar services to others and to engage in
<PAGE>
-3-
other activities, so long as the services rendered hereunder are
not impaired.
5. Use of Names. The Manager shall not use the name of the Adviser 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 parent 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.
6. Liability of the Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Adviser, the Adviser shall not be liable for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
Nothing herein shall constitute a waiver of any rights or remedies which the
Trust may have under any federal or state securities.
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 the Adviser, 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
<PAGE>
-4-
voting securities of the Portfolio upon 60 days' prior written notice to the
Adviser, or by the Adviser upon 150 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 July 22, 1999 between the Manager and the Trust. This Agreement
shall terminate automatically and immediately in the event of its assignment.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meaning set forth for such terms in the 1940 Act.
This Agreement may be amended at any time be the Adviser and the Manager,
subject to approval by the Trust's Board of Trustees and, if required by
applicable SEC rules and regulations, a vote of a majority of the Portfolio's
outstanding voting securities.
9. Confidential Relationship. Any information and advice
-------------------------
furnished by either party to this Agreement to the other shall be
treated as confidential and shall not be disclosed to third
parties except as required by law.
10. Severability. If any provision of this Agreement shall
------------
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
11. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of California. The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the parties.
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
Authorized Officer
THE DREYFUS CORPORATION
BY: /s/
---
Authorized Officer
<PAGE>
-5-
SCHEDULE A
Dreyfus U.S. Government
Securities Portfolio .15% of average daily net
assets.
<PAGE>
-1-
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 23rd day of July, 1999, by and
between T. Rowe Price Associates, Inc., a Maryland corporation
(the "Adviser"), and Endeavor Management Co., a California
corporation (the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
and administrator of Endeavor Series Trust (the "Trust"), a Massachusetts
business trust which has filed a registration statement under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933
(the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate
investment portfolios, one of which is the T. Rowe Price Equity
Income Portfolio (the "Portfolio"); and
WHEREAS, the Manager desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser to
assist the Manager in performing services for the Portfolio; and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment
advisory services to investment companies and 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 as
sub-adviser to manage the investment and reinvestment of the assets of the
Portfolio, subject to the control and direction of the Trust's Board of
Trustees, for the period and on the terms hereinafter set forth. The Adviser
hereby accepts such employment and agrees during such period to render the
services and to assume the obligations herein set forth for the compensation
herein provided. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or authorized
(whether herein or otherwise), have no authority to act for or represent the
Manager, the Portfolio or the Trust in any way.
2. Obligations of and Services to be Provided by the
-------------------------------------------------
Adviser. The Adviser undertakes to provide the following
- -------
services and to assume the following obligations:
a. The Adviser shall manage the investment and reinvestment of
the portfolio assets of the Portfolio, all without prior consultation with the
Manager, subject to and in accordance with the respective investment objectives
and policies of the Portfolio set forth in the Trust's Registration Statement,
as such Registration Statement may be amended from time to time, and any written
instructions which the Manager or
<PAGE>
-2-
the Trust's Board of Trustees may issue from time-to-time in accordance
therewith. In pursuance of the foregoing, the Adviser shall make all
determinations with respect to the purchase and sale of portfolio securities and
shall take such action necessary to implement the same. The Adviser shall render
regular reports as mutually agreed upon by both parties to the Trust's Board of
Trustees and the Manager concerning the investment activities of the Portfolio.
b. To the extent provided in the Trust's Registration
Statement, as such Registration Statement may be amended from time to time, the
Adviser shall, in the name of the Portfolio, place orders for the execution of
portfolio transactions with or through such brokers, dealers or banks as it may
select including affiliates of the Adviser and, complying with Section 28(e) of
the Securities Exchange Act of 1934, may pay a commission on transactions in
excess of the amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for the
execution of the portfolio transactions of the Portfolio, the Adviser shall
create and maintain all necessary records in accordance with applicable law
adequately demonstrating its compliance with its obligations under this
Agreement. All records shall be the property of the Trust and shall be available
for inspection and use by the Securities and Exchange Commission ("SEC"), the
Trust, the Manager or any person retained by the Trust. Where applicable, such
records shall be maintained by the Adviser for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of providing
services pursuant to this Agreement.
3. Compensation of the Adviser. In consideration of services rendered
pursuant to this Agreement, the Manager will pay the Adviser a fee at the annual
rate of the value of the Portfolio's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon as
practicable after the end of each month. If the Adviser shall serve for less
than the whole of any month, the foregoing compensation shall be prorated. For
the purpose of determining fees payable to the Adviser, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the Adviser hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others and to engage in other activities, so long as the services
rendered hereunder are not impaired.
<PAGE>
-3-
5. Use of Names. The Manager shall not use the name of the Adviser 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 parent 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.
6. Liability of the Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Adviser, the Adviser shall not be liable for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
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 the Adviser, 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 150 days' prior
<PAGE>
-4-
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 July 22, 1999 between the Manager
and the Trust. This Agreement shall terminate automatically and immediately in
the event of its assignment. The terms "assignment" and "vote of a majority of
the outstanding voting securities" shall have the meaning set forth for such
terms in the 1940 Act. This Agreement may be amended at any time be the Adviser
and the Manager, subject to approval by the Trust's Board of Trustees and, if
required by applicable SEC rules and regulations, a vote of a majority of the
Portfolio's outstanding voting securities.
9. Confidential Relationship. Any information and advice
-------------------------
furnished by either party to this Agreement to the other shall be
treated as confidential and shall not be disclosed to third
parties except as required by law.
10. Severability. If any provision of this Agreement shall
------------
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
11. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of California. The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the parties.
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
Authorized Officer
T. ROWE PRICE ASSOCIATES, INC.
BY: /s/
---
Authorized Officer
<PAGE>
SCHEDULE A
T. Rowe Price Equity Income
Portfolio .40% of average daily net
assets.
<PAGE>
-1-
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 23rd day of July, 1999, by and between
T. Rowe Price Associates, Inc., a Maryland corporation (the
"Adviser"), and Endeavor Management Co., a California corporation
(the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
and administrator of Endeavor Series Trust (the "Trust"), a Massachusetts
business trust which has filed a registration statement under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933
(the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate
investment portfolios, one of which is the T. Rowe Price Growth
Stock Portfolio (the "Portfolio"); and
WHEREAS, the Manager desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser to
assist the Manager in performing services for the Portfolio; and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment
advisory services to investment companies and 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 as
sub-adviser to manage the investment and reinvestment of the assets of the
Portfolio, subject to the control and direction of the Trust's Board of
Trustees, for the period and on the terms hereinafter set forth. The Adviser
hereby accepts such employment and agrees during such period to render the
services and to assume the obligations herein set forth for the compensation
herein provided. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or authorized
(whether herein or otherwise), have no authority to act for or represent the
Manager, the Portfolio or the Trust in any way.
2. Obligations of and Services to be Provided by the
-------------------------------------------------
Adviser. The Adviser undertakes to provide the following
- -------
services and to assume the following obligations:
a. The Adviser shall manage the investment and reinvestment of
the portfolio assets of the Portfolio, all without prior consultation with the
Manager, subject to and in accordance with the respective investment objectives
and policies of the Portfolio set forth in the Trust's Registration Statement,
as such Registration Statement may be amended from time to time, and any written
instructions which the Manager or
<PAGE>
-2-
the Trust's Board of Trustees may issue from time-to-time in accordance
therewith. In pursuance of the foregoing, the Adviser shall make all
determinations with respect to the purchase and sale of portfolio securities and
shall take such action necessary to implement the same. The Adviser shall render
regular reports as mutually agreed upon by both parties to the Trust's Board of
Trustees and the Manager concerning the investment activities of the Portfolio.
b. To the extent provided in the Trust's Registration
Statement, as such Registration Statement may be amended from time to time, the
Adviser shall, in the name of the Portfolio, place orders for the execution of
portfolio transactions with or through such brokers, dealers or banks as it may
select including affiliates of the Adviser and, complying with Section 28(e) of
the Securities Exchange Act of 1934, may pay a commission on transactions in
excess of the amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for the
execution of the portfolio transactions of the Portfolio, the Adviser shall
create and maintain all necessary records in accordance with applicable law
adequately demonstrating its compliance with its obligations under this
Agreement. All records shall be the property of the Trust and shall be available
for inspection and use by the Securities and Exchange Commission ("SEC"), the
Trust, the Manager or any person retained by the Trust. Where applicable, such
records shall be maintained by the Adviser for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of providing
services pursuant to this Agreement.
