As filed with the Securities and Exchange Commission on April 28, 1997
Registration No. 811-9140
File No. 33-80057
================================================================================
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. 5 [X]
and/or
REGISTRATION STATEMENT
Under the
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 7 [X]
(Check appropriate box or boxes.)
-------------
Phoenix Duff & Phelps Institutional Mutual Funds
(Exact Name of Registrant as Specified in Charter)
-------------
101 Munson Street, Greenfield, MA 01301
(Address of Principal Executive Offices) (Zip Code)
(800) 814-1897
(Registrant's Telephone Number, including Area Code)
-------------
Philip R. McLoughlin
Vice Chairman and Chief Executive Officer
Phoenix Duff & Phelps Corporation
56 Prospect Street
Hartford, Connecticut 06115
(Name and Address of Agent for Service)
-------------
It is proposed that this filing will become effective (check
appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date
for a previously filed effective amendment.
Registrant has registered an indefinite number of shares under the Securities
Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940. A
Form 24f-2 for Registrant's fiscal year ended December 31, 1996 was filed on
February 27, 1997.
================================================================================
<PAGE>
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
Cross Reference Sheet
Pursuant to Rule 495
Under the Securities Act of 1933
PART A
Information Required in Prospectus
<TABLE>
<CAPTION>
Item Number Caption
- ------------- -------
<S> <C> <C>
1. Cover Page ................................. Cover Page
2. Synopsis ................................. Introduction; Fund Expenses
3. Condensed Financial Information ............ Financial Highlights
4. General Description of Registrant ......... Introduction; Management of the Fund
5. Management of the Fund ..................... Management of the Fund; Custodian and
Transfer Agent
6. Capital Stock and Other Securities ......... Management of the Fund; Description of Shares;
Dividends, Distributions and Taxes; Additional
Information
7. Purchase of Securities Being Offered ...... How to Buy Shares; Net Asset Value;
Distribution Plan; How to Redeem Shares
8. Redemption or Repurchase .................. How to Buy Shares; How to Redeem Shares
9. Pending Legal Proceedings .................. Not Applicable
</TABLE>
PART B
Information required in Statement of Additional Information
<TABLE>
<CAPTION>
Item Number Caption
- ------------- -------
<S> <C> <C>
10. Cover Page ................................. Cover Page
11. Table of Contents ........................... Table of Contents
12. General Information and History ............ The Fund
13. Investment Objectives and Policies ......... Investment Objectives and Policies; Investment
Restrictions; Portfolio Turnover
14. Management of the Registrant ............... Trustees and Officers
15. Control Persons and Principal Holders
of Securities .............................. Trustees and Officers
16. Investment Advisory and Other Services ...... Trustees and Officers; The Investment Advisers;
The Distributor; Distribution Plan
17. Brokerage Allocation ........................ Brokerage Allocation
18. Capital Stock and Other Securities ......... Purchase of Shares; How to Redeem Shares
19. Purchase, Redemption and Pricing of
Securities Being Offered ..................... Determination of Net Asset Value; Purchase of Shares;
How to Redeem Shares
20. Tax Status ................................. Taxes
21. Underwriter ................................. The Distributor; Distribution Plan
22. Calculation of Yield Quotations of Money
Market Fund ................................. Performance Information
23. Financial Statements ........................ Financial Statements
</TABLE>
<PAGE>
PHOENIX
FUNDS
PROSPECTUS
MAY 1, 1997
Phoenix Duff & Phelps
Institutional Mutual Funds
- -BALANCED PORTFOLIO
- -MANAGED BOND PORTFOLIO
- -ENHANCED RESERVES PORTFOLIO
- -GROWTH STOCK PORTFOLIO
- -MONEY MARKET PORTFOLIO
- -U.S. GOVERNMENT SECURITIES PORTFOLIO
[LOGO] PHOENIX
DUFF & PHELPS
<PAGE>
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
101 Munson Street
Greenfield, MA 01301
(800) 814-1897
PROSPECTUS
May 1, 1997
Phoenix Duff & Phelps Institutional Mutual Funds (the "Fund") is a
diversified, open-end management investment company whose shares are presently
offered in seven separate portfolios, six of which are offered by this
Prospectus. Each portfolio generally operates as a separate fund with its own
investment objectives and policies designed to meet its specific investment
goals.
Phoenix Duff & Phelps Institutional Balanced Portfolio ("Balanced
Portfolio") seeks as its investment objectives long-
term capital growth, reasonable income and conservation of capital. It is
intended that this Portfolio will invest in common stocks and fixed income
securities, with emphasis on income-
producing securities which appear to the Adviser to have potential for capital
appreciation.
Phoenix Duff & Phelps Institutional Managed Bond Portfolio ("Managed Bond
Portfolio") seeks as its investment objective high current income and
appreciation of capital, consistent with prudent investment risk. It is intended
that this Portfolio will invest primarily in a diversified portfolio of
investment grade fixed income securities.
Phoenix Duff & Phelps Institutional Enhanced Reserves Portfolio ("Enhanced
Reserves Portfolio") seeks as its investment objective high current income
consistent with preservation of capital. It is intended that the Portfolio will
invest primarily in U.S. government securities and high grade corporate debt
obligations.
Phoenix Duff & Phelps Institutional Growth Stock Portfolio ("Growth
Portfolio") seeks as its investment objective long-
term appreciation of capital. Since income is not an objective, any income
generated by the investment of this Portfolio's assets will be incidental to its
objective. It is intended that this Portfolio will invest primarily in the
common stocks which have potential for capital appreciation.
Phoenix Duff & Phelps Institutional Money Market Portfolio ("Money Market
Portfolio") seeks as its investment objective as high a level of current income
as is consistent with the preservation of capital and the maintenance of
liquidity. It is intended that this Portfolio will invest solely in a portfolio
of high-quality money market instruments maturing in less than 397 days. An
investment in the Portfolio is neither insured nor guaranteed by the U.S.
Government and
there can be no assurance that the fund will be able to maintain a stable net
asset value of $1.00 per share.
Phoenix Duff & Phelps Institutional U.S. Government Securities
Portfolio ("U.S. Government Securities Portfolio") seeks as its investment
objective a high level of current income consistent with safety of principal. It
is intended that this Portfolio will invest primarily in a diversified portfolio
of securities having a weighted average duration generally not to exceed
approximately three years. The securities will be issued or guaranteed by the
U.S. Government or its agencies and backed by the full faith and credit of the
U.S. Government or supported by the ability to borrow from the U.S. Treasury or
by the credit of an agency or otherwise supported by the U.S. Government.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. No dealer, salesperson or
other person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Fund, Adviser or Distributor. This Prospectus does
not constitute an offer to sell or solicitation of an offer to buy any of the
securities offered hereby in any state in which or to any person whom it is
unlawful to make such offer. Investors should read and retain this Prospectus
for future reference. Additional information about the Fund is contained in the
Statement of Additional Information dated May 1, 1997 which has been filed with
the Securities and Exchange Commission and is available at no charge by calling
(800) 814-1897 or by writing to Phoenix Equity Planning Corporation, at 100
Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200. The
Statement of Additional Information is incorporated herein by reference.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, credit union, or affiliated entity and are not federally
insured or otherwise protected by the Federal Deposit Insurance Corporation
(FDIC), the Federal Reserve Board or any other agency and involve investment
risk, including possible loss of principal.
- --------------------------------------------------------------------------------
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INTRODUCTION ............................................................ 3
FUND EXPENSES ............................................................ 4
FINANCIAL HIGHLIGHTS ...................................................... 6
PERFORMANCE INFORMATION ................................................... 10
INVESTMENT OBJECTIVES AND POLICIES ....................................... 11
PHOENIX DUFF & PHELPS INSTITUTIONAL BALANCED PORTFOLIO .................. 11
PHOENIX DUFF & PHELPS INSTITUTIONAL MANAGED BOND PORTFOLIO ............... 11
PHOENIX DUFF & PHELPS INSTITUTIONAL ENHANCED RESERVES PORTFOLIO ......... 12
PHOENIX DUFF & PHELPS INSTITUTIONAL GROWTH STOCK PORTFOLIO ............... 12
PHOENIX DUFF & PHELPS INSTITUTIONAL MONEY MARKET PORTFOLIO ............... 13
PHOENIX DUFF & PHELPS INSTITUTIONAL U.S. GOVERNMENT SECURITIES PORTFOLIO 13
INVESTMENT TECHNIQUES AND RELATED RISKS ................................. 13
INVESTMENT RESTRICTIONS ................................................... 17
MANAGEMENT OF THE FUND ................................................... 17
DISTRIBUTION PLAN ......................................................... 19
HOW TO BUY SHARES ......................................................... 20
NET ASSET VALUE ......................................................... 21
HOW TO REDEEM SHARES ...................................................... 21
DIVIDENDS, DISTRIBUTIONS AND TAXES ....................................... 23
ADDITIONAL INFORMATION ................................................... 23
APPENDIX .................................................................. 25
</TABLE>
2
<PAGE>
INTRODUCTION
This Prospectus describes certain shares offered by and the operations of
Phoenix Duff & Phelps Institutional Mutual Funds (the "Fund"). The Fund is a
diversified, open-end management investment company established as a
Massachusetts business trust pursuant to an Agreement and Declaration of Trust
dated December 4, 1995, as amended from time to time. The Fund presently
consists of seven separate portfolios (the "Portfolios") six of which are
offered by this Prospectus. Each Portfolio has a different investment objective
and invests primarily in certain types of securities and is designed to meet
different investment needs.
The Investment Advisers
Phoenix Investment Counsel, Inc. ("PIC") serves as investment adviser to
the Balanced, Managed Bond, Growth, Money Market, and U.S. Government Securities
Portfolios. PIC is a subsidiary of Phoenix Duff & Phelps Corporation and, prior
to November 1, 1995, was an indirect subsidiary of Phoenix Home Life Mutual
Insurance Company. For managing, or directing the investments of the specified
Portfolios, PIC is entitled to fees as set forth under "The Advisers." Duff &
Phelps Investment Management Co. ("DPM") serves as investment adviser to the
Enhanced Reserves Portfolio and is entitled to fees as set forth under "The
Advisers." DPM is a subsidiary of Phoenix Duff & Phelps Corporation. PIC and DPM
are sometimes collectively referred to as the "Adviser." The Adviser has agreed
to reimburse the Fund for certain expenses as described under "Management of the
Fund."
The Distributor and Distribution Plan
Phoenix Equity Planning Corporation ("Equity Planning" or "Distributor"),
serves as National Distributor of the Fund's shares. See "Distribution Plan" and
the Statement of Additional Information. Equity Planning also acts as financial
agent and the Fund's transfer agent (the "Transfer Agent"). See "The Financial
Agent" and "The Custodian and Transfer Agent."
The Fund has adopted a distribution plan for Class Y Shares pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"). The distribution plan adopted for Class Y Shares provides that the Fund
shall reimburse the Distributor up to a maximum annual rate of 0.25% of the
Fund's average daily Class Y Share net assets for distribution expenses incurred
in connection with the sale and promotion of Class Y Shares for furnishing
shareholder services. See "Distribution Plan."
Purchase of Shares
Each Portfolio is currently authorized to offer two classes of shares on a
continuous basis. Class X Shares are available to Plans (as hereafter defined)
and institutional investors which initially purchase Class X Shares whose net
asset value exceeds $5 million. Class Y Shares are offered to Plans and
institutional investors which initially purchase Class Y Shares whose net asset
value exceeds $1 million. The minimum subsequent investment for each class is
$100. "Plans" are defined as corporate, public, union and governmental pension
plans. Shares of each class represent an identical interest in the investment
portfolio of a Portfolio, and generally have the same rights except that Class Y
Shares bear the cost of higher distribution fees which cause the Class Y Shares
to have a higher expense ratio and to receive lower dividends than Class X
Shares. See "How To Buy Shares."
Redemption of Shares
Shares may be redeemed at any time at the net asset value per share next
computed after receipt of a redemption request by the Transfer Agent. See "How
to Redeem Shares."
Risk Factors
There can be no assurance that any Portfolio will achieve its respective
investment objectives. In addition, special risks may be presented by the
particular types of securities in which a Portfolio may invest. To the extent
that a Portfolio invests in lower rated securities ("junk bonds"), such an
investment is speculative and involves risks not associated with investment in
higher-rated securities, including overall greater risk of non-payment of
interest and principal and potentially greater sensitivity to general economic
conditions and changes in interest rates. As a result of a Portfolio's
investment in the stock market, net asset values of such Portfolio will
fluctuate in response to changes in the market and economic conditions, as well
as the financial condition and prospects of issuers in which such Portfolio
invests. Certain Portfolios may invest in options, foreign securities, and
financial futures and related options. The risk factors relevant to investment
in each Portfolio should be reviewed and are set forth in the "Investment
Objectives and Policies" and "Investment Techniques and Related Risks" sections
of this Prospectus and Statement of Additional Information.
3
<PAGE>
FUND EXPENSES
The following tables illustrate all expenses and fees that a shareholder
will incur. The expenses and fees set forth in these tables are for the fiscal
year ended December 31, 1996.
<TABLE>
<CAPTION>
Class X Shares
-----------------------------------------------
Managed Enhanced
Balanced Bond Reserves
Portfolio Portfolio Portfolio
---------- ---------- ----------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None None None
Maximum Sales Load Imposed on Reinvested Dividends None None None
Deferred Sales Load None None None
Redemption Fees None None None
Exchange Fee None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.55% 0.45% 0.24%
12b-1 Fees None None None
Other Operating Expenses (After Reimbursement) 0.10%(a) 0.10%(a) 0.10%(b)
---------- ---------- ----------
Total Fund Operating Expenses 0.65% 0.55% 0.34%
========== ========== ==========
<CAPTION>
Class X Shares
------------------------------------------------
Money U.S. Gov't
Growth Market Securities
Portfolio Portfolio Portfolio
---------- ---------- -----------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None None None
Maximum Sales Load Imposed on Reinvested Dividends None None None
Deferred Sales Load None None None
Redemption Fees None None None
Exchange Fee None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.60% 0.25% 0.30%
12b-1 Fees None None None
Other Operating Expenses (After Reimbursement) 0.10%(a) 0.10%(a) 0.10%(a)
---------- ---------- -----------
Total Fund Operating Expenses 0.70% 0.35% 0.40%
========== ========== ===========
</TABLE>
- -----------
(a) Phoenix Investment Counsel, Inc. has voluntarily agreed to reimburse or
waive Total Fund Operating Expenses of Class X Shares of each Portfolio
(other than the Enhanced Reserves Portfolio), excluding interest, taxes,
brokerage fees, commissions and extraordinary expenses, until December 31,
2001, to the extent that such expenses exceed: 0.65% of the average annual
net asset values of the Balanced Portfolio; 0.55% of the average annual net
asset values of the Managed Bond Portfolio; 0.70% of the average annual net
asset values of the Growth Portfolio; 0.35% of the average annual net asset
values of the Money Market Portfolio; and 0.40% of the average annual net
asset values of the U.S. Government Securities Portfolio. Total Fund
Operating Expenses for the fiscal year ended December 31, 1996 would have
been 1.03%, 0.85%, 0.81%, 1.34% and 2.15% for the Balanced, Managed Bond,
Growth, Money Market and U.S. Government Securities Portfolios, respectively,
absent such reimbursement or waiver.
(b) Duff & Phelps Investment Management Co. has voluntarily agreed to reimburse
or waive Total Fund Operating Expenses of Class X Shares of the Enhanced
Reserves Portfolio, excluding interest, taxes, brokerage fees, commissions
and extraordinary expenses, until December 31, 1997, to the extent that such
expenses exceed: 0.34% of the average annual net asset values. Total Fund
Operating Expenses for the Enhanced Reserves Portfolio for the fiscal year
ended December 31, 1996 would have been 0.58% absent such reimbursement or
waiver.
<TABLE>
<CAPTION>
Class Y Shares
-----------------------------------------------
Managed Enhanced
Balanced Bond Reserves
Portfolio Portfolio Portfolio
---------- ---------- ----------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None None None
Maximum Sales Load Imposed on Reinvested Dividends None None None
Deferred Sales Load None None None
Redemption Fees None None None
Exchange Fee None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.55% 0.45% 0.24%
12b-1 Fees (c) 0.25% 0.25% 0.25%
Other Operating Expenses (After Reimbursement) 0.10%(a) 0.10%(a) 0.10%(b)
---------- ---------- ----------
Total Fund Operating Expenses 0.90% 0.80% 0.59%
========== ========== ==========
<CAPTION>
Class Y Shares
-----------------------------------------------
Money U.S. Gov't
Growth Market Securities
Portfolio Portfolio Portfolio
---------- ---------- -----------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None None None
Maximum Sales Load Imposed on Reinvested Dividends None None None
Deferred Sales Load None None None
Redemption Fees None None None
Exchange Fee None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.60% 0.25% 0.30%
12b-1 Fees (c) 0.25% 0.25% 0.25%
Other Operating Expenses (After Reimbursement) 0.10%(a) 0.10%(a) 0.10%(a)
---------- ---------- -----------
Total Fund Operating Expenses 0.95% 0.60% 0.65%
========== ========== ===========
</TABLE>
- -----------
(a) Phoenix Investment Counsel, Inc. has voluntarily agreed to reimburse or
waive Total Fund Operating Expenses of Class Y Shares of each Portfolio
(other than the Enhanced Reserves Portfolio), excluding interest, taxes,
brokerage fees, commissions and extraordinary expenses, until December 31,
2001, to the extent that such expenses exceed: 0.90% of the average annual
net asset values of the Balanced Portfolio; 0.80% of the average annual net
asset values of the Managed Bond Portfolio; 0.95% of the average annual net
asset values of the Growth Portfolio; 0.60% of the average annual net asset
values of the Money Market Portfolio; and 0.65% of the average annual net
asset values of the U.S. Government Securities Portfolio. Total Fund
Operating Expenses for the fiscal year ended December 31, 1996 would have
been 1.28%, 1.10%, 1.06%, 1.59% and 2.40% for the Balanced, Managed Bond,
Growth, Money Market and U.S. Government Securities Portfolios, respectively,
absent such reimbursement or waiver.
(b) Duff & Phelps Investment Management Co. has voluntarily agreed to reimburse
or waive Total Fund Operating Expenses of Class Y Shares of the Enhanced
Reserves Portfolio, excluding interest, taxes, brokerage fees, commissions
and extraordinary expenses, until December 31, 1997, to the extent that such
expenses exceed: 0.59% of the average annual net asset values. Total Fund
Operating Expenses for the Enhanced Reserves Portfolio for the fiscal year
ended December 31, 1996 would have been 0.82% absent such reimbursement or
waiver.
(c) Long-term shareholders may pay more in Rule 12b-1 fees than the equivalent
of the maximum front-end sales charges otherwise permitted by the National
Association of Securities Dealers, Inc.
4
<PAGE>
<TABLE>
<CAPTION>
Cumulative Expenses
Paid for the Period
<S> <C> <C>
Example* 1 year 3 years
- -------- --------- ---------
An investor would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and (2) redemption
at the end of each time period:
Balanced Portfolio
Class X Shares $ 7 $ 21
Class Y Shares 9 29
Managed Bond Portfolio
Class X Shares 6 18
Class Y Shares 8 26
Enhanced Reserves Portfolio
Class X Shares 3 11
Class Y Shares 6 19
Growth Portfolio
Class X Shares 7 22
Class Y Shares 10 30
Money Market Portfolio
Class X Shares 4 11
Class Y Shares 6 19
U.S. Government Securities Portfolio
Class X Shares 4 13
Class Y Shares 7 21
</TABLE>
* The purpose of the table above is to help the investor understand the various
costs and expenses that the investor will bear directly or indirectly. The
example should not be considered a representation of past or future expenses.
Actual expenses may be greater or less than those shown. For additional
information regarding various costs and expenses, see "Management of the Fund,"
and "How to Buy Shares."
5
<PAGE>
FINANCIAL HIGHLIGHTS
The following table sets forth certain financial information for the
respective fiscal years of the Fund. The financial information has been audited
by Price Waterhouse LLP, independent accountants. Their opinion and the Fund's
Financial statements and notes thereto are incorporated by reference in the
Statement of Additional Information. The Statement of Additional Information and
the Fund's most recent Annual Report (containing the report of Independent
Accountants and additional information relating to Fund performance) are
available at no charge upon request by calling (800) 814-1897.
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
- --------------------------------------------------------------------------------
Institutional Balanced Portfolio
<TABLE>
<CAPTION>
Class X Class Y
----------------- ----------------
From Inception From Inception
3/1/96 to 3/1/96 to
12/31/96 12/31/96
----------------- ----------------
<S> <C> <C>
Net asset value, beginning of period $ 17.90 $ 17.90
Income from investment operations
Net investment income ..................... 0.51(4) 0.46(4)
Net realized and unrealized gain ......... 1.17 1.18
-------- --------
Total from investment operations ......... 1.68 1.64
-------- --------
Less distributions
Dividends from net investment income ...... (0.49) (0.45)
Dividends from net realized gains ......... (0.94) (0.94)
-------- --------
Total distributions ..................... (1.43) (1.39)
-------- --------
Change in net asset value .................. 0.25 0.25
-------- --------
Net asset value, end of period ............ $ 18.15 $ 18.15
======== ========
Total return .............................. 9.43%(2) 9.20%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) ...... $ 37,147 $ 12,010
Ratio to average net assets of:
Operating expenses ........................ 0.65%(1) 0.90%(1)
Net investment income ..................... 3.02%(1) 2.78%(1)
Portfolio turnover ........................ 209%(2) 209%(2)
Average commission rate paid(3) ............ $ 0.0630 $ 0.0630
</TABLE>
- -----------
(1) Annualized
(2) Not annualized
(3) The fund is required to disclose its average commission rate per share for
securities trades on which commissions are charged. This rate generally does
not reflect mark-ups, mark-downs, or spreads on shares traded on a principal
basis.
(4) Includes reimbursement of operating expenses by investment adviser of $0.06
and $0.06, respectively.
6
<PAGE>
Institutional Managed Bond Portfolio
<TABLE>
<CAPTION>
Class X Class Y
----------------- --------------------
From Inception From Inception
3/1/96 to 3/1/96 to
12/31/96 12/31/96
----------------- --------------------
<S> <C> <C>
Net asset value, beginning of period $ 33.84 $ 33.84
Income from investment operations
Net investment income .............................. 2.03(3)(4) 1.98(3)(4)
Net realized and unrealized gain (loss) ............ 0.69 0.66
-------- ---------
Total from investment operations .................. 2.72 2.64
-------- ---------
Less distributions
Dividends from net investment income ............... (1.96) (1.89)
Dividends in excess of net investment income ...... (0.01) (0.01)
Distributions from net realized gains ............ (0.61) (0.61)
-------- ---------
Total distributions .............................. (2.58) (2.51)
-------- ---------
Change in net asset value ........................... 0.14 0.13
-------- ---------
Net asset value, end of period ..................... $ 33.98 $ 33.97
======== =========
Total return ....................................... 8.24%(2) 7.98%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) ............... $ 71,482 $ 7,010
Ratio to average net assets of:
Operating expenses ................................. 0.55%(1) 0.80%(1)
Net investment income .............................. 7.15%(1) 6.91%(1)
Portfolio turnover ................................. 199%(2) 199%(2)
</TABLE>
- -----------
(1) Annualized
(2) Not annualized
(3) Computed using average shares outstanding.
(4) Includes reimbursement of operating expenses by investment adviser of $0.09
and $0.09 per share, respectively.
Institutional Growth Stock Portfolio
<TABLE>
<CAPTION>
Class X Class Y
----------------- ----------------
From Inception From Inception
3/1/96 to 3/1/96 to
12/31/96 12/31/96
----------------- ----------------
<S> <C> <C>
Net asset value, beginning of period $ 48.01 $ 48.01
Income from investment operations(5)
Net investment income ........................ 0.34(4) 0.18(4)
Net realized and unrealized gain (loss) ...... 4.89 4.95
--------- ---------
Total from investment operations ............ 5.23 5.13
--------- ---------
Less distributions
Dividends from net investment income ......... (0.30) (0.19)
Distributions from net realized gains ...... (5.52) (5.52)
--------- ---------
Total distributions ........................ (5.82) (5.71)
Change in net asset value ..................... (0.59) (0.58)
--------- ---------
Net asset value, end of period ............... $ 47.42 $ 47.43
========= =========
Total return ................................. 10.71%(2) 10.48%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) ......... $ 82,739 $ 22,978
Ratio to average net assets of:
Operating expenses ........................... 0.70%(1) 0.95%(1)
Net investment income ........................ 0.65%(1) 0.39%(1)
Portfolio turnover ........................... 99%(2) 99%(2)
Average commission rate paid(3) ............... $ 0.0543 $ 0.0543
</TABLE>
- -----------
(1) Annualized
(2) Not annualized
(3) The fund is required to disclose its average commission rate per share for
securities trades on which commissions are charged. This rate generally does
not reflect mark-ups, mark-downs, or spreads on shares traded on a principal
basis.
(4) Includes reimbursement of operating expenses by investment adviser of $0.04
and $0.04, respectively, computed using average shares outstanding.
(5) Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from anticipated
results depending on the time of share purchases and redemptions.
7
<PAGE>
Institutional Money Market Portfolio
<TABLE>
<CAPTION>
Class X Class Y
----------------- ----------------
From Inception From Inception
3/1/96 to 3/1/96 to
12/31/96 12/31/96
----------------- ----------------
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
Income from investment operations
Net investment income ..................... 0.043(1) 0.040(1)
-------- --------
Total from investment operations ......... 0.043 0.040
-------- --------
Less distributions
Dividends from net investment income ...... (0.043) (0.040)
-------- --------
Change in net asset value .................. -- --
-------- --------
Net asset value, end of period ............ $ 1.00 $ 1.00
======== ========
Total return .............................. 4.34%(3) 4.11%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) ...... $ 15,182 $ 2,130
Ratio to average net assets of:
Operating expenses ........................ 0.35%(2) 0.60%(2)
Net investment income ..................... 5.08%(2) 4.84%(2)
</TABLE>
- -----------
(1) Includes reimbursement of operating expenses by investment adviser of less
than $0.01.
(2) Annualized
(3) Not annualized
Institutional U.S. Government Securities Portfolio
<TABLE>
<CAPTION>
Class X Class Y
-------------------- --------------------
From Inception From Inception
3/1/96 to 3/1/96 to
12/31/96 12/31/96
-------------------- --------------------
<S> <C> <C>
Net asset value, beginning of period $ 13.35 $ 13.35
Income from investment operations(5)
Net investment income ........................ 0.62(3)(4) 0.59(3)(4)
Net realized and unrealized gain (loss) ...... 0.02 0.01
--------- ---------
Total from investment operations ............ 0.64 0.60
--------- ---------
Less distributions
Dividends from net investment income ......... (0.75) (0.73)
In excess of net investment income ............ (0.09) (0.08)
--------- ---------
Total distributions ........................ (0.84) (0.81)
--------- ---------
Change in net asset value ..................... (0.20) (0.21)
--------- ---------
Net asset value, end of period ............... $ 13.15 $ 13.14
========= =========
Total return ................................. 4.86%(2) 4.56%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) ......... $ 4,734 $ 3,578
Ratio to average net assets of:
Operating expenses ........................... 0.40%(1) 0.65%(1)
Net investment income ........................ 5.58%(1) 5.32%(1)
Portfolio turnover ........................... 175%(2) 175%(2)
</TABLE>
- -----------
(1) Annualized
(2) Not annualized
(3) Computed using average shares outstanding.
(4) Includes reimbursement of operating expenses by investment adviser of $0.19
and $0.19, respectively.
(5) Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from anticipated
results depending on the time of share purchases and redemptions.
8
<PAGE>
Institutional Enhanced Reserves Portfolio
<TABLE>
<CAPTION>
Class X Class Y
----------------- ----------------
From Inception From Inception
7/19/96 to 11/1/96 to
12/31/96 12/31/96
----------------- ----------------
<S> <C> <C>
Net asset value, beginning of period $ 9.95 $ 9.97
Income from investment operations(5)
Net investment income ........................ 0.26(3) 0.09(3)
Net realized and unrealized gain (loss) ...... -- (0.02)
-------- --------
Total from investment operations ............ 0.26 0.07
-------- --------
Less distributions
Dividends from net investment income ......... (0.26) (0.09)
Distributions from net realized gains ......... -- --
-------- --------
Total distributions ........................ (0.26) (0.09)
-------- --------
Change in net asset value ..................... -- (0.02)
-------- --------
Net asset value, end of period ............... $ 9.95 $ 9.95
======== ========
Total return ................................. 2.57%(2) 0.71%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) ......... $122,010 $ 1,504
Ratio to average net asset of:
Operating expenses ........................... 0.34%(1) 0.59%(1)
Net investment income ........................ 5.68%(1) 5.58%(1)
Portfolio turnover ........................... 122%(2) 122%(2)
</TABLE>
- -----------
(1) Annualized
(2) Not annualized
(3) Includes reimbursement of operating expenses by investment adviser of less
than $0.01.
9
<PAGE>
PERFORMANCE INFORMATION
The Fund may, from time to time, include the performance history of any or
all of the Portfolios (and each Class thereof) in advertisements, sales
literature or reports to current or prospective shareholders. Both yield and
total return figures are computed separately for Class X and Class Y Shares of
each Portfolio in accordance with formulas specified by the Securities and
Exchange Commission.
Performance data involving the Balanced, Managed Bond, Growth and U.S.
Government Portfolios is based on each such Portfolio's past performance as
separate investment accounts of Phoenix Home Life Mutual Insurance Company prior
to March 1, 1996. This performance data may be relevant as each such separate
account was managed, in all material respects, using substantially the same
investment objectives and policies as those used by such Portfolio. Standardized
average annual total return of each Class shall be calculated for the preceding
one, five and ten year periods (or since inception of the applicable separate
account if it has been in existence less than five or ten years) by including
the corresponding separate account's total return calculated in accordance with
formulas specified by the Securities and Exchange Commission. The performance of
the separate accounts has been restated to reflect the deduction of the fees and
expenses of the classes of the corresponding Portfolio described in this
Prospectus.
Performance data involving the Enhanced Reserves Portfolio is based on the
Portfolio's past performance as the Enhanced Reserves Fund (a series of Duff &
Phelps Mutual Funds) prior to July 19, 1996. On that date, the shareholders of
the Enhanced Reserves Fund approved a merger with the Phoenix Duff & Phelps
Institutional Enhanced Reserves Portfolio.
Except as above stated, standardized quotations of average annual total
return for each class of shares of each Portfolio will be expressed in terms of
the average annual compounded rate of return of a hypothetical investment in
either Class X or Class Y Shares of each Portfolio over a period of 1, 5, and 10
years (or up to the life of the class of shares). Standardized total return
quotations reflect the deduction of a proportional share of each Class's
expenses of such Portfolio (on an annual basis), and assume that all dividends
and distributions are reinvested when paid. It is expected that the performance
of Class X Shares shall be better than that of Class Y Shares as a result of
lower distribution fees and certain incrementally lower expenses paid by Class X
Shares. The Fund may also quote supplementally a rate of total return over
different periods of time by means of aggregate, average, and year-by-
year or other types of total return figures.
Performance information may be expressed as yield, effective yield and
total return of either class of the Money Market Portfolio. Current yield for
the Money Market Portfolio will be based on the income earned by the Portfolio
(or Class) over a given 7-day period (less a hypothetical charge reflecting
deductions for expenses taken during the period) and then annualized, i.e., the
income earned in the period is assumed to be earned every seven days over a
52-week period and is stated in terms of an annual percentage return on the
investment. Effective yield is calculated similarly but reflects the compounding
effect of earnings on reinvested dividends.
The yield of each Portfolio (other than the Money Market Portfolio) will be
computed by dividing the Portfolio's net investment income over a 30-day period
by an average value of invested assets (using the average number of shares
entitled to receive dividends and the maximum offering price per share at the
end of the period), all in accordance with applicable regulatory requirements.
Such amount will be compounded for six months and then annualized for a
twelve-month period to derive the Portfolio's yield for each class.
Advertisements, sales literature and other communications may contain
information about the Fund or Adviser's current investment strategies and
management style. Current strategies and style may change to respond to a
changing market and economic conditions. From time to time, the Fund may discuss
specific portfolio holdings or industries in such communications. To illustrate
components of overall performance, the Fund may separate its cumulative and
average annual returns into income results and capital gains or losses; or cite
separately as a return figure the equity or bond portion of a Portfolio's
holdings; or compare a Portfolio's equity or bond return figure to well-known
indices of market performance including but not limited to: the Standard &
Poor's 500 Stock Index, Dow Jones Industrial Average, Lehman Brothers Aggregate
Bond Index, Lehman Brothers 1-3 year Government Bond Index, IBC Donoghue Money
Fund Report, Merrill Lynch 1 year Treasury Bill and Salomon Brothers Corporate
and Government Bond Indices.
Performance information for a Portfolio (and each Class thereof) reflects
only the performance of a hypothetical investment in a Class X Shares or Class Y
Shares of that Portfolio during the particular time period in which the
calculations are based. Performance information is not an indication of future
performance. Performance information should be considered in light of a
particular Portfolio's investment objectives and policies, characteristics and
qualities of the Portfolio, and the market conditions during the given time
period, and should not be considered as a representation of what may be achieved
in the future. Investment results will vary from those Portfolios which
previously existed as separate investment accounts particularly as such separate
investment accounts were not registered under the 1940 Act and therefore were
not subject to certain investment restrictions that are imposed by the 1940 Act.
For a description of the methods used to determine total return, see the
Statement of Additional Information.
The Fund's Annual Report, available upon request and without charge, shall
contain a discussion of the performance of each Portfolio and a comparison of
that performance to a securities market index.
10
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Each Portfolio has a different investment objective and is designed to meet
different investment needs. The differences in objectives and policies among the
Portfolios can be expected to affect the investment return of each Portfolio and
the degree of market and financial risk to which each Portfolio is subject. The
investment objective of each Portfolio is a fundamental policy which may not be
changed without the approval of a vote of a majority of the outstanding shares
of that Portfolio. Risks are inherent in the ownership of any security and there
can be no assurance that any Portfolio will achieve its investment objective.
The investment policies of each Portfolio will also affect the rate of portfolio
turnover. A high rate of portfolio turnover generally involves correspondingly
greater brokerage commissions or transaction costs, which are paid directly by
the Portfolio. The rates of portfolio turnover for each Portfolio are set forth
under "Financial Highlights."
Phoenix Duff & Phelps Institutional Balanced Portfolio
The investment objective of the Balanced Portfolio is to seek long-term
capital growth, reasonable income and conservation of capital. The Portfolio
intends to invest based on combined considerations of risk, income, capital
enhancement and protection of capital value.
It is intended that the Portfolio may invest in any type or class of stock
believed by the Adviser to offer potential for capital appreciation over the
intermediate and long term. The Portfolio may also invest in securities
convertible into common stocks.
At least 25% of the value of this Portfolio's assets will be invested in
fixed income senior securities. The Portfolio intends to emphasize fixed income
senior securities which are rated within the four highest categories by
recognized rating agencies (i.e., AAA to BBB by Standard & Poor's Corporation,
Aaa to Baa by Moody's Investors Service, Inc., AAA to BBB- by Duff & Phelps
Credit Rating Co. ("D&P"), or AAA to BBB by Fitch Investor Services Inc. D&P is
not affiliated with the Portfolio or DPM. Fixed-income securities which are
rated in these categories are sometimes referred to as "investment grade"
securities) or in unrated securities determined by the Adviser to be comparable
with such rating categories. If, in the Adviser's opinion, market conditions
warrant, the Portfolio may invest up to 10% of the Portfolio's total net assets,
determined at the time of investment, in high yield, high risk (non-investment
grade) securities ("junk bonds") or non-rated securities of comparable quality.
In an effort to protect its assets against major market declines, or for other
temporary defensive purposes, this Portfolio may actively pursue a policy of
retaining cash or investing part or all of its assets in cash equivalents, such
as government securities and high grade commercial paper.
The price of fixed income securities will generally move in inverse
proportion to interest rates. Lower rated and non-rated fixed-income securities
are predominantly speculative with respect to the issuer's capacity to repay
principal and pay interest. Investment in lower rated and non-rated convertible
fixed-income securities normally involves a greater degree of market and credit
risk than does investment in securities having higher ratings. In addition,
non-rated securities are often less marketable than rated securities. To the
extent that the Portfolio holds any lower rated or non-rated securities, it may
be negatively affected by adverse economic developments, increased volatility
and lack of liquidity.
Phoenix Duff & Phelps Institutional Managed
Bond Portfolio
The investment objective of the Managed Bond Portfolio is to generate a
high level of current income and appreciation of capital, consistent with
prudent investment risk, through investment in a diversified portfolio of bonds.
The "bonds" which the Portfolio will purchase comprise corporate debt
securities which are issued by United States or Canadian corporations and
government securities, domestic and foreign. It is the Adviser's present intent
to purchase principally those government securities which are issued or
guaranteed by the United States government and its agencies or instrumentalities
and by the Government of Canada or any Canadian province, municipality or
governmental agency thereof. Canadian and other foreign securities will be
purchased only if principal and interest with respect to such securities is
payable in United States dollars.
Under normal circumstances, at least 80% of the value of the Portfolio's
total assets in bonds (other than commercial paper) will be represented by debt
securities which have, at the time of purchase, a rating within the four highest
grades as determined by Moody's Investors Service, Inc. (Aaa, Aa, A or Baa) or
Standard Poor's Corporation (AAA, AA, A or BBB) and debt securities of banks and
other issuers which, although not rated as a matter of policy by either Moody's
Investors Service, Inc. or Standard & Poor's Corporation, are considered by the
Adviser to have investment quality comparable to investment grade securities.
If, in the Adviser's opinion, market conditions warrant, the Portfolio may
invest up to 20% of the Portfolio's total net assets, determined at the time of
investment, in high yield, high risk (non-investment grade) securities ("junk
bonds") or non-rated securities of comparable quality. The Portfolio will seek
to purchase debt securities which have protection against immediate refunding.
The Portfolio may include debt securities which sell at substantial discounts
from par. These securities are low coupon bonds which, during periods of high
interest rates because of their lower acquisition cost, tend to sell at a yield
basis that approaches current interest rates.
The Portfolio also intends to invest in short-term investments such as U.S.
Treasury notes and bills, obligations issued or guaranteed as to principal or
interest by the United States government or any agency or authority thereof,
obligations of U.S. banks and savings and loan associations (including foreign
branches of U.S. banks and U.S. branches of foreign banks) such as certificates
of deposit, time deposits
11
<PAGE>
and bankers acceptances, commercial paper, repurchase agreements with respect to
any of the foregoing obligations. The Adviser intends to achieve appreciation of
capital through sector selection with emphasis on undervalued securities. When
in the opinion of the Adviser, current cash needs or market or economic
conditions warrant, the Portfolio may temporarily retain its assets in cash or
invest part or all of its assets in cash equivalents.
The price of fixed income securities will generally move in inverse
proportion to interest rates. Lower rated and non-rated fixed-income securities
are predominantly speculative with respect to the issuer's capacity to repay
principal and pay interest. Investment in lower rated and non-rated convertible
fixed-income securities normally involves a greater degree of market and credit
risk than does investment in securities having higher ratings. In addition,
non-rated securities are often less marketable than rated securities. To the
extent that the Portfolio holds any lower rated or non-rated securities, it may
be negatively affected by adverse economic developments, increased volatility
and lack of liquidity.
Phoenix Duff & Phelps Institutional Enhanced
Reserves Portfolio
The investment objective of the Enhanced Reserves Portfolio is to seek a
high level of current income consistent with preservation of capital. The
Portfolio seeks to achieve its objective primarily by investing in a diversified
portfolio of U.S. government securities and high grade corporate debt
obligations.
The Portfolio, which is not a money market fund, is designed for investors
who seek a higher yield than a money market fund and less fluctuation in net
asset value than an intermediate-
term or long-term bond fund. Under normal market conditions, the Portfolio
intends to invest at least 65% of the total value of its assets in U.S.
government obligations including mortgage-related securities issued by the U.S.
government or its agencies or instrumentalities, high grade corporate debt
obligations and asset-backed securities. Under normal market conditions, the
Enhanced Reserves Portfolio will invest in high grade securities comprising debt
obligations with maturities greater than one year rated at the time of purchase
AAA, AA, or A by Standard & Poor's Corporation or Aaa, Aa, or A by Moody's
Investors Service, Inc. or rated AAA, AA, or A by Duff & Phelps Credit Rating
Co. or similarly rated by any nationally recognized statistical rating
organization. Short-term debt obligations acquired by the Portfolio will have
equivalent ratings. Under normal market conditions, the Portfolio's dollar
weighted average portfolio quality is expected to be AA or better by Standard &
Poor's Corporation, Moody's Investors Services, Inc. or similarly rated by any
nationally recognized statistical rating organization. The balance of the
Portfolio's assets may be invested in municipal obligations, mortgage related
securities of private issuers, bank obligations, certain money market
instruments, repurchase agreements, and foreign securities.
The Portfolio may purchase portfolio securities with maturities of greater
than one year. In normal market conditions, however, the duration of the
Portfolio's aggregate portfolio will be approximately one year. The term
"maturity" refers to the time remaining until the final payment on such security
is due taking no account of the pattern of the securities' payments prior to
maturity. "Duration" refers to an alternate measurement of a security's price
sensitivity to changes in interest rates. Duration measures the expected life of
a security by assessing and weighting the present value of the security's
payment pattern. The value of the Portfolio's holdings can be expected to fall
when interest rates rise and vice-versa, according to changes in prevailing
interest rates.
At times the Adviser may judge that market conditions make pursuing the
Portfolio's basic investment strategy inconsistent with the best interests of
its shareholders. At such times, the Adviser may use alternative strategies
primarily designed to reduce fluctuations in the value of the Portfolio's
assets. In implementing these "temporary defensive" strategies, the Portfolio
may, without limitation, invest in high-grade, short-
term securities.
Phoenix Duff & Phelps Institutional Growth
Stock Portfolio
The investment objective of the Growth Stock Portfolio is to seek long-term
appreciation of capital. Since income is not an objective, any income generated
by the investment of the Portfolio's assets will be incidental to its objective.
Under normal conditions, the Portfolio will invest at least 65% of its
total assets in any class or type of stock believed by the Adviser to offer
potential for capital appreciation over both the intermediate and long-term. The
Portfolio may also invest in preferred stocks, convertible securities, preferred
stocks and convertible debentures if, in the Adviser's judgment, such investment
will further its investment objective.
When, for temporary defensive purposes (as when market conditions for
growth stocks are adverse), it is determined that other types of investments
appear advantageous on the basis of combined considerations of risk and the
protection of capital values, investments may be made in investment grade fixed
income securities with or without warrants or conversion features. In an effort
to protect its assets against major market declines, or for other temporary
defensive purposes, the Portfolio may actively pursue a policy whereby it will
retain cash or invest part or all of its assets in cash equivalents.
Investments in common stocks for capital appreciation are subject to the
risks of changing economic and market conditions which may affect the
profitability and financial conditions of the companies in whose securities the
Portfolio is invested and the Adviser's ability to anticipate those changes.
Since investments normally will consist primarily of securities considered to
have potential for appreciation, the assets of the Portfolio may be considered
to be subject to greater risks than would be involved if the Portfolio invested
in securities which do not have such potential.
12
<PAGE>
Phoenix Duff & Phelps Institutional Money
Market Portfolio
The principal investment objective for the Money Market Portfolio is to
achieve as high a level of current income as is consistent with safety of
principal and maintenance of liquidity. Investments shall be solely in high
quality short term securities such as commercial paper, notes payable upon
demand and having maturities varying from one day to 397 days, Treasury or
agency obligations or repurchase agreements, municipal notes, Banker's
Acceptances, Certificates of Deposit or any other form of short term security.
The dollar-weighted average maturity for any Portfolio investment shall not
exceed 90 days.
Commercial paper held by the Portfolio will be limited to securities rated
in the two highest "short term" rating categories by at least two nationally
recognized statistical rating organizations (one nationally recognized
statistically rating organization if that security only has one rating) or, if
unrated, be issued by companies with an outstanding debt issue currently rated
AA by Standard & Poor's Corporation or Aa by Moody's Investors Service, Inc. No
more than 5% of the Portfolio assets will be invested in securities not rated in
the highest short-term rating category, and, of those securities, no more than
the greater of 1% of the Portfolio's assets or $1 million can be held by any one
issuer. Certificates of Deposits must be issued by banks which have capital,
surplus and undivided profits of at least $100,000,000.
The Portfolio may not necessarily invest in money market instruments paying
the highest available yield at a particular time as a result of considerations
of liquidity and preservation of capital. Rather, consistent with its investment
objective, the Portfolio will attempt to maximize yields by engaging in
portfolio trading and buying and selling portfolio investments in anticipation
of, or in response to, changing economic and money market conditions and trends.
These policies, as well as the relatively short maturities of obligations to be
purchased by the Portfolio, may result in frequent changes in its portfolio
holdings.
The value of the securities in the Portfolio can be expected to vary
inversely to the changes in prevailing interest rates. Thus, if interest rates
increase after a security was purchased, that security, if sold, might be sold
at less than cost. Conversely, if interest rates decline after purchase, the
security, if sold, might be sold at a profit. In either instance, if the
security were held to maturity, no gain or loss would normally be realized as a
result of these fluctuations. Substantial redemptions of Portfolio shares could
require the sale of portfolio investments at a time when a sale might not be
desirable.
Phoenix Duff & Phelps Institutional U.S. Government Securities Portfolio
The investment objective of the U.S. Government Securities Portfolio is to
seek a high level of current income consistent with safety of principal by
investing at least 80% of Portfolio assets in a diversified portfolio of
securities consisting of: (1) securities issued and guaranteed by the U.S.
Government, (2) securities issued by U.S. Government agencies and
instrumentalities and backed by the full faith and credit of the United States,
and (3) securities issued by U.S. Government agencies and instrumentalities
which are guaranteed by such agencies and instrumentalities but are not
otherwise backed by the full faith and credit of the United States. The
Portfolio is also authorized to invest up to 20% of its value in short-
term instruments.
U.S. Government Securities include (i) U.S. Treasury obligations which
differ only in their interest rates, maturities and times of issuance as
follows: U.S. Treasury Bills (maturity of one year or less), bonds (generally
maturities of greater than ten years), notes (maturity of one to ten years);
(ii) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are backed by the full faith and credit of the United
States, such as securities issued by the Federal Housing Administration, the
Government National Mortgage Association ("GNMA"), the Department of Housing and
Urban Development, the Export-Import Bank, the General Services Administration
and the Maritime Administration and certain securities issued by the Farmers
Home Administration and the Small Business Administration; (iii) obligations
issued or guaranteed by U.S. Government agencies or instrumentalities that are
not backed by the full faith and credit of the United States, such as securities
issued by the Farm Credit Financial Assistance Corporation, Federal Financing
Bank, Federal Home Loan Bank, Federal Home Loan Mortgage Corporation ("FHLMC"),
Federal National Mortgage Association ("FNMA"), Federal Farm Credit Banks and
Student Loan Marketing Association. The weighted average duration of U.S.
Government Securities expected to be held by the Portfolio will generally not
exceed three years. See "Phoenix Duff & Phelps Institutional Enhanced Reserves
Portfolio" for a discussion of the terms "duration" and "maturity."
Although the payment of interest and principal on a portfolio security may
be guaranteed in certain instances by the U.S. Government or one of its agencies
or instrumentalities, the value of units of the Portfolio will fluctuate in
response to interest rate levels. In general, when interest rates rise, prices
of fixed income securities decline. When interest rates decline, prices of fixed
income securities rise.
INVESTMENT TECHNIQUES AND RELATED RISKS
In addition to the investment policies described above, each Portfolio,
unless otherwise described, may utilize the following investment practices or
techniques:
"When issued" and "delayed delivery" Securities
Each Portfolio may purchase and sell securities on a "when issued" and
"delayed delivery" basis. A Portfolio accrues no income on such securities until
the Portfolio actually takes delivery of such securities. These transactions are
subject to
13
<PAGE>
market fluctuation; the value of the securities at delivery may be more or less
than their purchase price. The yields generally available on comparable
securities when delivery occurs may be higher than yields on the securities
obtained pursuant to such transactions. Because each Portfolio relies on the
buyer or seller to consummate the transaction, failure by the other party to
complete the transaction may result in a Portfolio missing the opportunity of
obtaining a price or yield considered to be advantageous. Each Portfolio will
engage in "when issued" and "delayed delivery" transactions for the purpose of
acquiring securities consistent with the Portfolio's investment objective and
policies and not for the purpose of investment leverage.
Securities Lending
Each Portfolio may lend its securities to brokers, dealers and financial
institutions provided that the market value of the securities subject to any
such loans does not exceed 25% of the value of the total assets (taken at market
value) of such Portfolio; and receive, as collateral, cash or cash equivalents
which at all times while the loan is outstanding, will be maintained in amounts
equal to at least 102% of the current market value of the loaned securities. Any
cash collateral will be invested in short-term securities. All fees or charges
earned from securities lending will inure to the benefit of the Portfolio. A
Portfolio will have the right to regain record ownership of loaned securities
within six business days and to exercise beneficial rights such as voting rights
and subscription rights. While a securities loan is outstanding, the Portfolio
will receive amounts equal to any interest or other distributions with respect
to the loaned securities. Any agreement to lend securities shall provide that
borrowers are obligated to return the identical securities or their equivalent
at termination of the loan and, that the Portfolio shall have the right to
retain any collateral or use the same to purchase equivalent securities should
the borrower fail to return securities as required. Lending portfolio securities
involves a risk of delay in the recovery of the loaned securities and possibly
the loss of the collateral if the borrower fails financially. See the Statement
of Additional Information.
Illiquid Securities
Each Portfolio (other than the Money Market Portfolio) may invest up to 15%
of its net assets, taken at market values at the time of investment, in
"illiquid securities". The Money Market Portfolio may invest up to 10% of its
net assets, taken at market values at the time of investment, in "illiquid
securities". For this purpose, illiquid securities include any securities
subject to legal or contractual restrictions on resale, securities which must be
registered with the Securities and Exchange Commission before they can be sold
to the public, repurchase agreements maturing in more than seven days,
securities for which market quotations are not readily available, or other
securities which legally or in the Adviser's or Trustees' opinion may be deemed
illiquid. Among other risks unique to certain illiquid securities (as described
elsewhere in this Prospectus and Statement of Additional Information), illiquid
securities may be thinly or not actively traded, and as a result, a Portfolio
utilizing this investment technique may experience difficulties in valuing or
disposing of these securities.
Short-Term Instruments
Each Portfolio (other than the Enhanced Reserves and Money Market
Portfolios) may invest up to 20% of its assets in short term instruments other
than instruments involving U.S. Government Securities. The Enhanced Reserves
Portfolio may invest up to 100% of its assets in short-term investments.
Short-term investments will be in high grade short term securities such as
commercial paper, drafts, notes payable upon demand or having maturities varying
from one day to 397 days, municipal notes, Bankers' Acceptances, Certificates of
Deposit or any other form of short-term security but may also include cash
should such a holding appear to be consistent with the goal of maximizing
earnings. It is intended that commercial paper held by these Portfolios will be
rated A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Service,
Inc. or, if unrated, be issued by companies with an outstanding debt issue
currently rated at least AA by Standard & Poor's Corporation or Aa by Moody's
Investors Service, Inc. Certificates of Deposits must be issued by banks which
have capital, surplus and undivided profits of at least $100,000,000.
Mortgage-Related Securities
Each Portfolio (other than the Growth and Money Market Portfolios) may
invest in securities that directly or indirectly represent a participation in,
or are secured by and payable from, mortgage loans secured by real property
("Mortgage-Related Securities"). These instruments are referred to as
"derivatives" as their value is derived from the value of the underlying
security or securities. The Mortgage-Related Securities in which these
Portfolios may invest include those with fixed, floating and variable interest
rates and those with interest rates that change based on multiples of changes in
interest rates. Although certain Mortgage-Related Securities are guaranteed by a
third party or otherwise similarly secured, the market value of the security,
which may fluctuate, is not so secured. If these Portfolios purchase a
Mortgage-Related Security at a premium, all or part of the premium may be lost
if there is a decline in the market value of the security, whether resulting
from changes in interest rates or prepayments in the underlying mortgage
collateral. As with other interest-bearing securities, the prices of certain
Mortgage-
Related Securities are inversely affected by changes in interest rates, while
other securities which these Portfolios may purchase may be structured so that
their interest rates will fluctuate inversely (and thus their price will
increase as interest rates rise and decrease as interest rates fall) in response
to changes in interest rates. Though the value of a Mortgage-Related Security
may decline when interest rates rise, the converse is not necessarily true,
since in periods of declining interest rates the mortgages underlying the
security are more likely to prepay. For this and other reasons, a
Mortgage-Related Security's stated maturity may be shortened by unscheduled
prepayments on the underlying mortgages, and, therefore, it is not possible to
predict
14
<PAGE>
accurately the security's return. In addition, regular payments received in
respect of Mortgage-Related Securities include both interest and principal. If
the underlying mortgage securities experience greater than anticipated
prepayments of principal, these Portfolios may fail to fully recoup its initial
investment in these securities even if the securities are rated in the highest
rating category by a nationally recognized statistical rating organization. No
assurance can be given as to the return these Portfolios will receive when these
amounts are reinvested.
Each Portfolio (other than the Growth and Money Market Portfolios) may also
invest in securities issued by corporate and other special purpose entities in
which the source of income payments on the securities is a dedicated pool of
assets ("Asset-Backed Securities"). The securitization techniques used for
Asset-Backed Securities are similar to those used for Mortgage-Related
Securities. The collateral for these securities has included home equity loans,
automobile and credit card receivables, boat loans, computer leases, airplane
leases, mobile home loans, recreational vehicle loans and hospital and other
account receivables.
Financial Futures and Related Options
Each Portfolio (other than the U.S. Government Securities and Money Market
Portfolios) may enter into financial futures contracts and related options.
These instruments are referred to as "derivatives" as their value is derived
from the value of the underlying security or securities. These Portfolios may
purchase and sell financial futures contracts which are traded on a recognized
exchange or board of trade and may purchase exchange- or board-traded put and
call options on financial futures contracts as a hedge against anticipated
changes in the market value of its portfolio securities or securities which it
intends to purchase.
These Portfolios will engage in transactions in financial futures contracts
and related options only for hedging purposes and not for speculation. In
addition, these Portfolios will not purchase or sell any financial futures
contract or related option if, immediately thereafter, the sum of the cash or
U.S. Treasury bills initially committed with respect to these Portfolios'
existing futures and related options positions and the premiums paid for related
options would exceed 2% of the market value of each Portfolio's total assets. At
the time of purchase of a futures contract or a call option on a futures
contract, any asset, including equity securities and non-
investment grade debt so long as the asset is liquid, unencumbered and marked to
market daily equal to the market value of the futures contract minus these
Portfolios' initial margin deposit with respect thereto will be deposited in a
segregated account with these Portfolios to collateralize fully the position and
thereby ensure that it is not leveraged.
Engaging in transactions in financial futures contracts involves certain
risks, such as the possibility of an imperfect correlation between futures
market prices and cash market prices and the possibility that the Adviser could
be incorrect in its expectations as to the direction or extent of various
interest rate movements, in which case these Portfolios' return might have been
greater had hedging not taken place. There is also the risk that a liquid
secondary market may not exist. The risk in purchasing an option on a financial
futures contract is that these Portfolios will lose the premium it paid. There
may also be circumstances when the purchase of an option on a financial future
contract would result in a loss to these Portfolios while the purchase or sale
of the contract would not have resulted in a loss. Futures and options may fail
as hedging techniques in cases where the price movements of the securities
underlying the options and futures do not follow the price movements of the
portfolio securities subject to the hedge. Financial losses relating to futures
and options are potentially unlimited.
Foreign Securities
Each Portfolio (other than the Money Market and U.S. Government Securities
Portfolios) may purchase foreign securities, including those issued by foreign
branches of U.S. banks. Such investments in foreign securities will be less than
15% of the total net asset value of the Growth and Balanced Portfolios, will not
exceed 20% of the total net asset value of the Enhanced Reserves Portfolio and
will not exceed 35% of the total net asset value of the Managed Bond Portfolio
at the time of purchase. The Enhanced Reserves, Managed Bond and Balanced
Portfolios may invest in debt obligations issued by foreign corporations and by
foreign governments and their political subdivisions, which securities will be
denominated, and pay interest and principal, in U.S. dollars.
Investments in foreign securities, particularly those of non-
governmental issuers, involve considerations which are not ordinarily associated
with investing in domestic issues. These Portfolios may invest in a broad range
of foreign securities including equity, debt and convertible securities and
foreign government securities. In connection with investments in foreign
securities, the Portfolio may enter into forward foreign currency exchange
contracts for the purpose of protecting against losses resulting from
fluctuations in exchange rates between the U.S. dollar and a particular foreign
currency denominating a security which the Portfolio holds or intends to
acquire. These Portfolios will not speculate in forward foreign currency
exchange contracts.
Investing in the securities of foreign companies involves special risks and
considerations not typically associated with investing in U.S. companies. These
include differences in accounting, auditing and financial reporting standards,
generally higher commission rates on foreign portfolio transactions, the
possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations, political instability which could
affect U.S. investments in foreign countries, difficulty in invoking legal
process abroad and potential restrictions on the flow of international capital.
Additionally, dividends payable on foreign securities may be subject to foreign
taxes withheld prior to distribution. Foreign securities often trade with less
frequency and volume than domestic securities and therefore may exhibit greater
price volatility. Changes in foreign exchange rates will affect the value of
those securities which are denominated or quoted in currencies other than the
U.S.
15
<PAGE>
dollar. Many of the foreign securities held by these Portfolios will not be
registered with the Securities and Exchange Commission and many of the issuers
of foreign securities will not be subject to the Commission's reporting
requirements. Accordingly, there may be less publicly available information
about the securities and about the foreign company or government issuing them
than is available about a domestic company or government entity. Moreover,
individual foreign economies may compare favorably or unfavorably with the
United States economy with respect to such factors as rate of growth, rate of
inflation, capital reinvestment, resource self-
sufficiency and balance of payment positions, and economic trends in foreign
countries may be difficult to assess.
Particular risks are posed by investments in third world countries or
so-called "emerging markets." These securities may be especially volatile based
on relative economic, political and market conditions present in these
countries. These and other relevant conditions vary widely between emerging
market countries. For instance, certain emerging market countries are either
comparatively undeveloped or are in the process of becoming developed and may
consequently be economically based on a relatively few or closely interdependent
industries. A high proportion of the shares of many emerging market issuers may
also be held by a limited number of large investors trading significant blocks
of securities. While the Portfolios will strive to be sensitive to publicized
reversals of economic conditions, political unrest and adverse changes in
trading status, unanticipated political and social developments may affect the
values of these Portfolios' investments in such countries and the availability
of additional investments in such countries.
The Portfolio may use foreign custodians or sub-custodians in connection
with purchases of foreign securities and may maintain cash and cash equivalents
in the care of a foreign custodian. The amount of cash or cash equivalents
maintained in the care of eligible foreign custodians will be limited to an
amount reasonably necessary to effect foreign securities transactions. The use
of a foreign custodian invokes considerations which are not ordinarily
associated with domestic custodians. These considerations include the
possibility of expropriation, restricted access to books and records of the
foreign custodian, inability to recover assets that are lost while under the
control of the foreign custodian, and the impact of political, social or
diplomatic developments.
Repurchase Agreements
Each Portfolio (excluding the Money Market and Growth Stock Portfolios) may
agree to purchase portfolio securities subject to the seller's agreement to
repurchase them at a mutually agreed upon date and price. A Portfolio will enter
into such repurchase agreements only with financial institutions that are deemed
to be creditworthy by the Adviser. During the term of any repurchase agreement,
the Adviser will continue to monitor the creditworthiness of the seller.
Although the securities subject to repurchase agreements may bear maturities
exceeding thirteen months, a Portfolio does not presently intend to enter into
repurchase agreements with deemed maturities in excess of seven days. If in the
future a Portfolio were to enter into repurchase agreements with deemed
maturities in excess of seven days, such Portfolio would do so only if such
investment, together with other illiquid securities, did not exceed 15% of the
net value of that Portfolio's total assets. Default or bankruptcy of the seller
would, however, expose the Portfolio to possible delay in connection with the
disposition of the underlying securities or loss to the extend that proceeds
from a sale of the underlying securities were less than the repurchase price
under the agreement.
Securities and Index Options
The Balanced, Enhanced Reserves and U.S. Government Securities Portfolios
may write covered call options and purchase call and put options. Call options
on securities indices will be written only to hedge in an economically
appropriate way portfolio securities which are not otherwise hedged with options
or financial futures contracts and will be "covered" by identifying the specific
portfolio securities being hedged.
These Portfolios will write call options in order to obtain a return on its
investments from the premiums received and will retain the premiums whether or
not the options are exercised. Any decline in the market value of portfolio
securities will be offset to the extent of the premiums received (net of
transaction costs). If an option is exercised, the premium received on the
option will effectively increase the exercise price.
