As filed with the Securities and Exchange Commission on March 30, 1998
Registration No. 811-9140
File No. 33-80057
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
Under the
SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [X]
and/or
REGISTRATION STATEMENT
Under the
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 10 [X]
(Check appropriate box or boxes.)
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Phoenix Duff & Phelps Institutional Mutual Funds
(Exact Name of Registrant as Specified in Charter)
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101 Munson Street, Greenfield, MA 01301
(Address of Principal Executive Offices) (Zip Code)
(800) 814-1897
(Registrant's Telephone Number, including Area Code)
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Thomas N. Steenburg
President, Counsel and Secretary
Phoenix Duff & Phelps Corporation
56 Prospect Street
Hartford, Connecticut 06115
(Name and Address of Agent for Service)
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It is proposed that this filing will become effective (check
appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on April 14, 1998 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:
[X] this post-effective amendment designates a new effective date
for a previously filed effective amendment.
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<PAGE>
This Registration Statement contains three prospectuses and three Statements of
Additional Information.
These are identified as Version A, B and C of each.
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
(Version C)
Cross Reference Sheet Pursuant to Rule 495
Under the Securities Act of 1933
PART A
Information Required in Prospectus
<TABLE>
<CAPTION>
Item Number Caption
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<S> <C> <C>
1. Cover Page .................................... Cover Page
2. Synopsis ...................................... Introduction; Fund Expenses
3. Condensed Financial Information ............... Not applicable
4. General Description of Registrant ............. Introduction; Management of the Trust
5. Management of the Fund ........................ Management of the Trust
6. Capital Stock and Other Securities ............ Management of the Trust; Portfolio Turnover;
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 Trust
13. Investment Objectives and Policies .............. Investment Objectives and Policies; Investment
Restrictions; Investment Techniques; 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 Adviser;
The Distributor; Distribution Plan
17. Brokerage Allocation ............................ Brokerage Allocation
18. Capital Stock and Other Securities .............. Purchase of Shares
19. Purchase, Redemption and Pricing of
Securities Being Offered ........................ Determination of Net Asset Value; Purchase of Shares
20. Tax Status ...................................... Dividends, Distributions and 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>
The following pages from Post-Effective Amendment No. 5 to the Registration
Statement on Form N-1A filed via EDGAR with the Securities and Exchange
Commission on April 28, 1997 are incorporated herein by reference thereto:
Part A
Version A Cross Reference Sheet to items required by Rule 495(a)
Version A Prospectus pages 1 through 26
Part B
Version A Statement of Additional Information pages 1 through 26
December 31, 1996 Annual Report
The following pages from Post-Effective Amendment No. 6 to the Registration
Statement on Form N-1A filed via EDGAR with the Securities and Exchange
Commission on September 30, 1997 are incorporated herein by reference thereto:
Part A
Version B Cross Reference Sheet to items required by Rule 495(a)
Version B Prospectus pages 1 through 17
Part B
Version B Statement of Additional Information pages 1 through 19 June 30,
1997 Semiannual Report
<PAGE>
[FRONT COVER]
P H O E N I X
F U N D S
PROSPECTUS
APRIL 14, 1998
Phoenix Duff & Phelps
Institutional Mutual Funds
[bullet] CORE EQUITY PORTFOLIO
[LOGOTYPE] PHOENIX
DUFF & PHELPS
<PAGE>
PHOENIX CORE EQUITY PORTFOLIO
101 Munson Street
Greenfield, MA 01301
(800) 814-1897
PROSPECTUS
April 14, 1998
Phoenix Core Equity Portfolio (the "Core Equity Portfolio" or "Portfolio")
seeks long-term capital appreciation by investing in common stocks.
Phoenix Duff & Phelps Institutional Mutual Funds (the "Trust") is an
open-end management investment company whose shares are presently offered in
eight 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 Core
Equity Portfolio.
This Prospectus sets forth concisely the information about the Core Equity
Portfolio 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 Trust, 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 Trust and the Core Equity
Portfolio is contained in the Statement of Additional Information dated April
14, 1998 which has been filed with the Securities and Exchange Commission (the
"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.
The Commission maintains a Web site (http://www.sec.gov) that contains this
Prospectus, the Statement of Additional Information, material incorporated by
reference, and other information regarding registrants that file electronically
with the Commission.
Shares of the Trust 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.
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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.
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1
<PAGE>
TABLE OF CONTENTS
Page
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INTRODUCTION ..................................... 3
FUND EXPENSES .................................... 4
PERFORMANCE INFORMATION .......................... 5
INVESTMENT OBJECTIVES AND POLICIES ............... 5
INVESTMENT TECHNIQUES AND RELATED RISKS .......... 6
INVESTMENT RESTRICTIONS .......................... 9
PORTFOLIO TURNOVER ............................... 9
MANAGEMENT OF THE TRUST .......................... 9
DISTRIBUTION PLAN ................................ 11
HOW TO BUY SHARES ................................ 12
NET ASSET VALUE .................................. 13
HOW TO REDEEM SHARES ............................. 13
DIVIDENDS, DISTRIBUTIONS AND TAXES ............... 15
ADDITIONAL INFORMATION ........................... 15
2
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INTRODUCTION
This Prospectus describes certain of the shares offered by and the
operations of Phoenix Duff & Phelps Institutional Mutual Funds (the "Trust").
The Trust 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 Trust presently consists of eight 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 Core Equity
Portfolio (the "Core Equity Portfolio" or "Portfolio").
The investment adviser for the Core Equity Portfolio is Duff & Phelps
Investment Management Co. ("DPIM" or the "Adviser"). The Adviser is a subsidiary
of Phoenix Duff & Phelps Corporation. For managing or directing the investments
of the Core Equity Portfolio, the Adviser is entitled to a monthly fee
equivalent to 0.50% of the aggregate daily net assets of such Core Equity
Portfolio.
The Distributor and Distribution Plan
Phoenix Equity Planning Corporation ("Equity Planning" or "Distributor"),
serves as national distributor of the Trust's shares. See "Distribution Plan"
and the Statement of Additional Information. Equity Planning also acts as the
Trust's financial agent and transfer agent. See "The Financial Agent" and "The
Custodian and Transfer Agent."
The Trust 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 Trust
shall reimburse the Distributor at an annual rate of 0.25% of the Trust's
average daily Class Y Share net assets for expenses incurred in connection with
furnishing shareholder services and maintaining shareholder accounts. See
"Distribution Plan."
Purchase of Shares
The Core Equity 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 Class X Shares whose net asset value equals or exceeds $5
million or Class Y Shares whose net asset value equals or 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 the Core Equity
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 Core Equity Portfolio will achieve its
investment objective. As a result of the Core Equity Portfolio's substantial
investment in the stock market, the net asset value of its shares will fluctuate
significantly in response to changes in market and economic conditions, as well
as the financial condition and prospects of issuers in which the Core Equity
Portfolio invests. The risk factors relevant to investment in the Core Equity
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>
Core Equity Portfolio
-------------------------------------
Class X Shares Class Y Shares
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<S> <C> <C>
Shareholder Transaction Expenses: (Pro Forma) (Pro Forma)
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%(a)
Other Operating Expenses (After Reimbursement)(b) 0.15% 0.15%
---- ----
Total Fund Operating Expenses 0.65% 0.90%
==== ====
</TABLE>
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(a) "12b-1 Fees" represent an asset based sales charge that, for a long
term shareholder, may be higher than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers, Inc. ("NASD").
(b) Duff & Phelps Investment Management Co. has voluntarily agreed to
reimburse or waive Other Operating Expenses of Class X and Y Shares of the Core
Equity Portfolio, excluding interest, taxes, brokerage fees, commissions and
extraordinary expenses until December 31, 1998 to the extent that such expenses
exceed 0.15% of the average annual net asset values. Other Operating Expenses
for the Core Equity Portfolio are estimated to be 0.50% and 0.50%,
respectively, absent such reimbursement or waiver, and Total Operating Expenses
are estimated to be 1.00% and 1.25% 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 a $1,000 investment assuming (1) 5% annual
return and (2) redemption at the end of each
time period:
Core Equity Portfolio
Class X Shares 7 22
Class Y Shares 10 30
*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
Trust," and "How to Buy Shares."
4
<PAGE>
PERFORMANCE INFORMATION
The Trust may, from time to time, include the performance history of the
Core Equity 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 Trust 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 Composite Stock Price Index (the "S&P 500"), Consumer
Price Index, Lehman Brothers Corporate Index and Lehman Brothers T-Bond Index.
The S&P 500 is a commonly quoted measure of stock market performance and
represents common stocks of companies of varying sizes segmented across 90
different industries which are listed on the New York Stock Exchange, the
American Stock Exchange or traded over the NASDAQ National Market System.
Advertisements, sales literature and other communications may contain
information about the Portfolio 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 Portfolio may
discuss specific portfolio holdings or industries in such communications. To
illustrate components of overall performance, the Portfolio may compare its
equity or bond return figure to well-known indices of market performance
including but not limited to the S&P 500, Dow Jones Industrial Average, and
Salomon Brothers Corporate and Government Bond Indices, Russell 2000 and Lehman
Brothers Bond Index.
Performance information for the Portfolio (and each Class thereof) reflects
only the performance of a hypothetical investment in 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 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 Trust'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 Core Equity Portfolio's investment objective is to seek long-term
capital appreciation by investing in a diversified portfolio of common stocks.
The Portfolio seeks to achieve its objective by selecting securities primarily
from equity securities of the 1,000 largest companies traded in the United
States, ranked by market capitalization. Under normal circumstances, at least
65% of the assets of the Core Equity Portfolio will be invested in equity
securities; however, it is the intention of the Adviser to be fully invested in
equity securities. Up to 10% of the total assets of the Core Equity Portfolio
may be invested in securities of foreign issuers.
The Adviser utilizes a quality driven strategy in pursuit of the
Portfolio's investment objective. The Portfolio selects large companies based on
predictability and consistency of future earnings and dividend growth at a price
which is low relative to the stock's historical valuation and the company's
future
5
<PAGE>
growth prospects. Portfolio risk is controlled through diversification among
industries, sectors, and the number of holdings. The Adviser's sell discipline
is based on a monitoring of holdings for fundamental change and overvaluation.
While the Adviser intends to be fully invested, in the event of adverse
market conditions the Portfolio may pursue a policy of retaining cash or
investing in high-quality money market instruments with maturities of one year
or less, and in repurchase agreements. See "Investment Techniques and Related
Risks" for more information on investment practices and risks.
INVESTMENT TECHNIQUES AND
RELATED RISKS
In addition to the investment policies described above, the Core Equity
Portfolio may utilize the following investment practices or techniques.
Convertible Securities
The Core Equity Portfolio may invest in convertible securities. A
convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a particular period of
time at a specified price or formula. A convertible security entitles the holder
to receive interest generally paid or accrued on debt or the dividend paid on
preferred stock until the convertible security matures or is redeemed, converted
or exchanged. Convertible securities have several unique investment
characteristics such as (1) higher yields than common stocks, but lower yields
than comparable nonconvertible securities, (2) a lesser degree of fluctuation in
value than the underlying stock since they have fixed income characteristics,
and (3) the potential for capital appreciation if the market price of the
underlying common stock increases. A convertible security might be subject to
redemption at the option of the issuer at a price established in the convertible
security's governing instrument. If a convertible security held by the Portfolio
is called for redemption, the Portfolio may be required to permit the issuer to
redeem the security, convert it into the underlying common stock or sell it to a
third party. The Portfolio will invest in convertible securities rated in the
four highest categories which are commonly called "investment grade" securities.
The Portfolio may, but is not required to, dispose of convertible securities
whose rating falls below investment grade. A detailed listing of rating
categories is in the Appendix to the Statement of Additional Information.
Futures Transactions
Financial Futures. The Core Equity Portfolio may enter into financial
futures contracts. These investments are intended as a hedge against anticipated
changes in the market value of the Portfolio's securities or securities which it
intends to purchase or in the exchange rate of foreign currencies. Hedging is
the initiation of an offsetting position in the futures market which is intended
to minimize the risk associated with a position's underlying securities in the
cash market. Investment techniques related to financial futures are summarized
below and are described more fully in the Statement of Additional Information.
Financial futures contracts consist of interest rate futures contracts,
foreign currency futures contracts and securities index futures contracts. An
interest rate futures contract obligates the seller of the contract to deliver,
and the purchaser to take delivery of, the interest rate securities called for
in the contract at a specified future time and a specified price. A foreign
currency futures contract obligates the seller of the contract to deliver, and
the purchaser to take delivery of, the foreign currency called for in the
contract at a specified future time and at a specified price. See "Foreign
Currency Transactions." A securities index assigns relative values to the
securities included in the index, and the index fluctuates with changes in the
market values of the securities so included. A securities index futures contract
is a bilateral agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value at the close of the last trading day of the
contract and the price at which the futures contract is originally struck. An
option on a financial futures contract gives the purchaser the right to assume a
position in the contract (a long position if the option is a call and a short
position if the option is a put) at a specified exercise price at any time
during the period of the option.
The Core Equity Portfolio may purchase and sell financial futures contracts
which are traded on a recognized exchange or board of trade and may enter into
financial futures contracts on foreign currencies.
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 expectation as to the direction or extent of various
interest rate movements or foreign currency exchange rates, in which case the
return might have been greater had hedging not taken place. There is also the
risk that a liquid secondary market may not exist, and the loss from investing
in futures contracts is potentially unlimited because the Portfolio may be
unable to close its position. Also, there may be circumstances when the purchase
of an option on a financial futures contract could result in a loss while the
purchase or sale of the contract would not have resulted in a loss.
Restrictions on Use of Futures. The Core Equity Portfolio may enter into
futures contracts, provided that such obligations represent no more than 20% of
the Core Equity Portfolio's net assets. Under the Commodity Exchange Act, a Fund
may enter into futures and options transactions for hedging purposes without
regard to the percentage of assets committed to initial margin and option
premiums and for other than hedging purposes provided that assets committed to
initial margin and option premiums do not exceed 5% of the Fund's net assets. To
the extent required by law, the Portfolio will set aside cash and appropriate
liquid assets in a pledged
6
<PAGE>
account to cover its obligations related to futures contracts. The extent to
which the Portfolio may enter into financial futures contracts may also be
limited by requirements of the Internal Revenue Code for qualification as a
regulated investment company.
Short-Term Instruments
For liquidity purposes, the Portfolio may invest in high-quality money
market instruments with remaining maturities of one year or less. Such
instruments may include U.S. Government Securities, Certificates of Deposit,
Commercial Paper and Bankers Acceptances. The Portfolio may also invest in
repurchase agreements with maturities of seven days or less to generate income
from its excess cash balances. The Portfolio may invest up to 5% of its net
assets in repurchase agreements having maturities of more than seven days
(together with any other illiquid securities held). Securities acquired through
repurchase agreements will be limited to U.S. Government securities and are
subject to resale to the seller at an agreed upon price and date (normally the
next business day). The resale price reflects an agreed upon interest rate
effective for the period the instrument is held by the Portfolio and is
unrelated to the interest rate on the underlying instrument. A repurchase
agreement acquired by the Portfolio will always be fully collateralized by the
underlying instrument, which will be marked to market every business day. The
underlying instrument will be held for the Portfolio's account by the
Portfolios' custodian bank until repurchased.
The use of repurchase agreements involves certain risks such as default by
or the insolvency of the other party to the repurchase agreement. Repurchase
agreements will be entered into only with commercial banks, brokers and dealers
considered by the Adviser to be creditworthy.
The Core Equity Portfolio may also invest up to 10% of its total assets in
a money market fund managed by the Adviser. Such investments may be subject to
duplicate fees and expenses on that portion of their assets invested in the
securities of another investment company. Such investments will be for liquidity
purposes.
Lending Portfolio Securities
In order to increase the return on its investment, the Core Equity
Portfolio may lend its portfolio securities to broker-dealers and other
financial institutions in amounts up to one-third of the value of its total
assets. Loans of portfolio securities will always be fully collateralized and
will be made only to borrowers considered by the Adviser to be credit-worthy.
Lending portfolio securities involves risk of delay in the recovery of the
loaned securities and in some cases the loss of rights in the collateral should
the borrower fail financially.
Leverage
The Core Equity Portfolio may borrow for temporary, extraordinary or
emergency purposes. The Core Equity Portfolio will borrow only from banks, and
only if immediately after such borrowing the value of the assets of the
Portfolio (including the amount borrowed) less its liabilities (not including
any borrowings) is at least three times the amount of funds borrowed. The effect
of this provision is to permit the Portfolio to borrow up to 33-1/3% of the
total assets (not including any borrowings) of the Portfolio. If, due to market
fluctuations or other reasons, the value of the Portfolio's assets computed as
provided above becomes at any time less than three times the amount of the
borrowings, the Portfolio, within three business days, is required to reduce
bank debt to the extent necessary to meet the required 300% asset coverage.
Interest on money borrowed will be an expense of the Portfolio with respect
to which the borrowing has been made. Because such expense would not otherwise
be incurred, the net investment income of the Portfolio is not expected to be as
high as it otherwise would be during periods when borrowings for investment
purposes are substantial. Bank borrowings must be obtained on an unsecured
basis. Any such borrowing must also be made subject to an agreement by the
lender that any recourse is limited to the assets of the Portfolio with respect
to which the borrowing has been made.
Foreign Securities
The Core Equity Portfolio will limit its investments in foreign securities
to 10% of its total assets. 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, differences and inefficiencies in transaction settlement
systems, the possibility of expropriation or confiscatory taxation, adverse
changes in investment or exchange control regulations, political instability
which could affect U.S. investment or exchange control regulations, political
instability which could affect U.S. investments in foreign countries, 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, and changes in foreign exchange rates will affect the value of those
securities which are denominated or quoted in currencies other than the U.S.
dollar. Exchange rates are determined by forces of supply and demand in the
foreign exchange markets, and these forces are in turn affected by a range of
economic, political, financial, governmental and other factors. Exchange rate
fluctuations can affect the Portfolio's net asset value and dividends either
positively or negatively depending upon whether foreign currencies are
appreciating or depreciating in value relative to the U.S. dollar. Exchange
rates fluctuate over both the short and long term.
Foreign securities held by the Portfolio may not be registered with the
Commission and the issuers thereof 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
7
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economies may differ favorably or unfavorably from the United States economy in
such respects as growth of Gross National Product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payment positions.
Although the Portfolio may buy securities of foreign issuers in foreign
markets, most of their foreign securities investments are made by purchasing
American Depositary Receipts (ADRs), "ordinary shares," or "New York Shares."
ADRs are dollar-denominated receipts representing interests in the securities of
a foreign issuer. They are issued by U.S. banks and traded on exchanges or over
the counter in the United States. Ordinary shares are shares of foreign issuers
that are traded abroad and on a U.S. exchange. New York shares are shares that a
foreign issuer has allocated for trading in the United States. ADRs, ordinary
shares, and New York shares all may be purchased with and sold for U.S. dollars,
which protects the Portfolio from the foreign settlement risks described below.
In investing in securities denominated in foreign currencies, the Portfolio
will be subject to the additional risk of currency fluctuations. An adverse
change in the value of a particular foreign currency as against the U.S. dollar,
to the extent that such change is not offset by a gain in other foreign
currencies, will result in a decrease in the Portfolio's assets. Any such change
may also have the effect of decreasing or limiting the income available for
distribution. Foreign currencies may be affected by revaluation, adverse
political and economic developments, and governmental restrictions. Although the
Portfolio will invest only in securities denominated in foreign currencies that
are fully convertible into U.S. dollars without legal restriction at the time of
investment, no assurance can be given that currency exchange controls will not
be imposed on any particular currency at a later date.
Securities of U.S. issuers denominated in foreign currencies may be less
liquid and their prices more volatile than securities issued by domestic issuers
and denominated in U.S. dollars. In addition, investing in securities
denominated in foreign currencies often entails costs not associated with
investment in U.S. dollar-denominated securities of U.S. issuers, such as the
cost of converting foreign currency to U.S. dollars, higher brokerage
commissions, custodial expenses and other fees. Non-U.S. dollar denominated
securities may be subject to certain withholding and other taxes of the relevant
jurisdiction, which may reduce the yield on the securities to the Portfolio and
which may not be recoverable by the Portfolio or its investors.
The Core Equity Portfolio will calculate its net asset value and complete
orders to purchase, exchange or redeem shares only on a Monday-Friday basis
(excluding holidays on which the New York Stock Exchange is closed). Foreign
securities in which the Portfolio may invest may be primarily listed on foreign
stock exchanges which may trade on other days (such as Saturdays). As a result,
the net asset value of the Portfolio may be affected by such trading on days
when a shareholder has no access to the Portfolio.
Investment income received by the Portfolio from sources within foreign
countries may be subject to foreign income taxes withheld at the source. If the
Portfolio should have more than 50% of the value of its assets invested in
securities of foreign corporations at the close of its taxable year, the
Portfolio may elect to pass through to its shareholders their proportionate
shares of foreign income taxes paid. Investors are urged to consult their tax
attorney with respect to specific questions regarding foreign, federal, state or
local taxes.
Foreign Currency Transactions
The value of the assets of the Core Equity Portfolio, as measured in United
States dollars, may be affected favorably or unfavorably by changes in foreign
currency exchange rates and exchange control regulations, and may incur costs in
connection with conversions between various currencies. The Portfolio may
conduct foreign currency exchange transactions either on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market, or
through forward contracts to purchase or sell foreign currencies. A forward
foreign currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded directly between currency traders
(usually large commercial banks) and their customers. At the time of the
purchase of a forward foreign currency exchange 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
contract, minus the Portfolio's initial margin deposit with respect thereto,
will be deposited in a pledged account with the Trust's custodian bank to
collateralize fully the position and thereby ensure that it is not leveraged.
When the Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may want to establish the United
States dollar cost or proceeds, as the case may be. By entering into a forward
contract in United States dollars for the purchase or sale of the amount of
foreign currency involved in the underlying security transaction, it is able to
protect itself against a possible loss between trade and settlement dates
resulting from an adverse change in the relationship between the United States
dollar and such foreign currency. However, this tends to limit potential gains
which might result from a positive change in such currency relationships.
Utilizing this investment technique may also hedge the foreign currency exchange
rate risk by engaging in currency financial futures and options transactions.
When the Adviser believes that the currency of a particular foreign country
may suffer a substantial decline against the United States dollar, it may enter
into a forward contract to sell an amount of foreign currency approximating the
value of some or all of the Portfolio's securities denominated in such foreign
currency. The forecasting of short-term currency market movement is extremely
difficult and whether such a short-term hedging strategy will be successful is
highly uncertain.
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It is impossible to forecast with precision the market value of portfolio
securities at the expiration of a contract. Accordingly, it may be necessary to
purchase additional currency on the spot market (and bear the expense of such
purchase) if the market value of the security is less than the amount of foreign
currency the Portfolio is obligated to deliver when a decision is made to sell
the security and make delivery of the foreign currency in settlement of a
forward contract. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the security if its
market value exceeds the amount of foreign currency the Portfolio is obligated
to deliver.
If the Portfolio retains the security and engages in an offsetting
transaction, the Portfolio will incur a gain or a loss (as described below) to
the extent that there has been movement in forward contract prices. If the
Portfolio engages in an offsetting transaction, it may subsequently enter into a
new forward contract to sell the foreign currency. Should forward prices decline
during the period between the Portfolio entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting contract
for the purchase of the foreign currency, the Portfolio would realize gains to
the extent the price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase. Should forward prices increase, the
Portfolio would suffer a loss to the extent the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
Although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency, they also tend to limit any potential gain
which might result should the value of such currency increase. The Portfolio
will have to convert its holdings of foreign currencies into United States
dollars from time to time. Although foreign exchange dealers do not charge a fee
for conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Other Techniques
The Adviser may buy other types of securities or employ other portfolio
management techniques on behalf of the Core Equity Portfolio. See the Statement
of Additional Information for more information on these investment techniques
and their related risks.
INVESTMENT RESTRICTIONS
The investment restrictions to which the Core Equity Portfolio is subject,
together with its investment objective, are fundamental policies which may not
be changed without the approval of its shareholders. There is no assurance that
the Portfolio will be able to meet its investment objective. A detailed
description of the investment restrictions is contained in the Statement of
Additional Information.
PORTFOLIO TURNOVER
The Core Equity Portfolio pays brokerage commissions for purchases and
sales of portfolio securities. A high rate of portfolio turnover involves a
correspondingly greater amount of brokerage commissions and other costs which
must be borne directly by the Portfolio and thus indirectly by its shareholders.
