THE PHOENIX EDGE SERIES FUND
101 Munson Street
P.O. Box 942
Greenfield, Massachusetts 01302-0942
Telephone Number: (800) 447-4312
c/o Variable Products Operations
Phoenix Home Life Companies
Statement of Additional Information
October 10, 1995
This Statement of Additional Information is not a prospectus. Much of the
information contained in this Statement of Additional Information expands upon
subjects discussed in the Prospectus. Accordingly, this Statement should be read
together with the Trust's current Prospectus, dated May 1, 1995, as supplemented
October 10, 1995, or dated October 10, 1995, which may be obtained by calling
Variable Products Operations of Phoenix Home Life Companies, at (800) 447-4312,
or by writing to Variable Products Operations at 101 Munson Street, P.O. Box
942, Greenfield, Massachusetts 01302-0942.
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Table of Contents*
Page
The Phoenix Edge Series Fund (2-1) 2
Investment Policies (2-9) 2
Investment Restrictions (2-17) 9
Portfolio Turnover (2-18) 10
Management of the Trust (2-17) 11
The Investment Advisers (2-17) 16
Brokerage Allocation (2-18) 17
Determination of Net Asset Value (2-20) 17
Investing In the Trust (2-20) 18
Redemption of Shares (2-21) 18
Taxes (2-21) 18
Custodian (2-21) 19
Independent Accountants 19
Financial Statements 19
*Numbers in parentheses are cross-references to related sections of the
Prospectus.
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THE PHOENIX EDGE SERIES FUND
The Phoenix Edge Series Fund (formerly "The Big Edge Series Fund") (the "Trust")
is an open-end investment company as defined in the Investment Company Act of
1940. It was formed on February 18, 1986 as a Massachusetts business trust and
commenced operations on December 5, 1986. The Phoenix Home Life Variable
Accumulation Account is a separate account of Phoenix Home Life Mutual Insurance
Company ("Phoenix Home Life") created on June 21, 1982. The Phoenix Home Life
Variable Universal Life Account is a separate account of Phoenix Home Life
created on June 17, 1985. The PHL Variable Accumulation Account is a separate
account of PHL Variable Insurance Company ("PHL Variable") formed on December 7,
1994. The executive offices of the Accounts, Phoenix Home Life and PHL Variable
are located at One American Row, Hartford, Connecticut. The Accounts own the
majority of the shares of the Trust.
INVESTMENT POLICIES
The investment objectives and policies of each Series are described in the
"Investment Objectives and Policies" section of the Prospectus. The following
specific policies supplement the information contained in that section of the
Prospectus.
Money Market Instruments
Certain money market instruments used extensively by the Money Market and Total
Return Series are described below. They may also be used by the International
and Real Estate Series and may be used by the other Series to a very limited
extent to invest otherwise idle cash or on a temporary basis for defensive
purposes.
Repurchase Agreements. Repurchase Agreements are agreements by which a Series
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. In fact, such a
transaction is a loan of money to the seller of the securities.
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 or 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
purchasing Series, if the seller of the repurchase agreement defaults and does
not repurchase the underlying securities, the Series 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.
U.S. Government Obligations. Securities issued or guaranteed as to principal and
interest by the United States Government include a variety of Treasury
securities, which differ only in their interest rates, maturities, and times of
issuance. Treasury bills have a maturity of one year or less. Treasury notes
have maturities of one to seven years, and Treasury bonds generally have
maturity of greater than five years.
Agencies of the United States Government which issue or guarantee obligations
include, among others, Export-Import Banks of the United States, Farmers Home
Administration, Federal Housing Administration, Government National Mortgage
Association, Maritime Administration, Small Business Administration and The
Tennessee Valley Authority. Obligations of instrumentalities of the United
States Government include securities issued or guaranteed by, among others, the
Federal National Mortgage Association, Federal Home Loan Banks, Federal Home
Loan Mortgage Corporation, Federal Intermediate Credit Banks, Banks for
Cooperatives, and the U.S. Postal Service. Securities issued or guaranteed by
the Export-Import Bank of the United States, Farmer's Home Administration,
Federal Housing Administration, Government National Mortgage Association,
Maritime Administration and Small Business Administration are supported by the
full faith and credit of the U.S. Treasury. Securities issued or guaranteed by
Federal National Mortgage Association and Federal Home Loan Banks are supported
by the right of the issuer to borrow from the Treasury. Securities issued or
guaranteed by the other agencies or instrumentalities listed above are supported
only by the credit of the issuing agency.
Certificates of Deposit. Certificates of deposit are generally short-term,
interest-bearing negotiable certificates issued by banks or savings and loan
associations against funds deposited in the issuing institution.
Time Deposits. Time deposits are deposits in a bank or other financial
institution for a specified period of time at a fixed interest rate for which a
negotiable certificate is not received.
Bankers' Acceptances. A banker's acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international
commercial transaction (to finance the import, export, transfer or storage of
goods). The borrower, as well as the bank, is liable for payment, and the bank
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
secondary markets prior to maturity.
Commercial Paper. Commercial paper refers to short-term, unsecured promissory
notes issued by corporations to finance short-term credit needs. Commercial
paper is usually sold on a discount basis and has a maturity at the time of
issuance not exceeding nine months.