3. Compensation of the Adviser. In consideration of services rendered
pursuant to this Agreement, the Manager will pay the Adviser a fee at the annual
rate of the value of the Portfolio's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon as
practicable after the end of each month. If the Adviser shall serve for less
than the whole of any month, the foregoing compensation shall be prorated. For
the purpose of determining fees payable to the Adviser, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the Adviser hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others and to engage in other activities, so long as the services
rendered hereunder are not impaired.
<PAGE>
-3-
5. Use of Names. The Manager shall not use the name of the Adviser 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 parent 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.
6. Liability of the Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Adviser, the Adviser shall not be liable for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
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 the Adviser, 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 150 days' prior
<PAGE>
-4-
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 July 22, 1999 between the Manager
and the Trust. This Agreement shall terminate automatically and immediately in
the event of its assignment. The terms "assignment" and "vote of a majority of
the outstanding voting securities" shall have the meaning set forth for such
terms in the 1940 Act. This Agreement may be amended at any time be the Adviser
and the Manager, subject to approval by the Trust's Board of Trustees and, if
required by applicable SEC rules and regulations, a vote of a majority of the
Portfolio's outstanding voting securities.
9. Confidential Relationship. Any information and advice
-------------------------
furnished by either party to this Agreement to the other shall be
treated as confidential and shall not be disclosed to third
parties except as required by law.
10. Severability. If any provision of this Agreement shall
------------
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
11. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of California. The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the parties.
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
Authorized Officer
T. ROWE PRICE ASSOCIATES, INC.
BY: /s/
---
Authorized Officer
<PAGE>
SCHEDULE A
T. Rowe Price Growth Stock
Portfolio .40% of average daily net
assets.
<PAGE>
-1-
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 23rd day of July, 1999, by and between
Rowe Price-Fleming International, Inc., a Maryland corporation
(the "Adviser"), and Endeavor Management Co., a California
corporation (the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
and administrator of Endeavor Series Trust (the "Trust"), a Massachusetts
business trust which has filed a registration statement under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933
(the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate
investment portfolios, one of which is the T. Rowe Price
International Stock Portfolio (the "Portfolio"); and
WHEREAS, the Manager desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser to
assist the Manager in performing services for the Portfolio; and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment
advisory services to investment companies and 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 as
sub-adviser to manage the investment and reinvestment of the assets of the
Portfolio, subject to the control and direction of the Trust's Board of
Trustees, for the period and on the terms hereinafter set forth. The Adviser
hereby accepts such employment and agrees during such period to render the
services and to assume the obligations herein set forth for the compensation
herein provided. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or authorized
(whether herein or otherwise), have no authority to act for or represent the
Manager, the Portfolio or the Trust in any way.
2. Obligations of and Services to be Provided by the
-------------------------------------------------
Adviser. The Adviser undertakes to provide the following
- -------
services and to assume the following obligations:
a. The Adviser shall manage the investment and reinvestment of
the portfolio assets of the Portfolio, all without prior consultation with the
Manager, subject to and in accordance with the respective investment objectives
and policies of the Portfolio set forth in the Trust's Registration Statement,
as such Registration Statement may be amended from time to time, and any written
instructions which the Manager or
<PAGE>
-2-
the Trust's Board of Trustees may issue from time-to-time in accordance
therewith. In pursuance of the foregoing, the Adviser shall make all
determinations with respect to the purchase and sale of portfolio securities and
shall take such action necessary to implement the same. The Adviser shall render
regular reports as mutually agreed upon by both parties to the Trust's Board of
Trustees and the Manager concerning the investment activities of the Portfolio.
b. To the extent provided in the Trust's Registration
Statement, as such Registration Statement may be amended from time to time, the
Adviser shall, in the name of the Portfolio, place orders for the execution of
portfolio transactions with or through such brokers, dealers or banks as it may
select including affiliates of the Adviser and, complying with Section 28(e) of
the Securities Exchange Act of 1934, may pay a commission on transactions in
excess of the amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for the
execution of the portfolio transactions of the Portfolio, the Adviser shall
create and maintain all necessary records in accordance with applicable law
adequately demonstrating its compliance with its obligations under this
Agreement. All records shall be the property of the Trust and shall be available
for inspection and use by the Securities and Exchange Commission ("SEC"), the
Trust, the Manager or any person retained by the Trust. Where applicable, such
records shall be maintained by the Adviser for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of providing
services pursuant to this Agreement.
3. Compensation of the Adviser. In consideration of services rendered
pursuant to this Agreement, the Manager will pay the Adviser a fee at the annual
rate of the value of the Portfolio's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon as
practicable after the end of each month. If the Adviser shall serve for less
than the whole of any month, the foregoing compensation shall be prorated. For
the purpose of determining fees payable to the Adviser, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the Adviser hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others and to engage in other activities, so long as the services
rendered hereunder are not impaired.
<PAGE>
-3-
5. Use of Names. The Manager shall not use the name of the Adviser 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 parent 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.
6. Liability of the Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Adviser, the Adviser shall not be liable for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
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 the Adviser, 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 150 days' prior
<PAGE>
-4-
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 July 22, 1999 between the Manager
and the Trust. This Agreement shall terminate automatically and immediately in
the event of its assignment. The terms "assignment" and "vote of a majority of
the outstanding voting securities" shall have the meaning set forth for such
terms in the 1940 Act. This Agreement may be amended at any time be the Adviser
and the Manager, subject to approval by the Trust's Board of Trustees and, if
required by applicable SEC rules and regulations, a vote of a majority of the
Portfolio's outstanding voting securities.
9. Confidential Relationship. Any information and advice
-------------------------
furnished by either party to this Agreement to the other shall be
treated as confidential and shall not be disclosed to third
parties except as required by law.
10. Severability. If any provision of this Agreement shall
------------
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
11. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of California. The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the parties.
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
Authorized Officer
ROWE PRICE-FLEMING INTERNATIONAL,
INC.
BY: /s/
---
Authorized Officer
<PAGE>
SCHEDULE A
T. Rowe Price International
Stock Portfolio .75% of average daily net
assets up to $20,000,000;
.60% of average daily net
assets in excess of
$20,000,000 up to
$50,000,000; and .50% of
average daily net assets
in excess of $50,000,000.
At such time as the net
assets of the Portfolio
exceed $200,000,000, the
fee shall be .50% of total
average daily net assets.
<PAGE>
-1-
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 23rd day of July 1999, by and between The Dreyfus
Corporation, a New York corporation (the "Adviser"), and Endeavor Management
Co., a California corporation (the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
and administrator of Endeavor Series Trust (the "Trust"), a Massachusetts
business trust which has filed a registration statement under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933
(the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is the Dreyfus Small Cap Value Portfolio (the
"Portfolio"); and
WHEREAS, the Manager desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser to
assist the Manager in performing services for the Portfolio; and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment
advisory services to investment companies and other institutional clients and
desires to provide such services to the Manager;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Adviser. The Manager hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Portfolio, subject
to the control and direction of the Trust's Board of Trustees, for the period
and on the terms hereinafter set forth. The Adviser hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth for the compensation herein provided. The
Adviser shall for all purposes herein be deemed to be an independent contractor
and shall, except as expressly provided or authorized (whether herein or
otherwise), have no authority to act for or represent the Manager, the Portfolio
or the Trust in any way.
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
<PAGE>
-2-
without prior consultation with the Manager, subject to and in accordance with
the respective investment objectives and policies of the Portfolio set forth in
the Trust's Registration Statement, as such Registration Statement may be
amended from time to time, and any written instructions which the Manager or the
Trust's Board of Trustees may issue from time-to-time in accordance therewith.