It may also result in the realization of larger amounts of short-term capital
gains, which are taxable to shareholders as ordinary income.
The rate of portfolio turnover is not a limiting factor when the Adviser
deems changes appropriate. Although the portfolio turnover rate cannot be
accurately predicted, it is anticipated that the annual turnover rate will
likely not exceed 100%. Portfolio turnover rate 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 its securities (excluding short-term
securities). The turnover rate may vary greatly from year to year and may be
affected by cash requirements for redemptions of shares and by compliance with
provisions of the Internal Revenue Code, relieving investment companies which
distribute substantially all of their net income from federal income taxation on
the amounts distributed. For more information regarding the consequences
relating to a high portfolio turnover rate, see "Portfolio Transactions and
Brokerage" and "Dividends, Distributions and Taxes" in the Statement of
Additional Information.
MANAGEMENT OF THE TRUST
The Trust is an open-end investment company known as a mutual fund. The
Board of Trustees supervises the business affairs and investments of the Trust,
which is managed on a daily basis by each portfolio's investment adviser. The
Trust was organized as a Massachusetts business trust on December 4, 1995. The
Trust commenced operations on March 1, 1996. The Trust is currently authorized
to offer shares of beneficial interest in series and is currently offering
shares of eight portfolios. Two classes of shares are currently offered by each
portfolio.
Duff & Phelps Investment Management Co. ("DPIM") serves as the investment
adviser to the Core Equity Portfolio. In addition to the Core Equity Portfolio,
DPIM also serves as investment adviser to the Enhanced Reserves Portfolio of
Phoenix Duff & Phelps Institutional Mutual Funds, Phoenix Core Equity Fund of
Phoenix Equity Series Fund and three closed-end funds: Duff & Phelps Utilities
Income Inc., Duff & Phelps Utilities Tax-Free Income Inc. and Duff & Phelps
Utility and Corporate Bond Trust Inc. In addition, DPIM serves as subadviser to
the Real Estate Equity Securities Portfolio of Phoenix Duff & Phelps
Institutional Mutual Funds, the Real Estate Securities Portfolio of Phoenix
Multi-Portfolio Fund, the Real Estate Securities Series of The Phoenix Edge
Series Fund and, from July 1987 through October 1995, the AAL Funds. DPIM is a
subsidiary of Phoenix Duff & Phelps Corporation and is located at 55 East Monroe
Street, Suite 3600, Chicago, Illinois 60603. As of December 31, 1997, DPIM had
approximately $13 billion in assets under management on a discretionary basis.
Prior Investment Performance of DPIM
The following table sets forth composite performance data relating to the
historical performance of substantially all of the institutional private
accounts managed by DPIM investment
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professionals that have substantially the same investment objectives, policies,
strategies and risks as the Core Equity Portfolio. The data is provided to
illustrate the past performance of the Adviser in managing substantially
similar accounts as compared to the S&P 500. Investors should not consider this
performance data as an indication of past or future performance of the Core
Equity Portfolio or of the Adviser.
The Adviser has calculated its composite performance data in compliance
with the Performance Presentation Standards of the Association for Investment
Management and Research ("AIMR-PPS[TM]"). AIMR has not been involved with the
preparation or review of this illustration. AIMR is a non-profit membership and
education organization with more than 60,000 members worldwide that, among other
things, has formulated a set of performance presentation standards for
investment advisers. These AIMR performance presentation standards are intended
to promote full and fair presentations by investment advisers of their
performance results and ensure uniformity in reporting so that performance
results of investment advisers are directly comparable.
AIMR composite performance figures are a quarterly aggregate of monthly
returns of a group of similar accounts which are time weighted and asset
weighted. Quarterly and yearly composite returns are the result of geometrically
linking monthly and quarterly returns, respectively. (Each composite return
figure is compounded by the successive period's composite return).
All returns presented were calculated on a total return basis and include
all dividends, interest, accrued income and realized and unrealized gains and
losses. All returns reflect the deduction of the maximum advisory fee of 0.75%
of assets under management, brokerage commissions and execution costs paid by
the Adviser's institutional private accounts, without provision for income
taxes. Only those institutional private accounts where the Adviser exercised
full discretionary investment authority have been included in the composite
performance data. The institutional private accounts included in the Adviser's
composite performance data are not subject to the same expenses and specific tax
restrictions applicable to regulated investment companies, such as the Core
Equity Portfolio, under Subchapter M of the Internal Revenue Code and are not
subject to Investment Company Act of 1940 restrictions on investment limitations
and diversification. Consequently, the Adviser's investment results could have
been adversely affected had these regulations applied to the institutional
private accounts.
The SEC standardized formula (average annual total return) is calculated
net of portfolio fees and expenses as well as investment commissions while AIMR
composites are net of portfolio expenses (for DPIM this consists of brokerage
and transaction costs only) but gross of management fees (which are variable by
client). A composite return is the aggregate total return of a group of similar
accounts while the SEC formula is applied to only one account (mutual fund). The
time weighting of the composite differs from the SEC formula in that the monthly
total returns calculated for each account within the composite are adjusted for
cash flows and income accruals by assuming that these flows occur mid-month.
Consequently, composite performance is not overstated as a result of new
investments nor penalized by withdrawals. Mutual funds, in contrast, calculate
their net asset value daily and no adjustments would therefore be required when
calculating total returns. For AIMR composites, accounts are dollar weighted to
reflect the proportionate effect of account size on total return within the
composite.
The following table illustrates all expenses and fees that an institutional
privately managed account of DPIM will incur.
Equity
Portfolios
-----------
Account Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of amount invested) None
Maximum Sales Load Imposed
on Reinvested Dividends None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable) None
Redemption Fee None
Exchange Fee None
Annual Fund Operating Expenses
Management Fees
first $10 million 0.75%
next $15 million 0.60%
next $25 million 0.50%
next $50 million 0.40%
12b-1 Fees None
Other Operating Expenses (a) None
-----
Total Fund Operating Expenses 0.75%
=====
(a) The Adviser's composite performance data reflect commission and
transaction costs. The Adviser does not assess custodial fees; however,
custodial fees are customarily directly paid by institutional private clients
to third party custodians.
The investment results covering the period January 1, 1993 through
December 31, 1996 were audited for consistency with the AIMR Performance
Presentation Standards by an independent third party (not AIMR) as of December
31, 1996. The investment results presented below could be calculated using
different methods thereby producing different results. The performance below
reflects past performance of the Adviser for periods ending December 31, 1997
for similarly managed institutional private accounts and is not indicative of
future results for the Core Equity Portfolio.
Period Adviser's Composite S&P 500
- ------------- --------------------- -----------
One Year 38.73% 33.38%
Three Years 31.63% 31.24%
Five Years 18.83% 20.30%
Ten Years 17.43% 18.04
The institutional private accounts whose composite return is shown were
managed by a team of DPIM professionals. The Core Equity Portfolio similarly
will be managed by a team headed by Diane Mustain.
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Management Fees
The Adviser continuously furnishes an investment program for the Core
Equity Portfolio and manages the investment and reinvestment of the assets
subject at all times to the supervision of the Trustees. Under the terms of the
Investment Advisory Agreement, the Adviser is entitled to a prescribed fee,
payable monthly, at the annual rate of 0.50% of the average daily net asset
value of the Core Equity Portfolio.
The Portfolio Manager
Diane Mustain serves as lead Portfolio Manager and as such is responsible
for the day-to-day operation of the Core Equity Portfolio. As lead Portfolio
Manager she manages the team of investment professionals responsible for the
selection and sell decisions of portfolio securities for the equity portfolio.
Ms. Mustain is an Executive Vice President of DPIM and serves as Vice Chairman
of its Equity Strategy Committee. In addition, since 1993 Ms. Mustain has been a
Sector Manager responsible for the Defensive Sector of the core equity
portfolio. Ms. Mustain was Group Vice President from 1992 to 1993 where she was
responsible for the selection of consumer stocks for the equity research model
portfolio and provided analytical input to the Investment Management Committee.
Ms. Mustain joined Phoenix Duff & Phelps Corporation, then known as Duff &
Phelps, in 1981.
The Financial Agent
Equity Planning serves as financial agent of the Portfolio 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 through $500 million .03%
Greater than $500 million .015%
(b) a minimum fee of $50,000; and (c) an annual fee of $12,000 for each class
of shares beyond one.
The Custodian and Transfer Agent
The custodian of the assets of the Core Equity Portfolio is State Street
Bank and Trust Company, P.O. Box 1713, Boston, Massachusetts 02101.
Equity Planning serves as transfer agent for the Core Equity Portfolio (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 Trust.
DISTRIBUTION PLAN
Equity Planning serves as the national distributor of the Trust'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 Trust and a director and officer of Equity Planning. Michael E.
Haylon, a director of Equity Planning, is an officer of the Trust. G. Jeffrey
Bohne, Nancy G. Curtiss, William E. Keen, III, William R. Moyer, Leonard J.
Saltiel, and Thomas N. Steenburg are officers of the Trust and officers of
Equity Planning.
Equity Planning and the Trust have entered into distribution agreements
under which Equity Planning has agreed to use its best efforts to find
purchasers for Trust shares. The Trust has granted Equity Planning the exclusive
right to purchase from the Trust and resell, as principal, shares needed to fill
unconditional orders for Trust shares. Equity Planning may sell Trust shares
through its registered representatives or through securities dealers with whom
it has sales agreements. Equity Planning may also sell Trust shares pursuant to
sales agreements entered into with banks or bank affiliated securities brokers
who, acting as agent for their customers, place orders for Trust 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 Trust. The sale of Trust shares through a bank or a
securities broker affiliated with a bank is not expected to preclude the Trust
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 of a service fee to Equity Planning
in an amount equal to 0.25% annually of the average of the daily net
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assets of Class Y Shares of each respective portfolio for each year elapsed
after the inception of the Plan. 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 Trust 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 then in office who
are not interested persons.
HOW TO BUY SHARES
The Trust currently issues two classes of shares of the Core Equity
Portfolio. Both Class X Shares and Class Y Shares are each available to Plans
(as hereafter defined) and institutional investors which initially purchase
Class X Shares of the Portfolio whose net asset value equals or exceeds $5
million or Class Y Shares of the Portfolio whose net asset value equals or
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 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 the close of trading on the
New York Stock Exchange (generally 4 p.m. eastern time) will be processed based
on that day's closing net asset value. Shares purchased will be recorded in
electronic book-entry form by the Transfer Agent. 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
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 Trust 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 Trust or any other
Affiliated Phoenix 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 Trust shares in accordance with the
limitations described in this Prospectus. The Trust reserves the right to refuse
exchange purchases by any person or broker/ dealer if, in the Trust's or
Adviser's opinion, (a) the exchange would adversely affect the Trust's ability
to invest according to its investment objectives and policies; (b) the Trust
believes that a pattern of exchanges coincides with a "market timing" strategy;
or (c) the exchange would otherwise adversely affect the Trust and its
shareholders. The Trust 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.
An "Affiliated Phoenix Fund" means any other mutual fund advised,
subadvised or distributed by the Adviser or Distributor or any corporate
affiliate of either or both the Adviser and Distributor provided such other
mutual fund extends reciprocal privileges to shareholders of the Phoenix Funds.
Market Timer Restrictions
Because excessive trading can hurt Portfolio performance and harm
shareholders, the Trust reserves the right to temporarily or permanently
terminate exchange privileges or reject any specific order from anyone whose
transactions seem to follow a timing pattern, including those who request more
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than one exchange out of a fund within any 30 day period. The Distributor has
entered into agreements with certain market timer entities permitting them to
exchange their clients' shares by telephone. These privileges are limited under
those agreements. The Distributor has the right to reject or suspend these
privileges upon reasonable notice.
Telephone Exchange Privileges
Unless a shareholder elects in writing not to participate in the Telephone
Exchange Privilege, shares 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 Trust 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 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 Trust 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 Trust 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, 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 unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations.
NET ASSET VALUE
The net asset value per share of the Core Equity Portfolio is determined as
of the close of 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 Core
Equity 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 the Core Equity Portfolio may require the Trust 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 request must make reference to the
name of the Core Equity 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.
13
<PAGE>
In addition, the Trust 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 trading 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 Trust 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 written request in proper form; provided,
however, that redemption proceeds will not 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 Trust 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 Trust 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
Trust 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 may 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 Trust 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 Trust holdings (at the net asset value on the date of redemption)
during each month. Program redemptions will only be effected after the Trust 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 Core Equity Portfolio 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 Trust may make
payment of the redemption price either in cash or in kind. The Trust 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 Trust 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 Trust.
A shareholder receiving such securities would incur brokerage costs when it sold
the securities.
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DIVIDENDS, DISTRIBUTIONS
AND TAXES
The Core Equity Portfolio will be treated as a separate mutual fund for
federal income tax purposes. The Core Equity 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 Core Equity Portfolio will not be
subject to federal income tax on its ordinary income and net realized gains
distributed to its shareholders. The Core Equity 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 Core Equity Portfolio and dispositions of shares of the Core Equity
Portfolio. The Trust 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 Trust 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 Trust 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 Trust.
Investors that do not receive preferential tax treatment are subject to
federal income tax on distributions received with respect to their shares of the
Trust. Distributions of the Trust's ordinary income and short-term capital gains
are taxable to shareholders as ordinary income whether received in cash or
shares of the Trust's. Designated long-term capital gains distributions are
taxable as long-term capital gains whether distributed in cash or additional
shares and regardless of how long the shareholder owned the shares of the Trust;
however, a loss recognized on the sale of the shares of the Core Equity
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 Trust 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
Core Equity Portfolio.
Dividends from net investment income for the Core Equity Portfolio will be
accrued and paid quarterly. Dividends from net realized capital gains, if any,
will be declared and paid annually for the Core Equity Portfolio. Dividends and
distributions with respect to the shares of any class of the Core Equity
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 Core Equity 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 Core Equity Portfolio and its shareholders. Shareholders
should consult competent tax advisers regarding specific tax situations.
ADDITIONAL INFORMATION
Organization of the Fund
The capitalization of the Trust consists solely of an unlimited number of
shares of beneficial interest. The Trust currently offers shares in eight
different portfolios, each offering two classes. Holders of shares of the Core
Equity Portfolio have equal rights with regard to voting, redemptions,
dividends, distributions, and liquidations with respect to the Core Equity
Portfolio (provided that Class Y Shares of the Core Equity 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 Core Equity Portfolio (such as approval of an investment
advisory agreement or a change in fundamental investment policies), a separate
vote of the Core Equity 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, preemptive rights
or subscription rights.
The assets received by the Trust 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 Trust.
Any general expenses of the Trust 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 Trust may be
personally liable for debts or claims against the Trust. The Declaration of
Trust provides that shareholders shall not be subject to any personal liability
for the acts or obligations of the Trust and that every written agreement,
undertaking or obligation made or issued by the Trust shall contain a provision
to that effect. The Declaration of Trust provides for indemnification out of the
trust property for all losses and
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<PAGE>
expenses of any shareholder held personally liable for the obligations of the
Trust. 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 Trust 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.
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<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 "Trust") which you should know before
investing. Please read it carefully and retain it for future reference.
The Trust has filed with the Securities and Exchange Commission a Statement of
Additional Information, dated April 14, 1998. The Statement contains more
detailed information about the Trust and is incorporated into this Prospectus
by reference. You may obtain a free copy of the Statement by writing the Trust
c/o Phoenix Equity Planning Corporation, 100 Bright Meadow Boulevard, P.O. Box
2200, Enfield, Connecticut 06083-2200.
[Recycle logo] Printed on recycled paper using soybean ink
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK.
<PAGE>
[back cover]
Phoenix Duff & Phelps Institutional Mutual Funds
PO Box 2200
Enfield CT 06083-2200
[logo]PHOENIX
DUFF & PHELPS
<PAGE>
PHOENIX CORE EQUITY PORTFOLIO
101 Munson Street, Greenfield, Massachusetts 01301
(800) 814-1897
Statement of Additional Information
April 14, 1998
This Statement of Additional Information is not a prospectus but expands
upon and supplements the information contained in the current prospectus of the
Core Equity Portfolio of the Phoenix Duff & Phelps Institutional Mutual Funds
(the "Trust"), dated April 14, 1998 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 TRUST ................................... 2
INVESTMENT OBJECTIVES AND POLICIES .......... 2
INVESTMENT RESTRICTIONS ..................... 2
INVESTMENT TECHNIQUES ....................... 3
PERFORMANCE INFORMATION ..................... 7
PORTFOLIO TURNOVER .......................... 7
SERVICES OF THE ADVISER ..................... 7
BROKERAGE ALLOCATION ........................ 8
DETERMINATION OF NET ASSET VALUE ............ 9
PURCHASE OF SHARES .......................... 9
DIVIDENDS, DISTRIBUTIONS AND TAXES .......... 10
THE DISTRIBUTOR ............................. 10
DISTRIBUTION PLAN ........................... 11
TRUSTEES AND OFFICERS ....................... 12
ADDITIONAL INFORMATION ...................... 18
APPENDIX .................................... 19
PDP 3008B (4/98)
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THE TRUST
Phoenix Duff & Phelps Institutional Mutual Funds (the "Trust") 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 Core Equity Portfolio
(the "Core Equity 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 Core Equity Portfolio is
deemed to be a fundamental policy and may not be changed without the approval of
the shareholders of the Portfolio.
INVESTMENT RESTRICTIONS
Fundamental Policies
The following investment restrictions constitute fundamental policies of
the Core Equity Portfolio which may be changed only upon approval by the holders
of a majority of the outstanding shares of the Portfolio. The Portfolio may not:
(1) With respect to 75% of its total assets, purchase the securities of any
issuer (other than securities issued or guaranteed by the U.S. government
or its agencies or instrumentalities) if, as a result, more than 5% of its
total assets would be invested in securities of that issuer.
(2) Purchase the securities of any one issuer if immediately after such
purchase the Portfolio would hold more than 10% of the outstanding voting
securities of that issuer.
(3) Borrow money except from a bank as a temporary measure to satisfy
redemption requests or for extraordinary or emergency purposes and then
only in an amount not exceeding 33-1/3% of the market value of the
Portfolio's total assets, so that immediately after any such borrowing
asset coverage of at least 300% for all such borrowings exists. To secure
any such borrowing, the Porfolio may not mortgage, pledge, or hypothecate
in excess of 33-1/3% of the value of its total assets. The Portfolio will
not purchase any security while borrowings representing more than 5% of its
total assets are outstanding.
(4) Act as an underwriter of securities issued by others.
(5) Purchase real estate, real estate mortgage loans, interests in real estate
limited partnerships, or interests in oil, gas or mineral exploration or
development programs or leases, provided that this limitation shall not
prohibit (i) the purchase of U.S. Government securities and other debt
securities secured by real estate or interests therein; (ii) the purchase
of marketable securities issued by companies or investment trusts that deal
in real estate or interests therein; or (iii) purchase of marketable
securities issued by companies or other entities or investment vehicles
that engage in businesses relating to the development, exploration, mining,
processing or distributing of oil, gas, or minerals.
(6) Engage in any short-selling operations (except by selling futures
contracts).
(7) Make loans to others, except for the lending of portfolio securities
pursuant to guidelines established by the Board of Trustees or in
connection with purchase of debt securities in accordance with the
Portfolio's investment objective and policies.
(8) Purchase warrants, valued at the lower of cost or market, in excess of 5%
of the value of the Portfolio's net assets. Included within that amount,
but not to exceed 2% of the value of the Portfolio's net assets, may be
warrants which are not listed on the New York or American Stock Exchanges.
Warrants acquired by the Portfolio at any time in units or attached to
securities are not subject to this restriction.
(9) Purchase securities on margin, except for such short-term credits as may be
necessary for the clearance of transactions, provided that the Portfolio
may make initial and variation margin payments in connection with purchases
or sales of futures contracts.
(10) Issue or sell any class of senior security as defined in the Investment
Company Act of 1940 except for notes or other evidences of indebtedness
permitted under investment restriction (3) and except to the extent that
notes evidencing temporary borrowings or the purchase of securities on a
when-issued or delayed delivery basis might be deemed such.
(11) Except in connection with a merger, consolidation, acquisition, or
reorganization, invest in the securities of other investment companies,
including investment companies advised by the Adviser, or any affiliates,
if, immediately after such purchase or acquisition, more than 10% of the
value of the Portfolio's total assets would be invested in such securities
in the aggregate, or more than 5% in any one such security.
2
<PAGE>
(12) Purchase or retain securities of any issuer if, to the knowledge of the
Trust's management, those officers and Trustees of the Trust and of its
adviser, who each own beneficially more than 0.50% of the outstanding
securities of such issuer, together own beneficially more than 5% of such
securities.
(13) Invest in securities of an issuer which, together with any predecessor,
has been in operation for less than three years if, as a result, more than
5% of the total assets of the Portfolio would then be invested in such
securities.
(14) Invest in the securities of any one issuer if, immediately after such
purchase, 25% or more of the Portfolio's total assets would be invested in
the securities of issuers having their principal business activities in
the same industry.
(15) Invest in securities which are not readily marketable or the disposition
of which is restricted under federal securities laws (collectively
"illiquid securities") if, as a result, more than 5% of the Portfolio's
net assets would be invested in illiquid securities.
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 Portfolio's
assets will not be considered a violation of the restriction with the exception
of the Portfolio's borrowing policy as described in restriction (3), above.
INVESTMENT TECHNIQUES
The Portfolio may utilize the following practices or techniques in pursuing
its investment objectives.
U.S. Government Securities. For liquidity purposes, the Portfolio may
invest in U.S. government securities, including bills, notes and bonds issued by
the U.S. Treasury and securities issued or guaranteed by agencies or
instrumentalities of the U.S. government. Some U.S. government securities are
supported by the direct full faith and credit pledge of the U.S. government;
others are supported by the right of the issuer to borrow from the U.S.
Treasury; others such as securities issued by the Federal National Mortgage
Association, are supported by the discretionary authority of the U.S. government
to purchase the agencies' obligations; and others are supported only by the
credit of the issuing or guaranteeing instrumentality. There is no assurance
that the U.S. government will provide financial support to an instrumentality it
sponsors when it is not obligated by law to do so.
Repurchase Agreements. Repurchase Agreements are agreements by which the
Portfolio purchases a security and obtains a simultaneous commitment from the
seller (a member bank of the Federal Reserve System or, to the extent permitted
by the Investment Company Act of 1940, a recognized securities dealer) that the
seller will repurchase the security at an agreed upon price and date. The resale
price is in excess of the purchase price and reflects an agreed upon market rate
unrelated to the coupon rate on the purchased security.
A repurchase transaction is usually accomplished either by crediting the
amount of securities purchased to the account of the custodian of the Trust
maintained in a central depository of a book-entry system or by physical
delivery of the securities to the Trust's custodian in return for delivery of
the purchase price to the seller. Repurchase transactions are intended to be
short-term transactions with the seller repurchasing the securities, usually
within seven days.
Even though repurchase transactions usually do not impose market risks on
the Portfolio, if the seller of the repurchase agreement defaults and does not
repurchase the underlying securities, the Portfolio might incur a loss if the
value of the underlying securities declines, and disposition costs may be
incurred in connection with liquidating the underlying securities. In addition,
if bankruptcy proceedings are commenced regarding the seller, realization upon
the underlying securities may be delayed or limited, and a loss may be incurred
if the underlying securities decline in value.
Financial Futures Contracts. The Portfolio may enter into financial futures
contracts. Financial Futures may be used to hedge against changes in the market
value of the Portfolio's securities or securities which the Portfolio 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 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.
3
<PAGE>
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 pledged account 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. 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.
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
transactions. These commissions may be higher than those which would apply to
purchases and sales of securities directly.
Limitations on Futures Contracts. The Portfolio may enter into futures
contracts, provided that such obligations represent no more than 20% of the
Portfolio's net assets. Under the Commodity Exchange Act, a Fund may enter into
futures and options transactions for hedging purposes without regard to the
percentage of assets committed to initial margin and option premiums and for
other than hedging purposes provided that assets committed to initial margin and
option premiums do not exceed 5% of the Fund's net assets. To the extent
required by law, the Portfolio will set aside cash and appropriate liquid assets
in a pledged account to cover its obligations related to futures contracts.
The extent to which the Portfolio may enter into financial futures
contracts also may be limited by the requirements of the Internal Revenue Code
for qualifications as a regulated investment company. See "Dividends,
Distributions and Taxes."
Risks Relating to Futures Contracts. Positions in futures contracts may be
closed out only on an exchange which provides a secondary market for such
contracts. The Portfolio will enter into a 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 futures contract at any
specific time. Thus, it may not be possible to close out 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 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 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 is held by the Portfolio or such prices move in a
direction opposite to that anticipated, the Portfolio may realize a potential
unlimited 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 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.