Corporate Debt Securities. Corporate debt securities with a remaining maturity
of less than one year tend to become extremely liquid and are traded as money
market securities.
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All of the Money Market Series' investments will mature in 397 days or less and
will have a weighted average age of not more than 90 days. By limiting the
maturity of its investments, the Series seeks to lessen the changes in the value
of its assets caused by market factors. This Series, consistent with its
investment objective, will attempt to maximize yield through portfolio trading.
This may involve selling portfolio instruments and purchasing different
instruments to take advantage of disparities of yields in different segments of
the high grade money market or among particular instruments within the same
segment of the market. It is expected that the Series' portfolio transactions
will be generally with issuers or dealers in money market instruments acting as
principal. Accordingly, this Series will normally not pay any brokerage
commissions.
The value of the securities in the Money Market Series' portfolio can be
expected to vary inversely to changes in prevailing interest rates, with the
amount of such variation depending primarily on the period of time remaining to
maturity of the security. Long-term obligations may fluctuate more in value than
short-term obligations. If interest rates increase after a security is
purchased, the security, if sold, could be sold at a loss. On the other hand, if
interest rates decline after a purchase, the security, if sold, could be sold at
a profit. If, however, the security is held to maturity, no gain or loss will be
realized as a result of interest rate fluctuations, although the day-to-day
valuation of the portfolio could fluctuate. Substantial withdrawals of the
amounts held in the Money Market Series could require it to sell portfolio
securities at a time when a sale might not be favorable. The value of a
portfolio security may also be affected by other factors, including factors
bearing on the credit-worthiness of its issuer. A more detailed discussion of
amortized cost is contained under "Determination of Net Asset Value".
Total Return Series: Market Segment Investments
and Trading
Market Segment Investments. The Total Return Series seeks to achieve its
investment objective by investing in the three market segments of stocks, bonds,
and money market instruments described below.
(1) Stock -- common stocks and other equity-type securities such as preferred
stocks, securities convertible into common stock and warrants;
(2) Bonds -- bonds and other debt securities with maturities generally exceeding
one year, including:
(a) publicly offered straight debt securities having a rating within the four
highest grades as determined by Moody's Investors Service, Inc. (Aaa, Aa, A
or Baa) or Standard & Poor's Corporation (AAA, AA, A or BBB) or, if unrated,
those publicly offered straight debt securities which are judged by the
Account to be of equivalent quality to securities so rated;
(b) obligations issued, sponsored, assumed or guaranteed as to principal and
interest by the U.S. Government or its agencies or instrumentalities;
(c) obligations (payable in U.S. dollars) issued or guaranteed as to principal
and interest by the Government of Canada or of a Province of Canada or any
instrumentality or political subdivision thereof, provided such obligations
have a rating within the highest grades as determined by Moody's (Aaa, Aa or
A) or Standard & Poor's (AAA, AA or A) and do not exceed 25% of the Total
Return Series' total assets; and
(d) publicly offered straight debt securities issued or guaranteed by a national
or state bank or bank holding company (as defined in the Federal Bank
Holding Company Act, as amended) having a rating within the three highest
grades as determined by Moody's (Aaa, Aa or A) or Standard & Poor's (AAA, AA
or A), and certificates of deposit of such banks.
(3) Money Market -- money market instruments and other debt securities with
maturities generally not exceeding one year, including:
(a) those money market instruments described in this Statement of Additional
Information; and
(b) reverse repurchase agreements with respect to any of the foregoing
obligations. Reverse repurchase agreements are agreements in which the
Series, as the seller of the securities, agrees to repurchase them at an
agreed time and price. This transaction constitues a borrowing of money by
the seller of the securities. The Series will maintain sufficient funds in a
segregated account with its Custodian to repurchase securities pursuant to
any outstanding reverse repurchase agreement. The Series is required to
maintain at all times asset coverage of at least 300% for all obligations
under reverse repurchase agreements.
Trading. In order to achieve the Series' investment objective, the timing and
amounts of purchases and sales of particular securities and particular type of
securities (i.e. common stock, debt, money market instruments) will be of
significance. As a result, the Total Return Series intends to use trading as a
means of managing the portfolio of the Series in seeking to achieve its
investment objective. Trading is used primarily in anticipation of, or in
response to, market developments or to take advantage of yield disparities. The
Investment Adviser will engage in trading when it believes that the trade, net
of transaction costs, will improve interest income or capital appreciation
potential, or will lessen capital loss potential. Whether these goals will be
achieved through trading depends on the Investment Adviser's ability to evaluate
particular securities and anticipate relevant market factors, including interest
rate trends and variations. Such trading places a premium on the Investment
Adviser's ability to obtain relevant information, evaluate it properly and take
advantage of its evaluations by completing transactions on a favorable basis. If
the Investment Adviser's evaluations and expectations prove to be incorrect, the
Series' income or capital appreciation may be reduced and its capital losses may
be increased. Portfolio trading involves transaction costs, but, as explained
above, will be engaged in when the Investment Adviser believes that the result
of the trading, net of transaction costs, will benefit the Series. Purchases and
sales of securities will be made, whenever necessary in the Investment Adviser's
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view, to achieve the total return investment objective of the Series without
regard to the resulting brokerage costs.