In pursuance of the foregoing, the Adviser shall make all determinations with
respect to the purchase and sale of portfolio securities and shall take such
action necessary to implement the same. The Adviser shall render regular reports
to the Trust's Board of Trustees and the Manager concerning the investment
activities of the Portfolio.
b. To the extent provided in the Trust's Registration
Statement, as such Registration Statement may be amended from time to time, the
Adviser shall, in the name of the Portfolio, place orders for the execution of
portfolio transactions with or through such brokers, dealers or banks as it may
select including affiliates of the Adviser and, complying with Section 28(e) of
the Securities Exchange Act of 1934, may pay a commission on transactions in
excess of the amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for the
execution of the portfolio transactions of the Portfolio, the Adviser shall
create and maintain all necessary records pertaining to the purchase and sale of
securities by the Adviser on behalf of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act. All records shall be the property of
the Trust and shall be available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Trust, the Manager or any person retained by
the Trust. Where applicable, such records shall be maintained by the Adviser for
the periods and in the places required by Rule 31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of providing
services pursuant to this Agreement.
3. Compensation of the Adviser. In consideration of services rendered
pursuant to this Agreement, the Manager will pay the Adviser a fee at the annual
rate of the value of the Portfolio's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon as
practicable after the end of each month. If the Adviser shall serve for less
than the whole of any month, the foregoing compensation shall be prorated. For
the purpose of determining fees payable to the Adviser, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the Adviser
-------------------------
hereunder are not to be deemed exclusive, and the Adviser shall
be free to render similar services to others and to engage in
<PAGE>
-3-
other activities, so long as the services rendered hereunder are
not impaired.
5. Use of Names. The Manager shall not use the name of the Adviser or
its parent 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
parent 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 "Dreyfus" as part of their name, and that the Adviser or its
affiliates may enter into investment advisory, administration or other
agreements with such other entities. If the Adviser ceases to act as the
Portfolio's investment adviser pursuant to this Agreement, the Manager agrees
that, at the Adviser's request, it will cause the Trust to take all necessary
action to change the name of the Portfolio to a name not including "Dreyfus" in
any form or combination of words.
6. Liability of the Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Adviser, the Adviser shall not be liable for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
Nothing herein shall constitute a waiver of any rights or remedies which the
Trust may have under any federal or state securities laws.
7. Limitation of Trust's Liability. The Adviser acknowledges that it
has received notice of and accepts the limitations upon the Trust's liability
set forth in its Agreement and Declaration of Trust. The Adviser agrees that any
of the Trust's obligations shall be limited to the assets of the Portfolio and
that the Adviser shall not seek satisfaction of any such obligation from the
shareholders of the Trust nor from any Trust officer, employee or agent of the
Trust.
8. Renewal, Termination and Amendment. This Agreement
----------------------------------
shall continue in effect, unless sooner terminated as hereinafter
<PAGE>
-4-
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 150 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 July 22, 1999 between the Manager and the Trust. This Agreement
shall terminate automatically and immediately in the event of its assignment.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meaning set forth for such terms in the 1940 Act.
This Agreement may be amended at any time by the Adviser and the Manager,
subject to approval by the Trust's Board of Trustees and, if required by
applicable SEC rules and regulations, a vote of a majority of the Portfolio's
outstanding voting securities.
9. Confidential Relationship. Any information and advice
-------------------------
furnished by either party to this Agreement to the other shall be
treated as confidential and shall not be disclosed to third
parties except as required by law.
10. Severability. If any provision of this Agreement shall
------------
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
11. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of California. The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the parties.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
<PAGE>
-5-
ENDEAVOR MANAGEMENT CO.
BY:
/s/ Vincent J. McGuinness
Authorized Officer
THE DREYFUS CORPORATION
BY:
/s/
Authorized Officer
<PAGE>
-6-
SCHEDULE A
Dreyfus Small Cap Value
Portfolio .375% of average daily
net assets.
<PAGE>
-1-
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 23rd day of July, 1999, by and between OpCap
Advisors, a Delaware general partnership (the "Adviser"), and Endeavor
Management Co., a California corporation (the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
and administrator of Endeavor Series Trust (the "Trust"), a Massachusetts
business trust which has filed a registration statement under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933
(the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is the Endeavor Opportunity Value Portfolio (the
"Portfolio"); and
WHEREAS, the Manager desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser to
assist the Manager in performing services for the Portfolio; and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment
advisory services to investment companies and desires to provide such services
to the Manager;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Adviser. The Manager hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Portfolio, subject
to the control and direction of the Trust's Board of Trustees, for the period
and on the terms hereinafter set forth. The Adviser hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth for the compensation herein provided. The
Adviser shall for all purposes herein be deemed to be an independent contractor
and shall, except as expressly provided or authorized (whether herein or
otherwise), have no authority to act for or represent the Manager, the Portfolio
or the Trust in any way.
2. Obligations of and Services to be Provided by the
-------------------------------------------------
Adviser. The Adviser undertakes to provide the following
- -------
services and to assume the following obligations:
a. The Adviser shall manage the investment and reinvestment of
the portfolio assets of the Portfolio, all without prior consultation with the
Manager, subject to and in accordance with the respective investment objectives
and policies of the Portfolio set forth in the Trust's Registration Statement,
as such Registration Statement may be amended from time to time, and any written
instructions which the Manager or
<PAGE>
-2-
the Trust's Board of Trustees may issue from time-to-time in accordance
therewith. In pursuance of the foregoing, the Adviser shall make all
determinations with respect to the purchase and sale of portfolio securities and
shall take such action necessary to implement the same. The Adviser shall render
regular reports to the Trust's Board of Trustees and the Manager concerning the
investment activities of the Portfolio.
b. To the extent provided in the Trust's Registration
Statement, as such Registration Statement may be amended from time to time, the
Adviser shall, in the name of the Portfolio, place orders for the execution of
portfolio transactions with or through such brokers, dealers or banks as it may
select including affiliates of the Adviser and, complying with Section 28(e) of
the Securities Exchange Act of 1934, may pay a commission on transactions in
excess of the amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for the
execution of the portfolio transactions of the Portfolio, the Adviser shall
create and maintain all necessary records pertaining to the purchase and sale of
securities by the Adviser on behalf of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act. All records shall be the property of
the Trust and shall be available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Trust, the Manager or any person retained by
the Trust. Where applicable, such records shall be maintained by the Adviser for
the periods and in the places required by Rule 31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of providing
services pursuant to this Agreement.
3. Compensation of the Adviser. In consideration of services rendered
pursuant to this Agreement, the Manager will pay the Adviser a fee at the annual
rate of the value of the Portfolio's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon as
practicable after the end of each month. If the Adviser shall serve for less
than the whole of any month, the foregoing compensation shall be prorated. For
the purpose of determining fees payable to the Adviser, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the Adviser hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others and to engage in other activities, so long as the services
rendered hereunder are not impaired.
<PAGE>
-3-
5. Use of Names. The Manager shall not use the name of the Adviser or
its parent, Oppenheimer Capital, 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 parent 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.
6. Liability of the Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Adviser, the Adviser shall not be liable for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
Nothing herein shall constitute a waiver of any rights or remedies which the
Trust may have under any federal or state securities laws.
7. Limitation of Trust's Liability. The Adviser acknowledges that it
has received notice of and accepts the limitations upon the Trust's liability
set forth in its Agreement and Declaration of Trust. The Adviser agrees that any
of the Trust's obligations shall be limited to the assets of the Portfolio and
that the Adviser shall not seek satisfaction of any such obligation from the
shareholders of the Trust nor from any Trust officer, employee or agent of the
Trust.