During the option period the writer of a call option has given up the
opportunity for capital appreciation above the exercise price should the market
price of the underlying security increase, but has retained the risk of loss
should the price of the underlying security decline. Writing call options also
involves risks relating to these Portfolios' ability to close out options it has
written.
These Portfolios may invest up to 2% of its total assets in exchange-traded
call and put options on securities and securities indices for the purpose of
hedging against changes in the market value of its portfolio securities. These
Portfolios will invest in call and put options whenever, in the opinion of the
Adviser, a hedging transaction is consistent with the investment objectives of
these Portfolios. These Portfolios may sell a call option or a put option which
it has previously purchased prior to the purchase (in the case of a call) or the
sale (in the case of a put) of the underlying security. Any such sale would
result in a net gain or loss depending on whether the amount received on the
sale is more or less than the premium and other transaction costs paid on the
call or put which is sold. Purchasing a call or a put option involves the risk
that these Portfolio may lose the premium it paid plus transaction costs.
"Zero-Coupon" and "Payment-in-Kind" Securities
The Balanced Portfolio may invest in so-called "zero-
coupon" and "payment-in-kind" securities. The Internal Revenue Code of 1986, as
amended (the "Code"), requires that regulated investment companies distribute at
least 90% of
16
<PAGE>
their net investment income each year, including tax-exempt and non-cash income.
Accordingly, although a Portfolio will receive no coupon payments on zero coupon
securities prior to their maturity and may receive additional securities in lieu
of cash payments on payment-in-kind securities, a Portfolio is required, in
order to maintain the desired tax treatment, to include in its distributions to
shareholders in each year any income attributable to such securities that is in
excess of 10% of a Portfolio's net investment income in that year.
Municipal Obligations
When conditions warrant, the Bond, Balanced and Enhanced Reserves
Portfolios may invest in obligations issued by or on behalf of state and local
governmental issuers ("Municipal Obligations"), whether or not the income
thereon is exempt from the Federal income tax. The purchase of Municipal
Obligations may be advantageous when, as a result of prevailing economic,
regulatory or other circumstances, the yield of such securities, on a pre-tax
basis, is comparable to that of corporate or U.S. Government obligations.
Dividends paid by this Portfolio that are derived from interest on Municipal
Obligations would be taxable to the Portfolio's shareholders for Federal income
tax purposes. See the Statement of Additional Information.
INVESTMENT RESTRICTIONS
Each Portfolio may not invest more than 25% of its assets in any one
industry, except the Money Market Portfolio may invest more than 25% of its
assets in the domestic banking industry; and the U.S. Government Securities
Portfolio will invest at least 80% of its net assets in securities backed or
supported by the U.S. Government. In addition to the investment restrictions
described above, each Portfolio's investment program is subject to further
restrictions which are described in the Statement of Additional Information. The
restrictions for each Portfolio described above are fundamental and may not be
changed without shareholder approval.
MANAGEMENT OF THE FUND
The Fund is an open-end, diversified investment company known as a mutual
fund. The Board of Trustees supervises the business affairs and investments of
the Fund, which is managed on a daily basis by each Portfolio's investment
adviser. The Fund was organized as a Massachusetts business trust on December 4,
1995. The Fund commenced operations on March 1, 1996. The Fund is currently
authorized to offer shares of beneficial interest in series and is currently
offering shares of seven Portfolios. Two classes of shares are currently offered
by each Portfolio.
The Advisers
Phoenix Investment Counsel, Inc. ("PIC") is the investment adviser for each
Portfolio other than the Enhanced Reserves Portfolio. PIC is located at 56
Prospect Street, Hartford, Connecticut 06115-0480. PIC was originally organized
in 1932 as John P. Chase, Inc. In addition to these Portfolios, PIC also serves
as investment adviser to other entities including Phoenix Series Fund, Phoenix
Multi-Portfolio Fund (all portfolios other than the Real Estate Securities
Portfolio), Phoenix Strategic Allocation Fund, Inc., Phoenix Strategic Equity
Series Fund (all funds except Phoenix Equity Opportunities Fund) and The Phoenix
Edge Series Fund (all series other than the Real Estate Securities Series and
Aberdeen New Asia Series) and as subadviser to the Chubb America Fund, Inc.,
SunAmerica Series Trust, and JNL Trust, among other investment advisory clients.
As of December 31, 1996, PIC had approximately $18.2 billion in assets under
management.
All of the outstanding stock of PIC is owned by Phoenix Equity Planning
Corporation ("Equity Planning"), a subsidiary of Phoenix Duff & Phelps
Corporation. Prior to November 1, 1995, PIC and Equity Planning were indirect,
wholly-owned subsidiaries of Phoenix Home Life Mutual Insurance Company
("Phoenix Home Life") of Hartford, Connecticut. Phoenix Home Life is a majority
shareholder of Phoenix Duff & Phelps Corporation. Phoenix Home Life is in the
business of writing ordinary and group life and health insurance and annuities.
Its principal offices are located at One American Row, Hartford, Connecticut
06115. Phoenix Duff & Phelps Corporation is a New York Stock Exchange traded
company that provides various financial advisory services to institutional
investors, corporations and individuals through operating subsidiaries.
Duff & Phelps Investment Management Co. ("DPM") serves as the investment
adviser to the Enhanced Reserves Portfolio. DPM is a subsidiary of Phoenix Duff
& Phelps Corporation. DPM is located at 55 East Monroe Street, Suite 3800,
Chicago, Illinois 60603. As of December 31, 1996, DPM had approximately $14
billion in assets under management on a discretionary basis. PIC and DPM are
sometimes collectively referred to as the "Advisers."
The Advisers continuously furnish an investment program for each applicable
Portfolio and manage the investment and reinvestment of the assets subject at
all times to the supervision of the Trustees. Under the terms of the Investment
Advisory Agreements, each Adviser is entitled to a prescribed fee. For managing,
or directing the investments of the following Portfolios, PIC is entitled a
monthly fee at the following annual rates based upon the average aggregate daily
net asset values of each such Portfolio up to $1 billion: (a) 0.60% of the
average of the aggregate daily net asset values of the Growth Portfolio; (b)
0.55% of the average of the aggregate daily net asset values of the Balanced
Portfolio; (c) 0.45% of the average of the aggregate daily net asset values of
the Managed Bond Portfolio; (d) 0.25% of the average of the aggregate daily net
asset values of the Money Market Portfolio; and, (e) 0.30% of the average of the
aggregate daily net asset values of the U.S. Government Securities Portfolio.
DPM is entitled to a monthly fee for managing, or directing the investments of
the Enhanced Reserves Portfolio, at the annual rate of 0.24% of the average of
the aggregate daily net asset values of such Portfolio up to
17
<PAGE>
$1 billion. Advisory fees payable to PIC or DPM, as applicable, shall decrease
by five basis points at such time as the average of the aggregate daily net
asset value of such Portfolio exceeds $1 billion.
The Investment Advisory Agreements provide that each Adviser will reimburse
the Fund for the amount, if any, by which the total operating expenses of any
applicable Portfolio (including each investment adviser's compensation, but
excluding interest, taxes, brokerage fees and commissions and extraordinary
expenses) for any fiscal year exceed the level of expenses which such Portfolio
is permitted to bear under the most restrictive expense limitation (which has
not been waived) imposed on mutual funds by any State in which shares of the
Portfolio are then qualified for sale. In addition, PIC has voluntarily agreed
to assume Total Fund Operating Expenses of each Portfolio (other than the
Enhanced Reserves Portfolio), excluding interest, taxes, brokerage fees,
commissions and extraordinary expenses, until December 31, 2001, to the extent
that such expenses exceed the following percentages of average annual net asset
values:
Class X Class Y
Shares Shares
---------- ---------
Balanced Portfolio ......... 0.65% 0.90%
Managed Bond Portfolio ...... 0.55% 0.80%
Growth Portfolio ............ 0.70% 0.95%
Money Market Portfolio ...... 0.35% 0.60%
U.S. Government Securities
Portfolio .................. 0.40% 0.65%
DPM has voluntarily agreed to reimburse or waive Total Fund Operating
Expenses of the Enhanced Reserves Portfolio, excluding interest, taxes,
brokerage fees, commissions and extraordinary expenses, until December 31, 1997,
to the extent that such expenses exceed 0.34% of the average annual net asset
values of Class X Shares of the Enhanced Reserves Portfolio and .59% of the
average annual net asset values of Class Y Shares of the Enhanced Reserves
Portfolio.
The Portfolio Managers
Balanced Portfolio
Mr. C. Edwin Riley, Jr. serves as portfolio manager of the Balanced
Portfolio and as such is responsible for the day-to-
day management of the Portfolio's holdings. Mr. Riley also is portfolio manager
of the Balanced Series of the Phoenix Series Fund (since 1995) and of the
Balanced Series of The Phoenix Edge Series Fund. Mr. Riley is Managing Director,
Equities, of Phoenix Investment Counsel, Inc. and National Securities Research
Corporation. From 1988 to 1995, Mr. Riley served as Senior Vice President and
Director of Equity Management for Nationsbank Investment Management.
Managed Bond Portfolio
Mr. James D. Wehr serves as portfolio manager of the Managed Bond Portfolio
and as such is responsible for the day-
to-day management of the Portfolio's holdings. Mr. Wehr has served as portfolio
manager of the Phoenix Home Life Separate Account P since 1990, Phoenix
Tax-Exempt Bond Portfolio of the Phoenix Multi-Portfolio Fund since 1988;
Phoenix California Tax Exempt Bond Fund since 1993 and has been a Managing
Director of PIC since 1991.
Enhanced Reserves Portfolio
Mr. Marvin E. Flewellen serves as portfolio manager of the Enhanced
Reserves Portfolio and as such is responsible for the day-to-day management of
the Portfolio's holdings. Mr. Flewellen has served as a Vice President and a
Fixed Income Portfolio Manager with DPM since 1994. Mr. Flewellen was a Second
Vice President and portfolio manager with Northern Trust Bank from 1985 until
1994.
Growth Portfolio
Mr. Thomas Melvin serves as portfolio manager of the Growth Portfolio and
as such is responsible for the day-to-day management of the Portfolio's
holdings. Mr. Melvin served as portfolio manager of Common Stock, Phoenix Home
Life Mutual Insurance Company from 1991 until 1995. He has been a Managing
Director, Equities of PIC since 1992.
Money Market Portfolio
Ms. Dorothy J. Skaret serves as portfolio manager of the Money Market
Portfolio and as such is responsible for the day-to-day management of the
Portfolio's holdings. Ms. Skaret has served as the portfolio manager of Phoenix
Home Life Separate Account G from 1990 until 1995. Ms Skaret has also served as
the portfolio manager of the Money Market Fund of The Phoenix Edge Series Fund
and of the Money Market Series of Phoenix Series Fund from 1990 until the
present, which also is advised by the Adviser. Ms. Skaret is also a Director,
Public Fixed Income of National Securities & Research Corporation since 1993.
U.S. Government Securities Portfolio
Mr. Christopher J. Kelleher serves as portfolio manager of the U.S.
Government Securities Portfolio and as such is responsible for the day-to-day
management of the Portfolio's holdings. Mr. Kelleher has served as the portfolio
manager of Phoenix Home Life Separate Account U since 1991. Mr. Kelleher has
been a Managing Director, Fixed Income, of PIC since 1991 and is also a Managing
Director, Fixed Income, of National Securities & Research Corporation (since
1993), and Vice President of Phoenix Series Fund and The Phoenix Edge Series
Fund (since 1989).
The Financial Agent
Equity Planning serves as financial agent of the Fund and, as such,
performs administrative, bookkeeping and pricing services and certain other
administrative functions. As compensation, Equity Planning is entitled to a fee,
payable monthly and based upon (a) the average of the aggregate daily net asset
values of each Portfolio of the Fund, at the following incremental annual rates:
First $100 million .05%
$100 million to $300 million .04%
$300 million to $500 million .03%
Greater than $500 million .015%
(b) a minimum fee based on the predominant type of assets of each
Portfolio; and (c) an annual fee of $12,000 together with an additional $12,000
for any additional class of shares created in the future.
18
<PAGE>
For its services during the Fund's fiscal year ended December 31, 1996,
Equity Planning received $98,788 or 0.03% of average net assets.
The Custodians and Transfer Agent
The custodian of the assets of all Portfolios other than the Enhanced
Reserves Portfolio is The Chase Manhattan Bank, N.A., 1 Chase Manhattan Plaza,
Floor 3B, New York, New York 10081. The custodian for the assets of the Enhanced
Reserves Portfolio is State Street Bank and Trust Company, P.O. Box 1713,
Boston, Massachusetts 02101. The Fund has authorized the custodians to appoint
one or more subcustodians for the assets of the Fund held outside the United
States.
Equity Planning serves as transfer agent for the Fund (the "Transfer
Agent") for which it is paid $19.25 for each designated daily dividend
shareholder account and $14.95 for each designated non-daily dividend
shareholder account. The Transfer Agent is authorized to engage sub-agents to
perform certain shareholder servicing functions from time to time for which such
agents shall be paid a fee by the Transfer Agent.
Brokerage Commissions
Although the Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD") prohibit its members from seeking orders for the
execution of investment company portfolio transactions on the basis of their
sales of investment company shares, under such Rules, sales of investment
company shares may be considered in selecting brokers to effect portfolio
transactions. Accordingly, some portfolio transactions are, subject to such
Rules and to obtaining best prices and executions, effected through dealers
(excluding Equity Planning) who sell shares of the Fund. The Advisers may also
select affiliated broker-dealers to execute transactions for the Fund, provided
that the commissions, fees or other remuneration paid to such affiliated brokers
is reasonable and fair as compared to that paid to non-affiliated brokers for
comparable transactions.
DISTRIBUTION PLAN
Equity Planning serves as the national distributor of the Fund's shares.
Equity Planning is registered as a broker-dealer in fifty states. The principal
offices of Equity Planning are located at 100 Bright Meadow Boulevard, P.O. Box
2200, Enfield, Connecticut 06083-2200. Philip R. McLoughlin is a Trustee and
President of the Fund and a director and officer of Equity Planning. Michael E.
Haylon, a director of Equity Planning is an officer of the Fund. G. Jeffrey
Bohne, Nancy G. Curtiss, William E. Keen, III, William R. Moyer, Leonard J.
Saltiel, and Thomas N. Steenburg are officers of the Fund and officers of Equity
Planning.
Equity Planning and the Fund have entered into distribution agreements
under which Equity Planning has agreed to use its best efforts to find
purchasers for Fund shares. The Fund has granted Equity Planning the exclusive
right to purchase from the Fund and resell, as principal, shares needed to fill
unconditional orders for Fund shares. Equity Planning may sell Fund shares
through its registered representatives or through securities dealers with whom
it has sales agreements. Equity Planning may also sell Fund shares pursuant to
sales agreements entered into with banks or bank affiliated securities brokers
who, acting as agent for their customers, place orders for Fund shares with
Equity Planning. Although the Glass-Steagall Act prohibits banks and bank
affiliates from engaging in the business of underwriting, distributing or
selling securities (including mutual fund shares), banking regulators have not
indicated that such institutions are prohibited from purchasing mutual fund
shares upon the order and for the account of their customers. If, because of
changes in law or regulations, or because of new interpretations of existing
law, it is determined that agency transactions of banks or bank affiliated
securities brokers are not permitted under the Glass-Steagall Act, the Trustees
will consider what action, if any, is appropriate. It is not anticipated that
termination of sales agreements with banks or bank affiliated securities brokers
would result in a loss to their customers or a change in the net asset value per
share of a Portfolio of the Fund. The sale of Fund shares through a bank or a
securities broker affiliated with a bank is not expected to preclude the Fund
from borrowing from such bank or from availing itself of custodial or transfer
agency services offered by such bank.
The Trustees have adopted a distribution plan on behalf of the Class Y
Shares pursuant to Rule 12b-1 under the 1940 Act. The Class Y Share distribution
plan (the "Plan") authorizes the payment to Equity Planning of amounts not
exceeding 0.25% annually of the average of the daily net assets of Class Y
Shares of each respective Portfolio for each year elapsed after the inception of
the Plan. Although under no contractual obligation to do so, the Fund intends to
make such payments to Equity Planning as commissions for Class Y Shares sold, to
enable Equity Planning to (i) pay maintenance or other fees with respect to
Class Y Shares (the "Service Fee"), and (ii) pay bank affiliated securities
brokers maintenance or other fees relating to Class Y Shares purchased by their
customers and remaining on the Fund's books during the period for which such fee
is paid. The portion of the above fees paid by the Fund to Equity Planning as
"Service Fees" shall not exceed 0.25% annually of Class Y Share average daily
net assets. Payments, less the portion thereof paid by Equity Planning to
others, may be used by Equity Planning for its expenses of distributing Class Y
Shares. The Fund is not required to reimburse Equity Planning if expenses of
distributing Class Y Shares exceed payments and any sales charges paid to Equity
Planning.
The Plan requires that at least quarterly the Trustees must review a
written report with respect to the amounts expended under the Plan and the
purposes for which such expenditures were made. While the Plan is in effect, the
Fund will be required to commit the selection and nomination of candidates for
Trustees who are not "interested persons" (as defined in the 1940 Act) to the
discretion of other Trustees who are not interested persons.
19
<PAGE>
HOW TO BUY SHARES
The Fund currently issues two classes of shares for each Portfolio. Class X
Shares are available to Plans (as hereafter defined) and institutional investors
which initially purchase Class X Shares of the Fund whose net asset value
exceeds $5 million. Class Y Shares are offered to Plans and institutional
investors which initially purchase Class Y Shares of the Fund whose net asset
value exceeds $1 million. "Plans" are defined as corporate, public, union and
governmental pension plans. Completed applications for the purchase of shares
should be mailed to Phoenix Duff & Phelps Institutional Mutual Funds c/o State
Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301.
The minimum subsequent investment for each class is $100. Shares are sold
at the net asset value per share (as described below) next computed after a
completed application or purchase order is received by State Street Bank and
Trust Company together with good and sufficient funds therefor (certified
checks, federal funds wires, and automated clearing house transactions ("ACH")).
Completed orders received on a business day prior to 4:00 p.m. E.S.T. will be
processed based on that day's closing net asset value. Sales of shares may be
made through broker-dealers, pension consultants or other qualified financial
agents/institutions.
The minimum initial investment amounts for the purchase of either class of
Fund shares shall be waived with respect to purchases by: (i) Plans and
institutional investors who have been invested in those separate investment
accounts of Phoenix Home Life Mutual Insurance Company described above as of
March 1, 1996; (ii) trust companies, bank trust departments, broker-dealers
financial planners and investment advisers for funds over which such entity
charges an account management fee and which are held in a fiduciary, agency,
advisory, custodial or similar capacity; or (iii) Plans and institutional
investors where the amounts invested represent the redemption proceeds from the
reorganization or merger of other investment companies.
No trail fees are payable to broker-dealers or others in connection with
the purchase, sale or retention of Class X Shares. Equity Planning may pay
broker-dealers and financial institutions exempt from registration pursuant to
the Securities Exchange Act of 1934, as amended, and related regulations
("exempt financial institutions"), from its own profits and resources, a
percentage of the net asset value of any shares sold as set forth below:
Payment to
Purchase Amount Broker-Dealer
--------------- ---------------
$0 to $5,000,000 0.50%
$5,000,001 to $10,000,000 0.25%
$10,000,001 or more 0.10%
If part of any investment is subsequently redeemed within one year of the
investment date, the broker/dealer or exempt financial institution will refund
to Equity Planning any such amounts paid with respect to the investment. Equity
Planning will sponsor sales contests, training and educational meetings and
provide to all qualifying agents, from its own profits and resources, additional
compensation in the form of trips, merchandise or expense reimbursement.
Broker-dealers or exempt financial institutions other than Equity Planning may
also levy customary additional charges to shareholders for their services in
effecting transactions, if they notify the Fund of their intention to do so.
Equity Planning intends to pay broker-dealers and exempt financial
institutions with whom it has a sales agreement a service fee of 0.25% of the
average daily net asset value of Class Y Shares sold by such broker-dealers and
exempt financial institutions, subject to future amendment or termination.
Equity Planning will retain all or a portion of the continuing distribution fee
assessed to Class Y shareholders to finance commissions and related marketing
expenses.
Exchange Privileges
Shareholders may exchange Class X or Class Y Shares held in book-entry form
for shares of the same class of other Portfolios of the Fund provided the
following conditions are met: (1) the shares that will be acquired in the
exchange (the "Acquired Shares") are available for sale in the shareholder's
principal place of business; (2) the Acquired Shares are the same class as the
shares to be surrendered (the "Exchanged Shares"); (3) the Acquired Shares will
be registered to the same shareholder account as the Exchanged Shares; (4) the
account value of the shares to be acquired must equal or exceed the minimum
initial or subsequent investment amount, as applicable, after the exchange is
implemented; and (5) the shareholder is qualified to acquire Fund shares in
accordance with the limitations described in this Prospectus. The Fund reserves
the right to refuse exchange purchases by any person or broker/dealer if, in the
Fund's or Adviser's opinion, (a) the exchange would adversely affect the Fund's
ability to invest according to its investment objectives and policies; (b) the
Fund believes that a pattern of exchanges coincides with a "market timing"
strategy; or (c) otherwise adversely affect the Fund and its shareholders. The
Fund reserves the right to terminate or modify its exchange privileges at any
time upon giving written notice to shareholders at least 60 days in advance.
Shareholders are urged to review their constituent documents and relevant
requirements in order to verify pertinent limitations imposed by retirement plan
or group annuity contract exchange limits as well as restrictions imposed by
governing law.
Telephone Exchange Privileges
Unless a shareholder elects in writing not to participate in the Telephone
Exchange Privilege, shares for which certificates have not been issued may be
exchanged by calling 800-814-1897 provided that the exchange is made between
accounts with identical registrations. Under the Telephone Exchange Privilege,
telephone exchange orders may also be entered on behalf of the shareholder by
his or her registered representative.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephone instructions are genuine. In addition to requiring
identical registrations on both
20
<PAGE>
accounts, the Transfer Agent will require address verification and will record
telephone instructions on tape. All exchanges will be confirmed in writing to
the shareholder. To the extent that procedures reasonably designed to prevent
unauthorized telephone exchanges are not followed, the Fund and/or the Transfer
Agent may be liable for following telephone instructions for exchange
transactions that prove to be fraudulent. Broker/dealers other than Equity
Planning have agreed to bear the risk of any loss resulting from any
unauthorized telephone exchange instruction from the firm or its registered
representatives. However, the shareholder would bear the risk of loss resulting
from instructions entered by an unauthorized third party that the Fund and/or
the Transfer Agent reasonably believe to be genuine. The Telephone Exchange
Privilege may be modified or terminated at any time on 60 days' notice to
shareholders. In addition, during times of drastic economic or market changes,
the Telephone Exchange Privilege may be difficult to exercise or may be
suspended temporarily. The Telephone Exchange Privilege is available only in
States where shares being acquired may be legally sold.
If a shareholder elects not to use the Telephone Exchange Privilege or if
the shares being exchanged are represented by a certificate or certificates, in
order to exchange shares the shareholder must submit a written request to
Phoenix Duff & Phelps Institutional Mutual Funds c/o State Street Bank and Trust
Company, P.O. Box 8301, Boston, MA 02266-8301. If the shares are being exchanged
between accounts that are not registered identically, the signature on such
request must be guaranteed by an eligible guarantor institution as defined by
the Transfer Agent in accordance with its signature guarantee procedures.
Currently, such procedures generally permit guarantees by banks, broker dealers,
credit union, national securities exchanges, registered securities associations,
clearing agencies and savings associations. Any outstanding certificate or
certificates for the tendered shares must be duly endorsed and submitted.
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 (the "Exchange") on days
when the Exchange is open for trading. The net asset value per share of a
Portfolio is determined by adding the values of all securities and other assets
of the Portfolio, subtracting liabilities, and dividing by the total number of
outstanding shares of the Portfolio. The total liability allocated to a class,
plus that class's distribution fee and any other expenses allocated solely to
that class, are deducted from the proportionate interest of such class in the
assets of the Portfolio, and the resulting amount of each is divided by the
number of shares of that class outstanding to produce the net asset value per
share.
The Portfolio's investments are valued at market value or, where market
quotations are not available, at fair value as determined in good faith by the
Trustees or their delegates. Foreign and domestic debt securities (other than
short-term investments) are valued on the basis of broker quotations or
valuations provided by a pricing service approved by the Trustees when such
prices are believed to reflect the fair value of such securities. Foreign and
domestic equity securities are valued at the last sale price or, if there has
been no sale that day, at the last bid price, generally. Since the Trust does
not price securities on weekends or United States national holidays, the net
asset value of a Portfolio's foreign assets may be significantly affected on
days when the investor has no access to the Trust. Short-term investments having
a remaining maturity of less than sixty-one days are valued at amortized cost,
which the Trustees have determined approximates market value. For further
information about security valuations, see the Statement of Additional
Information.
HOW TO REDEEM SHARES
Any holder of shares of any Portfolio may require the Fund to redeem its
shares at any time at the net asset value per share next computed after receipt
of a redemption request in proper written form by State Street Bank and Trust
Company, P.O. Box 8301, Boston, MA 02266-8301, ATTN: Phoenix Duff & Phelps
Institutional Mutual Funds. To be in proper form to redeem shares, (1) the
signature(s) of duly authorized representative(s) of the shareholder must appear
in the appropriate place upon the stock power; (2) the stock power or any
related instruction transmittal must specify the name and account number of the
shareholder exactly as registered; (3) the name of the Portfolio; and (4) and
all such signatures must be guaranteed by an eligible guarantor institution as
determined in accordance with the standards and procedures established by the
Transfer Agent. Currently, such procedures generally permit guarantees by banks,
broker-dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations.
Signature(s) must also be guaranteed on any change of address request submitted
in conjunction with any redemption request. Additional documentation may be
required for redemptions by corporations, partnerships or other organizations,
or if redemption is requested by anyone other than the shareholder(s) of record.
Redemption requests will not be honored until all required documents in proper
form have been received.
In addition, each Portfolio maintains a continuous offer to repurchase its
shares, and shareholders may normally sell their shares through securities
dealers, brokers or agents who may charge customary commissions or fees for
their services. The redemption price in such case will be the price as of the
close of the general trading session of the New York Stock Exchange on that day,
provided the order is received by the dealer prior thereto, and is transmitted
to the Distributor prior to the close of its business. No charge is made by the
Fund on redemptions, but shares tendered through investment dealers may be
subject to service charge by such dealers. Payment for shares redeemed will be
made within three days after receipt of the duly endorsed share certificates (if
issued) or written request; provided, however, that redemption proceeds will not
be disbursed until each check used for purchase of shares has
21
<PAGE>
been cleared for payment by the investor's bank which may take up to 15 days
after receipt of the check.
Telephone Redemption Privileges
Unless a shareholder elects in writing not to participate in the Telephone
Redemption Privilege, shareholders may redeem shares valued at up to $100,000 by
calling (800) 814-1897. The Fund and the Transfer Agent will employ reasonable
procedures to confirm that telephone instructions are genuine. Address and bank
account information will be verified, telephone redemption instructions will be
recorded on tape, and all redemptions will be confirmed in writing to the
shareholder. If there has been an address change within the past 60 days, a
telephone redemption will not be authorized. To the extent that procedures
reasonably designed to prevent unauthorized telephone redemptions are not
followed, the Fund and/or the Transfer Agent may be liable for following
telephone instructions for redemption transactions that prove to be fraudulent.
Broker/dealers other than Equity Planning have agreed to bear the risk of any
loss resulting from any unauthorized telephone redemption instruction from the
firm or its registered representatives. However, the shareholder would bear the
risk of loss resulting from instructions entered by an unauthorized person or
third party that the Fund and/or the Transfer Agent reasonably believe to be
genuine. The Telephone Redemption Privilege may be modified or terminated at any
time without prior notice to shareholders. In addition, during times of drastic
economic or market changes, the telephone redemption privilege may be difficult
to exercise or may be suspended temporarily and a shareholder should submit a
written redemption request, as described above.
If the amount of the redemption is $500 or more, the proceeds will be wired
to the shareholder's designated U.S. commercial bank account. If the amount of
the redemption is less than $500, the proceeds will be sent by check to the
address of record on the shareholder's account.
Telephone redemption orders received and accepted by Equity Planning on any
day when Equity Planning is open for business will be entered at the next
determined net asset value. However, telephone redemption orders received and
accepted by Equity Planning after the close of trading hours on the Exchange
will be executed on the following business day. The proceeds of a telephone
redemption will normally be sent on the first business day following receipt of
the redemption request. However, with respect to the telephone redemption of
shares purchased by check, such requests will only be effected after the Fund
has assured itself that good payment has been collected for the purchase of
shares, which may take up to 15 days.
Systematic Withdrawal Program
The Systematic Withdrawal Program (the "Program") allows shareholders to
periodically redeem a portion of their shares on predetermined monthly,
quarterly, semi-annual or annual dates. In order to participate in the Program,
shareholders must provide written notice to the Transfer Agent specifying (a)
the frequency in which Program redemptions are to occur, (b) the routing in
which proceeds are to be directed into the shareholder's account, and (c) the
priority among Portfolios and classes of shares in which redemptions are to
occur.
Except as provided below, Program payments will be made on or about the
20th day of the month during the frequency period selected by the shareholder.
Program payments may also be processed through Automated Clearing House (ACH) to
the shareholder's account on or about the 10th, 15th or 25th day of each month.
Participants may not redeem sums in any period in excess of the equivalent of 1%
of aggregate Fund holdings (at the net asset value on the date of redemption)
during each month. Program redemptions will only be effected after the Fund has
assured itself that good payment has been received for the purchase of shares
which are to be redeemed.
Class X shareholders participating in the Program must at all times own
shares of the Fund worth $100,000 or more in the aggregate as determined by the
then current net asset value per share. Class Y shareholders participating in
the Program must at all times own shares of the Fund worth $50,000 or more in
the aggregate as determined by the then current net asset value per share. A
shareholder's participation in the Program will also automatically terminate if
redemptions are made outside the Program.
Checkwriting Privileges
Shareholders owning shares of the Enhanced Reserves, Money Market and/or
U.S. Government Securities Portfolios may elect to redeem shares through
checkwriting privileges offered by Equity Planning. In order to exercise this
privilege, qualified shareholders must (a) complete the appropriate application,
(b) submit the required signature card/ incumbency certificate containing
guaranteed signatures of all authorized check signatories, and (c) designate the
priority among Portfolios and classes of shares in which redemptions are to
occur in order to cover the amount of each check. Applications are available by
contacting Equity Planning at 100 Bright Meadow Boulevard, P.O. Box 2200,
Enfield, Connecticut 06083-2200 or by calling (800) 814-1897.
Checkwriting privileges are subject to rules and procedures adopted from
time to time by Equity Planning. Checkwriting privileges may be amended or
withdrawn upon ten days prior notice. Equity Planning reserves the right, in its
sole and absolute discretion, to refuse to honor checks and/or terminate
checkwriting privileges with respect to a shareholder in the event that (a)
amounts drawn in any check are less than $500; (b) the shareholder at any time
owns shares of the Fund worth $50,000 or less, as determined by the then current
net asset value(s) per share; (c) the shareholder owns shares of the Fund worth
less than the amount of any check, as determined on the date of presentment of
such check to the Transfer Agent; or (d) honoring a check requires redemption of
shares purchased with sums from the shareholder which have not been actually and
properly received by the Fund (which may take at least fifteen days after
receipt of the check). Presently, there is no charge to the shareholder for this
privilege. Equity Planning reserves the right, however, to assess charges in
connection with checks drawn against non-sufficient funds or for research
expenses.
When a check is presented to Equity Planning for payment, a sufficient
number of full and fractional shares owned by the shareholder and identified as
being available for such
22
<PAGE>
purposes will be redeemed to cover the amount of the check. The number of shares
to be redeemed will be determined on the date the check is received by the
Transfer Agent. Checks will be processed on days in which the New York Stock
Exchange is open. If the net asset value(s) of the shares owned by the
shareholder are insufficient to cover the amount of a check presented, or if
good and sufficient funds required to purchase such shares have not been
actually received by the Fund, Equity Planning shall return such check marked
"Non-
sufficient Funds" and no shares shall be redeemed. Canceled checks returned to
shareholders shall be deemed to constitute confirmation of redemptions.
Shareholders may not close an account by a withdrawal check.
Redemption-in-Kind
To the extent consistent with state and federal law, the Fund may make
payment of the redemption price either in cash or in kind. The Fund has elected
to pay in cash all requests for redemption by any shareholder of record, but may
limit such cash in respect to each shareholder during any 90 day period to the
lesser of $250,000 or 1% of the net asset value of the Fund at the beginning of
such period. This election has been made pursuant to Rule 18f-1 under the 1940
Act and is irrevocable while the Rule is in effect unless the Securities and
Exchange Commission, by order, permits its withdrawal. In case of a redemption
in kind, securities delivered in payment for shares would be valued at the same
value assigned to them in computing the net asset value per share of the Fund. A
shareholder receiving such securities would incur brokerage costs when it sold
the securities.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio will be treated as a separate mutual fund for federal income
tax purposes. Each Portfolio intends to elect to be taxed as a regulated
investment company ("RIC") and qualify as such annually under Subchapter M of
the Internal Revenue Code (the "Code"). As a RIC, each Portfolio will not be
subject to federal income tax on its ordinary income and net realized gains
distributed to its shareholders. Each Portfolio intends to distribute sufficient
ordinary income and net realized capital gains, if any, annually to avoid the
imposition of federal income tax or a non-deductible 4% excise tax.
Many investors, including most tax qualified plan investors, may be
eligible for preferential federal income tax treatment on distributions received
from the Portfolio and dispositions of shares of the Portfolio. The Fund has not
sought opinions of counsel or applied for a ruling from the Internal Revenue
Service as to whether the assessment of higher distribution fees with respect to
Class Y Shares may result in any dividends or distributions constituting
"preferential dividends" under the Code. Complete assurances cannot be given
when or whether the Fund will receive a favorable opinion or ruling or, the
potential consequences associated with an adverse determination. This Prospectus
does not attempt to describe in any respect such preferential tax treatment. Any
prospective investor that is a trust or other entity eligible for special tax
treatment under the Code that is considering purchasing shares of the Fund
should consult its tax advisor about the federal, state or local tax
consequences particular to it, as should persons considering whether to have
amounts held for their benefit in such trusts or other entities which intend to
invest in shares of the Fund.
Investors that do not receive preferential tax treatment are subject to
federal income tax on distributions received with respect to their shares of the
Fund. Distributions of the Fund's ordinary income and short-term capital gains
are taxable to shareholders as ordinary income whether received in cash or
shares of the Fund's. Designated long-term capital gains distributions are
taxable as long-term capital gains whether distribution in cash or additional
shares and regardless of how long the shareholder owned the shares of the Fund;
however, a loss recognized on the sale of the shares of a Portfolio held for six
months or less will be treated as a long-term capital loss to the extent of
long-term capital gains distributions received on those shares. Certain
designated dividends paid by the Fund may be eligible for the dividends-received
deduction for corporate shareholders. Shareholders should consult with their tax
advisor for additional information concerning the federal, state, local and
foreign tax consequences of purchasing shares of the Portfolio.
Dividends from net investment income, if any, of the Money Market Portfolio
and Enhanced Reserves Portfolio will be declared daily and paid monthly.
Dividends from net investment income for all other Portfolios will be accrued
and paid semi-annually. Dividends from net realized capital gains, if any, will
be declared and paid annually for all Portfolios. Dividends and distributions
with respect to the shares of any class of any Portfolio will be payable in full
and fractional shares of such class of Portfolio at the net asset value on the
first business day after the record date, or, at the option of the shareholder,
in cash. Any shareholder who purchases shares of a Portfolio prior to the close
of business on the record date for a dividend or distribution will be entitled
to receive such dividend or distribution.
The foregoing is only a summary of some of the important tax considerations
generally affecting the Portfolios and their shareholders. Shareholders should
consult competent tax advisers regarding specific tax situations.
ADDITIONAL INFORMATION
Organization of the Fund
The capitalization of the Fund consists solely of an unlimited number of
shares of beneficial interest. The Fund currently offers shares in six different
Portfolios, each offering two classes. Holders of shares of a Portfolio have
equal rights with regard to voting, redemptions, dividends, distributions, and
liquidations with respect to that Portfolio (provided that Class Y Shares of a
Portfolio bear higher distribution fees and pay correspondingly lower dividends
per share than Class X Shares of the same Portfolio). Shareholders of all
Portfolios vote on the election of Trustees. On matters affecting an
23
<PAGE>
individual Portfolio (such as approval of an investment advisory agreement or a
change in fundamental investment policies), a separate vote of that Portfolio is
required. On matters affecting an individual class (such as approval of matters
relating to the Class Y distribution plan), a separate vote of that class is
required. Shares of each Portfolio are fully paid, nonassessable, redeemable and
fully transferable when they are issued. Shares do not have cumulative voting
rights, conversion, preemptive rights or subscription rights.
The assets received by the Fund for the issue or sale of shares of each
Portfolio and all income, earnings, profits and proceeds thereof, are allocated
to such Portfolio (and class if applicable) subject only to the rights of
creditors, and constitute the underlying assets of such Portfolio (and class if
applicable). The underlying assets of each Portfolio are required to be
segregated on the books of account, and are to be charged with the expenses in
respect to such Portfolio and with a share of the general expenses of the Fund.
Any general expenses of the Fund not readily identifiable as belonging to a
particular Portfolio or class will be allocated by or under the direction of the
Trustees as they determine fair and equitable.
Unlike the stockholders of a corporation, there is a possibility that the
shareholders of a Massachusetts business trust such as the Fund may be
personally liable for debts or claims against the Fund. The Declaration of Trust
provides that shareholders shall not be subject to any personal liability for
the acts or obligations of the Fund and that every written agreement,
undertaking or obligation made or issued by the Fund shall contain a provision
to that effect. The Declaration of Trust provides for indemnification out of the
trust property for all losses and expenses of any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability, which is
considered remote, is limited to circumstances in which the Fund itself would be
unable to meet its obligations.
Prior to March 1, 1996, the Balanced, Managed Bond, Growth, Money Market
and U.S. Government Securities Portfolios existed as the Balanced Account
(Separate Account L), Managed Bond Account (Separate Account P), Growth Stock
Account (Separate Account S), Money Market Account (Separate Account G), and
U.S. Government Account (Separate Account U), respectively; separate investment
accounts of Phoenix Home Life, pursuant to the insurance laws of the State of
New York and the laws of other States. Each separate account was maintained for
the purpose of investing amounts allocated thereto by Phoenix Home Life under
certain group annuity contracts issued by Phoenix Home Life in connection with
pension or profit-sharing plans which meet the requirements of Section 401(a) of
the Internal Revenue Code of 1986, as amended. The separate accounts were not
investment companies pursuant to the 1940 Act. Accordingly, a risk factor
associated with an investment in the Fund is that it has no operating history as
a mutual fund prior to March 1, 1996.
On October 16, 1995, the Board of Directors of Phoenix Home Life approved
the conversion of each such separate account into a corresponding Portfolio of
the Fund. As of March 1, 1996, the net assets of each separate account were
transferred into the corresponding Portfolio of the Fund in exchange for shares
of that Portfolio which were credited to each contractholder in accordance with
the value of that contractholder's separate account units as of the close of
business on such date. Each separate account was then terminated.
On June 3, 1996 Phoenix Duff & Phelps Institutional Enhanced Reserves
Portfolio, a portfolio of Phoenix Duff & Phelps Institutional Mutual Funds
entered into an Agreement and Plan of Reorganization with Duff & Phelps Enhanced
Reserves Fund, a series of Duff & Phelps Mutual Funds. The Board of Trustees of
the Phoenix Duff & Phelps Institutional Mutual Funds determined that the
Reorganization to combine the assets of the Enhanced Reserves Portfolio with
those of the Enhanced Reserves Fund will achieve greater operating economies and
increased portfolio diversification. At a Special Meeting of Shareholders of
Duff & Phelps Enhanced Reserves Fund held July 19, 1996, the holders of shares
of beneficial interest, approved the Agreement and Plan of Reorganization
pursuant to which the Duff & Phelps Enhanced Reserves Fund transferred all of
its net assets to the Phoenix Duff & Phelps Institutional Enhanced Reserves
Portfolio in exchange for corresponding shares of beneficial interest, of the
Phoenix Funds, which shares were then distributed to shareholders of the Duff &
Phelps Enhanced Reserves Fund.
Additional Inquiries
Inquiries and requests for the Statement of Additional Information, the
Annual Report to Shareholders and the Semi-
Annual Report to Shareholders should be directed to Equity Planning at (800)
814-1897 or 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut
06083-2200.
24
<PAGE>
APPENDIX
A-1 and P-1 Commercial Paper Ratings
The Money Market Portfolio will only invest in commercial paper which at
the date of investment is rated A-1 by Standard & Poor's Corporation or P-1 by
Moody's Investors Service, Inc., or, if not rated, is issued or guaranteed by
companies which at the date of investment have an outstanding debt issue rated
AA by Standard & Poor's or Aa by Moody's.
Commercial paper rated A-1 by Standard & Poor's Corporation ("S&P") has the
following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long-
term senior debt is rated "A" or better. The issuer has access to at least two
additional channels of borrowing. Basic earnings and cash flow have an upward
trend with allowance made for unusual circumstances. Typically, the issuer's
industry is well established and the issuer has a strong position within the
industry. The reliability and quality of management are unquestioned.
The rating P-1 is the highest commercial paper rating assigned by Moody's
Investors Service, Inc. ("Moody's"). Among the factors considered by Moody's in
assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationship which exists with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations.
Moody's Investors Service, Inc., Corporate Bond Ratings
Aaa--Bonds which are rated Aaa are judged to be of 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.
Aa--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.
A--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.
Baa--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.
Ba--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.
B--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.
Caa--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.
Ca--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.
C--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 and Poor's Corporation's Corporate
Bond Ratings
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
BB-B-CCC-CC--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.
25
<PAGE>
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Fitch Investor Services, Inc.
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA--Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA". Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated "F-1+."
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and
interest reflects the obligor's limited margin of safety and the need for
reasonable business and economic activity throughout the life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D--Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
Plus (+) Minus (-)--Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs however, are not used in the "DDD", "DD", or "D" categories.
Duff & Phelps Credit Rating Co. Rating Scale--Duff & Phelps (not affiliated
with the Fund or DPM) offers ratings for short-term and long-term debt,
preferred stock, structured financings, and insurer's claims paying ability. D&P
ratings are specific to credit quality, i.e., the likelihood of timely payment
for principal, interest, and in the case of a preferred stock rating, preferred
stock dividends. The insurance company claims paying ability ratings reflect an
insurer's ability to meet its claims obligations.
Long-Term Ratings
AAA Highest Quality
AA+, AA, AA- High Quality
A+, A, A- Good Quality
BBB+, BBB, BBB- Satisfactory Quality
(investment grade)
BB+, B, B- Non-Investment Grade
B+, B, B- Non-Investment Grade
CCC Speculative
26
<PAGE>
BACKUP WITHHOLDING INFORMATION
Step 1. Please make sure that the social security number or taxpayer
identification number (TIN) which appears on the Application complies with
the following guidelines:
<TABLE>
<CAPTION>
Account Type Give Social Security Number or Tax Identification Number of:
<S> <C>
- ---------------------------------------------------------------------------------------------------------
Individual Individual
- ---------------------------------------------------------------------------------------------------------
Joint (or Joint Tenant) Owner who will be paying tax
- ---------------------------------------------------------------------------------------------------------
Uniform Gifts to Minors Minor
- ---------------------------------------------------------------------------------------------------------
Legal Guardian Ward, Minor or Incompetent
- ---------------------------------------------------------------------------------------------------------
Sole Proprietor Owner of Business (also provide owner's name)
- ---------------------------------------------------------------------------------------------------------
Trust, Estate, Pension Plan Trust Trust, Estate, Pension Plan Trust (not personal TIN of fiduciary)
- ---------------------------------------------------------------------------------------------------------
Corporation, Partnership,
Other Organization Corporation, Partnership, Other Organization
- ---------------------------------------------------------------------------------------------------------
Broker/Nominee Broker/Nominee
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Step 2. If you do not have a TIN, you must obtain Form SS-5 (Application for
Social Security Number) or Form SS-4 (Application for Employer
Identification Number) from your local Social Security or IRS office and
apply for one. Write "Applied For" in the space on the application.
Step 3. If you are one of the entities listed below, you are exempt from backup
withholding.
[bullet] A corporation
[bullet] Financial institution
[bullet] Section 501(a) exempt organization (IRA, Corporate Retirement
Plan, 403(b), Keogh)
[bullet] United States or any agency or instrumentality thereof
[bullet] A State, the District of Columbia, a possession of the United
States, or any subdivision or instrumentality thereof
[bullet] International organization or any agency or instrumentality
thereof
[bullet] Registered dealer in securities or commodities registered in the
U.S. or a possession of the U.S.
[bullet] Real estate investment trust
[bullet] Common trust fund operated by a bank under section 584(a)
[bullet] An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1)
[bullet] Regulated Investment Company
If you are in doubt as to whether you are exempt, please contact the Internal
Revenue Service.
Step 4. IRS Penalties--If you do not supply us with your TIN, you will be
subject to an IRS $50 penalty unless your failure is due to reasonable
cause and not willful neglect. If you fail to report interest, dividend or
patronage dividend income on your federal income tax return, you will be
treated as negligent and subject to an IRS 5% penalty tax on any resulting
underpayment of tax unless there is clear and convincing evidence to the
contrary. If you falsify information on this form or make any other false
statement resulting in no backup withholding on an account which should be
subject to a backup withholding, you may be subject to an IRS $500 penalty
and certain criminal penalties including fines and imprisonment.
- -----------
This Prospectus sets forth concisely the information about the Phoenix Duff &
Phelps Institutional Mutual Funds (the "Fund") which you should know before
investing. Please read it carefully and retain it for future reference.
The Fund has filed with the Securities and Exchange Commission a Statement of
Additional Information, dated May 1, 1997. The Statement contains more detailed
information about the Fund and is incorporated into this Prospectus by
reference. You may obtain a free copy of the Statement by writing the Fund c/o
Phoenix Equity Planning Corporation, 100 Bright Meadow, P.O. Box 2200, Enfield,
Connecticut 06083-2200.
Financial information relating to the Fund is contained in the Annual Report to
Shareholders for the year ended December 31, 1996 and is incorporated into the
Statement of Additional Information by reference.
[logo] Printed on recycled paper using soybean ink
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE>
Phoenix Duff & Phelps Institutional Mutual Funds
PO Box 2200
Enfield CT 06083-2200
[LOGO] PHOENIX
DUFF & PHELPS
PDP 039 (5/97)
<PAGE>
PHOENIX
FUNDS
PROSPECTUS
MAY 1, 1997
Phoenix Duff & Phelps
Institutional Mutual Funds
- -REAL ESTATE EQUITY SECURITIES PORTFOLIO
[LOGO] PHOENIX
DUFF & PHELPS
<PAGE>
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
101 Munson Street
Greenfield, MA 01301
(800) 814-1897
PROSPECTUS
May 1, 1997
Phoenix Duff & Phelps Institutional Mutual Funds (the "Fund") is an
open-end management investment company whose shares are presently offered in
seven separate portfolios. Each portfolio generally operates as a separate fund
with its own investment objectives and policies designed to meet its specific
investment goals. This Prospectus offers only the shares of the Phoenix Real
Estate Equity Securities Portfolio.
The Phoenix Real Estate Equity Securities Portfolio (the "Real Estate
Portfolio") seeks as its investment objective capital appreciation and income
with approximately equal emphasis. It intends under normal circumstances to
invest primarily in marketable securities of publicly traded real estate
investment trusts (REITS) and companies that invest in, operate, develop, and/or
manage real estate located in the United States.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. No dealer, salesperson or
other person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Fund, Adviser or Distributor. This Prospectus does
not constitute an offer to sell or solicitation of an offer to buy any of the
securities offered hereby in any state in which or to any person whom it is
unlawful to make such offer. Investors should read and retain this Prospectus
for future reference. Additional information about the Fund is contained in the
Statement of Additional Information dated May 1, 1997 which has been filed with
the Securities and Exchange Commission and is available at no charge by calling
(800) 814-1897 or by writing to Phoenix Equity Planning Corporation, 100 Bright
Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200. The Statement
of Additional Information is incorporated herein by reference.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, credit union, or affiliated entity and are not federally
insured or otherwise protected by the Federal Deposit Insurance Corporation
(FDIC), he Federal Reserve Board or any other agency and involve investment
risk, including possible loss of principal.
- --------------------------------------------------------------------------------
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
------
INTRODUCTION .......................................................... 3
FUND EXPENSES .......................................................... 4
PERFORMANCE INFORMATION .............................................. 5
INVESTMENT OBJECTIVES AND POLICIES ..................................... 6
INVESTMENT TECHNIQUES AND RELATED RISKS ............................... 7
INVESTMENT RESTRICTIONS .............................................. 10
MANAGEMENT OF THE FUND ................................................. 10
DISTRIBUTION PLAN .................................................... 11
HOW TO BUY SHARES .................................................... 12
NET ASSET VALUE ....................................................... 13
HOW TO REDEEM SHARES ................................................. 13
DIVIDENDS, DISTRIBUTIONS AND TAXES ..................................... 14
ADDITIONAL INFORMATION ................................................. 15
2
<PAGE>
INTRODUCTION
This Prospectus describes certain of the shares offered by and the
operations of Phoenix Duff & Phelps Institutional Mutual Funds (the "Fund"). The
Fund is an open-end management investment company established as a Massachusetts
business trust pursuant to an Agreement and Declaration of Trust dated December
4, 1995. The Fund presently consists of seven separate portfolios. Each
portfolio has a different investment objective and invests primarily in certain
types of securities and is designed to meet different investment needs. This
Prospectus pertains only to the Phoenix Real Estate Equity Securities Portfolio
(the "Real Estate Portfolio" or "Portfolio").
The investment adviser for the Real Estate Portfolio is Phoenix Realty
Securities, Inc. (the "Adviser"). The Adviser is a wholly-
owned indirect subsidiary of Phoenix Home Life Mutual Insurance Company. For
managing or directing the investments of the Real Estate Portfolio, the Adviser
is entitled to a basic monthly fee equivalent to .50% of the aggregate daily net
assets of such Real Estate Portfolio. In addition, this fee is subject to a
performance adjustment to the extent that Portfolio annual performance differs
from prescribed benchmarks.
The Distributor and Distribution Plan
Phoenix Equity Planning Corporation ("Equity Planning" or "Distributor"),
serves as national distributor of the Fund's shares. See "Distribution Plan" and
the Statement of Additional Information. Equity Planning also acts as the Fund's
financial agent and transfer agent. See "The Financial Agent and Administrator"
and "The Custodian and Transfer Agent."
The Fund has adopted a distribution plan for Class Y Shares pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"). The distribution plan adopted for Class Y Shares provides that the Fund
shall reimburse the Distributor up to a maximum annual rate of 0.25% of the
Fund's average daily Class Y Share net assets for distribution expenses incurred
in connection with the sale and promotion of Class Y Shares for furnishing
shareholder services. See "Distribution Plan."
Purchase of Shares
The Real Estate Portfolio is currently authorized to offer two classes of
shares on a continuous basis. Class X Shares and Class Y Shares are both
available to Plans (as hereafter defined) and institutional investors which
initially purchase shares whose net asset value equals or exceeds $250,000. The
minimum subsequent investment for each class is $100. "Plans" are defined as
corporate, public, union and governmental pension plans. Shares of each class
represent an identical interest in the investment portfolio of the Real Estate
Portfolio, and generally have the same rights except that Class Y Shares bear
the cost of higher distribution fees which cause the Class Y Shares to have a
higher expense ratio and to receive lower dividends than Class X Shares. See
"How To Buy Shares."
Redemption of Shares
Shares may be redeemed at any time at the net asset value per share next
computed after receipt of a redemption request by the Transfer Agent. See "How
to Redeem Shares."
Risk Factors
There can be no assurance that the Real Estate Portfolio will achieve its
investment objective. Although the Real Estate Portfolio does not invest
directly in real property, it does invest primarily in securities concentrated
in and directly related to the real estate industry and may therefore be subject
to certain risks associated with the ownership of real estate and with the real
estate industry in general. The Real Estate Portfolio is non-diversified, and
therefore its value is potentially more susceptible to adverse developments
affecting the real estate industry. The risk factors relevant to investment in
the Real Estate Portfolio should be reviewed and are set forth in the
"Investment Objectives and Policies" and "Investment Techniques and Related
Risks" sections of this Prospectus and Statement of Additional Information.
3
<PAGE>
FUND EXPENSES
The following table illustrates all pro-forma expenses and fees that a
shareholder is expected to incur.
<TABLE>
<CAPTION>
Real Estate Portfolio
--------------------------------------------
<S> <C> <C>
Class X Shares Class Y Shares
- -----------------------------------------------------------------------------------------------------------------------------
[Pro-forma] [Pro-forma]
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases (as a percentage of offering price) None None
Maximum Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fees None None
Exchange Fee None None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees 0.50% 0.50%
12b-1 Fees None 0.25%
Other Operating Expenses (After Reimbursement) 0.40%(a) 0.40%(a)
---- ----
Total Fund Operating Expenses 0.90% 1.15%
==== ====
</TABLE>
- -----------
(a) Phoenix Realty Securities, Inc. has voluntarily agreed to reimburse or
waive Other Operating Expenses of Class X and Y Shares of the Real Estate
Portfolio, excluding interest, taxes, brokerage fees, commissions and
extraordinary expenses until December 31, 1997 to the extent that such expenses
exceed .40% of the average annual net asset values. Other Operating Expenses for
the Real Estate Portfolio are estimated to be .88% and .88%, respectively,
absent such reimbursement or waiver, and Total Operating Expenses are estimated
to be 1.38% and 1.63% for Class X and Y Shares, respectively, absent such
reimbursement or waiver.
Cumulative Expenses
Paid for the Period
Example* 1 year 3 years
- -------- --------- ---------
An investor would pay the following expenses on
(1) 5% annual return and (2) redemption at the
Real Estate Portfolio
Class X Shares 9 29
Class Y Shares 12 37
*The purpose of the table above is to help the investor understand the various
costs and expenses that the investor will bear directly or indirectly. The
example should not be considered a representation of past or future expenses.
Actual expenses may be greater or less than those shown. For additional
information regarding various costs and expenses, see "Management of the Fund,"
and "How to Buy Shares."
4
<PAGE>
PERFORMANCE INFORMATION
The Fund may, from time to time, include the performance history of the
Real Estate Portfolio (and each Class thereof) in advertisements, sales
literature or reports to current or prospective shareholders. Both yield and
total return figures are computed separately for Class X and Class Y Shares in
accordance with formulas specified by the Securities and Exchange Commission.
Standardized quotations of average annual total return for each class of
shares will be expressed in terms of the average annual compounded rate of
return of a hypothetical investment in either Class X or Class Y Shares over a
period of 1, 5, and 10 years (or up to the life of the class of shares).
Standardized total return quotations reflect the deduction of a proportional
share of each Class's expenses (on an annual basis), and assume that all
dividends and distributions are reinvested when paid. It is expected that the
performance of Class X Shares shall be better than that of Class Y Shares as a
result of lower distribution fees and certain incrementally lower expenses paid
by Class X Shares. The Fund may also quote supplementally a rate of total return
over different periods of time by means of aggregate, average, and year-by-year
or other types of total return figures.
Yield will be computed by dividing the Portfolio's net investment income
over a 30-day period by an average value of invested assets (using the average
number of shares entitled to receive dividends and the maximum offering price
per share at the end of the period), all in accordance with applicable
regulatory requirements. Such amount will be compounded for six months and then
annualized for a twelve-month period to derive the Portfolio's yield for each
class.
The Portfolio may from time to time include in advertisements information
containing total return and the ranking of those performance figures relative to
such figures for groups of mutual funds having similar investment objectives as
categorized by ranking services such as Lipper Analytical Services, Inc., CDA
Investment Technologies, Inc., Weisenberger Financial Services, Inc. and rating
services such as Morningstar, Inc. Additionally, the Portfolio or a Class of the
Portfolio may compare its performance results to other investment or savings
vehicles (such as certificates of deposit) and may refer to results published in
various publications such as Changing Times, Forbes, Fortune, Money, Barrons,
Business Week and Investor's Daily, Stanger's Mutual Fund Monitor, The Stanger
Register, Stanger's Investment Adviser, The Wall Street Journal, Pensions &
Investments, Institutional Investor, REIT Watch, The New York Times, Consumer
Reports, Registered Representative, Financial Planning, Financial Services
Weekly, Financial World, U.S. News and World Report, Standard and Poors The
Outlook, and Personal Investor. The Portfolio may, from time to time, illustrate
the benefits of tax deferral by comparing taxable investments to investments
made through tax-deferred retirement plans. The total return may also be used to
compare the performance of the Portfolio against certain widely acknowledged
outside standards or indices for stock and bond market performance, such as the
Standard & Poor's 500 Stock Index (the "S&P 500"), Consumer Price Index,
Shearson Lehman Corporate Index and Shearson Lehman T-Bond Index. The S&P 500 is
a commonly quoted market value-weighted and unmanaged index showing the changes
in the aggregate market value of 500 stocks relative to the base period 1941-43.
The S&P 500 is composed almost entirely of common stocks of companies listed on
the New York Stock Exchange, although the common stocks of a few companies
listed on the American Stock Exchange or traded over-the-counter are included.
The 500 companies represented include 400 industrial, 60 transportation and 40
financial services concerns. The S&P 500 represents about 80% of the market
value of all issues traded on the New York Stock Exchange.
Advertisements, sales literature and other communications may contain
information about the Fund or Adviser's current investment strategies and
management style. Current strategies and style may change to respond to a
changing market and economic conditions. From time to time, the Fund may discuss
specific portfolio holdings or industries in such communications. To illustrate
components of overall performance, the Fund may compare the Portfolio's equity
or bond return figure to well-known indices of market performance including but
not limited to the Standard & Poor's 500 Stock Index, Dow Jones Industrial
Average, and Salomon Brothers Corporate and Government Bond Indices, Russell
2000, Shearson Lehman Bond Index, Wilshire Real Estate Securities Index, NAREIT
Equity Total Return Index, NAREIT Combined Index, and NCREIF Property Index.
The NCREIF Property Index is produced by the National Council of Real
Estate Investment Fiduciaries (NCREIF) and measures the historical performance
of income-producing properties owned by commingled funds on behalf of qualified
pension and profit-sharing trusts, or owned directly by these trusts and managed
on a separate account basis. Properties in the NCREIF Property Index are
unleveraged and the figures represent gross returns before advisory fees. The
NAREIT Combined Index and NAREIT Equity Total Return Index are published by the
National Association of Real Estate Investment Trusts (NAREIT). The NAREIT
Combined Index is comprised of all publicly-traded equity, mortgage or hybrid
REITs. The NAREIT Equity Total Return Index is comprised of all publicly-traded
Equity REITs. The Wilshire Securities Index measures the investment
characteristics of publicly traded real estate securities such as REITs, real
estate operating companies and partnerships.
Performance information for the Portfolio (and each Class thereof) reflects
only the performance of a hypothetical investment in a Class X Shares or Class Y
Shares of the Portfolio during the particular time period in which the
calculations are based. Performance information is not an indication of future
performance. Performance information should be considered in light of the
Portfolio's investment objectives and policies, characteristics and qualities of
the Portfolio, and the market conditions during the given time period, and
should not be
5
<PAGE>
considered as a representation of what may be achieved in the future. For a
description of the methods used to determine total return, see the Statement of
Additional Information.
The Fund's Annual Report, available upon request and without charge, shall
contain a discussion of the performance of the Portfolio and a comparison of
that performance to a securities market index.
INVESTMENT OBJECTIVES
AND POLICIES
The Real Estate Portfolio seeks as its investment objective capital
appreciation and income with approximately equal emphasis. It intends under
normal circumstances to invest primarily in marketable securities of publicly
traded real estate investment trusts (REITs) and stocks of companies that are
principally engaged in the real estate industry. Under normal circumstances, the
Real Estate Portfolio intends to invest at least 75% of the value of its assets
in these securities. The Portfolio has adopted a policy to concentrate its
investments in the real estate industry.
The investment objective of the Real Estate Portfolio is a fundamental
policy which may not be changed without the approval of a vote of a majority of
the outstanding shares of the Real Estate Portfolio. Risks are inherent in the
ownership of any security and there can be no assurance that the Real Estate
Portfolio will achieve its investment objective. The investment policies of the
Real Estate Portfolio will also affect the rate of portfolio turnover. A high
rate of portfolio turnover generally involves correspondingly greater brokerage
commissions or transaction costs, which are paid directly by the Fund. The
portfolio turnover rate for the Real Estate Portfolio is not anticipated to
exceed 75%.