In addition to the traditional investment techniques for purchasing and selling,
and engaging in trading, the Total Return Series may enter into financial
futures and options contracts.
Financial Futures and Related Options
Total Return Series. The Total Return Series may enter into financial futures
contracts for the purchase or sale of debt obligations which are traded on
exchanges that are licensed and regulated by Commodity Futures Trading
Commission.
A futures contract on a debt obligation is a binding contractual commitment
which, if held to maturity, will result in an obligation to make or accept
delivery, during a particular month, of obligations having a standard face value
and rate of return. By entering into a futures contract for the purchase of a
debt obligation, the Series will legally obligate itself to accept delivery of
the underlying security and pay the agreed price. Futures contracts are valued
at the most recent settlement price, unless such price does not reflect the fair
value of the contract, in which case such positions will be valued by or under
the direction of the Board of Trustees of the Trust.
Positions taken in the futures markets are not normally held to maturity, but
are instead liquidated through offsetting transactions which may result in a
profit or loss. While futures positions taken by the Series would usually be
liquidated in this manner, it may instead make or take delivery of the
underlying securities whenever it appears economically advantageous for it to do
so.
The purpose of hedging in debt obligations is to establish more certainty than
would otherwise be possible in the effective rate of return on portfolio
securities. The Series might, for example, take a "short" position in the
futures markets by entering into contracts for the future delivery of securities
held by it in order to hedge against an anticipated rise in interest rates that
would adversely affect the value of such securities. When hedging of this type
is successful, any depreciation in the value of securities will be substantially
offset by appreciation in the value of the futures position. On the other hand,
the Series might take a "long" position by entering into contracts for the
future purchase of securities. This could be done when the Series anticipated
the future purchase of particular debt securities but expects the rate of return
then available in the securities market to be less favorable than rates that are
currently available in the futures markets.
The Total Return Series will incur brokerage fees in connection with its
financial futures transactions, and will be required to deposit and maintain
funds with its custodian in its own name as margin to guarantee performance of
its future obligations.
While financial futures would be traded to reduce certain risks, futures trading
itself entails certain other risks. One risk arises because of the imperfect
correlation between movements in the price of the futures contracts and
movements in the price of the debt securities which are the subject of such
contracts. In addition, the market price of futures contracts may be affected by
certain factors, such as the closing out of futures contracts by investors
through offsetting transactions, margin, deposit and maintenance requirements,
and the participation of speculators in the futures market. Another risk is that
there may not be a liquid secondary market on an exchange or board of trade for
a given futures contract or at a given time, and in such event it may not be
possible for the Series to close a futures position. Finally, successful use of
futures contracts by the Series is subject to the Investment Adviser's ability
to predict correctly movements in the direction of interest rates and other
factors affecting the market for debt securities. Thus, while the Series may
benefit from the use of such contracts, the operation of these risk factors may
result in a poorer overall performance for the Series than if it had not entered
into any futures contract.
The Total Return Series is required to maintain at all times an asset coverage
of at least 300% for all of its borrowings, which include obligations under any
financial futures contract on a debt obligation or reverse repurchase agreement.
In addition, immediately after entering into a futures contract for the receipt
or delivery of a security, the value of the securities called for by all of the
Series' futures contracts (both for receipts and delivery) will not exceed 10%
of its total assets. A futures contract for the receipt of a debt obligation
will be offset by cash, cash equivalents or liquid high quality debt obligations
held in a segregated account with the custodian bank for the Series in an amount
sufficient to cover the cost of purchasing the obligation.
International Series. The International Series may enter into financial futures
contracts and related options as a hedge against anticipated changes in the
market value of its portfolio 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 positions' underlying securities in the cash
market.
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 at 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. 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 Series may purchase and sell financial futures contracts which are traded on
a recognized exchange or board of trade and may purchase or exchange
board-traded put and call options on financial futures contracts.
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The Series will engage in transactions in financial futures contracts and
related options only for hedging purposes and not for speculation. In addition,
it will not purchase or sell any financial futures contract or related option
if, immediately thereafter, the sum of the cash or U.S. Treasury bills committed
with respect to its existing futures and related options positions and the
premiums paid for related options would exceed 5% of the market value of its
total assets. At the time of the purchase of a futures contract or a call option
on a futures contract, an amount of cash, U.S. Government securities or other
appropriate liquid high-grade debt obligations equal to the market value of the
futures contract, minus the initial margin deposit with respect thereto, will be
deposited in a segregated account with the Trust's custodian bank to
collateralize fully the position and thereby ensure that it is not leveraged.
The extent to which the Series may enter into financial futures contracts and
related options may also be limited by requirements of the Internal Revenue Code
of 1986 for qualification as a regulated investment company.
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 or Subadviser
could be incorrect in its expectations as to the direction or extent of various
interest rate movements or foreign currency exchange rates, in which case the
Series' return might have been greater had hedging not taken place. There is
also the risk that a liquid secondary market may not exist. The risk in
purchasing an option on a financial futures contract is that the Series will
lose the premium it paid. Also, there may be circumstances when the purchase of
an option on a financial futures contract would result in a loss to the Series
while the purchase or sale of the contract would not have resulted in a loss.