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The market prices of futures contracts may be affected if participants in
the futures market also elect to close out their contracts through off-setting
transactions rather than to meet margin deposit requirements. In such cases,
distortions in the normal relationship between the cash and futures markets
could result. Price distortions could also result if investors in futures
contracts choose 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.
Leverage. The Portfolio may borrow for temporary, extraordinary or
emergency purposes. The Portfolio will borrow only from banks, and only if
immediately after such borrowing the value of the assets of the Portfolio
(including the amount borrowed) less its liabilities (not including any
borrowings) is at least three times the amount of funds borrowed. The effect of
this provision is to permit the Portfolio to borrow up to 33-1/3% of the total
assets (not including any borrowings) of the Portfolio. If, due to market
fluctuations or other reasons, the value of the Portfolio's assets computed as
provided above becomes at any time less than three times the amount of the
borrowings, the Portfolio, within three business days, is required to reduce
bank debt to the extent necessary to meet the required 300% asset coverage.
Interest on money borrowed will be an expense of the Portfolio with respect
to which the borrowing has been made. Because such expense would not otherwise
be incurred, the net investment income of the Portfolio is not expected to be as
high as it otherwise would be during periods when borrowings for investment
purposes are substantial. Bank borrowings must be obtained on an unsecured
basis. Any such borrowing must also be made subject to an agreement by the
lender that any recourse is limited to the assets of the Portfolio with respect
to which the borrowing has been made.
Foreign Securities. The Portfolio 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 10% of the total assets of
the Core Equity 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 Portfolio may use a foreign 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 Portfolio'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.
Although the Portfolio may buy securities of foreign issuers in foreign
markets, most of its foreign securities investments are made by purchasing
American Depositary Receipts (ADRs), "ordinary shares," or "New York Shares."
The Portfolio may invest in foreign-currency-denominated securities that trade
in foreign markets if the Adviser believes that such investments will be
advantageous to the Portfolio.
ADRs are dollar-denominated receipts representing interests in the
securities of a foreign issuer. They are issued by U.S. banks and traded on
exchanges or over the counter in the United States. Ordinary shares are shares
of foreign issuers that are traded abroad and on a U.S. exchange. New York
shares are shares that a foreign issuer has allocated for trading in the United
States. ADRs, ordinary shares, and New York shares all may be purchased with and
sold for U.S. dollars, which protects the Portfolio from the foreign settlement
risks described below.
Lending Portfolio Securities. In order to increase its return on
investments, the Portfolio may make loans of its portfolio securities, as long
as the market value of the loaned securities does not exceed one-third of the
value of the Portfolio's total assets. Loans of portfolio securities will always
be fully collateralized by cash or securities issued or guaranteed by the U.S.
Government and marked to market daily, at no less than 100% of the market value
of the loaned securities (as marked to market daily) and made only to borrowers
considered by the Adviser 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.
Forward Foreign Currency Exchange Contracts. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days ("Term") 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 (usually
large commercial banks) and their customers.
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The Portfolio does not intend to enter into such forward contracts if it
would have more than 5% of the value of its net assets committed to the initial
margin and option premiums on such contracts on a regular or continuous basis.
The Portfolio will not enter into such forward contracts or maintain a net
exposure in such contracts where it would be obligated to deliver an amount of
foreign currency in excess of the value of its portfolio securities and other
assets denominated in that currency. The Adviser believes that it is important
to have the flexibility to enter into such forward contracts when it determines
that to do so is in the best interests of the Portfolio. The Portfolio's
custodian bank will pledge any asset, including equity securities and
non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily, in an amount not less than the value of the Portfolio's
total assets committed to forward foreign currency exchange contracts entered
into for the purchase of a foreign currency. If the value of the securities
pledged declines, additional cash or securities will be added so that the
pledged amount is not less than the amount of the Portfolio's commitments with
respect to such contracts. Generally, the Portfolio does not enter into forward
contracts with a term longer than one year.
Foreign Currency Options. A foreign currency option provides the option
buyer with the right to buy or sell a stated amount of foreign currency at the
exercise price at a specified date or during the option period. A call option
gives its owner the right, but not the obligation, to buy the currency, while a
put option gives its owner the right, but not the obligation, to sell the
currency. The option seller (writer) is obligated to fulfill the terms of the
option sold if it is exercised. However, either seller or buyer may close its
position during the option period for such options any time prior to expiration.
A call rises in value if the underlying currency appreciates. Conversely, a
put rises in value if the underlying currency depreciates. While purchasing a
foreign currency option can protect the Portfolio against an adverse movement in
the value of a foreign currency, it does not limit the gain which might result
from a favorable movement in the value of such currency. For example, if the
Portfolio were holding securities denominated in an appreciating foreign
currency and had purchased a foreign currency put to hedge against a decline in
the value of the currency, it would not have to exercise its put. Similarly, if
the Portfolio had entered into a contract to purchase a security denominated in
a foreign currency and had purchased a foreign currency call to hedge against a
rise in the value of the currency but instead the currency had depreciated in
value between the date of purchase and the settlement date, the Portfolio would
not have to exercise its call but could acquire in the spot market the amount of
foreign currency needed for settlement.
Foreign Currency Futures Transactions. The Portfolio may use foreign
currency futures contracts and options on such futures contracts. Through the
purchase or sale of such contracts, the Portfolio may be able to achieve many of
the same objectives attainable through the use of foreign currency forward
contracts, but more effectively and possibly at a lower cost.
Unlike forward foreign currency exchange contracts, foreign currency
futures contracts and options on foreign currency futures contracts are
standardized as to amount and delivery period and are traded on boards of trade
and commodities exchanges. It is anticipated that such contracts may provide
greater liquidity and lower cost than forward foreign currency exchange
contracts.
Regulatory Restrictions. To the extent required to comply with Securities
and Exchange Commission Release No. IC-10666, when purchasing a futures contract
or writing a put option, the Portfolio will maintain in a pledged account 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 value of
such contracts.
The Portfolio may enter into futures contracts, provided that such
obligations represent no more than 20% of the Portfolio's net assets. Under the
Commodity Exchange Act, a Portfolio may enter into futures and options
transactions for hedging purposes without regard to the percentage of assets
committed to initial margin and option premiums and for other than hedging
purposes provided that assets committed to initial margin and option premiums do
not exceed 5% of a Portfolio's net assets. To the extent required by law, the
Portfolio will set aside cash and appropriate liquid assets in a pledged account
to cover its obligations related to futures contracts and options.
Derivative Investments. In order to hedge various portfolio positions,
including to hedge against price movements in markets in which the Portfolio
anticipates increasing its exposure, the Portfolio may invest in certain
instruments which may be characterized as derivative investments. These
investments include various types of interest rate transactions, options and
futures. Such investments also may consist of indexed securities. Other of such
investments have no express quantitative limitations, although they may be made
solely for hedging purposes, not for speculation, and may in some cases be
limited as to the type of counter-party permitted. Interest rate transactions
involve the risk of an imperfect correlation between the index used in the
hedging transactions and that pertaining to the securities which are the subject
of such transactions. Similarly, utilization of options and futures transactions
involves the risk of imperfect correlation in movements in the price of options
and futures and movements in the price of the securities or interest rates which
are the subject of the hedge. Investments in indexed securities, including
inverse securities, subject the Portfolio to the risks associated with changes
in the particular indices, which may include reduced or eliminated interest
payments and losses of invested principal.
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PERFORMANCE INFORMATION
The Portfolio may, from time to time, include total return in
advertisements or reports to shareholders or prospective investors. Performance
information in advertisements and sales literature may be expressed as yield of
a class and as total return of any class.
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 for a hypothetical investment in either Class X or Class Y Shares over
periods of 1, 5 and 10 years or up to the life of the class of shares,
calculated for each class separately pursuant to the following formula: P(1 +
T)(n) = ERV (where P = a hypothetical initial payment of $1,000, T = the average
annual total return, n = the number of years, and ERV = the ending redeemable
value of a hypothetical $1,000 payment made at the beginning of the period). All
total return figures 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.
The 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 Morningstar, Inc.
Additionally, the Portfolio may compare 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, Investor's Daily, Stanger's Mutual Fund Monitor,
The Stanger Register, Stanger's Investment Adviser, The Wall Street Journal, The
New York Times, Consumer Reports, Registered Representative, Financial Planning,
Financial Services Weekly, Financial World, U.S. News and World Report, Standard
& Poor's 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 Composite Stock Price Index (the "S&P 500"),
Dow Jones Industrial Average, Europe Australia Far East Index (EAFE), Consumer
Price Index, Lehman Brothers Corporate Index and Lehman Brothers T-Bond Index.
Advertisements, sales literature and other communications may contain
information about the Portfolio and Adviser's current investment strategies and
management style. Current strategies and style may change to allow the Portfolio
to respond quickly to changing market and economic conditions. From time to time
the Portfolio may include specific portfolio holdings or industries in such
communications. To illustrate components of overall performance, the Portfolio
may separate its cumulative and average annual returns into income and capital
gains components.
Performance information for the Portfolio (and each Class thereof) reflects
only the performance of a hypothetical investment in 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.
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
Portfolio to receive certain favorable tax treatment.
SERVICES OF THE ADVISER
Duff & Phelps Investment Management Co., Inc. ("DPIM") are located at 55
East Monroe Street, Suite 3600, Chicago, Illinois 60603. DPIM is a subsidiary of
Phoenix Duff & Phelps Corporation whose majority shareholder is 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 Portfolio.
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 Portfolio are borne by the Portfolio. Each
portfolio pays expenses incurred in its own operation and also pays a portion of
the Trust's general administration expenses allocated on the basis of the asset
size of
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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 Portfolio 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 Portfolio),
association membership dues, charges of custodians, transfer agents, dividend
disbursing agents and financial agents, bookkeeping, auditing, and legal
expenses. The Portfolio will also pay the fees and bear the expense of
registering and maintaining the registration of the Portfolio 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 Portfolio or to any shareholder of the Portfolio for any error of
judgment or mistake of law or for any loss suffered by the Portfolio or by any
shareholder of the Portfolio 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
Portfolio, the Adviser is entitled to a fee, payable monthly, as described in
the Portfolio's Prospectus.
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 Trust or by the Adviser, on sixty (60) days written
notice.
BROKERAGE ALLOCATION
In effecting portfolio transactions for the Trust, the Adviser adheres to
the Trust'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 Trust 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 Trust 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 Trust and may benefit both the Trust and
other clients of the Adviser. Conversely, brokerage and research services
provided by brokers to other clients of the Adviser may benefit the Trust.
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 Trust (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
Trust. 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 Trust. Past sales of Trust shares may be considered when
selecting dealers to effect portfolio transactions.
The Trust 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 inconsistent with its duty
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to seek best execution (which shall include the duty to seek best price) for
the Trust. No advisory account of the Advisor 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 Advisor
in that security on a given business day, with all transaction costs shared pro
rata based on the Trust'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.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Portfolio is determined as of the
close of 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, Martin Luther King Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. Since the Trust does not price securities on weekends or
United States national holidays, the net asset value of the Portfolio's foreign
assets may be significantly affected on days when the investor has no access to
the Trust. The net asset value per share of the 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 the 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 Trust 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. No interest will
accrue on amounts represented by uncashed distribution or redemption checks.
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
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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.
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; and (2) 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 Trust 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 Trust with a correct taxpayer
identification number (TIN); ii) the Trust is notified by the Internal Revenue
Service that the shareholder furnished an incorrect TIN; or iii) the Trust 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 Trust with a correct TIN. The Trust 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 Trust for reporting an incorrect TIN and that TIN was provided by the
shareholder, the Trust 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 Trust, serves as the national distributor of the Trust'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 Trust for resale to the public, either directly or
through securities dealers or agents, and is obligated to purchase
10
<PAGE>
only those shares for which it has received purchase orders. Equity Planning
may also sell Trust shares pursuant to sales agreements entered into with
bank-affiliated securities brokers who, acting as agent for their customers,
place orders for Trust 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 Trust. 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 Portfolio, at the following incremental annual
rates:
First $100 million .05%
$100 million to $300 million .04%
$300 million through $500 million .03%
Greater than $500 million .015%
A minimum fee of $50,000 is applicable. In addition, Equity Planning is
paid $12,000 for each class of shares beyond one.
DISTRIBUTION PLAN
The Trust 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 Trust
to reimburse the Distributor for expenses incurred in connection with activities
intended to promote the sale of shares of Class Y Shares of the Trust.
Pursuant to the Plan, the Trust may compensate the Distributor in an amount
equal to 0.25% of the average daily net assets of the Class Y Shares (the
"Service Fee"). The Service Fee is paid to the Distributor to reimburse the
costs of providing services to Class Y shareholders, including assistance in
connection with inquiries related to shareholder accounts.
On a quarterly basis, the Trustees of the Trust 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 Trust 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 Trust may bear pursuant to the Plan without
approval of the Class Y shareholders of the Trust 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 then in office 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 Trust.
No interested persons of the Trust and no Trustee who is not an interested
person of the Trust, 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 Trust 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 Trust During the Past 5 Years
- --------------------------- ---------------- ---------------------------------------------------------------------
<S> <C> <C>
Robert Chesek (63) Trustee Trustee/Director (1981-present) and Chairman (1989-1994), Phoenix
49 Old Post Road Funds. Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff &
Wethersfield, CT 06109 Phelps Institutional Mutual Funds (1996-present). Vice President,
Common Stock, Phoenix Home Life Mutual Insurance Company
(1980-1994). Director/Trustee, the National Affiliated Investment
Companies (until 1993).
E. Virgil Conway (68) 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 Freddie Mac Mortgage
Securities Fund (Advisory Director) (1990-present), Centennial
Insurance Company (1974-present), Josiah Macy, Jr., Foundation
(1975-present), The Harlem Youth Development Foundation (1987-
present), Accuhealth (1994-present), Trism, Inc. (1994-present),
Realty Foundation of New York (1972-present), New York Housing
Partnership Development Corp. (Chairman) (1981-present) and Fund
Directions (Advisory Director) (1993-present). Director/Trustee,
Phoenix Funds (1993-present). Trustee, Phoenix-Aberdeen Series
Fund and Phoenix Duff & Phelps Institutional Mutual Funds (1996-
present). Director, Duff & Phelps Utilities Tax-Free Income Inc. and
Duff & Phelps Utility and Corporate Bond Trust Inc. (1995-present).
Chairman, Audit Committee of the City of New York (1981-1996).
Advisory Director, Blackrock Fannie Mae Mortgage Securities Fund
(1989-1996). Chairman, Financial Accounting Standards Advisory
Council (1992-1995). Director/Trustee, the National Affiliated
Investment Companies (until 1993).
William W. Crawford (69) 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 (68) Trustee Director/Trustee, Phoenix Funds (1983-present). Trustee, Phoenix-
330 East 39th Street Aberdeen Series Fund and Phoenix Duff & Phelps Institutional
Apartment 29G Mutual Funds (1996-present). Director, Duff & Phelps Utilities
New York, NY 10016 Tax-Free Income Inc. and Duff & Phelps Utility and Corporate Bond
Trust Inc. (1995-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 (70) 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).
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Trust During the Past 5 Years
- ---------------------------- ---------------- --------------------------------------------------------------------------
<S> <C> <C>
*Francis E. Jeffries (67) Trustee Director/Trustee, Phoenix Funds (1995-present). Trustee, Phoenix-
6585 Nicholas Blvd. Aberdeen Series Inc. and Phoenix Duff & Phelps Institutional Mutual
Apt. 1601 Funds (1996-present). Director, Duff & Phelps Utilities Income Inc.
Naples, FL 33963 (1987-present), Duff & Phelps Utilities Tax-Free Income Inc. (1991-
present) and Duff & Phelps Utility and Corporate Bond Trust Inc.
(1993-present). Director, The Empire District Electric Company
(1984-present). Director (1989-1997), Chairman of the Board
(1993-1997), President (1989-1993), and Chief Executive Officer
(1989-1995), Phoenix Duff & Phelps Corporation.
Leroy Keith, Jr. (59) 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 and Phoenix Duff & Phelps
Carson Product Company Institutional Mutual Funds (1996-present). Director, Equifax Corp.
64 Ross Road (1991-present) and Evergreen International Fund, Inc. (1989-present).
Savannah, GA 30750 Trustee, Evergreen Liquid Trust, Evergreen Tax Exempt Trust,
Evergreen Tax Free Fund, Master Reserves Tax Free Trust, and
Master Reserves Trust. President, Morehouse College (1987-1994).
Chairman and Chief Executive Officer, Keith Ventures (1992-1994).
Director/Trustee, the National Affiliated Investment Companies (until
1993). Director, Blue Cross/Blue Shield (1989-1993) and First Union
Bank of Georgia (1989-1993).
*Philip R. McLoughlin (51) Trustee and Chairman (1997-present), Director (1995-present), Vice Chairman (1995-
President 1997) and Chief Executive Officer (1995-present), Phoenix Duff &
Phelps Corporation. Director (1994-present) and Executive Vice
President, Investments (1988-present), Phoenix Home Life Mutual
Insurance Company. Director/Trustee and President, Phoenix Funds
(1989-present). Trustee and President, Phoenix-Aberdeen Series Fund
and Phoenix Duff & Phelps Institutional Mutual Funds (1996-present).
Director, 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 (1993-present),
Chairman (1993-present) and Chief Executive Officer (1993-1995),
National Securities & Research 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). Director, Phoenix Charter Oak Trust Company (1996-present).
Director and Vice President, PM Holdings, Inc. (1985-present). Director
and President, Phoenix Securities Group, Inc. (1993-1995). Director
(1992-present) and President (1992-1994), W.S. Griffith & Co., Inc.
Director (1992-present) and President (1992-1994), Townsend Financial
Advisers, Inc. Director/Trustee, the National Affiliated Investment
Companies (until 1993).
Eileen A. Moran (42) Trustee President and Chief Executive Officer, Public Service Resources
Corporation (1990-present).
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Trust During the Past 5 Years
- -------------------------- ---------------- -----------------------------------------------------------------------
<S> <C> <C>
**Everett L. Morris (69) Trustee Vice President, W.H. Reaves and Company (1993-present). Director/
164 Laird Road Trustee, Phoenix Funds (1995-present). Trustee, Phoenix-Aberdeen
Colts Neck, NJ 07722 Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Director, Duff & Phelps Utilities Tax-Free Income
Inc. (1991-present) and Duff & Phelps Utility and Corporate Bond
Trust Inc. (1993-present). Director, Public Service Enterprise Group,
Incorporated (1986-1993). President and Chief Operating Officer,
Enterprise Diversified Holdings, Incorporated (1989-1993).
*James M. Oates (51) 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 and Phoenix
60 State Street Duff & Phelps Institutional Mutual Funds (1996-present). Director,
Suite 950 Govett Worldwide Opportunity Funds, Inc. (1991-present), Blue Cross
Boston, MA 02109 and Blue Shield of New Hampshire (1994-present), Investors
Financial Service Corporation (1995-present), Investors Bank & Trust
Corporation (1995-present), Plymouth Rubber Co. (1995-present) and
Stifel Financial (1996-present). Member, Chief Executives
Organization (1996-present). Director (1984-1994), President (1984-
1994) and Chief Executive Officer (1986-1994), Neworld Bank.
Director/Trustee, the National Affiliated Investment Companies (until
1993).
Richard A. Pavia (67) 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 (56) Trustee Director (1986-present), President (1993-present) and Executive Vice
Phoenix Duff & Phelps President (1992-1993), Phoenix Duff & Phelps Corporation. Director/
Corporation Trustee, Phoenix Funds (1995-present). Trustee, Phoenix-Aberdeen
55 East Monroe Street Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
Suite 3600 (1996-present). President and Chief Executive Officer, Duff & Phelps
Chicago, IL 60603 Utilities Tax-Free Income Inc. (1995-present), Duff & Phelps Utilities
Income Inc. (1994-present) and Duff & Phelps Utility and Corporate
Bond Trust Inc. (1995-present).
**Herbert Roth, Jr. (69) Trustee Director/Trustee, Phoenix Funds (1980-present). Trustee, Phoenix-
134 Lake Street Aberdeen Series Fund and Phoenix Duff & Phelps Institutional
P.O. Box 909 Mutual Funds (1996-present). Director, Boston Edison Company
Sherborn, MA 01770 (1978-present), Phoenix Home Life Mutual Insurance Company
(1972-present), Landauer, Inc. (medical services) (1970-present), Tech
Ops./Sevcon, Inc. (electronic controllers) (1987-present), and Mark IV
Industries (diversified manufacturer) (1985-present). Director, Key
Energy Group (oil rig service) (1988-1994). Director/Trustee, the
National Affiliated Investment Companies (until 1993).
Richard E. Segerson (52) Managing Director, Mullin Associates (1993-present). Director/
102 Valley Road Trustee, Phoenix Funds (1993-present). Trustee, Phoenix-Aberdeen
New Canaan, CT 07840 Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Vice President and General Manager, Coats & Clark,
Inc. (previously Tootal American, Inc.) (1991-1993). Director/Trustee,
the National Affiliated Investment Companies (1984-1993).
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Trust During the Past 5 Years
- ----------------------------- ---------------- ----------------------------------------------------------------------
<S> <C> <C>
Lowell P. Weicker, Jr. (66) Trustee/Director, Phoenix Funds (1995-present). Trustee, Phoenix-
731 Lake Avenue Aberdeen Series Fund and Phoenix Duff & Phelps Institutional
Greenwich, CT 06830 Mutual Funds (1996-present). Director, UST Inc. (1995-present),
HPSC Inc. (1995-present), Duty Free International, Inc. (1997-
present) and Compuware (1996-present). Visiting Professor, University
of Virginia (1997-present). Chairman, Dresing, Lierman, Weicker
(1995-1996). Governor of the State of Connecticut (1991-1995).
Michael E. Haylon (40) Executive Director and Executive Vice President--Investments, Phoenix Duff &
Vice Phelps Corporation (1995-present). Executive Vice President, Phoenix
President Funds (1993-present) and Phoenix-Aberdeen Series Fund (1996-
present). Executive Vice President (1997-present), Vice President
(1996-1997), Phoenix Duff & Phelps Institutional Mutual Funds.
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 J. Newman (58) 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 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), Phoenix-Aberdeen Series Fund
(1996-present) and Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Senior Vice President, Phoenix Equity Planning
Corporation (1995- 1996), 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).
James D. Wehr (40) Senior 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. Senior Vice President (1997-
present), Vice President (1988-1997), Phoenix Multi-Portfolio Fund;
Senior Vice President (1997-present), Vice President (1990-1997),
Phoenix Series Fund; Senior Vice President (1997-present), Vice
President (1991-1997), The Phoenix Edge Series Fund; Senior Vice
President (1997-present), Vice President (1993-1997), Phoenix
California Tax Exempt Bonds, Inc.; Senior Vice President (1997-
present), Vice President (1996-1997), Phoenix Duff & Phelps
Institutional Mutual Funds; and Senior Vice President, Phoenix
Multi-Sector Short Term Bond Fund and Phoenix Multi-Sector Fixed
Income Fund (1997-present). Managing Director, Public Fixed
Income, Phoenix Home Life Insurance Company (1991-1995). Various
positions with Phoenix Home Life Insurance Company (1981-1991).
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Trust During the Past 5 Years
- ------------------------------ ---------------- ----------------------------------------------------------------------------
<S> <C> <C>
Marvin E. Flewellen (33) Vice Senior Vice President and Fixed Income Portfolio Manager, Duff &
55 East Monroe Street President Phelps Investment Management Co. (1994-present). Vice President,
Suite 3800 Phoenix Duff & Phelps Institutional Mutual Funds (1996-present).
Chicago, IL 60603 Second Vice President and Portfolio Manager, Northern Trust Bank
(1985-1994).
John D. Kattar (42) Vice Managing Director/Senior Portfolio Manager (1997-present), Phoenix
President Investment Counsel, Inc. Vice President (1997-present), The Phoenix
Edge Series Fund, Phoenix Series Fund and Phoenix-Aberdeen Series
Fund. Director (1989-1997), Senior Vice President (1993-1996),
Baring Asset Management Company, Inc. Director, (1995-1997),
Baring Mutual Fund Management (Luxembourg).
William E. Keen, III (34) Vice Assistant Vice President, Phoenix Equity Planning Corporation (1996-
100 Bright Meadow Blvd. President present). Vice President, Phoenix Funds, Phoenix Duff & Phelps
P.O. Box 2200 Institutional Mutual Funds and Phoenix-Aberdeen Series Fund (1996-
Enfield, CT 06083-2200 present). Assistant Vice President, USAffinity Investments LP (1994-
1995). Treasurer and Secretary, USAffinity Funds (1994-1995). Manager,
Fund Administration, SEI Corporation (1991-1994).