8. Renewal, Termination and Amendment. This Agreement shall continue in
effect, unless sooner terminated as hereinafter provided, for a period of two
years from the date hereof and shall continue in full force and effect for
successive periods of one year thereafter, but only so long as each such
continuance as to the Portfolio is specifically approved at least annually by
vote of the holders of a majority of the outstanding voting securities of the
Portfolio or by vote of a majority of the Trust's Board of Trustees; and further
provided that such continuance is also approved annually by the vote of a
majority of the Trustees who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. This Agreement may be terminated as to the Portfolio at
any time, without payment of any penalty, by the Trust's Board of Trustees,
<PAGE>
-4-
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 150 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 July 22, 1999 between the Manager and the Trust. This Agreement
shall terminate automatically and immediately in the event of its assignment.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meaning set forth for such terms in the 1940 Act.
This Agreement may be amended at any time by the Adviser and the Manager,
subject to approval by the Trust's Board of Trustees and, if required by
applicable SEC rules and regulations, a vote of a majority of the Portfolio's
outstanding voting securities.
9. Confidential Relationship. Any information and advice
-------------------------
furnished by either party to this Agreement to the other shall be
treated as confidential and shall not be disclosed to third
parties except as required by law.
10. Severability. If any provision of this Agreement shall
------------
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
11. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of California. The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the parties.
<PAGE>
-5-
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
Authorized Officer
OPCAP ADVISORS
BY:
/s/ Deborah Kaback
Authorized Officer
<PAGE>
-6-
SCHEDULE A
Endeavor Opportunity Value
Portfolio .40% of average daily net
assets
<PAGE>
-1-
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 23rd day of July, 1999, by and between
J.P. Morgan Investment Management Inc., a Delaware corporation
(the "Adviser"), and Endeavor Management Co., a California
corporation (the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
and administrator of Endeavor Series Trust (the "Trust"), a Massachusetts
business trust which has filed a registration statement under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933
(the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is the Endeavor Enhanced Index Portfolio (the
"Portfolio"); and
WHEREAS, the Manager desires to avail itself of the services of an
investment adviser to assist the Manager in performing services for the
Portfolio; and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment
advisory services to investment companies and desires to provide such services
to the Manager;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Adviser. The Manager hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Portfolio, subject
to the control and direction of the Trust's Board of Trustees, for the period
and on the terms hereinafter set forth. The Adviser hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth for the compensation herein provided. The
Adviser shall for all purposes herein be deemed to be an independent contractor
and shall, except as expressly provided or authorized (whether herein or
otherwise), have no authority to act for or represent the Manager, the Portfolio
or the Trust in any way.
2. Obligations of and Services to be Provided by the
-------------------------------------------------
Adviser. The Adviser undertakes to provide the following
- -------
services and to assume the following obligations:
a. The Adviser shall manage the investment and reinvestment of
the portfolio assets of the Portfolio, all without prior consultation with the
Manager, subject to and in accordance with the respective investment objectives
and policies of the Portfolio set forth in the Trust's Registration Statement,
as such Registration Statement may be amended from time to time, and any written
instructions which the Manager or the Trust's Board of Trustees may issue from
time-to-time in
<PAGE>
-2-
accordance therewith. The Manager has delivered copies of the Trust's
Declaration of Trust, as amended to date (the "Charter Document") to the
Adviser. The Manager agrees, on an ongoing basis, to provide the Adviser as
promptly as practicable copies of all amendments to the Registration Statement
and Charter Document and supplements to the Prospectus. In pursuance of the
foregoing, the Adviser shall make all determinations with respect to the
purchase and sale of portfolio securities and shall take such action necessary
to implement the same. The Adviser shall render regular reports to the Trust's
Board of Trustees and the Manager concerning the investment activities of the
Portfolio. The Manager agrees to cause to be delivered to a person designated in
writing for such purpose by the Adviser within three days after the end of each
month a written report dated the date of its delivery (the "Report") with
respect to the Portfolio's compliance for its current fiscal year with the
short-three test set forth in Section 851(b)(3) of the Internal Revenue Code of
1986, as amended (the "Code")(the "short-three test"). The Report shall include
in chart form the Portfolio's gross income (within the meaning of Section 851 of
the Code) from the beginning of the current fiscal year to the date of the
Report and its cumulative income and gains described in Section 851(b(3) of the
Code for such period. If the Report is not timely delivered, the Adviser shall
be permitted to rely on the most recent Report delivered to it. The Manager
agrees that its Adviser may rely on the Report without independent verification
of its accuracy.
b. To the extent provided in the Trust's Registration
Statement, as such Registration Statement may be amended from time to time, the
Adviser shall, in the name of the Portfolio, place orders for the execution of
portfolio transactions with or through such brokers, dealers or banks as it may
select including affiliates of the Adviser and, complying with Section 28(e) of
the Securities Exchange Act of 1934, may pay a commission on transactions in
excess of the amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for the
execution of the portfolio transactions of the Portfolio, the Adviser shall
create and maintain all necessary records pertaining to the purchase and sale of
securities by the Adviser on behalf of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act. All records shall be the property of
the Trust and shall be available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Trust, the Manager or any person retained by
the Trust. Where applicable, such records shall be maintained by the Adviser for
the periods and in the places required by Rule 31a-2 under the 1940 Act.
<PAGE>
-3-
d. The Adviser shall bear its expenses of providing services
pursuant to this Agreement. The Adviser will not bear any other expenses in the
operation of the Portfolio.
3. Compensation of the Adviser. In consideration of services rendered
pursuant to this Agreement, the Manager will pay the Adviser a fee at the annual
rate of the value of the Portfolio's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon as
practicable after the end of each month. If the Adviser shall serve for less
than the whole of any month, the foregoing compensation shall be prorated. For
the purpose of determining fees payable to the Adviser, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the Adviser hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others and to engage in other activities, so long as the services
rendered hereunder are not impaired.
5. Use of Names. The Manager shall not use the name of the Adviser or
its parent, J.P. Morgan & Co., Incorporated, in any prospectus, sales literature
or other material relating to the Trust in any manner not approved prior thereto
by the Adviser; provided, however, that the Adviser shall approve all uses of
its name which merely refer in accurate terms to its appointment hereunder with
no more prominence than other relationships described in the materials and all
uses of its name and that of its parent which are required by the SEC or a state
securities commission. The Adviser shall not use the name of the Trust or the
Manager in any material relating to the Adviser in any manner not approved prior
thereto by the Manager; provided, however, that the Manager shall approve all
uses of its or the Trust's name which merely refer in accurate terms to the
appointment of the Adviser hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld.
The Manager recognizes that from time to time directors, officers and
employees of the Adviser may serve as directors, trustees, partners, officers
and employees of other corporations, business trusts, partnerships or other
entities (including other investment companies) and that such other entities may
include the name "J.P. Morgan" as part of their name, and that the Adviser or
its affiliates may enter into investment advisory, administration or other
agreements with such other entities.
6. Liability of the Adviser; Indemnification of the Adviser.
--------------------------------------------------------
Absent willful misfeasance, bad faith, gross negligence, or
reckless disregard of obligations or duties hereunder on the part
<PAGE>
-4-
of the Adviser (each such act or omission shall be referred to as "Disqualifying
Conduct"), the Adviser shall not be liable for any act or omission in the course
of, or connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, holding or sale of any security. Nothing herein
shall constitute a waiver of any rights or remedies which the Trust may have
under any federal or state securities laws.
The Manager agrees to indemnify and hold harmless the Adviser from
and against any and all claims, losses, liabilities or damages (including
reasonable attorneys' fees and other related expenses), howsoever arising, from
or in connection with this Agreement or the performance by the Adviser of its
duties hereunder; provided, however, that nothing contained herein shall require
that the Adviser be indemnified for Disqualifying Conduct.
7. Limitation of Trust's Liability. The Adviser acknowledges that it
has received notice of and accepts the limitations upon the Trust's liability
set forth in its Agreement and Declaration of Trust. The Adviser agrees that any
of the Trust's obligations shall be limited to the assets of the Portfolio and
that the Adviser shall not seek satisfaction of any such obligation from the
shareholders of the Trust nor from any Trust officer, employee or agent of the
Trust.