Policies and limitations are considered at the time of purchase and the
sale of instruments is not required in the event of a change in circumstances.
REITs are pooled investment vehicles which invest primarily in income
producing real estate or real estate related loans or interests. Generally,
REITs can be classified as equity REITs, mortgage REITs or hybrid REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
some income from the collection of interest payments. Hybrid REITs combine the
characteristics of both equity REITs and Mortgage REITs. The Real Estate
Portfolio intends to emphasize investment in equity REITs.
In determining whether an issuer is "principally engaged" in the real
estate industry, Adviser seeks companies which derive at least 50% of their
gross revenues or net profits from the ownership, development, construction,
financing, management or sale of commercial, industrial or residential real
estate. The equity securities of real estate companies considered for purchase
by the Real Estate Portfolio will consist of shares of beneficial interest,
marketable common stock, rights or warrants to purchase common stock, and
securities with common stock characteristics such as preferred stock and debt
securities convertible into common stock.
The Real Estate Portfolio may also invest up to 25% of its total assets in
(a) marketable debt securities of companies principally engaged in the real
estate industry, (b) mortgage-
backed securities such as mortgage pass-through certificates, real estate
mortgage investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs") (see "Investment Techniques and Related Risks"); or (c)
short-
term investments.
The Real Estate Portfolio may invest in debt securities only if, at the
date of investment, they are rated within the four highest grades as determined
by Moody's Investors Services, Inc. (Aaa, Aa, A or Baa) or by Standard & Poor's
Corporation (AAA, AA, A or BBB) or, if not rated or rated under a different
system, are judged by Adviser to be of equivalent quality to debt securities so
rated. Securities rated Baa or BBB are medium grade investment obligations that
may have speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments in the case of such obligations than is the case for
higher grade securities. The Real Estate Portfolio may, but is not obligated to,
dispose of debt securities whose credit quality falls below investment grade.
Unrated debt securities may be less liquid than comparable rated debt securities
and may involve somewhat greater risk than rated debt securities.
For temporary defensive purposes (as when market conditions in real estate
securities are extremely adverse such that Adviser believes there are
extraordinary risks associated with investment therein), the Real Estate
Portfolio may invest up to 100% of its total assets in short-term investments
such as money market instruments consisting of securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities; repurchase
agreements; certificates of deposit and bankers' acceptances issued by banks or
savings and loan associations having net assets of at least $500 million as of
the end of their most recent fiscal year; high-grade commercial paper rated, at
time of purchase, in the top two categories by a national rating agency or
determined to be of comparable quality by Adviser at the time of purchase.
Risk Considerations
The Real Estate Portfolio is non-diversified under the federal securities
laws. As a non-diversified portfolio, there is no restriction under the 1940 Act
on the percentage of assets that may be invested at any time in the securities
of any one issuer. To the extent that the Real Estate Portfolio is not fully
diversified, it may be more susceptible to adverse economic, political or
regulatory developments affecting a single issuer than would be the case if it
were more broadly diversified. In addition, investments by the Real Estate
Portfolio in securities of companies providing mortgage servicing will be
subject to the risks associated with refinancings and their impact on servicing
rights.
6
<PAGE>
Although the Real Estate Portfolio does not invest directly in real estate,
it does invest primarily in real estate securities and accordingly concentrates
its investment in the real estate industry. Accordingly, the value of shares of
the Real Estate Portfolio will fluctuate in response to changes in economic
conditions within the real estate industry. Risks associated with the direct
ownership of real estate and with the real estate industry in general include,
among other things, possible declines in the value of real estate; risks related
to general and local economic conditions; possible lack of availability of
mortgage funds; over-building; extended vacancies of properties; increases in
competition, property taxes and operating expenses; changes in zoning laws;
costs resulting from the clean-up of, and liability to third parties for damages
resulting from, environmental problems; casualty or condemnation losses;
uninsured damages from flood, earthquakes or other natural disasters;
limitations on and variations in rents; dependency on property management skill;
the appeal of properties to tenants; and, changes in interest rates. The Real
Estate Portfolio may also invest in mortgage-backed securities as described
above. The risks associated with such securities are described in the section
"Mortgage-Related Securities."
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to the risks of financing projects. As the Real Estate Portfolio may
invest in new or unseasoned REIT issuers, it may be difficult or impossible for
Adviser to necessarily ascertain the value of each of such REIT's underlying
assets, management capabilities and growth prospects. In addition, REITs are
subject to heavy cash flow dependency, default by borrowers, self-liquidation,
and the possibilities of failing to qualify for the exemption from tax or
distributed income under the Internal Revenue Code of 1986, as amended (the
"Code") and failing to maintain their exemptions from the 1940 Act. REITs whose
underlying assets include long-term health care properties, such as nursing,
retirement and assisted living homes, may be impacted by federal regulations
concerning the health care industry. The Real Estate Portfolio will indirectly
bear its proportionate share of any expenses paid by REITs in which it invests
in addition to the expenses paid by the Real Estate Portfolio itself.
REITs (especially mortgage REITs) are subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations usually rises. Conversely, when interest rates rise, the value of a
REIT's investment in fixed rate obligations can be expected to decline. In
contrast, as interest rates on adjustable rate mortgage loans are reset
periodically, yields on a REIT's investment in such loans will gradually align
themselves to reflect changes in market interest rates, causing the value of
such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
In addition, investing in REITs involves risk similar to those associated
with investing in small capitalization companies. REITs may have limited
financial resources, may trade less frequently and in a limited volume and may
be more subject to abrupt or erratic price movements than larger capitalization
stocks included in the S&P 500 Index.
The Portfolio commenced operations on May 1, 1997 based upon an initial
capitalization of $5 million provided by Phoenix Home Life. The ability of the
Portfolio to raise additional capital for investment purposes may directly
affect the spectrum of portfolio holdings and performance.
INVESTMENT TECHNIQUES AND RELATED RISKS
In addition to the investment policies described above, the Real Estate
Portfolio may utilize the following investment practices or techniques:
"When issued" and "delayed delivery" Securities
The Real Estate Portfolio may purchase and sell securities on a "when
issued" and "delayed delivery" basis. The Real Estate Portfolio accrues no
income on such securities until the Real Estate Portfolio actually takes
delivery of such securities. These transactions are subject to market
fluctuation; the value of the securities at delivery may be more or less than
their purchase price. The yields generally available on comparable securities
when delivery occurs may be higher than yields on the securities obtained
pursuant to such transactions. Because the Real Estate Portfolio relies on the
buyer or seller to consummate the transaction, failure by the other party to
complete the transaction may result in the Portfolio missing the opportunity of
obtaining a price or yield considered to be advantageous. The Real Estate
Portfolio will engage in "when issued" and "delayed delivery" transactions for
the purpose of acquiring securities consistent with the Portfolio's investment
objective and policies and not for the purpose of investment leverage.
Securities Lending
The Real Estate Portfolio may lend its securities to brokers, dealers and
financial institutions provided that the market value of the securities subject
to any such loans does not exceed 33% of the value of the total assets (taken at
market value) of the Portfolio; and receive, as collateral, cash or cash
equivalents which at all times while the loan is outstanding, will be maintained
in amounts equal to at least 102% of the current market value of the loaned
securities. Any cash collateral will be invested in short-term securities. All
fees or charges earned from securities lending will inure to the benefit of the
Real Estate Portfolio. The Real Estate Portfolio will have the right to regain
record ownership of loaned securities within six business days and to exercise
beneficial rights such as
7
<PAGE>
voting rights and subscription rights. While a securities loan is outstanding,
the Real Estate Portfolio will receive amounts equal to any interest or other
distributions with respect to the loaned securities. Any agreement to lend
securities shall provide that borrowers are obligated to return the identical
securities or their equivalent at termination of the loan and, that the Real
Estate Portfolio shall have the right to retain any collateral or use the same
to purchase equivalent securities should the borrower fail to return securities
as required. Lending portfolio securities involves a risk of delay in the
recovery of the loaned securities and possibly the loss of the collateral if the
borrower fails financially. See the Statement of Additional Information.
Illiquid Securities
The Real Estate Portfolio may invest up to 15% of its net assets, taken at
market values at the time of investment, in "illiquid securities". For this
purpose, illiquid securities include any securities for which market quotations
are not readily available, or other securities which legally or in the Adviser's
or Trustees' opinion may be deemed illiquid. Such investments may include
repurchase agreements with deemed maturities in excess of seven days, certain
private placements and certain Rule 144A Securities (as discussed below). Among
other risks unique to certain illiquid securities (as described elsewhere in
this Prospectus and Statement of Additional Information), illiquid securities
may be thinly or not actively traded, and as a result, the Real Estate Portfolio
may experience difficulties in valuing or disposing of these securities.
Pursuant to procedures adopted by the Trustees, restricted securities, including
Rule 144A Securities, can be presumptively deemed to be liquid if the portfolio
manager can regularly obtain two consistent broker quotes for the security.
Short-Term Instruments
Short term investments will be in high grade short term securities such as
commercial paper, drafts, notes payable upon demand or having maturities varying
from one day to 397 days, municipal notes, Bankers' Acceptances, Certificates of
Deposit or any other form of short term security but may also include cash
should such a holding appear to be consistent with the goal of maximizing
earnings. It is intended that commercial paper held by the Real Estate Portfolio
will be rated A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors
Service, Inc. or, if unrated, be issued by companies with an outstanding debt
issue currently rated at least AA by Standard & Poor's Corporation or Aa by
Moody's Investors Service, Inc. Certificates of Deposits must be issued by banks
which have capital, surplus and undivided profits of at least $500 million.
Mortgage-Related Securities
The Real Estate Portfolio may invest in securities that directly or
indirectly represent a participation in, or are secured by and payable from,
mortgage loans secured by real property ("Mortgage-Related Securities"). These
instruments are referred to as "derivatives" as their value is derived from the
value of the underlying security or securities. The Mortgage-Related Securities
in which the Real Estate Portfolio may invest include those with fixed, floating
and variable interest rates and those with interest rates that change based on
multiples of changes in interest rates. Although certain Mortgage-Related
Securities are guaranteed by a third party or otherwise similarly secured, the
market value of the security, which may fluctuate, is not so secured. If the
Real Estate Portfolio purchases a Mortgage-Related Security at a premium, all or
part of the premium may be lost if there is a decline in the market value of the
security, whether resulting from changes in interest rates or prepayments in the
underlying mortgage collateral. As with other interest-bearing securities, the
prices of certain Mortgage-Related Securities are inversely affected by changes
in interest rates, while other securities which the Real Estate Portfolio may
purchase may be structured so that their interest rates will fluctuate inversely
(and thus their price will increase as interest rates rise and decrease as
interest rates fall) in response to changes in interest rates. Though the value
of a Mortgage-Related Security may decline when interest rates rise, the
converse is not necessarily true, since in periods of declining interest rates
the mortgages underlying the security are more likely to prepay. For this and
other reasons, a Mortgage-Related Security's stated maturity may be shortened by
unscheduled prepayments on the underlying mortgages, and, therefore, it is not
possible to predict accurately the security's return. In addition, regular
payments received in respect of Mortgage-
Related Securities include both interest and principal. If the underlying
mortgage securities experience greater than anticipated prepayments of
principal, the Real Estate Portfolio may fail to fully recoup its initial
investment in these securities even if the securities are rated in the highest
rating category by a nationally recognized statistical rating organization. No
assurance can be given as to the return the Portfolio will receive when these
amounts are reinvested.
The Real Estate Portfolio may also invest up to 25% of its total assets in
mortgage-backed securities such as mortgage pass-through certificates, real
estate mortgage investment conduit ("REMIC") certificates and collateralized
mortgage obligations ("CMOs"). CMOs are derivative securities or "derivatives"
and are hybrid instruments with characteristics of both mortgage-backed and
mortgage pass-through securities. Similar to a bond, interest and pre-paid
principal on a CMO are paid, in most cases, semiannually. CMOs may be
collateralized by whole mortgage loans but are more typically collateralized by
portfolios of mortgage pass-through securities guaranteed by Government National
Mortgage Association (GNMA) or the Federal National Mortgage Association. CMOs
are structured into multiple classes, with each class bearing a different stated
maturity. Monthly payments of principal, including prepayments, are first
returned to investors holding the shortest maturity class; investors holding the
longer maturity classes receive principal only after the first class has been
retired. REMICs are similar to CMOs and are fixed pools of mortgages with
multiple classes of interests held by investors.
8
<PAGE>
The Real Estate Portfolio may also invest in pass-through securities that
are derived from mortgages. A pass-through security is formed when mortgages are
pooled together and undivided interests in the pool or pools are sold. The cash
flow from the mortgages is passed through to the holders of the securities in
the form of periodic payments of interest, principal and prepayments (net of a
service fee).
The Real Estate Portfolio may purchase pass-through securities at a premium
or at a discount. The values of pass- through securities in which the Real
Estate Portfolio may invest will fluctuate with changes in interest rates. The
value of such securities varies inversely with interest rates, except that when
interest rates decline, the value of pass-through securities may not increase as
much as other debt securities because of the prepayment feature. Changes in the
value of such securities will not affect interest income from those obligations
but will be reflected in the Real Estate Portfolio's net asset value.
A particular risk associated with pass-through securities involves the
volatility of prices in response to changes in interest rates, or prepayment
risk. Prepayment rates are important because of their effect on the yield and
price of securities. Prepayments occur when the holder of an individual mortgage
prepays the remaining principal before the mortgage's scheduled maturity date.
As a result of the pass-through of prepayments of principal on the underlying
securities, mortgage-backed securities are often subject to more rapid
prepayment of principal than their stated maturity would indicate. Although the
pattern of prepayments is estimated and reflected in the price paid for
pass-through securities at the time of purchase, the actual prepayment behavior
of mortgages cannot be known at that time. Therefore, it is not possible to
predict accurately the realized yield or average life of a particular issue of
pass-through securities. Prepayments that occur faster than estimated adversely
affect yields for pass-throughs purchased at a premium (that is, a price in
excess of principal amount) and may cause a loss of principal because the
premium may not have been fully amortized at the time the obligation is repaid.
The opposite is true for pass-throughs purchased at a discount. Furthermore, the
proceeds from prepayments usually are reinvested at current market rates, which
may be higher than, but are usually lower than, the rates earned on the original
pass- through securities. Prepayments on a pool of mortgage loans are influenced
by a variety of economic, geographic, social and other factors, including
changes in mortgagors' housing needs, job transfers, unemployment, mortgagors'
net equity in the mortgaged properties and servicing decisions. Generally,
however, prepayments on fixed rate mortgage loans will increase during a period
of falling interest rates and decrease during a period of rising interest rates.
Mortgage-backed securities may decrease in value as a result of increases in
interest rates and may benefit less than other fixed income securities or
decline in value from declining interest rates because of risk of prepayment.
The Real Estate Portfolio may also invest in securities issued by corporate
and other special purpose entities in which the source of income payments on the
securities is a dedicated pool of assets ("Asset-Backed Securities"). The
securitization techniques used for Asset-Backed Securities are similar to those
used for Mortgage-Related Securities. The collateral for these securities has
included home equity loans, automobile and credit card receivables, boat loans,
computer leases, airplane leases, mobile home loans, recreational vehicle loans
and hospital and other account receivables.
Financial Futures and Related Options
The Real Estate Portfolio may enter into financial futures contracts and
related options. These instruments are referred to as "derivatives" as their
value is derived from the value of the underlying security or securities. The
Real Estate Portfolio may purchase and sell financial futures contracts which
are traded on a recognized exchange or board of trade and may purchase exchange-
or board-traded put and call options on financial futures contracts as a hedge
against anticipated changes in the market value of its portfolio securities or
securities which it intends to purchase.
The Real Estate Portfolio will engage in transactions in financial futures
contracts and related options only for hedging purposes and not for speculation.
In addition, the Real Estate Portfolio will not purchase or sell any financial
futures contract or related option if, immediately thereafter, the sum of the
margin deposits initially committed with respect to the Portfolio's existing
futures and related options positions and the premiums paid for related options
would exceed 5% of the market value of the Portfolio's total assets. At the time
of purchase of a futures contract or a call option on a futures contract, any
asset, including equity securities and non- investment grade debt so long as the
asset is liquid, unencumbered and marked to market daily equal to the market
value of the futures contract minus the Real Estate Portfolio's initial margin
deposit with respect thereto will be deposited in a segregated account with the
Portfolio to collateralize fully the position and thereby ensure that it is not
leveraged.
Engaging in transactions in financial futures contracts involves certain
risks, such as the possibility of an imperfect correlation between futures
market prices and cash market prices and the possibility that the Adviser could
be incorrect in its expectations as to the direction or extent of various
interest rate movements, in which case the Real Estate Portfolio's return might
have been greater had hedging not taken place. There is also the risk that a
liquid secondary market may not exist. The risk in purchasing an option on a
financial futures contract is that the Real Estate Portfolio will lose the
premium it paid. There may also be circumstances when the purchase of an option
on a financial futures contract would result in a loss to the Real Estate
Portfolio while the purchase or sale of the contract would not have resulted in
a loss. Futures and options may fail as hedging techniques in cases where the
price movements of the securities underlying the options and futures do not
follow the price movements of the portfolio securities subject to the hedge.
Financial losses relating to futures and options are potentially unlimited.
Repurchase Agreements
The Real Estate Portfolio may agree to purchase portfolio securities
subject to the seller's agreement to repurchase them at a mutually agreed upon
date and price. The Real Estate Portfolio
9
<PAGE>
will enter into such repurchase agreements only with financial institutions that
are deemed to be creditworthy by the Adviser. During the term of any repurchase
agreement, the Adviser will continue to monitor the creditworthiness of the
seller. Although the securities subject to repurchase agreements may bear
maturities exceeding thirteen months, the Real Estate Portfolio does not
presently intend to enter into repurchase agreements with deemed maturities in
excess of seven days. If in the future the Real Estate Portfolio were to enter
into repurchase agreements with deemed maturities in excess of seven days, the
Portfolio would do so only if such investment, together with other illiquid
securities, did not exceed 15% of the value of the Portfolio's net assets.
Default or bankruptcy of the seller would, however, expose the Real Estate
Portfolio to possible delay in connection with the disposition of the underlying
securities or loss to the extend that proceeds from a sale of the underlying
securities were less than the repurchase price under the agreement.
Private Placements and Rule 144A Securities
The Real Estate Portfolio may purchase securities which have been privately
issued or are issued by newly established emerging entities and are subject to
legal restrictions on resale or which are issued to qualified institutional
investors under special rules adopted by the Securities and Exchange Commission
("SEC"). Such securities may offer higher yields than comparable publicly traded
securities. Such securities ordinarily can be sold by the Portfolio in secondary
market transactions to certain qualified investors pursuant to rules established
by the SEC, in privately negotiated transactions to a limited number of
purchasers or in a public offering made pursuant to an effective registration
statement under the Securities Act of 1933 as amended (the "1933 Act"). Public
sales of such securities by the Portfolio may involve significant delays and
expense. Private sales often require negotiation with one or more purchasers and
may produce less favorable prices than the sale of similar unrestricted
securities. Public sales generally involve the time and expense of the
preparation and processing of a registration statement under the 1933 Act (and
the possible decline in value of the securities during such period) and may
involve the payment of underwriting commissions. In some instances, the
Portfolio may have to bear certain costs of registration in order to sell such
shares publicly. Pursuant to procedures adopted by the Trustees, restricted
securities, including Rule 144A Securities, can be presumptively deemed to be
liquid if the portfolio manager can regularly obtain two consistent broker
quotes for the security.
INVESTMENT RESTRICTIONS
The Real Estate Portfolio has adopted fundamental policies, which may not
be changed without the requisite shareholder vote, with regard to the issuance
of senior securities, short sales, the borrowing of money, the underwriting of
securities of other issuers, concentration of investments in particular
industries (other than real estate), the purchase and sale of real estate,
commodities and futures contracts, and the making of loans. These restrictions
are more particularly described in the Statement of Additional Information.
MANAGEMENT OF THE FUND
The Fund is a mutual fund, known as an open-end, investment company. The
Board of Trustees supervises the business affairs and investments of the Fund,
which is managed on a daily basis by each portfolio's investment adviser. The
Fund was organized as a Massachusetts business trust on December 4, 1995. The
Fund commenced operations on March 1, 1996. The Fund is currently authorized to
offer shares of beneficial interest in series and is currently offering shares
of seven portfolios. Two classes of shares are currently offered by each
portfolio.
The Adviser
The investment adviser to the Real Estate Portfolio is Phoenix Realty
Securities, Inc., which is located at 38 Prospect Street, Hartford, Connecticut
06115. The Adviser was formed in 1994 as an indirect wholly-owned subsidiary of
Phoenix Home Life Mutual Insurance Company ("Phoenix Home Life"). As of December
31, 1996, the Adviser had approximately $1.4 billion in assets under management.
Phoenix Home Life is a mutual insurance company engaged in the insurance and
investment businesses. Phoenix Home Life's principal place of business is
located at One American Row, Hartford, Connecticut.
The Adviser continuously furnishes an investment program for the Real
Estate Portfolio and manages the investment and reinvestment of the assets
subject at all times to the supervision of the Trustees. The Adviser is
responsible for monitoring the services provided to the Portfolio. Under the
terms of the Investment Advisory Agreement, the Adviser is entitled to a
prescribed fee.
For managing, or directing the management, of the investments of the Real
Estate Portfolio, the Adviser is entitled to a basic monthly fee at the annual
rate of .50% of the average daily net asset value of the Portfolio. Such basic
monthly fee is subject to a performance adjustment based on the Portfolio's
annual performance as compared to certain prescribed benchmarks. The basic
monthly fee will therefore increase or decrease by .005% for every .10% after
the first .50% in which Portfolio performance on a rolling twelve month basis is
higher or lower than that of the NAREIT Equity Total Return Index. In no event
will the increase or decrease in any one 12-month period exceed .10%. The
adjustment shall be computed and paid monthly. The Adviser is not eligible for
the performance adjustment until the 13th month after inception of the
Portfolio.
The Portfolio Managers
Barbara Rubin and Michael Schatt are responsible for managing the assets of
the Real Estate Portfolio. Ms. Rubin, President of the Adviser and is also Vice
President and Co-Portfolio Manager for the Real Estate Securities Series of The
Phoenix Edge Series Fund and the Real Estate Securities Portfolio of Phoenix
Multi-Portfolio Fund. She has over 21 years real estate experience and has been
associated with Phoenix Home Life for the past 15 years. Michael Schatt is a
Vice President of the Adviser and a Managing Director of Duff & Phelps
Investment Management Co., an affiliate of the
10
<PAGE>
Adviser. He has served as Portfolio Manager for Duff & Phelps Utility Income
Fund since 1994, responsible for managing the real estate investment securities
of the fund. Previously he served as a Director of the Real Estate Advisory
Practice for Coopers & Lybrand, LLC and has over 16 years experience in the real
estate industry.
The Financial Agent and Administrator
Equity Planning serves as financial agent of the Fund and, as such,
provides bookkeeping and pricing services and certain other ministerial
functions. As compensation, Equity Planning is entitled to a fee, payable
monthly and based upon (a) the average of the aggregate daily net asset values
of the Portfolio, at the following incremental annual rates:
First $100 million .05%
$100 million to $300 million .04%
$300 million to $500 million .03%
Greater than $500 million .015%
(b) a minimum fee of $70,000; and (c) an annual fee of $12,000 together
with an additional $12,000 for any additional class of shares created in the
future.
Duff & Phelps Investment Management Co. ("DPM") serves as administrator for
the Portfolio, and as such, facilitates and provides administrative services for
the Portfolio. DPM is a subsidiary of Phoenix Duff & Phelps Corporation, which
is an indirect less than wholly-owned subsidiary of Phoenix Home Life. As
compensation, under an Administration Agreement, DPM receives a fee, computed
daily and payable monthly, at the annual rate of 0.15% of the average daily net
assets of the Fund.
The Custodian and Transfer Agent
The custodian of the assets of the Real Estate Portfolio is State Street
Bank and Trust Company, P.O. Box 1713, Boston, Massachusetts 02101.
Equity Planning serves as transfer agent for the Fund (the "Transfer
Agent") for which it is paid $14.95 plus certain out-
of-pocket expenses for each designated shareholder account. The Transfer Agent
is authorized to engage sub-agents to perform certain shareholder servicing
functions from time to time for which such agents shall be paid a fee by the
Transfer Agent.
Brokerage Commissions
Although the Conduct Rules of the National Association of Securities
Dealers, Inc. prohibit its members from seeking orders for the execution of
investment company portfolio transactions on the basis of their sales of
investment company shares, under such Rules, past sales of investment company
shares may be considered in selecting brokers to effect portfolio transactions.
Accordingly, some portfolio transactions are, subject to such Rules and to
obtaining best prices and executions, effected through dealers (excluding Equity
Planning) who sell shares of the Fund.
DISTRIBUTION PLAN
Equity Planning serves as the national distributor of the Fund's shares.
Equity Planning is registered as a broker-dealer in fifty states. The principal
offices of Equity Planning are located at 100 Bright Meadow Boulevard, P.O. Box
2200, Enfield, Connecticut 06083-2200. Philip R. McLoughlin is a Trustee and
President of the Fund and a director and officer of Equity Planning. Michael E.
Haylon, a director of Equity Planning, is an officer of the Fund. G. Jeffrey
Bohne, Nancy G. Curtiss, William E. Keen, III, William R. Moyer, Leonard J.
Saltiel, and Thomas N. Steenburg are officers of the Fund and officers of Equity
Planning.
Equity Planning and the Fund have entered into distribution agreements
under which Equity Planning has agreed to use its best efforts to find
purchasers for Fund shares. The Fund has granted Equity Planning the exclusive
right to purchase from the Fund and resell, as principal, shares needed to fill
unconditional orders for Fund shares. Equity Planning may sell Fund shares
through its registered representatives or through securities dealers with whom
it has sales agreements. Equity Planning may also sell Fund shares pursuant to
sales agreements entered into with banks or bank affiliated securities brokers
who, acting as agent for their customers, place orders for Fund shares with
Equity Planning. Although the Glass-Steagall Act prohibits banks and bank
affiliates from engaging in the business of underwriting, distributing or
selling securities (including mutual fund shares), banking regulators have not
indicated that such institutions are prohibited from purchasing mutual fund
shares upon the order and for the account of their customers. If, because of
changes in law or regulations, or because of new interpretations of existing
law, it is determined that agency transactions of banks or bank affiliated
securities brokers are not permitted under the Glass-Steagall Act, the Trustees
will consider what action, if any, is appropriate. It is not anticipated that
termination of sales agreements with banks or bank affiliated securities brokers
would result in a loss to their customers or a change in the net asset value per
share of a portfolio of the Fund. The sale of Fund shares through a bank or a
securities broker affiliated with a bank is not expected to preclude the Fund
from borrowing from such bank or from availing itself of custodial or transfer
agency services offered by such bank.
The Trustees have adopted a distribution plan on behalf of the Class Y
Shares pursuant to Rule 12b-1 under the 1940 Act. The Class Y Share distribution
plan (the "Plan") has been approved by Phoenix Home Life as initial, sole
shareholder. The Plan authorizes the payment to Equity Planning of amounts not
exceeding 0.25% annually of the average of the daily net assets of Class Y
Shares of each respective portfolio for each year elapsed after the inception of
the Plan. Although under no contractual obligation to do so, the Fund intends to
make such payments to Equity Planning as commissions for Class Y Shares sold, to
enable Equity Planning to (i) pay maintenance or other fees with respect to
Class Y Shares (the "Service Fee"), and (ii) pay bank affiliated securities
brokers maintenance or other fees relating to Class Y Shares purchased by their
customers and remaining on the Fund's books during the period for which such fee
is paid. The portion of the above fees paid by the Fund to Equity Planning as
"Service Fees" shall not exceed 0.25% annually of Class Y Share average
11
<PAGE>
daily net assets. Payments, less the portion thereof paid by Equity Planning to
others, may be used by Equity Planning for its expenses of distributing Class Y
Shares. The Fund is not required to reimburse Equity Planning if expenses of
distributing Class Y Shares exceed payments and any sales charges paid to Equity
Planning. The Plan requires that at least quarterly the Trustees must review a
written report with respect to the amounts expended under the Plan and the
purposes for which such expenditures were made. While the Plan is in effect, the
Fund will be required to commit the selection and nomination of candidates for
Trustees who are not "interested persons" (as defined in the 1940 Act) to the
discretion of other Trustees who are not interested persons.
HOW TO BUY SHARES
The Fund currently issues two classes of shares for the Real Estate
Portfolio. Both Class X Shares and Class Y Shares are each available to Plans
(as hereafter defined) and institutional investors which initially purchase
shares of the Fund whose net asset value equals or exceeds $250,000. "Plans" are
defined as corporate, public, union and governmental pension plans. Completed
applications for the purchase of shares should be mailed to State Street Bank
and Trust Company, P.O. Box 8301, Boston, MA 02266-8301.
The minimum subsequent investment for each class is $100. Shares are sold
at the net asset value per share (as described below) next computed after a
completed application or purchase order is received by State Street Bank and
Trust Company together with good and sufficient funds therefor (certified
checks, federal funds wires, and automated clearing house transactions ("ACH")).
Completed orders received on a business day prior to 4:00 p.m. E.S.T. will be
processed based on that day's closing net asset value. Sales of shares may be
made through broker-dealers, pension consultants or other qualified financial
agents/institutions.
The minimum initial investment amounts for the purchase of either class of
Fund shares shall be waived with respect to purchases by: (i) trust companies,
bank trust departments, broker-dealers financial planners and investment
advisers for funds over which such entity charges an account management fee and
which are held in a fiduciary, agency, advisory, custodial or similar capacity;
or (ii) Plans and institutional investors where the amounts invested represent
the redemption proceeds from the reorganization or merger of other investment
companies.
No trail fees are payable to broker-dealers or others in connection with
the purchase, sale or retention of Class X Shares.
If part of any investment is subsequently redeemed within one year of the
investment date, the broker/dealer or exempt financial institution will refund
to Equity Planning any such amounts paid with respect to the investment. Equity
Planning will sponsor sales contests, training and educational meetings and
provide to all qualifying agents, from its own profits and resources, additional
compensation in the form of trips, merchandise or expense reimbursement.
Broker-dealers or exempt financial institutions other than Equity Planning may
also levy customary additional charges to shareholders for their services in
effecting transactions, if they notify the Fund of their intention to do so.
Equity Planning intends to pay broker-dealers and exempt financial
institutions with whom it has a sales agreement a service fee of 0.25% of the
average daily net asset value of Class Y Shares sold by such broker-dealers and
exempt financial institutions, subject to future amendment or termination.
Equity Planning will retain all or a portion of the continuing distribution fee
assessed to Class Y shareholders to finance commissions and related marketing
expenses.
Exchange Privileges
Shareholders may exchange Class X or Class Y Shares held in book-entry form
for shares of the same class of other Portfolios of the Fund provided the
following conditions are met: (1) the shares that will be acquired in the
exchange (the "Acquired Shares") are available for sale in the shareholder's
principal place of business; (2) the Acquired Shares are the same class as the
shares to be surrendered (the "Exchanged Shares"); (3) the Acquired Shares will
be registered to the same shareholder account as the Exchanged Shares; (4) the
account value of the shares to be acquired must equal or exceed the minimum
initial or subsequent investment amount, as applicable, after the exchange is
implemented; and (5) the shareholder is qualified to acquire Fund shares in
accordance with the limitations described in this Prospectus. The Fund reserves
the right to refuse exchange purchases by any person or broker/dealer if, in the
Fund's or Adviser's opinion, (a) the exchange would adversely affect the Fund's
ability to invest according to its investment objectives and policies; (b) the
Fund believes that a pattern of exchanges coincides with a "market timing"
strategy; or (c) otherwise adversely affect the Fund and its shareholders. The
Fund reserves the right to terminate or modify its exchange privileges at any
time upon giving written notice to shareholders at least 60 days in advance.
Shareholders are urged to review their constituent documents and relevant
requirements in order to verify pertinent limitations imposed by retirement plan
or group annuity contract exchange limits as well as restrictions imposed by
governing law.
Telephone Exchange Privileges
Unless a shareholder elects in writing not to participate in the Telephone
Exchange Privilege, shares for which certificates have not been issued may be
exchanged by calling 800-814-1897 provided that the exchange is made between
accounts with identical registrations. Under the Telephone Exchange Privilege,
telephone exchange orders may also be entered on behalf of the shareholder by
his or her registered representative.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephone instructions are genuine. In addition to requiring
identical registrations on both accounts, the Transfer Agent will require
address verification
12
<PAGE>
and will record telephone instructions on tape. All exchanges will be confirmed
in writing to the shareholder. To the extent that procedures reasonably designed
to prevent unauthorized telephone exchanges are not followed, the Fund and/or
the Transfer Agent may be liable for following telephone instructions for
exchange transactions that prove to be fraudulent. Broker/dealers other than
Equity Planning have agreed to bear the risk of any loss resulting from any
unauthorized telephone exchange instruction from the firm or its registered
representatives. However, the shareholder would bear the risk of loss resulting
from instructions entered by an unauthorized third party that the Fund and/or
the Transfer Agent reasonably believe to be genuine. The Telephone Exchange
Privilege may be modified or terminated at any time on 60 days' notice to
shareholders. In addition, during times of drastic economic or market changes,
the Telephone Exchange Privilege may be difficult to exercise or may be
suspended temporarily. The Telephone Exchange Privilege is available only in
States where shares being acquired may be legally sold.
If a shareholder elects not to use the Telephone Exchange Privilege or if
the shares being exchanged are represented by a certificate or certificates, in
order to exchange shares the shareholder must submit a written request to State
Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301, ATTN:
Phoenix Duff & Phelps Institutional Mutual Funds. If the shares are being
exchanged between accounts that are not registered identically, the signature on
such request must be guaranteed by an eligible guarantor institution as defined
by the Transfer Agent in accordance with its signature guarantee procedures.
Currently, such procedures generally permit guarantees by banks, broker dealers,
credit union, national securities exchanges, registered securities associations,
clearing agencies and savings associations. Any outstanding certificate or
certificates for the tendered shares must be duly endorsed and submitted.
NET ASSET VALUE
The net asset value per share of the Real Estate Portfolio is determined as
of the close of regular trading of the New York Stock Exchange (the "Exchange")
on days when the Exchange is open for trading. The net asset value per share of
the Real Estate Portfolio is determined by adding the values of all securities
and other assets of the Portfolio, subtracting liabilities, and dividing by the
total number of outstanding shares of the Portfolio. The total liability
allocated to a class, plus that class's distribution fee and any other expenses
allocated solely to that class, are deducted from the proportionate interest of
such class in the assets of the Portfolio, and the resulting amount of each is
divided by the number of shares of that class outstanding to produce the net
asset value per share.
The Portfolio's investments are valued at market value or, where market
quotations are not available, at fair value as determined in good faith by the
Trustees or their delegates. Foreign and domestic debt securities (other than
short-term investments) are valued on the basis of broker quotations or
valuations provided by a pricing service approved by the Trustees when such
prices are believed to reflect the fair value of such securities. Foreign and
domestic equity securities are valued at the last sale price or, if there has
been so sale that day, at the last bid price, generally. Since the Trust does
not price securities on weekends or United States national holidays, the net
asset value of a Portfolio's foreign assets may be significantly affected on
days when the investor has no access to the Trust. Short-term investments having
a remaining maturity of less than sixty-one days are valued at amortized cost,
which the Trustees have determined approximates market value. For further
information about security valuations, see the Statement of Additional
Information.
HOW TO REDEEM SHARES
Any holder of shares of the Real Estate Portfolio may require the Fund to
redeem its shares at any time at the net asset value per share next computed
after receipt of a redemption request in proper written form by State Street
Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301, ATTN: Phoenix Duff
& Phelps Institutional Mutual Funds. To be in proper form to redeem shares, (1)
the signature(s) of duly authorized representative(s) of the shareholder must
appear in the appropriate place upon the stock power; (2) the stock power or any
related instruction transmittal must specify the name and account number of the
shareholder exactly as registered; (3) reference to the name of the Real Estate
Portfolio; and (4) and all such signatures must be guaranteed by an eligible
guarantor institution as determined in accordance with the standards and
procedures established by the Transfer Agent. Currently, such procedures
generally permit guarantees by banks, broker-dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. Signature(s) must also be guaranteed on any change of
address request submitted in conjunction with any redemption request. Additional
documentation may be required for redemptions by corporations, partnerships or
other organizations, or if redemption is requested by anyone other than the
shareholder(s) of record. Redemption requests will not be honored until all
required documents in proper form have been received.
In addition, the Fund maintains a continuous offer to repurchase its
shares, and shareholders may normally sell their shares through securities
dealers, brokers or agents who may charge customary commissions or fees for
their services. The redemption price in such case will be the price as of the
close of the general trading session of the New York Stock Exchange on that day,
provided the order is received by the dealer prior thereto, and is transmitted
to the Distributor prior to the close of its business. No charge is made by the
Fund on redemptions, but shares tendered through investment dealers may be
subject to service charge by such dealers. Payment for shares redeemed will be
made within three days after receipt of the duly endorsed share certificates (if
issued) or written request; provided, however, that redemption proceeds will not
13
<PAGE>
be disbursed until each check used for purchase of shares has been cleared for
payment by the investor's bank which may take up to 15 days after receipt of the
check.
Telephone Redemption Privileges
Unless a shareholder elects in writing not to participate in the Telephone
Redemption Privilege, shareholders may redeem shares valued at up to $100,000 by
calling (800) 814-1897.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that telephone instructions are genuine. Address and bank account
information will be verified, telephone redemption instructions will be recorded
on tape, and all redemptions will be confirmed in writing to the shareholder. If
there has been an address change within the past 60 days, a telephone redemption
will not be authorized. To the extent that procedures reasonably designed to
prevent unauthorized telephone redemptions are not followed, the Fund and/or the
Transfer Agent may be liable for following telephone instructions for redemption
transactions that prove to be fraudulent. Broker/dealers other than Equity
Planning have agreed to bear the risk of any loss resulting from any
unauthorized telephone redemption instruction from the firm or its registered
representatives. However, the shareholder would bear the risk of loss resulting
from instructions entered by an unauthorized person or third party that the Fund
and/or the Transfer Agent reasonably believe to be genuine. The Telephone
Redemption Privilege may be modified or terminated at any time without prior
notice to shareholders. In addition, during times of drastic economic or market
changes, the telephone redemption privilege may be difficult to exercise or may
be suspended temporarily and a shareholder should submit a written redemption
request, as described above.
If the amount of the redemption is $500 or more, the proceeds will be wired
to the shareholder's designated U.S. commercial bank account. If the amount of
the redemption is less than $500, the proceeds will be sent by check to the
address of record on the shareholder's account. Telephone redemption orders
received and accepted by the Transfer Agent on any day when the Transfer Agent
is open for business will be entered at the next determined net asset value.
However telephone redemption orders received and accepted by the Transfer Agent
after the close of trading hours on the Exchange will be executed on the
following business day. The proceeds of a telephone redemption will normally be
sent on the first business day following receipt of the redemption request.
However, with respect to the telephone redemption of shares purchased by check,
such requests will only be effected after the Fund has assured itself that good
payment has been collected for the purchase of shares, which may take up to 15
days.
Systematic Withdrawal Program
The Systematic Withdrawal Program (the "Program") allows shareholders to
periodically redeem a portion of their shares on predetermined monthly,
quarterly, semi-annual or annual dates. In order to participate in the Program,
shareholders must provide written notice to the Transfer Agent specifying (a)
the frequency in which Program redemptions are to occur, (b) the routing in
which proceeds are to be directed into the shareholder's account, and (c) the
priority among classes of shares of the Portfolio in which redemptions are to
occur.
Except as provided below, Program payments will be made on or about the
20th day of the month during the frequency period selected by the shareholder.
Program payments may also be processed through Automated Clearing House (ACH) to
the shareholder's account on or about the 10th, 15th or 25th day of each month.
Participants may not redeem sums in any period in excess of the equivalent of 1%
of aggregate Fund holdings (at the net asset value on the date of redemption)
during each month. Program redemptions will only be effected after the Fund has
assured itself that good payment has been received for the purchase of shares
which are to be redeemed.
Class X shareholders participating in the Program must at all times own
shares of the Fund worth $100,000 or more in the aggregate as determined by the
then current net asset value per share. Class Y shareholders participating in
the Program must at all times own shares of the Fund worth $50,000 or more in
the aggregate as determined by the then current net asset value per share. A
shareholder's participation in the Program will also automatically terminate if
redemptions are made outside the Program.
Redemption-in-kind
To the extent consistent with state and federal law, the Fund may make
payment of the redemption price either in cash or in kind. The Fund has elected
to pay in cash all requests for redemption by any shareholder of record, but may
limit such cash in respect to each shareholder during any 90 day period to the
lesser of $250,000 or 1% of the net asset value of the Fund at the beginning of
such period. This election has been made pursuant to Rule 18f-1 under the 1940
Act and is irrevocable while the Rule is in effect unless the Securities and
Exchange Commission, by order, permits its withdrawal. In case of a redemption
in kind, securities delivered in payment for shares would be valued at the same
value assigned to them in computing the net asset value per share of the Fund. A
shareholder receiving such securities would incur brokerage costs when it sold
the securities.
DIVIDENDS, DISTRIBUTIONS
AND TAXES
The Real Estate Portfolio will be treated as a separate mutual fund for
federal income tax purposes. The Real Estate Portfolio intends to elect to be
taxed as a regulated investment company ("RIC") and qualify as such annually
under Subchapter M of the Code. As a RIC, the Real Estate Portfolio will not be
subject to federal income tax on its ordinary income and net realized gains
distributed to its shareholders. The Real Estate Portfolio intends to distribute
sufficient ordinary income and net realized capital gains, if any, annually to
avoid the imposition of federal income tax or a non-deductible 4% excise tax.
Many investors, including most tax qualified plan investors, may be
eligible for preferential federal income tax treatment
14
<PAGE>
on distributions received from the Real Estate Portfolio and dispositions of
shares of the Real Estate Portfolio. The Fund has not sought opinions of counsel
or applied for a ruling from the Internal Revenue Service as to whether the
assessment of higher distribution fees with respect to Class Y Shares may result
in any dividends or distributions constituting "preferential dividends" under
the Code. Complete assurances cannot be given when or whether the Fund will
receive a favorable opinion or ruling or, the potential consequences associated
with an adverse determination. This Prospectus does not attempt to describe in
any respect such preferential tax treatment. Any prospective investor that is a
trust or other entity eligible for special tax treatment under the Code that is
considering purchasing shares of the Fund should consult its tax advisor about
the federal, state or local tax consequences particular to it, as should persons
considering whether to have amounts held for their benefit in such trusts or
other entities which intend to invest in shares of the Fund.
Investors that do not receive preferential tax treatment are subject to
federal income tax on distributions received with respect to their shares of the
Fund. Distributions of the Fund's ordinary income and short-term capital gains
are taxable to shareholders as ordinary income whether received in cash or
shares of the Fund's. Designated long-term capital gains distributions are
taxable as long-term capital gains whether distribution in cash or additional
shares and regardless of how long the shareholder owned the shares of the Fund;
however, a loss recognized on the sale of the shares of the Real Estate
Portfolio held for six months or less will be treated as a long-term capital
loss to the extent of long-term capital gains distributions received on those
shares. Certain designated dividends paid by the Fund may be eligible for the
dividends-received deduction for corporate shareholders. Shareholders should
consult with their tax advisor for additional information concerning the
federal, state, local and foreign tax consequences of purchasing shares of the
Real Estate Portfolio.
Dividends from net investment income for the Real Estate Portfolio will be
accrued and paid quarterly. Dividends from net realized capital gains, if any,
will be declared and paid annually for the Real Estate Portfolio. Dividends and
distributions with respect to the shares of any class of the Real Estate
Portfolio will be payable in full and fractional shares of such class of the
Portfolio at the net asset value on the first business day after the record
date, or, at the option of the shareholder, in cash. Any shareholder who
purchases shares of the Real Estate Portfolio prior to the close of business on
the record date for a dividend or distribution will be entitled to receive such
dividend or distribution.
The foregoing is only a summary of some of the important tax considerations
generally affecting the Real Estate Portfolio and its shareholders. Shareholders
should consult competent tax advisers regarding specific tax situations.
ADDITIONAL INFORMATION
Organization of the Fund
The capitalization of the Fund consists solely of an unlimited number of
shares of beneficial interest. The Fund currently offers shares in seven
different portfolios, each offering two classes. Holders of shares of the Real
Estate Portfolio have equal rights with regard to voting, redemptions,
dividends, distributions, and liquidations with respect to the Real Estate
Portfolio (provided that Class Y Shares of the Real Estate Portfolio bear higher
distribution fees and pay correspondingly lower dividends per share than Class X
Shares). Shareholders of all portfolios vote on the election of Trustees. On
matters affecting the Real Estate Portfolio (such as approval of an investment
advisory agreement or a change in fundamental investment policies), a separate
vote of the Real Estate Portfolio is required. On matters affecting an
individual class (such as approval of matters relating to the Class Y
distribution plan), a separate vote of that class is required. Shares of each
portfolio are fully paid, nonassessable, redeemable and fully transferable when
they are issued. Shares do not have cumulative voting rights conversion,
preemptive rights or subscription rights.
The assets received by the Fund for the issue or sale of shares of each
portfolio and all income, earnings, profits and proceeds thereof, are allocated
to such portfolio (and class if applicable) subject only to the rights of
creditors, and constitute the underlying assets of such portfolio (and class if
applicable). The underlying assets of each portfolio are required to be
segregated on the books of account, and are to be charged with the expenses in
respect to such portfolio and with a share of the general expenses of the Fund.
Any general expenses of the Fund not readily identifiable as belonging to a
particular portfolio or class will be allocated by or under the direction of the
Trustees as they determine fair and equitable.
Unlike the stockholders of a corporation, there is a possibility that the
shareholders of a Massachusetts business trust such as the Fund may be
personally liable for debts or claims against the Fund. The Declaration of Trust
provides that shareholders shall not be subject to any personal liability for
the acts or obligations of the Fund and that every written agreement,
undertaking or obligation made or issued by the Fund shall contain a provision
to that effect. The Declaration of Trust provides for indemnification out of the
trust property for all losses and expenses of any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability, which is
considered remote, is limited to circumstances in which the Fund itself would be
unable to meet its obligations.
Additional Inquiries
Inquiries and requests for the Statement of Additional Information, the
Annual Report to Shareholders and the Semi-
Annual Report to Shareholders should be directed to Equity Planning at (800)
814-1897 or 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut
06083-2200.
15
<PAGE>
BACKUP WITHHOLDING INFORMATION
Step 1. Please make sure that the social security number or taxpayer
identification number (TIN) which appears on the Application complies with
the following guidelines:
<TABLE>
<CAPTION>
Account Type Give Social Security Number or Tax Identification Number of:
<S> <C>
- --------------------------------------------------------------------------------------------------------
Individual Individual
- --------------------------------------------------------------------------------------------------------
Joint (or Joint Tenant) Owner who will be paying tax
- --------------------------------------------------------------------------------------------------------
Uniform Gifts to Minors Minor
- --------------------------------------------------------------------------------------------------------
Legal Guardian Ward, Minor or Incompetent
- --------------------------------------------------------------------------------------------------------
Sole Proprietor Owner of Business (also provide owner's name)
- --------------------------------------------------------------------------------------------------------
Trust, Estate, Pension Plan Trust Trust, Estate, Pension Plan Trust (not personal TIN of fiduciary)
- --------------------------------------------------------------------------------------------------------
Corporation, Partnership,
Other Organization Corporation, Partnership, Other Organization
- --------------------------------------------------------------------------------------------------------
Broker/Nominee Broker/Nominee
- --------------------------------------------------------------------------------------------------------
</TABLE>
Step 2. If you do not have a TIN, you must obtain Form SS-5 (Application for
Social Security Number) or Form SS-4 (Application for Employer
Identification Number) from your local Social Security or IRS office and
apply for one. Write "Applied For" in the space on the application.
Step 3. If you are one of the entities listed below, you are exempt from backup
withholding.
[bullet] A corporation
[bullet] Financial institution
[bullet] Section 501(a) exempt organization (IRA, Corporate Retirement
Plan, 403(b), Keogh)
[bullet] United States or any agency or instrumentality thereof
[bullet] A State, the District of Columbia, a possession of the United
States, or any subdivision or instrumentality thereof
[bullet] International organization or any agency or instrumentality
thereof
[bullet] Registered dealer in securities or commodities registered in the
U.S. or a possession of the U.S.
[bullet] Real estate investment trust
[bullet] Common trust fund operated by a bank under section 584(a)
[bullet] An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1)
[bullet] Regulated Investment Company
If you are in doubt as to whether you are exempt, please contact the Internal
Revenue Service.
Step 4. IRS Penalties--If you do not supply us with your TIN, you will be
subject to an IRS $50 penalty unless your failure is due to reasonable
cause and not willful neglect. If you fail to report interest, dividend or
patronage dividend income on your federal income tax return, you will be
treated as negligent and subject to an IRS 5% penalty tax on any resulting
underpayment of tax unless there is clear and convincing evidence to the
contrary. If you falsify information on this form or make any other false
statement resulting in no backup withholding on an account which should be
subject to a backup withholding, you may be subject to an IRS $500 penalty
and certain criminal penalties including fines and imprisonment.
- -----------
This Prospectus sets forth concisely the information about the Phoenix Duff &
Phelps Institutional Mutual Funds (the "Fund") which you should know before
investing. Please read it carefully and retain it for future reference.
The Fund has filed with the Securities and Exchange Commission a Statement of
Additional Information, dated May 1, 1997. The Statement contains more detailed
information about the Fund and is incorporated into this Prospectus by
reference. You may obtain a free copy of the Statement by writing the Fund c/o
Phoenix Equity Planning Corporation, 100 Bright Meadow, P.O. Box 2200, Enfield,
Connecticut 06083-2200.
[logo] Printed on recycled paper using soybean ink
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE>
[LOGO] PHOENIX
REALTY
PDP 2003 (5/97)
<PAGE>
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
101 Munson Street
Greenfield, Massachusetts 01301
(800) 814-1897
Statement of Additional Information
May 1, 1997
This Statement of Additional Information is not a prospectus but expands
upon and supplements the information contained in the current Prospectus of the
Phoenix Duff & Phelps Institutional Mutual Funds (the "Fund"), dated May 1, 1997
and should be read in conjunction with it. A copy may be obtained by calling
Phoenix Equity Planning Corporation ("Equity Planning") at (800) 814-1897, or by
writing to Equity Planning at 100 Bright Meadow Boulevard, P.O. Box 2200,
Enfield, Connecticut 06083-2200.
TABLE OF CONTENTS*
PAGE
THE FUND .................................... 2
INVESTMENT OBJECTIVES AND POLICIES (11) ...... 2
INVESTMENT RESTRICTIONS (17) .................. 9
PERFORMANCE INFORMATION (10) .................. 11
PERFORMANCE COMPARISONS ..................... 13
PORTFOLIO TURNOVER ........................... 13
THE INVESTMENT ADVISERS (17) .................. 13
BROKERAGE ALLOCATION ........................ 14
DETERMINATION OF NET ASSET VALUE (21) ......... 15
PURCHASE OF SHARES (20) ..................... 16
TAXES (23) .................................... 16
THE DISTRIBUTOR (19) ........................ 17
DISTRIBUTION PLAN (19) ....................... 18
TRUSTEES AND OFFICERS ........................ 19
ADDITIONAL INFORMATION ........................ 26
*Numbers in parenthesis are cross-references to related pages of the
Prospectus.
PDP 039B (5/97)
1
<PAGE>
THE FUND
Phoenix Duff & Phelps Institutional Mutual Funds (the "Fund") is an
open-end management investment company which was organized under Massachusetts
law on December 4, 1995 as a business trust. Prior to March 1, 1996, the Bond,
Balanced, Growth, Money Market and U.S. Government Securities Portfolios existed
as the Managed Bond Account ("Separate Account P"), Balanced Account ("Separate
Account L"), Growth Stock Account ("Separate Account S"), Money Market Account
("Separate Account G"), and U.S. Government Account ("Separate Account U"),
respectively, separate investment accounts of Phoenix Home Life Mutual Insurance
Company pursuant to the insurance laws of the State of New York and the laws of
other States.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of each Portfolio are described in
the "Investment Objectives and Policies" and "Investment Techniques and Related
Risks" sections of the Prospectus. The following discussion supplements the
description of the Portfolio's investment policies and investment techniques
information contained in the Prospectus.
The investment objective of each Portfolio is deemed to be a fundamental
policy and may not be changed without the approval of the shareholders of that
Portfolio. Investment restrictions described in this Statement of Additional
Information are fundamental policies of the Fund and may not be changed as to
any Portfolio without the approval of the Portfolio's shareholders.
Money Market Instruments.
Certificates of Deposit. Certificates of deposit are generally short-term,
interest-bearing negotiable certificates issued by banks or savings and loan
associations against funds deposited in the issuing institution.
Time Deposits. Time deposits are deposits in a bank or other financial
institution for a specified period of time at a fixed interest rate for which a
negotiable certificate is not received.
Banker's Acceptances. A bankers' acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international
commercial transaction (to finance the import, export, transfer or storage of
goods). The borrower, as well as the bank, is liable for payment, and the bank
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
secondary markets prior to maturity.
Commercial Paper. Commercial paper refers to short-term, unsecured
promissory notes issued by corporations to finance short-
term credit needs. Commercial paper is usually sold on a discount basis and has
a maturity at the time of issuance not exceeding nine months.
Corporate Debt Securities. Corporate debt securities with a remaining
maturity of less than one year tend to become extremely liquid and are traded as
money market securities.
U.S. Government Obligations. Securities issued or guaranteed as to
principal and interest by the United States Government include a variety of
Treasury securities, which differ only in their interest rates, maturities, and
times of issuance. Treasury bills have maturities of one year or less. Treasury
notes have maturities of one to ten years, and Treasury bonds generally have
maturities of greater than ten years. Agencies of the United States Government
which issue or guarantee obligations include, among others, Export-Import Banks
of the United States, Farmers Home Administration, Federal Housing
Administration, Government National Mortgage Association, Maritime
Administration, Small Business Administration and The Tennessee Valley
Authority. Obligations of instrumentalities of the United States Government
include securities issued or guaranteed by, among others, the Federal National
Mortgage Association, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Banks for Cooperatives, and the
U.S. Postal Service. Some of these securities are supported by the full faith
and credit of the U.S. Government; others are supported by the right of the
issuer to borrow from the Treasury, while still others are supported only by the
credit of the instrumentality. The U.S. Government Securities Fund will invest
primarily in securities which are supported by the full faith and credit of the
U.S. Government.
Repurchase Agreements. The repurchase price under the repurchase agreements
described in the Prospectus generally equals the price paid by the Fund plus
interest negotiated on the basis of current short-term rates (which may be more
or less than the rate on the securities underlying the repurchase agreement).
Securities subject to repurchase agreements are held by the Fund's custodian (or
sub-custodian) or in the Federal Reserve/Treasury book-entry system. Repurchase
agreements are considered to be loans under the Investment Company Act of 1940
as amended (the "1940 Act").
Reverse Repurchase Agreements. At the time the Fund enters into a reverse
repurchase agreement (an agreement under which the Fund sells portfolio
securities and agrees to repurchase them at an agreed-upon date and price), it
will place in a segregated custodial account liquid assets such as U.S.
Government securities or other liquid high grade debt securities having a value
equal to or greater than the repurchase price (including accrued interest) and
will subsequently monitor the account to ensure that such value is maintained.
Reverse repurchase agreements involve the risk that the market value of the
securities sold by the Fund may decline below the price of the securities it is
obligated to repurchase. Reverse repurchase agreements are considered to be
borrowings under the 1940 Act.
2
<PAGE>
Bank Obligations. For purposes of a Portfolio's investment policies with
respect to bank obligations, the assets of a bank or savings institution will be
deemed to include the assets of its domestic and foreign branches.
Municipal Obligations. Municipal Obligations include debt obligations
issued by or on behalf of states, territories and possessions of the United
States and the District of Columbia and their political subdivisions, agencies
and instrumentalities to obtain funds for various public purposes, including the
construction of a wide range of public facilities, the refunding of outstanding
obligations, the payment of general operating expenses and the extension of
loans to public institutions and facilities.
The two principal classifications of Municipal Obligations consist of
"general obligation" and "revenue" issues. General obligation bonds are secured
by the issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest, and, accordingly, the capacity of the issuer of a
general obligation bond as to the timely payment of interest and the repayment
of principal when due is affected by the issuer's maintenance of its tax base.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special tax or other specific revenue source; accordingly, the timely payment of
interest and the repayment of principal in accordance with the terms of such
bonds is a function of the economic viability of such facility or revenue
source. The Bond, Balanced and Enhanced Reserves Portfolios may include "moral
obligation" issues, which are normally issued by special purpose authorities.
There are, of course, variations in the quality of Municipal Obligations both
within a particular classification and between classifications, and the yields
on Municipal Obligations depend upon a variety of factors, including general
money market conditions, the financial condition of the issuer, general
conditions of the municipal bond market, the size of a particular offering, the
maturity of the obligation and the rating of the issue.
Certain types of Municipal Obligations (private activity bonds) are or have
been issued to obtain funds to provide privately operated housing facilities,
pollution control facilities, convention or trade show facilities, mass transit,
airport, port or parking facilities and certain local facilities for water
supply, gas, electricity or sewage or solid waste disposal. Private activity
bonds are also issued by privately held or publicly owned corporations in the
financing of commercial or industrial facilities. State and local governments
are authorized in most states to issue private activity bonds for such purposes
in order to encourage corporations to locate within their communities. The
principal and interest on these obligations may be payable from the general
revenues of the users of such facilities.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on Municipal Obligations. For example, under the Federal tax
legislation enacted in 1986, interest on certain private activity bonds must be
included in an investor's alternative minimum taxable income, and corporate
investors must treat all tax-exempt interest as an item of tax preference.
Dividends paid by the Portfolio that are derived from interest of Municipal
Obligations would be taxable to the Portfolio shareholders for Federal income
tax purposes.
Insured Municipal Obligations. Certain of the Municipal Obligations held by
a Portfolio may be insured as to the timely payment of principal and interest.
The insurance policies will usually be obtained by the issuer of the Municipal
Obligation at the time of its original issuance. In the event that the issuer
defaults on interest or principal payment, the insurer will be notified and will
be required to make payment to the bondholders. There is, however, no guarantee
that the insurer will meet its obligations. In addition, such insurance will not
protect against market fluctuations caused by changes in interest rates and
other factors.
Stand-By Commitments. Under a stand-by commitment, a dealer or bank agrees
to purchase from the Fund, at the Fund's option, specified Municipal Obligations
at their amortized cost value to the Fund plus accrued interest, if any.
Stand-by commitments may be sold, transferred or assigned by the Fund only with
the underlying Municipal Obligation. The Fund expects that stand-by commitments
will generally be available without the payment of any direct or indirect
consideration. However, if necessary or advisable, the Fund may pay for a
stand-by commitment either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to the commitment (thus reducing
the yield to maturity otherwise available for the same securities). Where the
Fund paid any consideration directly or indirectly for a stand-by commitment,
its cost would be reflected as unrealized depreciation for the period during
which the commitment was held by the Fund.
The Fund intends to enter into stand-by commitments only with dealers,
banks and broker-dealers which, in the Adviser's opinion, present minimal credit
risks. The Fund's reliance upon the credit of these dealers, banks and
broker-dealers will be secured by the value of the underlying Municipal
Obligations that are subject to the commitment. In evaluating the
creditworthiness of the issuer of a stand-by commitment, the Adviser will review
periodically the issuer's assets, liabilities, contingent claims and other
relevant financial information. The Fund would acquire stand-by commitments
solely to facilitate portfolio liquidity and does not intend to exercise its
rights thereunder for trading purposes. Stand-by commitments acquired by the
Fund would be valued at zero in determining net asset value.
When-Issued and Delayed Delivery Transactions. When a Portfolio agrees to
purchase securities on a when-issued or delayed delivery basis, its custodian
will set aside cash, U.S. Government securities or other liquid high-grade debt
obligations equal to the amount of the purchase or the commitment in a separate
account. Normally, the custodian will set aside portfolio securities to meet
this requirement. The market value of the separate account will be monitored and
if such market value declines, the Portfolio
3
<PAGE>
will be required subsequently to place additional assets in the separate account
in order to ensure that the value of the account remains equal to the amount of
the Portfolio's commitments. Because a Portfolio will set aside cash or liquid
high-grade debt securities in the manner described, the Portfolio's liquidity
and ability to manage its portfolio might be affected in the event its
when-issued purchases or delayed delivery commitments ever exceeded 25% of the
value of its assets. In the case of a delayed delivery of the sale of portfolio
securities, the Portfolio's custodian will hold the portfolio securities
themselves in a segregated account while the commitment is outstanding.