Christopher J. Kelleher (42) 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)
and Phoenix Duff & Phelps Institutional Mutual Funds (1996-
present). Portfolio Manager, Public Bonds, Phoenix Home Life Mutual
Insurance Company (1991-1995).
William R. Moyer (53) 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. Senior Vice President and Chief Financial Officer, Duff &
Phelps Investment Management Co. (1996-present). Vice President,
Phoenix Funds (1990-present), Phoenix-Duff & Phelps Institutional
Mutual Funds (1996-present) and Phoenix-Aberdeen Series Fund (1996-
present). 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).
Diane L. Mustain (37) Vice Executive Vice President (1996-present), Senior Vice President
President (1995-1996), Vice President (1993-1995), Duff & Phelps Investment
Management Co. Group Vice President, Duff & Phelps Investment
Research Company (1992-1993).
Leonard J. Saltiel (43) Vice Managing Director (1996-present), Senior Vice President (1994-
President 1996), Phoenix Equity Planning Corporation. Vice President, Phoenix
Funds (1994-present), Phoenix Duff & Phelps Institutional Mutual
Funds (1996-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).
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Trust During the Past 5 Years
- ------------------------ ---------------- ------------------------------------------------------------------------
<S> <C> <C>
Julie L. Sapia (40) Vice Head Money Market Trader (1997-present), Phoenix Investment
President Counsel, Inc. Vice President (1997-present), The Phoenix Edge Series
Fund, Phoenix Series Fund, Phoenix Duff & Phelps Institutional
Mutual Funds and Phoenix-Aberdeen Series Fund. Money Market
Trader (1995-1997), Phoenix Investment Counsel, Inc. Money Market
Trader (1991-1995), Phoenix Home Life Mutual Insurance Company.
Michael Schatt (50) Vice Vice President, Phoenix Realty Securities, Inc. (1997-present). Vice
President President (1997-present), Phoenix Duff & Phelps Institutional Mutual
Funds, Phoenix Multi-Portfolio Fund and The Phoenix Edge Series
Fund. Vice President, Duff & Phelps Investment Management Co.
(1997-present). Vice President, Duff & Phelps Utilities Income Inc.
(1997-present). Managing Director, Phoenix Duff & Phelps
Corporation (1994-present). Director, Real Estate Advisory Practice,
Coopers & Lybrand, LLC (1990-1994).
Dorothy J. Skaret (45) 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), Phoenix Duff
& Phelps Institutional Mutual Funds (1996-present) and Phoenix
Realty Securities, Inc. (1995-present). Director, Public Fixed Income,
Phoenix Home Life Mutual Insurance Company (1991-1995).
Pierre G. Trinque (42) Vice Vice President (1997-present), The Phoenix Edge Series Fund and
President Phoenix Series Fund. Managing Director, Equities (March, 1997-
November, 1997), Managing Director, Director of Equity Research
(October, 1996-March, 1997), Senior Research Analyst, Equities
(January, 1996-October, 1996) and Associate Portfolio Manager-
Institutional Funds (1992-1995), Phoenix Investment Counsel, Inc.
Nancy G. Curtiss (44) Treasurer Vice President, Fund Accounting (1994-present) and Treasurer (1996-
present), Phoenix Equity Planning Corporation. Treasurer, Phoenix Funds
(1994-present), Phoenix Duff & Phelps Institutional Mutual Funds
(1996-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).
G. Jeffrey Bohne (49) Secretary Vice President and General Manager (1993-present), Assistant Vice
101 Munson Street President (1992-1993) Phoenix Home Life Mutual Insurance Co. Vice
Greenfield, MA 01301 President, Mutual Fund Customer Service, Phoenix Equity Planning
Corporation (1993-present). Secretary, Phoenix Funds (1993-present).
Clerk, Phoenix Strategic Allocation Fund, Inc. (1994-present).
Secretary, Phoenix Duff & Phelps Institutional Mutual Funds (1996-
present) and Phoenix-Aberdeen Series Fund (1996-present). Vice
President, Home Life of New York Insurance Company (1984-1992).
</TABLE>
- -----------
*Indicates that the Trustee is an "interested person" of the Trust within the
meaning of the definition set forth in Section 2(a)(19) of the Investment
Company Act of 1940.
**Pursuant to the retirement policy of the Phoenix Funds, Messrs. Morris and
Roth will retire from the Board of Trustees effective January 1, 1999.
17
<PAGE>
For services rendered to the Trust during the period ended December 31, 1996,
the Trustees received an aggregate of $77,238 from the Trust 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 Trust.
For the Trust's last fiscal year, the Trustees received the following
compensation:
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits From Fund and
Aggregate Accrued Estimated Fund Complex
Compensation as Part of Annual Benefits (13 Funds)
Name From Fund Fund Expenses Upon Retirement Paid to Trustees
- ------------------------ ---------------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C>
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
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>
* This compensation (and the earnings thereon) will be deferred pursuant to the
Deferred Compensation Plan. At December 31, 1997, the total amount of
deferred compensation (including interest and other accumulation earned on
the original amounts deferred) accrued for Messrs. Crawford, Jeffries,
Morris, Pavia and Roth was $5,372, $60,161, $126,891, $5,007 and $137,672,
respectively. At present, by agreement among the Trust, the Distributor and
the electing director, director fees that are deferred are paid by the Trust
to the Distributor. The liability for the deferred compensation obligation
appears only as a liability of the Distributor.
+ Messrs. Conway, Dalzell-Payne, McLoughlin, Morris, Oates and Roth are members
of the Executive Committee.
ADDITIONAL INFORMATION
Independent Accountants
Price Waterhouse LLP, 160 Federal Street, Boston, MA 02110, has been
selected as the independent accountants for the Trust. Price Waterhouse LLP
audits the Trust's annual financial statements and expresses an opinion thereon.
Custodian and Transfer Agent
State Street Bank and Trust Company ("State Street"), serves as custodian
of the Trust's assets (the "Custodian") and is located at 1 Heritage Drive, P2N,
North Quincy, MA 02171. In addition, pursuant to an agreement between Equity
Planning, the Trust's Transfer Agent, and State Street Bank and Trust Company,
State Street has been appointed subagent to perform certain shareholder
servicing functions for the Trust. For performing such services State Street
receives a monthly fee from Equity Planning.
Reports to Shareholders
The fiscal year of the Fund ends on December 31. The Trust will send to its
shareholders, at least semi-annually, reports showing the securities of the
Trust's portfolio and other information.
Financial Statements
The Financial Statements for the fiscal year ended December 31, 1997
appearing in the Trust's 1997 Annual Report to Shareholders, are incorporated
herein by reference.
18
<PAGE>
APPENDIX
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 some time 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 & 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.
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.
20
<PAGE>
Institutional Balanced Portfolio
- --------------------------------------------------------------------------------
INVESTMENTS AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- ------------ ----------------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--4.4%
U.S. Treasury Notes--4.4%
U.S. Treasury Notes 6%, 8/15/00 ................................ Aaa $ 80 $ 80,575
U.S. Treasury Notes 6.625%,
6/30/01 ...................................................... Aaa 1,200 1,233,750
---------
1,314,325
---------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(Identified cost $1,276,297) ................................................................. 1,314,325
---------
MUNICIPAL BONDS--6.2%
California--1.9%
California State Department Water
System Series S 5%, 12/1/29 .................................. Aa 60 58,336
L.A. County Public Works
Financing Authority Series A
5.125%, 12/1/29 .............................................. Aaa 90 88,423
Long Beach Pension Obligation
Taxable 6.87%, 9/1/06 ........................................ Aaa 100 104,037
San Bernardino County Pension
Obligation Revenue Taxable
6.87%, 8/1/08 ................................................ Aaa 50 51,969
San Bernardino County Pension
Obligation Revenue Taxable
6.94%, 8/1/09 ................................................ Aaa 135 141,224
Ventura County Pension
Obligation Taxable 6.54%,
11/1/05 ...................................................... Aaa 125 127,430
---------
571,419
---------
Florida--0.9%
Florida State Department of
Transportation Series A 5%,
7/1/27 ....................................................... Aa 75 72,986
University of Miami Exchangeable
Revenue Series A Taxable
7.65%, 4/1/20 ................................................ Aaa 180 189,992
---------
262,978
---------
Massachusetts--0.3%
Massachusetts State Water Authority
Series D 5%, 8/1/24 .......................................... Aaa 75 72,861
---------
Texas--0.3%
Houston Water & Sewer
Refunding, Jr. Lien, Series D
5%, 12/1/25 .................................................. Aaa 90 88,026
---------
Virginia--2.5%
Newport News Series B Taxable
7.05%, 1/15/25 ............................................... Aa 750 756,683
---------
Washington--0.3%
Washington State Series E Taxable
5%, 7/1/22 ................................................... Aa 90 88,512
---------
TOTAL MUNICIPAL BONDS
(Identified cost $1,798,934) ................................................................. 1,840,479
---------
</TABLE>
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- ------------ ----------------
<S> <C> <C> <C>
NON-CONVERTIBLE BONDS--11.7%
Asset-Backed Securities--2.6%
AESOP Funding II LLC 144A
97-1, A2 6.40%, 10/20/03 (c) ................................. Aaa $ 250 $ 252,031
Capita Equipment Receivables
Trust 97-1, B 6.45%, 8/15/02 ................................. Aa 120 120,188
Chase Credit Card Master Trust
97-2, A 6.30%, 4/15/03 ....................................... Aaa 150 151,107
Fleetwood Credit Corp. 96-B, A
6.90%, 3/15/12 ............................................... Aaa 146 146,829
Green Tree Financial Corp. 96-2,
M1 7.60%, 4/15/27 ............................................ Aa 100 104,313
---------
774,468
---------
Non-Agency Mortgage-Backed Securities--8.8%
CS First Boston Mortgage
Securities Corp. 95-AE, B
7.182%, 11/25/27 ............................................. AA-(d) 190 191,306
DLJ Mortgage Acceptance Corp.
96-CF1, A1B 144A 7.58%,
3/13/28 (c) .................................................. Aaa 75 79,430
First Union Lehman Bros. 97-C1,
B 7.43%, 4/18/29 ............................................. Aa 275 287,977
G.E. Capital Mortgage Services,
Inc. 96-8, M 7.25%, 5/25/26 .................................. AA(d) 245 247,382
Lehman Large Loan 97-LL1, B
6.95%, 3/12/07 ............................................... Aa 325 332,871
Nationslink Funding Corp. 96-1, B
7.69%, 12/20/05 .............................................. AA(d) 250 265,859
Residential Asset Securitization
Trust 96-A8, A1 8%, 12/25/26 ................................. AAA(d) 198 200,868
Residential Funding Mortgage
Securities I 96-S1, A11 7.10%,
1/25/26 ...................................................... AAA(d) 500 506,094
Residential Funding Mortgage
Securities I 96-S8, A4 6.75%,
3/25/11 ...................................................... AAA(d) 279 280,918
Resolution Trust Corp. 93-C1, B
8.75%, 5/25/24 ............................................... Aa 92 91,999
Structured Asset Securities Corp.
93-C1, B 6.60%, 10/25/24 ..................................... AA+(d) 135 132,311
---------
2,617,015
---------
Truckers--0.3%
Teekay Shipping Corp. 8.32%,
2/1/08 ....................................................... Ba 100 102,000
---------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $3,434,573) .............................................................. 3,493,483
---------
FOREIGN GOVERNMENT SECURITIES--8.1%
Argentina--0.6%
Republic of Argentina Bearer FRB
6.688%, 3/31/05 (e) .......................................... Ba 202 180,180
---------
</TABLE>
See Notes to Financial Statements
3
<PAGE>
Institutional Balanced Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- ------- ------------
<S> <C> <C> <C>
Brazil--0.6%
Republic of Brazil NMB-L Bearer
6.75%, 4/15/09 (e) .................... B $235 $ 189,909
---------
Bulgaria--0.3%
Republic of Bulgaria FLIRB RegA
2.25%, 7/28/12 (e) .................... B 155 94,356
---------
Colombia--0.6%
Republic of Colombia 7.25%,
2/15/03 ............................... Baa 190 184,300
---------
Croatia--0.3%
Croatia Series A 6.625%,
7/31/10 (e) ........................... Baa 105 92,400
---------
Ecuador--0.6%
Ecuador Bearer PDI Euro,
PIK interest capitalization
6.688%, 2/27/15 (e) ................... B 257 170,551
---------
Mexico--1.1%
United Mexican States Global
Bond 11.50%, 5/15/26 .................. Ba 265 313,561
---------
Panama--0.6%
Panama 8.875%, 9/30/27 .................. Ba 200 188,200
---------
Peru--0.6%
Peru PDI 4%, 3/7/17 (e) ................. BB(d) 250 164,375
---------
Poland--0.8%
Poland Bearer PDI 4%,
10/27/14 (e) .......................... Baa 280 242,550
---------
Russia--1.4%
Russia Interest Notes Series US
144A 6.719%, 12/15/15 (c) (e) ......... NR 575 408,250
---------
Venezuela--0.6%
Republic of Venezuela 9.25%,
9/15/27 ............................... Ba 215 192,291
---------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $2,332,058).................................... 2,420,923
---------
FOREIGN NON-CONVERTIBLE BONDS--0.6%
Chile--0.6%
Compania Sud Americana de
Vapores SA 7.375%, 12/8/03 ............ BBB(d) 30 29,813
Petropower I Funding Trust 144A
7.36%, 2/15/14 (c) .................... BBB(d) 150 151,926
---------
181,739
---------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $179,414) ..................................... 181,739
---------
</TABLE>
<TABLE>
<CAPTION>
SHARES
--------
<S> <C> <C>
COMMON STOCKS--55.1%
Banks (Major Regional)--4.6%
AmSouth Bancorporation ...................... 1,200 65,175
Banc One Corp. .............................. 5,200 282,425
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C>
Banks (Major Regional)--continued
BankBoston Corp. .............................. 3,200 $ 300,600
Compass Bankshares, Inc. ...................... 1,000 43,750
Mellon Bank Corp. ............................. 3,150 190,969
NationsBank Corp. ............................. 3,000 182,438
Southtrust Corp. .............................. 1,600 101,500
Washington Mutual, Inc. ....................... 3,000 191,437
---------
1,358,294
---------
Banks (Money Center)--1.3%
BankAmerica Corp. ............................. 3,400 248,200
Citicorp ...................................... 1,200 151,725
---------
399,925
---------
Biotechnology--0.3%
Centocor, Inc. (b) ............................ 3,100 103,075
---------
Broadcasting (Television, Radio, & Cable)--0.3%
Chancellor Media Corp. (b) .................... 1,200 89,550
---------
Chemicals (Specialty)--0.4%
Solutia, Inc. (b) ............................. 4,200 112,087
---------
Communications Equipment--1.7%
Ciena Corp. (b) ............................... 4,800 293,400
Lucent Technologies, Inc. ..................... 2,700 215,663
---------
509,063
---------
Computers (Hardware)--3.2%
International Business Machines Corp. ......... 9,000 941,062
---------
Computers (Networking)--0.4%
Cisco Systems, Inc. (b) ....................... 2,400 133,800
---------
Computers (Peripherals)--0.3%
EMC Corp. (b) ................................. 3,400 93,287
---------
Computers (Software & Services)--3.8%
Adaptec, Inc. (b) ............................. 7,600 282,150
BMC Software, Inc. (b) ........................ 6,300 413,438
Compuware Corp. (b) ........................... 9,100 291,200
Edwards (J.D.) & Co. (b) ...................... 3,300 97,350
Yahoo!, Inc. (b) .............................. 700 48,475
---------
1,132,613
---------
Distributors (Food & Health)--1.0%
Cardinal Health, Inc. ......................... 3,850 289,231
---------
Electrical Equipment--1.1%
General Electric Co. .......................... 4,500 330,187
---------
Electronics (Instrumentation)--0.3%
Linear Technology Corp. ....................... 1,400 80,675
---------
Electronics (Semiconductors)--1.4%
National Semiconductor Corp. (b) .............. 10,200 264,563
Texas Instruments, Inc. ....................... 3,600 162,000
---------
426,563
---------
Entertainment--1.0%
Tele-Comm Liberty Media Group (b) ............. 7,900 286,375
---------
Financial (Diversified)--0.6%
American Express Co. .......................... 2,000 178,500
---------
Health Care (Diversified)--2.2%
Bristol-Myers Squibb Co. ...................... 3,150 298,069
Warner-Lambert Co. ............................ 2,800 347,200
---------
645,269
---------
</TABLE>
See Notes to Financial Statements
4
<PAGE>
Institutional Balanced Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------------ ----------------
<S> <C> <C>
Health Care (Drugs-Major Pharmaceuticals)--3.2%
Lilly (Eli) & Co. ............................ 2,100 $ 146,213
Pfizer, Inc. ................................. 8,200 611,412
Watson Pharmaceuticals, Inc. (b) ............. 5,700 184,894
----------
942,519
----------
Health Care (Hospital Management)--1.0%
HBO & Co. .................................... 6,500 312,000
----------
Health Care (Long Term Care)--0.7%
HEALTHSOUTH Corp. (b) ........................ 7,000 194,250
----------
Health Care (Medical Products & Supplies)--1.7%
Guidant Corp. ................................ 4,900 305,025
Medtronic, Inc. .............................. 3,700 193,556
----------
498,581
----------
Household Furn. & Appliances--0.6%
Sunbeam Corp., Inc. .......................... 4,500 189,563
----------
Household Products (Non-Durables)--0.7%
Colgate-Palmolive Co. ........................ 2,900 213,150
----------
Insurance (Life/Health)--0.3%
UNUM Corp. ................................... 1,900 103,313
----------
Insurance (Multi-Line)--1.0%
ReliaStar Financial Corp. .................... 600 24,713
Travelers Group, Inc. ........................ 5,300 285,537
----------
310,250
----------
Insurance (Property-Casualty)--0.9%
Allstate Corp. ............................... 2,950 268,081
----------
Investment Banking/Brokerage--0.3%
Merrill Lynch & Co., Inc. .................... 1,250 91,172
----------
Machinery (Diversified)--0.7%
Deere & Co. .................................. 3,500 204,094
----------
Manufacturing (Diversified)--1.7%
Tyco International Ltd. ...................... 11,300 509,206
----------
Oil (Domestic Integrated)--1.1%
Tosco Corp. .................................. 8,500 321,406
----------
Oil & Gas (Drilling & Equipment)--5.0%
BJ Services Co. (b) .......................... 2,500 179,844
Cooper Cameron Corp. (b) ..................... 1,200 73,200
Diamond Offshore Drilling, Inc. .............. 3,600 173,250
Halliburton Co. .............................. 6,100 316,819
Nabors Industries, Inc. (b) .................. 1,100 34,581
Noble Drilling Corp. (b) ..................... 2,600 79,625
Rowan Companies, Inc. (b) .................... 2,400 73,200
Schlumberger Ltd. ............................ 4,500 362,250
Transocean Offshore, Inc. .................... 3,800 183,112
----------
1,475,881
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------------ ----------------
<S> <C> <C>
Oil & Gas (Refining & Marketing)--0.3%
Santa Fe International Corp. ................. 2,500 $ 101,719
----------
Personal Care--1.2%
Gillette Co. ................................. 3,500 351,531
----------
Retail (Building Supplies)--1.0%
Home Depot, Inc. ............................. 5,000 294,375
----------
Retail (Drug Stores)--2.2%
CVS Corp. .................................... 4,900 313,906
Rite Aid Corp. ............................... 5,700 334,519
----------
648,425
----------
Retail (Food Chains)--1.4%
Safeway, Inc. (b) ............................ 6,500 411,125
----------
Retail (General Merchandise)--1.1%
Borders Group, Inc. (b) ...................... 4,100 128,381
Staples, Inc. (b) ............................ 7,200 199,800
----------
328,181
----------
Telecommunications (Cellular/Wireless)--1.6%
AirTouch Communications, Inc. (b) ............ 11,500 477,969
----------
Telecommunications (Long Distance)--2.0%
AT&T Corp. ................................... 9,800 600,250
----------
Tobacco--1.5%
Philip Morris Companies, Inc. ................ 9,800 444,062
----------
TOTAL COMMON STOCKS
(Identified cost $14,968,521) ................................. 16,400,659
----------
FOREIGN COMMON STOCKS--3.7%
Banks (Major Regional)--0.0%
Banco Rio de La Plata SA ADR
(Argentina) (b) ............................ 200 2,800
----------
Computers (Software & Services)--0.1%
Baan Company NV (Netherlands) (b) ............ 1,200 39,600
----------
Health Care (Drugs-Major Pharmaceuticals)--0.9%
SmithKline Beecham PLC Sponsored
ADR (United Kingdom) ....................... 5,400 277,762
----------
Health Care (Medical Products & Supplies)--0.3%
Elan PLC Sponsored ADR (Ireland) (b) ......... 1,900 97,256
----------
Household Furn. & Appliances--1.5%
Philips Electronics NV ADR NY
Registered Shares (Netherlands) ............ 7,200 435,600
----------
Oil (International Integrated)--0.9%
Elf Aquitane Sponsored ADR (France) .......... 4,300 252,088
----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $1,165,496) ................................. 1,105,106
----------
TOTAL LONG-TERM INVESTMENTS--89.8%
(Identified cost $25,155,293) ................................ 26,756,714
----------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
Institutional Balanced Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- -------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--10.0%
Commercial Paper--9.7%
Anheuser-Busch Cos., Inc.
6.25%, 1/2/98 ................. A-1 $1,180 $1,179,795
Exxon Imperial U.S., Inc.
6.07%, 1/5/98 ................. A-1+ 1,200 1,199,191
Sara Lee Corp. 6.05%, 1/7/98 .... A-1+ 500 499,496
----------
2,878,482
----------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000) VALUE
------- -----------------
<S> <C> <C>
Federal Agency Securities--0.3%
FNMA 5.70%, 1/13/98 ......................... $85 $ 84,838
-------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $2,963,320) ........................ 2,963,320
-------------
TOTAL INVESTMENTS--99.8%
(Identified cost $28,118,613) ....................... 29,720,034(a)
Cash and receivables, less liabilities--0.2% ....... 66,748
-------------
NET ASSETS--100.0% ................................... $ 29,786,782
=============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $2,236,809 and gross
depreciation of $635,388 for income tax purposes. At December 31, 1997,
the aggregate cost of securities for federal income tax purposes was
$28,118,613.
(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,
1997, these securities amounted to a value of $891,637 or 3.0% of net
assets.
(d) As rated by Standard & Poor's, Fitch or Duff & Phelps.