Options
Bond, Money Market, Growth, Balanced and Total Return Series:
Writing Covered Call Options. The Bond, Money Market, Growth, Balanced and Total
Return Series may write (sell) covered call options on securities owned by them,
including securities into which convertible securities are convertible, provided
that such call options are listed on a national securities exchange.
A call option gives the holder the right to buy a security at a specified price
(the exercise price) for a stated period of time. Prior to the expiration of the
option, the seller of the option has an obligation to sell the underlying
security to the holder of the option at the original price specified regardless
of the market price of the security at the time the option is exercised. The
seller of the call option receives a cash payment (premium) at the time of sale,
which premium is retained by the seller whether or not the option is exercised.
The premium represents consideration to the seller for undertaking the
obligations under the option contract and thereby foregoing the opportunity to
profit from an increase in the market price of the underlying security above the
exercise price (except insofar as the premium represents such a profit).
A call option may be purchased to terminate a call option previously written.
The premium paid in connection with the purchase of a call option may be more
than, equal to or less than the premium received upon writing the call option
which is being terminated.
When a Series writes a covered call option, an amount equal to the premium
received by it is included in assets of the Series offset by an equivalent
liability. The amount of the liability is subsequently marked to market to
reflect the current market value of the option written. Market value is the last
sale price of the options on the exchange on which it is traded, or in absence
of a sale, the mean between last bid and offer prices. If an option which the
Series has written either expires or if the Series enters into a closing
purchase transaction, the Series realizes a gain (or loss if the cost of a
closing purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is extinguished.
In order to maintain its qualification as a regulated investment company under
Subchapter M of the Internal Revenue Code, the Trust intends to limit gains from
the sale of securities held or deemed held for less than three months to less
than 30% of annual gross income. Accordingly, the Trust may be restricted in the
selling of securities which have been held less than three months, in the
writing of options on securities into which convertible securities are
convertible, in the writing of options on securities which have been held for
six months or less, in the writing of options which expire in less than three
months and in purchasing options to terminate options which it wrote within the
preceding three months. In this regard, the Trust can minimize the possibility
of a suspended holding period for purposes of the 30 percent rule to the extent
the Trust limits its covered call writing to options with more than 30 days to
expiration that are not "deep in the money" and that satisfy certain other
requirements such that they will constitute "qualified covered call options" as
defined in Section 1092(c)(4)(B) of the Code, as recently enacted.
An option is generally considered to be "in the money" if the striking price
under the option is less than the currently prevailing price of the stock
covered by the option so that there is a built-in discount or intrinsic value to
the option. Section 1092(c)(4) of the Internal Revenue Code sets forth complex
rules defining options which are "deep in the money". These rules vary in their
application depending upon the prevailing stock price and the stock price under
option contracts available in the market, but are designed to provide objective
rules to classify as "deep in the money" options those options whose primary
value is attributable to their built-in discount or intrinsic value.
Premium income earned with respect to a qualified covered call option contract
which lapses or gain or loss from such an option contract which is closed out
(other than by exercise) generally will be short-term capital gain or loss.
Further, gain or loss with respect to the exercise of such an option contract
generally will be short-term or long-term depending upon the actual or deemed
holding period of the underlying security. However, any loss realized from
writing a "qualified covered call option" which has a strike price that is less
than the applicable security price as defined in Section 1092(c)(4)(G) of the
Code will be treated as a long-term capital loss, if gain from the sale of the
underlying security at the time the loss is realized would be long-term capi-
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tal gain. Also, with respect to such options, the holding period of the
underlying security will not include any period during which the Trust has a
written option outstanding.
Buying Call and Put Options. The Total Return and Balanced Series may buy
national exchange-traded call and put options on equity and debt securities and
on various stock market indexes. The Money Market, Growth and Bond Series may
only purchase a call option to terminate a call option previously written. (See
"Writing Covered Call Options" above for a description of call options).
A put option on equity or debt securities gives the holder the right to sell
such a security at a specified price (the exercise price) for a stated period of
time. Prior to the expiration of the option, the seller of the option has an
obligation to buy the underlying security from the holder of the option at the
original price specified regardless of the market price of the security at the
time the option is exercised.
Call and put options on stock market indexes operate the same way as call and
put options on equity or debt securities except that they are settled in cash.
In effect, the holder of a call option on a stock market index has the right to
buy the value represented by the index at a specified price for a stated period
of time. Conversely, the holder of a put option on a stock market index has the
right to sell the value represented by the index for a specified price for a
stated period of time. To be settled in cash means that if the option is
exercised, the difference in the current value of the stock market index and the
exercise value must be paid in cash. For example, if a call option was bought on
the XYZ stock market index with an exercise price of $100 (assuming the current
value of the index is 110 points, with each point equal to $1.00), the holder of
the call option could exercise the option and receive $10 (110 points minus 100
points) from the seller of the option. If the index equals 90 points, the holder
of the option receives nothing.