A Portfolio will make commitments to purchase securities on a when-issued
basis or delayed delivery basis only with the intention of completing the
transaction and actually purchasing or selling the securities. If deemed
advisable as a matter of investment strategy, however, the Portfolio may dispose
of or renegotiate a commitment after it is entered into, and may sell securities
it has committed to purchase before those securities are delivered to the
Portfolio on the settlement date. In these cases the Portfolio may realize a
capital gain or loss. When a Portfolio engages in when-issued and delayed
delivery transactions, it relies on the other party to consummate the trade.
Failure of such party to do so may result in the Portfolio's incurring a loss or
missing an opportunity to obtain a price considered to be advantageous.
The value of the securities underlying a when-issued purchase or a delayed
delivery to purchase securities, and any subsequent fluctuations in their value,
is taken into account when determining a Portfolio's net asset value starting on
the day a Portfolio agrees to purchase the securities. The Portfolio does not
earn interest on the securities it has committed to purchase until they are paid
for and delivered on the settlement date. When a Portfolio makes a delayed
delivery of the sale of securities it owns, the proceeds to be received upon
settlement are included in the Portfolio's assets, and fluctuations in the value
of the underlying securities are not reflected in the Portfolio's net asset
value as long as the commitment remains in effect.
Securities and Index Options. The Balanced and U.S. Government Securities
Portfolios may write covered call options and purchase call and put options.
Options and the related risks are summarized below.
Writing and Purchasing Options. Call options written by a Portfolio
normally will have expiration dates between three and nine months from the date
written. During the option period a Portfolio may be assigned an exercise notice
by the broker-dealer through which the call option was sold, requiring the
Portfolio to deliver the underlying security (or cash in the case of securities
index calls) against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time as
the Portfolio effects a closing purchase transaction. A closing purchase
transaction cannot be effected with respect to an option once the Portfolio has
received an exercise notice.
The exercise price of a call option written by a Portfolio may be below,
equal to or above the current market value of the underlying security or
securities index at the time the option is written.
A multiplier for an index option performs a function similar to the unit of
trading for an option on an individual security. It determines the total dollar
value per contract of each point between the exercise price of the option and
the current level of the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on different indices may have
different multipliers.
Securities indices for which options are currently traded include the
Standard & Poor's 100 and 500 Composite Stock Price Indices, Computer/Business
Equipment Index, Major Market Index, Amex Market Value Index, Computer
Technology Index, Oil and Gas Index, NYSE Options Index, Gaming/Hotel Index,
Telephone Index, Transportation Index, Technology Index, and Gold/
Silver Index. A Portfolio may write call options and purchase call and put
options on any other indices traded on a recognized exchange.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option written by a Portfolio, to prevent an
underlying security from being called, or to enable a Portfolio to write another
call option with either a different exercise price or expiration date or both. A
Portfolio may realize a net gain or loss from a closing purchase transaction,
depending upon whether the amount of the premium received on the call option is
more or less than the cost of effecting the closing purchase transaction. If a
call option written by a Portfolio expires unexercised, a Portfolio will realize
a gain in the amount of the premium on the option less the commission paid.
The option activities of a Portfolio may increase its portfolio turnover
rate and the amount of brokerage commissions paid. A Portfolio will pay a
commission each time it purchases or sells a security in connection with the
exercise of an option. These commissions may be higher than those which would
apply to purchases and sales of securities directly.
Limitations on Options. A Portfolio may write call options only if they are
covered and if they remain covered so long as a Portfolio is obligated as a
writer. If a Portfolio writes a call option on an individual security, a
Portfolio will own the underlying security at all times during the option
period. A Portfolio will write call options on indices only to hedge in an
economically appropriate way portfolio securities which are not otherwise hedged
with options or financial futures contracts. Call options on securities indices
written by a Portfolio will be "covered" by identifying the specific portfolio
securities being hedged.
4
<PAGE>
To secure the obligation to deliver the underlying security, the writer of
a covered call option on an individual security is required to deposit the
underlying security or other assets in escrow with the broker in accordance with
clearing corporation and exchange rules. In the case of an index call option
written by a Portfolio, a Portfolio will be required to deposit qualified
securities. A "qualified security" is a security against which a Portfolio has
not written a call option and which has not been hedged by a Portfolio by the
sale of a financial futures contract. If at the close of business on any day the
market value of the qualified securities falls below 100% of the current index
value times the multiplier times the number of contracts, a Portfolio will
deposit an amount of cash or liquid assets equal in value to the difference. In
addition, when a Portfolio writes a call on an index which is "in-the-money" at
the time the call is written, a Portfolio will segregate with its custodian bank
any asset, including equity securities and non-
investment grade debt so long as the asset is liquid, unencumbered and marked to
market daily equal in value to the amount by which the call is "in-the-money"
times the multiplier times the number of contracts. Any amount segregated may be
applied to a Portfolio's obligation to segregate additional amounts in the event
that the market value of the qualified securities falls below 100% of the
current index value times the multiplier times the number of contracts.
The Balanced, Enhanced Reserves and U.S. Government Securities Portfolios
may invest up to 2% of its total assets in exchange-
traded call and put options. Each of these Portfolios may sell a call option or
a put option which it has previously purchased prior to the purchase (in the
case of a call) or the sale (in the case of a put) of the underlying security.
Any such sale of a call option or a put option would result in a net gain or
loss, depending on whether the amount received on the sale is more or less than
the premium and other transaction costs paid. In connection with a Portfolio
qualifying as a regulated investment company under the Internal Revenue Code,
other restrictions on a Portfolio's ability to enter into option transactions
may apply from time to time. See "Taxes."
Risks Relating to Options. During the option period, the writer of a call
option has, in return for the premium received on the option, given up the
opportunity for capital appreciation above the exercise price should the market
price of the underlying security increase, but has retained the risk of loss
should the price of the underlying security decline. The writer has no control
over the time when it may be required to fulfill its obligation as a writer of
the option.
The risk of purchasing a call option or a put option is that a Portfolio
may lose the premium it paid plus transaction costs. If a Portfolio does not
exercise the option and is unable to close out the position prior to expiration
of the option, it will lose its entire investment.
An option position may be closed out only on an exchange which provides a
secondary market for an option of the same series. Although a Portfolio will
write and purchase options only when the Adviser believes that a liquid
secondary market will exist for options of the same series, there can be no
assurance that a liquid secondary market will exist for a particular option at a
particular time and that a Portfolio, if it so desires, can close out its
position by effecting a closing transaction. If the writer of a covered call
option is unable to effect a closing purchase transaction, it cannot sell the
underlying security until the option expires or the option is exercised.
Accordingly, a covered call writer may not be able to sell the underlying
security at a time when it might otherwise be advantageous to do so.
Possible reasons for the absence of a liquid secondary market on an
exchange include the following: (i) insufficient trading interest in certain
options; (ii) restrictions on transactions imposed by an exchange; (iii) trading
halts, suspensions or other restrictions imposed with respect to particular
classes or series of options or underlying securities; (iv) inadequacy of the
facilities of an exchange or the clearing corporation to handle trading volume;
and (v) a decision by one or more exchanges to discontinue the trading of
options or impose restrictions on orders.
Each exchange has established limitations governing the maximum number of
call options, whether or not covered, which may be written by a single investor
acting alone or in concert with others (regardless of whether such options are
written on the same or different exchanges or are held or written on one or more
accounts or through one or more brokers). An exchange may order the liquidation
of positions found to be in violation of these limits and it may impose other
sanctions or restrictions. The Adviser believes that the position limits
established by the exchanges will not have any adverse impact upon a Portfolio
or all of the Portfolios, in the aggregate.
Risks of Options on Indices. Because the value of an index option depends
upon movements in the level of the index rather than movements in the price of a
particular security, whether a Portfolio will realize a gain or loss on the
purchase or sale of an option on an index depends upon movements in the level of
prices in the market generally or in an industry or market segment rather than
upon movements in the price of an individual security. Accordingly, successful
use by a Portfolio of options on indices will be subject to the Adviser's
ability to predict correctly movements in the direction of the market generally
or in the direction of a particular industry. This requires different skills and
techniques than predicting changes in the prices of individual securities.
Index prices may be distorted if trading of certain securities included in
the index is interrupted. Trading in index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
securities included in the index. If this occurred, a Portfolio would not be
able to close out options which it had written or purchased and, if restrictions
5
<PAGE>
on exercise were imposed, might be unable to exercise an option it purchased,
which would result in substantial losses to a Portfolio. However, it is the
Fund's policy to write or purchase options only on indices which include a
sufficient number of securities so that the likelihood of a trading halt in the
index is minimized.
Because the exercise of an index option is settled in cash, an index call
writer cannot determine the amount of its settlement obligation in advance and,
unlike call writing on portfolio securities, cannot provide in advance for its
potential settlement obligation by holding the underlying securities.
Consequently, a Portfolio will write call options on indices only subject to the
limitations described above.
Price movements in securities in a Portfolio's holdings will not correlate
perfectly with movements in the level of the index and, therefore, a Portfolio
bears the risk that the price of the securities held by the Portfolio may not
increase as much as the level of the index. In this event, the Portfolio would
bear a loss on the call which would not be completely offset by movements in the
prices of a Portfolio's portfolio securities. It is also possible that the index
may rise when the value of a Portfolio's holdings securities does not. If this
occurred, the Portfolio would experience a loss on the call which would not be
offset by an increase in the value of its portfolio and might also experience a
loss in the market value of portfolio securities.
Unless a Portfolio has other liquid assets which are sufficient to satisfy
the exercise of a call on an index, a Portfolio will be required to liquidate
portfolio securities in order to satisfy the exercise. Because an exercise must
be settled within hours after receiving the notice of exercise, if a Portfolio
fails to anticipate an exercise, it may have to borrow from a bank (in an amount
not exceeding 10% of a Portfolio's total assets) pending settlement of the sale
of securities in its portfolio and pay interest on such borrowing.
When a Portfolio has written a call on an index, there is also a risk that
the market may decline between the time a Portfolio has the call exercised
against it, at a price which is fixed as of the closing level of the index on
the date of exercise, and the time a Portfolio is able to sell securities in its
portfolio. As with options on portfolio securities, a Portfolio will not learn
that a call has been exercised until the day following the exercise date but,
unlike a call on a portfolio security where a Portfolio would be able to deliver
the underlying security in settlement, a Portfolio may have to sell part of its
portfolio securities in order to make settlement in cash, and the price of such
securities might decline before they could be sold.
If a Portfolio exercises a put option on an index which it has purchased
before final determination of the closing index value for that day, it runs the
risk that the level of the underlying index may change before closing. If this
change causes the exercised option to fall "out-of-the-money" a Portfolio will
be required to pay the difference between the closing index value and the
exercise price of the option (multiplied by the applicable multiplier) to the
assigned writer. Although a Portfolio may be able to minimize this risk by
withholding exercise instructions until just before the daily cutoff time or by
selling rather than exercising an option when the index level is close to the
exercise price, it may not be possible to eliminate this risk entirely because
the cutoff times for index options may be earlier than those fixed for other
types of options and may occur before definitive closing index values are
announced.
Financial Futures and Related Options. Each Portfolio (other than the Money
Market and U.S. Government Securities Portfolios) may use financial futures
contracts and related options to hedge against changes in the market value of
its portfolio securities or securities which it intends to purchase. Hedging is
accomplished when an investor takes a position in the futures market opposite to
his cash market position. There are two types of hedges--long (or buying) and
short (or selling) hedges. Historically, prices in the futures market have
tended to move in concert with cash market prices, and prices in the futures
market have maintained a fairly predictable relationship to prices in the cash
market. Thus, a decline in the market value of securities in a Portfolio's
holdings may be protected against to a considerable extent by gains realized on
futures contracts sales. Similarly, it is possible to protect against an
increase in the market price of securities which a Portfolio may wish to
purchase in the future by purchasing futures contracts.
A Portfolio may purchase or sell any financial futures contracts which are
traded on a recognized exchange or board of trade. Financial futures contracts
consist of interest rate futures contracts and securities index futures
contracts. A public market presently exists in interest rate futures contracts
covering long-term U.S. Treasury bonds, U.S. Treasury notes, three-month U.S.
Treasury bills and GNMA certificates. Securities index futures contracts are
currently traded with respect to the Standard & Poor's 500 Composite Stock Price
Index and such other broad-based stock market indices as the New York Stock
Exchange Composite Stock Index and the Value Line Composite Stock Price Index. A
clearing corporation associated with the exchange or board of trade on which a
financial futures contract trades assumes responsibility for the completion of
transactions and also guarantees that open futures contracts will be performed.
In contrast to the situation when a Portfolio purchases or sells a
security, no security is delivered or received by a Portfolio upon the purchase
or sale of a financial futures contract. Initially, a Portfolio will be required
to deposit in a segregated account with its custodian bank an amount of cash,
U.S. Treasury bills or liquid high grade debt obligations. This amount is known
as initial margin and is in the nature of a performance bond or good faith
deposit on the contract. The current initial margin deposit
6
<PAGE>
required per contract is approximately 5% of the contract amount. Brokers may
establish deposit requirements higher than this minimum. Subsequent payments,
called variation margin, will be made to and from the account on a daily basis
as the price of the futures contract fluctuates. This process is known as
marking to market.
The writer of an option on a futures contract is required to deposit margin
pursuant to requirements similar to those applicable to futures contracts. Upon
exercise of an option on a futures contract, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's margin
account. This amount will be equal to the amount by which the market price of
the futures contract at the time of exercise exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.
Although financial futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed out
before the settlement date without the making or taking of delivery. Closing out
is accomplished by effecting an offsetting transaction. A futures contract sale
is closed out by effecting a futures contract purchase for the same aggregate
amount of securities and the same delivery date. If the sale price exceeds the
offsetting purchase price, the seller immediately would be paid the difference
and would realize a gain. If the offsetting purchase price exceeds the sale
price, the seller immediately would pay the difference and would realize a loss.
Similarly, a futures contract purchase is closed out by effecting a futures
contract sale for the same securities and the same delivery date. If the
offsetting sale price exceeds the purchase price, the purchaser would realize a
gain, whereas if the purchase price exceeds the offsetting sale price, the
purchaser would realize a loss. A Portfolio will pay commissions on financial
futures contracts and related options transactions. These commissions may be
higher than those which would apply to purchases and sales of securities
directly.
Limitations on Futures Contracts and Related Options. A Portfolio may not
engage in transactions in financial futures contracts or related options for
speculative purposes but only as a hedge against anticipated changes in the
market value of its portfolio securities or securities which it intends to
purchase. A Portfolio may not purchase or sell financial futures contracts or
related options if, immediately thereafter, the sum of the amount of initial
margin deposits on a Portfolio's existing futures and related options positions
and the premiums paid for related options would exceed 2% of the market value of
a Portfolio's total assets after taking into account unrealized profits and
losses on any such contracts. At the time of purchase of a futures contract or a
call option on a futures contract, any asset, including equity securities and
non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily equal to the market value of the futures contract minus a
Portfolio's initial margin deposit with respect thereto will be deposited in a
segregated account with a Portfolio's custodian bank to collateralize fully the
position and thereby ensure that it is not leveraged. The extent to which a
Portfolio may enter into financial futures contracts and related options also
may be limited by the requirements of the Internal Revenue Code for
qualification as a regulated investment company. See "Taxes."
Risks Relating to Futures Contracts and Related Options. Positions in
futures contracts and related options may be closed out only on an exchange
which provides a secondary market for such contracts or options. A Portfolio
will enter into an option or futures position only if there appears to be a
liquid secondary market. However, there can be no assurance that a liquid
secondary market will exist for any particular option or futures contract at any
specific time. Thus, it may not be possible to close out a futures or related
option position. In the case of a futures position, in the event of adverse
price movements a Portfolio would continue to be required to make daily margin
payments. In this situation, if a Portfolio has insufficient cash to meet daily
margin requirements it may have to sell portfolio securities at a time when it
may be disadvantageous to do so. In addition, a Portfolio may be required to
take or make delivery of the securities underlying the futures contracts it
holds. The inability to close out futures positions also could have an adverse
impact on a Portfolio's ability to hedge its portfolio effectively.
There are several risks in connection with the use of futures contracts as
a hedging device. While hedging can provide protection against an adverse
movement in market prices, it can also preclude a hedger's opportunity to
benefit from a favorable market movement. In addition, investing in futures
contracts and options on futures contracts will cause a Portfolio to incur
additional brokerage commissions and may cause an increase in a Portfolio's
portfolio turnover rate.
The successful use of futures contracts and related options also depends on
the ability of the Adviser to forecast correctly the direction and extent of
market movements within a given time frame. To the extent market prices remain
stable during the period a futures contract or option is held by a Portfolio or
such prices move in a direction opposite to that anticipated, a Portfolio may
realize a loss on the hedging transaction which is not offset by an increase in
the value of its portfolio securities. As a result, a Portfolio's return for the
period may be less than if it had not engaged in the hedging transaction.
Utilization of futures contracts by a Portfolio involves the risk of
imperfect correlation in movements in the price of futures contracts and
movements in the price of the securities which are being hedged. If the price of
the futures contract moves more or less than the price of the securities being
hedged, a Portfolio will experience a gain or loss which will not be completely
offset by movements in the price of the securities. It is possible that, where a
Portfolio has sold futures contracts to hedge its portfolio against decline in
the market, the market may advance and the value of securities held in a
Portfolio's holdings may decline. If this occurred, a Portfolio would lose money
on the futures contract and would also experience a decline in value in its
portfolio
7
<PAGE>
securities. Where futures are purchased to hedge against a possible increase in
the prices of securities before a Portfolio is able to invest its cash (or cash
equivalents) in securities (or options) in an orderly fashion, it is possible
that the market may decline; if a Portfolio then determines not to invest in
securities (or options) at that time because of concern as to possible further
market decline or for other reasons, a Portfolio will realize a loss on the
futures that would not be offset by a reduction in the price of the securities
purchased.
The market prices of futures contracts may be affected if participants in
the futures market elect to close out their contracts through off-setting
transactions rather than to meet margin deposit requirements. In such case,
distortions in the normal relationship between the cash and futures markets
could result. Price distortions could also result if investors in futures
contracts opt to make or take delivery of the underlying securities rather than
to engage in closing transactions due to the resultant reduction in the
liquidity of the futures market. In addition, due to the fact that, from the
point of view of speculators, the deposit requirements in the futures markets
are less onerous than margin requirements in the cash market, increased
participation by speculators in the futures market could cause temporary price
distortions. Due to the possibility of price distortions in the futures market
and because of the imperfect correlation between movements in the prices of
securities and movements in the prices of futures contracts, a correct forecast
of market trends may still not result in a successful hedging transaction.
Compared to the purchase or sale of futures contracts, the purchase of put
or call options on futures contracts involves less potential risk for a
Portfolio because the maximum amount at risk is the premium paid for the options
plus transaction costs. However, there may be circumstances when the purchase of
an option on a futures contract would result in a loss to a Portfolio while the
purchase or sale of the futures contract would not have resulted in a loss, such
as when there is no movement in the price of the underlying securities.
Foreign Securities. Each Portfolio (other than the Money Market and U.S.
Government Securities Portfolios) may purchase foreign securities, including
those issued by foreign branches of U.S. banks. In any event, such investments
in foreign securities will be limited to 15% of the total net asset value of the
Growth and Balanced Portfolios and will not exceed 20% of the total net asset
value of the Enhanced Reserves Portfolio or 35% of the total net asset value of
the Managed Bond Portfolio. Investments in foreign securities, particularly
those of non-governmental issuers, involve considerations which are not
ordinarily associated with investing in domestic issues. These considerations
include changes in currency rates, currency exchange control regulations, the
possibility of expropriation, the unavailability of financial information, the
difficulty of interpreting financial information prepared under foreign
securities markets, the impact of political, social or diplomatic developments,
difficulties in invoking legal process abroad and the difficulty of assessing
economic trends in foreign countries.
The Fund may use a foreign custodian or sub-custodian in connection with
its purchases of foreign securities and may maintain cash and cash equivalents
in the care of a foreign custodian. The amount of cash or cash equivalents
maintained in the care of eligible foreign custodians will be limited to an
amount reasonably necessary to effect the Fund's foreign securities
transactions. The use of a foreign custodian invokes considerations which are
not ordinarily associated with domestic custodians. These considerations include
the possibility of expropriations, restricted access to books and records of the
foreign custodian, inability to recover assets that are lost while under the
control of the foreign custodian, and the impact of political, social or
diplomatic developments.
Mortgage-Related Securities. Each Portfolio (other than the Growth and
Money Market Portfolios) may invest in Mortgage-
Related Securities (as defined in the Prospectus), including those representing
an undivided ownership interest in a pool of mortgages, such as certificates of
the Government National Mortgage Association ("GNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). These certificates are in most cases
pass-through instruments, through which the holder receives a share of all
interest and principal payments from the mortgages underlying the certificate,
net of certain fees. The average life of a Mortgage-Related Security varies with
the underlying mortgage instruments, which have maximum maturities of 40 years.
The average life is likely to be substantially less than the original maturity
of the mortgage pools underlying the securities as the result of prepayments,
mortgage refinancings or foreclosure. Mortgage prepayment rates are affected by
various factors including the level of interest rates, general economic
conditions, the location and age of the mortgage and other social and
demographic conditions. Such prepayments are passed through to the registered
holder with the regular monthly payments of principal and interest and have the
effect of reducing future payments.
Government securities with nominal remaining maturities in excess of 31/2
years that have variable or floating interest rates or demand or put features
may nonetheless be deemed to have remaining maturities of 31/2 years or less so
as to be permissible investments for the Fund as follows: (a) a government
security with a variable or floating rate of interest will be deemed to have a
maturity equal to the period remaining until the next readjustment of the
interest rate; (b) a government security with a demand or put feature that
entitles the holder to receive the principal amount of the underlying security
at the time of or sometime after the holder gives notice of demand or exercise
of the put will be deemed to have a maturity equal to the period remaining until
the principal amount can be recovered through demand or exercise of the put; and
(c) a government security with both a variable or floating rate of interest as
described in clause (a) and a demand or put feature as described in clause (b)
will be deemed to have a maturity equal to the shorter 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 or exercise of the put.
8
<PAGE>
Securities issued by Government National Mortgage Association ("GNMA") are,
and securities issued by Federal National Mortgage Association ("FNMA") include,
mortgage-backed securities representing part ownership of a pool of mortgage
loans. In the case of GNMA, the mortgages are insured by the Federal Housing
Administration or Farmers' Home Administration or guaranteed by the Veteran's
Administration. In the case of FNMA, the mortgages are not insured by an agency
of the U.S. Government.
The prices of mortgage-backed securities are inversely affected by changes
in interest rates and, therefore, are subject to the risk of market price
fluctuations. Mortgage-backed securities issued by GNMA and FNMA currently offer
yields which are higher than those available on other securities of the U.S.
Government and its agencies and instrumentalities, but may be less effective
than these other securities as a means of "locking in" attractive long-term
interest rates. This is a result of the need to reinvest prepayment of principal
and the possibility of significant unscheduled prepayments resulting from
declines in mortgage interest rates. As a result, these securities have less
potential for capital appreciation during periods of declining interest rates
than other investments of comparable risk of decline in value during periods of
rising rates.
Lending Portfolio Securities. In order to increase its return on
investments, each Portfolio may make loans of the portfolio securities as long
as the market value of the loaned securities does not exceed 25% of the value of
that Portfolio's total assets. Loans of portfolio securities will always be
fully collateralized at no less than 102% of the market value of the loaned
securities (as marked to market daily) and made only to borrowers considered to
be creditworthy. Lending portfolio securities involves a risk of delay in the
recovery of the loaned securities and possibly the loss of the collateral if the
borrower fails financially.
Lower Rated Fixed Income Securities. In the event that an issuer of
securities held by a Portfolio experiences difficulties in the timely payment of
principal or interest and such issuer seeks to restructure the terms of its
borrowings, the Portfolio may incur additional expenses and may determine to
invest additional assets with respect to such issuer or the project or projects
to which the Portfolio's portfolio securities relate. Further, the Portfolio may
incur additional expenses to the extent that it is required to seek recovery
upon a default in the payment of interest or the repayment of principal on its
portfolio holdings, and the Portfolio may be unable to obtain full recovery
thereof.
To the extent there is no established secondary market for some of the
medium and lower grade income securities in which the Portfolio may invest,
trading in such securities may be relatively inactive. During periods of reduced
market liquidity or in the absence of readily available market quotations for
medium and lower grade income securities held in the Portfolio's holdings, the
ability of the Investment Adviser to value the Portfolio's securities becomes
more difficult and the Investment Adviser's use of judgment may play a greater
role in the valuation of the Portfolio's securities due to the reduced
availability of reliable objective data. Further, the Portfolio may have more
difficulty selling such securities in a timely manner and at their stated value
than would be the case for securities for which an established secondary market
does exist.
Many medium and lower grade income securities are not listed for trading on
any national securities exchange, and many issuers of medium and lower grade
income securities choose not to have a rating assigned to their obligations by
any nationally recognized statistical rating organization. The amount of
information available about the financial condition of an issuer of unrated or
unlisted securities generally is not as extensive as that which is available
with respect to issuers of listed or rated securities. To the extent that the
Portfolio invests in unrated or unlisted medium and lower grade income
securities, the ability of the Adviser to evaluate the credit risk of such
securities may play a greater role in the ability of the Portfolio to achieve
its investment objective.
The Adviser seeks to minimize the risks involved in investing in medium and
lower grade income securities through portfolio diversification, careful
investment analysis, and attention to current developments and trends in the
economy and financial and credit markets. The Portfolio will rely on the
Adviser's judgment, analysis and experience in evaluating the creditworthiness
of an issue. In its analysis, the Adviser will take into consideration, among
other things, the issuer's financial resources, its sensitivity to economic
conditions and trends, its operating history, the quality of the issuer's
management and regulatory matters. Although the Adviser's internal business and
default risk analysis is independent of the credit ratings of S&P, Moody's or
D&P (or other nationally recognized statistical rating organization), the
Adviser may consider such ratings in evaluating income securities. Achievement
by the Portfolio of its investment objective will be more dependent on the
credit analysis of the Adviser than is the case for investment companies with
investment objectives similar to the Portfolio's that are more reliant on such
rating organizations in selecting portfolio securities.
INVESTMENT RESTRICTIONS
The Fund's fundamental policies as they affect any Portfolio cannot be
changed without the approval vote of a majority of the outstanding shares of
such Portfolio, which is the lesser of (i) 67% or more of the voting securities
of such Portfolio present at a meeting if the holders of more than 50% of the
outstanding voting securities of such Portfolio are present or represented by
proxy or (ii) more than 50% of the outstanding voting securities of such
Portfolio. A proposed change in fundamental policy or investment objective will
be deemed to have been effectively acted upon with respect to any Portfolio if a
majority of the outstanding voting securities of that Portfolio votes for the
approval of the proposal as provided above, notwithstanding (1) that such matter
has not been approved by a majority of the outstanding securities of any other
Portfolio affected by such matter and (2) that such matter has not been approved
by a majority of the outstanding voting securities of the Fund.
9
<PAGE>
The following investment restrictions are fundamental policies of the Fund
with respect to all Portfolios and may not be changed except as described above.
Each Portfolio may not:
1. Purchase for such Portfolio securities of any issuer, other than
obligations issued or guaranteed as to principal and interest by the United
States Government or its agencies or instrumentalities, if immediately
thereafter (i) more than 5% of such Portfolio's total assets (taken at market
value) would be invested in the securities of such issuer or (ii) more than 10%
of the outstanding securities of any class of such issuer would be held by such
Portfolio or by all Portfolios of the Fund in the aggregate.
2. Concentrate the portfolio investments of any Portfolio in any one
industry. To comply with this restriction, no security may be purchased for a
Portfolio if such purchase would cause the value of the aggregate investment of
such Portfolio in any one industry to exceed 25% of that Portfolio's total
assets (taken at market value). However, the Money Market Portfolio may invest
more than 25% of its assets in the domestic banking industry and the Managed
Bond Portfolio may invest up to 80% of that Portfolio's total assets in
corporate debt securities. Provided further, the foregoing restrictions shall be
inapplicable to investments in tax-exempt securities issued by government or
political subdivisions of governments.
3. Act as securities underwriter except as it technically may be deemed to
be an underwriter under the Securities Act of 1933, as amended, in selling a
portfolio security.
4. Purchase securities on margin, but it may obtain short-term credit as
may be necessary for the clearance of purchases and sales of securities.
5. Make short sales of securities or maintain a short position.
6. Make cash loans, except that the Fund may (i) purchase bonds, notes,
debentures or similar obligations which are customarily purchased by
institutional investors whether publicly distributed or not, and (ii) enter into
repurchase agreements, provided that no more than 15% of any Portfolio's net
assets (taken at market value) may be subject to repurchase agreements maturing
in more than seven days.
7. Make securities loans, except that the Portfolios may make loans of the
portfolio securities of any such Portfolio, provided that the market value of
the securities subject to any such loans does not exceed 25% of the value of the
total assets (taken at market value) of such Portfolio.
8. Make investments in real estate, real estate limited partnerships or
commodities or commodity contracts, although (i) the Fund may purchase
securities of issuers which deal in real estate or commodities and may purchase
securities which are secured by interests in real estate, specifically,
securities issued by real estate investment trusts and (ii) any Portfolio
(excluding the Money Market and U.S. Government Securities Portfolios) may
engage in transactions in financial futures contracts and related options,
provided that the sum of the initial margin deposits on such Portfolio's
existing futures positions and the premiums paid for related options would not
exceed in the aggregate 2% of such Portfolio's total assets.
9. Invest in oil, gas or other mineral leases, although the Fund may
purchase securities of issuers which engage in whole or in part in such
activities.
10. Invest in puts, calls, straddles and any combination thereof, except
that the Balanced, Enhanced Reserves and U.S. Government Securities Portfolios
may (i) write (sell) exchange-traded covered call options on portfolio
securities and on securities indices and engage in related closing purchase
transactions and (ii) invest up to 2% of its total assets in exchange-traded
call and put options on securities and securities indices.
11. Purchase securities of companies for the purpose of exercising
management or control.
12. Participate in a joint or joint and several trading account in
securities.
13. Purchase or retain securities of any issuer if any officer or Trustee
of the Fund, or officer or director of its investment adviser, owns beneficially
more than 1/2 of 1% of the outstanding securities or shares, or both, of such
issuer and all such persons owning more than 1/2 of 1% of such securities or
shares together own beneficially more than 5% of such securities or shares.
14. Borrow money, except that the Fund may (i) borrow money for any
Portfolio for temporary administrative purposes provided that any such borrowing
does not exceed 10% of the value of the total assets (taken at market value) of
such Portfolio and (ii) borrow money for any Portfolio for investment purposes,
provided that any such borrowing for investment purposes with respect to any
such Portfolio is (a) authorized by the Trustees prior to any public
distribution of the shares of such Portfolio or is authorized by the
shareholders of such Portfolio thereafter, (b) is limited to 331/3% of the value
of the total assets (taken at market value) of such Portfolio, and (c) is
subject to an agreement by the lender that any recourse is limited to the assets
of that Portfolio with respect to which the borrowing has been made.
15. Pledge, mortgage or hypothecate the assets of any Portfolio to an
extent greater than 10% of the total assets (taken at market value) of such
Portfolio to secure borrowing made pursuant to the provisions of item 15 above.
10
<PAGE>
16. Issue senior securities except to the extent that it is permitted to
(a) borrow money from banks pursuant to the Fund's investment restrictions
regarding the borrowing of money, and (b) enter into transactions involving
forward foreign currency contracts, foreign currency futures contracts and
options thereon as described in the Fund's Prospectus and this Statement of
Additional Information.
17. Invest more than 5% of a Portfolio's net assets, valued at the lower of
cost or market, in warrants or rights. Included within that amount, but not to
exceed 2% of the value of a Portfolio's net assets, may be warrants not listed
on the New York or American Stock Exchange.
The Fund may purchase illiquid securities, including repurchase agreements
providing for settlement more than seven days after notice and restricted
securities (securities that must be registered with the Securities and Exchange
Commission before they can be sold to the public) deemed to be illiquid, but
such securities will not constitute more than 15% of each Portfolio's net assets
(provided that not more than 10% of the Money Market Portfolio's net assets may
constitute illiquid securities). The Board of Trustees, or the Adviser acting at
its direction, values these securities, taking into consideration quotations
available from broker-
dealers and pricing services and other information deemed relevant.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage beyond the specified limit resulting
from a change in values of portfolio securities or amount of net assets shall
not be considered a violation of the restrictions.
PERFORMANCE INFORMATION
Performance information for each Portfolio may appear in advertisements,
sales literature, or reports to shareholders or prospective shareholders.
Performance information in advertisements and sales literature may be expressed
as yield and effective yield of the Money Market Portfolio, as yield of the
other Portfolios offered and as total return of any Portfolio. Current yield for
the Money Market Portfolio will be based on the change in the value of a
hypothetical investment (exclusive of capital changes) over a particular 7-day
period, less a hypothetical charge reflecting deductions for expenses during the
period (the stated as a percentage of the investment at the start of the base
period (the "base period return"). The base period return is then annualized by
multiplying by 365/7, with the resulting yield figure carried to at least the
nearest hundredth of one percent. "Effective yield" for the Money Market
Portfolio assumes that all dividends received during an annual period have been
reinvested. Calculation of "effective yield" begins with the same "base period
return" used in the calculation of yield, which is then annualized to reflect
weekly compounding pursuant to the following formula:
Effective Yield = [(Base Period Return) + 1) 365/7] - 1
For the 7 day period ended December 31, 1996, the effective yield for Class
X and Class Y shares of the Money Market Portfolio was 5.15% and 4.90%,
respectively.
Quotations of yield for the Balanced, Managed Bond, Enhanced Reserves,
Growth, and U.S. Government Securities Portfolios will be based on all
investment income per share earned during a particular 30-day period (including
dividends and interest), less expenses (including pro rata Fund expenses and
expenses applicable to each particular Portfolio) accrued during the period
("net investment income"), and are computed by dividing net investment income by
the value of a share of the Portfolio on the last day of the period, according
to the following formula:
YIELD = 2[((a-b)) + 1)(6) - 1]
cd
where,
a = dividends and interest earned during the period by the Portfolio,
b = expenses accrued for the period (net of any reimbursements),
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends, and
d = the maximum offering price per share on the last day of the period.
As summarized in the Prospectus under the heading "Performance
Information," total return is a measure of the change in value of an investment
in a Portfolio over the period covered. The formula for total return used herein
includes four steps: (1) adding to the total number of shares purchased by a
hypothetical $1,000 investment in the Portfolio; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares of a Portfolio owned at the end of the
period by the net asset value on the last trading day of the period; (3)
assuming maximum sales charge deducted and reinvestment of all dividends at net
asset value and (4) dividing this account value for the hypothetical investor by
the initial $1,000 investment. Total return will be calculated for one year,
five years and ten years or the time period during which the registration
statement including the Portfolio was in effect if a Portfolio has not been in
existence for at least ten years.
Except as above stated, standardized quotations of average annual total
return for each class of shares of each Portfolio will be expressed in terms of
the average annual compounded rate of return of a hypothetical investment in
either Class X or Class Y Shares of each Portfolio over a period of 1, 5, and 10
years (or up to the life of the class of shares). Standardized total return
11
<PAGE>
quotations reflect the deduction of a proportional share of each Class's
expenses of such Portfolio (on an annual basis), and assume that all dividends
and distributions are reinvested when paid. It is expected that the performance
of Class X Shares shall be better than that of Class Y Shares as a result of
lower distribution fees and certain incrementally lower expenses paid by Class X
Shares. The Fund may also quote supplementally a rate of total return over
different periods of time by means of aggregate, average, and year-by-year or
other types of total return figures.
Performance information for the Portfolio (and each Class thereof) reflects
only the performance of a hypothetical investment in a Class X or Class Y of a
Portfolio during the particular time period in which the calculations are based.
Performance information is not an indication of future performance. Performance
information should be considered in light of a particular Portfolio's investment
objectives and policies, characteristics and qualities of the Portfolio, and the
market conditions during the given time period, and should not be considered as
a representation of what may be achieved in the future. Investment results will
vary from time to time and are not identical to the past portfolio investments
of those Portfolios which previously existed as separate accounts.
The manner in which total return will be calculated for public use is
described above. The following table summarizes the calculation of total return
involving the Balanced, Managed Bond, Growth and U.S. Government Securities
Portfolios based on each such Portfolio's past performance as a separate
investment account of Phoenix Home Life Mutual Insurance Company, for periods
before the Fund's registration statement became effective (March 1, 1996). This
performance data may be relevant as each such separate account was managed, in
all material respects, using substantially the same investment objectives,
policies and restrictions as those used by such Portfolio. These separate
investment accounts were not registered under the 1940 Act and therefore were
not subject to certain investment restrictions that are imposed by the 1940 Act.
If these separate investment accounts had been registered under the 1940 Act,
the separate investment accounts' performance may have been adversely affected.
Standardized average annual total return of each Class shall be calculated for
the preceding one, five and ten year periods (or since inception of the
applicable separate account if it has been in existence less than five or ten
years) by including the corresponding separate account's total return calculated
in accordance with formulas specified by the Securities and Exchange Commission.
The performance of the separate accounts has been restated to reflect the
deduction of the fees and expenses of the classes of the corresponding Portfolio
described in the Prospectus.
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1996
Periods Ended
----------------------------------------
10 Years or
1 Year 5 Years Since Inception
------ ------- ---------------
Balanced
Class X 10.86% 9.58 12.69%(1)
Class Y 10.58 9.31 12.40(1)
Managed Bond
Class X 8.70 8.66 8.61
Class Y 8.39 8.38 8.33
Enhanced Reserves
Class X 4.72 N/A 5.78(3)
Class Y N/A N/A 0.71(4)
Growth
Class X 11.34 10.82 15.34
Class Y 11.06 10.55 15.06
U.S. Government Securities
Class X 5.21 6.08 6.61(2)
Class Y 4.87 5.80 6.33(2)
Money Market
Class X 5.53 4.31 5.90
Class Y 5.24 3.94 5.51
- -----------
1 Inception date 5/17/91
2 Inception date 9/30/91
3 Inception date 6/27/94
4 Inception date 11/1/96
NOTE: Average annual total return assumes a hypothetical initial payment of
$1,000. At the end of each period, a total redemption is assumed. The ending
redeemable value is divided by the original investment to calculate total
return. Performance information for any Portfolio reflects only the performance
of a hypothetical investment in the Portfolio during the particular time period
on which the calculations are based. Performance information should be
considered in light of the investment objectives and policies, characteristics
and quality of the particular Portfolio, and the market conditions during the
given time period, and should not be considered as a representation of what may
be achieved in the future.
12
<PAGE>
PERFORMANCE COMPARISONS
Each Portfolio may from time to time include in advertisements containing
total return the ranking of those performance figures relative to such figures
for groups of mutual funds having similar investment objectives as categorized
by ranking services such as Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Weisenberger Financial Services, Inc. and rating services
such as Morningstar, Inc. Additionally, a Portfolio or Class of Portfolio may
compare its performance results to other investment or savings vehicles (such as
certificates of deposit) and may refer to results published in various
publications such as Changing Times, Forbes, Fortune, Money, Barrons, Business
Week and Investor's Daily, Stanger's Mutual Fund Monitor, The Stanger Register,
Stanger's Investment Adviser, The Wall Street Journal, Pensions & Investments,
Institutional Investor, The New York Times, Consumer Reports, Registered
Representative, Financial Planning, Financial Services Weekly, Financial World,
U.S. News and World Report, Standard and Poor's The Outlook, and Personal
Investor. A Portfolio may, from time to time, illustrate the benefits of tax
deferral by comparing taxable investments to investments made through
tax-deferred retirement plans. The total return may also be used to compare the
performance of the Portfolio against certain widely acknowledged outside
standards or indices for stock and bond market performance, such as the Standard
& Poor's 500 Stock Index (the "S&P 500"), Dow Jones Industrial Average, Europe
Australia Far East Index (EAFE), Consumer Price Index, Lehman Brothers Aggregate
Bond Index, Lehman Brothers 1-3 year Government Bond Index, IBC Donoghue Money
Fund Report, Merrill Lynch 1 year Treasury Bill, Lehman Brothers Corporate Index
and T-Bond Index.
Advertisements, sales literature, and other communications may contain
information about the Adviser's current investment strategies and management
style. Current strategies and style may change to allow the Fund to respond
quickly to changing market and economic conditions. From time to time the Fund
may include specific portfolio holdings or industries. To illustrate components
of overall performance, the Fund may separate its cumulative and average annual
returns into income and capital gains components; or cite separately as a return
figure the equity or bond portion of the Fund's portfolio; or compare the Fund's
equity or bond return figure to well-known indices of market performance,
including but not limited to: the S&P 500 Index, Dow Jones Industrial Average,
Lehman Brothers Aggregate Bond Index, Lehman Brothers 1-3 year Government Bond
Index, IBC Donoghue Money Fund Report, Merrill Lynch 1 year Treasury Bill, CS
First Boston High Yield Index and Salomon Brothers Corporate Bond and Government
Bond Indices.
PORTFOLIO TURNOVER
Each Portfolio has a different expected annual rate of portfolio turnover,
which is calculated by dividing the lesser of purchases or sales of portfolio
securities during the fiscal year by the monthly average of the value of the
Portfolio's securities (excluding from the computation all securities, including
options, with maturities at the time of acquisition of one year or less). A high
rate of portfolio turnover generally involves correspondingly greater brokerage
commission expenses, which must be borne directly by the Portfolio. Turnover
rates may vary greatly from year to year as well as within a particular year and
may also be affected by cash requirements for redemptions of each Portfolio's
shares and by requirements which enable the Fund to receive certain favorable
tax treatment. For the fiscal year ended December 31, 1996, the turnover rate
for the equity portion of the Balanced Portfolio was 246%. The turnover rate for
the fixed income portion was 148%.
THE INVESTMENT ADVISERS
The offices of Phoenix Investment Counsel, Inc. ("PIC") are located at 56
Prospect Street, Hartford, Connecticut 06115. The offices of Duff & Phelps
Investment Management Co, Inc. ("DPM") are located at 55 East Monroe Street,
Suite 3800, Chicago, Illinois 60603.
All of the outstanding stock of PIC is owned by Phoenix Equity Planning
Corporation ("Equity Planning"), a subsidiary of Phoenix Duff & Phelps
Corporation. DPM is also a subsidiary of Phoenix Duff & Phelps Corporation.
Phoenix Duff & Phelps Corporation is an indirect, less than wholly-owned
subsidiary of Phoenix Home Life Mutual Insurance Company ("Phoenix Home Life")
of Hartford, Connecticut.
Phoenix Home Life is a mutual insurance company engaged in the insurance
and investment businesses. Phoenix Home Life's principal place of business is
located at One American Row, Hartford, Connecticut.
The Advisers provide certain services and facilities required to carry on
the day-to-day operations of the Fund (for which they receive a management fee)
other than the costs of printing and mailing proxy materials, reports and
notices to shareholders; legal, auditing and accounting services; regulatory
filing fees and expenses of printing the Fund's registration statements (but the
Underwriter purchases such copies of the Fund's prospectuses and reports and
communications to shareholders as it may require for sales purposes at printer's
over-run cost); insurance expense; association membership dues; brokerage fees;
and taxes.
All costs and expenses (other than those specifically referred to as being
borne by the Advisers) incurred in the operation of the Fund are borne by the
Fund. Each Portfolio pays expenses incurred in its own operation and also pays a
portion of the Fund's general administration expenses allocated on the basis of
the asset size of the respective Portfolio, except where an allocation using
13
<PAGE>
an alternative method can be more fairly made. Such expenses include, but shall
not be limited to, all expenses incurred in the operation of the Fund and any
public offering of its shares, including, among others, interest, taxes,
brokerage fees and commissions, fees of Trustees who are not employees of the
Adviser or any of its affiliates, expenses of Trustees' and shareholders'
meetings, including the cost of printing and mailing proxies, expenses of
insurance premiums for fidelity and other coverage, expenses of repurchase and
redemption of shares, expenses of issue and sale of shares (to the extent not
borne by Equity Planning under its agreement with the Fund), expenses of
printing and mailing stock certificates representing shares of the Fund,
association membership dues, charges of custodians, transfer agents, dividend
disbursing agents and financial agents, bookkeeping, auditing, and legal
expenses. The Fund will also pay the fees and bear the expense of registering
and maintaining the registration of the Fund and its shares with the Securities
and Exchange Commission and registering or qualifying its shares under state or
other securities laws and the expense of preparing and mailing prospectuses and
reports to shareholders.
The investment advisory agreements provide that the Advisers shall not be
liable to the Fund or to any shareholder of the Fund for any error of judgment
or mistake of law or for any loss suffered by the Fund or by any shareholder of
the Fund in connection with the matters to which the investment advisory
agreement relates, except a loss resulting from willful misfeasance, bad faith,
gross negligence or reckless disregard on the part of the Advisers in the
performance of its duties thereunder.
As full compensation for the services and facilities furnished to the Fund,
the Advisers are entitled to a fee, payable monthly, as described in the
Prospectus. There is no assurance that the Fund will reach net asset levels high
enough to realize reductions in the rates of the advisory fees. Any reduction in
the rate of the advisory fee on all Portfolios will be prorated among the
Portfolios in proportion to their respective averages of the aggregate daily net
asset values for the period for which the fee had been paid.
The advisory agreements continue in force from year to year for all
Portfolios, provided that, with respect to each Portfolio, the agreement must be
approved at least annually by the Trustees or by vote of a majority of the
outstanding voting securities of the Portfolio. In addition, and in either
event, the terms of the agreement and any renewal thereof must be approved by
the vote of a majority of the Trustees who are not parties to the agreement or
interested persons (as that term is defined in the Investment Company Act of
1940) of any such party, cast in person at a meeting called for the purpose of
voting on such approval. The agreements will terminate automatically if assigned
and may be terminated at any time, without payment of any penalty, either by the
Fund or by the Adviser, on sixty (60) days written notice.
BROKERAGE ALLOCATION
In effecting portfolio transactions for the Fund, the Advisers adhere to
the Fund's policy of seeking best execution and price, determined as described
below, except to the extent it is permitted to pay higher brokerage commissions
for "brokerage and research services" as defined herein. The Advisers may cause
the Fund to pay a broker an amount of commission for effecting a securities
transaction in excess of the amount of commission which another broker or dealer
would have charged for effecting the transaction if the Advisers determine in
good faith that such amount of commission is reasonable in relation to the value
of the brokerage and research services provided by such broker or that any
offset of direct expenses of a Portfolio yields the best net price. As provided
in Section 28(e) of the Securities Exchange Act of 1934, "brokerage and research
services" include giving advice as to the value of securities, the advisability
of investing in, purchasing or selling securities, and the availability of
securities; furnishing analyses and reports concerning issuers, industries,
economic factors and trends, portfolio strategy and the performance of accounts;
and effecting securities transactions and performing functions incidental
thereto (such as clearance and settlement). Brokerage and research services
provided by brokers to the Fund or to the Adviser are considered to be in
addition to and not in lieu of services required to be performed by the Advisers
under their contracts with the Fund and may benefit both the Fund and other
clients of the Advisers. Conversely, brokerage and research services provided by
brokers to other clients of the Advisers may benefit the Fund.
If the securities in which a particular Portfolio of the Fund invests are
traded primarily in the over-the-counter market, where possible the Portfolio
will deal directly with the dealers who make a market in the securities involved
unless better prices and execution are available elsewhere. Such dealers usually
act as principals for their own account. On occasion, securities may be
purchased directly from the issuer. Bonds and money market instruments are
generally traded on a net basis and do not normally involve either brokerage
commission or transfer taxes.
The determination of what may constitute best execution and price in the
execution of a securities transaction by a broker involves a number of
considerations including, without limitation, the overall direct net economic
result to the Fund (involving both price paid or received and any net
commissions and other costs paid), the efficiency with which the transaction is
effected, the ability to effect the transaction at all where a large block is
involved, the availability of the broker to stand ready to execute possibly
difficult transactions in the future and the financial strength and stability of
the broker. Such considerations are judgmental and are weighed by the Adviser in
determining the overall reasonableness of brokerage commissions paid by the
Fund. Some portfolio transactions are, subject to the Conduct Rules of the
National Association of Securities Dealers, Inc. and subject to obtaining best
prices and executions, effected through dealers (excluding Equity Planning) who
sell shares of the Fund.
14
<PAGE>
The Fund has adopted a policy and procedures governing the execution of
aggregated advisory client orders ("bunching procedures") in an attempt to lower
commission costs on a per-share and per-dollar basis. According to the bunching
procedures, the Adviser shall aggregate transactions unless it believes in its
sole discretion that such aggregation is consistent with its duty to seek best
execution (which shall include the duty to seek best price) for the Fund. No
advisory account of the Adviser is to be favored over any other account and each
account that participates in an aggregated order is expected to participate at
the average share price for all transactions of the Adviser in that security on
a given business day, with all transaction costs share pro rata based on the
Fund's participation in the transaction. If the aggregated order is filled in
its entirety, it shall be allocated among the Adviser's accounts in accordance
with the allocation order, and if the order is partially filled, it shall be
allocated pro rata based on the allocation order. Notwithstanding the foregoing,
the order may be allocated on a basis different form that specified in the
allocation order if all accounts of the Adviser whose orders are allocated
receive fair and equitable treatment and the reason for such different
allocation is explained in writing and is approved in writing by the Adviser's
compliance officer as soon as practicable after the opening of the markets on
the trading day following the day on which the order is executed. If an
aggregated order is partially filled and allocated on a basis different from
that specified in the allocation order, no account that is benefited by such
different allocation may intentionally and knowingly effect any purchase or sale
for a reasonable period following the execution of the aggregated order that
would result in it receiving or selling more shares than the amount of shares it
would have received or sold had the aggregated order been completely filled. The
Trustees will annually review these procedures or as frequently as shall appear
appropriate.
For the fiscal year ended December 31, 1996, the Fund paid brokerage commissions
totalling $515,900.
DETERMINATION OF 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 (the "Exchange") on days
when the Exchange is open for trading. The Exchange will be closed on the
following observed national holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Since the Fund does not price securities on weekends or United
States national holidays, the net asset value of a Portfolio's foreign assets
may be significantly affected on days when the investor has no access to the
Fund. The net asset value per share of a Portfolio is determined by adding the
values of all securities and other assets of the Portfolio, subtracting
liabilities, and dividing by the total number of outstanding shares of the
Portfolio. Assets and liabilities are determined in accordance with generally
accepted accounting principles and applicable rules and regulations of the
Securities and Exchange Commission. The total liability allocated to a class,
plus that class's distribution fee and any other expenses allocated solely to
that class, are deducted from the proportionate interest of such class in the
assets of the Portfolio, and the resulting amount of each is divided by the
number of shares of that class outstanding to produce the net asset value per
share.
A security that is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary exchange for such
security by the Trustees or their delegates. Because of the need to obtain
prices as of the close of trading on various exchanges throughout the world, the
calculation of net asset value may not take place for any Portfolio which
invests in foreign securities contemporaneously with the determination of the
prices of the majority of the portfolio securities of such Portfolio. All assets
and liabilities initially expressed in foreign currency values will be converted
into United States dollar values at the mean between the bid and ask quotations
of such currencies against United States dollars as last quoted by any
recognized dealer. If an event were to occur after the value of an investment
was so established but before the net asset value per share was determined,
which was likely to materially change the net asset value, then the instrument
would be valued using fair value considerations by the Trustees or their
delegates. If at any time a Portfolio has investments where market quotations
are not readily available, such investments are valued at the fair value thereof
as determined in good faith by the Trustees although the actual calculations may
be made by persons acting pursuant to the direction of the Trustees.
Money Market Portfolio
The assets of the Money Market Portfolio are valued on the basis of
amortized cost absent extraordinary or unusual market conditions. Under the
amortized cost method of valuation, securities are valued at cost on the date of
purchase. Thereafter the value of a security is increased or decreased
incrementally each day so that at maturity any purchase discount or premium is
fully amortized and the value of the security is equal to its principal amount.
Due to fluctuations in interest rates, the amortized cost value of the Money
Market Portfolio securities may at times be more or less than their market
value. By using amortized cost valuation, the Money Market Portfolio seeks to
maintain a constant net asset value of $1.00 per share despite minor shifts in
the market value of its portfolio securities.
The yield on a shareholder's investment may be more or less than that which
would be recognized if the Portfolio's net asset value per share was not
constant and was permitted to fluctuate with the market value of the Portfolio's
portfolio securities. However, as a result of the following procedures, it is
believed that any difference will normally be minimal. The deviation is
monitored
15
<PAGE>
periodically by comparing the Portfolio net asset value per share as determined
by using available market quotations with its net asset value per share as
determined through the use of the amortized cost method of valuation. The
Adviser will advise the Trustees promptly in the event of any significant
deviation. If the deviation exceeds 1/2 of 1%, the Trustees will consider what
action, if any, should be initiated to provide fair valuation of the Portfolio's
portfolio securities and prevent material dilution or other unfair results to
shareholders. Such action may include redemption of shares in kind, selling
portfolio securities prior to maturity, withholding dividends or utilizing a net
asset value per share as determined by using available market quotations.
Furthermore, the assets of the Portfolio will not be invested in any security
with a maturity of greater than 397 days, and the average weighted maturity of
its portfolio will not exceed 90 days. Portfolio investments will be limited to
U.S. dollar-denominated securities which present minimal credit risks and are
rated within the two highest "short-term" rating categories as more particularly
described in the Prospectus.
PURCHASE OF SHARES
The Prospectus includes information as to the offering price of shares of
the Portfolio and the minimum initial and subsequent investments which may be
made in a Portfolio. Sales of shares are made through registered representatives
of Equity Planning, or through securities dealers with whom Equity Planning has
sales agreements. Sales of shares are also made to customers of bank affiliated
securities brokers with whom Equity Planning has sales agreements. Customers
purchase shares at the applicable offering price.
Each Portfolio currently declares all income dividends and all capital gain
distributions, if any, payable in shares of the Fund at net asset value or, at
the option of the shareholder, in cash. The Money Market Portfolio will normally
make no capital gain distributions, since its investments will generally be made
in securities which do not generate capital gains. Unless otherwise specified in
writing, shareholders shall automatically receive both dividends and capital
gain distributions in additional shares. If a shareholder elects to receive
dividends and/or distributions in cash and the check cannot be delivered or
remains uncashed by the shareholder due to an invalid address, then the dividend
and/or distribution will be reinvested after the Transfer Agent has been
informed that the proceeds are undeliverable. Additional shares will be
purchased for the shareholder's account at the then current net asset value.
Reinvestment direction forms and prospectuses are available from Equity
Planning. An alternate payee section has been incorporated into the application
allowing distributions to be mailed to a second payee and/or address. Dividends
and capital gain distributions received in shares are taxable to the shareholder
and credited in full and fractional shares computed at the closing net asset
value on the next business day after the record date. To be effective with
respect to a particular dividend or distribution, notification of the new
distribution option must be received by the Transfer Agent at least three days
prior to the record date of such dividend or distribution. If all shares in the
shareholder's account are repurchased or redeemed or transferred between the
record date and the payment date of a dividend or distribution, he will receive
cash for the dividend or distribution regardless of the distribution option
selected.
TAXES
As stated in the Prospectus, each Portfolio is treated as a separate entity
for federal income tax purposes. Each Portfolio intends to elect to be treated
as a regulated investment company ("RIC") and qualify as such under Subchapter M
of the Internal Revenue Code (the "Code").
The Code sets forth numerous criteria which must be satisfied in order for
each Portfolio to qualify as a RIC. Each Portfolio must, among other things,
meet the following tests for each taxable year: (1) at least 90% of the
Portfolio's gross income must be derived from a) dividends, b) interest, c)
payments with respect to securities loans, d) gains from the sale or other
disposition of stocks or securities or foreign currencies, or e) other income
(including but not limited to gains from options, futures, or forward contracts)
derived by the Portfolio with respect to its business of investing in stocks,
securities or currencies; (2) less than 30% of the Portfolio's gross income must
be derived from gains realized on the sale or other disposition of: a) stocks or
securities b) options, futures or forward contracts (other than options,
futures, or forward contracts on foreign currencies) held less than three
months; and c) foreign currencies (or options, futures, or forward contracts)
not directly related to the Portfolio business of investing in stocks or
securities; and (3) distribute annually at least 90% of its investment company
taxable income and net exempt-interest income.
In addition to the gross income tests, to qualify as a RIC, each Portfolio
must also diversify its holdings so that, at the close of each quarter of its
taxable year, (1) at least 50% of the value of its total assets consists of
cash, cash items, U.S. Government securities, and other securities limited
generally with respect to any one issuer to not more than 5% of the total assets
of the Portfolio and not more than 10% of the outstanding voting securities of
such issuer, and (2) not more than 25% of the value of its total assets is
invested in the assets of any one issuer (other than U.S. Government
securities). If in any taxable year a Portfolio does not qualify as a RIC, all
of its net investment income and realized capital gains will be taxed at
corporate rates.
In each taxable year that a Portfolio qualifies as a RIC, it (but not its
shareholders) will be relieved of federal income tax on that portion of its net
investment income and net capital gains that are currently distributed (or
deemed distributed) to its shareholders. It is the policy of each Portfolio to
distribute all of its net investment income and net capital gains to its
shareholders
16
<PAGE>
in order to avoid any federal income tax liability. In addition, each Portfolio
intends to make timely distribution sufficient in amount to avoid a
non-deductible 4% excise tax. An excise tax will be imposed on each Portfolio to
the extent that it fails to distribute, with respect to each calendar year, at
least 98% of its net ordinary income for such calendar year and 98% of its net
capital gains as determined for the one year period ending December 31 of such
calendar year. In addition, an amount equal to the undistributed net ordinary
income and net capital gains from the previous calendar year must also be
distributed to avoid the excise tax.
The Fund is required to withhold for income taxes 31% of dividends,
distributions and redemption payments, if any of the following circumstances
exist: i) a shareholder fails to provide the Fund with a correct taxpayer
identification number (TIN); ii) the Portfolio is notified by the Internal
Revenue Service that the shareholder furnished an incorrect TIN; or iii) the
Fund is notified by the Internal Revenue Service that withholding is required
because the shareholder failed to report the receipt of dividends or interest
from other sources. Withholding may also be required for accounts with respect
to which a shareholder fails to certify that i) the TIN provided is correct and
ii) the shareholder is not subject to such withholding. However, withholding
will not be required from certain exempt entities nor those shareholders
complying with the procedures as set forth by the Internal Revenue Service. A
shareholder is required to provide the Fund with a correct TIN. The Fund in turn
is required to report correct taxpayer identification numbers when filing all
tax forms with the Internal Revenue Service. Should the IRS levy a penalty on a
Portfolio for reporting an incorrect TIN and that TIN was provided by the
shareholder, the Portfolio will pass the penalty onto the shareholder.
Dividends paid by a Portfolio from net investment income and net realized
short-term capital gains to a shareholder who is a nonresident alien individual,
a foreign Fund or estate, a foreign corporation or a foreign partnership (a
foreign shareholder) will be subject to United States withholding tax at a rate
of 30% unless a reduced rate of withholding or a withholding exemption is
provided under applicable treaty law. Foreign shareholders are urged to consult
their own tax advisors concerning the applicability of the United States
withholding tax and any foreign taxes.
The discussion of "Dividends, Distributions and Taxes" in the Prospectus,
in conjunction with the foregoing, is a general and abbreviated summary of
applicable provisions of the Code and Treasury regulations now in effect as
currently interpreted by the courts and the Internal Revenue Service. The Code
and regulations, as well as the current interpretations thereof, may be changed
at any time by legislative, judicial, or administrative action. Shareholders are
urged to consult with their tax advisor regarding specific questions as to
federal, state, local or foreign taxes.
THE DISTRIBUTOR
Phoenix Equity Planning Corporation ("Equity Planning"), which has
undertaken to use its best efforts to find purchasers for shares of the Fund,
serves as the National Distributor of the Fund's shares. Shares of each
Portfolio are offered on a continuous basis. Pursuant to distribution agreements
for each class of shares or distribution method, the Distributor will purchase
shares of the Fund for resale to the public, either directly or through
securities dealers or agents, and is obligated to purchase only those shares for
which it has received purchase orders. Equity Planning may also sell Fund shares
pursuant to sales agreements entered into with bank-affiliated securities
brokers who, acting as agent for their customers, place orders for Fund shares
with Equity Planning. Although the Glass-Steagall Act prohibits banks and bank
affiliates from engaging in the business of underwriting, distributing or
selling securities (including mutual fund shares), banking regulators have not
indicated that such institutions are prohibited from purchasing mutual fund
shares upon the order and for the account of their customers. In addition, state
securities laws on this issue may differ from the interpretations of federal law
and banks and financial institutions may be required to register as dealers
pursuant to state law. If, because of changes in law or regulations, or because
of new interpretations of existing law, it is determined that agency
transactions of bank-affiliated securities brokers are not permitted, the
Trustees will consider what action, if any, is appropriate. It is not
anticipated that termination of sales agreements with bank-affiliated securities
brokers would result in a loss to their customers or a change in the net asset
value per share of a Portfolio.