(e) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
See Notes to Financial Statements
6
<PAGE>
Institutional Balanced Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value
(Identified cost $28,118,613) $29,720,034
Cash 119,517
Receivables
Investment securities sold 781,076
Dividends and interest 131,301
Fund shares sold 67,113
Receivable from adviser 2,839
-----------
Total assets 30,821,880
-----------
Liabilities
Payables
Investment securities purchased 835,803
Fund shares repurchased 128,783
Financial agent fee 6,115
Transfer agent fee 4,325
Distribution fee 1,402
Trustees' fee 1,122
Accrued expenses 57,548
-----------
Total liabilities 1,035,098
-----------
Net Assets $29,786,782
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $27,099,114
Accumulated net realized gain 1,086,247
Net unrealized appreciation 1,601,421
-----------
Net Assets $29,786,782
===========
Class X
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $23,528,472) 1,455,399
Net asset value and offering price per share $16.17
Class Y
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $6,258,310) 386,801
Net asset value and offering price per share $16.18
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Investment Income
Interest $1,056,343
Dividends 230,645
----------
Total investment income 1,286,988
----------
Expenses
Investment advisory fee 201,006
Distribution fee--Class Y 22,735
Financial agent fee 72,000
Transfer agent 49,654
Registration 39,232
Custodian 25,043
Professional 18,124
Trustees 13,309
Printing 3,166
Miscellaneous 12,149
----------
Total expenses 456,418
Less expenses borne by investment adviser (196,130)
----------
Net expenses 260,288
----------
Net investment income 1,026,700
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 6,825,623
Net realized gain on written options 1,338
Net change in unrealized appreciation (depreciation)
on investments (1,339,424)
----------
Net gain on investments 5,487,537
----------
Net increase in net assets resulting from
operations $6,514,237
==========
</TABLE>
See Notes to Financial Statements
7
<PAGE>
Institutional Balanced Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
Year Ended March 1, 1996 to
December 31, 1997 December 31, 1996
------------------- ------------------
<S> <C> <C>
From Operations
Net investment income $ 1,026,700 $ 1,360,086
Net realized gain 6,826,961 3,730,688
Net change in unrealized appreciation (depreciation) (1,339,424) (413,816)
------------- -------------
Increase in net assets resulting from operations 6,514,237 4,676,958
------------- -------------
From Distributions to Shareholders
Net investment income--Class X (856,383) (1,072,486)
Net investment income--Class Y (212,027) (283,103)
Net realized gains--Class X (5,505,499) (1,923,139)
Net realized gains--Class Y (1,467,013) (583,212)
In excess of net investment income--Class X (8,380) --
In excess of net investment income--Class Y (2,075) --
------------- -------------
Decrease in net assets from distributions to shareholders (8,051,377) (3,861,940)
------------- -------------
From Share Transactions
Class X
Proceeds from sales of shares (173,733 and 282,929 shares, respectively) 3,331,056 5,116,425
Net asset value of shares issued from reinvestment of distributions (386,169 and
152,545 shares, respectively) 6,370,247 2,779,558
Net asset value of shares issued in conjunction with conversion of PHL Pooled
Separate Account L (0 and 2,524,966 shares, respectively) -- 45,200,432
Cost of shares repurchased (1,151,407 and 913,536 shares, respectively) (21,859,715) (16,577,547)
------------- -------------
Total (12,158,412) 36,518,868
------------- -------------
Class Y
Proceeds from sales of shares (66,028 and 123,668 shares, respectively) 1,272,503 2,267,577
Net asset value of shares issued from reinvestment of distributions (101,742 and
47,488 shares, respectively) 1,681,177 866,311
Net asset value of shares issued in conjunction with conversion of PHL Pooled
Separate Account L (0 and 721,462 shares, respectively) -- 12,915,189
Cost of shares repurchased (442,749 and 230,838 shares, respectively) (8,628,236) (4,226,073)
------------- -------------
Total (5,674,556) 11,823,004
------------- -------------
Increase (decrease) in net assets from share transactions (17,832,968) 48,341,872
------------- -------------
Net increase (decrease) in net assets (19,370,108) 49,156,890
Net Assets
Beginning of period 49,156,890 0
------------- -------------
End of period (including undistributed net investment income of $0 and
$41,710, respectively) $ 29,786,782 $ 49,156,890
============= =============
</TABLE>
See Notes to Financial Statements
8
<PAGE>
Institutional Balanced Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class X Class Y
----------------------------------------- ----------------------------------------
From Inception From Inception
Year Ended 3/1/96 to Year Ended 3/1/96 to
12/31/97 12/31/96 12/31/97 12/31/96
---------------------- ---------------- ---------------------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $18.15 $17.90 $18.15 $17.90
Income from investment operations
Net investment income 0.54(4)(6) 0.51(4) 0.49(5)(6) 0.46(5)
Net realized and unrealized gain 2.70 1.17 2.70 1.18
-------- --------- -------- -------
Total from investment operations 3.24 1.68 3.19 1.64
-------- --------- -------- -------
Less distributions
Dividends from net investment income (0.65) (0.49) (0.59) (0.45)
Dividends from net realized gains (4.56) (0.94) (4.56) (0.94)
In excess of net investment income (0.01) -- (0.01) --
-------- --------- -------- -------
Total distributions (5.22) (1.43) (5.16) (1.39)
-------- --------- -------- -------
Change in net asset value (1.98) 0.25 (1.97) 0.25
-------- --------- -------- -------
Net asset value, end of period $16.17 $18.15 $16.18 $18.15
======== ========= ======== =======
Total return 18.80% 9.43%(2) 18.50% 9.20%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) $23,528 $37,147 $6,258 $12,010
Ratio to average net assets of:
Operating expenses 0.65% 0.65%(1) 0.90% 0.90%(1)
Net investment income 2.87% 3.02%(1) 2.62% 2.78%(1)
Portfolio turnover 214% 209%(2) 214% 209%(2)
Average commission rate paid(3) $0.0517 $0.0630 $0.0517 $0.0630
</TABLE>
(1) Annualized
(2) Not annualized
(3) 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 $0.10
and $0.06, respectively.
(5) Includes reimbursement of operating expenses by investment adviser of $0.10
and $0.06, respectively.
(6) Computed using average shares outstanding.
See Notes to Financial Statements
9
<PAGE>
Institutional Managed Bond Portfolio
- --------------------------------------------------------------------------------
INVESTMENTS AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- ------------- ----------------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--6.6%
U.S. Treasury Notes--1.2%
U.S. Treasury Notes 5.625%,
10/31/99 ............................... Aaa $ 830 $ 828,962
U.S. Treasury Notes 5.75%,
11/30/02 ............................... Aaa 150 150,141
----------
979,103
----------
Agency Mortgage-Backed Securities--5.4%
FHLMC 8.50%, 8/15/20 ..................... NR 438 442,045
FHLMC 6.65%, 6/15/23 ..................... NR 1,890 1,925,494
FNMA 6.75%, 6/25/20 ...................... Aaa 1,920 1,924,397
----------
4,291,936
----------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(Identified cost $5,024,796) ........................................... 5,271,039
----------
MUNICIPAL BONDS--14.1%
California--3.2%
California State Department of
Water Resources Revenue
Series S 5%, 12/1/29 ................... Aa 795 772,955
Oakland Pension Obligation
Sub Series A Taxable 6.98%,
12/15/09 ............................... Aaa 400 420,880
Orange County Pension
Obligation Series A Taxable
7.67%, 9/1/09 .......................... Aaa 1,200 1,325,892
----------
2,519,727
----------
Colorado--2.2%
Denver City and County School
District 01 Taxable 6.76%,
12/15/07 ............................... Aaa 1,700 1,754,043
----------
Florida--1.8%
Palm Beach County Solid Waste
Industrial Development
Revenue Project B Taxable
10.50%, 1/1/11 (f) ..................... NR 920 515,200
University of Miami
Exchangeable Revenue
Series A Taxable 7.40%,
4/1/11 ................................. Aaa 170 180,074
University of Miami
Exchangeable Revenue
Series A Taxable 7.65%,
4/1/20 ................................. Aaa 725 765,245
----------
1,460,519
----------
Illinois--3.3%
Illinois Educational Facilities
Authority Revenue-Loyola
University Series A Taxable
7.84%, 7/1/24 .......................... Aaa 2,425 2,631,270
----------
</TABLE>
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- ------------- ----------------
<S> <C> <C> <C>
New Hampshire--0.9%
New Hampshire Higher
Educational & Health
Facilities Authority Revenue
Dartmouth College Series A
5.125%, 6/1/28 ......................... Aaa $ 730 $ 716,349
----------
Pennsylvania--1.5%
Pennsylvania Economic
Development Financing
Authority Revenue Series B
9.50%, 1/1/12 .......................... NR 1,750 1,190,000
----------
Virginia--1.2%
Newport News Taxable Series B
7.05%, 1/15/25 ......................... Aa 970 978,643
----------
TOTAL MUNICIPAL BONDS
(Identified cost $11,628,055) ......................................... 11,250,551
----------
NON-CONVERTIBLE BONDS--36.8%
Asset-Backed Securities--7.0%
BankBoston RV Asset Backed
Trust 97-1 B 6.98%, 11/15/17 Baa 1,600 1,619,000
California Infrastructure SCE-1
97-1 A2 6.14%, 3/25/02 ................. Aaa 1,000 1,001,250
Capita Equipment Receivables
Trust 97-1B 6.45%, 8/15/02 Aa 600 600,938
Green Tree Financial Corp.
95-8 A2 6.15%, 12/15/26 ................ Aaa 113 113,054
Green Tree Financial Corp.
96-10 A3 6.16%, 11/15/28 ............... AAA(c) 680 679,681
Green Tree Financial Corp.
97-4 M1 7.22%, 2/15/29 ................. Aa 1,500 1,528,125
----------
5,542,048
----------
Banks (Major Regional)--1.8%
NationsBank Capital Trust III
6.308%, 1/15/27 (d) .................... A 1,450 1,404,147
----------
Consumer Finance--1.0%
Ford Motor Credit Corp.
6.625%, 6/30/03 ........................ A 800 815,960
----------
Gaming, Lottery, & Parimutuel Cos.--1.5%
Mashantucket Pequot 144A
6.91%, 9/1/12 (b) ...................... Aaa 1,100 1,154,241
----------
Insurance (Property-Casualty)--0.7%
HSB Capital I 6.668%,
7/15/27 (d) ............................ NR 550 539,745
----------
Non-Agency Mortgage-Backed Securities--24.2%
CS First Boston Mortgage
Securities Corp. 97-SPCE, D
144A 7.33%, 4/20/08 (b) ................ BBB(c) 986 987,233
</TABLE>
See Notes to Financial Statements
12
<PAGE>
Institutional Managed Bond Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- ------------- ----------------
<S> <C> <C> <C>
Non-Agency Mortgage-Backed Securities--continued
Chase Commercial Mortgage
Securities Corp. 97-2, A1
6.45%, 12/19/04 ............................ AAA(c) $ 195 $ 195,731
Criimi Mae Trust I 96-C1, A2
144A 7.56%, 6/30/33 (b) .................... BBB(c) 1,475 1,500,352
FFCA Secured Lending Corp.
144A 97-1 A1B 7.45%,
10/18/11 (b) ............................... Aaa 1,400 1,470,000
G.E. Capital Mortgage Services,
Inc. 96-8, 2A5 7.50%,
5/25/26 .................................... AAA(c) 172 177,185
G.E. Capital Mortgage Services,
Inc. 97-1, A14 7.50%,
3/25/27 .................................... AAA(c) 1,720 1,774,287
GMAC Commerical Mortgage
Securities, Inc. 97-C2, A3
6.57%, 11/15/07 ............................ Aaa 900 907,312
General Growth Properties 1, C2
144A 6.81%, 11/15/07 (b) ................... A 1,700 1,710,094
Merrill Lynch Mortgage, Inc.
95-C2, C 7.59%, 6/15/21 .................... A 1,098 1,126,010
Residential Accredit 96-QS4,
AI10 7.90%, 8/25/26 ........................ AAA(c) 900 934,594
Residential Asset Securitization
Trust 96-A8, A1 8%, 12/25/26 ............... AAA(c) 792 803,470
Residential Funding Mortgage
93-S25, M3 6.50%, 7/25/08 .................. BBB(c) 622 613,299
Resolution Trust Corp. 92-C3,
B 9.05%, 8/25/23 ........................... AA(c) 134 135,657
Resolution Trust Corp. 95-1,
M2 7.50%, 10/25/28 ......................... Aa 1,231 1,249,935
Resolution Trust Corp. 95-2,
M1 7.15%, 5/25/29 .......................... Aa 177 180,091
Ryland Mortgage Securities
Corp. III 92-A, 1A 8.27%,
3/29/30 .................................... A(c) 603 612,020
Securitized Asset Sales 95-A,
M 7.53%, 3/25/24 ........................... Aa 1,943 1,994,952
Structured Asset Securities Corp.
95-C1, D 7.375%, 9/25/24 ................... BBB(c) 1,865 1,872,285
Structured Asset Securities
Corp. 95-C4, D 7%, 6/25/26 BBB(c) 1,000 989,687
----------
19,234,194
----------
Services (Commercial & Consumer)--0.1%
ARA Services, Inc. 10.625%,
8/1/00 ..................................... Baa 107 115,827
----------
Telephone--0.5%
InterAmericas Communication
Corp. Unit 144A 14%,
10/27/07 (b) (g) ........................... NR 415 419,150
----------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $28,703,189) .............................................. 29,225,312
----------
</TABLE>
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- ------------- ----------------
<S> <C> <C> <C>
FOREIGN GOVERNMENT SECURITIES--19.9%
Bulgaria--0.8%
Bulgaria FLIRB Series A Bearer
Euro 2.25%, 7/28/12 (d) .................... B $1,020 $ 620,925
----------
Colombia--1.4%
Republic of Colombia 7.625%,
2/15/07 .................................... Baa 1,200 1,125,588
----------
Croatia--1.5%
Croatia Series A 6.625%,
7/31/10 (d) ................................ Baa 665 585,200
Croatia Series B 6.625%,
7/31/06 (d) ................................ Baa 633 578,000
----------
1,163,200
----------
Ecuador--0.9%
Ecuador Bearer PDI Euro, PIK
interest capitalization
6.688%, 2/27/15 (d) ........................ B 1,121 743,891
----------
Mexico--3.7%
United Mexican States Global
Bond 11.50%, 5/15/26 ....................... Ba 905 1,070,841
United Mexican States Series A
Euro 6.25%, 12/31/19 ....................... Ba 175 146,125
United Mexican States Series B
Euro 6.25%, 12/31/19 ....................... Ba 1,000 835,000
United Mexican States Series
Par W-B 6.25%, 12/31/19 (e) ................ Ba 1,050 876,750
----------
2,928,716
----------
Panama--3.0%
Panama 8.875%, 9/30/27 ....................... Ba 2,555 2,404,255
----------
Peru--0.9%
Peru PDI 4%, 3/7/17 (d) ...................... BB(c) 1,100 723,250
----------
Poland--1.3%
Poland Global Reg'd RSTA
3.75%, 10/27/24 (d) ........................ Baa 1,500 1,012,500
----------
Russia--3.2%
Russia Interest Notes Series US
144A 6.719%, 12/15/15 (b) (d) .............. NR 3,610 2,563,100
----------
Venezuela--3.2%
Republic of Venezuela 9.25%,
9/15/27 .................................... Ba 2,800 2,504,250
----------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $15,146,307) .......................................... 15,789,675
----------
FOREIGN NON-CONVERTIBLE BONDS--5.7%
Chile--3.4%
Compania Sud Amer Vapore
144A 7.375%, 12/8/03 (b) ................... BBB(c) 1,240 1,232,250
Petropower I Funding Trust
144A 7.36%, 2/15/14 (b) .................... BBB(c) 1,400 1,417,976
----------
2,650,226
----------
</TABLE>
See Notes to Financial Statements
13
<PAGE>
Institutional Managed Bond Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- --------------
<S> <C> <C> <C>
Mexico--1.9%
Banco Nacional de Mexico
144A 7.57%, 12/31/00 (b) ........ NR $ 1,500 $ 1,507,969
-----------
Venezuela--0.4%
Petrozuata Finance, Inc. 144A
8.22%, 4/1/17 (b) ............... Baa 325 342,810
-----------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $4,339,183) ............................. 4,501,005
-----------
SHARES
-------
PREFERRED STOCKS--4.8%
REITS--4.8%
Home Ownership Funding 2, Step-down
Pfd. 144A 13.338% (b) ....................... 3,900 3,802,266
-----------
TOTAL PREFERRED STOCKS
(Identified cost $3,700,681) ............................. 3,802,266
-----------
TOTAL LONG-TERM INVESTMENTS--87.9%
(Identified cost $68,542,211) ............................ 69,839,848
-----------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- -------- -------------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--10.5%
Commercial Paper--9.8%
Anheuser-Busch Cos., Inc.
6.25%, 1/2/98 .............. A-1 $ 448 $ 447,922
Cargill, Inc. 6.25%, 1/2/98 .. A-1+ 2,000 1,999,653
Warner-Lambert Co. 6.10%,
1/5/98 ..................... A-1+ 2,100 2,098,577
Corporate Receivables Corp.
5.90%, 1/6/98 .............. A-1 1,070 1,069,123
Exxon Imperial U.S., Inc.
6.10%, 1/6/98 .............. A-1+ 2,175 2,173,157
-------------
7,788,432
-------------
Federal Agency Securities--0.7%
FNMA 5.72%, 1/13/98 ...................... 580 578,894
-------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $8,367,326)....................... 8,367,326
-------------
TOTAL INVESTMENTS--98.4%
(Identified cost $76,909,537) ..................... 78,207,174(a)
Cash and receivables, less liabilities--1.6% ...... 1,264,854
-------------
NET ASSETS--100.0% ................................. $ 79,472,028
=============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $2,413,348 and gross
depreciation of $1,371,529 for income tax purposes. At December 31, 1997,
the aggregate cost of securities for federal income tax purposes was
$77,165,355.
(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,
1997, these securities amounted to a value of $18,107,441 or 22.8% of net
assets.
(c) As rated by Standard & Poor's, Fitch or Duff & Phelps.
(d) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
(e) Rights incorporated as a unit.
(f) Non-income producing.
(g) Warrants incorporated as a unit.
See Notes to Financial Statements
14
<PAGE>
Institutional Managed Bond Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value
(Identified cost $76,909,537) $78,207,174
Cash 875,332
Receivables
Interest 998,351
Investment securities sold 430,375
Fund shares sold 237
-----------
Total Assets 80,511,469
-----------
Liabilities
Payables
Investment securities purchased 948,375
Fund shares repurchased 1,404
Investment advisory fee 14,703
Financial agent fee 6,964
Transfer agent fee 4,310
Distribution fee 1,434
Trustees' fee 1,122
Accrued expenses 61,129
-----------
Total liabilities 1,039,441
-----------
Net Assets $79,472,028
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $78,175,761
Accumulated net realized loss (1,370)
Net unrealized appreciation 1,297,637
-----------
Net Assets $79,472,028
===========
Class X
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $72,747,482) 2,193,072
Net asset value and offering price per share $33.17
Class Y
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $6,724,546) 202,686
Net asset value and offering price per share $33.18
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Investment Income
Interest $5,487,116
Dividends 361,699
----------
Total investment income 5,848,815
----------
Expenses
Investment advisory fee 352,253
Distribution fee--Class Y 15,527
Financial agent fee 82,000
Transfer agent 47,993
Registration 42,594
Custodian 28,104
Professional 21,627
Trustees 13,209
Printing 2,669
Miscellaneous 12,926
----------
Total expenses 618,902
Less expenses borne by investment adviser (172,844)
----------
Net expenses 446,058
----------
Net investment income 5,402,757
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 3,000,960
Net change in unrealized appreciation (depreciation) (942,641)
----------
Net gain on investments 2,058,319
----------
Net increase in net assets resulting from
operations $7,461,076
==========
</TABLE>
See Notes to Financial Statements
15
<PAGE>
Institutional Managed Bond Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
Year Ended March 1, 1996 to
December 31, 1997 December 31, 1996
------------------- ------------------
<S> <C> <C>
From Operations
Net investment income $ 5,402,757 $ 4,094,124
Net realized gain 3,000,960 1,624,424
Net change in unrealized appreciation (depreciation) (942,641) (396,251)
------------- -------------
Increase in net assets resulting from operations 7,461,076 5,322,297
------------- -------------
From Distributions to Shareholders
Net investment income--Class X (5,037,525) (3,719,461)
Net investment income--Class Y (398,984) (374,664)
Net realized gains--Class X (2,936,548) (1,199,095)
Net realized gains--Class Y (262,528) (118,493)
In excess of net investment income--Class X (382,909) (19,201)
In excess of net investment income--Class Y (30,327) (1,934)
------------- -------------
Decrease in net assets from distributions to shareholders (9,048,821) (5,432,848)
------------- -------------
From Share Transactions
Class X
Proceeds from sales of shares (482,929 and 538,250 shares, respectively) 16,708,642 18,818,739
Net asset value of shares issued from reinvestment of distributions (245,591 and
123,928 shares, respectively) 8,172,835 4,187,321
Net asset value of shares issued in conjunction with conversion of PHL Pooled
Separate Account P (0 and 1,774,264 shares, respectively) -- 60,037,092
Cost of shares repurchased (639,417 and 332,473 shares, respectively) (22,159,462) (11,414,976)
------------- -------------
Total 2,722,015 71,628,176
------------- -------------
Class Y
Proceeds from sales of shares (69,564 and 34,115 shares, respectively) 2,431,562 1,164,449
Net asset value of shares issued from reinvestment of distributions (20,824 and
14,700 shares, respectively) 691,833 495,088
Net asset value of shares issued in conjunction with conversion of PHL Pooled
Separate Account P (0 and 196,803 shares, respectively) -- 6,659,369
Cost of shares repurchased (94,022 and 39,298 shares, respectively) (3,277,501) (1,344,667)
------------- -------------
Total (154,106) 6,974,239
------------- -------------
Increase in net assets from share transactions 2,567,909 78,602,415
------------- -------------
Net increase in net assets 980,164 78,491,864
Net Assets
Beginning of period 78,491,864 0
------------- -------------
End of period (including undistributed net investment income of $0 and
$33,752, respectively) $ 79,472,028 $ 78,491,864
============= =============
</TABLE>
See Notes to Financial Statements
16
<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
Year Ended 3/1/96 to Year Ended 3/1/96 to
12/31/97 12/31/96 12/31/97 12/31/96
---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $33.98 $33.84 $33.97 $33.84
Income from investment operations
Net investment income 2.37(3)(5) 2.03(3)(5) 2.27(4)(5) 1.98(4)(5)
Net realized and unrealized gain 0.85 0.69 0.88 0.66
------- -------- ------- --------
Total from investment operations 3.22 2.72 3.15 2.64
------- -------- ------- --------
Less distributions
Dividends from net investment income (2.42) (1.96) (2.33) (1.89)
Dividends from net realized gains (1.43) (0.61) (1.43) (0.61)
In excess of net investment income (0.18) (0.01) (0.18) (0.01)
------- -------- ------- --------
Total distributions (4.03) (2.58) (3.94) (2.51)
------- -------- ------- --------
Change in net asset value (0.81) 0.14 (0.79) 0.13
------- -------- ------- --------
Net asset value, end of period $33.17 $33.98 $33.18 $33.97
======= ======== ======= ========
Total return 9.75% 8.24%(2) 9.52% 7.98%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) $72,747 $71,482 $6,725 $7,010
Ratio to average net assets of:
Operating expenses 0.55% 0.55%(1) 0.80% 0.80%(1)
Net investment income 6.92% 7.15%(1) 6.65% 6.91%(1)
Portfolio turnover 176% 199%(2) 176% 199%(2)
</TABLE>
(1) Annualized
(2) Not annualized
(3) Includes reimbursement of operating expenses by investment adviser of $0.08
and $0.09 per share, respectively.
(4) Includes reimbursement of operating expenses by investment adviser of $0.08
and $0.09 per share, respectively.
(5) Computed using average shares outstanding.