The seller of an option receives a cash payment (premium) at the time of sale,
which premium is retained by the seller whether or not the option is exercised.
The premium represents consideration to the seller for undertaking the
obligation under the option contract. In the case of call options, the premium
compensates the seller for the loss of the opportunity to profit from any
increase in the value of the security or the index. The premium to a seller of a
put option compensates the seller for the risk assumed in connection with a
decline in the value of the security or index.
The Total Return and Balanced Series may close an open call or put option
position by selling a call option, in the case of an open call position, or a
put option, in the case of an open put option, which is the same as the option
being closed. The Series will receive a premium for selling such an option. The
premium received may be more than, equal to or less than the premium paid by the
Series when it bought the option which is being closed.
Immediately after entering into an opening option position the total value of
all open option positions based on exercise price will not exceed ten percent
(10%) of the Total Return or Balanced Series' total assets. The premium paid by
the Series for the purchase of a call or a put option and the expiration or
closing sale transaction with respect to such options are treated in a manner
analogous to that described above, except there is no liability created to the
Series. The premium paid for any such option is included in assets and marked to
the market value on a current basis. If the options expire the Series will
realize a short-term loss on the amount of the cost of the option. If a
purchased put or call option is closed out by the Series entering into a closing
sale transaction, the Series will realize a short-term gain or loss, depending
upon whether the sale proceeds from the closing sale transaction are greater or
less than cost of the put or call option.
International Series. In furtherance of its objectives, the International Series
may write covered call options and purchase call and put options on securities.
In addition, the Series may write secured put options and enter into option
transactions on foreign currency.
Writing (Selling) Call and Put Options. A call option on a security or a foreign
currency gives the purchaser of the option, in return for the premium paid to
the writer (seller), the right to buy the underlying security or foreign
currency at the exercise price at any time during the option period. Upon
exercise by the purchaser, the writer of a call option has the obligation to
sell the underlying security or foreign security, except that the value of the
option depends on the weighted value of the group of securities comprising the
index and all settlements are made in cash. A call option may be terminated by
the writer (seller) by entering into a closing purchase transaction in which it
purchases an option of the same series as the option previously written.
A put option on a security or foreign currency gives the purchaser of the
option, in return for the premium paid to the writer (seller), the right to sell
the underlying security or foreign currency at the exercise price at any time
during the option period. Upon exercise by the purchaser, the writer of a put
option has the obligation to purchase the underlying security or foreign
currency at the exercise price. A put option on a securities index is similar to
a put option on an individual security, except that the value of the options
depends on the weighted value of the group of securities comprising the index
and all settlements are made in cash.
The International Series may write exchange-traded call options on its
securities. Call options may be written on portfolio securities and on
securities indices, and on foreign currencies. The International Series may,
with respect to securities and foreign currencies, write call and put options on
an exchange or over the counter. Call options on portfolio securities will be
covered since the Series will own the underlying securities or other securities
that are acceptable for escrow at all times during the option period. Call
options on securities indices will be written only to hedge in an economically
appropriate way portfolio securities which are not otherwise hedged with options
or financial futures contracts and will be "covered" by identifying the specific
portfolio securities being hedged. Call options on foreign currencies and put
options on securities and foreign currencies will be covered by securities
acceptable for escrow. The Series may not write options on more than 50% of its
total assets. Management presently intends to cease writing options if and as
long as 25% of such total assets are subject to outstanding options contract.
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The Series will write call and put options in order to obtain a return on its
investments from the premiums received and will retain the premiums whether or
not the options are exercised. Any decline in the market value of portfolio
securities or foreign currencies will be offset to the extent of the premiums
received (net of transaction costs). If an option is exercised, the premium
received on the option will effectively increase the exercise price or reduce
the difference between the exercise price and market value.
During the option period, the writer of a call option gives up the opportunity
for appreciation in the market value of the underlying security or currency
above the exercise price. It retains the risk of loss should the price of the
underlying security or foreign currency decline. Writing call options also
involves risks relating to the Series' ability to close out options it has
written.
During the option period, the writer of a put option has assumed the risk that
the price of the underlying security or foreign currency will decline below the
exercise price. However, the writer of the put option has retained the
opportunity for any appreciation above the exercise price should the market
price of the underlying security or foreign currency increase. Writing put
options also involves risks relating to a Portfolio's ability to close out
options it has written.
Purchasing Call and Put Options, Warrants and Stock Rights. The International
Series may invest up to an aggregate of 5% of its total assets in
exchange-traded or over-the-counter call and put options on securities and
securities indices and foreign currencies. Purchases of such options may be made
for the purpose of hedging against changes in the market value of the underlying
securities or foreign currencies. The Series will invest in call and put options
whenever, in the opinion of the Adviser or Subadviser, a hedging transaction is
consistent with its investment objectives. The Series may sell a call option or
a put option which it has previously purchased prior to the purchase (in the
case of a call) or the sale (in the case of a put) of the underlying security or
foreign currency. Any such sale would result in a net gain or loss depending on
whether the amount received on the sale is more or less than the premium and
other transaction costs paid on the call or put which is sold. Purchasing a call
or put option involves the risk that the Series may lose the premium it paid
plus transaction costs.