8. Renewal, Termination and Amendment. This Agreement shall continue in
effect, unless sooner terminated as hereinafter provided, for a period of two
years from the date hereof and shall continue in full force and effect for
successive periods of one year thereafter, but only so long as each such
continuance as to the Portfolio is specifically approved at least annually by
vote of the holders of a majority of the outstanding voting securities of the
Portfolio or by vote of a majority of the Trust's Board of Trustees; and further
provided that such continuance is also approved annually by the vote of a
majority of the Trustees who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. This Agreement may be terminated as to the Portfolio at
any time, without payment of any penalty, by the Trust's Board of Trustees, by
the Manager, or by a vote of the majority of the outstanding voting securities
of the Portfolio upon 60 days' prior written notice to the Adviser, or by the
Adviser upon 90 days' prior written notice to the Manager, or upon such shorter
notice as may be mutually agreed upon. This Agreement shall terminate
automatically and immediately upon termination of the Management Agreement dated
July 22, 1999 between the Manager and the Trust, provided that the Adviser
receives prior written notice of the termination of the Management Agreement.
This Agreement shall terminate automatically and immediately in the event of its
assignment. The terms "assignment" and "vote of a majority of
<PAGE>
-5-
the outstanding voting securities" shall have the meaning set forth for such
terms in the 1940 Act. This Agreement may be amended at any time by the Adviser
and the Manager, subject to approval by the Trust's Board of Trustees and, if
required by applicable SEC rules and regulations, a vote of a majority of the
Portfolio's outstanding voting securities.
9. Confidential Relationship. Any information and advice
-------------------------
furnished by either party to this Agreement to the other shall be
treated as confidential and shall not be disclosed to third
parties except as required by law.
10. Severability. If any provision of this Agreement shall
------------
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
11. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of California. The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the parties.
<PAGE>
-6-
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
ENDEAVOR MANAGEMENT CO.
BY:
/s/ Vincent J. McGuinness
Authorized Officer
J.P. MORGAN INVESTMENT MANAGEMENT INC.
BY:
/s/ Joseph Bertuii
Authorized Officer
<PAGE>
-7-
SCHEDULE A
Endeavor Enhanced Index
Portfolio .35% of average daily net
assets
<PAGE>
-1-
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 23rd day of July, 1999 by and between Montgomery
Asset Management, LLC, a Delaware limited liability company (the "Adviser"), and
Endeavor Management Co., a California corporation (the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
and administrator of Endeavor Series Trust (the "Trust"), a Massachusetts
business trust which has filed a registration statement under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933
(the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is the Endeavor Select 50 Portfolio (the "Portfolio");
and
WHEREAS, the Manager desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser to
assist the Manager in performing services for the Portfolio; and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment
advisory services to investment companies and other institutional clients and
desires to provide such services to the Manager;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Adviser. The Manager hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Portfolio, subject
to the control and direction of the Trust's Board of Trustees, for the period
and on the terms hereinafter set forth. The Adviser hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth for the compensation herein provided. The
Adviser shall for all purposes herein be deemed to be an independent contractor
and shall, except as expressly provided or authorized (whether herein or
otherwise), have no authority to act for or represent the Manager, the Portfolio
or the Trust in any way.
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
<PAGE>
-2-
without prior consultation with the Manager, subject to and in accordance with
the investment objective and policies of the Portfolio set forth in the Trust's
Registration Statement, as such Registration Statement may be amended from time
to time, and any written instructions which the Manager or the Trust's Board of
Trustees may issue from time-to-time in accordance therewith. In pursuance of
the foregoing, the Adviser shall make all determinations with respect to the
purchase and sale of portfolio securities and shall take such action necessary
to implement the same. The Adviser shall render regular reports to the Trust's
Board of Trustees and the Manager concerning the investment activities of the
Portfolio.
b. To the extent provided in the Trust's Registration
Statement, as such Registration Statement may be amended from time to time, the
Adviser shall, in the name of the Portfolio, place orders for the execution of
portfolio transactions with or through such brokers, dealers or banks as it may
select including affiliates of the Adviser and, complying with Section 28(e) of
the Securities Exchange Act of 1934, may pay a commission on transactions in
excess of the amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for the
execution of the portfolio transactions of the Portfolio, the Adviser shall
create and maintain all necessary records pertaining to the purchase and sale of
securities by the Adviser on behalf of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act. All records shall be the property of
the Trust and shall be available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Trust, the Manager or any person retained by
the Trust. Where applicable, such records shall be maintained by the Adviser for
the periods and in the places required by Rule 31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of providing
services pursuant to this Agreement.
3. Compensation of the Adviser. In consideration of services rendered
pursuant to this Agreement, the Manager will pay the Adviser a fee at the annual
rate of the value of the Portfolio's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon as
practicable after the end of each month. If the Adviser shall serve for less
than the whole of any month, the foregoing compensation shall be prorated. For
the purpose of determining fees payable to the Adviser, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the Adviser
-------------------------
hereunder are not to be deemed exclusive, and the Adviser shall
be free to render similar services to others and to engage in
<PAGE>
-3-
other activities, so long as the services rendered hereunder are not impaired;
provided, however, that for a period from the date hereof until the later of (i)
one year from the date hereof and (ii) only if the Portfolio's assets equal or
exceed $200 million one year from the date hereof, the term of this Agreement
for so long as the Portfolio's net assets equal or exceed $200 million
(disregarding fluctuations below $200 million because of investment
performance), the Adviser shall not provide investment advisory services with
respect to a fund substantially similar to the Portfolio which is an investment
option for a variable annuity or variable life contract issued by an insurance
company other than PFL Life Insurance Company.
5. Use of Names. The Adviser hereby consents to the Portfolio being
named the "Select 50 Portfolio." The Manager shall not use the name of the
Adviser or any of its affiliates in any prospectus, sales literature or other
material relating to the Trust in any manner not approved prior thereto by the
Adviser; provided, however, that the Adviser shall approve all uses of its name
and that of its affiliates which merely refer in accurate terms to its
appointment hereunder or which are required by the SEC or a state securities
commission; and, provided, further, that in no event shall such approval be
unreasonably withheld. The Adviser shall not use the name of the Trust or the
Manager in any material relating to the Adviser in any manner not approved prior
thereto by the Manager; provided, however, that the Manager shall approve all
uses of its or the Trust's name which merely refer in accurate terms to the
appointment of the Adviser hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld.
The Manager recognizes that from time to time directors, officers and
employees of the Adviser may serve as directors, trustees, partners, officers
and employees of other corporations, business trusts, partnerships or other
entities (including other investment companies) and that such other entities may
include the name "Montgomery" as part of their name, and that the Adviser or its
affiliates may enter into investment advisory, administration or other
agreements with such other entities.
6. Liability of the Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Adviser, the Adviser shall not be liable for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
Nothing herein shall constitute a waiver of any rights or remedies which the
Trust may have under any federal or state securities laws.
7. Limitation of Trust's Liability. The Adviser
-------------------------------
acknowledges that it has received notice of and accepts the
limitations upon the Trust's liability set forth in its Agreement
and Declaration of Trust. The Adviser agrees that any of the
<PAGE>
-4-
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
July 22, 1999 between the Manager and the Trust. This Agreement shall terminate
automatically and immediately in the event of its assignment. The terms
"assignment" and "vote of a majority of the outstanding voting securities" shall
have the meaning set forth for such terms in the 1940 Act. This Agreement may be
amended at any time by the Adviser and the Manager, subject to approval by the
Trust's Board of Trustees and, if required by applicable SEC rules and
regulations, a vote of a majority of the Portfolio's outstanding voting
securities.
9. Confidential Relationship. Any information and advice
-------------------------
furnished by either party to this Agreement to the other shall be
treated as confidential and shall not be disclosed to third
parties except as required by law.
The Manager hereby consents to the disclosure to third parties of (i)
investment results and other data of the Manager or the Portfolio (other than
the identity of the Manager or the Trust) in connection with providing composite
investment results of the Adviser and (ii) investments and transactions of the
Manager or the Portfolio (other than the identify of the Manager or the Trust)
in connection with providing composite information of clients of the Adviser.