See Notes to Financial Statements
17
<PAGE>
Institutional Growth Stock Portfolio
- --------------------------------------------------------------------------------
INVESTMENTS AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
------------------ ----------------
<S> <C> <C>
COMMON STOCKS--93.4%
Banks (Major Regional)--6.7%
AmSouth Bancorporation ........................ 3,600 $ 195,525
Banc One Corp. ................................ 18,500 1,004,781
BankBoston Corp. .............................. 11,200 1,052,100
Compass Bancshares, Inc. ...................... 4,600 201,250
Mellon Bank Corp. ............................. 11,100 672,938
NationsBank Corp. ............................. 10,600 644,612
Southtrust Corp. .............................. 5,700 361,594
----------
4,132,800
----------
Banks (Money Center)--3.1%
BankAmerica Corp. ............................. 16,900 1,233,700
Citicorp ...................................... 5,600 708,050
----------
1,941,750
----------
Biotechnology--0.6%
Centocor, Inc. (b) ............................ 11,100 369,075
----------
Broadcasting (Television, Radio, & Cable)--0.7%
Chancellor Media Corp. (b) .................... 6,000 447,750
----------
Chemicals (Specialty)--0.6%
Solutia, Inc. (b) ............................. 14,500 386,969
----------
Communications Equipment--2.9%
Ciena Corp. (b) ............................... 16,700 1,020,787
Lucent Technologies, Inc. ..................... 9,300 742,837
----------
1,763,624
----------
Computers (Hardware)--5.3%
International Business Machines Corp. ......... 31,300 3,272,806
----------
Computers (Networking)--0.8%
Cisco Systems, Inc. (b) ....................... 8,450 471,087
----------
Computers (Peripherals)--0.5%
EMC Corp. (b) ................................. 11,900 326,506
----------
Computers (Software & Services)--6.4%
Adaptec, Inc. (b) ............................. 26,300 976,388
BMC Software, Inc. (b) ........................ 21,800 1,430,625
Compuware Corp. (b) ........................... 31,500 1,008,000
Edwards (J.D.) & Co. (b) ...................... 11,700 345,150
Yahoo!, Inc. (b) .............................. 2,800 193,900
----------
3,954,063
----------
Distributors (Food & Health)--1.6%
Cardinal Health, Inc. ......................... 13,100 984,137
----------
Electrical Equipment--2.0%
General Electric Co. .......................... 16,500 1,210,688
----------
Electronics (Instrumentation)--0.4%
Linear Technology Corp. ....................... 4,800 276,600
----------
Electronics (Semiconductors)--2.5%
National Semiconductor Corp. (b) .............. 36,400 944,125
Texas Instruments, Inc. ....................... 13,200 594,000
----------
1,538,125
----------
Entertainment--1.7%
Tele-Comm Liberty Media Group (b) ............. 28,700 1,040,375
----------
Financial (Diversified)--1.0%
American Express Co. .......................... 7,000 624,750
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------------------ ----------------
<S> <C> <C>
Health Care (Diversified)--3.6%
Bristol-Myers Squibb Co. ...................... 10,800 $1,021,950
Warner-Lambert Co. ............................ 9,800 1,215,200
----------
2,237,150
----------
Health Care (Drugs--Major Pharmaceuticals)--5.5%
Lilly (Eli) & Co. ............................. 7,500 522,188
Pfizer, Inc. .................................. 29,900 2,229,419
Watson Pharmaceuticals, Inc. (b) .............. 19,500 632,531
----------
3,384,138
----------
Health Care (Hospital Management)--1.7%
HBO & Co. ..................................... 22,100 1,060,800
----------
Health Care (Long Term Care)--1.1%
HEALTHSOUTH Corp. (b) ......................... 24,600 682,650
----------
Health Care (Medical Products & Supplies)--2.8%
Guidant Corp. ................................. 16,600 1,033,350
Medtronic, Inc. ............................... 13,500 706,219
----------
1,739,569
----------
Household Furn. & Appliances--1.1%
Sunbeam Corp., Inc. ........................... 16,000 674,000
----------
Household Products (Non-Durables)--1.2%
Colgate-Palmolive Co. ......................... 10,000 735,000
----------
Insurance (Life/Health)--0.6%
UNUM Corp. .................................... 6,600 358,875
----------
Insurance (Multi-Line)--1.8%
ReliaStar Financial Corp. ..................... 2,400 98,850
Travelers Group, Inc. ......................... 19,399 1,045,094
----------
1,143,944
----------
Insurance (Property-Casualty)--1.5%
AllState Corp. ................................ 10,400 945,100
----------
Investment Banking/Brokerage--0.5%
Merrill Lynch & Co., Inc. ..................... 4,400 320,925
----------
Machinery (Diversified)--1.1%
Deere & Co. ................................... 12,000 699,750
----------
Manufacturing (Diversified)--2.9%
Tyco International Ltd. ....................... 40,000 1,802,500
----------
Oil (Domestic Integrated)--1.9%
Tosco Corp. ................................... 30,800 1,164,625
----------
Oil & Gas (Drilling & Equipment)--8.4%
BJ Services Co. (b) ........................... 8,900 640,244
Cooper Cameron Corp. (b) ...................... 4,200 256,200
Diamond Offshore Drilling, Inc. ............... 12,900 620,813
Halliburton Co. ............................... 21,600 1,121,850
Nabors Industries, Inc. (b) ................... 4,300 135,181
Noble Drilling Corp. (b) ...................... 9,000 275,625
Rowan Companies, Inc. (b) ..................... 8,100 247,050
Schlumberger Ltd. ............................. 15,800 1,271,900
Transocean Offshore, Inc. ..................... 13,600 655,350
----------
5,224,213
----------
Oil & Gas (Refining & Marketing)--0.6%
Santa Fe International Corp. .................. 8,800 358,050
----------
Personal Care--2.1%
Gillette Co. .................................. 12,880 1,293,635
----------
</TABLE>
See Notes to Financial Statements
20
<PAGE>
Institutional Growth Stock Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
-------- --------------
<S> <C> <C>
Retail (Building Supplies)--1.8%
Home Depot, Inc. ............................. 19,400 $ 1,142,175
------------
Retail (Drug Stores)--3.5%
CVS Corp. .................................... 17,500 1,121,094
Rite Aid Corp. ............................... 18,300 1,073,981
------------
2,195,075
------------
Retail (Food Chains)--2.3%
Safeway, Inc. (b) ............................ 22,200 1,404,150
------------
Retail (General Merchandise)--1.9%
Borders Group, Inc. (b) ...................... 15,000 469,688
Staples, Inc. (b) ............................ 24,600 682,650
------------
1,152,338
------------
Telecommunications (Cellular/Wireless)--2.7%
AirTouch Communications, Inc. (b) ............ 41,000 1,704,063
------------
Telecommunications (Long Distance)--3.4%
AT&T Corp. ................................... 34,500 2,113,125
------------
Tobacco--2.6%
Philip Morris Companies, Inc. ................ 35,700 1,617,656
------------
TOTAL COMMON STOCKS
(Identified cost $50,081,522) ........................ 57,894,611
------------
FOREIGN COMMON STOCKS--6.6%
Computers (Software & Services)--0.3%
Baan Company NV (Netherlands) (b) ............ 5,000 165,000
------------
Health Care (Drugs--Major Pharmaceuticals)--1.6%
SmithKline Beecham PLC Sponsored
ADR (United Kingdom) ....................... 19,200 987,600
------------
Health Care (Medical Products & Supplies)--0.5%
Elan PLC Sponsored ADR (Ireland) (b) ......... 6,600 337,838
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
-------- --------------
<S> <C> <C>
Household Furn. & Appliances--2.7%
Philips Electronics NV ADR NY
Registered shares (Netherlands) ............ 27,500 $ 1,663,750
------------
Oil (International Integrated)--1.5%
Elf Aquitane SA Sponsored ADR (France) 15,500 908,687
------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $4,252,478) ........................... 4,062,875
------------
TOTAL LONG-TERM INVESTMENTS--100.0%
(Identified cost $54,334,000) .......................... 61,957,486
------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------- -------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--0.7%
Commercial Paper--0.7%
Marsh & McLennan Cos.
6.20%, 1/5/98 ................................ A-1+ $270 269,814
Private Export Funding
Corp. 5.99%, 1/7/98 .......................... A-1+ 190 189,810
------------
459,624
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $459,624) ............................................ 459,624
------------
TOTAL INVESTMENTS--100.7%
(Identified cost $54,793,624) ......................................... 62,417,110(a)
Cash and receivables, less liabilities--(0.7%) ...................... (435,638)
------------
NET ASSETS--100.0% ..................................................... $61,981,472
============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $9,610,885 and gross
depreciation of $2,113,195 for income tax purposes. At December 31, 1997,
the aggregate cost of securities for federal income tax purposes was
$54,919,420.
(b) Non-income producing.
See Notes to Financial Statements
21
<PAGE>
Institutional Growth Stock Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value
(Identified cost $54,793,624) $62,417,110
Receivables
Investment securities sold 9,996,581
Fund shares sold 109,878
Dividends and interest 78,499
-----------
Total assets 72,602,068
-----------
Liabilities
Payables
Custodian 70,159
Fund shares repurchased 10,321,956
Investment securities purchased 127,173
Investment advisory fee 22,023
Financial agent fee 5,266
Transfer agent fee 4,400
Distribution fee 3,830
Trustees' fee 1,122
Accrued expenses 64,667
-----------
Total liabilities 10,620,596
-----------
Net Assets $61,981,472
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $48,995,450
Accumulated net realized gain 5,362,536
Net unrealized appreciation 7,623,486
-----------
Net Assets $61,981,472
===========
Class X
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $44,350,168) 1,310,362
Net asset value and offering price per share $ 33.85
Class Y
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $17,631,304) 520,694
Net asset value and offering price per share $ 33.86
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Investment Income
Dividends $ 882,176
Interest 269,325
-----------
Total investment income 1,151,501
-----------
Expenses
Investment advisory fee 515,459
Distribution fee--Class Y 52,154
Financial agent fee 62,000
Transfer agent 50,376
Registration 43,182
Custodian 23,646
Professional 19,322
Trustees 13,309
Printing 2,226
Miscellaneous 15,227
-----------
Total expenses 796,901
Less expenses borne by investment adviser (143,366)
-----------
Net expenses 653,535
-----------
Net investment income 497,966
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 27,922,808
Net realized loss on foreign currency transactions (132)
Net change in unrealized appreciation (depreciation) (8,683,661)
-----------
Net gain on investments 19,239,015
-----------
Net increase in net assets resulting from
operations $19,736,981
===========
</TABLE>
See Notes to Financial Statements
22
<PAGE>
Institutional Growth Stock Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
Year Ended March 1, 1996 to
December 31, 1997 December 31, 1996
------------------- ------------------
<S> <C> <C>
From Operations
Net investment income $ 497,966 $ 930,570
Net realized gain 27,922,676 28,236,436
Net change in unrealized appreciation (depreciation) (8,683,661) (12,435,676)
------------- --------------
Increase in net assets resulting from operations 19,736,981 16,731,330
------------- --------------
From Distributions to Shareholders
Net investment income--Class X (454,672) (835,353)
Net investment income--Class Y (109,947) (86,185)
Net realized gains--Class X (27,451,354) (12,433,098)
Net realized gains--Class Y (8,523,137) (2,389,027)
In excess of net investment income--Class X (20,589) --
In excess of net investment income--Class Y (4,979) --
------------- --------------
Decrease in net assets from distributions to shareholders (36,564,678) (15,743,663)
------------- --------------
From Share Transactions
Class X
Proceeds from sales of shares (186,821 and 200,121 shares, respectively) 8,631,368 9,732,878
Net asset value of shares issued from reinvestment of distributions (760,770 and
275,344 shares, respectively) 27,925,887 13,268,434
Net asset value of shares issued in conjunction with conversion of PHL Pooled
Separate Account S (0 and 3,807,589 shares, respectively) -- 182,803,604
Cost of shares repurchased (1,381,997 and 2,538,286 shares, respectively) (61,947,854) (124,359,905)
------------- --------------
Total (25,390,599) 81,445,011
------------- --------------
Class Y
Proceeds from sales of shares (34,497 and 68,980 shares, respectively) 1,706,016 3,405,171
Net asset value of shares issued from reinvestment of distributions (235,940 and
51,358 shares, respectively) 8,638,038 2,475,206
Net asset value of shares issued in conjunction with conversion of PHL Pooled
Separate Account S (0 and 493,631 shares, respectively) -- 23,699,396
Cost of shares repurchased (234,220 and 129,492 shares, respectively) (11,860,743) (6,295,994)
------------- --------------
Total (1,516,689) 23,283,779
------------- --------------
Increase (decrease) in net assets from share transactions (26,907,288) 104,728,790
------------- --------------
Net increase (decrease) in net assets (43,734,985) 105,716,457
Net Assets
Beginning of period 105,716,457 0
------------- --------------
End of period (including undistributed net investment income of $0 and
$66,653, respectively) $ 61,981,472 $ 105,716,457
============= ==============
</TABLE>
See Notes to Financial Statements
23
<PAGE>
Institutional Growth Stock Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class X Class Y
----------------------------------------- ----------------------------------------
From Inception From Inception
Year Ended 3/1/96 to Year Ended 3/1/96 to
12/31/97 12/31/96 12/31/97 12/31/96
---------------------- ---------------- ---------------------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $47.42 $48.01 $47.43 $48.01
Income from investment operations(6)
Net investment income 0.31(4)(7) 0.34(4) 0.18(5)(7) 0.18(5)
Net realized and unrealized gain 10.60 4.89 10.59 4.95
------------- ----------- ------------- -----------
Total from investment operations 10.91 5.23 10.77 5.13
------------- ----------- ------------- -----------
Less distributions
Dividends from net investment income (0.39) (0.30) (0.31) (0.19)
Dividends from net realized gains (24.07)(8) (5.52) (24.02)(8) (5.52)
In excess of net investment income (0.02) -- (0.01) --
------------- ----------- ------------- -----------
Total distributions (24.48) (5.82) (24.34) (5.71)
------------- ----------- ------------- -----------
Change in net asset value (13.57) (0.59) (13.57) (0.58)
------------- ----------- ------------- -----------
Net asset value, end of period $33.85 $47.42 $33.86 $47.43
============= ============= =============== =============
Total return 25.76% 10.71%(2) 25.46% 10.48%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) $44,350 $82,739 $17,631 $22,978
Ratio to average net assets of:
Operating expenses 0.70% 0.70%(1) 0.95% 0.95%(1)
Net investment income 0.64% 0.65%(1) 0.39% 0.39%(1)
Portfolio turnover 148% 99%(2) 148% 99%(2)
Average commission rate paid(3) $0.0503 $0.0543 $0.0503 $0.0543
</TABLE>
(1) Annualized
(2) Not annualized
(3) 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 $0.08
and $0.04, respectively.
(5) Includes reimbursement of operating expenses by investment adviser of $0.08
and $0.04, respectively.
(6) 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 timing of share purchases and
redemptions.
(7) Computed using average shares outstanding.
(8) Includes amounts distributed as income and redesignated for tax purposes.
See Notes to Financial Statements
24
<PAGE>
Institutional Money Market Portfolio
- --------------------------------------------------------------------------------
INVESTMENTS AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
Face
Amount Interest Maturity
(000) Description Rate Date Value
- --------- ------------- ---------- --------- ------------
<S> <C> <C> <C> <C>
FEDERAL AGENCY SECURITIES--8.8%
$ 110 FNMA (c) .. 6.05% 1/12/98 $ 110,002
260 FNMA (c) .. 6.02 1/20/98 260,008
500 FHLB ...... 5.78 1/28/98 500,000
----------
TOTAL FEDERAL AGENCY SECURITIES . . . . . . 870,010
----------
Reset
Date
-------
FEDERAL AGENCY SECURITIES--VARIABLE--17.3% (b)
1,000 SLMA (final
maturity
2/22/99) ... 5.63 1/6/98 1,000,000
700 FNMA (final
maturity
12/14/98) .. 5.51 3/14/98 699,634
----------
TOTAL FEDERAL AGENCY SECURITIES--VARIABLE 1,699,634
----------
</TABLE>
<TABLE>
<CAPTION>
Standard
& Poor's
Rating Maturity
(Unaudited) Date
----------- --------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER--80.1%
500 Koch Industries,
Inc. ................. A-1+ 6.70 1/2/98 499,907
290 AlliedSignal, Inc. ..... A-1 6.00 1/5/98 289,807
200 General Electric
Capital Corp. ........ A-1+ 6.25 1/5/98 199,861
350 Greenwich Funding
Corp. ................ A-1+ 5.78 1/5/98 349,775
235 Preferred
Receivables
Funding Corp. ........ A-1 5.95 1/6/98 234,806
100 Sara Lee Corp. ......... A-1+ 6.05 1/7/98 99,899
250 Minnesota Mining
& Manufacturing
Co. .................. A-1+ 5.90 1/9/98 249,672
270 Potomac Electric
Power Co. ............ A-1 6.10 1/9/98 269,634
265 Receivables Capital
Corp. ................ A-1+ 5.90 1/9/98 264,652
220 International Lease
Finance Corp. ........ A-1 5.95 1/12/98 219,600
330 Exxon Imperial
U.S., Inc. ........... A-1+ 5.82 1/13/98 329,360
</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
$ 250 Corporate Receivables
Corp. .................. A-1 5.875% 1/14/98 $ 249,470
300 Deutsche Bank, NY ........ A-1+ 5.64 1/15/98 300,000
455 Koch Industries, Inc. A-1+ 5.90 1/15/98 453,956
425 Vermont American
Corp. .................. A-1+ 6.20 1/16/98 423,902
250 General Electric Co. ..... A-1+ 5.75 1/21/98 249,201
250 Receivables Capital
Corp. .................. A-1+ 5.81 1/26/98 248,991
350 CXC, Inc. ................ A-1+ 5.57 1/27/98 348,592
365 Goldman, Sachs
& Co. .................. A-1+ 5.85 1/30/98 363,280
250 Merrill Lynch & Co.,
Inc. ................... A-1+ 5.58 1/30/98 248,876
300 Pitney Bowes Credit
Corp. .................. A-1+ 5.52 1/30/98 298,666
345 Corporate Asset
Funding Co., Inc. ...... A-1+ 5.90 2/4/98 343,077
350 Procter & Gamble Co. A-1+ 5.63 2/11/98 347,756
250 Preferred Receivables
Funding Corp. .......... A-1 5.83 2/12/98 248,300
240 AT&T Corp. ............... A-1+ 5.75 2/27/98 237,815
255 Enterprise Funding
Corp. .................. A-1+ 5.69 2/27/98 252,703
270 General Re Corp. ......... A-1+ 5.73 3/13/98 266,949
-------------
TOTAL COMMERCIAL PAPER ................................................. 7,888,507
-------------
MEDIUM-TERM NOTES--5.1%
100 General Electric
Capital Corp. .......... A-1+ 7.125 4/6/98 100,321
400 Associates
Corporation of
North America .......... AA- 6.375 8/15/98 401,077
-------------
TOTAL MEDIUM-TERM NOTES ................................................ 501,398
-------------
TOTAL INVESTMENTS--111.3%
(Identified cost $10,959,549).......................................... 10,959,549(a)
Cash and receivables, less liabilities--(11.3%) ....................... (1,109,175)
-------------
NET ASSETS--100.0% .................................................... $ 9,850,374
=============
</TABLE>
(a) Federal Income Tax Information: At December 31, 1997, the aggregate cost of
securities was the same for book and tax purposes.
(b) Variable rate demand notes. The interest rates shown reflect the rates
currently in effect.
(c) Medium-term Note.
See Notes to Financial Statements
27
<PAGE>
Institutional Money Market Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value
(Identified cost $10,959,549) $10,959,549
Cash 8,759
Receivables
Fund shares sold 149,080
Interest 60,453
Receivable from adviser 10,680
-----------
Total assets 11,188,521
-----------
Liabilities
Payables
Fund shares repurchased 1,262,532
Dividend distributions 12,184
Transfer agent fee 4,250
Financial agent fee 3,992
Trustees' fee 1,122
Distribution fee 347
Accrued expenses 53,720
-----------
Total liabilities 1,338,147
-----------
Net Assets $9,850,374
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $9,850,374
-----------
Net Assets $9,850,374
===========
Class X
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $8,128,849) 8,128,849
Net asset value and offering price per share $1.00
Class Y
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $1,721,525) 1,721,525
Net asset value and offering price per share $1.00
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Investment Income
Interest $647,426
--------
Total investment income 647,426
--------
Expenses
Investment advisory fee 29,153
Distribution fee--Class Y 4,269
Financial agent fee 46,998
Transfer agent 46,157
Registration 28,766
Professional 16,901
Trustees 13,509
Custodian 11,423
Printing 4,962
Miscellaneous 5,982
--------
Total expenses 208,120
Less expenses borne by investment adviser (163,040)
--------
Net expenses 45,080
--------
Net investment income 602,346
--------
Net increase in net assets resulting from
operations $602,346
========
</TABLE>
See Notes to Financial Statements
28
<PAGE>
Institutional Money Market Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
Year Ended March 1, 1996 to
December 31, 1997 December 31, 1996
------------------- ------------------
<S> <C> <C>
From Operations
Net investment income $ 602,346 $ 563,801
------------- -------------
Increase in net assets resulting from operations 602,346 563,801
------------- -------------
From Distributions to Shareholders
Net investment income--Class X (517,729) (454,271)
Net investment income--Class Y (84,617) (109,530)
------------- -------------
Decrease in net assets from distributions to shareholders (602,346) (563,801)
------------- -------------
From Share Transactions
Class X
Proceeds from sales of shares (13,237,363 and 17,010,234 shares, respectively) 13,237,363 17,010,234
Net asset value of shares issued from reinvestment of distributions (504,476 and 438,107
shares, respectively) 504,476 438,107
Net asset value of shares issued in conjunction with conversion of PHL Pooled
Separate Account G (0 and 8,106,057 shares, respectively) -- 8,106,057
Cost of shares repurchased (20,794,521 and 10,372,867 shares, respectively) (20,794,521) (10,372,867)
------------- -------------
Total (7,052,682) 15,181,531
------------- -------------
Class Y
Proceeds from sales of shares (1,448,463 and 2,849,561 shares, respectively) 1,448,463 2,849,561
Net asset value of shares issued from reinvestment of distributions (83,278 and 105,240
shares, respectively) 83,278 105,240
Net asset value of shares issued in conjunction with conversion of PHL
Pooled Separate Account G (0 and 2,666,813 shares, respectively) -- 2,666,813
Cost of shares repurchased (1,939,870 and 3,491,960 shares, respectively) (1,939,870) (3,491,960)
------------- -------------
Total (408,129) 2,129,654
------------- -------------
Increase (decrease) in net assets from share transactions (7,460,811) 17,311,185
------------- -------------
Net increase (decrease) in net assets (7,460,811) 17,311,185
Net Assets
Beginning of period 17,311,185 0
------------- -------------
End of period $ 9,850,374 $ 17,311,185
============= =============
</TABLE>
See Notes to Financial Statements 29
<PAGE>
Institutional Money Market Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class X Class Y
--------------------------------- --------------------------------
From Inception From Inception
Year Ended 3/1/96 to Year Ended 3/1/96 to
12/31/97 12/31/96 12/31/97 12/31/96
-------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00
Income from investment operations
Net investment income 0.052(3) 0.043(3) 0.050(4) 0.040(4)
---------- ---------- ---------- ----------
Total from investment operations 0.052 0.043 0.050 0.040
---------- ---------- ---------- ----------
Less distributions
Dividends from net investment income (0.052) (0.043) (0.050) (0.040)
---------- ---------- ---------- ----------
Change in net asset value -- -- -- --
---------- ---------- ---------- ----------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00
========== ========== ========== ==========
Total return 5.34% 4.34%(2) 5.08% 4.11%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) $8,129 $15,182 $1,722 $2,130
Ratio to average net assets of:
Operating expenses 0.35% 0.35%(1) 0.60% 0.60%(1)
Net investment income 5.20% 5.08%(1) 4.96% 4.84%(1)
</TABLE>
(1) Annualized
(2) Not annualized
(3) Includes reimbursement of operating expenses by investment adviser of $0.01
and less than $0.01, respectively.
(4) Includes reimbursement of operating expenses by investment adviser of $0.01
and less than $0.01, respectively.
See Notes to Financial Statements
30
<PAGE>
Institutional U.S. Government Securities Portfolio
- --------------------------------------------------------------------------------
INVESTMENTS AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- --------- ------------------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--74.2%
U.S. Treasury Notes--41.7%
U.S. Treasury Notes 5.875%,
10/31/98 .................................. AAA $ 250 $ 250,390
U.S. Treasury Notes 5.875%,
2/28/99 ................................... AAA 500 501,360
U.S. Treasury Notes 5.625%,
10/31/99 .................................. AAA 1,500 1,498,125
U.S. Treasury Notes 5.75%,
11/30/02 .................................. AAA 750 750,703
U.S. Treasury Notes 6.50%,
10/15/06 .................................. AAA 500 523,460
----------
3,524,038
------------
Agency Mortgage-Backed Securities--32.5%
FNMA 5.25%, 8/25/13 ......................... AAA 1,417 1,409,320
FNMA 5.50%, 2/25/14 ......................... AAA 1,343 1,336,974
----------
2,746,294
------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(Identified cost $6,221,942) ........................................ 6,270,332
------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- --------- ------------------
<S> <C> <C> <C>
MUNICIPAL BONDS--5.7%
Chicago Public Building
Taxable 7%, 1/1/07 (b) .................... AAA $ 450 $ 479,776
------------
TOTAL MUNICIPAL BONDS
(Identified cost $447,854) ............................................ 479,776
------------
TOTAL LONG-TERM INVESTMENTS--79.9%
(Identified cost $6,669,796) .......................................... 6,750,108
------------
SHORT-TERM OBLIGATIONS--19.5%
Federal Agency Securities--19.5%
FHLMC 5.75%, 1/20/98 ...................................... 1,655 1,649,978
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $1,649,978) .......................................... 1,649,978
------------
TOTAL INVESTMENTS--99.4%
(Identified cost $8,319,774) .......................................... 8,400,086(a)
Cash and receivables, less liabilities--0.6% ......................... 51,353
------------
NET ASSETS--100.0% ...................................................... $8,451,439
============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $80,312 and gross
depreciation of $0 for income tax purposes. At December 31, 1997, the
aggregate cost of securities for federal income tax purposes was
$8,319,774.
(b) These municipal bonds are fully defeased by U.S. Government Treasury
Obligations.