Warrants and stock rights are almost identical to call options in their nature,
use and effect except that they are issued by the issuer of the underlying
security, rather than an option writer, and they generally have longer
expiration dates than call options. The International Series intends to invest
up to 5% of its net assets in warrants and stock rights, but no more than 2% of
its net assets in warrants and stock rights not listed on the New York Stock
Exchange or the American Stock Exchange.
Over-the-Counter ("OTC") Options. OTC options differ from exchange-traded
options in several respects. They are transacted directly with dealers and not
with a clearing corporation, and there is a risk of non-performance by the
dealer. However, the premium is paid in advance by the dealer. OTC options are
available for a greater variety of securities and foreign currencies, and in a
wider range of expiration dates and exercise prices than exchange-traded
options. Since there is no exchange, pricing is normally done by reference to
information from a market maker, which information is carefully monitored or
caused to be monitored by the Adviser or Subadviser and verified in appropriate
cases.
A writer or purchaser of a put or call option can terminate it voluntarily only
by entering into a closing transaction. In the case of OTC options, there can be
no assurance that a continuous liquid secondary market will exist for any
particular option at any specific time. Consequently, the International Series
may be able to realize the value of an OTC option it has purchased only by
exercising it or entering into a closing sale transaction with the dealer that
issued it. Similarly, when the Series writes an OTC option, it generally can
close out that option prior to its expiration only by entering into a closing
purchase transaction with the dealer to which it originally wrote the option. If
a covered call option writer cannot effect a closing transaction, it cannot sell
the underlying security or foreign currency until the option expires or the
option is exercised. Therefore, the writer of a covered OTC call option may not
be able to sell an underlying security even though it might otherwise be
advantageous to do so. Likewise, the writer of a secured OTC put option may be
unable to sell the securities pledged to secure the put for other investment
purposes while it is obligated as a put writer. Similarly, a purchaser of an OTC
put or call option might also find it difficult to terminate its position on a
timely basis in the absence of a secondary market.
The Trust understands the position of the staff of the Securities and Exchange
Commission (the "SEC") to be that purchased OTC options and the assets used as
"cover" for written OTC options are illiquid securities. Although the Subadviser
has found that dealers with which they will engage in OTC options transactions
are generally agreeable to and capable of entering into closing transactions,
the Trust has adopted procedures for engaging in OTC options transactions for
the purpose of reducing any potential adverse effect of such transactions upon
the liquidity of the International Series.
The Trust will engage in OTC options transactions only with dealers that meet
certain credit and other criteria established by the Board of Trustees of the
Trust. The Trust and the Adviser believe that the approved dealers present
minimal credit risks to the Trust and, therefore, should be able to enter into
closing transactions if necessary. The Trust currently will not engage in OTC
options transactions if the amount invested by the Trust in OTC options, plus a
"liquidity charge" related to OTC options written by the Trust in illiquid
securities plus any other portfolio securities considered to be illiquid, would
exceed 10% of the Trust's total assets. The "liquidity charge" referred to above
is computed as described below.
The Trust anticipates entering into agreements with dealers to which the Trust
sells OTC options. Under these agreements the Trust would have the absolute
right to repurchase the OTC options from the dealer at any time at a price no
greater than a price established under the agreements (the "Repurchase Price").
The "liquidity charge" referred to above for a specific OTC option transaction
will be the Repurchase Price related to the OTC option less the intrinsic value
of the OTC option. The intrinsic value of an OTC call option for such purposes
will be the amount by which the current market value of the underlying security
exceeds the exercise price. In the case of an OTC put option, intrinsic value
will be the amount by which the exercise price exceeds the current market value
of the
7
<PAGE>
underlying security. If there is no such agreement requiring a dealer to
allow the Trust to repurchase a specific OTC option written by the Trust, the
"liquidity charge" will be the current market value of the assets serving as
"cover" for such OTC option.
Foreign Currency Transactions. The value of the assets of an International
Series as measured in United States dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations, and a Series may incur costs in connection with conversions between
various currencies. A Series will conduct its 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, an amount of cash, U.S. Government securities or other
appropriate high-grade debt obligations equal to the market value of the
contract, minus the Series' initial margin deposit with respect thereto, will be
deposited in a segregated account with the Trust's custodian bank to
collateralize fully the position and thereby ensure that it is not leveraged.
When a Series 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, a Series 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. The
International Series may also hedge its 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 a Series' portfolio 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.
It is impossible to forecast with precision the market value of portfolio
securities at the expiration of a contract. Accordingly, it may be necessary for
a Series 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 Series 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 portfolio
security if its market value exceeds the amount of foreign currency the Series
is obligated to deliver.
If the Series retains the portfolio security and engages in an offsetting
transaction, it will incur a gain or a loss (as described below) to the extent
that there has been movement in forward contract prices. If the Series 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 Series' 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 Series would realize gain 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 Series
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 Series will have to convert
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.