Equity Planning also acts as administrative agent of the Fund (except for
the Real Estate Equity Securities Portfolio) and as such performs
administrative, bookkeeping and pricing services for the Fund. As compensation
for such services, effective as of January 1, 1997, Equity Planning is entitled
to a fee, payable monthly and based upon the average of the aggregate daily net
asset values of each Portfolio, at the following incremental annual rates:
First $100 million .05% plus a minimum fee
$100 million to $300 million .04%
$300 million to $500 million .03%
Greater than $500 million .015%
17
<PAGE>
A minimum fee applies to each Portfolio as follows:
Money Market Portfolio $35,000
Growth Stock Portfolio $50,000
Balanced Portfolio $60,000
Managed Bond Portfolio $70,000
Enhanced Reserves Portfolio $70,000
U.S. Government Securities Portfolio $70,000
In addition, Equity Planning is paid $12,000 for each class of shares of
each Portfolio beyond one. Until December 31, 1996, Equity Planning's fee for
these services was based on an annual rate of 0.03% of the Fund's aggregate
daily net asset value. For services to the Fund for the fiscal year ended
December 31, 1996, the financial agent received a fee of $98,788.
In addition, pursuant to an agreement between Equity Planning, the Fund's
Transfer Agent, and State Street Bank and Trust Company, State Street has been
appointed subagent to perform certain shareholder servicing functions for the
Fund. For performing such services State Street receives a monthly fee from
Equity Planning.
DISTRIBUTION PLAN
The Fund has adopted a distribution plan on behalf of its Class Y Shares
pursuant to Rule 12b-1 of the 1940 Act (the "Plan"). The Plan permits the Fund
to reimburse the Distributor for expenses incurred in connection with activities
intended to promote the sale of shares of Class Y Shares of the Fund.
Pursuant to the Plan, the Fund may reimburse the Distributor for actual
expenses of the Distributor up to 25% of the average daily net assets of the
Class Y Shares. Expenditures under the Plan shall consist of: (i) commissions to
sales personnel for selling Class Y Shares of the Fund; (ii) compensation, sales
incentives and payments to sales, marketing and service personnel; (iii)
payments to broker-dealers and other financial institutions which have entered
into selling agreements with the Distributor for services rendered in connection
with the sale and distribution of Class Y Shares of the Fund; (iv) payment of
expenses incurred in sales and promotional activities, including advertising
expenditures related to the Fund; (v) the costs of preparing and distributing
promotional materials; (vi) the cost of printing the Fund's Prospectus and
Statement of Additional Information for distribution to potential investors; and
(vii) such other similar services that the Trustees of the Fund determines are
reasonably calculated to result in the sale of Class Y Shares of the Fund;
provided, however, a portion of such amount paid to the Distributor, which
portion shall be equal to or less than 0.25% annually of the average daily net
assets of the Fund's Class Y Shares may be paid for reimbursing the costs of
providing services to Class Y shareholders, including assistance in connection
with inquiries related to shareholder accounts (the "Service Fee").
In order to receive payments under the Plan, participants must meet such
qualifications to be established in the sole discretion of the Distributor, such
as services to the Fund's Class Y shareholders, or services providing the Fund
with more efficient methods of offering shares to coherent groups of clients,
members or prospects of a participant, or services permitting bulking of
purchases or sales, or transmission of such purchases or sales by computerized
tape or other electronic equipment, or other processing.
On a quarterly basis, the Trustees of the Fund review a report on
expenditures under the Plan and the purposes for which expenditures were made.
The Trustees conduct an additional, more extensive review annually in
determining whether the Plan will be continued. By its terms, continuation of
the Plan from year to year is contingent on annual approval by a majority of the
Trustees of the Fund and by a majority of the Trustees who are not "interested
persons" (as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operation of the Plans or any related agreements (the
"Plan Trustees"). The Plan provides that it may not be amended to increase
materially the costs which the Fund may bear pursuant to the Plan without
approval of the Class Y shareholders of the Fund and that other material
amendments to the Plan must be approved by a majority of the Plan Trustees by
vote cast in person at a meeting called for the purpose of considering such
amendments. The Plan further provides that while it is in effect, the selection
and nomination of Trustees who are not "interested persons" shall be committed
to the discretion of the Trustees who are not "interested persons." The Plan may
be terminated at any time by vote of a majority of the Plan Trustees or a
majority of the outstanding Class Y Shares of the Fund.
For the fiscal year ended December 31, 1996, the Fund paid Rule 12b-1 Fees
in the amount of $99,546 of which Equity Planning received $28,999 and
unaffiliated broker-dealers received $70,547. Of this amount: (1) $70,547
represented compensation to dealers; (2) $20,720 represented compensation to
sales and shareholder services personnel and (3) $8,279 was utilized for
compensation for marketing material. No interested persons of the Fund and no
Trustee who is not an interested person of the Fund, as that term is defined in
the Investment Company Act of 1940, had any direct or indirect financial
interest in the operation of the Plan.
18
<PAGE>
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Fund and their principal
occupations for at least the last five years are set forth below. Unless
otherwise noted, the address of each executive officer and Trustee is 56
Prospect Street, Hartford, Connecticut 06115-0480.
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- -------------- -----------------------
<S> <C> <C>
C. Duane Blinn (69) Trustee Partner in the law firm of Day, Berry & Howard. Director/Trustee,
Day, Berry & Howard Phoenix Funds (1980-present). Trustee, Phoenix-Aberdeen Series
CityPlace Fund (1996-present). Director/Trustee, the National Affiliated
Hartford, CT 06103 Investment Companies (until 1993).
Robert Chesek (62) Trustee Trustee/Director, Phoenix Funds (1981-present) and Chairman
49 Old Post Road (1989-1994). Trustee, Phoenix-Aberdeen Series Fund (1996-present).
Wethersfield, CT 06109 Director/Trustee, the National Affiliated Investment Companies (until
1993). Vice President, Common Stock, Phoenix Home Life Mutual
Insurance Company (1980-1994).
E. Virgil Conway (67) Trustee Chairman, Metropolitan Transportation Authority (1992-present).
9 Rittenhouse Road Trustee/Director, Consolidated Edison Company of New York, Inc.
Bronxville, NY 10708 (1970-present), Pace University (1978-present), Atlantic Mutual
Insurance Company (1974-present), HRE Properties (1989-present),
Greater New York Councils, Boy Scouts of America (1985-present),
Union Pacific Corp. (1978-present), Blackrock Fund for Freddie Mac
Mortgage Securities (Advisory Director) (1990-present), Centennial
Insurance Company (1974-present), Josiah Macy, Jr., Foundation
(1975-present) and The Harlem Youth Development Foundation
(1987-present). Chairman, Audit Committee of the City of New York
(1981-1996). Director/Trustee, the National Affiliated Investment
Companies (until 1993). Director/Trustee, Phoenix Funds (1993-
William W. Crawford (68) Trustee Representative (1994-1995), Senior Executive (1994-1995), President
3029 Wynfield Mews Lane and Chief Operating Officer (1988-1993), Hilliard, Lyons, Inc.
Louisville, KY 40206 (broker/dealer). Director, Duff & Phelps Utilities Tax-Free Income
Inc. (1995-present), Duff & Phelps Utility and Corporate Bond Trust
Inc. (1995-present).
Harry Dalzell-Payne (67) Trustee Director/Trustee, Phoenix Funds (1983-present). Director, Duff & Phelps
330 East 39th Street Utilities Tax-Free Income Inc. (1995-present), Duff & Phelps Utility and
Apartment 29G Corporate Bond Trust Inc. (1995-present). Trustee, Phoenix-Aberdeen Series
New York, NY 10016 Fund (1996-present). Director, Farragut Mortgage Co., Inc. (1991-1994).
Director/Trustee, the National Affiliated Investment Companies (1983-1993).
Formerly a Major General of the British Army.
William N. Georgeson (69) Trustee Director, Duff & Phelps Utility and Corporate Bond Trust Inc.
575 Glenwood Road (1994-present) and Duff & Phelps Utilities Tax-Free Income Inc.
Lake Forest, IL 60045 (1993-present).
*Francis E. Jeffries (66) Trustee Director and Chairman of the Board, Phoenix Duff & Phelps
6585 Nicholas Blvd. Corporation (1995-present). Director/Trustee, Phoenix Funds (1995-
Apt. 1601 present). Trustee, Phoenix-Aberdeen Series Fund (1996-present).
Naples, FL 33963 Director, Duff & Phelps Utilities Income Fund (1987-present), Duff &
Phelps Utilities Tax-Free Income Inc. (1991-present), Duff & Phelps
Utility and Corporate Bond Trust Inc. (1993-present) and The
Empire District Electric Company (1984-present). Director (1989-
1995), Chairman of the Board (1993-1995), President (1989-1993),
and Chief Executive Officer (1989-1995), Duff & Phelps Corporation.
19
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- -------------- -----------------------
Leroy Keith, Jr. (58) Trustee Chairman and Chief Executive Officer, Carson Products Company
Chairman and Chief (1995-present). Director/Trustee, Phoenix Funds (1980-present).
Executive Officer Trustee, Phoenix-Aberdeen Series Fund (1996-present). Director,
Carson Product Company Equifax Corp. (1991-present) and Keystone International Fund, Inc.
64 Ross Road (1989-present). Trustee, Keystone Liquid Trust, Keystone Tax Exempt
Savannah, GA 30750 Trust, Keystone Tax Free Fund, Master Reserves Tax Free Trust, and
Master Reserves Trust. Director/Trustee, the National Affiliated
Investment Companies (until 1993). Director, Blue Cross/Blue Shield
(1989-1993) and First Union Bank of Georgia (1989-1993). President,
Morehouse College (1987-1994). Chairman and Chief Executive
Officer, Keith Ventures (1992-1994).
*Philip R. McLoughlin (50) Trustee and Director, Vice Chairman and Chief Executive Officer, Phoenix Duff &
One American Row President Phelps Corporation (1995-present). Director (1994-present) and
Hartford, CT 06102 Executive Vice President, Investments, (1988-present) Phoenix Home
Life Mutual Insurance Company. Director/Trustee and President,
Phoenix Funds (1989-present). Trustee, Phoenix-Aberdeen Series
Fund (1996-present), Duff & Phelps Utilities Tax-Free Income Inc.
(1995-present) and Duff & Phelps Utility and Corporate Bond Trust
Inc. (1995-present). Director, (1983-present) and Chairman (1995-
present) Phoenix Investment Counsel, Inc. Director (1984-present)
and President (1990-present), Phoenix Equity Planning Corporation.
Director, Phoenix Realty Group, Inc. (1994-present), Phoenix Realty
Advisors, Inc. (1987-present), Phoenix Realty Investors, Inc. (1994-
present), Phoenix Realty Securities, Inc. (1994-present), PXRE
Corporation (Delaware) (1985-present), and World Trust Fund (1991-
present). Director and Executive Vice President, Phoenix Life and
Annuity Company (1996-present), Director and Executive Vice
President, PHL Variable Insurance Company (1995-present), and
Director, Phoenix Charter Oak Trust Company (1996-present).
Director/Trustee, the National Affiliated Investment Companies (until
1993). Director (1994-present), Chairman (1996-present) and Chief
Executive Officer (1995-1996), National Securities & Research
Corporation and Director and President, Phoenix Securities Group,
Inc. (1993-1996). Director (1992-present) and President (1992-1994),
W.S. Griffith & Co., Inc. (1992-1995) and Director (1992-present) and
President (1992-1994), Townsend Financial Advisers, Inc. Director
and Vice President, PM Holdings, Inc. (1985-present).
Eileen A. Moran (42) Trustee President and Chief Executive Officer, Public Service Resources
Corporation (1990-present).
20
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- -------------- -----------------------
Everett L. Morris (68) Trustee Vice President, W.H. Reaves and Company (1993-present). Director/
164 Laird Road Trustee, Phoenix Funds (1995-present). Trustee, Duff & Phelps
Colts Neck, NJ 07722 Mutual Funds (1994-present). Trustee, Phoenix-Aberdeen Series Fund
(1996-present). Director, Duff & Phelps Utilities Tax-Free Income
Inc. (1991-present), Duff & Phelps Utility and Corporate Bond Trust
Inc. (1993-present) and Public Service Enterprise Group,
Incorporated (1986-1993). President and Chief Operating Officer,
Enterprise Diversified Holdings, Incorporated (1989-1993). Senior
Executive Vice President and Chief Financial Officer, Public Service
Electric and Gas Company (1986-1992). Trustee, Phoenix-Aberdeen
Series Fund (1996-present). Director, Duff & Phelps Utilities Tax-
Free Income Inc. and Duff & Phelps Utility and Corporate Bond
Trust Inc. (1995-present). Director, Accuhealth (1994-present), Trism,
Inc. (1994-present), Realty Foundation of New York (1972-present),
Chairman, New York Housing Partnership Development Corp. (1981-
present), and Blackrock Fannie Mae Mortgage Securities Fund
(Advisory Director) (1989-1996) and Advisory Director, Fund
Directions (1993-present). Chairman, Financial Accounting Standards
Advisory Council (1992-1995).
*James M. Oates (50) Trustee Chairman, IBEX Capital Markets LLC (1997-present). Managing
Managing Director Director, Wydown Group (1994-present). Director, Phoenix Duff &
The Wydown Group Phelps Corporation (1995-present). Director/Trustee, Phoenix Funds
IBEX Capital Markets LLC (1987-present). Trustee, Phoenix-Aberdeen Series Fund (1996-
60 State Street present). Director, Govett Worldwide Opportunity Funds, Inc. (1991-
Suite 950 present), Blue Cross and Blue Shield of New Hampshire (1994-
Boston, MA 02109 present), Investors Financial Service Corporation (1995-present),
Investors Bank & Trust Corporation (1995-present) and Plymouth
Rubber Co. (1995-present). Director, Stifel Financial (1996-present).
Member, Chief Executives Organization (1996-present). Director/
Trustee, the National Affiliated Investment Companies (until 1993).
Director and President (1984-1994) and Chief Executive Officer
(1986-1994), Neworld Bank.
Richard A. Pavia (66) Trustee Director (1981-present), Chairman and Chief Executive Officer (1989-
7145 North Ionia 1994), Speer Financial, Inc. Director, Duff & Phelps Utilities Tax-
Chicago, IL 60646 Free Income Inc. (1991-present), Duff & Phelps Utility and Corporate
Bond Trust Inc. (1992-present).
*Calvin J. Pedersen (54) Trustee Director and President, Phoenix Duff & Phelps Corporation (1995-
Phoenix Duff & Phelps present). Director/Trustee, Phoenix Funds (1995-present). Trustee,
Corporation Phoenix-Aberdeen Series Fund (1996-present). President and Chief
55 East Monroe Street Executive Officer, Duff & Phelps Utilities Tax-Free Income Inc.
Suite 3600 (1995-present), Duff & Phelps Utilities Income Fund (since
Chicago, IL 60603 inception), and Duff & Phelps Utility and Corporate Bond Trust Inc.
(1995-present). Director (1986-1995), President (1993-1995) and
Executive Vice President (1992-1993), Duff & Phelps Corporation.
Philip R. Reynolds (69) Trustee Director/Trustee, Phoenix Funds (1984-present). Trustee, Phoenix-
43 Montclair Drive Aberdeen Series Fund (1996-present). Director, Vestaur Securities, Inc.
West Hartford, CT 06107 (1972-present). Trustee and Treasurer, J. Walton Bissell Foundation, Inc.
(1988-present). Director/Trustee, the National Affiliated Investment
Companies (until 1993).
21
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- -------------- -----------------------
Herbert Roth, Jr. (68) Trustee Director/Trustee, Phoenix Funds (1980-present). Trustee, Phoenix-
134 Lake Street Aberdeen Series Fund (1996-present). Director, Boston Edison
P.O. Box 909 Company (1978-present), Phoenix Home Life Mutual Insurance
Sherborn, MA 01770 Company (1972-present), Landauer, Inc. (medical services) (1970-
present), Tech Ops./Sevcon, Inc. (electronic controllers) (1987-
present), Key Energy Group (oil rig service) (1988-1994), and Mark
IV Industries (diversified manufacturer) (1985-present). Director/
Trustee, the National Affiliated Investment Companies (until 1993).
Richard E. Segerson (50) Trustee Director/Trustee, Phoenix Funds, (1993-present). Trustee, Phoenix-
102 Valley Road Aberdeen Series Fund (1996-present). Managing Director, Mullin
New Canaan, CT 06840 Associates (1993-present). Vice President and General Manager,
Coats & Clark, Inc. (previously Tootal American, Inc.) (1991-1993).
Director/Trustee, the National Affiliated Investment Companies
(1984-1993).
Lowell P. Weicker, Jr. (65) Trustee Trustee/Director, Phoenix Funds (1995-present). Trustee, Phoenix-
731 Lake Avenue Aberdeen Series Fund (1996-present). Chairman, Dresing, Lierman,
Greenwich, CT 06830 Weicker (1995-1996). Director, UST Inc. (1995-present), HPSC Inc.
(1995-present), Duty Free International (1997-present) and
Compuware (1996-present). Visiting Professor, University of Virginia
(1997-present). Governor of the State of Connecticut (1991-1995).
William J. Newman (57) Senior Vice Executive Vice President (1995-present), Chief Investment Strategist
President (1996-present), Phoenix Investment Counsel, Inc. Executive Vice
President and Chief Investment Strategist (1996-present), Senior Vice
President (1995-1996), National Securities & Research Corporation.
Senior Vice President, Phoenix Equity Planning Corporation (1995-
1996), Phoenix Strategic Equity Series Fund (1996-present). The
Phoenix Edge Series Fund (1995-present), Phoenix Multi-Portfolio
Fund (1995-present), Phoenix Income and Growth Fund (1996-
present), Phoenix Series Fund (1996-present). Phoenix Strategic
Allocation Fund, Inc. (1996-present), Phoenix Worldwide
Opportunities Fund (1996-present) and Phoenix-Aberdeen Series
Fund (1996-present). Vice President, Common Stock and Chief
Investment Strategist. Phoenix Home Life Mutual Insurance Company
(April 1995-November 1995). Chief Investment Strategist, Kidder,
Peabody Co., Inc. (1993-1994). Managing Director, Equities, Bankers
Trust Company (1991-1993).
Marvin E. Flewellen (32) Vice Senior Vice President and Fixed Income Portfolio Manager, Duff &
55 East Monroe Street President Phelps Investment Management Co. (1994-present). Second Vice
Suite 3800 President and Portfolio Manager, Northern Trust Bank (1985-1994).
Chicago, IL 60603
Michael E. Haylon (39) Vice Director and Executive Vice President--Investments. Phoenix Duff &
President Phelps Corporation (1995-present). Executive Vice President, Phoenix
Funds (1993-present) and Phoenix-Aberdeen Series Fund (1976-
present). Director (1994-present), President (1995-present), Executive
Vice President (1994-1995), Vice President (1991-1994), Phoenix
Investment Counsel, Inc. Director (1994-present), President (1996-
present), Executive Vice President (1994-1996), Vice President
(1993-1994). National Securities & Research Corporation. Director,
Phoenix Equity Planning Corporation (1995-present). Senior Vice
President, Securities Investments, Phoenix Home Life Mutual
Insurance Company (1993-1995). Various other positions with
Phoenix Home Life Mutual Insurance Company (1990-1993).
22
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- -------------- -----------------------
William E. Keen, III (33) Vice Assistant Vice President, Phoenix Equity Planning Corporation
President (1996-present). Vice President, Phoenix Funds, and Phoenix-
Aberdeen Series Fund (1996-present). Assistant Vice President,
USAffinity Funds, USAffinity Investments LP (1994-1995). Manager,
Fund Administration, SEI Corporation (1991-1994).
Christopher J. Kelleher (41) Vice Managing Director, Fixed Income (1996-present), Vice President
President (1991-1996), Phoenix Investment Counsel, Inc. and National
Securities & Research Corporation. Vice President, The Phoenix
Edge Series Fund (1989-present), Phoenix Series Fund (1989-
present). Portfolio Manager, Public Bonds, Phoenix Home Life Mutual
Insurance Company (1991-1995).
Thomas S. Melvin, Jr. (53) Vice Managing Director, Equities (1996-present), Vice President (1994-
President 1996), Executive Vice President (1992-1994), Phoenix Investment
Counsel, Inc. Managing Director, Equities (1996-present), Vice
President (1994-1996), Executive Vice President (1993-1994),
National Securities & Research Corporation. Vice President, Phoenix
Multi-Portfolio Fund (1993-present). Portfolio Manager, Common
Stock, Phoenix Home Life Mutual Insurance Company (1991-1995).
William R. Moyer (52) Vice Senior Vice President and Chief Financial Officer, Phoenix Duff &
100 Bright Meadow Blvd. President Phelps Corporation (1995-present). Senior Vice President, Finance
P.O. Box 2200 (1990-present), Chief Financial Officer (1996-present), and Treasurer
Enfield, CT 06083-2200 (1994-1996), Phoenix Equity Planning Corporation. Senior Vice
President (1990-present), Chief Financial Officer (1996-present) and
Treasurer (1994-present), Phoenix Investment Counsel, Inc. Senior
Vice President, Finance (1993-present), Chief Financial Officer
(1996-present), and Treasurer (1994-present), National Securities &
Research Corporation. Vice President, Phoenix Funds (1990-present)
and Phoenix-Aberdeen Series Fund (1996-present). Senior Vice
President, Finance, Phoenix Securities Group, Inc. (1993-1995).
Senior Vice President and Chief Financial Officer, W. S. Griffith &
Co., Inc. (1992-1995) and Townsend Financial Advisers, Inc. (1993-
1995). Vice President, the National Affiliated Investment Companies
(until 1993). Vice President, Investment Products Finance, Phoenix
Home Life Mutual Insurance Company (1990-1995).
Scott C. Noble (49) Vice Director and President, Phoenix Realty Group, Inc. (1994-present).
President Senior Vice President, Real Estate, Phoneix Home Life Mutual
Insurance Company (1991-present). Director and Executive Vice
President, Phoenix Real Estate Securities, Inc. (1993-present). Vice
President, Phoenix Multi-Portfolio Fund (1994-present) and The
Phoenix Edge Series Fund (1995-present). Director (1991-present)
and President (1993-present), Phoenix Founders, Inc. Director,
Phoenix Realty Advisors, Inc. (1991-present). Director, President and
Chief Executive Officer (1994-present), Phoenix Realty Investors, Inc.
Various other positions with Phoenix Home Life Mutual Insurance
Company (1991-1993).
C. Edwin Riley, Jr. (43) Vice Managing Director, Equities (1996-present), Vice President (1995-
President 1996), Phoenix Investment Counsel, Inc. Managing Director, Equities,
National Securities & Research Corporation (1996-present). Vice
President, The Phoenix Edge Series Fund (1995-present), Phoenix
Strategic Allocation Fund, Inc. (1995-present), Phoenix Series
Fund (1996-present). Director of Equity Management, NationsBanc
(1981-1995).
23
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- -------------- -----------------------
Barbara Rubin (42) Vice Vice President (1992-present), Second Vice President (1986-1992),
President Real Estate, Phoenix Home Life Mutual Insurance Company. Vice
President, Phoenix Multi-Portfolio Fund (1994-present) and The
Phoenix Edge Series Fund (1995-present). Vice President (1991-
present), 238 Columbus Blvd., Inc. Director (1998-present) and Vice
President (1993-present), Phoenix Founders, Inc. Vice President
Phoenix Real Estate Securities, Inc. (1993-present). Director and
President, Phoenix Realty Advisors, Inc. (1987-present). President
(1995-present), Executive Vice President (1994-present), Phoenix
Realty Securities, Inc.
Leonard J. Saltiel (45) Vice Managing Director (1996-present), Senior Vice President (1994-
President 1996), Phoenix Equity Planning Corporation. Vice President, Phoenix
Funds (1994-present), and Phoenix-Aberdeen Series Fund (1996-
present). Vice President, Investment Operations, Phoenix Home Life
Mutual Insurance Company (1994-1995). Various positions with
Home Life Insurance Company and Phoenix Home Life Mutual
Insurance Company (1987-1994).
Michael Schatt Vice Vice President, Phoenix Realty Securities, Inc. (1997-present).
President Managing Director, Duff & Phelps Investment Management Co.
(1994-present). Portfolio Manager, Duff & Phelps Utility Income Fund
(1994-present). Director, Real Estate Advisory Practice, Coopers &
Lybrand, LLC (1990-1994).
Dorothy J. Skaret (43) Vice Director, Money Market Trading (1996-present), Vice President
President (1991-1996), Phoenix Investment Counsel, Inc. Director, Money
Market Trading (1996-present), Vice President (1993-1996), National
Securities & Research Corporation. Vice President, The Phoenix
Edge Series Fund (1991-present), Phoenix Series Fund (1990-
present), Phoenix-Aberdeen Series Fund (1996-present) and Phoenix
Realty Securities, Inc. (1995-present). Second Vice President and
Treasurer, Fund Accounting, Phoenix Home Life Mutual Insurance
Company (1994-1995). Various other positions with Phoenix Home
Life Mutual Insurance Company (1987-1994).
James D. Wehr (39) Vice Managing Director, Fixed Income (1996-present), Vice President
President (1991-1996), Phoenix Investment Counsel, Inc. Managing Director,
Fixed Income (1996-present), Vice President (1993-1996), National
Securities & Research Corporation. Vice President, Phoenix Multi-
Portfolio Fund (1988-present), Phoenix Series Fund (1990-present),
The Phoenix Edge Series Fund (1991-present), Phoenix California
Tax Exempt Bond Fund, Inc. (1993-present). Various positions with
Phoneix Home Life Mutual Insurance company (1981-1991).
Nancy G. Curtiss (44) Treasurer Vice President, Fund Accounting (1994-present) and Treasurer (1996-
present), Phoenix Equity Planning Corporation. Treasurer, Phoenix
Investment Counsel, Inc. and National Securities & Research
Corporation (1996-present). Treasurer, Phoenix Funds (1994-present) and
Phoenix-Aberdeen Series Fund (1996-present). Second Vice President
and Treasurer, Fund Accounting, Phoenix Home Life Mutual Insurance
Company (1994-1995). Various positions with Phoenix Home Life
Insurance Company (1987-1994).
24
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- -------------- -----------------------
G. Jeffrey Bohne (49) Secretary Vice President and General Manager, Phoenix Home Life Mutual
101 Munson Street Insurance Co. (1993-present). Vice President, Transfer Agent
Greenfield, MA 01301 Operations, Phoenix Equity Planning Corporation (1993-present).
Secretary, Phoenix Funds (1993-present). Clerk, Phoenix Strategic
Allocation Fund, Inc. (1994-present). Secretary, Phoenix-Aberdeen
Series Fund (1996-present). Vice President, Home Life of New York
Insurance Company (1984-1992).
</TABLE>
- -----------
*Trustees identified with an asterisk are considered to be interested persons of
the Fund (within the meaning of the Investment Company Act of 1940, as amended)
because of their affiliation with Phoenix Investment Counsel, Inc., Duff &
Phelps Investment Management Co., Inc. or Phoenix Equity Planning Corporation.
For services rendered to the Fund during the period ended December 31,
1996, the Trustees received an aggregate of $77,238 from the Fund as Trustees'
fees. Each Trustee who is not a full-time employee of the Adviser or any of its
affiliates currently receives a retainer at the annual rate of $3,000 and $500
per meeting. Each Trustee who serves on a Committee receives a fee of $250 for
each meeting attended. The function of the Executive Committee is to serve as a
contract review, compliance review and performance review delegate of the full
Board of Trustees. Officers and employees of the Adviser who are interested
persons are compensated for their services by the Adviser and receive no
compensation from the Fund. Any other interested persons who are not compensated
by the Adviser receive fees from the Fund.
For the Fund's last fiscal year, the Trustees received the following
compensation:
COMPENSATION TABLE
<TABLE>
<CAPTION>
Total
Compensation
Pension or From Fund and
Aggregate Retirement Benefits Estimated Fund Complex
Compensation Accrued as Part Annual Benefits (11 Funds)
Name From Fund of Fund Expenses Upon Retirement Paid to Trustees
- ----------------------- --------------- ---------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
C. Duane Blinn $ 5,000 None None $60,500
Robert Chesek 5,000 None None 53,500
E. Virgil Conway+ 5,250 None None 94,110
William W. Crawford 5,250 None None 43,150
Harry Dalzell-Payne+ 5,250 None None 68,630
William N. Georgeson 5,250 None None 41,990
Francis E. Jeffries None None None None
Leroy Keith, Jr 5,000 None None 53,500
Philip R. McLoughlin+ None None None None
Eileen A. Moran 1,250 None None 7,130
Everett L. Morris+ 5,250 None None 92,490
James M. Oates+ 5,000 None None 58,000
Richard A. Pavia 5,250 None None 39,490
Calvin J. Pederson None None None None
Philip R. Reynolds 5,000 None None 53,500
Herbert Roth, Jr+ 5,250 None None 64,750
Richard E. Segerson 5,250 None None 60,250
Lowell P. Weicker, Jr 5,000 None None 60,500
</TABLE>
- -----------
+Messrs. Conway, Dalzell-Payne, McLoughlin, Morris, Oates and Roth are members
of the Executive Committee.
25
<PAGE>
ADDITIONAL INFORMATION
Financial Statements
Financial information relating to the Fund is contained in the Annual
Report to Shareholders for the year ended December 31, 1996 and is available by
calling Equity Planning at (800) 243-4361 or by writing to Equity Planning at
100 Bright Meadow Blvd., PO Box 2200, Enfield, CT 06083-2200. The Annual Report
is incorporated into this Statement of Additional Information by reference.
Independent Accountants
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110, has
been selected as the independent accountants for the Fund. Price Waterhouse LLP
audits the Fund's annual financial statements and expresses an opinion thereon.
Reports to Shareholders
The fiscal year of the Fund ends on December 31. The Fund will send to its
shareholders at least semi-annually reports showing the securities of the Fund's
portfolio and other information.
26
<PAGE>
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
101 Munson Street, Greenfield, Massachusetts 01301
(800) 814-1897
Statement of Additional Information
May 1, 1997
This Statement of Additional Information is not a prospectus but expands
upon and supplements the information contained in the current prospectus of the
Real Estate Equity Securities Portfolio of the Phoenix Duff & Phelps
Institutional Mutual Funds (the "Fund"), dated May 1, 1997 and should be read in
conjunction with it. A copy may be obtained by calling Phoenix Equity Planning
Corporation ("Equity Planning") at (800) 814-1897, or by writing to Equity
Planning at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut
06083-2200.
TABLE OF CONTENTS*
PAGE
THE FUND .............................................................. 2
INVESTMENT OBJECTIVES AND POLICIES (6) ................................ 2
INVESTMENT RESTRICTIONS (10) ............................................ 5
PERFORMANCE INFORMATION (5) ............................................ 6
PORTFOLIO TURNOVER ..................................................... 7
SERVICES OF THE ADVISER (10) ......................................... 7
SERVICES OF THE ADMINISTRATOR ......................................... 8
BROKERAGE ALLOCATION .................................................. 8
DETERMINATION OF NET ASSET VALUE (13) ................................... 9
PURCHASE OF SHARES (12) ............................................... 9
DIVIDENDS, DISTRIBUTIONS AND TAXES (14) ................................ 10
THE DISTRIBUTOR (11) .................................................. 10
DISTRIBUTION PLAN (11) .................................................. 11
TRUSTEES AND OFFICERS .................................................. 12
ADDITIONAL INFORMATION ............................................... 18
*Numbers in parenthesis are cross-references to related pages of the Prospectus.
PDP 2003B (5/97)
<PAGE>
THE FUND
Phoenix Duff & Phelps Institutional Mutual Funds (the "Fund") is an
open-end management investment company which was organized under Massachusetts
law on December 4, 1995 as a business trust.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of the Phoenix Real Estate Portfolio (the
"Real Estate Portfolio" or "Portfolio") are described in the "Investment
Objectives and Policies" and "Investment Techniques and Related Risks" sections
of the Prospectus.
The investment objective of the Real Estate Portfolio is deemed to be a
fundamental policy and may not be changed without the approval of the
shareholders of the Portfolio. Investment restrictions described in this
Statement of Additional Information are fundamental policies and may not be
changed without the approval of the Portfolio's shareholders.
The following discussion supplements the description of the Portfolio's
investment policies and investment techniques information contained in the
Prospectus.
Money Market Instruments.
Certificates of Deposit. Certificates of deposit are generally short-term,
interest-bearing negotiable certificates issued by banks or savings and loan
associations against funds deposited in the issuing institution.
Time Deposits. Time deposits are deposits in a bank or other financial
institution for a specified period of time at a fixed interest rate for which a
negotiable certificate is not received.
Banker's Acceptances. A bankers' acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international
commercial transaction (to finance the import, export, transfer or storage of
goods). The borrower, as well as the bank, is liable for payment, and the bank
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
secondary markets prior to maturity.
Commercial Paper. Commercial paper refers to short-term, unsecured
promissory notes issued by corporations to finance short-term credit needs.
Commercial paper is usually sold on a discount basis and has a maturity at the
time of issuance not exceeding nine months.
Corporate Debt Securities. Corporate debt securities with a remaining
maturity of less than one year tend to become extremely liquid and are traded as
money market securities.
U.S. Government Obligations. Securities issued or guaranteed as to
principal and interest by the United States Government include a variety of
Treasury securities, which differ only in their interest rates, maturities, and
times of issuance. Treasury bills have maturities of one year or less. Treasury
notes have maturities of one to ten years, and Treasury bonds generally have
maturities of greater than ten years. Agencies of the United States Government
which issue or guarantee obligations include, among others, Export-Import Banks
of the United States, Farmers Home Administration, Federal Housing
Administration, Government National Mortgage Association, Maritime
Administration, Small Business Administration and The Tennessee Valley
Authority. Obligations of instrumentalities of the United States Government
include securities issued or guaranteed by, among others, the Federal National
Mortgage Association, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Banks for Cooperatives, and the
U.S. Postal Service. Some of these securities are supported by the full faith
and credit of the U.S. Government; others are supported by the right of the
issuer to borrow from the Treasury, while still others are supported only by the
credit of the instrumentality.
Repurchase Agreements. The repurchase price under the repurchase agreements
described in the Prospectus generally equals the price paid by the Fund plus
interest negotiated on the basis of current short-term rates (which may be more
or less than the rate on the securities underlying the repurchase agreement).
Securities subject to repurchase agreements are held by the Fund's custodian (or
sub-custodian) or in the Federal Reserve/Treasury book-entry system. Repurchase
agreements are considered to be loans under the Investment Company Act of 1940,
as amended (the "1940 Act").
Bank Obligations. For purposes of the Portfolio's investment policies with
respect to bank obligations, the assets of a bank or savings institution will be
deemed to include the assets of its domestic and foreign branches.
When-Issued and Delayed Delivery Transactions. When the Portfolio agrees to
purchase securities on a when-issued or delayed delivery basis, its custodian
will set aside any asset, including equity securities and any non-investment
grade debt so long as the asset is liquid, unencumbered and marked to market
daily equal to the amount of the purchase or the commitment in a pledged
account. Normally, the custodian will set aside portfolio securities to meet
this requirement. The market value of the pledged account will be monitored and
if such market value declines, the Portfolio will be required subsequently to
place additional assets in the pledged account in order to ensure that the value
of the account remains equal to the amount of the Portfolio's commitments.
Because the Portfolio will set aside cash or other liquid assets in the manner
described, the Portfolio's liquidity
2
<PAGE>
and ability to manage its portfolio might be affected in the event its
when-issued purchases or delayed delivery commitments ever exceeded 25% of the
value of its assets. In the case of a delayed delivery of the sale of portfolio
securities, the Portfolio's custodian will hold the portfolio securities
themselves in a segregated account while the commitment is outstanding.
The Portfolio will make commitments to purchase securities on a when-issued
basis or delayed delivery basis only with the intention of completing the
transaction and actually purchasing or selling the securities. If deemed
advisable as a matter of investment strategy, however, the Portfolio may dispose
of or renegotiate a commitment after it is entered into, and may sell securities
it has committed to purchase before those securities are delivered to the
Portfolio on the settlement date. In these cases the Portfolio may realize a
capital gain or loss. When the Portfolio engages in when-issued and delayed
delivery transactions, it relies on the other party to consummate the trade.
Failure of such party to do so may result in the Portfolio's incurring a loss or
missing an opportunity to obtain a price considered to be advantageous.
The value of the securities underlying a when-issued purchase or a delayed
delivery to purchase securities, and any subsequent fluctuations in their value,
is taken into account when determining the Portfolio's net asset value starting
on the day the Portfolio agrees to purchase the securities. The Portfolio does
not earn interest on the securities it has committed to purchase until they are
paid for and delivered on the settlement date. When the Portfolio makes a
delayed delivery of the sale of securities it owns, the proceeds to be received
upon settlement are included in the Portfolio's assets, and fluctuations in the
value of the underlying securities are not reflected in the Portfolio's net
asset value as long as the commitment remains in effect.
Financial Futures and Related Options. The Portfolio may use financial
futures contracts and related options to hedge against changes in the market
value of its portfolio securities or securities which it intends to purchase.
Hedging is accomplished when an investor takes a position in the futures market
opposite to his cash market position. There are two types of hedges--long (or
buying) and short (or selling) hedges. Historically, prices in the futures
market have tended to move in concert with cash market prices, and prices in the
futures market have maintained a fairly predictable relationship to prices in
the cash market. Thus, a decline in the market value of securities in the
Portfolio's holdings may be protected against to a considerable extent by gains
realized on futures contracts sales. Similarly, it is possible to protect
against an increase in the market price of securities which the Portfolio may
wish to purchase in the future by purchasing futures contracts.
The Portfolio may purchase or sell any financial futures contracts which
are traded on a recognized exchange or board of trade. Financial futures
contracts consist of interest rate futures contracts and securities index
futures contracts. A public market presently exists in interest rate futures
contracts covering long-term U.S. Treasury bonds, U.S. Treasury notes,
three-month U.S. Treasury bills and GNMA certificates. Securities index futures
contracts are currently traded with respect to the Standard & Poor's 500
Composite Stock Price Index and such other broad-based stock market indices as
the New York Stock Exchange Composite Stock Index and the Value Line Composite
Stock Price Index. A clearing corporation associated with the exchange or board
of trade on which a financial futures contract trades assumes responsibility for
the completion of transactions and also guarantees that open futures contracts
will be performed.
In contrast to the situation when the Portfolio purchases or sells a
security, no security is delivered or received by the Portfolio upon the
purchase or sale of a financial futures contract. Initially, the Portfolio will
be required to deposit in a segregated account with its custodian bank an amount
of cash, U.S. Treasury bills or liquid high grade debt obligations. This amount
is known as initial margin and is in the nature of a performance bond or good
faith deposit on the contract. The current initial margin deposit required per
contract is approximately 5% of the contract amount. Brokers may establish
deposit requirements higher than this minimum. Subsequent payments, called
variation margin, will be made to and from the account on a daily basis as the
price of the futures contract fluctuates. This process is known as marking to
market.
The writer of an option on a futures contract is required to deposit margin
pursuant to requirements similar to those applicable to futures contracts. Upon
exercise of an option on a futures contract, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's margin
account. This amount will be equal to the amount by which the market price of
the futures contract at the time of exercise exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.
Although financial futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed out
before the settlement date without the making or taking of delivery. Closing out
is accomplished by effecting an offsetting transaction. A futures contract sale
is closed out by effecting a futures contract purchase for the same aggregate
amount of securities and the same delivery date. If the sale price exceeds the
offsetting purchase price, the seller immediately would be paid the difference
and would realize a gain. If the offsetting purchase price exceeds the sale
price, the seller immediately would pay the difference and would realize a loss.
Similarly, a futures contract purchase is closed out by effecting a futures
contract sale for the same securities and the same delivery date. If the
offsetting sale price exceeds the purchase price, the purchaser would realize a
gain, whereas if the purchase price exceeds the offsetting sale price, the
purchaser would realize a loss. The Portfolio will pay commissions on financial
futures contracts and related options transactions. These commissions may be
higher than those which would apply to purchases and sales of securities
directly.
3
<PAGE>
Limitations on Futures Contracts and Related Options. The Portfolio may
not engage in transactions in financial futures contracts or related options for
speculative purposes but only as a hedge against anticipated changes in the
market value of its portfolio securities or securities which it intends to
purchase. The Portfolio may not purchase or sell financial futures contracts or
related options if, immediately thereafter, the sum of the amount of initial
margin deposits on the Portfolio's existing futures and related options
positions and the premiums paid for related options would exceed 2% of the
market value of the Portfolio's total assets after taking into account
unrealized profits and losses on any such contracts. At the time of purchase of
a futures contract or a call option on a futures contract, any asset, including
equity securities and non-investment grade debt so long as the asset is liquid,
unencumbered and marked to market daily equal to the market value of the futures
contract minus the Portfolio's initial margin deposit with respect thereto will
be deposited in a segregated account with the Portfolio's custodian bank to
collateralize fully the position and thereby ensure that it is not leveraged.
The extent to which the Portfolio may enter into financial futures contracts and
related options also may be limited by the requirements of the Internal Revenue
Code for qualification as a regulated investment company. See "Taxes."
Risks Relating to Futures Contracts and Related Options. Positions in
futures contracts and related options may be closed out only on an exchange
which provides a secondary market for such contracts or options. The Portfolio
will enter into an option or futures position only if there appears to be a
liquid secondary market. However, there can be no assurance that a liquid
secondary market will exist for any particular option or futures contract at any
specific time. Thus, it may not be possible to close out a futures or related
option position. In the case of a futures position, in the event of adverse
price movements the Portfolio would continue to be required to make daily margin
payments. In this situation, if the Portfolio has insufficient cash to meet
daily margin requirements it may have to sell portfolio securities at a time
when it may be disadvantageous to do so. In addition, the Portfolio may be
required to take or make delivery of the securities underlying the futures
contracts it holds. The inability to close out futures positions also could have
an adverse impact on the Portfolio's ability to hedge its portfolio effectively.
There are several risks in connection with the use of futures contracts as
a hedging device. While hedging can provide protection against an adverse
movement in market prices, it can also preclude a hedger's opportunity to
benefit from a favorable market movement. In addition, investing in futures
contracts and options on futures contracts will cause the Portfolio to incur
additional brokerage commissions and may cause an increase in the Portfolio's
portfolio turnover rate.
The successful use of futures contracts and related options also depends on
the ability of the Adviser to forecast correctly the direction and extent of
market movements within a given time frame. To the extent market prices remain
stable during the period a futures contract or option is held by the Portfolio
or such prices move in a direction opposite to that anticipated, the Portfolio
may realize a loss on the hedging transaction which is not offset by an increase
in the value of its portfolio securities. As a result, the Portfolio's return
for the period may be less than if it had not engaged in the hedging
transaction.
Utilization of futures contracts by the Portfolio involves the risk of
imperfect correlation in movements in the price of futures contracts and
movements in the price of the securities which are being hedged. If the price of
the futures contract moves more or less than the price of the securities being
hedged, the Portfolio will experience a gain or loss which will not be
completely offset by movements in the price of the securities. It is possible
that, where the Portfolio has sold futures contracts to hedge its portfolio
against decline in the market, the market may advance and the value of
securities held in the Portfolio's holdings may decline. If this occurred, the
Portfolio would lose money on the futures contract and would also experience a
decline in value in its portfolio securities. Where futures are purchased to
hedge against a possible increase in the prices of securities before the
Portfolio is able to invest its cash (or cash equivalents) in securities (or
options) in an orderly fashion, it is possible that the market may decline; if
the Portfolio then determines not to invest in securities (or options) at that
time because of concern as to possible further market decline or for other
reasons, the Portfolio will realize a loss on the futures that would not be
offset by a reduction in the price of the securities purchased.
The market prices of futures contracts may be affected if participants in
the futures market elect to close out their contracts through off-setting
transactions rather than to meet margin deposit requirements. In such case,
distortions in the normal relationship between the cash and futures markets
could result. Price distortions could also result if investors in futures
contracts opt to make or take delivery of the underlying securities rather than
to engage in closing transactions due to the resultant reduction in the
liquidity of the futures market. In addition, due to the fact that, from the
point of view of speculators, the deposit requirements in the futures markets
are less onerous than margin requirements in the cash market, increased
participation by speculators in the futures market could cause temporary price
distortions. Due to the possibility of price distortions in the futures market
and because of the imperfect correlation between movements in the prices of
securities and movements in the prices of futures contracts, a correct forecast
of market trends may still not result in a successful hedging transaction.
Compared to the purchase or sale of futures contracts, the purchase of put
or call options on futures contracts involves less potential risk for the
Portfolio because the maximum amount at risk is the premium paid for the options
plus transaction costs. However, there may be circumstances when the purchase of
an option on a futures contract would result in a loss to the Portfolio while
the purchase or sale of the futures contract would not have resulted in a loss,
such as when there is no movement in the price of the underlying securities.
4
<PAGE>
Mortgage-Related Securities. The Portfolio may invest in Mortgage-Related
Securities (as defined in the Prospectus), including those representing an
undivided ownership interest in a pool of mortgages, such as certificates of the
Government National Mortgage Association ("GNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). These certificates are in most cases
pass-through instruments, through which the holder receives a share of all
interest and principal payments from the mortgages underlying the certificate,
net of certain fees. The average life of a Mortgage-Related Security varies with
the underlying mortgage instruments, which have maximum maturities of 40 years.
The average life is likely to be substantially less than the original maturity
of the mortgage pools underlying the securities as the result of prepayments,
mortgage refinancings or foreclosure. Mortgage prepayment rates are affected by
various factors including the level of interest rates, general economic
conditions, the location and age of the mortgage and other social and
demographic conditions. Such prepayments are passed through to the registered
holder with the regular monthly payments of principal and interest and have the
effect of reducing future payments.
Securities issued by Government National Mortgage Association ("GNMA") are,
and securities issued by Federal National Mortgage Association ("FNMA") include,
mortgage-backed securities representing part ownership of a pool of mortgage
loans. In the case of GNMA, the mortgages are insured by the Federal Housing
Administration or Farmers' Home Administration or guaranteed by the Veteran's
Administration. In the case of FNMA, the mortgages are not insured by an agency
of the U.S. Government.
The prices of mortgage-backed securities are inversely affected by changes
in interest rates and, therefore, are subject to the risk of market price
fluctuations. Mortgage-backed securities issued by GNMA and FNMA currently offer
yields which are higher than those available on other securities of the U.S.
Government and its agencies and instrumentalities, but may be less effective
than these other securities as a means of "locking in" attractive long-term
interest rates. This is a result of the need to reinvest prepayment of principal
and the possibility of significant unscheduled prepayments resulting from
declines in mortgage interest rates. As a result, these securities have less
potential for capital appreciation during periods of declining interest rates
than other investments of comparable risk of decline in value during periods of
rising rates.
Lending Portfolio Securities. In order to increase its return on
investments, the Portfolio may make loans of the portfolio securities as long as
the market value of the loaned securities does not exceed 33% of the value of
the Portfolio's total assets. Loans of portfolio securities will always be fully
collateralized by cash or U.S. government securities at no less than 102% of the
market value of the loaned securities (as marked to market daily) and made only
to borrowers considered to be creditworthy. Lending portfolio securities
involves a risk of delay in the recovery of the loaned securities and possibly
the loss of the collateral if the borrower fails financially.
Investment in Other Investment Companies. The Fund is authorized to invest
in the securities of other investment companies subject to the limitations
contained in the 1940 Act. In certain countries, investments by the Fund may
only be made through investments in other investment companies that, in turn,
are authorized to invest in the securities that are issued in such countries.
Investors should recognize that the Portfolio's purchase of the securities of
such other investment companies results in the layering of expenses such that
investors indirectly bear a proportionate part of the expenses for such
investment companies including operating costs, and investment advisory and
administrative fees.
INVESTMENT RESTRICTIONS
The Portfolio's fundamental policies cannot be changed without the approval
vote of a majority of the outstanding shares of the Portfolio, which is the
lesser of (i) 67% or more of the voting securities of the Portfolio present at a
meeting if the holders of more than 50% of the outstanding voting securities of
the Portfolio are present or represented by proxy or (ii) more than 50% of the
outstanding voting securities of the Portfolio. A proposed change in fundamental
policy or investment objective will be deemed to have been effectively acted
upon if a majority of the outstanding voting securities of the Portfolio votes
for the approval of the proposal as provided above, notwithstanding (1) that
such matter has not been approved by a majority of the outstanding securities of
any other Portfolio affected by such matter and (2) that such matter has not
been approved by a majority of the outstanding voting securities of the Fund.
The following investment restrictions are fundamental policies of the
Portfolio and may not be changed except as described above. The Portfolio may
not:
(1) issue senior securities, as such term is defined in the Investment Company
Act of 1940, as amended, except as otherwise provided herein;
(2) make short sales of securities or purchase any securities on margin, except
for such short-term credits as are necessary for the clearance of transactions;
provided, however, the deposit or payment of an initial or maintenance margin
in connection with financial futures contracts or related options transactions
is not considered the purchase of a security on margin;
(3) borrow money in excess of 25% of the value of its total assets, or pledge
its assets to an extent greater than 3% of the market or other fair value of
its total assets. Any such borrowings shall be from banks and shall be
undertaken only as a temporary measure or for extraordinary or emergency
purposes. Deposits in escrow in connection with the writing of covered call
options or in connection with the purchase or sale of financial futures
contracts and related options shall not be deemed to be a pledge or other
encumbrance;
5
<PAGE>
(4) engage in the business of underwriting the securities of others;
(5) concentrate its investments in the securities of issuers all of which
conduct their principal business activities in the same industry provided that
this restriction shall not apply to obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities or issuers principally
engaged in the real estate industry as defined by the Adviser from time to
time;
(6) make any direct investment in real estate, real estate mortgage loans
and/or commodities, except that the Fund may (a) purchase or sell readily
marketable securities which are secured by interests in real estate, or issued
by companies which deal in real estate including real estate investment and
mortgage investment trusts, and (b) engage in financial futures contracts and
related options transactions, provided that the sum of the initial margin
deposits on the Fund's futures and related options positions and the premiums
paid for related options do not exceed 5% of the Fund's total assets; and
(7) make loans, except that the Fund may (a) invest up to 15% of its total
assets in repurchase agreements of a type regarded as "liquid" which are fully
collateralized as to principal and interest and which are entered into only
with commercial banks, brokers and dealers considered by the Fund to be
creditworthy and (b) loan its portfolio securities in amounts up to one-third
of the market or other fair value of its total assets.
If a percentage restriction on investment or utilization of assets as set
forth is adhered to at the time an investment is made, a later change in the
percentage resulting from a change in the values or costs of the Fund's assets
will not be considered violate of the restriction.
PERFORMANCE INFORMATION
Performance information for the Portfolio may appear in advertisements,
sales literature, or reports to shareholders or prospective shareholders.
Performance information in advertisements and sales literature may be expressed
as yield and as total return.
Quotations of yield for the Portfolio will be based on all investment
income per share earned during a particular 30-day period (including dividends
and interest), less expenses (including pro rata Fund expenses and expenses
applicable to each particular Portfolio) accrued during the period ("net
investment income"), and are computed by dividing net investment income by the
value of a share of the Portfolio on the last day of the period, according to
the following formula:
YIELD = 2[((a-b)) + 1) (6) - 1]
-------
cd
where,
a = dividends and interest earned during the period by the Portfolio
b = expenses accrued for the period (net of any reimbursements),
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends, and
d = the maximum offering price per share on the last day of the period.
As summarized in the Prospectus under the heading "Performance Information",
total return is a measure of the change in value of an investment in the
Portfolio over the period covered. The formula for total return used herein
includes four steps: (1) adding to the total number of shares purchased by a
hypothetical $1,000 investment in the Portfolio; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares of the Portfolio owned at the end of the
period by the net asset value on the last trading day of the period; (3)
assuming maximum sales charge deducted and reinvestment of all dividends at net
asset value and (4) dividing this account value for the hypothetical investor by
the initial $1,000 investment. Total return will be calculated for one year,
five years and ten years or the time period during which the registration
statement including the Portfolio was in effect if the Portfolio has not been in
existence for at least ten years.
Except as above stated, standardized quotations of average annual total return
for each class of shares of the Portfolio will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in either
Class X or Class Y Shares of the Portfolio over a period of 1, 5, and 10 years
(or up to the life of the class of shares). Standardized total return quotations
reflect the deduction of a proportional share of each Class's expenses of the
Portfolio (on an annual basis), and assume that all dividends and distributions
are reinvested when paid. It is expected that the performance of Class X Shares
shall be better than that of Class Y Shares as a result of lower distribution
fees and certain incrementally lower expenses paid by Class X Shares. The Fund
may also quote supplementally a rate of total return over different periods of
time by means of aggregate, average, and year-by-year or other types of total
return figures.
Performance information for the Portfolio (and each Class thereof) reflects only
the performance of a hypothetical investment in a Class X or Class Y of the
Portfolio during the particular time period in which the calculations are based.
Performance information is not an indication of future performance. Performance
information should be considered in light of the Portfolio's investment
objectives and policies, characteristics and qualities of the Portfolio, and the
market conditions during the given time period, and should not be considered as
a representation of what may be achieved in the future.
6
<PAGE>
PORTFOLIO TURNOVER
Portfolio turnover is calculated by dividing the lesser of purchases or
sales of portfolio securities during the fiscal year by the monthly average of
the value of the Portfolio's securities (excluding from the computation all
securities, including options, with maturities at the time of acquisition of one
year or less). A high rate of portfolio turnover generally involves
correspondingly greater brokerage commission expenses, which must be borne
directly by the Portfolio. Turnover rates may vary greatly from year to year as
well as within a particular year and may also be affected by cash requirements
for redemptions of the Portfolio's shares and by requirements which enable the
Fund to receive certain favorable tax treatment.
SERVICES OF THE ADVISER
The offices of Phoenix Realty Securities ("PRS") are located at 38 Prospect
Street, Hartford, Connecticut 06115. PRS was formed in 1994 as an indirect
subsidiary of Phoenix Home Life Mutual Insurance Company ("Phoenix Home Life")
of Hartford, Connecticut. Phoenix Home Life is a mutual insurance company
engaged in the insurance and investment businesses. Phoenix Home Life's
principal place of business is located at One American Row, Hartford,
Connecticut.
The Adviser continuously furnishes an investment program for the Portfolio
and manages the investment and reinvestment of the assets of the Portfolio,
subject at all times to the supervision of the Trustees. The Adviser, at its
expense, furnishes certain other services, including the services of any member
of its staff who serves as an officer of the Fund.
The investment advisory agreement provides that all costs and expenses
(other than those specifically referred to as being borne by the Adviser)
incurred in the operation of the Fund are borne by the Fund. Each portfolio pays
expenses incurred in its own operation and also pays a portion of the Fund's
general administration expenses allocated on the basis of the asset size of the
respective portfolio, except where an allocation using an alternative method can
be more fairly made. Such expenses include, but shall not be limited to, all
expenses incurred in the operation of the Fund and any public offering of its
shares, including, among others, interest, taxes, brokerage fees and
commissions, fees of Trustees who are not employees of the Adviser or any of its
affiliates, expenses of Trustees' and shareholders' meetings, including the cost
of printing and mailing proxies, a portion of the expenses of insurance premiums
for fidelity and other coverage, expenses of repurchase and redemption of
shares, expenses of issue and sale of shares (to the extent not borne by Equity
Planning under its agreement with the Fund), association membership dues,
charges of custodians, transfer agents, dividend disbursing agents and financial
agents, bookkeeping, auditing, and legal expenses. The Fund will also pay the
fees and bear the expense of registering and maintaining the registration of the
Fund and its shares with the Securities and Exchange Commission and or
qualifying its shares under state or other securities laws and the expense of
preparing and mailing prospectuses and reports to shareholders.
The investment advisory agreement provides that the Adviser shall not be
liable to the Fund or to any shareholder of the Fund for any error of judgment
or mistake of law or for any loss suffered by the Fund or by any shareholder of
the Fund in connection with the matters to which the investment advisory
agreement relates, except a loss resulting from willful misfeasance, bad faith,
gross negligence or reckless disregard on the part of the Advisers in the
performance of its duties thereunder.
As full compensation for the services and facilities furnished to the Fund,
the Adviser is entitled to a fee. The basic monthly advisory fee payable to the
Adviser is subject to a performance adjustment based upon the Portfolio's annual
performance as compared to certain prescribed benchmarks. The basic monthly fee
will therefore increase or decrease by .005% for every .10% after the first .50%
in which Portfolio performance (calculated at the highest total return of the
Portfolio based on the methods described in the Prospectus and in this Statement
of Additional Information) on a rolling twelve month basis is higher or lower
than that of the NAREIT Equity Total Return Index. In no event will the increase
or decrease in any one twelve month period exceed .10%. There will be no
performance adjustment in the first twelve months following inception of the
Portfolio. The following chart describes the total fees which would be
applicable:
<TABLE>
<CAPTION>
Performance
Rolling One Year Portfolio Return vs. NAREIT Index Base Fee Adjustment Total Fee
-------------------------------------------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
(NAREIT Index -.50%) - Portfolio Return - (NAREIT Index +.50%) .50% none .50%
(NAREIT Index +.50%) - Portfolio Return - (NAREIT Index +.60%) .50% +0.005% .505%
(NAREIT Index +.60%) - Portfolio Return - (NAREIT Index +.70%) .50% +0.01% .51%
. . .
(NAREIT Index +2.40%) - Portfolio Return .50% +0.1% .60%
(NAREIT Index -.60%) - Portfolio Return - (NAREIT Index -.50%) .50% -0.005% .495%
(NAREIT Index -.70%) - Portfolio Return - (NAREIT Index -.60%) .50% -0.01% .49%
. . .
Portfolio Return - (NAREIT Index -2.40%) .50% -0.10% .40%
</TABLE>
7
<PAGE>
The advisory agreement will continue in force from year to year, provided
that the agreement must be approved at least annually by the Trustees or by vote
of a majority of the outstanding voting securities of the Portfolio. In
addition, and in either event, the terms of the agreement and any renewal
thereof must be approved by the vote of a majority of the Trustees who are not
parties to the agreement or interested persons (as that term is defined in the
Investment Company Act of 1940) of any such party, cast in person at a meeting
called for the purpose of voting on such approval. The agreement will terminate
automatically if assigned and may be terminated at any time, without payment of
any penalty, either by the Fund or by the Adviser, on sixty (60) days written
notice.
SERVICES OF THE ADMINISTRATOR
Duff & Phelp Investment Management Co. (the "Administrator") serves as
administrator for the Real Estate Portfolio. Under the terms of the
Administration Agreement, the Administrator will assist in maintaining office
facilities, furnish clerical services, office supplies and stationery, provide
advice and assistance on the general operations of the Portfolio, monitor and
make recommendations concerning fidelity bond coverage, monitor compliance with
the policies and limitations of the Portfolio as set forth in the Fund's
governing documents, and prepare and/or coordinate all materials for the Board
of Trustees' meetings. As compensation, the Administrator receives a fee,
computed daily and payable monthly, at the annual rate of 0.15% of the average
daily net assets of the Portfolio.
The Agreement continues in effect from year to year provided such
continuance is specifically approved at least annually by the Fund's Board of
Trustees including a majority of the trustees who are not interested persons or
by a vote of a majority of the outstanding voting securities of the Portfolio.
The Agreement automatically terminates upon its assignment and may be terminated
by either party at any time upon not less than 60 days' written notice.
BROKERAGE ALLOCATION
In effecting portfolio transactions for the Fund, the Adviser adheres to
the Fund's policy of seeking best execution and price, determined as described
below, except to the extent it is permitted to pay higher brokerage commissions
for "brokerage and research services" as defined herein. The Adviser may cause
the Fund to pay a broker an amount of commission for effecting a securities
transaction in excess of the amount of commission which another broker or dealer
would have charged for effecting the transaction if the Adviser determines in
good faith that such amount of commission is reasonable in relation to the value
of the brokerage and research services provided by such broker or that any
offset of direct expenses of the Portfolio yields the best net price. As
provided in Section 28(e) of the Securities Exchange Act of 1934, "brokerage and
research services" include giving advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities; furnishing analyses and reports concerning issuers,
industries, economic factors and trends, portfolio strategy and the performance
of accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). Brokerage and research
services provided by brokers to the Fund or to the Adviser are considered to be
in addition to and not in lieu of services required to be performed by the
Adviser under its contract with the Fund and may benefit both the Fund and other
clients of the Adviser. Conversely, brokerage and research services provided by
brokers to other clients of the Adviser may benefit the Fund.