See Notes to Financial Statements
33
<PAGE>
Institutional U.S. Government Securities Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value
(Identified cost $8,319,774) $8,400,086
Cash 15,575
Receivables
Interest 65,729
Fund shares sold 20,794
Receivable from adviser 9,224
----------
Total assets 8,511,408
----------
Liabilities
Payables
Fund shares repurchased 146
Financial agent fee 6,964
Transfer agent fee 3,725
Trustees' fee 1,122
Distribution fee 858
Accrued expenses 47,154
----------
Total liabilities 59,969
----------
Net Assets $8,451,439
==========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $8,569,084
Undistributed net investment income 3,572
Accumulated net realized loss (201,529)
Net unrealized appreciation 80,312
----------
Net Assets $8,451,439
==========
Class X
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $4,432,450) 334,198
Net asset value and offering price per share $13.26
Class Y
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $4,018,989) 303,212
Net asset value and offering price per share $13.25
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Investment Income
Interest $470,872
--------
Total investment income 470,872
--------
Expenses
Investment advisory fee 25,340
Distribution fee--Class Y 10,506
Financial agent fee 82,000
Transfer agent 41,097
Registration 34,931
Professional 17,286
Trustees 13,409
Printing 3,916
Custodian 2,976
Miscellaneous 3,908
--------
Total expenses 235,369
Less expenses borne by investment adviser (191,076)
--------
Net expenses 44,293
--------
Net investment income 426,579
--------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 75,919
Net change in unrealized appreciation (depreciation) on
investments 49,718
--------
Net gain on investments 125,637
--------
Net increase in net assets resulting from
operations $552,216
========
</TABLE>
See Notes to Financial Statements
34
<PAGE>
Institutional U.S. Government Securities Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
Year Ended March 1, 1996 to
December 31, 1997 December 31, 1996
------------------- ------------------
<S> <C> <C>
From Operations
Net investment income $ 426,579 $ 467,991
Net realized gain (loss) 75,919 (236,317)
Net change in unrealized appreciation (depreciation) 49,718 193,233
------------ ------------
Increase in net assets resulting from operations 552,216 424,907
------------ ------------
From Distributions to Shareholders
Net investment income--Class X (215,503) (297,193)
Net investment income--Class Y (211,076) (170,798)
In excess of net investment income--Class X (21,208) (33,911)
In excess of net investment income--Class Y (20,773) (19,488)
------------ ------------
Decrease in net assets from distributions to shareholders (468,560) (521,390)
------------ ------------
From Share Transactions
Class X
Proceeds from sales of shares (112,978 and 68,722 shares, respectively) 1,507,428 922,793
Net asset value of shares issued from reinvestment of distributions (17,887 and
21,717 shares, respectively) 236,709 285,465
Net asset value of shares issued in conjunction with conversion of PHL Pooled
Separate Account U (0 and 826,222 shares, respectively) -- 11,033,355
Cost of shares repurchased (156,630 and 556,698 shares, respectively) (2,080,993) (7,465,688)
------------ ------------
Total (336,856) 4,775,925
------------ ------------
Class Y
Proceeds from sales of shares (146,257 and 199,852 shares, respectively) 1,941,555 2,672,950
Net asset value of shares issued from reinvestment of distributions (17,536 and
14,474 shares, respectively) 231,847 190,283
Net asset value of shares issued in conjunction with conversion of PHL Pooled
Separate Account U (0 and 150,065 shares, respectively) -- 2,003,966
Cost of shares repurchased (132,875 and 92,097 shares, respectively) (1,781,224) (1,234,180)
------------ ------------
Total 392,178 3,633,019
------------ ------------
Increase in net assets from share transactions 55,322 8,408,944
------------ ------------
Net increase in net assets 138,978 8,312,461
Net Assets
Beginning of period 8,312,461 0
------------ ------------
End of period (including undistributed net investment income of $3,572
and $0, respectively) $ 8,451,439 $ 8,312,461
============ ============
</TABLE>
See Notes to Financial Statements
35
<PAGE>
Institutional U.S. Government Securities Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class X Class Y
--------------------------------------------- ---------------------------------------------
From Inception From Inception
Year Ended 3/1/96 to Year Ended 3/1/96 to
12/31/97 12/31/96 12/31/97 12/31/96
---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $13.15 $13.35 $13.14 $13.35
Income from investment operations(6)
Net investment income 0.69(3)(5) 0.62(3)(5) 0.65(4)(5) 0.59(4)(5)
Net realized and unrealized gain 0.18 0.02 0.19 0.01
-------------- -------------- -------------- --------------
Total from investment operations 0.87 0.64 0.84 0.60
-------------- -------------- -------------- --------------
Less distributions
Dividends from net investment income (0.69) (0.75) (0.66) (0.73)
In excess of net investment income (0.07) (0.09) (0.07) (0.08)
-------------- -------------- -------------- --------------
Total distributions (0.76) (0.84) (0.73) (0.81)
-------------- -------------- -------------- --------------
Change in net asset value 0.11 (0.20) 0.11 (0.21)
-------------- -------------- -------------- --------------
Net asset value, end of period $13.26 $13.15 $13.25 $13.14
============== ============== ============== ==============
Total return 6.69% 4.86%(2) 6.44% 4.56%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) $4,432 $4,734 $4,019 $3,578
Ratio to average net assets of:
Operating expenses 0.40% 0.40%(1) 0.65% 0.65%(1)
Net investment income 5.18% 5.58%(1) 4.92% 5.32%(1)
Portfolio turnover 232% 175%(2) 232% 175%(2)
</TABLE>
(1) Annualized
(2) Not annualized
(3) Includes reimbursement of operating expenses by investment adviser of $0.30
and $0.19, respectively.
(4) Includes reimbursement of operating expenses by investment adviser of $0.30
and $0.19, respectively.
(5) Computed using average shares outstanding.
(6) 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 timing of share purchases and
redemptions.
See Notes to Financial Statements
36
<PAGE>
Institutional Enhanced Reserves Portfolio
- --------------------------------------------------------------------------------
INVESTMENTS AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- ------------ -----------------
<S> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES--18.9%
U.S. Treasury Notes--12.1%
U.S. Treasury Notes 7.75%,
1/31/00 ..................................................... Aaa $4,000 $4,161,248
U.S. Treasury Notes 5.75%,
10/31/02 .................................................... Aaa 5,200 5,206,500
----------
9,367,748
----------
Agency Asset-Backed Securities--5.2%
SLMA 97-1, A1 5.715%,
10/25/05 (b) ................................................ Aaa 2,686 2,683,059
SLMA 97-2, A1 5.795%,
10/25/05 (b) ................................................ Aaa 1,359 1,351,762
----------
4,034,821
----------
Agency Mortgage-Backed Securities--1.6%
FNMA 7.739%, 3/1/20 ........................................... Aaa 1,162 1,219,320
----------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(Identified cost $14,597,637) ............................................................. 14,621,889
----------
NON-CONVERTIBLE BONDS--68.8%
Asset-Backed Securities--41.4%
Amresco 97-2, A9 6.179%,
6/25/27 (b) ................................................. Aaa 1,739 1,739,304
CIT RV Trust 96-A, A 5.40%,
12/15/11 .................................................... Aaa 1,582 1,570,449
Case Equipment Loan Trust
94-C, A2 8.10%, 6/15/01 ..................................... Aaa 1,291 1,302,159
ContiMortgage Home Equity
Loan Trust 97-3, A10 6.19%,
8/15/28 (b) ................................................. Aaa 1,760 1,758,546
Discover Card Master Trust 96-4,
A 6.355%, 10/16/13 (b) ...................................... Aaa 2,500 2,547,225
First Plus Home Loan Trust
96-2, A1 6.80%, 6/20/05 ..................................... Aaa 875 873,321
First Plus Home Loan Trust
97-3, A1 6.10%, 4/10/06 (b) ................................. AAA(c) 2,135 2,134,301
Fleetwood Credit Corporation
Grantor Trust 93-A, A 6%,
1/15/08 ..................................................... Aaa 1,791 1,783,761
Ford Credit Grantor Trust 95-A,
A 5.90%, 5/15/00 ............................................ Aaa 687 687,852
Green Tree Financial Corp.
96-8, A2 6.55%, 10/15/27 .................................... Aaa 3,000 3,043,500
Green Tree Home Improvement
Loan Trust 97-A, HEAR
6.17%, 3/15/27 (b) .......................................... AAA(c) 2,128 2,125,461
Household Consumer Loan Trust
96-2, A2 6.30%, 8/15/06 (b) ................................. Aa 3,000 3,005,337
MBNA Master Credit Card Trust
94-B, A 5.77%, 1/15/02 (b) .................................. Aaa 2,500 2,508,175
Money Store (The) 96-C, A1
6.70%, 9/15/08 .............................................. Aaa 398 399,823
</TABLE>
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
--------------- ------------ -----------------
<S> <C> <C> <C>
Asset-Backed Securities--continued
Money Store (The) 95-A, A7
6.645%, 6/15/25 (b) ......................................... Aaa $1,851 $1,869,312
UCFC Home Equity Loan
96-B1, A3 7.30%, 4/15/14 .................................... Aaa 1,000 1,012,500
UCFC Home Equity Loan 97-D,
A3 6.51%, 1/15/16 ........................................... Aaa 2,500 2,506,250
Western Financial Grantor Trust
95-2, A1 7.10%, 7/1/00 ...................................... Aaa 1,066 1,075,104
----------
31,942,380
----------
Banks (Major Regional)--3.1%
Northern Trust Capital 6.278%,
1/15/27 (b) ................................................. A 2,500 2,409,375
----------
Banks (Money Center)--3.2%
Chase Capital II 6.25%,
2/1/27 (b) .................................................. Aa 2,500 2,431,250
----------
Broker-Dealers--3.2%
Morgan Stanley Group MTNC
5.976%, 12/28/98 (b) ........................................ A 2,500 2,501,250
----------
Consumer Finance--3.2%
General Motors Acceptance
Corp. Global Bond 5.906%,
4/29/02 (b) ................................................. A 2,500 2,500,450
----------
Non-Agency Mortgage-Backed Securities--12.1%
Independent National Mortgage
Corp. 96-E, A2 6.93%,
5/25/26 ..................................................... Aaa 2,277 2,280,004
Residential Accredit Loans, Inc.
97-QS9, A1 6.75%, 9/25/27 ................................... Aaa 3,032 3,034,003
Residential Accredit Loans, Inc.
98-QS1 7%, 12/25/27 (d) ..................................... Aaa 2,000 2,000,937
Residential Funding Mortgage
Securities I 97-S9, A20
7.50%, 7/25/27 .............................................. Aaa 2,000 2,053,125
----------
9,368,069
----------
Retail (General Merchandise)--2.6%
Sears Roebuck Co. 8.45%,
11/1/98 ..................................................... A 2,000 2,039,714
----------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $53,105,499) ..................................................... 53,192,488
----------
TOTAL LONG-TERM INVESTMENTS--87.7%
(Identified cost $67,703,136) ..................................................... 67,814,377
----------
</TABLE>
See Notes to Financial Statements
39
<PAGE>
Institutional Enhanced Reserves Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------- --------- -------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--10.4%
Commercial Paper--8.7%
Ford Motor Credit Co. 5.857%,
1/7/98 ......................... P1 $2,000 $2,000,000
American Express Credit Co.
5.838%, 1/8/98 ................. P1 1,500 1,500,000
General Motors Acceptance
Corp. 5.863%, 2/24/98 .......... P1 1,250 1,250,063
General Electric Capital Corp.
5.781%, 3/10/98 ................ P1 2,000 1,999,940
----------
6,750,003
----------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000) VALUE
--------- -----------------
<S> <C> <C>
Repurchase Agreement--1.7%
State Street Bank and Trust Co. Repurchase
Agreement, 5.15%, dated 12/31/97 due
1/2/98, repurchase price $1,289,369,
collateralized by U.S. Treasury Note
5.625%, 11/30/99, market value
$1,320,478 .................................. $1,289 $ 1,289,000
-------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $8,039,000) ............................. 8,039,003
-------------
TOTAL INVESTMENTS--98.1%
(Identified cost $75,742,136) ............................ 75,853,380(a)
Cash and receivables, less liabilities--1.9% ............ 1,430,077
-------------
NET ASSETS--100.0% ........................................ $ 77,283,457
=============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $247,994 and gross
depreciation of $136,750 for income tax purposes. At December 31, 1997,
the aggregate cost of securities for income tax purposes was $75,742,136.
(b) Variable or step coupon security; interest rate shown reflects the rate
currently in effect.
(c) As rated by Standard & Poor's.
(d) When issued.
See Notes to Financial Statements
40
<PAGE>
Institutional Enhanced Reserves Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value
(Identified cost $75,742,136) $75,853,380
Cash 1,040,919
Receivables
Investment securities sold 2,000,860
Interest 542,101
Receivable from adviser 158
-----------
Total assets 79,437,418
-----------
Liabilities
Payables
Investment securities purchased 2,000,938
Dividend distributions 80,739
Financial agent fee 6,964
Transfer agent fee 3,625
Trustees' fee 1,122
Distribution fee 430
Accrued expenses 60,143
-----------
Total liabilities 2,153,961
-----------
Net Assets $77,283,457
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $77,579,071
Distributions in excess of net investment income (43,059)
Accumulated net realized loss (363,799)
Net unrealized appreciation 111,244
-----------
Net Assets $77,283,457
===========
Class X
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $75,269,459) 7,564,860
Net asset value and offering price per share $9.95
Class Y
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $2,013,998) 202,502
Net asset value and offering price per share $9.95
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Investment Income
Interest $5,447,262
----------
Total investment income 5,447,262
----------
Expenses
Investment advisory fee 211,566
Distribution fee--Class Y 5,092
Financial agent fee 82,000
Registration 47,028
Transfer agent 41,612
Professional 22,039
Trustees 13,571
Custodian 13,186
Printing 3,476
Miscellaneous 1,466
----------
Total expenses 441,036
Less expenses borne by investment adviser (136,227)
----------
Net expenses 304,809
----------
Net investment income 5,142,453
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized loss on securities (15,822)
Net change in unrealized appreciation (depreciation) on
investments (108,788)
----------
Net loss on investments (124,610)
----------
Net increase in net assets resulting from
operations $5,017,843
==========
</TABLE>
See Notes to Financial Statements
41
<PAGE>
Institutional Enhanced Reserves Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
Year Ended July 19, 1996 to
December 31, 1997 December 31, 1996
------------------- ------------------
<S> <C> <C>
From Operations
Net investment income $ 5,142,453 $ 3,138,403
Net realized loss (15,822) (212,416)
Net change in unrealized appreciation (depreciation) (108,788) 278,680
-------------- --------------
Increase in net assets resulting from operations 5,017,843 3,204,667
-------------- --------------
From Distributions to Shareholders
Net investment income--Class X (5,018,041) (3,113,690)
Net investment income--Class Y (113,618) (7,637)
-------------- --------------
Decrease in net assets from distributions to shareholders (5,131,659) (3,121,327)
-------------- --------------
From Share Transactions
Class X
Proceeds from sales of shares (21,169,694 and 18,754,392 shares, respectively) 210,525,776 186,663,642
Net asset value of shares issued from reinvestment of distributions (495,501 and 291,631
shares, respectively) 4,927,719 2,902,589
Net asset value of shares issued in conjunction with the acquisition of Duff & Phelps
Enhanced Reserves Fund (0 and 13,730,413 shares, respectively) -- 136,554,593
Cost of shares repurchased (26,359,297 and 20,517,474 shares, respectively) (262,080,920) (204,195,925)
-------------- --------------
Total (46,627,425) 121,924,899
-------------- --------------
Class Y
Proceeds from sales of shares (70,612 and 150,567 shares, respectively) 702,004 1,500,150
Net asset value of shares issued from reinvestment of distributions
(8,690 and 585 shares, respectively) 86,399 5,827
Cost of shares repurchased (27,952 and 0 shares, respectively) (277,921) --
-------------- --------------
Total 510,482 1,505,977
-------------- --------------
Increase (decrease) in net assets from share transactions (46,116,943) 123,430,876
-------------- --------------
Net increase (decrease) in net assets (46,230,759) 123,514,216
Net Assets
Beginning of period 123,514,216 0
-------------- --------------
End of period (including distributions in excess of net investment income and
undistributed net investment income of ($43,059) and $13,193, respectively) $ 77,283,457 $ 123,514,216
============== ==============
</TABLE>
See Notes to Financial Statements
42
<PAGE>
Institutional Enhanced Reserves Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class X Class Y
----------------------------------------- ---------------------------------------
From Inception From Inception
Year Ended 7/19/96 to Year Ended 11/1/96 to
12/31/97 12/31/96 12/31/97 12/31/96
--------------------- ----------------- --------------------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.95 $9.95 $9.95 $9.97
Income from investment operations(5)
Net investment income 0.58(3)(6) 0.26(3) 0.56(4)(6) 0.09(4)
Net realized and unrealized gain (loss) -- -- -- (0.02)
------------ ----------- ------------ -----------
Total from investment operations 0.58 0.26 0.56 0.07
------------ ----------- ------------ -----------
Less distributions
Dividends from net investment income (0.58) (0.26) (0.56) (0.09)
------------ ----------- ------------ -----------
Total distributions (0.58) (0.26) (0.56) (0.09)
------------ ----------- ------------ -----------
Change in net asset value -- -- -- (0.02)
------------ ----------- ------------ -----------
Net asset value, end of period $9.95 $9.95 $9.95 $9.95
============ =========== ============ ===========
Total return 6.03% 2.57%(2) 5.75% 0.71%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) $75,269 $122,010 $2,014 $1,504
Ratio to average net assets of:
Operating expenses 0.34% 0.34%(1) 0.59% 0.59%(1)
Net investment income 5.84% 5.68%(1) 5.59% 5.58%(1)
Portfolio turnover 177% 122%(2) 177% 122%(2)
</TABLE>
(1) Annualized
(2) Not annualized
(3) Includes reimbursement of operating expenses by investment adviser of $0.02
and less than $0.01, respectively.
(4) Includes reimbursement of operating expenses by investment adviser of $0.02
and less than $0.01, 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 timing of share purchases and
redemptions.
(6) Computed using average shares outstanding.
See Notes to Financial Statements
43
<PAGE>
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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. To date, seven Portfolios are offered for sale: Balanced
Portfolio, Managed Bond Portfolio, Growth Stock Portfolio, Money Market
Portfolio, U.S. Government Securities Portfolio, Enhanced Reserves Portfolio,
and Real Estate Equity Securities Portfolio. The Real Estate Equity Securities
Portfolio is reported separately from these financial statements.
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
a high 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.
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 accrete 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 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.
44
<PAGE>
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 (Continued)
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 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. Options:
Each Portfolio may write covered options or purchase options contracts for
the purpose of hedging against changes in the market value of the underlying
securities or foreign currencies.
Each Portfolio will realize a gain or loss upon the expiration or closing
of the option transaction. Gains and losses on written options are reported
separately in the Statement of Operations. When a written option is exercised,
the proceeds on sales or amounts paid are adjusted by the amount of premium
received. Options written are reported as a liability in the Statement of
Assets and Liabilities and subsequently marked-to-market to reflect the current
value of the option. The risk associated with written options is that the
change in value of options contracts may not correspond to the change in value
of the hedged instruments. In addition, losses may arise from changes in the
value of the underlying instruments, or if a liquid secondary market does not
exist for the contracts.
Each Portfolio may purchase options which are included in the Portfolio's
Schedule of Investments and subsequently marked-to-market to reflect the
current value of the option. When a purchased option is exercised, the cost of
the security is adjusted by the amount of premium paid. The risk associated
with purchased options is limited to the premium paid.
I. 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.
J. 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.
45
<PAGE>
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 (Continued)
NOTE 2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
The Advisers to the Fund are Phoenix Investment Counsel, Inc. ("PIC") and
Duff & Phelps Investment Management Co. ("DPIM"). PIC is an indirect, majority-
owned subsidiary of Phoenix Home Life Mutual Insurance Company ("PHL"). DPIM is
a subsidiary of Phoenix Duff & Phelps Corporation, which is an indirect,
majority-owned subsidiary of PHL. As compensation for their services to the
Fund, the Advisers are entitled to a fee based upon the following annual rates
as a percentage of the average daily net assets of each separate Portfolio:
<TABLE>
<CAPTION>
1st $1+
Portfolio Adviser $1 Billion Billion
- ------------------------------------- --------- ------------ ----------
<S> <C> <C> <C>
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 ......... DPIM 0.24% 0.19%
</TABLE>
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:
<TABLE>
<CAPTION>
Class X Class Y
--------- ----------
<S> <C> <C>
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%
</TABLE>
DPIM had 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 exceeded 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
year ended December 31, 1997, $15,050 was earned by the Distributor, $24,458
was earned by unaffiliated participants, and $70,775 was paid to W.S. Griffith,
an indirect subsidiary of PHL.
As Financial Agent of the Fund, PEPCO receives a fee for bookkeeping,
administrative and pricing services at an annual rate of 0.05% of average daily
net assets up to $100 million, 0.04% of average daily net assets of $100
million to $300 million, 0.03% of average daily net assets of $300 million
through $500 million, and 0.015% of average daily net assets greater than $500
million; a minimum fee may apply. PEPCO serves as the Fund's Transfer Agent
with State Street Bank and Trust Company as sub-transfer agent. For the year
ended December 31, 1997, transfer agent fees were $276,889 of which PEPCO
retained $267 which is net of fees paid to State Street.
At December 31, 1997, PHL and affiliates held Portfolio shares which
aggregated the following:
<TABLE>
<CAPTION>
Aggregate
Net Asset
Shares Value
---------- -------------
<S> <C> <C>
Balanced Portfolio--Class X ............. 8 $ 130
Balanced Portfolio--Class Y ............. 7,998 129,401
Managed Bond Portfolio--Class X ......... 801,324 26,579,918
Managed Bond Portfolio--Class Y ......... 3,564 118,263
Growth Stock Portfolio--Class X ......... 4 139
Growth Stock Portfolio--Class Y ......... 4,094 138,611
Money Market Portfolio--Class X ......... 109 109
Money Market Portfolio--Class Y ......... 109,276 109,276
U.S. Government Securities
Portfolio-- Class X ................... 80,954 1,073,455
U.S. Government Securities
Portfolio-- Class Y ................... 8,399 111,293
</TABLE>
NOTE 3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities during the year ended December 31, 1997
(excluding U.S. Government and agency securities and short-term securities)
aggregated the following:
<TABLE>
<CAPTION>
Purchases Sales
-------------- --------------
<S> <C> <C>
Balanced Portfolio ......... $48,562,787 $67,795,855
Managed Bond Portfolio ..... 87,414,407 81,159,771
Growth Stock Portfolio ..... 118,746,559 177,866,832
Enhanced Reserves
Portfolio ................ 52,795,232 71,744,411
</TABLE>
Purchases and sales of U.S. Government and agency securities during the
year ended December 31, 1997, aggregated the following:
46
<PAGE>
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 (Continued)
<TABLE>
<CAPTION>
Purchases Sales
-------------- --------------
<S> <C> <C>
Balanced Portfolio ......... $22,523,460 $27,570,799
Managed Bond Portfolio ..... 41,266,887 48,016,692
U.S. Government
Securities Portfolio ..... 17,471,751 18,101,359
Enhanced Reserves
Portfolio ................ 88,164,818 97,618,699
</TABLE>
Written option activity for the year ended December 31, 1997 aggregated
the following:
<TABLE>
<CAPTION>
Balanced Portfolio Call Options
- ----------------------------- --------------------------
Number of Amount
Options of Premiums
----------- ------------
<S> <C> <C>
Options outstanding at
December 31, 1996 ......... -- $ --
Options written ............. 200 26,471
Options canceled in
closing purchase
transactions .............. (26) (6,349)
Options expired ............. (102) (8,579)
Options exercised ........... (72) (11,543)
---- -------
Options outstanding at
December 31, 1997 ......... -- $ --
==== =======
</TABLE>
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.
The net assets of each Portfolio before and after the reorganization are
as follows:
<TABLE>
<CAPTION>
Before After
----------- --------------
<S> <C> <C>
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
</TABLE>
NOTE 5. CREDIT RISK
In countries with limited or developing markets, investments may present
greater risks than in more developed markets and the prices of such investments
may be volatile. The consequences of political, social or economic changes in
these markets may have disruptive effects on the market price of these
investments and the income they generate, as well as a Portfolio's ability to
repatriate such amounts.