Zero and Deferred Coupon Debt Securities. The Bond Series may invest in debt
obligations that do not make any interest payments for a specified period of
time prior to maturity ("deferred coupon" obligations) or until maturity ("zero
coupon" obligations). Because deferred and zero coupon bonds do not make
interest payments for a certain period of time, they are purchased by the Series
at a deep discount and their value fluctuates more in response to interest rate
changes than does the value of debt obligations that make current interest
payments. The degree of fluctuation with interest rate changes is greater when
the deferred period is longer. Therefore, there is a risk that the value of the
Series' shares may decline more as a result of an increase in interest rates
than would be the case if the Series did not invest in deferred or zero coupon
bonds.
Real Estate Investment Trusts
As described in the Prospectus, the Real Estate Series intends under normal
conditions to invest in real estate investment trusts ("REITs"). REITs pool
investors' funds for investment primarily in income-producing commercial real
estate or real estate related loans. A REIT is not taxed on income distributed
to shareholders if it complies with several requirements relating to its
organization, ownership, assets, and income and a requirement that it distribute
to its shareholders at least 95% of its taxable income (other than net capital
gains) for each taxable year.
REITs can generally be classified as follows:
- -- Equity REITs, which invest the majority of their assets directly in real
property and derive their income primarily from rents. Equity REITs can also
realize capital gains by selling properties that have appreciated in value.
8
<PAGE>
- -- Mortgage REITs, which invest the majority of their assets in real estate
mortgages and derive their income primarily from interest payments.
- -- Hybrid REITs, which combine the characteristics of both equity REITs and
mortgage REITs.
REITs are like closed-end investment companies in that they are essentially
holding companies which rely on professional managers to supervise their
investments. A shareholder in the Real Estate Series should realize that by
investing in REITs indirectly through the Series, he will bear not only his
proportionate share of the expenses of the Portfolio, but also, indirectly
similar expenses of underlying REITs.
Debt Securities
Up to 25% of the Real Estate Series total assets may be invested in debt
securities (which include for purposes of this investment policy convertible
debt securities which PRS or ABKB believes have attractive equity
characteristics). The Real Estate Series may invest in debt securities rated BBB
or better by Standard & Poor's Corporation ("S&P") or Baa or better by Moody's
Investor Service, Inc. ("Moody's") or, if not rated, are judged to be of
comparable quality as determined by PRS or ABKB. In choosing debt securities for
purchase by the Portfolio, PRS will employ the same analytical and valuation
techniques utilized in managing the equity portion of the Real Estate Series
holdings (see "Investment Advisory and Other Services") and will invest in debt
securities only of companies that satisfy PRS' investment criteria.
The value of the Real Estate Series investments in debt securities will change
as interest rates fluctuate. When interest rates decline, the values of such
securities generally can be expected to increase and when interest rates rise,
the values of such securities can generally be expected to decrease. The
lower-rated and comparable unrated debt securities described above are subject
to greater risks of loss of income and principal than are higher-rated fixed
income securities. The market value of lower-rated securities generally tends to
reflect the market's perception of the creditworthiness of the issuer and
short-term market developments to a greater extent than is the case with more
highly rated securities, which reflect primarily functions in general levels of
interest rates.
Risks of Investment in Real Estate Securities
The Real Estate Series will not invest in real estate directly, but only in
securities issued by real estate companies. However, the Portfolio may be
subject to risks similar to those associated with the direct ownership of real
estate because of its policy of concentrating in the securities of companies in
the real estate industry. These include declines in the value of real estate,
risks related to general and local economic conditions, dependence on management
skill, cash flow dependence, possible lack of availability of long-term mortgage
funds, over-building, extended vacancies of properties, decreased occupancy
rates and increased competition, increases in property taxes and operating
expenses, changes in neighborhood values and the appeal of the properties to
tenants and changes in interest rates.
Selecting REITs requires an evaluation of the merits of each type of asset a
particular REIT owns, as well as regional and local economics. Due to the
proliferation of REITs in recent years and the relative lack of sophistication
of certain REIT managers, the quality of REIT assets has varied significantly.
In addition to these risks, equity REITs may be affected by changes in the value
of the underlying properties owned by the trusts, while mortgage REITs may be
affected by the quality of any credit extended. Further, equity and mortgage
REITs are dependent upon management skills and generally are not diversified.
Equity and mortgage REITs are also subject to potential defaults by borrowers,
self-liquidation, and the possibility of failing to qualify for tax-free status
of income under the Code and failing to maintain exemption from the Investment
Company Act of 1940. In the event of a default by a borrower or lessee, the REIT
may experience delays in enforcing its rights as a mortgagee or lessor and may
incur substantial costs associated with protecting its investments. In addition,
investment in REITs could cause the Series to possibly fail to qualify as a
regulated investment company.
INVESTMENT RESTRICTIONS
The Trust's fundamental policies as they affect any Series cannot be changed
without the approval of a vote of a majority of the outstanding shares of such
Series, which is the lesser of (i) 67% or more of the voting securities of such
Series present at a meeting if the holders of more than 50% of the outstanding
voting securities of such Series are present or represented by proxy or (ii)
more than 50% of the outstanding voting securities of such Series. A proposed
change in fundamental policy or investment objective will be deemed to have been
effectively acted upon by any Series if a majority of the outstanding voting
securities of that Series votes for the approval of the proposal as provided
above, notwithstanding (1) that such matter has not been approved by a majority
of the outstanding securities of any other Series affected by such matter and
(2) that such matter has not been approved by a majority of the outstanding
voting securities of the Trust.