If the securities in which the Portfolio invests are traded primarily in
the over-the-counter market, where possible the Portfolio will deal directly
with the dealers who make a market in the securities involved unless better
prices and execution are available elsewhere. Such dealers usually act as
principals for their own account. On occasion, securities may be purchased
directly from the issuer. Bonds and money market instruments are generally
traded on a net basis and do not normally involve either brokerage commission or
transfer taxes.
The determination of what may constitute best execution and price in the
execution of a securities transaction by a broker involves a number of
considerations including, without limitation, the overall direct net economic
result to the Fund (involving both price paid or received and any net
commissions and other costs paid), the efficiency with which the transaction is
effected, the ability to effect the transaction at all where a large block is
involved, the availability of the broker to stand ready to execute possibly
difficult transactions in the future and the financial strength and stability of
the broker. Such considerations are judgmental and are weighed by the Adviser in
determining the overall reasonableness of brokerage commissions paid by the
Fund. Some portfolio transactions are, subject to the Conduct Rules of the
National Association of Securities Dealers, Inc. and subject to obtaining best
prices and executions, effected through dealers (excluding Equity Planning) who
sell shares of the Fund. Past sales of Fund shares may be considered when
selecting dealers to effect portfolio transactions.
The Fund has adopted a policy and procedures governing the execution of
aggregated advisory client orders ("bunching procedures") in an attempt to lower
commission costs on a per-share and per-dollar basis. According to the bunching
procedures, the Advisor shall aggregate transactions unless it believes in its
sole discretion that such aggregation is consistent with its duty to seek best
execution (which shall includes the duty to seek best price) for the Fund. No
advisory account of the Advisor is to
8
<PAGE>
be favored over any other account and each account that participates in an
aggregated order is expected to participate at the average share price for all
transactions of the Advisor in that security on a given business day, with all
transaction costs share pro rata based on the Fund's participation in the
transaction. If the aggregated order is filled in its entirety, it shall be
allocated among the Adviser's accounts in accordance with the allocation order,
and if the order is partially filled, it shall be allocated pro rata based on
the allocation order. Notwithstanding the foregoing, the order may be allocated
on a basis different from that specified in the allocation order if all accounts
of the Adviser whose orders are allocated receive fair and equitable treatment
and the reason for such different allocation is explained in writing and is
approved in writing by the Adviser's compliance officer as soon as practicable
after the opening of the markets on the trading day following the day on which
the order is executed. If an aggregated order is partially filled and allocated
on a basis different from that specified in the allocation order, no account
that is benefited by such different allocation may intentionally and knowingly
effect any purchase or sale for a reasonable period following the execution of
the aggregated order that would result in it receiving or selling more shares
than the amount of shares it would have received or sold had the aggregated
order been completely filled. The Trustees will annually review these procedures
or as frequently as shall appear appropriate.
As the Portfolio is in startup, it has paid no brokerage commissions.
DETERMINATION OF 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 (the "Exchange") on days
when the Exchange is open for trading. The Exchange will be closed on the
following observed national holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Since the Fund does not price securities on weekends or United
States national holidays, the net asset value of a Portfolio's foreign assets
may be significantly affected on days when the investor has no access to the
Fund. The net asset value per share of a Portfolio is determined by adding the
values of all securities and other assets of the Portfolio, subtracting
liabilities, and dividing by the total number of outstanding shares of the
Portfolio. Assets and liabilities are determined in accordance with generally
accepted accounting principles and applicable rules and regulations of the
Securities and Exchange Commission. The total liability allocated to a class,
plus that class's distribution fee and any other expenses allocated solely to
that class, are deducted from the proportionate interest of such class in the
assets of the Portfolio, and the resulting amount of each is divided by the
number of shares of that class outstanding to produce the net asset value per
share.
A security that is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary exchange for such
security by the Trustees or their delegates. Because of the need to obtain
prices as of the close of trading on various exchanges throughout the world, the
calculation of net asset value may not take place for any Portfolio which
invests in foreign securities contemporaneously with the determination of the
prices of the majority of the portfolio securities of such Portfolio. All assets
and liabilities initially expressed in foreign currency values will be converted
into United States dollar values at the mean between the bid and ask quotations
of such currencies against United States dollars as last quoted by any
recognized dealer. If an event were to occur after the value of an investment
was so established but before the net asset value per share was determined,
which was likely to materially change the net asset value, then the instrument
would be valued using fair value considerations by the Trustees or their
delegates. If at any time a Portfolio has investments where market quotations
are not readily available, such investments are valued at the fair value thereof
as determined in good faith by the Trustees although the actual calculations may
be made by persons acting pursuant to the direction of the Trustees.
PURCHASE OF SHARES
The Prospectus includes information as to the offering price of shares of
the Portfolio and the minimum initial and subsequent investments which may be
made in the Portfolio. Sales of shares are made through registered
representatives of Equity Planning, or through securities dealers with whom
Equity Planning has sales agreements. Sales of shares are also made to customers
of bank affiliated securities brokers with whom Equity Planning has sales
agreements. Customers purchase shares at the applicable net asset value.
The Portfolio currently declares all income dividends and all capital gain
distributions, if any, payable in shares of the Fund at net asset value or, at
the option of the shareholder, in cash. Unless otherwise specified in writing,
shareholders shall automatically receive both dividends and capital gain
distributions in additional shares. If a shareholder elects to receive dividends
and/or distributions in cash and the check cannot be delivered or remains
uncashed by the shareholder due to an invalid address, then the dividend and/or
distribution will be reinvested after the Transfer Agent has been informed that
the proceeds are undeliverable. Additional shares will be purchased for the
shareholder's account at the then current net asset value. Reinvestment
direction forms and prospectuses are available from Equity Planning. An
alternate payee section has been incorporated into the application allowing
distributions to be mailed to a second payee and/or address. Dividends and
capital gain distributions received in shares are taxable to the shareholder and
credited in full and fractional shares computed at the closing net asset value
on the next business day after the record date. To be effective with respect to
a particular dividend or distribution, notification of the new distribution
option must be received by the Transfer Agent at least three days prior to the
record date of such dividend or distribution. If all shares in the shareholder's
account are repurchased or redeemed or transferred between the record date and
the payment date of a dividend or distribution, he will receive cash for the
dividend or distribution regardless of the distribution option selected.
9
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
As stated in the Prospectus, the Portfolio is treated as a separate entity
for federal income tax purposes. The Portfolio intends to elect to be treated as
a regulated investment company ("RIC") and qualify as such under Subchapter M of
the Internal Revenue Code (the "Code").
The Code sets forth numerous criteria which must be satisfied in order for
the Portfolio to qualify as a RIC. The Portfolio must, among other things, meet
the following tests for each taxable year: (1) at least 90% of the Portfolio's
gross income must be derived from a) dividends, b) interest, c) payments with
respect to securities loans, d) gains from the sale or other disposition of
stocks or securities or foreign currencies, or e) other income (including but
not limited to gains from options, futures, or forward contracts) derived by the
Portfolio with respect to its business of investing in stocks, securities or
currencies; (2) less than 30% of the Portfolio's gross income must be derived
from gains realized on the sale or other disposition of: a) stocks or securities
b) options, futures or forward contracts (other than options, futures, or
forward contracts on foreign currencies) held less than three months; and c)
foreign currencies (or options, futures, or forward contracts) not directly
related to the Portfolio business of investing in stocks or securities; and (3)
distribute annually at least 90% of its investment company taxable income and
net exempt-interest income.
In addition to the gross income tests, to qualify as a RIC, the Portfolio
must also diversify its holdings so that, at the close of each quarter of its
taxable year, (1) at least 50% of the value of its total assets consists of
cash, cash items, U.S. Government securities, and other securities limited
generally with respect to any one issuer to not more than 5% of the total assets
of the Portfolio and not more than 10% of the outstanding voting securities of
such issuer, and (2) not more than 25% of the value of its total assets is
invested in the assets of any one issuer (other than U.S. Government
securities). If in any taxable year a Portfolio does not qualify as a RIC, all
of its net investment income and realized capital gains will be taxed at
corporate rates.
In each taxable year that the Portfolio qualifies as a RIC, it (but not its
shareholders) will be relieved of federal income tax on that portion of its net
investment income and net capital gains that are currently distributed (or
deemed distributed) to its shareholders. It is the policy of the Portfolio to
distribute all of its net investment income and net capital gains to its
shareholders in order to avoid any federal income tax liability. In addition,
the Portfolio intends to make timely distribution sufficient in amount to avoid
a non-deductible 4% excise tax. An excise tax will be imposed on the Portfolio
to the extent that it fails to distribute, with respect to each calendar year,
at least 98% of its net ordinary income for such calendar year and 98% of its
net capital gains as determined for the one year period ending October 31 of
such calendar year. In addition, an amount equal to the undistributed net
ordinary income and net capital gains from the previous calendar year must also
be distributed to avoid the excise tax.
The Fund is required to withhold for income taxes 31% of dividends,
distributions and redemption payments, if any of the following circumstances
exist: i) a shareholder fails to provide the Fund with a correct taxpayer
identification number (TIN); ii) the Fund is notified by the Internal Revenue
Service that the shareholder furnished an incorrect TIN; or iii) the Fund is
notified by the Internal Revenue Service that withholding is required because
the shareholder failed to report the receipt of dividends or interest from other
sources. Withholding may also be required for accounts with respect to which a
shareholder fails to certify that i) the TIN provided is correct and ii) the
shareholder is not subject to such withholding. However, withholding will not be
required from certain exempt entities nor those shareholders complying with the
procedures as set forth by the Internal Revenue Service. A shareholder is
required to provide the Fund with a correct TIN. The Fund in turn is required to
report correct taxpayer identification numbers when filing all tax forms with
the Internal Revenue Service. Should the IRS levy a penalty on the Fund for
reporting an incorrect TIN and that TIN was provided by the shareholder, the
Fund will pass the penalty onto the shareholder.
Dividends paid by the Portfolio from net investment income and net realized
short-term capital gains to a shareholder who is a nonresident alien individual,
a foreign fund or estate, a foreign corporation or a foreign partnership (a
foreign shareholder) will be subject to United States withholding tax at a rate
of 30% unless a reduced rate of withholding or a withholding exemption is
provided under applicable treaty law. Foreign shareholders are urged to consult
their own tax advisors concerning the applicability of the United States
withholding tax and any foreign taxes.
The discussion of "Dividends, Distributions and Taxes" in the Prospectus,
in conjunction with the foregoing, is a general and abbreviated summary of
applicable provisions of the Code and Treasury regulations now in effect as
currently interpreted by the courts and the Internal Revenue Service. The Code
and regulations, as well as the current interpretations thereof, may be changed
at any time by legislative, judicial, or administrative action. Shareholders are
urged to consult with their tax advisor regarding specific questions as to
federal, state, local or foreign taxes.
THE DISTRIBUTOR
Phoenix Equity Planning Corporation ("Equity Planning" or "Distributor"),
which has undertaken to use its best efforts to find purchasers for shares of
the Fund, serves as the national distributor of the Fund's shares. Shares of the
Portfolio are offered on a continuous basis. Pursuant to distribution agreements
for each class of shares or distribution method, the Distributor will purchase
shares of the Fund for resale to the public, either directly or through
securities dealers or agents, and is obligated to purchase only those shares for
which it has received purchase orders. Equity Planning may also sell Fund shares
pursuant to sales agreements
10
<PAGE>
entered into with bank-affiliated securities brokers who, acting as agent for
their customers, place orders for Fund shares with Equity Planning. Although the
Glass-Steagall Act prohibits banks and bank affiliates from engaging in the
business of underwriting, distributing or selling securities (including mutual
fund shares), banking regulators have not indicated that such institutions are
prohibited from purchasing mutual fund shares upon the order and for the account
of their customers. In addition, state securities laws on this issue may differ
from the interpretations of federal law and banks and financial institutions may
be required to register as dealers pursuant to state law. If, because of changes
in law or regulations, or because of new interpretations of existing law, it is
determined that agency transactions of bank-affiliated securities brokers are
not permitted, the Trustees will consider what action, if any, is appropriate.
It is not anticipated that termination of sales agreements with bank-affiliated
securities brokers would result in a loss to their customers or a change in the
net asset value per share of the Portfolio.
Pursuant to a Financial Agent Agreement, Equity Planning provides
bookkeeping and pricing services and certain other ministerial functions
directly to the Fund. As compensation for such services, Equity Planning is
entitled to a fee, payable monthly and based upon the average of the aggregate
daily net asset values of the fund, at the following incremental annual rates:
First $100 million .05%
$100 million to $300 million .04%
$300 million to $500 million .03%
Greater than $500 million .015%
A minimum fee of $70,000 is applicable. In addition, Equity Planning is
paid $12,000 for each class of shares beyond one.
In addition, pursuant to an agreement between Equity Planning, the Fund's
Transfer Agent, and State Street Bank and Trust Company, State Street has been
appointed subagent to perform certain shareholder servicing functions for the
Fund. For performing such services State Street receives a monthly fee from
Equity Planning.
DISTRIBUTION PLAN
The Fund has adopted a distribution plan on behalf of its Class Y Shares
pursuant to Rule 12b-1 of the 1940 Act (the "Plan"). The Plan permits the Fund
to reimburse the Distributor for expenses incurred in connection with activities
intended to promote the sale of shares of Class Y Shares of the Fund.
Pursuant to the Plan, the Fund may reimburse the Distributor for actual
expenses of the Distributor up to 0.25% of the average daily net assets of the
Class Y Shares. Expenditures under the Plan shall consist of: (i) commissions to
sales personnel for selling Class Y Shares of the Fund; (ii) compensation, sales
incentives and payments to sales, marketing and service personnel; (iii)
payments to broker-dealers and other financial institutions which have entered
into selling agreements with the Distributor for services rendered in connection
with the sale and distribution of Class Y Shares of the Fund; (iv) payment of
expenses incurred in sales and promotional activities, including advertising
expenditures related to the Fund; (v) the costs of preparing and distributing
promotional materials; (vi) the cost of printing the Fund's Prospectus and
Statement of Additional Information for distribution to potential investors; and
(vii) such other similar services that the Trustees of the Fund determines are
reasonably calculated to result in the sale of Class Y Shares of the Fund;
provided, however, a portion of such amount paid to the Distributor, which
portion shall be equal to or less than 0.25% annually of the average daily net
assets of the Fund's Class Y Shares may be paid for reimbursing the costs of
providing services to Class Y shareholders, including assistance in connection
with inquiries related to shareholder accounts (the "Service Fee").
In order to receive payments under the Plan, participants must meet such
qualifications to be established in the sole discretion of the Distributor, such
as services to the Fund's Class Y shareholders, or services providing the Fund
with more efficient methods of offering shares to coherent groups of clients,
members or prospects of a participant, or services permitting bulking of
purchases or sales, or transmission of such purchases or sales by computerized
tape or other electronic equipment, or other processing.
On a quarterly basis, the Trustees of the Fund review a report on
expenditures under the Plan and the purposes for which expenditures were made.
The Trustees conduct an additional, more extensive review annually in
determining whether the Plan will be continued. By its terms, continuation of
the Plan from year to year is contingent on annual approval by a majority of the
Trustees of the Fund and by a majority of the Trustees who are not "interested
persons" (as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operation of the Plans or any related agreements (the
"Plan Trustees"). The Plan provides that it may not be amended to increase
materially the costs which the Fund may bear pursuant to the Plan without
approval of the Class Y shareholders of the Fund and that other material
amendments to the Plan must be approved by a majority of the Plan Trustees by
vote cast in person at a meeting called for the purpose of considering such
amendments. The Plan further provides that while it is in effect, the selection
and nomination of Trustees who are not "interested persons" shall be committed
to the discretion of the Trustees who are not "interested persons." The Plan may
be terminated at any time by vote of a majority of the Plan Trustees or a
majority of the outstanding Class Y Shares of the Fund.
As the Portfolio is in startup, it has paid no Rule 12b-1 fees. No
interested persons of the Fund and no Trustee who is not an interested person of
the Fund, as that term is defined in the Investment Company Act of 1940, had any
direct or indirect financial interest in the operation of the Plan.
11
<PAGE>
TRUSTEES AND OFFICERS
The Trustees and Officers of the Fund and their business affiliations for
the past five years are set forth below and, unless otherwise noted, the address
of each executive officer and Trustee is 56 Prospect Street, Hartford,
Connecticut, 06115-0480.
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- -------------- -----------------------
<S> <C> <C>
C. Duane Blinn (69) Trustee Partner in the law firm of Day, Berry & Howard. Director/Trustee,
Day, Berry & Howard Phoenix Funds (1980-present). Trustee, Phoenix-Aberdeen Series
CityPlace Fund (1996-present). Director/Trustee, the National Affiliated
Hartford, CT 06103 Investment Companies (until 1993).
Robert Chesek (62) Trustee Trustee/Director, Phoenix Funds (1981-present) and Chairman
49 Old Post Road (1989-1994). Trustee, Phoenix-Aberdeen Series Fund (1996-present).
Wethersfield, CT 06109 Director/Trustee, the National Affiliated Investment Companies (until
1993). Vice President, Common Stock, Phoenix Home Life Mutual
Insurance Company (1980-1994).
E. Virgil Conway (67) Trustee Chairman, Metropolitan Transportation Authority (1992-present).
9 Rittenhouse Road Trustee/Director, Consolidated Edison Company of New York, Inc.
Bronxville, NY 10708 (1970-present), Pace University (1978-present), Atlantic Mutual
Insurance Company (1974-present), HRE Properties (1989-present),
Greater New York Councils, Boy Scouts of America (1985-present),
Union Pacific Corp. (1978-present), Blackrock Fund for Freddie Mac
Mortgage Securities (Advisory Director) (1990-present), Centennial
Insurance Company (1974-present), Josiah Macy, Jr., Foundation
(1975-present) and The Harlem Youth Development Foundation
(1987-present). Chairman, Audit Committee of the City of New York
(1981-1996). Director/Trustee, the National Affiliated Investment
Companies (until 1993). Director/Trustee, Phoenix Funds (1993-
present). Trustee, Phoenix-Aberdeen Series Fund (1996-present).
Director, Duff & Phelps Utilities Tax-Free Income Inc. and Duff &
Phelps Utility and Corporate Bond Trust Inc. (1995-present). Director,
Accuhealth (1994-present), Trism, Inc. (1994-present), Realty
Foundation of New York (1972-present), Chairman, New York
Housing Partnership Development Corp. (1981-present), and
Blackrock Fannie Mae Mortgage Securities Fund (Advisory Director)
(1989-1996) and Advisory Director, Fund Directions (1993-present).
Chairman, Financial Accounting Standards Advisory Council
(1992-1995).
William W. Crawford (68) Trustee Representative (1994-1995), Senior Executive (1994-1995), President
3029 Wynfield Mews Lane and Chief Operating Officer (1988-1993), Hilliard, Lyons, Inc.
Louisville, KY 40206 (broker/dealer). Director, Duff & Phelps Utilities Tax-Free Income
Inc. (1995-present), Duff & Phelps Utility and Corporate Bond Trust
Inc. (1995-present).
Harry Dalzell-Payne (67) Trustee Director/Trustee, Phoenix Funds (1983-present). Director, Duff & Phelps
330 East 39th Street Utilities Tax-Free Income Inc. (1995-present), Duff & Phelps Utility and
Apartment 29G Corporate Bond Trust Inc. (1995-present). Trustee, Phoenix-Aberdeen Series
New York, NY 10016 Fund (1996-present). Director, Farragut Mortgage Co., Inc. (1991-1994).
Director/Trustee, the National Affiliated Investment Companies (1983-1993).
Formerly a Major General of the British Army.
William N. Georgeson (69) Trustee Director, Duff & Phelps Utility and Corporate Bond Trust Inc.
575 Glenwood Road (1994-present) and Duff & Phelps Utilities Tax-Free Income Inc.
Lake Forest, IL 60045 (1993-present).
12
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- -------------- -----------------------
*Francis E. Jeffries (66) Trustee Director and Chairman of the Board, Phoenix Duff & Phelps
6585 Nicholas Blvd. Corporation (1995-present). Director/Trustee, Phoenix Funds (1995-
Apt. 1601 present). Trustee, Phoenix-Aberdeen Series Fund (1996-present).
Naples, FL 33963 Director, Duff & Phelps Utilities Income Fund (1987-present), Duff &
Phelps Utilities Tax-Free Income Inc. (1991-present), Duff & Phelps
Utility and Corporate Bond Trust Inc. (1993-present) and The
Empire District Electric Company (1984-present). Director (1989-
1995), Chairman of the Board (1993-1995), President (1989-1993),
and Chief Executive Officer (1989-1995), Duff & Phelps Corporation.
Leroy Keith, Jr. (58) Trustee Chairman and Chief Executive Officer, Carson Products Company
Chairman and Chief (1995-present). Director/Trustee, Phoenix Funds (1980-present).
Executive Officer Trustee, Phoenix-Aberdeen Series Fund (1996-present). Director,
Carson Product Company Equifax Corp. (1991-present) and Keystone International Fund, Inc.
64 Ross Road (1989-present). Trustee, Keystone Liquid Trust, Keystone Tax Exempt
Savannah, GA 30750 Trust, Keystone Tax Free Fund, Master Reserves Tax Free Trust, and
Master Reserves Trust. Director/Trustee, the National Affiliated
Investment Companies (until 1993). Director, Blue Cross/Blue Shield
(1989-1993) and First Union Bank of Georgia (1989-1993). President,
Morehouse College (1987-1994). Chairman and Chief Executive
Officer, Keith Ventures (1992-1994).
*Philip R. McLoughlin (50) Trustee and Director, Vice Chairman and Chief Executive Officer, Phoenix Duff &
One American Row President Phelps Corporation (1995-present). Director (1994-present) and
Hartford, CT 06102 Executive Vice President, Investments, (1988-present) Phoenix Home
Life Mutual Insurance Company. Director/Trustee and President,
Phoenix Funds (1989-present). Trustee, Phoenix-Aberdeen Series
Fund (1996-present), Duff & Phelps Utilities Tax-Free Income Inc.
(1995-present) and Duff & Phelps Utility and Corporate Bond Trust
Inc. (1995-present). Director, (1983-present) and Chairman (1995-
present) Phoenix Investment Counsel, Inc. Director (1984-present)
and President (1990-present), Phoenix Equity Planning Corporation.
Director, Phoenix Realty Group, Inc. (1994-present), Phoenix Realty
Advisors, Inc. (1987-present), Phoenix Realty Investors, Inc. (1994-
present), Phoenix Realty Securities, Inc. (1994-present), PXRE
Corporation (Delaware) (1985-present), and World Trust Fund (1991-
present). Director and Executive Vice President, Phoenix Life and
Annuity Company (1996-present), Director and Executive Vice
President, PHL Variable Insurance Company (1995-present), and
Director, Phoenix Charter Oak Trust Company (1996-present).
Director/Trustee, the National Affiliated Investment Companies (until
1993). Director (1994-present), Chairman (1996-present) and Chief
Executive Officer (1995-1996), National Securities & Research
Corporation and Director and President, Phoenix Securities Group,
Inc. (1993-1996). Director (1992-present) and President (1992-1994),
W.S. Griffith & Co., Inc. (1992-1995) and Director (1992-present) and
President (1992-1994), Townsend Financial Advisers, Inc. Director
and Vice President, PM Holdings, Inc. (1985-present).
Eileen A. Moran (42) Trustee President and Chief Executive Officer, Public Service Resources
Corporation (1990-present).
13
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- -------------- -----------------------
Everett L. Morris (68) Trustee Vice President, W.H. Reaves and Company (1993-present). Director/
164 Laird Road Trustee, Phoenix Funds (1995-present). Trustee, Duff & Phelps
Colts Neck, NJ 07722 Mutual Funds (1994-present). Trustee, Phoenix-Aberdeen Series Fund
(1996-present). Director, Duff & Phelps Utilities Tax-Free Income
Inc. (1991-present), Duff & Phelps Utility and Corporate Bond Trust
Inc. (1993-present) and Public Service Enterprise Group,
Incorporated (1986-1993). President and Chief Operating Officer,
Enterprise Diversified Holdings, Incorporated (1989-1993). Senior
Executive Vice President and Chief Financial Officer, Public Service
Electric and Gas Company (1986-1992).
*James M. Oates (50) Trustee Chairman, IBEX Capital Markets LLC (1997-present). Managing
Managing Director Director, Wydown Group (1994-present). Director, Phoenix Duff &
The Wydown Group Phelps Corporation (1995-present). Director/Trustee, Phoenix Funds
IBEX Capital Markets LLC (1987-present). Trustee, Phoenix-Aberdeen Series Fund (1996-
60 State Street present). Director, Govett Worldwide Opportunity Funds, Inc. (1991-
Suite 950 present), Blue Cross and Blue Shield of New Hampshire (1994-
Boston, MA 02109 present), Investors Financial Service Corporation (1995-present),
Investors Bank & Trust Corporation (1995-present) and Plymouth
Rubber Co. (1995-present). Director, Stifel Financial (1996-present).
Member, Chief Executives Organization (1996-present). Director/
Trustee, the National Affiliated Investment Companies (until 1993).
Director and President (1984-1994) and Chief Executive Officer
(1986-1994), Neworld Bank.
Richard A. Pavia (66) Trustee Director (1981-present), Chairman and Chief Executive Officer (1989-
7145 North Ionia 1994), Speer Financial, Inc. Director, Duff & Phelps Utilities Tax-
Chicago, IL 60646 Free Income Inc. (1991-present), Duff & Phelps Utility and Corporate
Bond Trust Inc. (1992-present).
*Calvin J. Pedersen (54) Trustee Director and President, Phoenix Duff & Phelps Corporation (1995-
Phoenix Duff & Phelps present). Director/Trustee, Phoenix Funds (1995-present). Trustee,
Corporation Phoenix-Aberdeen Series Fund (1996-present). President and Chief
55 East Monroe Street Executive Officer, Duff & Phelps Utilities Tax-Free Income Inc.
Suite 3600 (1995-present), Duff & Phelps Utilities Income Fund (since
Chicago, IL 60603 inception), and Duff & Phelps Utility and Corporate Bond Trust Inc.
(1995-present). Director (1986-1995), President (1993-1995) and
Executive Vice President (1992-1993), Duff & Phelps Corporation.
Philip R. Reynolds (69) Trustee Director/Trustee, Phoenix Funds (1984-present). Trustee, Phoenix-
43 Montclair Drive Aberdeen Series Fund (1996-present). Director, Vestaur Securities, Inc.
West Hartford, CT 06107 (1972-present). Trustee and Treasurer, J. Walton Bissell Foundation, Inc.
(1988-present). Director/Trustee, the National Affiliated Investment
Companies (until 1993).
Herbert Roth, Jr. (68) Trustee Director/Trustee, Phoenix Funds (1980-present). Trustee, Phoenix-
134 Lake Street Aberdeen Series Fund (1996-present). Director, Boston Edison
P.O. Box 909 Company (1978-present), Phoenix Home Life Mutual Insurance
Sherborn, MA 01770 Company (1972-present), Landauer, Inc. (medical services) (1970-
present), Tech Ops./Sevcon, Inc. (electronic controllers) (1987-
present), Key Energy Group (oil rig service) (1988-1994), and Mark
IV Industries (diversified manufacturer) (1985-present). Director/
Trustee, the National Affiliated Investment Companies (until 1993).
14
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- -------------- -----------------------
Richard E. Segerson (50) Trustee Director/Trustee, Phoenix Funds, (1993-present). Trustee, Phoenix-
102 Valley Road Aberdeen Series Fund (1996-present). Managing Director, Mullin
New Canaan, CT 06840 Associates (1993-present). Vice President and General Manager,
Coats & Clark, Inc. (previously Tootal American, Inc.) (1991-1993).
Director/Trustee, the National Affiliated Investment Companies
(1984-1993).
Lowell P. Weicker, Jr. (65) Trustee Trustee/Director, Phoenix Funds (1995-present). Trustee, Phoenix-
731 Lake Avenue Aberdeen Series Fund (1996-present). Chairman, Dresing, Lierman,
Greenwich, CT 06830 Weicker (1995-1996). Director, UST Inc. (1995-present), HPSC Inc.
(1995-present), Duty Free International (1997-present) and
Compuware (1996-present). Visiting Professor, University of Virginia
(1997-present). Governor of the State of Connecticut (1991-1995).
William J. Newman (57) Senior Vice Executive Vice President (1995-present), Chief Investment Strategist
President (1996-present), Phoenix Investment Counsel, Inc. Executive Vice
President and Chief Investment Strategist (1996-present), Senior Vice
President (1995-1996), National Securities & Research Corporation.
Senior Vice President, Phoenix Equity Planning Corporation (1995-
1996), Phoenix Strategic Equity Series Fund (1996-present). The
Phoenix Edge Series Fund (1995-present), Phoenix Multi-Portfolio
Fund (1995-present), Phoenix Income and Growth Fund (1996-
present), Phoenix Series Fund (1996-present). Phoenix Strategic
Allocation Fund, Inc. (1996-present), Phoenix Worldwide
Opportunities Fund (1996-present) and Phoenix-Aberdeen Series
Fund (1996-present). Vice President, Common Stock and Chief
Investment Strategist. Phoenix Home Life Mutual Insurance Company
(April 1995-November 1995). Chief Investment Strategist, Kidder,
Peabody Co., Inc. (1993-1994). Managing Director, Equities, Bankers
Trust Company (1991-1993).
Marvin E. Flewellen (32) Vice Senior Vice President and Fixed Income Portfolio Manager, Duff &
55 East Monroe Street President Phelps Investment Management Co. (1994-present). Second Vice
Suite 3800 President and Portfolio Manager, Northern Trust Bank (1985-1994).
Chicago, IL 60603
Michael E. Haylon (39) Vice Director and Executive Vice President--Investments. Phoenix Duff &
President Phelps Corporation (1995-present). Executive Vice President, Phoenix
Funds (1993-present) and Phoenix-Aberdeen Series Fund (1976-
present). Director (1994-present), President (1995-present), Executive
Vice President (1994-1995), Vice President (1991-1994), Phoenix
Investment Counsel, Inc. Director (1994-present), President (1996-
present), Executive Vice President (1994-1996), Vice President
(1993-1994). National Securities & Research Corporation. Director,
Phoenix Equity Planning Corporation (1995-present). Senior Vice
President, Securities Investments, Phoenix Home Life Mutual
Insurance Company (1993-1995). Various other positions with
Phoenix Home Life Mutual Insurance Company (1990-1993).
William E. Keen, III (33) Vice Assistant Vice President, Phoenix Equity Planning Corporation
President (1996-present). Vice President, Phoenix Funds, and Phoenix-
Aberdeen Series Fund (1996-present). Assistant Vice President,
USAffinity Funds, USAffinity Investments LP (1994-1995). Manager,
Fund Administration, SEI Corporation (1991-1994).
15
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- -------------- -----------------------
Christopher J. Kelleher (41) Vice Managing Director, Fixed Income (1996-present), Vice President
President (1991-1996), Phoenix Investment Counsel, Inc. and National
Securities & Research Corporation. Vice President, The Phoenix
Edge Series Fund (1989-present), Phoenix Series Fund (1989-
present). Portfolio Manager, Public Bonds, Phoenix Home Life Mutual
Insurance Company (1991-1995).
Thomas S. Melvin, Jr. (53) Vice Managing Director, Equities (1996-present), Vice President (1994-
President 1996), Executive Vice President (1992-1994), Phoenix Investment
Counsel, Inc. Managing Director, Equities (1996-present), Vice
President (1994-1996), Executive Vice President (1993-1994),
National Securities & Research Corporation. Vice President, Phoenix
Multi-Portfolio Fund (1993-present). Portfolio Manager, Common
Stock, Phoenix Home Life Mutual Insurance Company (1991-1995).
William R. Moyer (52) Vice Senior Vice President and Chief Financial Officer, Phoenix Duff &
100 Bright Meadow Blvd. President Phelps Corporation (1995-present). Senior Vice President, Finance
P.O. Box 2200 (1990-present), Chief Financial Officer (1996-present), and Treasurer
Enfield, CT 06083-2200 (1994-1996), Phoenix Equity Planning Corporation. Senior Vice
President (1990-present), Chief Financial Officer (1996-present) and
Treasurer (1994-present), Phoenix Investment Counsel, Inc. Senior
Vice President, Finance (1993-present), Chief Financial Officer
(1996-present), and Treasurer (1994-present), National Securities &
Research Corporation. Vice President, Phoenix Funds (1990-present)
and Phoenix-Aberdeen Series Fund (1996-present). Senior Vice
President, Finance, Phoenix Securities Group, Inc. (1993-1995).
Senior Vice President and Chief Financial Officer, W. S. Griffith &
Co., Inc. (1992-1995) and Townsend Financial Advisers, Inc. (1993-
1995). Vice President, the National Affiliated Investment Companies
(until 1993). Vice President, Investment Products Finance, Phoenix
Home Life Mutual Insurance Company (1990-1995).
Scott C. Noble (49) Vice Director and President, Phoenix Realty Group, Inc. (1994-present).
President Senior Vice President, Real Estate, Phoneix Home Life Mutual
Insurance Company (1991-present). Director and Executive Vice
President, Phoenix Real Estate Securities, Inc. (1993-present). Vice
President, Phoenix Multi-Portfolio Fund (1994-present) and The
Phoenix Edge Series Fund (1995-present). Director (1991-present)
and President (1993-present), Phoenix Founders, Inc. Director,
Phoenix Realty Advisors, Inc. (1991-present). Director, President and
Chief Executive Officer (1994-present), Phoenix Realty Investors, Inc.
Various other positions with Phoenix Home Life Mutual Insurance
Company (1991-1993).
C. Edwin Riley, Jr. (43) Vice Managing Director, Equities (1996-present), Vice President (1995-
President 1996), Phoenix Investment Counsel, Inc. Managing Director, Equities,
National Securities & Research Corporation (1996-present). Vice
President, The Phoenix Edge Series Fund (1995-present), Phoenix
Strategic Allocation Fund, Inc. (1995-present), Phoenix Series
Fund (1996-present). Director of Equity Management, NationsBanc
(1981-1995).
16
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- -------------- -----------------------
Barbara Rubin (42) Vice Vice President (1992-present), Second Vice President (1986-1992),
President Real Estate, Phoenix Home Life Mutual Insurance Company. Vice
President, Phoenix Multi-Portfolio Fund (1994-present) and The
Phoenix Edge Series Fund (1995-present). Vice President (1991-
present), 238 Columbus Blvd., Inc. Director (1998-present) and Vice
President (1993-present), Phoenix Founders, Inc. Vice President
Phoenix Real Estate Securities, Inc. (1993-present). Director and
President, Phoenix Realty Advisors, Inc. (1987-present). President
(1995-present), Executive Vice President (1994-present), Phoenix
Realty Securities, Inc.
Leonard J. Saltiel (45) Vice Managing Director (1996-present), Senior Vice President (1994-
President 1996), Phoenix Equity Planning Corporation. Vice President, Phoenix
Funds (1994-present), and Phoenix-Aberdeen Series Fund (1996-
present). Vice President, Investment Operations, Phoenix Home Life
Mutual Insurance Company (1994-1995). Various positions with
Home Life Insurance Company and Phoenix Home Life Mutual
Insurance Company (1987-1994).
Michael Schatt Vice Vice President, Phoenix Realty Securities, Inc. (1997-present).
President Managing Director, Duff & Phelps Investment Management Co.
(1994-present). Portfolio Manager, Duff & Phelps Utility Income Fund
(1994-present). Director, Real Estate Advisory Practice, Coopers &
Lybrand, LLC (1990-1994).
Dorothy J. Skaret (43) Vice Director, Money Market Trading (1996-present), Vice President
President (1991-1996), Phoenix Investment Counsel, Inc. Director, Money
Market Trading (1996-present), Vice President (1993-1996), National
Securities & Research Corporation. Vice President, The Phoenix
Edge Series Fund (1991-present), Phoenix Series Fund (1990-
present), Phoenix-Aberdeen Series Fund (1996-present) and Phoenix
Realty Securities, Inc. (1995-present). Second Vice President and
Treasurer, Fund Accounting, Phoenix Home Life Mutual Insurance
Company (1994-1995). Various other positions with Phoenix Home
Life Mutual Insurance Company (1987-1994).
James D. Wehr (39) Vice Managing Director, Fixed Income (1996-present), Vice President
President (1991-1996), Phoenix Investment Counsel, Inc. Managing Director,
Fixed Income (1996-present), Vice President (1993-1996), National
Securities & Research Corporation. Vice President, Phoenix Multi-
Portfolio Fund (1988-present), Phoenix Series Fund (1990-present),
The Phoenix Edge Series Fund (1991-present), Phoenix California
Tax Exempt Bond Fund, Inc. (1993-present). Various positions with
Phoneix Home Life Mutual Insurance company (1981-1991).
Nancy G. Curtiss (44) Treasurer Vice President, Fund Accounting (1994-present) and Treasurer (1996-
present), Phoenix Equity Planning Corporation. Treasurer, Phoenix
Investment Counsel, Inc. and National Securities & Research
Corporation (1996-present). Treasurer, Phoenix Funds (1994-present)
and
Phoenix-Aberdeen Series Fund (1996-present). Second Vice President
and Treasurer, Fund Accounting, Phoenix Home Life Mutual Insurance
Company (1994-1995). Various positions with Phoenix Home Life
Insurance Company (1987-1994).
17
<PAGE>
Positions Held Principal Occupations
Name, Address and Age With the Fund During the Past 5 Years
- --------------------- -------------- -----------------------
G. Jeffrey Bohne (49) Secretary Vice President and General Manager, Phoenix Home Life Mutual
101 Munson Street Insurance Co. (1993-present). Vice President, Transfer Agent
Greenfield, MA 01301 Operations, Phoenix Equity Planning Corporation (1993-present).
Secretary, Phoenix Funds (1993-present). Clerk, Phoenix Strategic
Allocation Fund, Inc. (1994-present). Secretary, Phoenix-Aberdeen
Series Fund (1996-present). Vice President, Home Life of New York
Insurance Company (1984-1992).
</TABLE>
For services rendered to the Fund during the period ended December 31, 1996, the
Trustees received an aggregate of $77,238 from the Fund as Trustees' fees. Each
Trustee who is not a full-time employee of the Adviser or any of its affiliates
currently receives a retainer at the annual rate of $3,000 and $500 per meeting.
Each Trustee who serves on a Committee receives a fee of $250 for each meeting
attended. The function of the Executive Committee is to serve as a contract
review, compliance review and performance review delegate of the full Board of
Trustees. Officers and employees of the Adviser who are interested persons are
compensated for their services by the Adviser and receive no compensation from
the Fund. Any other interested persons who are not compensated by the Adviser
receives fees from the Fund. For the Fund's last fiscal year, the Trustees
received the following compensation:
Compensation Table
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits From Fund and
Aggregate Accrued Estimated Fund Complex
Compensation as Part of Annual Benefits (11 Funds)
Name From Fund Fund Expenses Upon Retirement Paid to Trustees
- ------------------------ --------------- ---------------- ------------------ -----------------
<S> <C> <C> <C> <C>
C. Duane Blinn $5,000 None None $60,500
Robert Chesek 5,000 None None 53,500
E. Virgil Conway+ 5,250 None None 94,110
William W. Crawford 5,250 None None 43,150
Harry Dalzell-Payne+ 5,250 None None 68,630
William N. Georgeson 5,250 None None 41,990
Francis E. Jeffries None None None None
Leroy Keith, Jr. 5,000 None None 53,500
Philip R. McLoughlin+ None None None None
Eileen A. Moran 1,250 None None 7,130
Everett L. Morris+ 5,250 None None 92,490
James M. Oates+ 5,000 None None 58,000
Richard A. Pavia 5,250 None None 39,490
Calvin J. Pedersen None None None None
Philip R. Reynolds 5,000 None None 53,500
Herbert Roth, Jr.+ 5,250 None None 64,750
Richard E. Segerson 5,250 None None 60,250
Lowell P. Weicker, Jr. 5,000 None None 60,500
</TABLE>
+ Messrs. Conway, Dalzell-Payne, McLoughlin, Morris, Oates and Roth are members
of the Executive Committee.
ADDITIONAL INFORMATION
Reports to Shareholders
The fiscal year of the Fund ends on December 31. The Fund will send to its
shareholders, at least semi-annually, reports showing the securities of the
Fund's portfolio and other information.
18
<PAGE>
Institutional Balanced Portfolio
INVESTMENTS AT DECEMBER 31, 1996
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ --------- -------------
U.S. GOVERNMENT AND AGENCY
SECURITIES--12.5%
U.S. Treasury Bonds--5.8%
U.S. Treasury Bonds 6.50%, '06 Aaa $ 2,840 $2,855,975
-----------
U.S. Treasury Notes--3.1%
U.S. Treasury Notes 6.375%, '99 Aaa 325 327,844
U.S. Treasury Notes 6.625%, '01 Aaa 1,200 1,219,124
-----------
1,546,968
-----------
Agency Mortgage-Backed Securities--3.6%
GNMA 6.50%, '23-'26 Aaa 1,823 1,745,619
-----------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(Identified cost $6,163,982) 6,148,562
-----------
NON-CONVERTIBLE BONDS--10.7%
Asset Backed Securities--1.5%
Airplanes Pass Through Trust 1D
10.875%, '19 Ba 100 110,307
Fleetwood Credit Corp. 96-B,
A 6.90%, '12 Aaa 190 191,436
Green Tree Financial Corp. 96-2, M1
7.60%, '27 Aa 100 100,406
Green Tree Financial Corp. 96-3, B1
7.70%, '27 Aa 300 302,344
-----------
704,493
-----------
Non-Agency Mortgage-Backed Securities--8.4%
CS First Boston Mortgage
95-AE1, B 7.182%, '27 Aaa 190 189,198
DLJ Mortgage Acceptance 96-CF1, A1B
144A 7.58%, '28 (c) Aaa 75 77,531
GE Capital Mortgage Service 96-8,
M, 7.25%, '26 AA(d) 249 242,177
Lehman Commercial Conduit 95-C2, B
7.184%, '05 AA(d) 225 226,055
Merrill Lynch Mortgage, Inc. 95-C2,
B 7.61%, '21 Aa 89 90,459
Merrill Lynch Mortgage, Inc. 95-C3,
B 7.149%, '25 Aa 250 249,375
Merrill Lynch Mortgage, Inc. 96-C1,
B 7.42%, '28 AA(d) 130 131,402
Nationslink Funding Corp. 96-1, B
7.69%, '05 Aa 250 259,375
Residential Asset Securitization
Trust 96-A8, A1 8%, '26 AAA(d) 287 291,639
Residential Funding Mortgage 96-S1,
A11 7.10%, '26 AAA(d) 500 486,484
Residential Funding Mortgage 96-S4,
M1 7.25%, '26 AA(d) 298 289,320
Non-Agency Mortgage-Backed Securities--continued
Residential Funding Mortgage 96-S8,
A4 6.75%, '11 AAA(d) $291 $285,187
Resolution Trust Corp. 93-C1,
B 8.75%, '24 Aa 200 204,558
Resolution Trust Corp. 95-C1,
B 6.90%, '27 Aa 225 222,961
Resolution Trust Corp. 95-C2,
B 6.80%, '27 Aa 446 441,040
Structured Asset Securities Corp.
95-C1, C 7.375%, '24 A(d) 300 299,953
Structured Asset Securities Corp.
96-CFL, C 6.525%, '28 A(d) 155 151,513
-----------
4,138,227
-----------
Paper & Forest Products--0.6%
Buckeye Cellulose Corp. 8.50%, '05 Ba 300 300,750
-----------
Truckers & Marine--0.2%
Teekay Shipping Corp. 8.32%, '08 Ba 100 100,250
-----------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $5,235,996) 5,243,720
-----------
FOREIGN NON-CONVERTIBLE BONDS--0.9%
Chile--0.3%
Petropower Funding 144A 7.36%, '14
(c) BBB(d) 150 143,145
-----------
Indonesia--0.3%
Asia Pulp & Paper Co. Yankee
11.75%, '05 Ba 150 161,625
-----------
Sweden--0.3%
Astra Overseas Financial 144A
8.75%, '03 (c) NR 150 151,875
-----------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $447,321) 456,645
-----------
FOREIGN GOVERNMENT SECURITIES--4.7%
Argentina--0.7%
Republic of Argentina Discount L-GL
Euro 6.375%, '23 (f) B 250 192,969
Republic of Argentina Global Euro
8.375%, '03 B 150 143,062
-----------
336,031
-----------
Brazil--0.8%
Republic of Brazil DCB-L Euro
6.563%, '12 (f) B 250 189,531
Republic of Brazil Par Z-L Euro 5%,
'24 (f) B 300 189,000
-----------
378,531
-----------
See Notes to Financial Statements
2
<PAGE>
Institutional Balanced Portfolio
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ --------- -------------
Foreign Government Securities--continued
Colombia--0.6%
Republic of Colombia 7.25%, '03 Baa $300 $290,328
-----------
Croatia--0.6%
Croatia Series A 6.688%, '10 (f) NR 300 290,438
-----------
Mexico--0.7%
United Mexican States 144A 7.563%,
'01 (c) (f) Baa 115 115,270
United Mexican Discount B Euro
6.375%, '19 (e) (f) Ba 300 258,750
-----------
374,020
-----------
Panama--0.8%
Panama PDI 144A, PIK interest
capitalization, 6.75%, '16 (c) (f) NR 535 423,978
-----------
Poland--0.5%
Poland Discount Euro 6.50%, '24 (f) Baa 250 243,125
-----------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $2,091,404) 2,336,451
-----------
MUNICIPAL BONDS--4.5%
California--1.2%
Kern County Pension Obligation
Taxable 7.26%, '14 Aaa 200 197,132
Long Beach Pension Obligation
Taxable 6.87%, '06 Aaa 100 100,227
San Bernardino County Obligation
Revenue Taxable 6.87%, '08 Aaa 50 49,635
San Bernardino County Obligation
Revenue Taxable 6.94%, '09 Aaa 135 134,540
Ventura County Pension Taxable
6.54%, '05 Aaa 125 123,111
-----------
604,645
-----------
Florida--1.8%
Dade County Ed. Facs. Authority
5.75%, '20 Aaa 95 96,166
Miami Beach Special Obligation
Taxable 8.60%, '21 Aaa 395 432,316
University Miami Exchange Revenue
Taxable A 7.65%, '20 Aaa 355 358,312
-----------
886,794
-----------
Virgina--1.5%
Newport News Taxable Series B
7.05%, '25 Aa 750 707,145
-----------
TOTAL MUNICIPAL BONDS
(Identified cost $2,242,444) 2,198,584
-----------
SHARES VALUE
-------- ------------
COMMON STOCKS--58.2%
Aerospace & Defense--1.9%
Boeing Co. 3,800 $ 404,225
United Technologies Corp. 7,800 514,800
----------
919,025
----------
Autos & Trucks--0.2%
Chrysler Corp. 3,000 99,000
----------
Banks--2.3%
BankAmerica Corp. 3,200 319,200
Chase Manhattan Corp. 2,900 258,825
Citicorp 2,500 257,500
Mellon Bank Corp. 2,900 205,900
Nationsbank Corp. 1,100 107,525
----------
1,148,950
----------
Beverages--1.8%
Coca-Cola Co. 5,300 278,913
PepsiCo, Inc. 19,400 567,450
Seagram Ltd. 1,300 50,375
----------
896,738
----------
Chemical--1.8%
Du Pont (E.I.) de Nemours & Co. 3,800 358,625
Monsanto Co. 10,800 419,850
Philip Environmental, Inc. (b) 8,000 116,000
----------
894,475
----------
Computer Software & Services--2.8%
Computer Associates International, Inc. 7,400 368,150
First Data Corp. 9,000 328,500
Microsoft Corp. (b) 3,400 280,925
Oracle Corp. (b) 10,000 417,500
----------
1,395,075
----------
Conglomerates--2.1%
AlliedSignal, Inc. 3,800 254,600
Thermo Electron Corp. (b) 2,800 115,500
Tyco International Ltd. 12,500 660,938
----------
1,031,038
----------
Cosmetics & Soaps--2.1%
Colgate Palmolive Co. 1,700 156,825
Gillette Co. 4,700 365,425
Procter & Gamble Co. 5,000 537,500
----------
1,059,750
----------
Diversified Financial Services--3.5%
Conseco, Inc. 6,400 408,000
First USA, Inc. 12,300 425,887
MBNA Corp. 5,000 207,500
T. Rowe Price Associates 7,100 308,850
Travelers Group, Inc. 8,433 382,648
----------
1,732,885
----------
Diversified Miscellaneous--0.5%
Minnesota Mining & Manufacturing Co. 2,800 232,050
----------
Electrical Equipment--1.6%
Emerson Electric Co. 600 58,050
General Electric Co. 5,400 533,925
Westinghouse Electric Corp. 10,000 198,750
----------
790,725
----------
See Notes to Financial Statements
3
<PAGE>
Institutional Balanced Portfolio
SHARES VALUE
-------- ------------
Common Stocks--continued
Electronics--3.2%
Intel Corp. 6,100 $ 798,719
Micron Technology, Inc. 3,700 107,762
Perkin Elmer Corp. 4,300 253,163
Texas Instruments, Inc. 2,350 149,812
3Com Corp. (b) 3,400 249,475
----------
1,558,931
----------
Entertainment, Leisure & Gaming--0.5%
Walt Disney Co. 3,500 243,687
----------
Food--1.1%
Campbell Soup Co. 3,000 240,750
Hudson Foods, Inc. Class A 16,500 313,500
----------
554,250
----------
Healthcare--Diversified--1.7%
American Home Products Corp. 5,200 304,850
Bristol-Myers Squibb Co. 3,900 424,125
Warner-Lambert Co. 1,400 105,000
----------
833,975
----------
Healthcare--Drugs--2.4%
Amgen, Inc. (b) 3,500 190,312
Lilly (Eli) & Co. 1,400 102,200
Merck & Co., Inc. 6,500 515,125
Pfizer, Inc. 4,300 356,363
----------
1,164,000
----------
Hospital Management & Services--1.2%
Columbia/HCA Healthcare Corp. 14,000 570,500
----------
Household Furnishings & Appliances--1.0%
Sunbeam Corp., Inc. 18,700 481,525
----------
Insurance--2.7%
Allstate Corp. 9,300 538,237
American International Group, Inc. 3,000 324,750
Chubb Corp. 1,900 102,125
ITT Hartford Group, Inc. (b) 1,000 67,500
TIG Holdings, Inc. 8,100 274,388
----------
1,307,000
----------
Lodging & Restaurants--1.0%
Hilton Hotels Corp. 18,400 480,700
----------
Machinery--0.5%
Deere & Co. 6,000 243,750
----------
Medical Products & Supplies--1.3%
Abbott Laboratories 2,000 101,500
Boston Scientific Corp. (b) 4,500 270,000
Johnson & Johnson 5,000 248,750
----------
620,250
----------
Natural Gas--2.2%
Apache Corp. 5,900 208,712
Columbia Gas System, Inc. 2,400 152,700
Consolidated Natural Gas Co. 3,700 204,425
Enron Corp. 11,900 513,188
----------
1,079,025
----------
Common Stocks--continued
Office & Business Equipment--2.6%
International Business Machines Corp. 4,200 $ 634,200
Sun Microsystems, Inc. (b) 17,000 436,687
Xerox Corp. 4,000 210,500
----------
1,281,387
----------
Oil--2.6%
Chevron Corp. 6,400 416,000
Exxon Corp. 3,300 323,400
Mobil Corp. 500 61,125
Noble Affiliates, Inc. 9,900 473,963
----------
1,274,488
----------
Oil Service & Equipment--4.1%
Noble Drilling Corporation (b) 23,800 473,025
Schlumberger Ltd. 2,500 249,688
Seacor Holdings, Inc. (b) 8,200 516,600
Transocean Offshore, Inc. 4,000 250,500
Western Atlas, Inc. (b) 7,600 538,650
----------
2,028,463
----------
Pollution Control--0.7%
Republic Industries, Inc. (b) 3,000 93,562
U.S.A. Waste Services, Inc. (b) 8,100 258,188
----------
351,750
----------
Professional Services--2.0%
Cognizant Corp. 9,000 297,000
Corrections Corporation of America (b) 4,000 122,500
HFS, Inc. (b) 5,700 340,575
Marsh & McLennan Cos., Inc. 2,000 208,000
----------
968,075
----------
Publishing, Broadcasting, Printing & Cable--0.2%
New York Times Co. 3,000 114,000
----------
Real Estate Investment Trusts--0.2%
Redwood Trust, Inc. 2,800 104,300
----------
Retail--2.0%
Office Depot, Inc. (b) 3,000 53,250
Sears Roebuck & Co. 7,000 322,875
Staples, Inc. (b) 13,500 243,844
TJX Companies, Inc. 8,000 379,000
----------
998,969
----------
Retail--Food--1.0%
Safeway, Inc. (b) 12,000 513,000
----------
Telecommunications Equipment--2.1%
Cisco Systems, Inc. (b) 15,600 992,550
Lucent Technologies, Inc. 1,100 50,875
----------
1,043,425
----------
Textile & Apparel--0.8%
Nike, Inc. Class B 6,600 394,350
----------
Utility--Telephone--0.5%
Ameritech Corp. 1,900 115,187
Bell Atlantic Corp. 1,700 110,075
----------
225,262
----------
TOTAL COMMON STOCKS
(Identified cost $25,926,240) 28,634,773
----------
See Notes to Financial Statements
4
<PAGE>
Institutional Balanced Portfolio
SHARES VALUE
-------- ------------
FOREIGN COMMON STOCKS--1.0%
Oil--1.0%
British Petroleum PLC ADR (United
Kingdom) 1,500 $ 212,063
Royal Dutch Petroleum Co. ADR NY
Registered Shares (Netherlands) 1,600 273,200
----------
485,263
----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $455,766) 485,263
----------
TOTAL LONG-TERM INVESTMENTS--92.5%
(Identified cost $42,563,153) 45,503,998
----------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------ ---------
SHORT-TERM OBLIGATIONS--7.1%
Commercial Paper--6.9%
Campbell Soup Co. 6.75%,
1-2-97 A-1+ $ 1,690 1,689,683
Amoco Co. 5.25%, 1-6-97 A-1+ 75 74,945
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ --------- ----------------
Commercial Paper--continued
AT&T Corp. 5.58%, 1-6-97 A-1+ $ 1,000 $ 999,225
Exxon Imperial U.S., Inc.
5.41%, 1-13-97 A-1+ 175 174,684
Vermont American Corp. 5.37%,
1-22-97 A-1+ 464 462,547
---------------
3,401,084
---------------
Federal Agency Securities--0.2%
Federal Home Loan Mortgage
Corp. 5.70%, 1-2-97 75 74,989
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $3,476,073) 3,476,073
---------------
TOTAL INVESTMENTS--99.6%
(Identified cost $46,039,226) 48,980,071(a)
Cash and receivables, less liabilities--0.4% 176,819
---------------
NET ASSETS--100.0% $49,156,890
===============
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $3,523,473 and gross
depreciation of $681,463 for income tax purposes. At December 31, 1996,
the aggregate cost of securities for federal income tax purposes was
$46,138,061.
(b) Non-income producing.
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1996, these securities amounted to a value of $911,799 or 1.9% of net
assets.
(d) As rated by Standard & Poor's, Fitch or Duff and Phelps.
(e) Rights incorporated as a unit.
(f) Variable or step coupon bond; interest rate shown reflects the rate
currently in effect.
See Notes to Financial Statements
5
<PAGE>
Institutional Balanced Portfolio
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
Assets
Investment securities at value
(Identified cost $46,039,226) $48,980,071
Cash 17,299
Receivables
Investment securities sold 411
Fund shares sold 21,679
Dividends and interest 234,364
Prepaid expenses 8,997
------------
Total Assets 49,262,821
------------
Liabilities
Payables
Investment securities purchased 3,630
Fund shares repurchased 9,632
Investment advisory fee 19,466
Transfer agent fee 4,906
Distribution fee 2,525
Trustees' fee 1,575
Financial agent fee 1,304
Accrued expenses 62,893
------------
Total Liabilities 105,931
------------
Net Assets $49,156,890
============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $44,940,027
Undistributed net investment income 41,710
Accumulated net realized gain 1,234,308
Net unrealized appreciation 2,940,845
------------
Net Assets $49,156,890
============
Class X
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $37,146,771) 2,046,904
Net asset value and offering price per share $18.15
Class Y
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $12,010,119) 661,780
Net asset value and offering price per share $18.15
STATEMENT OF OPERATIONS
FROM INCEPTION MARCH 1, 1996
TO DECEMBER 31, 1996
Investment Income
Dividends $ 273,663
Interest 1,409,324
----------
Total investment income 1,682,987
----------
Expenses
Investment advisory fee 251,989
Distribution fee--Class Y 25,096
Financial agent fee 13,745
Registration 86,827
Transfer agent 44,785
Professional 20,700
Custodian 17,000
Printing 14,565
Trustees 14,100
Miscellaneous 8,934
----------
Total expenses 497,741
Less expenses borne by investment adviser (174,840)
----------
Net expenses 322,901
----------
Net investment income 1,360,086
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 3,729,791
Net realized gain on foreign currency transactions 897
----------
Net realized gain 3,730,688
----------
Net change in unrealized appreciation on investments end
of period 2,940,845
Less net unrealized appreciation in connection with PHL
Pooled Separate Account L 3,354,661
----------
Net change in unrealized appreciation (depreciation) (413,816)
----------
Net gain on investments 3,316,872
----------
Net increase in net assets resulting from operations $4,676,958
==========
See Notes to Financial Statements
6
<PAGE>
Institutional Balanced Portfolio
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
March 1, 1996 to
December 31, 1996
------------------
<S> <C>
From Operations
Net investment income $ 1,360,086
Net realized gain 3,730,688
Net change in unrealized appreciation (depreciation) (413,816)
-----------------
Increase in net assets resulting from operations 4,676,958
-----------------
From Distributions to Shareholders
Net investment income--Class X (1,072,486)
Net investment income--Class Y (283,103)
Net realized gains--Class X (1,923,139)
Net realized gains--Class Y (583,212)
-----------------
Decrease in net assets from distributions to shareholders (3,861,940)
-----------------
From Share Transactions
Class X
Proceeds from sales of shares (282,929 shares) 5,116,425
Net asset value of shares issued from reinvestment of distributions (152,545 shares) 2,779,558
Net asset value of shares issued in conjunction with conversion of PHL Pooled Separate
Account L (2,524,966 shares) 45,200,432
Cost of shares repurchased (913,536 shares) (16,577,547)
-----------------
Total 36,518,868
-----------------
Class Y
Proceeds from sales of shares (123,668 shares) 2,267,577
Net asset value of shares issued from reinvestment of distributions (47,488 shares) 866,311
Net asset value of shares issued in conjunction with conversion of PHL Pooled Separate
Account L (721,462 shares) 12,915,189
Cost of shares repurchased (230,838 shares) (4,226,073)
-----------------
Total 11,823,004
-----------------
Increase in net assets from share transactions 48,341,872
-----------------
Net increase in net assets 49,156,890
Net Assets
Beginning of period 0
-----------------
End of period (including undistributed net investment income of $41,710) $ 49,156,890
=================
</TABLE>
See Notes to Financial Statements
7
<PAGE>
Institutional Balanced Portfolio
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
Class X Class Y
---------------- ----------------
From Inception From Inception
3/1/96 to 3/1/96 to
12/31/96 12/31/96
---------------- ----------------
Net asset value, beginning of period $17.90 $17.90
Income from investment operations
Net investment income 0.51(4) 0.46(4)
Net realized and unrealized gain 1.17 1.18
-------------- ---------------
Total from investment operations 1.68 1.64
-------------- ---------------
Less distributions
Dividends from net investment income (0.49) (0.45)
Distributions from net realized gains (0.94) (0.94)
-------------- ---------------
Total distributions (1.43) (1.39)
-------------- ---------------
Change in net asset value 0.25 0.25
-------------- ---------------
Net asset value, end of period $18.15 $18.15
============== ===============
Total return 9.43%(2) 9.20%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) $37,147 $12,010
Ratio to average net assets of:
Operating expenses 0.65%(1) 0.90%(1)
Net investment income 3.02%(1) 2.78%(1)
Portfolio turnover 209%(2) 209%(2)
Average commission rate paid(3) $0.0630 $0.0630
(1) Annualized
(2) Not annualized
(3) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs, or spreads on shares traded on a principal
basis.
(4) Includes reimbursement of operating expenses by investment adviser of
$0.06 and $0.06, respectively.