NOTE 6. 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, 1997, the Portfolios recorded the following reclassifications to
increase (decrease) the accounts listed below:
<TABLE>
<CAPTION>
Capital
paid in on
Undistributed Accumulated shares of
net investment net realized beneficial
income (loss) gain (loss) interest
---------------- -------------- -------------
<S> <C> <C> <C>
Balanced Portfolio $10,455 $ (2,510) $ (7,945)
Managed Bond
Portfolio ......... 413,236 (104,837) (308,399)
Growth Stock
Portfolio ......... 25,568 132 (25,700)
U.S. Government
Securities
Portfolio ......... 45,553 (34,841) (10,712)
Enhanced Reserves
Portfolio ......... (67,046) 49,976 17,070
</TABLE>
47
<PAGE>
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 (Continued)
NOTE 7. CAPITAL LOSS CARRYOVERS
At December 31, 1997, the Portfolios had available for federal income tax
purposes unused capital losses as follows:
<TABLE>
<CAPTION>
Expiring in
2003 2004 2005
---------- ----------- ---------
<S> <C> <C> <C>
U.S. Government
Securities Portfolio ......... $ -- $201,529 $ --
Enhanced Reserves
Portfolio .................... 189,419 128,718 36,912
</TABLE>
For the Enhanced Reserves Portfolio, capital loss carryovers include
$189,419 acquired in connection with the merger of the Duff & Phelps Enhanced
Reserves Fund.
In addition, the U.S. Government Securities Portfolio was able to utilize
losses deferred in the prior year against current year capital gains in the
amount of $33,475.
Under current tax law, capital losses realized after October 31, 1997, may
be deferred and treated as occurring on the first day of the following tax
year. For the year ended December 31, 1997, the U.S. Government Securities
Portfolio and the Enhanced Reserves Portfolio were able to utilize losses
deferred in the prior year in the amounts of $7,603 and $66,858, respectively.
NOTE 8. OTHER
As of December 31, 1997, 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.
<TABLE>
<CAPTION>
Number of % of Total
shareholders shares outstanding
-------------- -------------------
<S> <C> <C>
Balanced Portfolio ......... 2 25.8%
Managed Bond Portfolio ..... 2 25.5%
Growth Stock Portfolio ..... 2 22.6%
Money Market Portfolio ..... 2 39.9%
U.S. Government
Securities Portfolio ..... 3 46.1%
Enhanced Reserves
Portfolio ................ 3 69.3%
</TABLE>
- --------------------------------------------------------------------------------
TAX INFORMATION NOTICE (Unaudited)
Long-Term Capital Gains:
The Taxpayer Relief Act of 1997 included changes in the taxability of
long-term capital gains for individuals and certain other taxpayers. The
long-term capital gain distributions these shareholders receive from the
Portfolios are now taxed at either a 28% or 20% maximum rate, depending on how
long an asset was held and when it was sold. For the fiscal year ended December
31, 1997, the Portfolios distributed long-term capital gain dividends as
follows:
<TABLE>
<CAPTION>
28% rate gain 20% rate gain
Portfolio distributions distributions
- -------------------------------- --------------- --------------
<S> <C> <C>
Balanced Portfolio ............. $1,166,855 $ 211,591
Managed Bond Portfolio ......... 954,187 583,914
Growth Stock Portfolio ......... 16,408,493 4,382,236
</TABLE>
Corporate Dividends Received Deduction:
For federal income tax purposes, 2.84% and 7.16% 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.
48
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[Price Waterhouse LLP] [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 portfolios of the Phoenix Duff &
Phelps Institutional Mutual Funds, hereafter referred to as the "Fund") at
December 31, 1997, 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, 1997 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 19, 1998
49
<PAGE>
Institutional Real Estate Equity Securities Portfolio
- --------------------------------------------------------------------------------
INVESTMENTS AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
------------ ---------------
<S> <C> <C> <C>
COMMON STOCKS 75.3%
REAL ESTATE INVESTMENT TRUSTS 74.9%
COMMERCIAL 23.3%
Office/Industrial 23.3%
Arden Realty Group, Inc. 15,500 $ 476,625
Boston Properties, Inc. 3,300 109,106
CenterPoint Properties Corp. 13,400 470,675
First Industrial Realty Trust, Inc. 18,500 668,313
Great Lakes REIT, Inc. 20,000 388,750
Highwoods Properties, Inc. 18,900 702,844
Reckson Associates Realty Corp. 21,000 532,875
Weeks Corp. 16,300 521,600
---------------
3,870,788
---------------
DIVERSIFIED 9.9%
Colonial Properties Trust 6,300 189,787
Crescent Real Estate Equities Co. 22,900 901,688
Vornado Realty Trust 12,000 563,250
---------------
1,654,725
---------------
HEALTH CARE 3.4%
Nationwide Health Properties, Inc. 22,200 566,100
---------------
HOTELS 14.0%
Patriot American Hospitality, Inc. 29,300 844,206
Starwood Lodging Trust combined certificate 18,500 1,070,688
Sunstone Hotel Investors, Inc. 23,600 407,100
---------------
2,321,994
---------------
NET LEASE 3.5%
TriNet Corporate Realty Trust, Inc. 15,100 584,181
---------------
RESIDENTIAL 11.1%
Apartments 11.1%
Bay Apartment Communities, Inc. 13,700 534,300
Equity Residential Properties Trust 13,700 692,706
Essex Property Trust, Inc. 17,700 619,500
---------------
1,846,506
---------------
RETAIL 9.7%
Community/Neighborhood 2.8%
Developers Diversified Realty Corp. 12,000 459,000
---------------
Factory Outlet 1.6%
Chelsea GCA Realty, Inc. 7,200 274,950
---------------
Regional Malls 5.3%
Macerich Company (The) 14,800 421,800
Urban Shopping Centers, Inc. 13,300 463,837
---------------
885,637
---------------
TOTAL RETAIL 1,619,587
---------------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(Identified cost $10,381,920) 12,463,881
---------------
REAL ESTATE OPERATING COMPANIES 0.4%
Diversified 0.4%
Crescent Operating, Inc. (b) 2,500 61,250
---------------
TOTAL REAL ESTATE OPERATING COMPANIES
(Identified cost $43,125) 61,250
---------------
TOTAL COMMON STOCKS
(Identified cost $10,425,045) 12,525,131
---------------
</TABLE>
See Notes to Financial Statements 3
<PAGE>
Institutional Real Estate Equity Securities Portfolio
- --------------------------------------------------------------------------------
INVESTMENTS AT DECEMBER 31, 1997 (Continued)
<TABLE>
<CAPTION>
PAR
VALUE
(000) VALUE
------------ ---------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS 18.7%
State Street Bank and Trust Co. repurchase agreement,
5.15%, dated 12/31/97 due 1/2/98, repurchase price
$3,117,892, collateralized by U.S. Treasury Note 6.25%,
7/31/98, market value $3,261,871 $3,117 $ 3,117,000
---------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $3,117,000) 3,117,000
---------------
TOTAL INVESTMENTS 94.0%
(Identified cost $13,542,045) 15,642,131 (a)
Cash and receivables, less liabilities 6.0% 1,003,664
---------------
NET ASSETS 100.0% $ 16,645,795
===============
</TABLE>
(a) Federal income tax information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $2,106,438 and gross
depreciation of $6,352 for federal income tax purposes. At December 31,
1997, the aggregate cost of securities for federal income tax purposes was
$13,542,045.
(b) Non-income producing
4 See Notes to Financial Statements
<PAGE>
Institutional Real Estate Equity Securities Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $10,425,045) $12,525,131
Repurchase agreement (Identified cost $3,117,000) 3,117,000
Cash 82
Receivables
Fund shares sold 981,201
Dividends and interest 50,050
Receivable from adviser 14,414
Prepaid expenses 21,207
----------------
Total assets 16,709,085
----------------
Liabilities
Payables
Financial agent fee 6,964
Transfer agent fee 3,335
Administration fee 1,668
Trustees' fee 1,122
Distribution fee 26
Accrued expenses 50,175
----------------
Total liabilities 63,290
----------------
Net Assets $16,645,795
================
Net Assets Consist of:
Capital paid in on shares of beneficial interest $14,496,250
Undistributed net investment income 44,752
Accumulated net realized gain 4,707
Net unrealized appreciation 2,100,086
----------------
Net Assets $16,645,795
================
Class X
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $15,790,802) 1,319,995
Net asset value and offering price per share $11.96
Class Y
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $854,993) 71,483
Net asset value and offering price per share $11.96
</TABLE>
See Notes to Financial Statements 5
<PAGE>
Institutional Real Estate Equity Securities Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FROM INCEPTION MAY 1, 1997
TO DECEMBER 31, 1997
Investment Income
Dividends $418,975
Interest 12,830
----------------
Total investment income 431,805
----------------
Expenses
Investment advisory fee 38,173
Distribution fee - Class Y 188
Financial agent fee 55,041
Administration fee 11,440
Registration 68,003
Transfer agent 26,048
Professional 16,787
Trustees 7,301
Printing 5,289
Custodian 1,772
Miscellaneous 4,773
----------------
Total expenses 234,815
Less expenses borne by investment adviser (165,748)
----------------
Net expenses 69,067
----------------
Net investment income 362,738
----------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 46,037
Net change in unrealized appreciation (depreciation) on
investments 2,100,086
----------------
Net gain on investments 2,146,123
----------------
Net increase in net assets resulting from operations $2,508,861
================
6 See Notes to Financial Statements
<PAGE>
Institutional Real Estate Equity Securities Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
From Inception
May 1, 1997 to
Dec. 31, 1997
----------------
From Operations
Net investment income $ 362,738
Net realized gain 46,037
Net change in unrealized appreciation (depreciation) 2,100,086
----------------
Increase in net assets resulting from operations 2,508,861
----------------
From Distributions to Shareholders
Net investment income - Class X (356,617)
Net investment income - Class Y (3,409)
Net realized gains - Class X (40,923)
Net realized gains - Class Y (407)
----------------
Decrease in net assets from distributions
to shareholders (401,356)
----------------
From Share Transactions
Class X
Proceeds from sales of shares (1,285,529 shares) 13,305,591
Net asset value of shares issued from reinvestment of
distributions (34,466 shares) 397,538
Cost of shares repurchased (0 shares) -
----------------
Total 13,703,129
----------------
Class Y
Proceeds from sales of shares (71,152 shares) 831,346
Net asset value of shares issued from reinvestment of
distributions (331 shares) 3,815
Cost of shares repurchased (0 shares) -
----------------
Total 835,161
----------------
Increase in net assets from share transactions 14,538,290
----------------
Net increase in net assets 16,645,795
Net Assets
Beginning of period 0
----------------
End of period (including undistributed net investment
income of $44,752) $16,645,795
================
See Notes to Financial Statements 7
<PAGE>
Institutional Real Estate Equity Securities Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Class X Class Y
------------ ------------
From Inception From Inception
5/1/97 to 5/1/97 to
12/31/97 12/31/97
------------ ------------
<S> <C> <C>
Net asset value, beginning of period $10.00 $10.00
Income from investment operations (5)
Net investment income 0.39(1) 0.34(1)
Net realized and unrealized gain 1.96 2.00
------------ ------------
Total from investment operations 2.35 2.34
------------ ------------
Less distributions
Dividends from net investment income (0.35) (0.34)
Dividends from net realized gains (0.04) (0.04)
------------ ------------
Total distributions (0.39) (0.38)
------------ ------------
Change in net asset value 1.96 1.96
------------ ------------
Net asset value, end of period $11.96 $11.96
============ ============
Total return 23.70%(3) 23.55%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $15,791 $855
Ratio to average net assets of:
Operating expenses 0.90%(2) 1.15%(2)
Net investment income (5) 4.75%(2) 4.51%(2)
Portfolio turnover 4%(3) 4%(3)
Average commission rate paid $0.0500 (4) $0.0500 (4)
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $0.16
and $0.16, respectively.
(2) Annualized.
(3) Not annualized.
(4) 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.
(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 timing of share purchases and redemptions.
8 See Notes to Financial Statements
<PAGE>
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
REAL ESTATE EQUITY SECURITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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 an open-end management investment company. Seven
Portfolios are presently offered for sale: Balanced Portfolio, Managed Bond
Portfolio, Growth Stock Portfolio, Money Market Portfolio, U.S. Government
Securities Portfolio, Enhanced Reserves Portfolio and Real Estate Equity
Securities Portfolio. This report covers only the Real Estate Equity Securities
Portfolio (the "Portfolio"). The Portfolio's investment objective is capital
appreciation and income with approximately equal emphasis through investing,
under normal circumstances, 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.
The 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 the 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 Portfolio 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 amount 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 has been
no sale that day, at the last bid price. Short-term investments having a
remaining maturity of 60 days or less are valued at amortized cost which
approximates market.
B. Security transactions and related income:
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis. The Portfolio does not amortize premiums but does accrete discounts using
the effective interest method. Realized gains or losses are determined on the
identified cost basis.
C. Income taxes:
The Portfolio is treated as a separate taxable entity. It is the policy of
the Portfolio to comply with the requirements of the Internal Revenue Code (the
"Code"), applicable to regulated investment companies, and to distribute all of
its taxable income to its shareholders. In addition, the 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 the 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, 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. 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.
9
<PAGE>
PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
REAL ESTATE EQUITY SECURITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 (Continued)
F. Repurchase agreements:
A repurchase agreement is a transaction where a Portfolio acquires a
security for cash and obtains a simultaneous commitment from the seller to
repurchase the security at an agreed upon price and date. The Portfolio, through
its custodian, takes possession of securities collateralizing the repurchase
agreement. The collateral is marked to market daily to ensure that the market
value of the underlying assets remains sufficient to protect the Portfolio in
the event of default by the seller. If the seller defaults and the value of the
collateral declines or, if the seller enters insolvency proceedings, realization
of collateral may be delayed or limited.
2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
The investment adviser for the Portfolio is Phoenix Realty Securities,
Inc. ("PRS"), an indirect, wholly-owned subsidiary of Phoenix Home Life Mutual
Insurance Company ("PHL"). As compensation for its services, PRS is entitled to
a fee based on an annual rate of 0.50% of the average daily net assets of the
Portfolio. The Adviser has agreed to reimburse the Portfolio to the extent that
total expenses exceed 0.90% and 1.15% of the average daily net assets of Class X
and Class Y, respectively.
Duff & Phelps Investment Management Co. ("DPIM") serves as administrator
for the Portfolio, and as such, facilitates and provides administrative
services. DPIM is a subsidiary of Phoenix Duff & Phelps Corporation, which is an
indirect, majority-owned subsidiary of PHL. As compensation, under an
Administration Agreement, DPIM receives a fee at the annual rate of 0.15% of the
average daily net assets of the Portfolio.
Phoenix Equity Planning Corporation ("PEPCO"), an indirect, majority-owned
subsidiary of PHL, serves as the national distributor of the Fund's shares. The
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.
As Financial Agent to the Portfolio, PEPCO receives a fee for bookkeeping
and pricing services at an annual rate of 0.05% of average daily net assets up
to $100 million, 0.04% of average daily net assets from $100 million through
$300 million, 0.03% of average daily net assets from $300 million through $500
million and 0.015% of average daily net assets greater than $500 million; a
minimum fee may apply.
PEPCO serves as the Portfolio's Transfer Agent with State Street Bank and
Trust Company as sub-transfer agent. For the period ended December 31, 1997,
transfer agent fees were $26,048 which were all paid to State Street.
As of December 31, 1997, PHL owned 498,529 Class X shares with a value of
$5,962,409 and 10,169 Class Y shares with a value of $121,621. The PHL Employee
Defined Benefit Pension Plan owned 533,215 Class X shares with a value of
$6,377,252.
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities during the period ended December 31,
1997, were $10,815,095 and $383,094, respectively. There were no purchases or
sales of U.S. Government and agency securities.
4. RECLASS OF CAPITAL ACCOUNTS
In accordance with accounting pronouncements, the Portfolio has recorded
several reclassifications in the capital accounts. These reclassifications have
no impact on the net asset value of the Portfolio 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, 1997,
the Portfolio increased undistributed net investment income and decreased
capital paid in on shares of common stock by $42,040.
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[Price Waterhouse LLP]
To the Trustees and Shareholders of
Phoenix Duff & Phelps Institutional Real Estate Equity Securities Portfolio
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, 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 Phoenix Duff & Phelps Institutional
Real Estate Equity Securities Portfolio (the "Fund") at December 31, 1997, the
results of its operations, the changes in its net assets and the financial
highlights for the period 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 audit. We conducted our audit 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 audit, which included
confirmation of securities at December 31, 1997 by correspondence with the
custodian, provides a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Boston, Massachusetts
February 19, 1998
11
<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: Not Applicable
Included in Part B of the Registration Statement: Financial Statements and
Notes thereto included in the Annual Report to Shareholders dated December
31, 1997, incorporated by reference.
(b) Exhibits:
<TABLE>
<S> <C>
(1)(a) Declaration of Trust of the Registrant, filed via Edgar 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 via Edgar 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.
("DPIM"), filed via Edgar 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
via Edgar 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 with Post-Effective Amendment No. 5 on April 28, 1997 and incorporated
herein by reference.
(d) Amendment to the Investment Advisory Agreement between Registrant and Duff & Phelps Investment
Management Co. relating to the Core Equity Portfolio filed via Edgar with Post-Effective Amendment
No. 7 on January 14, 1998 and incorporated herein by reference.
(6)(a) Distribution Agreement between Registrant and Phoenix Equity Planning Corporation, filed via Edgar
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 via Edgar
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 via Edgar
with Post-Effective Amendment No. 6 on September 30, 1997 and incorporated herein by reference.
(b) Custodian Agreement between Registrant and The Chase Manhattan Bank, N.A., filed via Edgar 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 with Post-Effective Amendment No. 5 on April 28, 1997 and incorporated herein
by reference.
(b) Transfer Agent Agreement between Registrant and Phoenix Equity Planning Corporation, filed via Edgar
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 Equity Securities
Portfolio) and Phoenix Duff & Phelps Corporation, filed via Edgar with Post-Effective Amendment No. 4
on February 11, 1997 and incorporated herein by reference.
(10)(a) Opinion of Counsel, filed via Edgar with Pre-Effective Amendment No. 2 on February 28, 1996 and
incorporated herein by reference.
(b) Opinion of Counsel (as to the Real Estate Equity Securities Portfolio) filed via Edgar with Post-Effective
Amendment No. 5 on April 28, 1997 and incorporated herein by reference.
(c) Opinion of Counsel (covering the Core Equity Portfolio) filed via Edgar herewith.
(11) Consent of Accountants filed herewith.
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C>
(12) None
(13) Initial Capitalization Agreement, filed via Edgar with Pre-Effective Amendment No. 1 on February 2,
1996 and incorporated herein by reference.
(14) None
(15) Amended and Restated Rule 12b-1 Distribution Plan for Class Y Shares, filed via Edgar with Post-
Effective Amendment No. 6 on September 30, 1997 and incorporated herein by reference.
(16) Schedule for Computation of Performance Quotations, filed via Edgar 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 with Post-Effective
Amendment No. 5 on April 28, 1997 and incorporated herein by reference.
(19)(a) Powers of Attorney, filed via Edgar 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 and incorporated herein by reference.
</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 27, 1998:
Class X Shares Class Y Shares
Number of Number of
Record Holders Record Holders
---------------- ---------------
Balanced Portfolio .................. 50 29
Managed Bond Portfolio .............. 77 21
Enhanced Reserves Portfolio ......... 19 4
Growth Portfolio .................... 53 35
Money Market Portfolio .............. 35 21
U.S. Gov't Sec. Portfolio ........... 19 13
Real Estate Portfolio ............... 9 5
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 Trust" in the Prospectus and "Trustees and
Officers" and "Services of the Adviser" 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), 801-48190
(PRS) and 14813 (DPIM)) filed under the Investment Advisers Act of 1940,
incorporated herein by reference.
C-2
<PAGE>
Item 29. Principal Underwriter.
(a) Equity Planning also serves as the principal underwriter for the following
other registrants: Phoenix Series Fund, Phoenix Strategic Allocation Fund,
Inc., Phoenix Multi-Sector Fixed Income Fund, Inc., Phoenix Multi-Sector
Short Term Bond Fund, Phoenix Multi-Portfolio Fund, Phoenix California Tax
Exempt Bonds, Inc., Phoenix Income and Growth Fund, Phoenix Worldwide
Opportunities Fund, Phoenix Strategic Equity Series Fund, Phoenix Equity
Series Fund, Phoenix-Engemann Funds, Phoenix Investment Trust 97, Phoenix
Home Life Variable Universal Life Account, Phoenix Home Life Variable
Accumulation Account, PHL Variable Accumulation Account, Phoenix Life and
Annuity Variable Universal Life Account and PHL Variable Separate Account
MVAI.
(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 Distributor with Registrant
- -------------------------- ------------------------------- -------------------------
<S> <C> <C>
Michael E. Haylon Director Executive Vice President
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
Philip R. McLoughlin Director and President Trustee and President
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
John F. Sharry 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
56 Prospect Street Infrastructure/Operations
P.O. Box 150480
Hartford, CT 06115-0480
Paul Atkins Senior Vice President and None
56 Prospect Street Sales Manager
P.O. Box 150480
Hartford, CT 06115-0480
William R. Moyer Senior Vice President and Vice President
100 Bright Meadow Blvd. Chief Financial Officer
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
Elizabeth R. Sadowinski Vice President, None
56 Prospect Street Administration
P.O. Box 150480
Hartford, CT 06115-0480
</TABLE>
C-3
<PAGE>
Name and Principal Position and Offices Position and Offices
Business Address with Distributor with Registrant
- ------------------------- --------------------------- ----------------------
Thomas N. Steenburg Vice President, Counsel Assistant Secretary
56 Prospect Street and Secretary
P.O. Box 150480
Hartford, CT 06115
William E. Keen, III Assistant Vice President, Vice President
100 Bright Meadow Blvd. Mutual Fund Regulation
P.O. Box 2200
Enfield, CT 06083-2200
(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 hereby undertakes to file a post-effective amendment using
financial statements for Core Equity Portfolio, which need not be
certified, within four to six months after the effective date of this
post-effective amendment to the Registration Statement.
(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.
(f) Registrant undertakes to file a post-effective amendment to the
Registration Statement in response to any rulings by the Commission or
interpretive changes by the staff regarding the inclusion of prior
investment performance of an adviser or portfolio manager in the
Registration Statement of an open-end management investment company.
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 of
the requirements for effectiveness of this Amendment to the 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 30th day of March, 1998.
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 this30th day of March, 1998.
<TABLE>
<CAPTION>
Signature Title
- ------------------------------- -------------------------------
<S> <C>
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
Trustee
- ----------------------------
Eileen A. Moran**
Trustee
- ----------------------------
Everett L. Morris*
Trustee
- ----------------------------
James M. Oates*
Trustee
- ----------------------------
Richard A. Pavia*
</TABLE>
S-1(c)
<PAGE>
<TABLE>
<CAPTION>
Signature Title
- ------------------------------- --------
<S> <C>
Trustee
- ----------------------------
Calvin J. Pedersen*
Trustee
- ----------------------------
Herbert Roth, Jr.*
Trustee
- ----------------------------
Richard E. Segerson*
Trustee
- ----------------------------
Lowell P. Weicker, Jr.*
</TABLE>
*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)
[LETTERHEAD]
THE PHOENIX FUNDS
March 27, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Phoenix Duff & Phelps Institutional Mutual Funds
Post-Effective Amendment No. 8 to
Registration Statement no. 33-80057
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 Core
Equity Portfolio of Phoenix Duff & Phelps Institutional Mutual Funds (the
"Fund").
In rendering my opinion, I have examined such documents, records, and
matters of law as we deemed necessary for purposes of this opinion. I 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 me.
Based upon the subject to the foregoing, it is my opinion that the
Shares that will be issued by the Fund when sold will be legally issued, fully
paid, and non-assessable.
My 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 my written consent. I hereby consent
to the use of this opinion as an exhibit to such Registration Statement.
Yours truly,
/s/ Thomas N. Steenburg
Thomas N. Steenburg
Exhibit 11
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. 8 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated February 19, 1998, relating to the financial
statements and financial highlights appearing in the December 31, 1997 Annual
Report to Shareholders of the Balanced Portfolio, Managed Bond Portfolio, Growth
Stock Portfolio, Money Market Portfolio, U.S. Government Securities Portfolio
and Enhanced Reserves Portfolio (portfolios of the Phoenix Duff & Phelps
Institutional Mutual Funds) and the December 31, 1997 Annual Report to
Shareholders of the Phoenix Duff & Phelps Institutional Real Estate Equity
Securities Portfolio, which are incorporated by reference in the Registration
Statement.
We also consent to the reference to us under the heading "Additional
Information-Independent Accountants" in the Statement of Additional Information,
and 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 constituting parts of Post-Effective Amendment No. 5
which is incorporated by reference in the Registration Statement.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
March 30, 1998
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