10. Severability. If any provision of this Agreement shall
------------
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
<PAGE>
-5-
11. Information. The Manager hereby acknowledges that it and the
Trustees of the Trust have been provided with all information necessary in
connection with the services to be provided by the Adviser hereunder, including
a copy of Part II of the Adviser's Form ADV at least 48 hours prior to the
Manager's execution of this Agreement, and any other information that the
Manager or the Trustees deem necessary.
12. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of California. The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the parties.
<PAGE>
-6-
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
ENDEAVOR MANAGEMENT CO.
BY:
/s/ Vincent J. McGuinness
Authorized Officer
MONTGOMERY ASSET MANAGEMENT, LLC
BY:
/s/
Authorized Officer
<PAGE>
SCHEDULE A
Endeavor Select 50 Portfolio .70% of average daily net
assets.
<PAGE>
-1-
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 23rd day of July, 1999, by and between
Morgan Stanley Dean Witter Investment Management Inc., a Delaware
corporation (the "Adviser"), and Endeavor Management Co., a
California corporation (the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
and administrator of Endeavor Series Trust (the "Trust"), a Massachusetts
business trust which has filed a registration statement under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933
(the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is the Endeavor Money Market Portfolio (the
"Portfolio"); and
WHEREAS, the Manager desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser to
assist the Manager in performing services for the Portfolio; and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment
advisory services to investment companies and other institutional clients and
desires to provide such services to the Manager;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Adviser. The Manager hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Portfolio, subject
to the control and direction of the Trust's Board of Trustees, for the period
and on the terms hereinafter set forth. The Adviser hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth for the compensation herein provided. The
Adviser shall for all purposes herein be deemed to be an independent contractor
and shall, except as expressly provided or authorized (whether herein or
otherwise), have no authority to act for or represent the Manager, the Portfolio
or the Trust in any way.
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
<PAGE>
-2-
without prior consultation with the Manager, subject to and in accordance with
the investment objective and policies of the Portfolio set forth in the Trust's
Registration Statement, as such Registration Statement may be amended from time
to time, and any written instructions which the Manager or the Trust's Board of
Trustees may issue from time-to-time in accordance therewith. In pursuance of
the foregoing, the Adviser shall make all determinations with respect to the
purchase and sale of portfolio securities and shall take such action necessary
to implement the same. The Adviser shall render regular reports to the Trust's
Board of Trustees and the Manager concerning the investment activities of the
Portfolio.
b. To the extent provided in the Trust's Registration
Statement, as such Registration Statement may be amended from time to time, the
Adviser shall, in the name of the Portfolio, place orders for the execution of
portfolio transactions with or through such brokers, dealers or banks as it may
select including affiliates of the Adviser and, complying with Section 28(e) of
the Securities Exchange Act of 1934, may pay a commission on transactions in
excess of the amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for the
execution of the portfolio transactions of the Portfolio, the Adviser shall
create and maintain all necessary records pertaining to the purchase and sale of
securities by the Adviser on behalf of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act. All records shall be the property of
the Trust and shall be available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Trust, the Manager or any person retained by
the Trust at all reasonable times. Where applicable, such records shall be
maintained by the Adviser for the periods and in the places required by Rule
31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of providing
services pursuant to this Agreement.
3. Compensation of the Adviser. In consideration of services rendered
pursuant to this Agreement, the Manager will pay the Adviser a fee at the annual
rate of the value of the Portfolio's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon as
practicable after the end of each month. If the Adviser shall serve for less
than the whole of any month, the foregoing compensation shall be prorated. For
the purpose of determining fees payable to the Adviser, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the Adviser
-------------------------
hereunder are not to be deemed exclusive, and the Adviser shall
be free to render similar services to others and to engage in
<PAGE>
-3-
other activities, so long as the services rendered hereunder are
not impaired.
5. Use of Names. The Manager shall not use the name of the Adviser or
any of its affiliates in any prospectus, sales literature or other material
relating to the Trust in any manner not approved prior thereto by the Adviser;
provided, however, that the Adviser shall approve all uses of its name and that
of its affiliates which merely refer in accurate terms to its appointment
hereunder or which are required by the SEC or a state securities commission;
and, provided, further, that in no event shall such approval be unreasonably
withheld. The Adviser shall not use the name of the Trust or the Manager in any
material relating to the Adviser in any manner not approved prior thereto by the
Manager; provided, however, that the Manager shall approve all uses of its or
the Trust's name which merely refer in accurate terms to the appointment of the
Adviser hereunder or which are required by the SEC or a state securities
commission; and, provided further, that in no event shall such approval be
unreasonably withheld.
The Manager recognizes that from time to time directors, officers and
employees of the Adviser may serve as directors, trustees, partners, officers
and employees of other corporations, business trusts, partnerships or other
entities (including other investment companies) and that such other entities may
include the name "Morgan Stanley" as part of their name, and that the Adviser or
its affiliates may enter into investment advisory, administration or other
agreements with such other entities.
6. Liability of the Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Adviser, the Adviser shall not be liable for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
Nothing herein shall constitute a waiver of any rights or remedies which the
Trust may have under any federal or state securities laws.
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
<PAGE>
-4-
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
July 22, 1999, between the Manager and the Trust. This Agreement shall terminate
automatically and immediately in the event of its assignment. The terms
"assignment" and "vote of a majority of the outstanding voting securities" shall
have the meaning set forth for such terms in the 1940 Act. This Agreement may be
amended at any time by the Adviser and the Manager, subject to approval by the
Trust's Board of Trustees and, if required by applicable SEC rules and
regulations, a vote of a majority of the Portfolio's outstanding voting
securities.
9. Confidential Relationship. Any information and advice furnished by
either party to this Agreement to the other shall be treated as confidential and
shall not be disclosed to third parties without the consent of the other party
hereto except as required by law, rule or regulation.
The Manager hereby consents to the disclosure to third parties of (i)
investment results and other data of the Manager or the Portfolio (other than
the identity of the Manager or the Trust) in connection with providing composite
investment results of the Adviser and (ii) investments and transactions of the
Manager or the Portfolio (other than the identify of the Manager or the Trust)
in connection with providing composite information of clients of the Adviser.
10. Severability. If any provision of this Agreement shall
------------
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
11. Information. The Manager hereby acknowledges that it and the
Trustees of the Trust have been provided with all information necessary in
connection with the services to be provided by the Adviser hereunder, including
a copy of Part II of the Adviser's Form ADV at least 48 hours prior to the
Manager's execution of this Agreement, and any other information that the
Manager or the Trustees deem necessary.
<PAGE>
-5-
12. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of California. The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the parties.
<PAGE>
-6-
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
ENDEAVOR MANAGEMENT CO.
BY:
/s/ Vincent J. McGuinness
Authorized Officer
MORGAN STANLEY DEAN WITTER INVESTMENT
MANAGEMENT INC.
BY:
/s/
Authorized Officer
<PAGE>
SCHEDULE A
Endeavor Money Market .25% of average daily net
Portfolio assets
<PAGE>
-1-
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 23rd day of July, 1999, by and between
Morgan Stanley Dean Witter Investment Management Inc., a Delaware
corporation (the "Adviser"), and Endeavor Management Co., a
California corporation (the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
and administrator of Endeavor Series Trust (the "Trust"), a Massachusetts
business trust which has filed a registration statement under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933
(the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is the Endeavor Asset Allocation Portfolio (the
"Portfolio"); and
WHEREAS, the Manager desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser to
assist the Manager in performing services for the Portfolio; and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment
advisory services to investment companies and other institutional clients and
desires to provide such services to the Manager;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Adviser. The Manager hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Portfolio, subject
to the control and direction of the Trust's Board of Trustees, for the period
and on the terms hereinafter set forth. The Adviser hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth for the compensation herein provided. The
Adviser shall for all purposes herein be deemed to be an independent contractor
and shall, except as expressly provided or authorized (whether herein or
otherwise), have no authority to act for or represent the Manager, the Portfolio
or the Trust in any way.