See Notes to Financial Statements
8
<PAGE>
Institutional Managed Bond Portfolio
INVESTMENTS AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ --------- --------------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--14.7%
U.S. Treasury Notes--2.5%
U.S. Treasury Notes 6.125%, '01 Aaa $ 2,000 $ 1,991,520
------------
Agency Mortgage-Backed Securities--12.2%
FHLMC 9%, '04 Aaa 23 22,993
FHLMC 8.50%, '20 Aaa 812 823,595
FHLMC 6.65%, '23 Aaa 1,890 1,865,940
FNMA 7%, '07 Aaa 934 916,453
FNMA 8.70%, '16 Aaa 398 406,636
FNMA 7.50%, '19 Aaa 1,840 1,843,238
FNMA 6.75%, '20 Aaa 1,920 1,883,923
GNMA 6.50%, '26 Aaa 1,871 1,784,276
------------
9,547,054
------------
TOTAL U.S. GOVERNMENT AND AGENCY
SECURITIES
(Identified cost $11,206,875) 11,538,574
------------
NON-CONVERTIBLE BONDS--35.3%
Asset-Backed Securities--7.2%
Airplanes Pass Through Trust 1C 8.15%, '19 Baa 1,400 1,453,718
Airplanes Pass Through Trust 1D 10.875%, '19 Ba 650 716,995
Capital Equipment Receivable Trust 96-1, B
6.57%, '01 Aa 1,250 1,255,273
Green Tree Financial Corp. 96-4, A6 7.40%,
'27 Aaa 1,250 1,259,180
National Car Rental 96-1, A2 144A 6.80%, '00
(b) A(c) 1,000 1,004,687
------------
5,689,853
------------
Conglomerates--0.4%
Allied Waste North America 144A 10.25%, '06
(b) B 300 316,500
------------
Non-Agency Mortgage-Backed Securities--24.5%
DLJ Mortgage Acceptance 94-M11, B1 8.10%,
'04 Baa 1,380 1,408,031
Eaglemark Trust 96-1, A 144A 6.25%, '02 (b) Aaa 768 769,472
Equitable Life 174, C1 144A 7.52%, '06 (b) A 2,000 2,045,937
Kidder Peabody Acceptance Corp. 94-C2, D
7.18%, '05 BBB(c) 990 993,713
Lehman Structured Securities Corp. 96-1, E1
7.955%, '26 BBB(c) 1,229 1,248,659
Merrill Lynch Mortgage, Inc. 95-C2, C 7.87%,
'21 A 1,118 1,138,704
Mortgage Capital Funding, Inc. 96-MC2, A3
7.008%, '06 Aaa 2,000 1,998,125
Residential Accredit Loans, Inc. 96-QS4,
AI10 7.90%, '26 AAA(c) 800 814,750
Non-Agency Mortgage-Backed Securities--continued
Residential Asset Securitization Trust
96-A8, C2 8%, '26 AAA(c) $ 958 $ 972,129
Residential Funding Mortgage 93-S25, M3
6.50%, '08 AA(c) 663 626,210
Resolution Trust Corp. 93-C3, A4 6.55%, '24
(g) BBB(c) 219 218,621
Resolution Trust Corp. 94-C2, D 8%, '25 (g) BBB(c) 947 965,705
Resolution Trust Corp. 95-1, M2 7.50%, '28 BBB(c) 1,338 1,352,663
Ryland Mortgage Sec. Corp. 92-A, 1A 8.33%,
'30 A-(c) 663 665,360
Securitized Asset Sales, Inc. 95-A, M 7.53%,
'24 Aa 1,808 1,790,103
Structured Asset Securities Corp. 95-C1, B
7.375%, '24 AA(c) 1,865 1,877,822
Structured Asset Securities Corp. 96-CFL, C
6.525%, '28 AA(c) 350 342,125
------------
19,228,129
------------
Publishing, Broadcasting, Printing & Cable--1.8%
Poland Communications, Inc. 144A 9.875%, '03
(b) B 1,400 1,391,782
------------
Retail--Food Service--0.2%
ARA Services, Inc. 10.625%, '00 Ba 107 118,904
------------
Utility--Electric--1.2%
Louisiana Power & Lighting 10.30%, '05 Baa 901 928,859
------------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $26,943,989) 27,674,027
------------
Foreign Government Securities--13.7%
Argentina--2.6%
Republic of Argentina Discount L-GL Euro
6.375%, '23 (d) B 1,300 1,003,438
Republic of Argentina Par L-GP 5.25%, '23
(d) B 1,575 1,004,063
------------
2,007,501
------------
Brazil--3.1%
Republic of Brazil Discount ZL Euro 6.50%,
'24 (d) B 1,600 1,235,000
Republic of Brazil Par Z-L Euro 4.25%, '24
(d) B 1,925 1,212,750
------------
2,447,750
------------
Croatia--1.1%
Croatia Series A 6.688%, '10 (d) NR 925 895,516
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE>
Institutional Managed Bond Portfolio
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ --------- --------------
<S> <C> <C> <C>
Mexico--3.2%
United Mexican Discount Series C 6.375%, '19
(d) (e) Ba $ 250 $ 215,625
United Mexican States 144A 7.563%, '01 (b)
(d) Baa 525 526,234
United Mexican States Euro D 6.352%, '19
(d)(e) Ba 1,000 862,500
United Mexican States Series A Euro 6.25%,
'19 (e) Ba 250 183,438
United Mexican States Series B Euro 6.25%,
'19 (e) Ba 1,000 733,750
------------
2,521,547
------------
Panama--2.2%
Panama PDI PIK interest capitalization,
6.75%, '16 (d) NR 575 455,677
Panama PDI 144A, PIK interest
capitalization, 6.75%, '16 (b) (d) NR 1,600 1,267,972
------------
1,723,649
------------
Russia--1.5%
Russian Interest Notes WI 6.41% (d) (f) NR 1,650 1,146,750
------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $9,788,898) 10,742,713
------------
FOREIGN NON-CONVERTIBLE BONDS--8.1%
Bermuda--0.4%
AES China Generating Co. Yankee 10.125%, '06
(d) Ba 275 285,313
------------
Chile--3.1%
CSAV 144A 7.375%, '03 (b) (d) BBB(c) 1,240 1,221,400
Petropower Funding 144A 7.36%, '14 (b) BBB(c) 1,290 1,231,047
------------
2,452,447
------------
Colombia--1.4%
Centragas Yankee 144A 10.65%, '10 (b) (d) BBB-(c) 1,028 1,108,967
------------
Indonesia--1.3%
Asia Pulp & Paper Co. Yankee 11.75%, '05 Ba 925 996,688
------------
Mexico--1.9%
Coca-Cola Femsa 8.95%,
'06 (d) Ba 1,500 1,501,875
------------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $6,165,488) 6,345,290
------------
MUNICIPAL BONDS--15.0%
California--1.6%
Orange County Pension A 7.67%, '09 Aaa $ 1,200 $ 1,251,276
------------
Florida--3.5%
Dade County Ed. Facs. Authority 5.75%, '20 Aaa 335 339,114
Palm Beach Waste Revenue Project B Taxable
10.50%, '11 NR 920 915,667
University Miami Exchange Revenue Taxable
7.40%, '11 Aaa 250 254,880
University Miami Exchange Revenue A Taxable
7.65%, '20 Aaa 1,255 1,266,709
------------
2,776,370
------------
Michigan--0.8%
Hartland Consolidated School District
5.125%, '22 Aaa 690 642,376
------------
Pennsylvania--5.7%
Pennsylvania Economic Development Finance
Authority 9.50%, '12 NR 2,760 2,592,192
Pennsylvania Economic Development Finance
Authority 6.75%, '07 NR 1,840 1,883,718
------------
4,475,910
------------
Texas--0.8%
Texas Turnpike Authority 5.25%, '23 Aaa 690 658,998
------------
Virginia--2.6%
Newport News Taxable Series B 7.05%, '25 Aa 670 631,716
Pittslyvania County Series B 7.65%, '10 NR 1,290 1,379,178
------------
2,010,894
------------
TOTAL MUNICIPAL BONDS
(Identified cost $11,770,900) 11,815,824
------------
TOTAL LONG-TERM INVESTMENTS--86.8%
(Identified cost $65,876,150) 68,116,428
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE>
Institutional Managed Bond Portfolio
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ --------- ----------------
SHORT-TERM OBLIGATIONS--13.3%
Commercial Paper--13.3%
CXC, Inc. 6.85%, 1-2-97 A-1+ $ 3,210 $ 3,209,389
Shell Oil Co. 6.40%, 1-2-97 A-1+ 1,500 1,499,733
Ciesco L.P. 5.375%, 1-7-97 A-1+ 2,295 2,292,944
General Electric Capital
Corp. 5.28%, 1-8-97 A-1+ 265 264,728
Asset Securitization Corp.
5.40%, 1-23-97 A-1+ 3,200 3,189,440
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $10,456,234) 10,456,234
---------------
TOTAL INVESTMENTS--100.1%
(Identified cost $76,332,384) 78,572,662(a)
Cash and receivables, less liabilities--(0.1%) (80,798)
---------------
NET ASSETS--100% $78,491,864
===============
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $2,637,001 and gross
depreciation of $396,723 for income tax purposes. At December 31, 1996,
the aggregate cost of securities for federal income tax purposes was
$76,332,384.
(b) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1996, these securities amounted to a value of $10,883,998 or 13.9% of net
assets.
(c) As rated by Standard & Poor's, Fitch or Duff & Phelps.
(d) Variable or step coupon; interest rate shown reflects the rate currently
in effect.
(e) Rights incorporated as a unit.
(f) When issued.
(g) Segregated as collateral.
See Notes to Financial Statements
13
<PAGE>
Institutional Managed Bond Portfolio
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
Assets
Investment securities at value
(Identified cost $76,332,384) $78,572,662
Cash 14,966
Receivables
Investment securities sold 1,262,052
Fund shares sold 4,342
Interest 977,462
Prepaid expenses 9,642
------------
Total assets 80,841,126
------------
Liabilities
Payables
Investment securities purchased 1,791,375
Fund shares repurchased 440,000
Investment advisory fee 37,642
Transfer agent fee 4,443
Financial agent fee 1,966
Trustees' fee 1,675
Distribution fee 1,473
Accrued expenses 70,688
------------
Total liabilities 2,349,262
------------
Net Assets $78,491,864
============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $75,916,251
Undistributed net investment income 33,752
Accumulated net realized gain 301,583
Net unrealized appreciation 2,240,278
------------
Net Assets $78,491,864
============
Class X
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $71,482,361) 2,103,969
Net asset value and offering price per share $33.98
Class Y
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $7,009,503) 206,320
Net asset value and offering price per share $33.97
STATEMENT OF OPERATIONS
FROM INCEPTION MARCH 1, 1996
TO DECEMBER 31, 1996
Investment Income
Interest $4,424,498
-----------
Total investment income 4,424,498
-----------
Expenses
Investment advisory fee 258,587
Distribution fee--Class Y 14,323
Financial agent fee 17,239
Registration 97,423
Transfer agent 41,646
Professional 21,982
Custodian 16,700
Trustees 14,200
Printing 11,888
Miscellaneous 8,740
-----------
Total expenses 502,728
Less expenses borne by investment adviser (172,354)
-----------
Net expenses 330,374
-----------
Net investment income 4,094,124
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 1,618,621
Net realized gain on foreign currency transactions 5,803
-----------
Net realized gain 1,624,424
-----------
Net change in unrealized appreciation on investments end
of period 2,240,278
Less net unrealized appreciation in connection with
PHL Pooled Separate Account P 2,636,529
-----------
Net change in unrealized appreciation
(depreciation) (396,251)
-----------
Net gain on investments 1,228,173
-----------
Net increase in net assets resulting from operations $5,322,297
===========
See Notes to Financial Statements
14
<PAGE>
Institutional Managed Bond Portfolio
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
March 1, 1996 to
December 31, 1996
------------------
<S> <C>
From Operations
Net investment income $ 4,094,124
Net realized gain 1,624,424
Net change in unrealized appreciation (depreciation) (396,251)
-----------------
Increase in net assets resulting from operations 5,322,297
-----------------
From Distributions to Shareholders
Net investment income--Class X (3,719,461)
Net investment income--Class Y (374,664)
In excess of net investment income--Class X (19,201)
In excess of net investment income--Class Y (1,934)
Net realized gains--Class X (1,199,095)
Net realized gains--Class Y (118,493)
-----------------
Decrease in net assets from distributions to shareholders (5,432,848)
-----------------
From Share Transactions
Class X
Proceeds from sales of shares (538,250 shares) 18,818,739
Net asset value of shares issued from reinvestment of distributions (123,928 shares) 4,187,321
Net asset value of shares issued in conjunction with conversion of PHL Pooled
Separate Account P (1,774,264 shares) 60,037,092
Cost of shares repurchased (332,473 shares) (11,414,976)
-----------------
Total 71,628,176
-----------------
Class Y
Proceeds from sales of shares (34,115 shares) 1,164,449
Net asset value of shares issued from reinvestment of distributions (14,700 shares) 495,088
Net asset value of shares issued in conjunction with conversion of PHL Pooled
Separate Account P (196,803 shares) 6,659,369
Cost of shares repurchased (39,298 shares) (1,344,667)
-----------------
Total 6,974,239
-----------------
Increase in net assets from share transactions 78,602,415
-----------------
Net increase in net assets 78,491,864
Net Assets
Beginning of period 0
-----------------
End of period (including undistributed net investment income of $33,752) $ 78,491,864
=================
</TABLE>
See Notes to Financial Statements
15
<PAGE>
Institutional Managed Bond Portfolio
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class X Class Y
---------------- ----------------
From Inception From Inception
3/1/96 to 3/1/96 to
12/31/96 12/31/96
---------------- ----------------
<S> <C> <C>
Net asset value, beginning of period $33.84 $33.84
Income from investment operations
Net investment income 2.03(3)(4) 1.98(3)(4)
Net realized and unrealized gain (loss) 0.69 0.66
-------------- ---------------
Total from investment operations 2.72 2.64
-------------- ---------------
Less distributions
Dividends from net investment income (1.96) (1.89)
Distribution in excess of net investment income (0.01) (0.01)
Distributions from net realized gains (0.61) (0.61)
-------------- ---------------
Total distributions (2.58) (2.51)
-------------- ---------------
Change in net asset value 0.14 0.13
-------------- ---------------
Net asset value, end of period $33.98 $33.97
============== ===============
Total return 8.24%(2) 7.98%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) $71,482 $7,010
Ratio to average net assets of:
Operating expenses 0.55%(1) 0.80%(1)
Net investment income 7.15%(1) 6.91%(1)
Portfolio turnover 199%(2) 199%(2)
</TABLE>
(1) Annualized
(2) Not annualized
(3) Computed using average shares outstanding.
(4) Includes reimbursement of operating expenses by investment adviser of
$0.09 and $0.09 per share, respectively.
See Notes to Financial Statements
16
<PAGE>
Institutional Growth Stock Portfolio
INVESTMENTS AT DECEMBER 31, 1996
SHARES VALUE
-------- ---------------
COMMON STOCKS--92.3%
Aerospace & Defense--3.2%
Boeing Co. 16,300 $ 1,733,912
United Technologies Corp. 25,400 1,676,400
--------------
3,410,312
--------------
Banks--6.8%
BankAmerica Corp. 17,700 1,765,575
Chase Manhattan Corp. 20,000 1,785,000
Citicorp 17,400 1,792,200
Nationsbank Corp. 18,500 1,808,375
--------------
7,151,150
--------------
Beverages--1.4%
Seagram Ltd. 39,400 1,526,750
--------------
Chemical--1.6%
Monsanto Co. 42,700 1,659,962
--------------
Computer Software & Services--7.7%
Computer Associates International, Inc. 26,600 1,323,350
Computer Sciences Corp. (b) 19,600 1,609,650
First Data Corp. 41,400 1,511,100
Microsoft Corp. (b) 26,000 2,148,250
Oracle Corp. (b) 37,300 1,557,275
--------------
8,149,625
--------------
Conglomerates--2.7%
Thermo Electron Corp. (b) 31,300 1,291,125
Tyco International Ltd. 29,900 1,580,962
--------------
2,872,087
--------------
Cosmetics & Soaps--3.1%
Colgate Palmolive Co. 17,500 1,614,375
Estee Lauder Co. Class A 33,900 1,724,662
--------------
3,339,037
--------------
Diversified Financial Services--6.5%
Associates First Capital Corp. Class A 35,800 1,579,675
Federal National Mortgage Assoc. 54,000 2,011,500
First USA, Inc. 48,000 1,662,000
Travelers Group, Inc. 35,533 1,612,310
--------------
6,865,485
--------------
Diversified Miscellaneous--4.2%
CUC International, Inc. (b) 45,100 1,071,125
Duracell International, Inc. 25,200 1,760,850
Equifax, Inc. 50,800 1,555,750
--------------
4,387,725
--------------
Electrical Equipment--1.6%
Raychem Corp. 21,400 1,714,675
--------------
Electronics--5.6%
Applied Materials, Inc. (b) 35,300 1,268,594
Intel Corp. 15,800 2,068,812
Perkin Elmer Corp. 28,200 1,660,275
Xilinx, Inc. (b) 24,700 909,269
--------------
5,906,950
--------------
Entertainment, Leisure & Gaming--1.5%
Walt Disney Co. 22,300 1,552,637
--------------
Food--1.5%
Ralston-Ralston Purina Group 21,000 $ 1,540,875
--------------
Healthcare--Drugs--5.4%
Biochem Pharmaceutical, Inc. (b) 17,300 869,325
Genzyme Corp. (b) 33,800 735,150
Lilly (Eli) & Co. 27,900 2,036,700
Merck & Co., Inc. 26,000 2,060,500
--------------
5,701,675
--------------
Hospital Management & Services--1.2%
Columbia/HCA Healthcare Corp. 31,300 1,275,475
--------------
Insurance--2.2%
Allstate Corp. 21,800 1,261,675
SunAmerica, Inc. 24,700 1,096,062
--------------
2,357,737
--------------
Machinery--2.4%
Deere & Co. 30,300 1,230,938
Dover Corp. 26,000 1,306,500
--------------
2,537,438
--------------
Medical Products & Supplies--5.0%
Boston Scientific Corp. (b) 27,100 1,626,000
Guidant Corp. 19,000 1,083,000
Johnson & Johnson 25,800 1,283,550
Medtronic, Inc. 19,200 1,305,600
--------------
5,298,150
--------------
Natural Gas--2.9%
Apache Corp. 43,100 1,524,662
Burlington Resources, Inc. 30,700 1,546,513
--------------
3,071,175
--------------
Oil Service & Equipment--7.8%
BJ Services Co. (b) 25,400 1,295,400
Diamond Offshore Drilling (b) 21,500 1,225,500
ENSCO International, Inc. (b) 26,000 1,261,000
Halliburton Co. 26,200 1,578,550
Schlumberger Ltd. 15,300 1,528,088
Western Atlas, Inc. (b) 18,500 1,311,187
--------------
8,199,725
--------------
Paper & Forest Products--1.6%
Kimberly Clark Corp. 17,700 1,685,925
--------------
Pollution Control--2.5%
U.S.A. Waste Services, Inc. (b) 43,100 1,373,812
U.S. Filter Corp. (b) 41,500 1,317,625
--------------
2,691,437
--------------
Professional Services--1.0%
ADT Ltd. (b) 47,300 1,081,988
--------------
Retail--6.7%
CVS Corp. 39,600 1,638,450
Home Depot, Inc. 31,000 1,553,875
Lowe's Companies, Inc. 42,600 1,512,300
Price/Costco, Inc. (b) 52,400 1,316,550
Staples, Inc. (b) 58,600 1,058,463
--------------
7,079,638
--------------
See Notes to Financial Statements
19
<PAGE>
Institutional Growth Stock Portfolio
SHARES VALUE
-------- -------------
Telecommunications Equipment--3.2%
Ascend Communications, Inc. (b) 14,900 $ 925,663
Cascade Communications Corp. (b) 16,000 882,000
Cisco Systems, Inc. (b) 24,800 1,577,900
-----------
3,385,563
-----------
Tobacco--1.5%
Philip Morris Companies, Inc. 14,500 1,633,063
-----------
Utility-Telephone--1.5%
SBC Communications, Inc. 30,000 1,552,500
-----------
TOTAL COMMON STOCKS
(Identified cost $81,884,653) 97,628,759
-----------
FOREIGN COMMON STOCKS--4.1%
Chemical--1.4%
Potash Corp. of Saskatchewan, Inc.
(Canada) 17,000 1,445,000
-----------
Cosmetics & Soaps--2.1%
Unilever NV (Netherlands) 12,600 2,208,150
-----------
Textile & Apparel--0.6%
Gucci Group NV-NY (Italy) 9,900 632,363
-----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $3,722,472) 4,285,513
-----------
TOTAL LONG-TERM INVESTMENTS--96.4%
(Identified cost $85,607,125) 101,914,272
-----------
STANDARD &
POOR'S
RATING PAR VALUE
(Unaudited) (000) VALUE
------------ --------- ---------------
SHORT-TERM OBLIGATIONS--2.7%
Commercial Paper--2.7%
AlliedSignal, Inc., 6.10%,
1-2-97 A-1 $ 825 $ 824,860
Campbell Soup Co. 6.75%,
1-2-97 A-1+ 2,030 2,029,620
--------------
2,854,480
--------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $2,854,480) 2,854,480
--------------
TOTAL INVESTMENTS--99.1%
(Identified cost $88,461,605) 104,768,752(a)
Cash and receivables, less liabilities--0.9% 947,705
--------------
NET ASSETS--100.0% $105,716,457
==============
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $17,686,428 and gross
depreciation of $1,499,620 for income tax purposes. At December 31, 1996,
the aggregate cost of securities for federal income tax purposes was
$88,581,944.
(b) Non-income producing.
See Notes to Financial Statements
20
<PAGE>
Institutional Growth Stock Portfolio
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
Assets
Investment securities at value
(Identified cost $88,461,605) $104,768,752
Cash 12,402
Receivables
Investment securities sold 1,768,719
Dividends and interest 76,774
Fund shares sold 947,711
Prepaid expenses 10,964
--------------
Total assets 107,585,322
--------------
Liabilities
Payables
Investment securities purchased 1,636,901
Fund shares repurchased 2,036
Investment advisory fee 121,351
Transfer agent fee 5,966
Distribution fee 4,848
Financial agent fee 3,630
Trustees' fee 1,575
Accrued expenses 92,558
--------------
Total liabilities 1,868,865
--------------
Net Assets $105,716,457
==============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $ 75,928,438
Undistributed net investment income 66,653
Accumulated net realized gain 13,414,219
Net unrealized appreciation 16,307,147
--------------
Net Assets $105,716,457
==============
Class X
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $82,738,934) 1,744,768
Net asset value and offering price per share $47.42
Class Y
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $22,977,523) 484,477
Net asset value and offering price per share $47.43
STATEMENT OF OPERATIONS
FROM INCEPTION MARCH 1, 1996
TO DECEMBER 31, 1996
Investment Income
Dividends $ 1,444,837
Interest 590,345
--------------
Total investment income 2,035,182
--------------
Expenses
Investment advisory fee 906,089
Distribution fee--Class Y 47,509
Financial agent fee 45,304
Registration 120,373
Transfer agent 49,450
Custodian 26,400
Professional 25,900
Printing 16,400
Trustees 14,100
Miscellaneous 15,097
--------------
Total expenses 1,266,622
Less expenses borne by investment adviser (162,010)
--------------
Net expenses 1,104,612
--------------
Net investment income 930,570
--------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 28,236,344
Net realized gain on foreign currency transactions 92
--------------
Net realized gain 28,236,436
--------------
Net change in unrealized appreciation on investments end
of period 16,307,147
Less net unrealized appreciation in connection with PHL
Pooled Separate Account S 28,742,823
--------------
Net change in unrealized appreciation
(depreciation) (12,435,676)
--------------
Net gain on investments 15,800,760
--------------
Net increase in net assets resulting from operations $ 16,731,330
==============
See Notes to Financial Statements
21
<PAGE>
Institutional Growth Stock Portfolio
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
March 1, 1996 to
December 31, 1996
------------------
<S> <C>
From Operations
Net investment income $ 930,570
Net realized gain 28,236,436
Net change in unrealized appreciation (depreciation) (12,435,676)
-----------------
Increase in net assets resulting from operations 16,731,330
-----------------
From Distributions to Shareholders
Net investment income--Class X (835,353)
Net investment income--Class Y (86,185)
Net realized gains--Class X (12,433,098)
Net realized gains--Class Y (2,389,027)
-----------------
Decrease in net assets from distributions to shareholders (15,743,663)
-----------------
From Share Transactions
Class X
Proceeds from sales of shares (200,121 shares) 9,732,878
Net asset value of shares issued from reinvestment of distributions (275,344 shares) 13,268,434
Net asset value of shares issued in conjunction with conversion of PHL Pooled Separate
Account S (3,807,589 shares) 182,803,604
Cost of shares repurchased (2,538,286 shares) (124,359,905)
-----------------
Total 81,445,011
-----------------
Class Y
Proceeds from sales of shares (68,980 shares) 3,405,171
Net asset value of shares issued from reinvestment of distributions (51,358 shares) 2,475,206
Net asset value of shares issued in conjunction with conversion of PHL Pooled Separate
Account S (493,631 shares) 23,699,396
Cost of shares repurchased (129,492 shares) (6,295,994)
-----------------
Total 23,283,779
-----------------
Increase in net assets from share transactions 104,728,790
-----------------
Net increase in net assets 105,716,457
Net Assets
Beginning of period 0
-----------------
End of period (including undistributed net investment income of $66,653) $ 105,716,457
=================
</TABLE>
See Notes to Financial Statements
22
<PAGE>
Institutional Growth Stock Portfolio
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
Class X Class Y
---------------- ----------------
From Inception From Inception
3/1/96 to 3/1/96 to
12/31/96 12/31/96
---------------- ----------------
Net asset value, beginning of period $48.01 $48.01
Income from investment operations(5)
Net investment income 0.34(4) 0.18(4)
Net realized and unrealized gain (loss) 4.89 4.95
-------------- ---------------
Total from investment operations 5.23 5.13
-------------- ---------------
Less distributions
Dividends from net investment income (0.30) (0.19)
Distributions from net realized gains (5.52) (5.52)
-------------- ---------------
Total distributions (5.82) (5.71)
-------------- ---------------
Change in net asset value (0.59) (0.58)
-------------- ---------------
Net asset value, end of period $47.42 $47.43
============== ===============
Total return 10.71%(2) 10.48%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) $82,739 $22,978
Ratio to average net assets of:
Operating expenses 0.70%(1) 0.95%(1)
Net investment income 0.65%(1) 0.39%(1)
Portfolio turnover 99%(2) 99%(2)
Average commission rate paid(3) $0.0543 $0.0543
(1) Annualized
(2) Not annualized
(3) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs, or spreads on shares traded on a principal
basis.
(4) Includes reimbursement of operating expenses by investment adviser of
$0.04 and $0.04, respectively, computed using average shares outstanding.
(5) Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from
anticipated results depending on the time of share purchases and
redemptions.
See Notes to Financial Statements
23
<PAGE>
Institutional Money Market Portfolio
INVESTMENTS AT DECEMBER 31, 1996
Face
Amount Interest Maturity
(000) Description Rate Date Value
- -------- --------------------------- --------- ----------- -----------
FEDERAL AGENCY SECURITIES--0.4%
$ 70 Federal Home Loan Mortgage Assoc. 5.28% 01/31/97 $ 69,692
---------
Reset
Date
---------
FEDERAL AGENCY SECURITIES--VARIABLE--21.4% (b)
500 Federal Home Loan Banks (final
maturity 01/14/97) 5.70 01/02/97 500,000
1,500 Student Loan Marketing Assoc.
(final maturity 11/24/97) 5.39 01/07/97 1,500,000
1,000 Student Loan Marketing Assoc.
(final maturity 02/22/99) 5.42 01/07/97 1,000,000
700 Federal National Mortgage Assoc.
(final maturity 12/14/98) 5.18 03/14/97 699,249
---------
TOTAL FEDERAL AGENCY SECURITIES--VARIABLE 3,699,249
---------
<TABLE>
<CAPTION>
Standard
& Poor's
Rating Interest Maturity
(Unaudited) Rate Date Value
------------ ---------------------- ------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER--55.0%
295 Shell Oil Co. A-1+ 6.25 01/02/97 294,949
640 Abbott Laboratories A-1+ 5.75 01/07/97 639,387
200 Cargill, Inc. A-1+ 5.43 01/10/97 199,728
210 Heinz (H.J.) Co. A-1+ 5.40 01/10/97 209,716
350 Exxon Imperial U.S., Inc. A-1+ 5.41 01/13/97 349,369
500 Greenwich Funding Corp. A-1+ 5.60 01/15/97 498,911
150 Preferred Receivables
Funding Corp. A-1 5.35 01/16/97 149,666
500 General Electric Capital
Corp. A-1+ 6.00 01/18/97 499,417
400 Cargill, Inc. A-1+ 5.41 01/22/97 398,738
173 General Electric Capital
Corp. A-1+ 5.31 01/22/97 173,000
250 AlliedSignal, Inc. A-1 5.65 01/23/97 249,137
325 Albertson's, Inc. A-1 5.48 01/29/97 323,615
</TABLE>
<TABLE>
<CAPTION>
Standard
Face & Poor's
Amount Rating Interest Maturity
(000) Description (Unaudited) Rate Date Value
- -------- -------------------------------- --------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER--continued
$500 United Parcel
Service, Inc. A-1+ 5.35 01/30/97 $ 497,845
400 Heinz (H.J.) Co. A-1+ 5.40 02/03/97 398,020
320 Kellogg Co. A-1+ 5.35 02/05/97 318,335
195 Kellogg Co. A-1+ 5.37 02/07/97 193,924
500 Vermont American
Corp. A-1+ 5.47 02/07/97 497,189
500 Schering Corp. A-1+ 5.40 02/11/97 496,925
255 Corporate
Receivables Corp. A-1 5.37 02/12/97 253,402
150 Preferred
Receivables Funding
Corp. A-1 5.35 02/13/97 149,041
350 Goldman Sachs & Co. A-1+ 5.35 02/14/97 347,711
300 Receivables Capital
Corp. A-1+ 5.40 02/14/97 298,020
25 Corporate
Receivables Corp. A-1 5.35 02/20/97 24,814
500 Southwestern Bell
Telephone Co. A-1+ 5.43 02/25/97 495,852
500 Bellsouth
Telecommunications,
Inc. A-1+ 5.34 03/04/97 495,402
380 First Deposit
Funding Trust A-1+ 5.33 03/14/97 375,949
400 CXC, Inc. A-1+ 5.32 03/17/97 395,567
300 Receivables Capital
Corp. A-1+ 5.39 05/01/97 294,610
---------------
TOTAL COMMERCIAL PAPER 9,518,239
---------------
TOTAL INVESTMENTS--76.8%
(Identified cost $13,287,180) 13,287,180(a)
Cash and receivables, less liabilities--23.2% 4,024,005
---------------
NET ASSETS--100.0% $17,311,185
===============
</TABLE>
(a) Federal Income Tax Information: At December 31, 1996, the aggregate cost
of securities was the same for book and tax purposes.
(b) Variable rate demand note. The interest rates shown reflect the rate
currently in effect.
See Notes to Financial Statements
25
<PAGE>
Institutional Money Market Portfolio
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
Assets
Investment securities at value
(Identified cost $13,287,180) $13,287,180
Cash 22,181
Receivables
Fund shares sold 4,579,358
Interest 22,925
Receivable from adviser 35,210
------------
Total assets 17,946,854
------------
Liabilities
Payables
Fund shares repurchased 569,348
Dividend distributions 14,638
Transfer agent fee 3,802
Trustees' fee 1,375
Distribution fee 448
Financial agent fee 324
Accrued expenses 45,734
------------
Total liabilities 635,669
------------
Net Assets $17,311,185
============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $17,311,185
------------
Net Assets $17,311,185
============
Class X
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $15,181,531) 15,181,531
Net asset value and offering price per share $1.00
Class Y
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $2,129,654) 2,129,654
Net asset value and offering price per share $1.00
STATEMENT OF OPERATIONS
FROM INCEPTION MARCH 1, 1996
TO DECEMBER 31, 1996
Investment Income
Interest $ 608,661
----------
Total investment income 608,661
----------
Expenses
Investment advisory fee 28,000
Distribution fee--Class Y 5,661
Financial agent fee 3,360
Registration 28,589
Transfer agent 38,616
Professional 18,900
Trustees 13,900
Printing 10,688
Custodian 7,000
Miscellaneous 728
----------
Total expenses 155,442
Less expenses borne by investment adviser (110,582)
----------
Net expenses 44,860
----------
Net investment income 563,801
----------
Net increase in net assets resulting from
operations $ 563,801
==========
See Notes to Financial Statements
26
<PAGE>
Institutional Money Market Portfolio
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
March 1, 1996 to
December 31, 1996
------------------
<S> <C>
From Operations
Net investment income $ 563,801
-----------------
Increase in net assets resulting from operations 563,801
-----------------
From Distributions to Shareholders
Net investment income--Class X (454,271)
Net investment income--Class Y (109,530)
-----------------
Decrease in net assets from distributions to shareholders (563,801)
-----------------
From Share Transactions
Class X
Proceeds from sales of shares (17,010,234 shares) 17,010,234
Net asset value of shares issued from reinvestment of distributions (438,107 shares) 438,107
Net asset value of shares issued in conjunction with conversion of PHL Pooled
Separate Account G (8,106,057 shares) 8,106,057
Cost of shares repurchased (10,372,867 shares) (10,372,867)
-----------------
Total 15,181,531
-----------------
Class Y
Proceeds from sales of shares (2,849,561 shares) 2,849,561
Net asset value of shares issued from reinvestment of distributions (105,240 shares) 105,240
Net asset value of shares issued in conjunction with conversion of PHL
Pooled Separate Account G (2,666,813 shares) 2,666,813
Cost of shares repurchased (3,491,960 shares) (3,491,960)
-----------------
Total 2,129,654
-----------------
Increase in net assets from share transactions 17,311,185
-----------------
Net increase in net assets 17,311,185
Net Assets
Beginning of period 0
-----------------
End of period $ 17,311,185
=================
</TABLE>
See Notes to Financial Statements
27
<PAGE>
Institutional Money Market Portfolio
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
Class X Class Y
---------------- ----------------
From Inception From Inception
3/1/96 to 3/1/96 to
12/31/96 12/31/96
---------------- ----------------
Net asset value, beginning of period $1.00 $1.00
Income from investment operations
Net investment income 0.043(1) 0.040(1)
-------------- ---------------
Total from investment operations 0.043 0.040
-------------- ---------------
Less distributions
Dividends from net investment income (0.043) (0.040)
-------------- ---------------
Change in net asset value -- --
-------------- ---------------
Net asset value, end of period $1.00 $1.00
============== ===============
Total return 4.34%(3) 4.11%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $15,182 $ 2,130
Ratio to average net assets of:
Operating expenses 0.35%(2) 0.60%(2)
Net investment income 5.08%(2) 4.84%(2)
(1) Includes reimbursement of operating expenses by investment adviser of for
less than $0.01.
(2) Annualized
(3) Not annualized
See Notes to Financial Statements
28
<PAGE>
Institutional U.S. Government Securities Portfolio
INVESTMENTS AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- ---------------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--81.8%
U.S. Treasury Bonds--6.1%
U.S. Treasury Bonds 6.50%, '06 AAA $ 500 $ 502,813
--------------
U.S. Treasury Notes--9.0%
U.S. Treasury Notes 5.875%, '98 AAA 750 749,062
--------------
Agency Mortgage-Backed Securities--66.7%
FHLMC 9%, '04 AAA 17 17,223
FHLMC 9.30%, '05 AAA 107 107,434
FHLMC 4.75%, '11 AAA 458 456,374
FNMA 5.75%, '02 AAA 1,000 997,010
FNMA 5.25%, '13 AAA 2,000 1,980,640
FNMA 5.50%, '14 AAA 2,000 1,986,000
--------------
5,544,681
--------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(Identified cost $6,772,935) 6,796,556
--------------
MUNICIPAL BONDS (b)--5.4%
Chicago Public Building Taxable
7%, '07 AAA $ 450 $ 454,662
TOTAL MUNICIPAL BONDS
(Identified cost $447,689) 454,662
--------------
TOTAL LONG-TERM INVESTMENTS--87.2%
(Identified cost $7,220,624) 7,251,218
--------------
SHORT-TERM OBLIGATIONS--8.6%
Federal Agency Securities--8.6%
Federal Home Loan Mortgage Corp. 5.70%, 1-2-97 715 714,887
--------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $714,887) 714,887
--------------
TOTAL INVESTMENTS--95.8%
(Identified cost $7,935,511) 7,966,105(a)
Cash and receivables, less liabilities--4.2% 346,356
--------------
NET ASSETS--100.0% $8,312,461
==============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $39,942 and gross
depreciation of $9,348 for income tax purposes. At December 31, 1996, the
aggregate cost of securities for federal income tax purposes was
$7,935,511.
(b) These municipal bonds are fully defeased by U.S. Government Treasury
Obligations.
See Notes to Financial Statements
30
<PAGE>
Institutional U.S. Government Securities Portfolio
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
Assets
Investment securities at value
(Identified cost $7,935,511) $7,966,105
Cash 3,337
Receivables
Fund shares sold 310,121
Interest 51,895
Receivable from adviser 22,143
Prepaid expenses 9,157
-----------
Total assets 8,362,758
-----------
Liabilities
Payables
Fund shares repurchased 100
Transfer agent fee 3,916
Trustees' fee 1,475
Distribution fee 685
Financial agent fee 201
Accrued expenses 43,920
-----------
Total liabilities 50,297
-----------
Net Assets $8,312,461
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $8,524,474
Accumulated net realized loss (242,607)
Net unrealized appreciation 30,594
-----------
Net Assets $8,312,461
===========
Class X
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $4,734,029) 359,963
Net asset value and offering price per share $13.15
Class Y
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $3,578,432) 272,294
Net asset value and offering price per share $13.14
STATEMENT OF OPERATIONS
FROM INCEPTION MARCH 1, 1996
TO DECEMBER 31, 1996
Investment Income
Interest $ 508,661
----------
Total investment income 508,661
----------
Expenses
Investment advisory fee 25,541
Distribution fee--Class Y 6,615
Financial agent fee 2,554
Registration 74,176
Transfer agent 35,900
Professional 17,500
Trustees 14,000
Printing 8,102
Custodian 2,700
Miscellaneous 2,784
----------
Total expenses 189,872
Less expenses borne by investment adviser (149,202)
----------
Net expenses 40,670
----------
Net investment income 467,991
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized loss on securities (236,317)
----------
Net change in unrealized appreciation on investments end
of period 30,594
Less net unrealized depreciation in connection with PHL
Pooled Separate Account U (162,639)
----------
Net change in unrealized appreciation
(depreciation) 193,233
----------
Net loss on investments (43,084)
----------
Net increase in net assets resulting from operations $ 424,907
==========
See Notes to Financial Statements
31
<PAGE>
Institutional U.S. Government Securities Portfolio
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
March 1, 1996 to
December 31, 1996
-----------------
<S> <C>
From Operations
Net investment income $ 467,991
Net realized loss (236,317)
Net change in unrealized appreciation (depreciation) 193,233
----------------
Increase in net assets resulting from operations 424,907
----------------
From Distributions to Shareholders
Net investment income--Class X (297,193)
Net investment income--Class Y (170,798)
In excess of net investment income--Class X (33,911)
In excess of net investment income--Class Y (19,488)
----------------
Decrease in net assets from distributions to shareholders (521,390)
----------------
From Share Transactions
Class X
Proceeds from sales of shares (68,722 shares) 922,793
Net asset value of shares issued from reinvestment of distributions (21,717 shares) 285,465
Net asset value of shares issued in conjunction with conversion of PHL Pooled Separate
Account U (826,222 shares) 11,033,355
Cost of shares repurchased (556,698 shares) (7,465,688)
----------------
Total 4,775,925
----------------
Class Y
Proceeds from sales of shares (199,852 shares) 2,672,950
Net asset value of shares issued from reinvestment of distributions (14,474 shares) 190,283
Net asset value of shares issued in conjunction with conversion of PHL Pooled Separate
Account U (150,065 shares) 2,003,966
Cost of shares repurchased (92,097 shares) (1,234,180)
----------------
Total 3,633,019
----------------
Increase in net assets from share transactions 8,408,944
----------------
Net increase in net assets 8,312,461
Net Assets
Beginning of period 0
----------------
End of period (including undistributed net investment income of $0) $ 8,312,461
================
</TABLE>
See Notes to Financial Statements
32
<PAGE>
Institutional U.S. Government Securities Portfolio
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
Class X Class Y
---------------- ----------------
From Inception From Inception
3/1/96 to 3/1/96 to
12/31/96 12/31/96
---------------- ----------------
Net asset value, beginning of period $13.35 $13.35
Income from investment operations(5)
Net investment income 0.62(3)(4) 0.59(3)(4)
Net realized and unrealized gain (loss) 0.02 0.01
-------------- ---------------
Total from investment operations 0.64 0.60
-------------- ---------------
Less distributions
Dividends from net investment income (0.75) (0.73)
In excess of net investment income (0.09) (0.08)
-------------- ---------------
Total distributions (0.84) (0.81)
-------------- ---------------
Change in net asset value (0.20) (0.21)
-------------- ---------------
Net asset value, end of period $13.15 $13.14
============== ===============
Total return 4.86%(2) 4.56%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) $4,734 $3,578
Ratio to average net assets of:
Operating expenses 0.40%(1) 0.65%(1)
Net investment income 5.58%(1) 5.32%(1)
Portfolio turnover 175%(2) 175%(2)
(1) Annualized
(2) Not annualized
(3) Computed using average shares outstanding.
(4) Includes reimbursement of operating expenses by investment adviser of
$0.19 and $0.19, respectively.
(5) Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from
anticipated results depending on the time of share purchases and
redemptions.
See Notes to Financial Statements
33
<PAGE>
Institutional Enhanced Reserves Portfolio
INVESTMENTS AT DECEMBER 31, 1996
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ -------- -------------
U.S. Government And Agency Securities--16.2%
U.S. Treasury Notes--7.5%
U.S. Treasury Notes 5.625%, '98 Aaa $3,000 $ 2,986,170
U.S. Treasury Notes 7.75%, '99 Aaa 6,000 6,275,622
-----------
9,261,792
-----------
Agency Mortgage-Backed Securities--8.7%
GNMA 8.50%, '26 3,841 3,986,062
FHLMC 7.50% WI, '11 (c) 5,000 5,068,750
FNMA 7.835%, '20 1,662 1,721,405
-----------
10,776,217
-----------
Total U.S. Government And Agency Securities
(Identified cost $20,027,061) 20,038,009
-----------
Non-Convertible Bonds--61.9%
Asset-Backed Securities--43.3%
Chase Manhattan Grantor 95-A, A 6%,
'01 Aaa 2,635 2,646,372
CIT RV Trust 96-A, A 5.40%, '11 Aaa 2,207 2,164,561
Citibank Credit Card Master Trust I
96-6, A 5.62%, '08 (b) Aaa 3,000 2,999,063
Discover Card Master Trust 96-4, A
5.98%, '13 (b) Aaa 2,500 2,546,725
First Chicago Master Trust 93-F,
5.93%, '00 (b) Aaa 5,000 5,021,900
First Plus Home Loan 96-2, A1
6.80%, '05 Aaa 4,962 4,979,249
Fleetwood Credit Corp. 93-A, A 6%,
'08 Aaa 2,416 2,419,880
Ford Credit Auto Owner Trust 96-A,
A1 5.67%, '97 P-1 1,708 1,711,942
Ford Credit Grantor Trust 95-A, A
5.90%, '00 Aaa 1,613 1,618,941
Fremont Small Business Loan 6.11%,
'99 (b) Baa 1,800 1,802,698
Green Tree Financial Corp. 96-8, A2
6.55%, '27 Aaa 3,000 3,021,562
Green Tree Home Improvement 95-A,
A1 7%, '20 Aaa 16 16,058
Green Tree Home Improvement 96-A,
A1 5.70%, '26 Aaa 1,912 1,913,117
Household Consumer Loan 96-2, A2
5.931%, '06 (b) Aa 3,000 2,998,594
MBNA Master Credit Card 94-B, A
5.47%, '02 (b) Aaa 2,500 2,509,125
Nationsbank Auto 96-A, A-1 5.776%,
'97 P-1 1,681 1,684,128
Standard Credit Card Master Trust
95-4, A 5.60%, '00 (b) Aaa 3,000 3,004,680
Asset-Backed Securities--continued
The Money Store 96-CA1, 6.70%, '08 Aaa $4,463 $ 4,467,835
Western Financial Grantor 95-2, A1
7.10%, '00 Aaa 2,096 2,127,029
World Omni Auto Trust 95-A, A
6.05%, '01 Aaa 3,780 3,796,590
-----------
53,450,049
-----------
Banks--4.1%
General Electric Corp. 5.55%, '98
(b) Aaa 5,000 5,018,540
-----------
Diversified Financial Services--6.8%
Dean Witter Discover Co. 6%, '98 A 3,800 3,802,250
General Motors Acceptance Corp.
7.50%, '97 A 4,500 4,561,722
-----------
8,363,972
-----------
Non-Agency Mortgage-Backed Securities--4.8%
Independent National Mortgage Corp.
96-E, A2 6.93%, '26 Aaa 2,959 2,933,470
Residential Asset Securitization
Trust 96-A9, A1 7.50%, '27 Aaa 2,973 2,983,876
-----------
5,917,346
-----------
Retail--2.9%
Sears Roebuck Co. 8.45%, '98 A 3,500 3,637,155
-----------
Total Non-Convertible Bonds
(Identified cost $76,177,978) 76,387,062
-----------
Total Long-Term Investments--78.1%
(Identified cost $96,205,039) 96,425,071
-----------
STANDARD
& POOR'S
RATING
(Unaudited)
----------
Short-Term Obligations--21.9%
Commercial Paper--18.6%
Beneficial Corp. 5.406%, 1-13-97 A-1 5,000 5,000,000
Ford Motor Credit Co. 5.638%,
1-13-97 A-1 5,000 5,000,000
Merrill Lynch & Co., Inc. 5.671%,
1-16-97 A-1+ 5,000 5,000,000
CIT Group Holdings 5.635%, 1-22-97 A-1 5,000 5,000,000
Deere (John) Capital Corp. 5.53%,
1-30-97 A-1 3,000 3,000,000
-----------
23,000,000
-----------
See Notes to Financial Statements
35
<PAGE>
Institutional Enhanced Reserves Portfolio
PAR
VALUE
(000) VALUE
-------- ---------------
Repurchase Agreements--3.3%
State Street Repurchase Agreement
4.90% dated 12/31/96 due 1/2/97,
repurchase price $4,116,120,
collateralized by U.S. Treasury
Note 7.25%, 2/15/98, market value
$4,201,094 $4,115 $ 4,115,000
--------------
Total Short-Term Obligations
(Identified cost $27,115,000) 27,115,000
--------------
Total Investments--100.0%
(Identified cost $123,320,039) 123,540,071(a)
Cash and receivables, less liabilities--0.0% (25,855)
--------------
Net Assets--100.0% $123,514,216
==============
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $289,717 and gross
depreciation of $82,643 for income tax purposes. At December 31, 1996,
the aggregate cost of securities for income tax purposes was
$123,332,997.
(b) Variable or step coupon; interest rate shown reflects the rate currently
in effect.
(c) When issued.
See Notes to Financial Statements
36
<PAGE>
Institutional Enhanced Reserves Portfolio
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
Assets
Investment securities at value
(Identified cost $123,320,039) $123,540,071
Cash 1,346
Receivables
Investment securities sold 4,566,348
Interest 636,442
Receivable from adviser 97,824
--------------
Total assets 128,842,031
--------------
Liabilities
Payables
Investment securities purchased 5,076,563
Dividend distributions 158,487
Transfer agent fee 3,502
Financial agent fee 3,095
Trustees' fee 1,313
Distribution fee 243
Accrued expenses 84,612
--------------
Total liabilities 5,327,815
--------------
Net Assets $123,514,216
==============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $123,678,944
Undistributed net investment income 13,193
Accumulated net realized loss (397,953)
Net unrealized appreciation 220,032
--------------
Net Assets $123,514,216
==============
Class X
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $122,010,341) 12,258,962
Net asset value and offering price per share $9.95
Class Y
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $1,503,875) 151,152
Net asset value and offering price per share $9.95
STATEMENT OF OPERATIONS
FROM INCEPTION JULY 19, 1996
TO DECEMBER 31, 1996
Investment Income
Interest $3,326,723
-----------
Total investment income 3,326,723
-----------
Expenses
Investment advisory fee 132,690
Distribution fee--Class Y 342
Financial agent fee 16,586
Registration 22,500
Professional 19,717
Transfer agent 17,187
Custodian 9,126
Printing 9,043
Trustees 6,938
Miscellaneous 2,500
-----------
Total expenses 236,629
Less expenses borne by investment adviser (48,309)
-----------
Net expenses 188,320
-----------
Net investment income 3,138,403
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized loss on securities (212,416)
-----------
Net change in unrealized appreciation on investments end
of period 220,032
Less net unrealized depreciation in connection with Duff
& Phelps Enhanced Reserves Fund (58,648)
-----------
Net change in unrealized appreciation
(depreciation) 278,680
-----------
Net gain on investments 66,264
-----------
Net increase in net assets resulting from operations $3,204,667
===========
See Notes to Financial Statements
37
<PAGE>
Institutional Enhanced Reserves Portfolio
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
July 19, 1996 to
December 31, 1996
------------------
<S> <C>
From Operations
Net investment income $ 3,138,403
Net realized loss (212,416)
Net change in unrealized appreciation (depreciation) 278,680
-----------------
Increase in net assets resulting from operations 3,204,667
-----------------
From Distributions to Shareholders
Net investment income--Class X (3,113,690)
Net investment income--Class Y (7,637)
-----------------
Decrease in net assets from distributions to shareholders (3,121,327)
-----------------
From Share Transactions
Class X
Proceeds from sales of shares (18,754,392 shares) 186,663,642
Net asset value of shares issued from reinvestment of distributions (291,631 shares) 2,902,589
Net asset value of shares issued in conjunction with the acquisition of Duff & Phelps
Enhanced Reserves Fund (13,730,413 shares) 136,554,593
Cost of shares repurchased (20,517,474 shares) (204,195,925)
-----------------
Total 121,924,899
-----------------
Class Y
Proceeds from sales of shares (150,567 shares) 1,500,150
Net asset value of shares issued from reinvestment of distributions (585 shares) 5,827
-----------------
Total 1,505,977
-----------------
Increase in net assets from share transactions 123,430,876
-----------------
Net increase in net assets 123,514,216
Net Assets
Beginning of period 0
-----------------
End of period (including undistributed net investment income of $13,193) $ 123,514,216
=================
</TABLE>
See Notes to Financial Statements
38
<PAGE>
Institutional Enhanced Reserves Portfolio
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
Class X Class Y
---------------- ----------------
From Inception From Inception
7/19/96 to 11/1/96 to
12/31/96 12/31/96
---------------- ----------------
Net asset value, beginning of period $9.95 $9.97
Income from investment operations(5)
Net investment income 0.26(3) 0.09(3)
Net realized and unrealized gain (loss) -- (0.02)
-------------- ---------------
Total from investment operations 0.26 0.07
-------------- ---------------
Less distributions
Dividends from net investment income (0.26) (0.09)
Distributions from net realized gains -- --
-------------- ---------------
Total distributions (0.26) (0.09)
-------------- ---------------
Change in net asset value -- (0.02)
-------------- ---------------
Net asset value, end of period $9.95 $9.95
============== ===============
Total return 2.57%(2) 0.71%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) $122,010 $1,504
Ratio to average net assets of:
Operating expenses 0.34%(1) 0.59%(1)
Net investment income 5.68%(1) 5.58%(1)
Portfolio turnover 122%(2) 122%(2)
(1) Annualized
(2) Not annualized
(3) Includes reimbursement of operating expenses by investment adviser of
less than $0.01.
See Notes to Financial Statements
39
<PAGE>
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Phoenix Duff & Phelps Institutional Mutual Funds (the "Fund") is organized
as a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company whose shares are offered in six separate Portfolios (the
"Portfolios").
Each Portfolio has distinct investment objectives. The Balanced Portfolio
seeks to provide reasonable income, long-term capital growth and conservation
of capital. The Managed Bond Portfolio seeks to generate a high level of
current income and capital appreciation. The Growth Stock Portfolio seeks
long-term appreciation of capital. The Money Market Portfolio seeks to
provide as high a level of current income consistent with capital
preservation and liquidity. The U.S. Government Securities Portfolio seeks a
high level of current income by investing in U.S. Government guaranteed or
backed securities. The Enhanced Reserves Portfolio seeks to provide high
current income consistent with preservation of capital.
Each Portfolio offers both Class X and Class Y shares. Both classes of
shares have identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that Class Y bears distribution expenses
and has exclusive voting rights with respect to its distribution plan. Income
and expenses of each Portfolio are borne pro rata by the holders of both
classes of shares, except that Class X bears no distribution expenses.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and
expenses. Actual results could differ from those estimates.
A. Security valuation:
Equity securities are valued at the last sale price, or if there had been
no sale that day, at the last bid price. Debt securities are valued on the
basis of broker quotations or valuations provided by a pricing service which
utilizes information with respect to recent sales, market transactions in
comparable securities, quotations from dealers, and various relationships
between securities in determining value. Short-term investments having a
remaining maturity of 60 days or less are valued at amortized cost which
approximates market. All other securities and assets are valued at their fair
value as determined in good faith by or under the direction of the Trustees.
The Money Market Portfolio uses the amortized cost method of security
valuation which, in the opinion of the Trustees, represents the fair value of
the particular security. The Trustees monitor the deviations between the
classes' net asset value per share as determined by using available market
quotations and its amortized cost per share. If the deviation exceeds 1/2 of
1%, the Board of Trustees will consider what action, if any, should be
initiated to provide a fair valuation. This valuation procedure allows each
class of the Portfolio to maintain a constant net asset value of $1 per
share. The assets of the Portfolio will not be invested in any security with
a maturity of greater than 397 days, and the average weighted maturity of its
portfolio will not exceed 90 days.
B. Security transactions and related income:
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date or, in the case of certain foreign
securities, as soon as the Portfolio is notified. Interest income is recorded
on the accrual basis. The Fund does not amortize premiums except for the
Money Market Portfolio and Enhanced Reserves Portfolio, but does amortize
discounts using the effective interest method. Realized gains and losses are
determined on the identified cost basis.
C. Income taxes:
Each of the Portfolios is treated as a separate taxable entity. It is the
policy of each Portfolio in the Fund to comply with the requirements of the
Internal Revenue Code (the Code), applicable to regulated investment
companies, and to distribute substantially all of its taxable income to its
shareholders. In addition, each Portfolio intends to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Code. Therefore, no provision for federal income taxes or excise taxes has
been made.
D. Distributions to shareholders:
Distributions are recorded by each Portfolio on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences include the treatment of non-taxable dividends,
non-deductible expenses, foreign currency gain/loss, partnerships, and losses
deferred due to wash sales and excise tax regulations. Permanent book and tax
basis differences relating to shareholder distributions will result in
reclassifications to paid in capital.
E. Foreign currency translation:
Foreign securities, other assets and liabilities are valued using the
foreign currency exchange rate effective at the end of the reporting period.
Cost of investments is translated at the currency exchange rate effective at
the
40
<PAGE>
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 (Continued)
trade date. The gain or loss resulting from a change in currency exchange
rates between the trade and settlement dates of a portfolio transaction is
treated as a gain or loss on foreign currency. Likewise, the gain or loss
resulting from a change in currency exchange rates between the date income is
accrued and paid is treated as a gain or loss on foreign currency. The Fund
does not separate that portion of the results of operations arising from
changes in exchange rates and that portion arising from changes in the market
prices of securities.
F. Forward currency contracts:
Each of the Portfolios, except U.S. Government Securities Portfolio and
Money Market Portfolio, may enter into forward currency contracts in
conjunction with the planned purchase or sale of foreign denominated
securities in order to hedge the U.S. dollar cost or proceeds. Forward
currency contracts involve, to varying degrees, elements of market risk in
excess of the amount recognized in the statement of assets and liabilities.
Risks arise from the possible movements in foreign exchange rates or if the
counterparty does not perform under the contract.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any number of days from the
date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded directly between currency traders
and their customers. The contract is marked-to-market daily and the change in
market value is recorded by each Portfolio as an unrealized gain (or loss).
When the contract is closed or offset, the Portfolio records a realized gain
(or loss) equal to the change in the value of the contract when it was opened
and the value at the time it was closed or offset.
G. Futures contracts:
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. A Portfolio may enter into
financial futures contracts as a hedge against anticipated changes in the
market value of their portfolio securities. Upon entering into a futures
contract the Portfolio is required to pledge to the broker an amount of cash
and/or securities equal to the "initial margin" requirements of the futures
exchange on which the contract is traded. Pursuant to the contract, the
Portfolio agrees to receive from or pay to the broker an amount of cash equal
to the daily fluctuation in value of the contract. Such receipts or payments
are known as variation margin and are recorded by the Portfolio as unrealized
gains or losses. When the contract is closed, the Portfolio records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
The potential risk to a Portfolio is that the change in value of the futures
contract may not correspond to the change in value of the hedged instruments.
H. Expenses:
Expenses incurred by the Fund with respect to any two or more Portfolios
are allocated in proportion to the net assets of each Portfolio, except where
allocation of direct expense to each Portfolio or an alternative allocation
method can be more fairly made.
I. When-Issued and delayed delivery transactions:
Each Portfolio may engage in when-issued or delayed delivery transactions.
The Portfolios record when-issued securities on the trade date and maintain
collateral for the securities purchased. Securities purchased on a when-
issued or delayed delivery basis begin earning interest on the settlement
date.
NOTE 2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
As compensation for its services to the Fund, the Advisers, Phoenix
Investment Counsel, Inc. ("PIC"), an indirect majority-owned subsidiary of
Phoenix Home Life Mutual Insurance Company ("PHL") and Duff & Phelps
Management Co. ("DPM"), a subsidiary of Phoenix Duff & Phelps Corporation,
are entitled to a fee based upon the following annual rates as a percentage
of the average daily net assets of each separate Portfolio:
1st $1+
Portfolio Adviser $1 Billion Billion
------------------------------ ---------------------- ----------
Balanced Portfolio PIC 0.55% 0.50%
Managed Bond Portfolio PIC 0.45% 0.40%
Growth Stock Portfolio PIC 0.60% 0.55%
Money Market Portfolio PIC 0.25% 0.20%
U.S. Government Securities
Portfolio PIC 0.30% 0.25%
Enhanced Reserves Portfolio DPM 0.24% 0.19%
PIC has voluntarily agreed to assume total fund operating expenses of each
Portfolio it advises, excluding interest, taxes, brokerage fees, commissions
and extraordinary expenses until December 31, 2001, to the extent that such
expenses exceed the following percentages of average annual net assets:
Class X Class Y
-------- ---------
Balanced Portfolio 0.65% 0.90%
Managed Bond Portfolio 0.55% 0.80%
Growth Stock Portfolio 0.70% 0.95%
Money Market Portfolio 0.35% 0.60%
U.S. Government
Securities Portfolio 0.40% 0.65%
41
<PAGE>
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 (Continued)
DPM has voluntarily agreed to reimburse or waive total fund operating
expenses of the Enhanced Reserves Portfolio, excluding interest, taxes,
brokerage fees, commissions and extraordinary expenses until December 31,
1997, to the extent that such expenses exceed 0.34% and 0.59%, respectively,
of the average annual net assets of Class X and Y, respectively.
Phoenix Equity Planning Corporation ("PEPCO"), an indirect majority-owned
subsidiary of PHL, serves as the national distributor of the Fund's shares.
Each Portfolio pays PEPCO a distribution fee of an annual rate of 0.25% for
Class Y shares applied to the average daily net assets of that class. The
distributor has advised the Portfolio that of the total amount expensed for
the period ended December 31, 1996, $28,999 was earned by the Distributor and
$70,547 was earned by unaffiliated participants.
As Financial Agent to the Fund and to each Portfolio, PEPCO receives a fee
at an annual rate of 0.03% of the average daily net assets for bookkeeping,
administrative and pricing services. PEPCO serves as the Fund's Transfer
Agent with State Street Bank and Trust Company as sub-transfer agent. For
the period ended December 31, 1996, transfer agent fees were $227,584 of
which PEPCO retained $97 which is net of fees paid to State Street.
At December 31, 1996, PHL and affiliates held Portfolio shares which
aggregated the following:
Aggregate
Net Asset
Shares Value
------------ -------------
Balanced Portfolio-Class X 6 $ 109
Balanced Portfolio-Class Y 6,017 109,202
Managed Bond Portfolio-Class X 964,810 32,784,247
Managed Bond Portfolio-Class Y 3,179 107,980
Growth Stock Portfolio-Class X 2 111
Growth Stock Portfolio-Class Y 2,330 110,485
Money Market Portfolio-Class X 4,188,211 4,188,211
Money Market Portfolio-Class Y 104,000 104,000
U.S. Government Securities Portfolio-
Class X 8 105
U.S. Government Securities Portfolio-
Class Y 7,957 104,559
NOTE 3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities during the period ended December 31,
1996 (excluding U.S. Government and agency securities and short-term
securities) aggregated the following:
Purchases Sales
-------------- --------------
Balanced Portfolio $ 78,618,645 $ 83,001,463
Managed Bond Portfolio 41,193,818 32,078,713
Growth Stock Portfolio 162,155,076 255,823,389
U.S. Government
Securities Portfolio 447,655 --
Enhanced Reserves
Portfolio 28,603,158 37,816,786
Purchases and sales of U.S. Government and agency securities during the
period ended December 31, 1996, aggregated the following:
Purchases Sales
-------------- --------------
Balanced Portfolio $20,333,715 $21,567,310
Managed Bond Portfolio 90,065,593 93,826,124
U.S. Government
Securities Portfolio 16,343,443 21,423,027
Enhanced Reserves
Portfolio 92,701,698 91,373,139
NOTE 4. MERGERS
The Fund commenced operations on March 1, 1996, other than the Enhanced
Reserves Portfolio which became available for sale on July 19, 1996 following
the tax-free reorganization of the Duff & Phelps Enhanced Reserves Fund with
the Phoenix Duff & Phelps Institutional Enhanced Reserves Portfolio.
Prior to March 1, 1996, the Portfolios, other than Enhanced Reserves
Portfolio, existed as separate accounts of Phoenix Home Life Mutual Insurance
Company ("PHL"). Upon commencement of operations, the net assets of each
separate account were transferred into the corresponding Portfolio of the
Fund in a tax-free exchange for an equal number of shares of that Portfolio,
other than the Money Market Portfolio which issued 33.828 shares for each
unit of the separate account. The number of shares and dollars issued are
listed in each Portfolio's Statement of Changes in Net Assets. Acquired
unrealized appreciation (depreciation) is reflected in each Portfolio's
Statement of Operations.
The net assets of each Portfolio before and after the reorganization are
as follows:
Before After
----------- --------------
Balanced Portfolio $100,100 $ 58,215,721
Managed Bond Portfolio 100,100 66,796,561
Growth Stock Portfolio 100,100 206,603,100
Money Market Portfolio 100,100 10,872,970
U.S. Government
Securities Portfolio 100,100 13,137,421
Enhanced Reserves
Portfolio -- 136,554,593
42
<PAGE>
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 (Continued)
NOTE 5. RECLASS OF CAPITAL ACCOUNTS
In accordance with accounting pronouncements, the Portfolios of the Fund
have recorded several reclassifications in the capital accounts. These
reclassifications have no impact on the net asset value of the Portfolios and
are designed generally to present undistributed income and realized gains on
a tax basis which is considered to be more informative to the shareholder. As
of December 31, 1996, the Portfolios recorded the following reclassifications
to increase (decrease) the accounts listed below:
Capital paid
Undistributed Accumulated in on shares
net investment net realized of beneficial
income (loss) gain (loss) interest
---------------- -------------- ---------------
Balanced Portfolio $37,213 $ 9,971 $(47,184)
Managed Bond
Portfolio 54,888 (5,253) (49,635)
Growth Stock
Portfolio 57,621 (92) (57,529)
U.S. Government
Securities
Portfolio 53,399 (6,290) (47,109)
Enhanced Reserves
Portfolio (3,883) (185,537) 189,420
NOTE 6. CAPITAL LOSS CARRYOVERS
At December 31, 1996, the Portfolios had available for federal income tax
purposes unused capital losses as follows:
Expiring in
2003 2004
--------- -----------
U.S. Government
Securities Portfolio $ -- $235,004
Enhanced Reserves
Portfolio 189,419 128,718
For the Enhanced Reserves Portfolio, capital loss carryovers include
$189,419 acquired in connection with the merger of the Duff & Phelps Enhanced
Reserves Fund.
Under current tax law, capital losses realized after October 31, 1996 may be
deferred and treated as occurring on the first day of the following tax year.
For the year ended December 31, 1996, the U.S. Government Securities
Portfolio and the Enhanced Reserves Portfolio elected to defer $7,603 and
$66,858, respectively, in losses occurring between November 1, 1996 and
December 31, 1996.
NOTE 7. OTHER
As of December 31, 1996, the Portfolios had shareholders who each
individually owned more than 10% of shares outstanding, none of whom are
affiliated with PHL or PDP as follows. In addition, affiliate holdings are
presented in the table located within Note 2.
Number of % of Total
shareholders shares outstanding
--------------- --------------------
Balanced Portfolio 1 11.7%
Managed Bond Portfolio 1 12.6%
Growth Stock Portfolio 1 12.8%
Money Market Portfolio 1 16.4%
US Government Securities
Portfolio 1 13.6%
Enhanced Reserves
Portfolio 3 50.0%
TAX INFORMATION NOTICE (Unaudited)
For the fiscal year ended December 31, 1996, the following Portfolio's
distributed long-term capital gains dividends as follows:
Balanced Portfolio $1,255,831
Managed Bond Portfolio 748,876
Growth Stock Portfolio 8,379,943
For federal income tax purposes 3.84% and 9.51% of the ordinary income
dividends paid by the Balanced Portfolio and the Growth Stock Portfolio,
respectively, qualify for the dividends received deduction for corporate
shareholders.
43
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP [Price Waterhouse logo]
To the Shareholders and Trustees of
Phoenix Duff & Phelps Institutional Mutual Funds
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments (except for bond ratings), and the
related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the financial
position of the Balanced Portfolio, the Managed Bond Portfolio, the Growth
Stock Portfolio, the Money Market Portfolio, the U.S. Government Securities
Portfolio and the Enhanced Reserves Portfolio (constituting the Phoenix Duff
& Phelps Institutional Mutual Funds, hereinafter referred to as the "Fund")
at December 31, 1996, and the results of each of their operations, the
changes in each of their net assets and the financial highlights for each of
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits,
which included confirmation of securities at December 31, 1996 by
correspondence with the custodians and brokers, and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Boston, Massachusetts
February 14, 1997
44
<PAGE>
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
PART C--OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A of the Registration Statement: Financial Highlights
Included in Part B of the Registration Statement: Financial Statements and
Notes thereto, and Report of Independent Accountants included in the Annual
Report to Shareholders for the year ended December 31, 1996, incorporated by
reference.
(b) Exhibits:
<TABLE>
<S> <C>
(1)(a) Declaration of Trust of the Registrant, filed with Pre-Effective Amendment No. 1 on February 2, 1996
and incorporated herein by reference.
(1)(b) Amendment to Declaration of Trust changing names of Portfolios, filed with Pre-Effective Amendment
No. 2 on February 28, 1996 and incorporated herein by reference.
(1)(c) Amendment to Declaration of Trust adding Real Estate Equity Securities Portfolio filed via Edgar with
Post-Effective Amendment No. 4 on February 11, 1997.
(2) None
(3) None
(4) Reference is made to Article III, Section 3.4 of Registrant's Declaration of Trust
(5)(a) Investment Advisory Agreement between Registrant and Duff & Phelps Investment Management Co.
("DPM"), filed with Pre-Effective Amendment No. 1 on February 2, 1996 and incorporated herein by
reference.
(b) Investment Advisory Agreement between Registrant and Phoenix Investment Counsel, Inc. ("PIC"), filed
with Pre-Effective Amendment No. 1 on February 2, 1996 and incorporated herein by reference.
(c) Form of Investment Advisory Agreement between Registrant and Phoenix Realty Securities, Inc.
("PRS"), filed via Edgar herewith.
(6)(a) Distribution Agreement between Registrant and Phoenix Equity Planning Corporation, filed with
Pre-Effective Amendment No. 1 on February 2, 1996 and incorporated herein by reference.
(b) Form of Sales Agreement between Phoenix Equity Planning Corporation and dealers, filed with
Post-Effective Amendment No. 1 on March 1, 1996 and incorporated herein by reference.
(7) None
(8)(a) Custodian Agreement between Registrant and State Street Bank and Trust Company, filed with
Pre-Effective Amendment No. 1 to the Registration Statement/Proxy Statement on Form N-14 on
June 3, 1996 and incorporated herein by reference.
(b) Custodian Agreement between Registrant and The Chase Manhattan Bank, N.A., filed with Pre-Effective
Amendment No. 2 on February 28, 1996 and incorporated herein by reference.
(9)(a) Financial Agent Agreement between Registrant and Phoenix Equity Planning Corporation dated
December 11, 1996, filed via Edgar herewith.
(b) Transfer Agent Agreement between Registrant and Phoenix Equity Planning Corporation, filed with
Pre-Effective Amendment No. 2 on February 28, 1996 and incorporated herein by reference.
(c) Form of Administration Agreement between Registrant (on behalf of Real Estate Portfolio) and Phoenix
Duff & Phelps Corporation, filed via Edgar with Post-Effective Amendment on February 11, 1997.
(10)(a) Opinion of Counsel, filed with Pre-Effective Amendment No. 2 on February 28, 1996 and incorporated
herein by reference.
(b) Opinion of Counsel (as to the Real Estate Portfolio) filed via Edgar herewith.
(11) Consent of Accountants filed herewith.
(12) None
(13) Initial Capitalization Agreement, filed with Pre-Effective Amendment No. 1 on February 2, 1996 and
incorporated herein by reference.
(14) None
(15) Rule 12b-1 Distribution Plan for Class Y Shares, filed with Pre-Effective Amendment No. 1 on
February 2, 1996 and incorporated herein by reference.
C-1
<PAGE>
(16) Schedule for Computation of Performance Quotations, filed with Pre-Effective Amendment No. 2 on
February 28, 1996 and incorporated herein by reference.
(17) Financial Data Schedule as reflected on Edgar as Exhibit 27 filed herewith.
(18) Amended and Restated Rule 18f-3 Dual Distribution Plan filed via Edgar herewith.
(19)(a) Powers of Attorney, filed with Pre-Effective Amendment No. 2 on February 28, 1996 and incorporated
herein by reference.
(b) Power of Attorney for Ms. Moran, filed via Edgar with Post-Effective Amendment No. 4 on February 11, 1997.
</TABLE>
Item 25. Persons Controlled by or Under Common Control with Registrant.
As of the date hereof, to the best knowledge of the Registrant, no person
is directly or indirectly controlled by or under common control with the
Registrant.
Item 26. Number of Holders of Securities.
As of February 28, 1997:
Class X Shares Class Y Shares
Number of Number of
Record Holders Record Holders
-------------- --------------
Balanced Portfolio ............... 70 51
Managed Bond Portfolio ............ 54 42
Enhanced Reserves Portfolio ...... 29 5
Growth Portfolio .................. 82 61
Market Portfolio .................. 48 29
U.S. Gov't Sec. Portfolio ......... 27 18
Item 27. Indemnification.
Please see Article of the Registrant's Declaration of Trust (incorporated
herein by reference). Registrant's trustees and officers are covered by an
Errors and Omissions Policy. Paragraph 10 of the Investment Advisory Agreements
between the Registrant and its Advisers provide in relevant part that, in the
absence of willful malfeasance, bad faith, gross negligence or reckless
disregard of the obligations or duties under the Investment Advisory Agreements
on the part of each the Adviser, the Advisers shall not be liable to the
Registrant or to any shareholder for any act or omission in the course of or
connected in any way with rendering services or for any losses that may be
sustained in the purchase, holding or sale of any security.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, directors, officers and controlling
persons of the Registrant and the investment advisers and distributor pursuant
to the foregoing provisions or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission 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,
director, officer, or controlling person of the Registrant and the principal
underwriter in connection with the successful defense or any action, suit or
proceeding) is asserted against the Registrant by such trustee, director,
officer or controlling person or the Distributor in connection with the shares
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 by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
See "Management of the Fund" in the Prospectus and "Management of the
Trust" and "Services of the Advisers" in the Statement of Additional Information
for information regarding the business of the Advisers. For information as to
the business, profession, vocation or employment of a substantial nature of
directors and officers of the Advisers, reference is made to the Advisers'
current Form ADV (SEC File Nos. 801- 5995 (PIC) & 14813 (DPM)) filed under the
Investment Advisers Act of 1940, incorporated herein by reference.
Item 29. Principal Underwriter.
(a) The sole principal underwriter for the Registrant is Phoenix Equity
Planning Corporation.
C-2
<PAGE>
(b) The directors and executive officers of Phoenix Equity Planning Corporation,
the distributor for Registrant, are as follows:
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Michael E. Haylon Director Executive Vice Presiden
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
Philip R. McLoughlin Director and President Trustee and President
One American Row
Hartford, CT 06115
David R. Pepin Executive Vice President, None
56 Prospect Street Mutual Fund Sales and
P.O. Box 150480 Operations
Hartford, CT 06115-0480
Leonard J. Saltiel Managing Director, Vice President
100 Bright Meadow Blvd. Operations and Service
P.O. Box 2200
Enfield, CT 06083-2200
Paul Atkins Senior Vice President and None
56 Prospect Street Sales Manager
P.O. Box 150480
Hartford, CT 06115-0480
Maris Lambers Senior Vice President, None
100 Bright Meadow Blvd. Insurance and Independent
P.O. Box 2200 Division
Enfield, CT 06083-2200
William R. Moyer Senior Vice President and Vice President
100 Bright Meadow Blvd. Chief Financial Officer
P.O. Box 2200
Enfield, CT 06083-2200
John F. Sharry Managing Director, Mutual None
100 Bright Meadow Blvd. Fund Distribution
P.O. Box 2200
Enfield, CT 06083-2200
G. Jeffrey Bohne Vice President, Mutual Fund Secretary
101 Munson Street Customer Service
P.O. Box 810
Greenfield, MA 01302-0810
Eugene A. Charon Vice President and Controller None
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, CT 06083-2200
Nancy G. Curtiss Vice President and Treasurer, Treasurer
56 Prospect Street Fund Accounting
P.O. Box 150480
Hartford, CT 06115-0480
William E. Keen, III Assistant Vice President, Vice President
100 Bright Meadow Blvd. Mutual Fund Regulation
P.O. Box 2200
Enfield, CT 06083-2200
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Elizabeth R. Sadowinski Vice President, None
56 Prospect Street Administration
P.O. Box 150480
Hartford, CT 06115-0480
Thomas N. Steenburg Vice President, Counsel Assistant Secretary
56 Prospect Street and Secretary
P.O. Box 150480
Hartford, CT 06115
</TABLE>
(c) To the best of the Registrant's knowledge, no commissions or other
compensation was received by any principal underwriter who is not an
affiliated person of the Registrant or an affiliated person of such
affiliated person, directly or indirectly, from the Registrant during the
Registrant's last fiscal year.
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by the
Registrant by Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder will be maintained at the offices of the Registrant located at 56
Prospect Street, Hartford, CT 06115, or its investment advisers, Duff & Phelps
Investment Management Co., 55 East Monroe Street, Suite 3800, Chicago, Illinois
60610, Phoenix Investment Counsel, Inc., 56 Prospect Street, Hartford, CT 06115,
or the custodians, State Street Bank and Trust Company, 1 Heritage Drive, P2N,
North Quincy, MA 02171 or The Chase Manhattan Bank, N.A., 1 Chase Manhattan
Plaza, Floor 3B, New York, NY 10081. All such accounts, books and other
documents required to be maintained by the principal underwriter will be
maintained at Phoenix Equity Planning Corporation, 100 Bright Meadow Boulevard,
Enfield, Connecticut 06083.
Item 31. Management Services.
None.
Item 32. Undertakings.
(a) Not applicable.
(b) Registrant undertakes to file a post-effective amendment, using financial
statements, which need not be certified, within four to six months from the
effective date of Registrant's Post-Effective Amendment No. 5 with respect
to the Real Estate Equity Securities Portfolio.
(c) Registrant undertakes to furnish to each person to whom a prospectus is
delivered a copy of the Registrant's latest annual report to shareholders
upon request and without charge if the information called for by Item 5A of
Form N-1A is contained in such annual report.
(d) Registrant undertakes to provide the information specified pursuant to
Regulation S-K, Item 512 (Reg.S.S. 229.512), as applicable, the terms of
which are incorporated herein by reference.
(e) Registrant undertakes to call a special meeting of shareholders for the
purpose of voting upon the question of removal of a trustee or trustees and
to assist in communications with other shareholders, as required by Section
16(c) of the 1940 Act, if requested to do so by holders of at least 10% of
a Portfolio's outstanding shares.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Hartford, and State of Connecticut on
the 28th day of April, 1997.
PHOENIX DUFF & PHELPS
INSTITUTIONAL MUTUAL FUNDS
ATTEST: /s/ Thomas N. Steenburg By: /s/ Philip R. McLoughlin
---------------------------- -------------------------------
Thomas N. Steenburg Philip R. McLoughlin
Assistant Secretary President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities indicated, on this 28th day of April, 1997.
Signature Title
--------- -----
Trustee
- ----------------------------
C. Duane Blinn*
Trustee
- ----------------------------
Robert Chesek*
Trustee
- ----------------------------
E. Virgil Conway*
Trustee
- ----------------------------
William W. Crawford*
Treasurer (principal financial
- ---------------------------- and accounting officer)
Nancy G. Curtiss*
Trustee
- ----------------------------
Harry Dalzell-Payne*
Trustee
- ----------------------------
William N. Georgeson*
Trustee
- ----------------------------
Francis E. Jeffries*
Trustee
- ----------------------------
Leroy Keith, Jr.*
/s/ Philip R. McLoughlin Trustee and President
- ----------------------------
Philip R. McLoughlin
- ----------------------------
Eileen A. Moran**
Trustee
- ----------------------------
Everett L. Morris*
Trustee
- ----------------------------
James M. Oates*
S-1(c)
<PAGE>
Signature Title
--------- -----
Trustee
- ----------------------------
Richard A. Pavia*
Trustee
- ----------------------------
Calvin J. Pedersen*
Trustee
- ----------------------------
Philip R. Reynolds*
Trustee
- ----------------------------
Herbert Roth, Jr.*
Trustee
- ----------------------------
Richard E. Segerson*
Trustee
- ----------------------------
Lowell P. Weicker, Jr.*
*By: /s/ Philip R. McLoughlin
-------------------------
* Philip R. McLoughlin pursuant to powers of attorney filed with Pre-Effective
Amendment No. 2 on February 28, 1996 and incorporated herein by reference.
** Philip R. McLoughlin pursuant to powers of attorney filed with Post-Effective
Amendment No. 4 on February 11, 1997 and incorporated herein by reference.
S-2(c)
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT made effective as of the 1st day of May, 1997 (the
"Contract Date") by and between Phoenix Duff & Phelps Institutional Mutual Funds
(the "Trust"), a Massachusetts business trust authorized to issue shares of
beneficial interest in separate series, and Phoenix Realty Securities, Inc. (the
"Adviser"), a Connecticut corporation.
WITNESSETH THAT:
1. The Trust hereby appoints the Adviser to act as investment adviser to
the Trust on behalf of the Phoenix Real Estate Equity Securities Portfolio (the
"Portfolio" or "Series"), for the period and on the terms set forth herein. The
Adviser accepts such appointment and agrees to render the services described in
this Agreement for the compensation herein provided.
2. In the event that the Trustees desire to retain the Adviser to render
investment advisory services hereunder with respect to one or more additional
series ("Additional Portfolio"), the Trust shall notify the Adviser in writing.
If the Adviser is willing to render such services, it shall notify the Trust in
writing, whereupon such Additional Portfolio shall become subject to the terms
and conditions of this Agreement.
3. The Adviser shall furnish continuously an investment program for the
Portfolio and any Additional Portfolio which may become subject to the terms and
conditions set forth herein (which, together with the Portfolio is sometimes
collectively referred to as the "Portfolio") and shall manage the investment and
reinvestment of the assets of each Portfolio, subject at all times to the
supervision of the Trustees.
4. With respect to managing the investment and reinvestment of the
Portfolio' assets, the Adviser shall provide, at its own expense:
(a) Investment research, advice and supervision;
(b) An investment program for each Portfolio consistent with its
investment objectives;
(c) Implementation of the investment program for each Portfolio
including the purchase and sale of securities;
(d) Regular reports to the Trustees on the implementation of each
Portfolio' investment program; and
(e) Continuous monitoring and evaluation of the performance and
investment style of any subadviser recommended by Adviser and
appointed to act on behalf of the Trust.
<PAGE>
-2-
5. The Adviser shall, for all purposes herein, be deemed to be an
independent contractor.
6. The Adviser shall furnish at its own expense, or pay the
expenses of the Trust, for the following:
(a) Personnel necessary to perform the functions required to manage
the investment and reinvestment of each Portfolios' assets
(including those required for research, statistical and
investment work);
(b) Personnel to serve without salaries from the Trust as officers
or agents of the Trust. The Adviser need not provide personnel
to perform, or pay the expenses of the Trust for, services
customarily performed for an open-end management investment
company by its national distributor, custodian, financial agent,
transfer agent, auditors and legal counsel;
(c) Compensation and expenses, if any, of the Trustees who are also
full-time employees of the Adviser; and
(d) Any subadviser recommended by Adviser and appointed to act on
behalf of the Trust.
7. As between the Trust and the Adviser, all costs and expenses not
specifically enumerated herein as payable by the Adviser shall be paid by the
Trust. Such expenses shall include, but shall not be limited to, all expenses
(other than those specifically referred to as being borne by the Adviser)
incurred in the operation of the Trust and any public offering of its shares,
including, among others, interest, taxes, brokerage fees and commissions, fees
of Trustees who are not full-time employees of the Adviser or any of its
affiliates, expenses of Trustees' and shareholders' meetings including the cost
of printing and mailing proxies, certain expenses of insurance premiums for
fidelity and other coverage, expenses of repurchase and redemption of shares,
expenses of issue and sale of shares (to the extent not borne by its national
distributor under its agreement with the Trust), expenses of printing and
mailing stock certificates representing shares of the Trust, association
membership dues, charges of custodians, transfer agents, dividend disbursing
agents and financial agents, bookkeeping, auditing and legal expenses. The Trust
will also pay the fees and bear the expense of registering and maintaining the
registration of the Trust and its shares with the Securities and Exchange
Commission and registering or qualifying its shares under state or other
securities laws and the expense of preparing and mailing prospectuses and
reports to shareholders. Additionally, if authorized by the Trustees, the Trust
shall pay for extraordinary expenses and expenses of a non-recurring nature
which may include, but not be limited to the reasonable and proportionate cost
of any reorganization or acquisition of assets and the cost of legal proceedings
to which the Trust is a party.
<PAGE>
-3-
8. Adviser hereby undertakes to abide by policies and procedures
adopted by the Trust.
9. For providing the services and assuming the expenses outlined
herein, the Trust agrees that the Adviser shall be compensated
as follows:
(a) Within eight days after the end of each month, the Trust shall
pay the Adviser a base fee based on the annual rate of .50% of
the average aggregate daily net asset values of the Portfolio
(the "Base Rate"). The amounts payable to the Adviser with
respect to the Portfolio shall be based upon the average of
the values of the net assets of such Portfolio as of the close
of business each day, computed in accordance with the then
effective registration statement for the Portfolio.
(b) Beginning on July 1, 1998, and for each whole or partial month
thereafter during the term hereof, the Base Rate shall be
increased or decreased by a Performance Adjustment, effective
as of the first day of the calendar month following each such
adjustment, based on the Performance Spread as more
particularly described in the following table:
<TABLE>
<CAPTION>
Performance Performance Performance Performance
Spread Adjustment Spread Adjustment
--------- ---------- --------- ----------
<S> <C> <C> <C>
.50% - .59% .005% (.50%) - (.59%) (.005%)
.60% - .69% .010% (.60%) - (.69%) (.010%)
.70% - .79% .015% (.70%) - (.79%) (.015%)
.80% - .89% .020% (.80%) - (.89%) (.020%)
.90% - .99% .025% (.90%) - (.99%) (.025%)
1.00% - 1.09% .030% (1.00%) - (1.09%) (.030%)
1.10% - 1.19% .035% (1.10%) - (1.19%) (.035%)
1.20% - 1.29% .040% (1.20%) - (1.29%) (.040%)
1.30% - 1.39% .045% (1.30%) - (1.39%) (.045%)
1.40% - 1.49% .050% (1.40%) - (1.49%) (.050%)
1.50% - 1.59% .055% (1.50%) - (1.59%) (.055%)
1.60% - 1.69% .060% (1.60%) - (1.69%) (.060%)
1.70% - 1.79% .065% (1.70%) - (1.79%) (.065%)
1.80% - 1.89% .070% (1.80%) - (1.89%) (.070%)
1.90% - 1.99% .075% (1.90%) - (1.99%) (.075%)
2.00% - 2.09% .080% (2.00%) - (2.09%) (.080%)
2.10% - 2.19% .085% (2.10%) - (2.19%) (.085%)
2.20% - 2.29% .090% (2.20%) - (2.29%) (.090%)
2.30% - 2.39% .095% (2.30%) - (2.39%) (.095%)
2.40%+ .100% greater than (2.40%) (.100%)
</TABLE>
For the purposes hereof, "Performance Spread" shall be
equivalent to Performance minus the Benchmark for each
Reference Period. "Performance" shall refer to the highest
total return of the Portfolio calculated in accordance with
the then effective registration statement for the Portfolio.
"Reference Period" shall refer to a rolling twelve month
period ending on the last day of each calendar month during
the term hereof.
<PAGE>
-4-
"Benchmark" shall mean the NAREIT Equity Total Return Index,
or such other mutually agreed upon index as the parties may
from time to time specify, for the comparable Reference
Period. The Performance Adjustment shall be based on the
average aggregate daily net asset value of the Portfolio for
the relevant period.
(c) Compensation shall accrue immediately upon the effective date
of this Agreement.
(d) If there is termination of this Agreement during a month, each
Portfolio fee for that month shall be proportionately computed
upon the average of the aggregate daily net asset values of
such Portfolio for such partial period in such month.
(e) The Adviser agrees to reimburse the Trust for the amount, if
any, by which the total operating and management expenses for
any Portfolio (including the Adviser's compensation, pursuant
to this paragraph, but excluding taxes, interest, costs of
portfolio acquisitions and dispositions and extraordinary
expenses), for any "fiscal year" exceed the level of expenses
which such Portfolio is permitted to bear under the most
restrictive expense limitation (which is not waived by a
State) imposed on open-end investment companies by any state
in which shares of such Portfolio are then qualified. Such
reimbursement, if any, will be made by the Adviser to the
Trust within eight days after the end of each month. For the
purpose of this subparagraph (d), the term "fiscal year" shall
include the portion of the then current fiscal year which
shall have elapsed at the date of termination of this
Agreement.
10. The services of the Adviser to the Trust are not to be deemed
exclusive, the Adviser being free to render services to others and to engage in
other activities. Without relieving the Adviser of its duties hereunder and
subject to the prior approval of the Trustees and subject further to compliance
with applicable provisions of the Investment Company Act of 1940, as amended,
the Adviser may appoint one or more agents to perform any of the functions and
services which are to be provided under the terms of this Agreement upon such
terms and conditions as may be mutually agreed upon among the Trust, the Adviser
and any such agent.
11. The Adviser shall not be liable to the Trust or to any shareholder
of the Trust for any error of judgment or mistake of law or for any loss
suffered by the Trust or by any shareholder of the Trust in connection with the
matters to which this Agreement or any Subadvisory Agreement relates, except a
loss resulting from willful misfeasance, bad faith, gross negligence or reckless
disregard on the part of the Adviser in the performance of its duties hereunder.
12. It is understood that:
(a) Trustees, officers, employees, agents and shareholders of the
Trust are or may be "interested persons" of the Adviser or any
subadviser as directors, officers, stockholders or otherwise;
<PAGE>
-5-
(b) Directors, officers, employees, agents and stockholders of the
Adviser or any subadviser are or may be "interested persons"
of the Trust as Trustees, officers, shareholders or otherwise;
and
(c) The existence of any such dual interest shall not affect the
validity hereof or of any transactions hereunder.
13. This Agreement shall become effective with respect to the Portfolio
as of the date stated above (the "Contract Date") and with respect to any
Additional Portfolio, on the date specified in the notice to the Trust from the
Adviser in accordance with paragraph 2 hereof that the Adviser is willing to
serve as Adviser with respect to such Additional Portfolio. Unless terminated as
herein provided, this Agreement shall remain in full force and effect for a
period of one year following the Contract Date, and, with respect to each
Additional Portfolio, until the next anniversary of the Contract Date on which
such Additional Portfolio became subject to the terms and conditions of this
Agreement and shall continue in full force and effect for periods of one year
thereafter with respect to each Portfolio so long as (a) such continuance with
respect to any such Portfolio is approved at least annually by either the
Trustees or by a "vote of the majority of the outstanding voting securities" of
such Portfolio and (b) the terms and any renewal of this Agreement with respect
to any such Portfolio have been approved by a 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;
provided, however, that the continuance of this Agreement with respect to each
Additional Portfolio is subject to its approval by a "vote of a majority of the
outstanding voting securities" of any such Additional Portfolio on or before the
next anniversary of the Contract Date following the date on which such
Additional Portfolio became a Portfolio hereunder.
Any approval of this Agreement by a vote of the holders of a "majority
of the outstanding voting securities" of any Portfolio shall be effective to
continue this Agreement with respect to such Portfolio notwithstanding (a) that
this Agreement has not been approved by a "vote of a majority of the outstanding
voting securities" of any other Portfolio of the Trust affected thereby and (b)
that this Agreement has not been approved by the holders of a "vote of a
majority of the outstanding voting securities" of the Trust, unless either such
additional approval shall be required by any other applicable law or otherwise.
14. The Trust may terminate this Agreement with respect to the Trust or
to the Portfolio upon 60 days' written notice to the Adviser at any time,
without the payment of any penalty, by vote of the Trustees or, as to each
Portfolio, by a "vote of the majority of the outstanding voting securities" of
such Portfolio. The Adviser may terminate this Agreement upon 60 days' written
notice to the Trust, without the payment of any penalty. This Agreement shall
immediately terminate in the event of its "assignment".
<PAGE>
-6-
15. The terms "majority of the outstanding voting securities",
"interested persons" and "assignment", when used herein, shall have
the respective meanings in the Investment Company Act of 1940, as amended.
16. It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but bind only the trust property of
the Trust, as provided in the Declaration of Trust. The execution and delivery
of this Agreement have been authorized by the Trustees and shareholders of the
Trust and signed by the President of the Trust, acting as such, and neither such
authorization by such Trustees and shareholders nor such execution and delivery
by such officer shall be deemed to have been made by any of them individually or
be binding upon or impose any liability on any of them personally, but shall
bind only the trust property of the Trust as provided in its Declaration of
Trust. The Declaration of Trust, as amended, is or shall be on file with the
Secretary of The Commonwealth of Massachusetts.
17. This Agreement shall be construed and the rights and obligations of
the parties hereunder enforced in accordance with the laws of The Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
PHOENIX DUFF & PHELPS
INSTITUTIONAL MUTUAL FUNDS
By:
-------------------------------
Philip R. McLoughlin, President
PHOENIX REALTY SECURITIES, INC.
By:
--------------------------------
Barbara Rubin, President
-7-
Exhibit 9(a)
FINANCIAL AGENT AGREEMENT
THIS AGREEMENT made and concluded as of this 11th day of December, 1996
by and between Phoenix Equity Planning Corporation, a Connecticut corporation
having a place of business located at 100 Bright Meadow Boulevard, Enfield,
Connecticut (the "Financial Agent") and Phoenix Duff & Phelps Institutional
Mutual Funds, a Massachusetts business trust having a place of business located
at 101 Munson Street, Greenfield, Massachusetts (the "Trust").
WITNESSETH THAT:
1. Financial Agent shall keep the books of the Trust and compute the
daily net asset value of shares of the Trust in accordance with instructions
received from time to time from the Board of Trustees of the Trust; which
instructions shall be certified to Financial Agent by the Trust's Secretary.
Financial Agent shall report such net asset value so determined to the Trust and
shall perform such other services as may be requested from time to time by the
Trust as are reasonably incidental to Financial Agent's duties hereunder.
2. Financial Agent shall be obligated to maintain, for the periods and
in the places required by Rule 31a-2 under the Investment Company Act of 1940,
as amended, those books and records maintained by Financial Agent. Such books
and records are the property of the Trust and shall be surrendered promptly to
the Trust upon its request. Furthermore, such books and records shall be open to
inspection and audit at reasonable times by officers and auditors of the Trust.
3. As compensation for its services hereunder during any fiscal year of
the Trust, Financial Agent shall receive, within eight days after the end of
each month, a fee as specified in Schedule A.
4. Financial Agent shall not be liable for anything done or omitted by
it in the exercise of due care in discharging its duties specifically described
hereunder and shall be answerable and accountable only for its own acts and
omissions and not for those of any agent employed by it nor for those of any
bank, trust company, broker, depository, correspondent or other person.
Financial Agent shall be protected in acting upon any instruction, notice,
request, consent, certificate, resolution, or other instrument or paper believed
by Financial Agent to be genuine, and to have been properly executed, and shall,
unless otherwise specifically provided herein, be entitled to receive as
conclusive proof of any fact or matter required to be ascertained by Financial
Agent hereunder a certificate signed by the Secretary of the Trust. Financial
Agent shall be entitled, with respect to questions of law relating to its duties
hereunder, to advice of counsel (which may be counsel for the Trust) and, with
respect to anything done or omitted by it in good faith hereunder in conformity
with the advice of or based upon an opinion of counsel, to be held harmless by
the Trust from all claims of loss or damage. Nothing herein shall protect
Financial Agent against any liability to the Trust or to its respective
shareholders to which Financial Agent would otherwise be subject by reason of
its willful misfeasance, bad faith, gross negligence or reckless disregard of
its duties hereunder. Except as provided in this paragraph, Financial Agent
shall not be entitled to any indemnification by the Trust.
<PAGE>
5. Subject to prior approval of the Board of Trustees of the Trust,
Financial Agent may appoint one or more sub-financial agents to perform any of
the functions and services which are to be provided under the terms of this
Agreement upon such terms and conditions as may be mutually agreed upon by the
Trust, Financial Agent and such sub-financial agent.
6. This Agreement shall continue in effect only so long as (a) such
continuance is specifically approved at least annually by the Board of Trustees
of the Trust or by a vote of a majority of the outstanding voting securities of
the Trust, and (b) the terms and any renewal of such Agreement have been
approved by the vote of a majority of the trustees of the Trust who are not
parties to this Agreement or interested persons, as that term is defined in the
Investment Company Act of 1940, as amended, of any such party, cast in person at
a meeting called for the purpose of voting on such approval. A "majority of the
outstanding voting securities of the Trust" shall have, for all purposes of this
Agreement, the meaning provided therefor in said Investment Company Act.
7. Either party may terminate the within Agreement by tendering written
notice to the other, whereupon Financial Agent will be relieved of the duties
described herein. This Agreement shall immediately terminate in the event of its
assignment, as that term is defined in said Investment Company Act.
8. This Agreement shall be construed and the rights and obligations of
the parties hereunder enforced in accordance with the laws of the Commonwealth
of Massachusetts.
9. This Agreement shall become effective on January 1, 1997.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
PHOENIX DUFF & PHELPS INSTITUTIONAL
MUTUAL FUNDS
By: /s/ Philip R. McLoughlin
-------------------------
Philip R. McLoughlin
President
PHOENIX EQUITY PLANNING
CORPORATION
By: /s/ David R. Pepin
-------------------------
David R. Pepin
Executive Vice President
<PAGE>
SCHEDULE A
FEE SCHEDULE
FEE INFORMATION FOR SERVICES AS FINANCIAL AGENT
Annual Financial Agent Fees shall be based on the following formula:
(1) An incremental schedule applies as follows:
<TABLE>
<S> <C>
Up to $100 million: 5 basis points on average daily net assets
$100 million to $300 million: 4 basis points on average daily net assets
$300 million thru $500 million: 3 basis points on average daily net assets
Greater than $500 million: 1.5 basis points on average daily net assets
</TABLE>
A minimum fee will apply as follows:
Money Market $35,000
Equity $50,000
Balanced $60,000
Fixed Income $70,000
International $70,000
REIT $70,000
(2) An additional charge of $12,000 applies for each additional class
of shares above one, over and above the minimum asset-based fee previously
noted.
The following tables indicates the classification for each of the
applicable portfolio:
Classification Series Name
-------------- -----------
Equity Institutional Growth Stock Portfolio
Balanced Institutional Balanced Portfolio
Fixed Income Institutional Enhanced Reserves Portfolio
Institutional Managed Bond Portfolio
Institutional U.S. Government Securities
Portfolio
Exhibit 10(b)
April ___, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Ladies and Gentlemen:
This opinion is furnished in connection with the registration under the
Securities Act of 1933, as amended, of shares ("Shares") of the Phoenix Real
Estate Equity Securities Portfolio of Phoenix Duff & Phelps Institutional Mutual
Funds (the "Fund").
In rendering our opinion, we have examined such documents, records, and
matters of law as we deemed necessary for purposes of this opinion. We have
assumed the genuineness of all signatures of all parties, the authenticity of
all documents submitted as originals, the correctness of all copies and the
correctness of all written or oral statements made to us.
Based upon the subject to the foregoing, it is our opinion that the
Shares that will be issued by the Fund when sold will be legally issued, fully
paid, and nonassessable.
Our opinion is rendered solely in connection with the Registration
Statement on Form N-1A under which the Shares will be registered and may not be
relied upon for any other purposes without our written consent. We hereby
consent to the use of this opinion as an exhibit to such Registration Statement.
Yours truly,
/s/ Richard J. Wirth
Richard J. Wirth
Exhibit 11
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 5 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 14, 1997, relating to the financial
statements and financial highlights appearing in the December 31, 1996 Annual
Report to Shareholders of the Phoenix Duff and Phelps Institutional Mutual
Funds, which is also incorporated by reference into the Registration Statement.
We also consent to the reference to us under the heading "Financial Highlights"
in the Prospectus and under the heading "Independent Accountants" in the
Statement of Additional Information.
/s/ PRICE WATERHOUSE LLP
- ------------------------
PRICE WATERHOUSE LLP
Boston, Massachusetts
April 24, 1997
Exhibit 18
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
(the "Fund")
AMENDED AND RESTATED
PLAN PURSUANT TO RULE 18f-3
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
Pursuant to Rule 18f-3 under the Investment Company Act of 1940, as
amended ("1940 Act"), this Plan describes the multi-class system for the Fund,
including the separate classes of shares' arrangements for distribution, the
method for allocating expenses to those classes and any related conversion or
exchange privileges applicable to these classes.
Upon the original effective date of this Plan, the Fund shall offer
multiple classes of shares, as described herein, pursuant to Rule 18f-3 and this
Plan.
2. The Multi-Class Structure
The portfolios of the Fund listed on Schedule A hereto shall offer two
classes of shares, Class X and Class Y ("Multi-Class Portfolios"). Shares of the
Multi-Class Portfolios shall represent an equal pro rata interest in the
respective Multi-Class Portfolio and, generally, shall have identical voting,
dividend, liquidation, and other rights, preferences, powers, restrictions,
limitations, qualifications and terms and conditions, except that: (a) each
class shall have a different designation; (b) each class shall bear any Class
Expenses, as defined by Section 2(b), below; (c) each class shall have exclusive
voting rights on any matter submitted to shareholders that relates solely to its
distribution arrangement; and (d) each class shall have separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class. In addition, Class X and Class Y
shares shall have the features described in Sections a, b, c and d, below.
a. Distribution Plan
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 with
respect to Class Y shares for each Multi-Class Portfolio, containing
substantially the following terms:
Class Y shares of each Multi-Class Portfolio shall reimburse Phoenix
Equity Planning Corporation (the "Distributor") for costs and expenses incurred
in connection with distribution and marketing of shares of the Fund, as provided
in the Distribution Plan and any supplements thereto, subject to an annual limit
of 0.25% of the average daily net assets of a Multi-Class Portfolio's Class Y
shares.
<PAGE>
b. Allocation of Income and Expenses
i. General.
The gross income, realized and unrealized capital gains and
losses and expenses (other than Class Expenses, as defined below) of each
Multi-Class Portfolio shall be allocated to each class on the basis of its net
asset value relative to the net asset value of the Multi-Class Portfolio.
Expenses to be so allocated include expenses of the Fund that are not
attributable to a particular Multi-Class Portfolio or class of a Multi-Class
Portfolio but are allocated to a Multi-Class Portfolio ("Fund Expenses") and
expenses of a particular Multi-Class Portfolio that are not attributable to a
particular class of that Multi-Class Portfolio ("Portfolio Expenses"). Fund
Expenses include, but are not limited to, Trustees' fees, insurance costs and
certain legal fees. Portfolio Expenses include, but are not limited to, certain
state registration fees, custodial fees, advisory fees and other expenses
relating to the management of the Multi-Class Portfolio's assets.
ii. Class Expenses.
Expenses attributable to a particular class ("Class Expenses")
shall be limited to: (1) transfer agency fees; (2) stationery, printing,
postage, and delivery expenses relating to preparing and distributing
shareholder reports, prospectuses, and proxy statements; (3) state Blue Sky
registration fees; (4) SEC registration fees; (5) expenses of administrative
personnel and services to the extent related to another category of
class-specific expenses; (6) trustees' fees and expenses; (7) accounting
expenses, auditors' fees, litigation expenses, and legal fees and expenses; and
(8) expenses incurred in connection with shareholder meetings. Expenses
described in (a) (i) and (ii) above of this paragraph must be allocated to the
class for which they are incurred. All other expenses described in this
paragraph will be allocated as Class Expenses, if the Fund's President and
Treasurer have determined, subject to Board approval or ratification, which of
such categories of expenses will be treated as Class Expenses, consistent with
applicable legal principles under the 1940 Act and the Internal Revenue Code of
1986, as amended ("Code").
In the event that a particular expense is no longer reasonably
allocable by class or to a particular class, it shall be treated as a Fund
Expense or Portfolio Expense as applicable, and in the event a Fund Expense or
Portfolio Expense becomes allocable as a Class Expense, it shall be so
allocated, subject to compliance with Rule 18f-3 and Board approval or
ratification.
The initial determination of expenses that will be allocated
as Class Expenses and any subsequent changes thereto as set forth in this Plan
shall be reviewed by the Board of Trustees and approved by such Board and by a
majority of the Trustees who are not "interested persons" of the Fund, as
defined in the 1940 Act ("Independent Trustees").
iii. Waivers or Reimbursements of Expenses
Investment Advisor may waive or reimburse its management fee in whole
or in part provided that the fee is waived or reimbursed to all shares of the
Fund in proportion to the relative average daily net asset values.
Investment Advisor or a related entity who charges a fee for a Class
Expense may waive or reimburse that fee in whole or in part only if the revised
fee more accurately reflects the relative
<PAGE>
-3-
cost of providing to each Multi-Class Portfolio the service for which the Class
Expense is charged.
Distributor may waive or reimburse a Rule 12b-1 Plan fee payment in
whole or in part.
c. Exchange Privileges
Shareholders of a Multi-Class Portfolio may exchange shares of a
particular class for shares of the same class in another Multi-Class Portfolio,
at the relative net asset values of the respective shares to be exchanged and
with no sales charge, provided the shares to be acquired in the exchange are, as
may be necessary, qualified for sale in the shareholder's state of residence and
subject to the applicable requirements, if any, as to minimum amount. Each
Multi-Class Portfolio reserves the right to temporarily or permanently terminate
exchange privileges, impose conditions upon the exercision of exchange
privileges, or reject any specific order for any dealer, shareholder or person
whose transactions seem to follow a timing pattern, including those who request
more than one exchange out of a Multi-Class Portfolio within any thirty (30) day
period. Each Multi-Class Portfolio reserves the right to terminate or modify
these exchange privileges at any time upon giving prominent notice to
shareholders at least 60 days in advance.
d. Conversion Feature
There shall be no conversion rights between classes of shares of a
Multi-Class Portfolio.
3. Board Review
a. Approval of Amended and Restated Plan
The Board of Trustees, including a majority of the Independent
Trustees, at a meeting held on November 20, 1996, approved the Amended and
Restated Plan based on a determination that the Plan, including the expense
allocation, is in the best interests of each class and Multi-Class Portfolio
individually and of the Funds. Their determination was based on their review of
information furnished to them which they deemed reasonably necessary and
sufficient to evaluate the Plan.
b. Approval of Amendments
The Plan may not be amended materially unless the Board of Trustees, including a
majority of the Independent Trustees, have found that the proposed amendment,
including any proposed related expense allocation, is in the best interests of
each class and Multi-Class Portfolio individually and of the Funds. Such funding
shall be based on information required by the Board and furnished to them that
the Board deems reasonably necessary to evaluate the proposed amendment.
c. Periodic Review
<PAGE>
-4-
The Board shall review reports of expense allocations and such
other information as they request at such times, or pursuant to such schedule,
as they may determine consistent with applicable legal requirements.
4. Contracts
Any agreement related to the Multi-Class System shall require the
parties thereto to furnish to the Board of Trustees, upon their request, such
information as is reasonably necessary to permit the Trustees to evaluate the
Plan or any proposed amendment.
5. Effective Date
The Amended and Restated Plan, having been reviewed and approved by the
Board of Trustees and the Independent Trustees, shall take effect as of January
1, 1996.
6. Amendments
The Plan may not be amended to modify materially its terms unless such
amendment has been approved in the manner specified in Section 3.b. of this
Plan.
<PAGE>
SCHEDULE A
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
INSTITUTIONAL BALANCED PORTFOLIO
INSTITUTIONAL ENHANCED RESERVES PORTFOLIO
INSTITUTIONAL GROWTH STOCK PORTFOLIO
INSTITUTIONAL MANAGED BOND PORTFOLIO
INSTITUTIONAL MONEY MARKET PORTFOLIO
INSTITUTIONAL REAL ESTATE EQUITY SECURITIES PORTFOLIO
INSTITUTIONAL U.S. GOVERNMENT SECURITIES PORTFOLIO
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001004658
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL BALANCED PORT. CL X
<SERIES>
<NUMBER> 017
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL BALANCED PORT. CL X
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 46039
<INVESTMENTS-AT-VALUE> 48980
<RECEIVABLES> 257
<ASSETS-OTHER> 26
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 49263
<PAYABLE-FOR-SECURITIES> 4
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 102
<TOTAL-LIABILITIES> 106
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 44940
<SHARES-COMMON-STOCK> 2047
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 42
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1234
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2941
<NET-ASSETS> 49157
<DIVIDEND-INCOME> 274
<INTEREST-INCOME> 1409
<OTHER-INCOME> 0
<EXPENSES-NET> (323)
<NET-INVESTMENT-INCOME> 1360
<REALIZED-GAINS-CURRENT> 3731
<APPREC-INCREASE-CURRENT> (414)
<NET-CHANGE-FROM-OPS> 4677
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1073)
<DISTRIBUTIONS-OF-GAINS> (1923)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2808
<NUMBER-OF-SHARES-REDEEMED> (914)
<SHARES-REINVESTED> 153
<NET-CHANGE-IN-ASSETS> 37147
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 252
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 498
<AVERAGE-NET-ASSETS> 54800
<PER-SHARE-NAV-BEGIN> 17.90
<PER-SHARE-NII> 0.51
<PER-SHARE-GAIN-APPREC> 1.17
<PER-SHARE-DIVIDEND> (0.49)
<PER-SHARE-DISTRIBUTIONS> (0.94)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.15
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001004658
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL BALANCED PORTFOLIO CL Y
<SERIES>
<NUMBER> 018
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL BALANCED PORTFOLIO CL Y
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 46039
<INVESTMENTS-AT-VALUE> 48980
<RECEIVABLES> 257
<ASSETS-OTHER> 26
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 49263
<PAYABLE-FOR-SECURITIES> 4
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 102
<TOTAL-LIABILITIES> 106
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 44940
<SHARES-COMMON-STOCK> 662
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 42
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1234
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2941
<NET-ASSETS> 49157
<DIVIDEND-INCOME> 274
<INTEREST-INCOME> 1409
<OTHER-INCOME> 0
<EXPENSES-NET> (323)
<NET-INVESTMENT-INCOME> 1360
<REALIZED-GAINS-CURRENT> 3731
<APPREC-INCREASE-CURRENT> (414)
<NET-CHANGE-FROM-OPS> 4677
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (283)
<DISTRIBUTIONS-OF-GAINS> (583)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 845
<NUMBER-OF-SHARES-REDEEMED> (231)
<SHARES-REINVESTED> 47
<NET-CHANGE-IN-ASSETS> 12010
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 252
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 498
<AVERAGE-NET-ASSETS> 54800
<PER-SHARE-NAV-BEGIN> 17.90
<PER-SHARE-NII> 0.46
<PER-SHARE-GAIN-APPREC> 1.18
<PER-SHARE-DIVIDEND> (0.45)
<PER-SHARE-DISTRIBUTIONS> (0.94)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.15
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001004658
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL MANAGED BOND CL X
<SERIES>
<NUMBER> 027
<NAME> PHOENIX DUFF & PHELPS INSTITUIONAL MANAGED BOND CL X
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 76332
<INVESTMENTS-AT-VALUE> 78573
<RECEIVABLES> 2244
<ASSETS-OTHER> 24
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 80841
<PAYABLE-FOR-SECURITIES> 1791
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 558
<TOTAL-LIABILITIES> 2349
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75916
<SHARES-COMMON-STOCK> 2104
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 34
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 302
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2240
<NET-ASSETS> 78492
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4425
<OTHER-INCOME> 0
<EXPENSES-NET> (331)
<NET-INVESTMENT-INCOME> 4094
<REALIZED-GAINS-CURRENT> 1624
<APPREC-INCREASE-CURRENT> (396)
<NET-CHANGE-FROM-OPS> 5322
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3739)
<DISTRIBUTIONS-OF-GAINS> (1199)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2313
<NUMBER-OF-SHARES-REDEEMED> (332)
<SHARES-REINVESTED> 124
<NET-CHANGE-IN-ASSETS> 71482
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 259
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 503
<AVERAGE-NET-ASSETS> 68731
<PER-SHARE-NAV-BEGIN> 33.84
<PER-SHARE-NII> 2.03
<PER-SHARE-GAIN-APPREC> 0.69
<PER-SHARE-DIVIDEND> (1.97)
<PER-SHARE-DISTRIBUTIONS> (0.61)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 33.98
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001004658
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL MANAGED BOND CL Y
<SERIES>
<NUMBER> 028
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL MANAGED BOND CL Y
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 76332
<INVESTMENTS-AT-VALUE> 78573
<RECEIVABLES> 2244
<ASSETS-OTHER> 24
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 80841
<PAYABLE-FOR-SECURITIES> 1791
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 558
<TOTAL-LIABILITIES> 2349
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75916
<SHARES-COMMON-STOCK> 206
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 34
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 302
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2240
<NET-ASSETS> 78492
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4425
<OTHER-INCOME> 0
<EXPENSES-NET> (331)
<NET-INVESTMENT-INCOME> 4094
<REALIZED-GAINS-CURRENT> 1624
<APPREC-INCREASE-CURRENT> (396)
<NET-CHANGE-FROM-OPS> 5322
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (377)
<DISTRIBUTIONS-OF-GAINS> (119)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 231
<NUMBER-OF-SHARES-REDEEMED> (39)
<SHARES-REINVESTED> 15
<NET-CHANGE-IN-ASSETS> 7010
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 259
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 503
<AVERAGE-NET-ASSETS> 68731
<PER-SHARE-NAV-BEGIN> 33.84
<PER-SHARE-NII> 1.98
<PER-SHARE-GAIN-APPREC> 0.66
<PER-SHARE-DIVIDEND> (1.90)
<PER-SHARE-DISTRIBUTIONS> (0.61)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 33.97
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001004658
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL GROWTH PORTFOLIO CL X
<SERIES>
<NUMBER> 037
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL GROWTH PORTFOLIO CL X
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 88462
<INVESTMENTS-AT-VALUE> 104769
<RECEIVABLES> 2793
<ASSETS-OTHER> 23
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 107585
<PAYABLE-FOR-SECURITIES> 1637
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 232
<TOTAL-LIABILITIES> 1869
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75928
<SHARES-COMMON-STOCK> 1745
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 67
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13414
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16307
<NET-ASSETS> 105716
<DIVIDEND-INCOME> 1445
<INTEREST-INCOME> 590
<OTHER-INCOME> 0
<EXPENSES-NET> (1104)
<NET-INVESTMENT-INCOME> 931
<REALIZED-GAINS-CURRENT> 28236
<APPREC-INCREASE-CURRENT> (12436)
<NET-CHANGE-FROM-OPS> 16731
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (835)
<DISTRIBUTIONS-OF-GAINS> (12433)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4008
<NUMBER-OF-SHARES-REDEEMED> (2538)
<SHARES-REINVESTED> 275
<NET-CHANGE-IN-ASSETS> 82739
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 906
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1266
<AVERAGE-NET-ASSETS> 180626
<PER-SHARE-NAV-BEGIN> 48.01
<PER-SHARE-NII> 0.34
<PER-SHARE-GAIN-APPREC> 4.89
<PER-SHARE-DIVIDEND> (0.30)
<PER-SHARE-DISTRIBUTIONS> (5.52)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 47.42
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001004658
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL GROWTH PORTFOLIO CL Y
<SERIES>
<NUMBER> 038
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL GROWTH PORTFOLIO CL Y
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 88462
<INVESTMENTS-AT-VALUE> 104769
<RECEIVABLES> 2793
<ASSETS-OTHER> 23
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 107585
<PAYABLE-FOR-SECURITIES> 1637
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 232
<TOTAL-LIABILITIES> 1869
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75928
<SHARES-COMMON-STOCK> 484
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 67
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13414
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16307
<NET-ASSETS> 105716
<DIVIDEND-INCOME> 1445
<INTEREST-INCOME> 590
<OTHER-INCOME> 0
<EXPENSES-NET> (1104)
<NET-INVESTMENT-INCOME> 931
<REALIZED-GAINS-CURRENT> 28236
<APPREC-INCREASE-CURRENT> (12436)
<NET-CHANGE-FROM-OPS> 16731
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (86)
<DISTRIBUTIONS-OF-GAINS> (2389)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 563
<NUMBER-OF-SHARES-REDEEMED> (129)
<SHARES-REINVESTED> 51
<NET-CHANGE-IN-ASSETS> 22977
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 906
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1266
<AVERAGE-NET-ASSETS> 180626
<PER-SHARE-NAV-BEGIN> 48.01
<PER-SHARE-NII> 0.18
<PER-SHARE-GAIN-APPREC> 4.95
<PER-SHARE-DIVIDEND> (0.19)
<PER-SHARE-DISTRIBUTIONS> (5.52)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 47.43
<EXPENSE-RATIO> 0.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001004658
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL MONEY MARKET CL X
<SERIES>
<NUMBER> 047
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL MONEY MARKET CL X
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 13287
<INVESTMENTS-AT-VALUE> 13287
<RECEIVABLES> 4638
<ASSETS-OTHER> 22
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17947
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 636
<TOTAL-LIABILITIES> 636
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17311
<SHARES-COMMON-STOCK> 15182
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 17311
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 609
<OTHER-INCOME> 0
<EXPENSES-NET> (45)
<NET-INVESTMENT-INCOME> 564
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 564
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (454)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25116
<NUMBER-OF-SHARES-REDEEMED> (10373)
<SHARES-REINVESTED> 438
<NET-CHANGE-IN-ASSETS> 15181
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 28
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 155
<AVERAGE-NET-ASSETS> 13396
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.043
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.043)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001004658
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL MONEY MARKET CL Y
<SERIES>
<NUMBER> 048
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL MONEY MARKET CL Y
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 13287
<INVESTMENTS-AT-VALUE> 13287
<RECEIVABLES> 4638
<ASSETS-OTHER> 22
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17947
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 636
<TOTAL-LIABILITIES> 636
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17311
<SHARES-COMMON-STOCK> 2130
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 17311
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 609
<OTHER-INCOME> 0
<EXPENSES-NET> (45)
<NET-INVESTMENT-INCOME> 564
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 564
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (110)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5516
<NUMBER-OF-SHARES-REDEEMED> (3492)
<SHARES-REINVESTED> 105
<NET-CHANGE-IN-ASSETS> 2130
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 28
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 155
<AVERAGE-NET-ASSETS> 13396
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.040
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.040)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001004658
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL U.S. GOVERNMENT CL X
<SERIES>
<NUMBER> 057
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL U.S. GOVERNMENT CL X
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 7936
<INVESTMENTS-AT-VALUE> 7966
<RECEIVABLES> 384
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8363
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51
<TOTAL-LIABILITIES> 51
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8524
<SHARES-COMMON-STOCK> 360
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (243)
<ACCUM-APPREC-OR-DEPREC> 31
<NET-ASSETS> 8312
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 509
<OTHER-INCOME> 0
<EXPENSES-NET> (41)
<NET-INVESTMENT-INCOME> 468
<REALIZED-GAINS-CURRENT> (236)
<APPREC-INCREASE-CURRENT> 193
<NET-CHANGE-FROM-OPS> 425
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (331)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 895
<NUMBER-OF-SHARES-REDEEMED> (557)
<SHARES-REINVESTED> 22
<NET-CHANGE-IN-ASSETS> 4734
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 26
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 190
<AVERAGE-NET-ASSETS> 10183
<PER-SHARE-NAV-BEGIN> 13.35
<PER-SHARE-NII> 0.62
<PER-SHARE-GAIN-APPREC> 0.02
<PER-SHARE-DIVIDEND> (0.75)
<PER-SHARE-DISTRIBUTIONS> (0.09)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.15
<EXPENSE-RATIO> 0.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001004658
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL U.S. GOVERNMENT CL Y
<SERIES>
<NUMBER> 058
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL U.S. GOVERNMENT CL Y
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 7936
<INVESTMENTS-AT-VALUE> 7966
<RECEIVABLES> 384
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8363
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51
<TOTAL-LIABILITIES> 51
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8524
<SHARES-COMMON-STOCK> 272
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (243)
<ACCUM-APPREC-OR-DEPREC> 31
<NET-ASSETS> 8312
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 509
<OTHER-INCOME> 0
<EXPENSES-NET> (41)
<NET-INVESTMENT-INCOME> 468
<REALIZED-GAINS-CURRENT> (236)
<APPREC-INCREASE-CURRENT> 193
<NET-CHANGE-FROM-OPS> 425
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (190)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 350
<NUMBER-OF-SHARES-REDEEMED> (92)
<SHARES-REINVESTED> 14
<NET-CHANGE-IN-ASSETS> 3578
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 26
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 190
<AVERAGE-NET-ASSETS> 10183
<PER-SHARE-NAV-BEGIN> 13.35
<PER-SHARE-NII> 0.59
<PER-SHARE-GAIN-APPREC> 0.01
<PER-SHARE-DIVIDEND> (0.73)
<PER-SHARE-DISTRIBUTIONS> (0.08)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.14
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001004658
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL ENHANCED RESERVES CL X
<SERIES>
<NUMBER> 067
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL ENHANCED RESERVES CL X
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-19-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 123320
<INVESTMENTS-AT-VALUE> 123540
<RECEIVABLES> 5301
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 128842
<PAYABLE-FOR-SECURITIES> 5077
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 251
<TOTAL-LIABILITIES> 5328
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 123679
<SHARES-COMMON-STOCK> 12259
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 13
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (398)
<ACCUM-APPREC-OR-DEPREC> 220
<NET-ASSETS> 123514
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3327
<OTHER-INCOME> 0
<EXPENSES-NET> (189)
<NET-INVESTMENT-INCOME> 3138
<REALIZED-GAINS-CURRENT> (212)
<APPREC-INCREASE-CURRENT> 279
<NET-CHANGE-FROM-OPS> 3205
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3114)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 32485
<NUMBER-OF-SHARES-REDEEMED> (20517)
<SHARES-REINVESTED> 291
<NET-CHANGE-IN-ASSETS> 122010
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 133
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 237
<AVERAGE-NET-ASSETS> 122838
<PER-SHARE-NAV-BEGIN> 9.95
<PER-SHARE-NII> 0.26
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.26)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.95
<EXPENSE-RATIO> 0.34
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001004658
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL ENHANCED RESERVES CL Y
<SERIES>
<NUMBER> 068
<NAME> PHOENIX DUFF & PHELPS INSTITUTIONAL ENHANCED RESERVES CL Y
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-19-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 123320
<INVESTMENTS-AT-VALUE> 123540
<RECEIVABLES> 5301
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 128842
<PAYABLE-FOR-SECURITIES> 5077
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 251
<TOTAL-LIABILITIES> 5328
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 123679
<SHARES-COMMON-STOCK> 151
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 13
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (398)
<ACCUM-APPREC-OR-DEPREC> 220
<NET-ASSETS> 123514
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3327
<OTHER-INCOME> 0
<EXPENSES-NET> (189)
<NET-INVESTMENT-INCOME> 3138
<REALIZED-GAINS-CURRENT> (212)
<APPREC-INCREASE-CURRENT> 279
<NET-CHANGE-FROM-OPS> 3205
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 151
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 1504
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 133
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 237
<AVERAGE-NET-ASSETS> 122838
<PER-SHARE-NAV-BEGIN> 9.97
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> (0.09)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.95
<EXPENSE-RATIO> 0.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