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
<PAGE>
-2-
without prior consultation with the Manager, subject to and in accordance with
the investment objective and policies of the Portfolio set forth in the Trust's
Registration Statement, as such Registration Statement may be amended from time
to time, and any written instructions which the Manager or the Trust's Board of
Trustees may issue from time-to-time in accordance therewith. In pursuance of
the foregoing, the Adviser shall make all determinations with respect to the
purchase and sale of portfolio securities and shall take such action necessary
to implement the same. The Adviser shall render regular reports to the Trust's
Board of Trustees and the Manager concerning the investment activities of the
Portfolio.
b. To the extent provided in the Trust's Registration
Statement, as such Registration Statement may be amended from time to time, the
Adviser shall, in the name of the Portfolio, place orders for the execution of
portfolio transactions with or through such brokers, dealers or banks as it may
select including affiliates of the Adviser and, complying with Section 28(e) of
the Securities Exchange Act of 1934, may pay a commission on transactions in
excess of the amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for the
execution of the portfolio transactions of the Portfolio, the Adviser shall
create and maintain all necessary records pertaining to the purchase and sale of
securities by the Adviser on behalf of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act. All records shall be the property of
the Trust and shall be available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Trust, the Manager or any person retained by
the Trust at all reasonable times. Where applicable, such records shall be
maintained by the Adviser for the periods and in the places required by Rule
31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of providing
services pursuant to this Agreement.
3. Compensation of the Adviser. In consideration of services rendered
pursuant to this Agreement, the Manager will pay the Adviser a fee at the annual
rate of the value of the Portfolio's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon as
practicable after the end of each month. If the Adviser shall serve for less
than the whole of any month, the foregoing compensation shall be prorated. For
the purpose of determining fees payable to the Adviser, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Trust's Registration Statement.
4. Activities of the Adviser. The services of the Adviser
-------------------------
hereunder are not to be deemed exclusive, and the Adviser shall
be free to render similar services to others and to engage in
<PAGE>
-3-
other activities, so long as the services rendered hereunder are
not impaired.
5. Use of Names. The Manager shall not use the name of the Adviser or
any of its affiliates in any prospectus, sales literature or other material
relating to the Trust in any manner not approved prior thereto by the Adviser;
provided, however, that the Adviser shall approve all uses of its name and that
of its affiliates which merely refer in accurate terms to its appointment
hereunder or which are required by the SEC or a state securities commission;
and, provided, further, that in no event shall such approval be unreasonably
withheld. The Adviser shall not use the name of the Trust or the Manager in any
material relating to the Adviser in any manner not approved prior thereto by the
Manager; provided, however, that the Manager shall approve all uses of its or
the Trust's name which merely refer in accurate terms to the appointment of the
Adviser hereunder or which are required by the SEC or a state securities
commission; and, provided further, that in no event shall such approval be
unreasonably withheld.
The Manager recognizes that from time to time directors, officers and
employees of the Adviser may serve as directors, trustees, partners, officers
and employees of other corporations, business trusts, partnerships or other
entities (including other investment companies) and that such other entities may
include the name "Morgan Stanley" as part of their name, and that the Adviser or
its affiliates may enter into investment advisory, administration or other
agreements with such other entities.
6. Liability of the Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Adviser, the Adviser shall not be liable for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
Nothing herein shall constitute a waiver of any rights or remedies which the
Trust may have under any federal or state securities laws.
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
<PAGE>
-4-
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
July 22, 1999, between the Manager and the Trust. This Agreement shall terminate
automatically and immediately in the event of its assignment. The terms
"assignment" and "vote of a majority of the outstanding voting securities" shall
have the meaning set forth for such terms in the 1940 Act. This Agreement may be
amended at any time by the Adviser and the Manager, subject to approval by the
Trust's Board of Trustees and, if required by applicable SEC rules and
regulations, a vote of a majority of the Portfolio's outstanding voting
securities.
9. Confidential Relationship. Any information and advice furnished by
either party to this Agreement to the other shall be treated as confidential and
shall not be disclosed to third parties without the consent of the other party
hereto except as required by law, rule or regulation.
The Manager hereby consents to the disclosure to third parties of (i)
investment results and other data of the Manager or the Portfolio (other than
the identity of the Manager or the Trust) in connection with providing composite
investment results of the Adviser and (ii) investments and transactions of the
Manager or the Portfolio (other than the identify of the Manager or the Trust)
in connection with providing composite information of clients of the Adviser.
10. Severability. If any provision of this Agreement shall
------------
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
11. Information. The Manager hereby acknowledges that it and the
Trustees of the Trust have been provided with all information necessary in
connection with the services to be provided by the Adviser hereunder, including
a copy of Part II of the Adviser's Form ADV at least 48 hours prior to the
Manager's execution of this Agreement, and any other information that the
Manager or the Trustees deem necessary.
<PAGE>
-5-
12. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of California. The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed in several
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the parties.
<PAGE>
-6-
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
ENDEAVOR MANAGEMENT CO.
BY:
/s/ Vincent J. McGuinness
Authorized Officer
MORGAN STANLEY DEAN WITTER INVESTMENT
MANAGEMENT INC.
BY:
/s/
Authorized Officer
<PAGE>
SCHEDULE A
Endeavor Asset Allocation .30% of average daily net
Portfolio assets
<PAGE>
-1-
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 23rd day of July, 1999 by and between Massachusetts
Financial Services Company, a Delaware corporation (the "Adviser"), and Endeavor
Management Co., a California corporation (the "Manager").
WHEREAS, the Manager has been organized to serve as investment manager
and administrator of Endeavor Series Trust (the "Trust"), a Massachusetts
business trust which has filed a registration statement under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933
(the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is the Endeavor High Yield Portfolio (the "Portfolio");
and
WHEREAS, the Manager desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser to
assist the Manager in performing investment advisory services for the Portfolio;
and
WHEREAS, the Adviser is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), and is engaged in the business of
rendering investment advisory services to investment companies and other
institutional clients and desires to provide such services to the Manager;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Adviser. The Manager hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Portfolio, subject
to the control and direction of the Trust's Board of Trustees, for the period
and on the terms hereinafter set forth. The Adviser hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth for the compensation herein provided. The
Adviser shall for all purposes herein be deemed to be an independent contractor
and shall, except as expressly provided or authorized (whether herein or
otherwise), have no authority to act for or represent the Manager, the Portfolio
or the Trust in any way. The Adviser may execute account documentation,
agreements, contracts and other documents requested by brokers, dealers,
counterparties and other persons in connection with its management of the assets
of the Portfolio, provided the Adviser receives the express agreement and
consent of the Manager and/or the Trust's Board of Trustees to execute such
documentation, agreements, contracts and other documents. In such respect, and
only for this limited purpose,
<PAGE>
-2-
the Adviser shall act as the Manager's and the Trust's agent and
attorney-in-fact.
Copies of the Trust's Registration Statement, as it relates to the
Portfolio (the "Registration Statement"), and the Trust's Declaration of Trust
and Bylaws (collectively, the "Charter Documents"), each as currently in effect,
have been delivered to the Adviser. The Manager agrees, on an ongoing basis, to
notify the Adviser of each change in the fundamental and non-fundamental
investment policies and restrictions of the Portfolio and to provide to the
Adviser as promptly as practicable copies of all amendments and supplements to
the Registration Statement and amendments to the Charter Documents. The Manager
will promptly provide the Adviser with any procedures applicable to the Adviser
adopted from time to time by the Trust's Board of Trustees and agrees to
promptly provide the Adviser copies of all amendments thereto. The Adviser will
not be bound to follow any change in the investment policies, restrictions or
procedures of the Portfolio or Trust, however, until it has received written
notice of any such change from the Manager.
2. Obligations of and Services to be Provided by the
-------------------------------------------------
Adviser. The Adviser undertakes to provide the following
- -------
services and to assume the following obligations:
a. The Adviser shall manage the investment and reinvestment of
the portfolio assets of the Portfolio, all without prior consultation with the
Manager, subject to and in accordance with the investment objective and policies
of the Portfolio set forth in the Trust's Registration Statement and the Charter
Documents, as such Registration Statement and Charter Documents may be amended
from time to time, in compliance with the requirements applicable to registered
investment companies under applicable laws and those requirements applicable to
both regulated investment companies and segregated asset accounts under
Subchapters M and L of the Internal Revenue Code of 1986, as amended (the
"Code") and any written instructions which the Manager or the Trust's Board of
Trustees may issue from time-to-time in accordance therewith. In pursuance of
the foregoing, the Adviser shall make all determinations with respect to the
purchase and sale of portfolio securities and shall take such action necessary
to implement the same. The Adviser shall render such reports to the Trust's
Board of Trustees and the Manager as they may reasonably request concerning the
investment activities of the Portfolio. Unless the Manager gives the Adviser
written instructions to the contrary, the Adviser shall, in good faith and in a
manner which it reasonably believes best 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,
<PAGE>
-3-
place orders for the execution of portfolio transactions with or through such
brokers, dealers or other financial institutions as it may select including
affiliates of the Adviser and, complying with Section 28(e) of the Securities
Exchange Act of 1934, may pay a commission on transactions in excess of the
amount of commission another broker-dealer would have charged.
c. In connection with the placement of orders for the
execution of the portfolio transactions of the Portfolio, the Adviser shall
create and maintain all necessary records pertaining to the purchase and sale of
securities by the Adviser on behalf of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act. All records shall be the property of
the Trust and shall be available for inspection and use by the Securities and
Exchange Commission ("SEC"), the Trust, the Manager or any person retained by
the Trust at all reasonable times. Where applicable, such records shall be
maintained by the Adviser for the periods and in the places required by Rule
31a-2 under the 1940 Act.
d. The Adviser shall bear its expenses of providing
services pursuant to this Agreement.
e. The Adviser and the Manager acknowledge that the Adviser is
not the compliance agent for the Portfolio or for the Manager, and does not have
access to all of the Portfolio's books and records necessary to perform certain
compliance testing. To the extent that the Adviser has agreed to perform the
services specified in this Section 2 in accordance with the Trust's Registration
Statement and Charter Documents, written instructions of the Manager and any
policies adopted by the Trust's Board of Trustees applicable to the Portfolio
(collectively, the "Charter Requirements"), and in accordance with applicable
law (including sub-chapters M and L of the Code, the Investment Company Act and
the Advisers Act ("Applicable Law")), the Adviser shall perform such services
based upon its books and records with respect to the Portfolio (as specified in
Section 2.c. hereof), which comprise a portion of each Portfolio's books and
records, and upon information and written instructions received from the Trust,
the Manager or the Trust's administrator, and shall not be held responsible
under this Agreement so long as it performs such services in accordance with
this Agreement, the Charter Requirements and Applicable Law based upon such
books and records and such information and instructions provided by the Trust,
the Manager or the Trust's administrator.
3. Compensation of the Adviser. In consideration of services rendered
pursuant to this Agreement, the Manager will pay the Adviser a fee at the annual
rate of the value of the Portfolio's average daily net assets set forth in
Schedule A hereto. Such fee shall be accrued daily and paid monthly as soon as
practicable after the end of each month. If the Adviser shall serve for less
than the whole of any month, the foregoing compensation shall be prorated. For
the purpose of determining
<PAGE>
-4-
fees payable to the Adviser, the value of the Portfolio's net assets shall be
computed at the times and in the manner specified in the Trust's Registration
Statement.
4. Activities of the Adviser. The services of the Adviser hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others and to engage in other activities, so long as the services
rendered hereunder are not impaired.
5. Use of Names. The Manager shall not use the name of the Adviser or
any of its affiliates in any prospectus, sales literature or other material
relating to the Trust in any manner not approved prior thereto by the Adviser;
provided, however, that the Adviser shall approve all uses of its name and that
of its affiliates which merely refer in accurate terms to its appointment
hereunder. The Adviser shall not use the name of the Trust or the Manager in any
material relating to the Adviser in any manner not approved prior thereto by the
Manager; provided, however, that the Manager shall approve all uses of its or
the Trust's name which merely refer in accurate terms to the appointment of the
Adviser hereunder.
The Manager recognizes that from time to time directors, officers and
employees of the Adviser may serve as directors, trustees, partners, officers
and employees of other corporations, business trusts, partnerships or other
entities (including other investment companies) and that such other entities may
include the name "Massachusetts Financial Services" or any derivative or
abbreviation thereof as part of their name, and that the Adviser or its
affiliates may enter into investment advisory, administration or other
agreements with such other entities.
6. Liability of the Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Adviser, the Adviser shall not be liable for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
Nothing herein shall constitute a waiver of any rights or remedies which the
Trust may have under any federal or state securities laws.
7. Limitation of Trust's Liability. The Adviser acknowledges that it
has received notice of and accepts the limitations upon the Trust's liability
set forth in its Agreement and Declaration of Trust. The Adviser agrees that any
of the Trust's obligations shall be limited to the assets of the Portfolio and
that the Adviser shall not seek satisfaction of any such obligation from the
shareholders of the Trust nor from any Trust officer, employee or agent of the
Trust.
8. Renewal, Termination and Amendment. This Agreement
----------------------------------
shall continue in effect, unless sooner terminated as hereinafter
provided, for a period of two years from the date hereof and
<PAGE>
-5-
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 July 22, 1999, between the Manager
and the Trust. This Agreement shall terminate automatically and immediately in
the event of its assignment. The terms "assignment" and "vote of a majority of
the outstanding voting securities" shall have the meaning set forth for such
terms in the 1940 Act. This Agreement may be amended at any time by the Adviser
and the Manager, subject to approval by the Trust's Board of Trustees and, if
required by applicable SEC rules and regulations, a vote of a majority of the
Portfolio's outstanding voting securities.
9. Confidential Relationship. Any information and advice furnished by
either party to this Agreement to the other shall be treated as confidential and
shall not be disclosed to third parties without the consent of the other party
hereto except as required by law, rule or regulation.
The Manager hereby consents to the disclosure to third parties of (i)
investment results and other data of the Manager or the Portfolio (other than
the identity of the Manager or the Trust) in connection with providing composite
investment results of the Adviser and (ii) investments and transactions of the
Manager or the Portfolio (other than the identify of the Manager or the Trust)
in connection with providing composite information of clients of the Adviser.
10. Severability. If any provision of this Agreement shall
------------
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
11. Information. The Manager hereby acknowledges that it and the
Trustees of the Trust have been provided with all information necessary in
connection with the services to be provided by the Adviser hereunder, including
a copy of Part II of the Adviser's Form ADV at least 48 hours prior to the
Manager's execution of this Agreement, and any other information that the
Manager or the Trustees deem necessary.
<PAGE>
-6-
12. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the
Commonwealth of Massachusetts. The captions in this Agreement are included for
convenience only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed in
several counterparts, all of which together shall for all purposes constitute
one Agreement, binding on all the parties.
<PAGE>
-7-
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
ENDEAVOR MANAGEMENT CO.
BY:
/s/ Vincent J. McGuinness
Authorized Officer
MASSACHUSETTS FINANCIAL SERVICES COMPANY
BY:
/s/
Authorized Officer
<PAGE>
SCHEDULE A
Endeavor High Yield .375% of average daily
Portfolio net assets
<PAGE>
-1-
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 23rd day of July, 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
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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.
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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
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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
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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
July 22, 1999 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
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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.
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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
Authorized Officer
JANUS CAPITAL CORPORATION
BY:
/s/
Authorized Officer
Assistant Vice President
<PAGE>
SCHEDULE A
Endeavor Janus Growth 0.50% of average daily net
Portfolio assets
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 29 to the Registration Statement (Form N-1A) (No.
33-27352) of Endeavor Series Trust of our report dated February 4, 2000,
included in the 1999 Annual Report to shareholders.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 24, 2000
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