The following investment restrictions are fundamental policies of the Trust with
respect to all Series and may not be changed except as described above. The
Trust may not:
(1) Purchase real estate or any interest therein, except through the purchase of
corporate or certain government securities (including securities secured by
a mortgage or a leasehold interest or other interest in real estate). A
security issued by a real estate or mortgage investment trust is not treated
as an interest in real estate. The Real Estate Series may, however, invest
in mortgage backed securities.
(2) Make loans other than loans of securities secured by cash or cash
equivalents for the full value of the securities; any interest earned from
securities lending will inure to the benefit of the Series which holds such
securities. However, the purchase of debt securities which are ordinarily
purchased by financial institutions are not considered the loaning of money.
9
<PAGE>
(3) Invest in commodities or in commodity contracts or in options, provided,
however, that it may write covered call option contracts; and provided
further, that the Total Return and Balanced Series may enter into financial
futures contracts to purchase and sell debt obligations and may buy call and
put options on securities and stock market indexes; and provided further,
that the International Series may purchase call and put options on
securities, engage in financial futures contracts and related options
transactions, write secured put options, and enter into foreign currency and
foreign currency options transactions.
(4) Engage in the underwriting of securities of other issuers, except to the
extent any Series may be deemed an underwriter in selling as part of an
offering registered under the Securities Act of 1933 securities which it has
acquired. The International Series will buy and sell securities outside the
United States that are not registered with the SEC or marketable in the
United States.
(5) Borrow money, except as a temporary measure where such borrowing would not
exceed 25% of the market value of total assets at the time each such
borrowing is made. However, the Trust may borrow money for any general
purpose from a bank provided such borrowing does not exceed 10% of the net
asset value of the Trust, not considering any such borrowings as
liabilities. The Total Return and International Series may borrow money to
the extent of financial futures transactions and reverse repurchase
agreements, provided that such borrowings are limited to 33-1/3% of the
value of the total assets of the Series.
(6) Invest in restricted securities in an amount greater than 10% of the value
of any Series' portfolio at the time any such investment is made.
(7) Purchase securities on margin, except for short-term credits as may be
necessary for the clearance of purchases or sales of securities, or to
effect a short sale of any security. (The deposit of "maintenance margin" in
connection with financial futures contracts is not considered the purchase
of a security on margin.)
(8) Invest for the purpose of exercising control over or management of any
company.
(9) Unless received as a dividend or as a result of an offer of exchange
approved by the Securities and Exchange Commission or of a plan of
reorganization, purchase or otherwise acquire any security issued by an
investment company if the Series would immediately thereafter own (a) more
than 3% of the outstanding voting stock of the investment company, (b)
securities of the investment company having an aggregate value in excess of
5% of the Series' total assets, (c) securities of investment companies
having an aggregate value in excess of 10% of the Series' total assets, or
(d) together with investment companies having the same investment adviser as
the Trust (and companies controlled by such investment companies), more than
10% of the outstanding voting stock of any registered closed-end investment
company.
(10) (a) Invest more than 5% of its total assets (taken at market value at the
time of each investment) in the securities (other than United States
government or government agency securities or in the case of the
International Series, other than foreign government securities), or, with
respect to the Total Return and Balanced Series, call or put options
contracts and financial futures contracts of any one issuer (including
repurchase agreements with any one bank); and (b) purchase more than either
(i) 10% in principal amount of the outstanding debt securities of an issuer
(the foregoing restriction being inapplicable to the Real Estate Series),
or (ii) 10% of the outstanding voting securities of an issuer, except that
such restrictions shall not apply to securities issued or guaranteed by the
United States government or its agencies, bank money instruments or bank
repurchase agreements. The International Series will, with respect to 75%
of its assets, limit its investment in the securities of any one foreign
government, its agencies or instrumentalities, to 5% of the Series' total
assets.
(11) Concentrate the portfolio investments in any one industry (the foregoing
restriction being inapplicable to the Real Estate Series). No security may
be purchased for a Series if such purchase would cause the value of the
aggregate investment in any one industry to exceed 25% of the Trust's total
assets. However, the Money Market Series and Total Return Series may invest
more than 25% of their assets in the banking industry. The Real Estate
Series may invest not less than 75% of its assets in the real estate
industry.
(12) Issue senior securities.
(13) Enter into repurchase agreements which would cause more than 10% of any
Series' total assets (taken at market value) to be subject to repurchase
agreements maturing in more than seven days.
PORTFOLIO TURNOVER
The portfolio turnover rate of each Series 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 Series' securities (excluding all
securities, including options, with maturities at the time of acquisition of one
year or less). All long-term securities, including long-term U.S. Government
securities, are included. A high rate of portfolio turnover generally involves
correspondingly greater brokerage commission expenses, which must be borne
directly by the Series. Turnover rates may vary greatly from year to year as
well as within a particular year and may also be affected by cash requirements
for redemptions of each Series' shares
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by requirements which enable the Trust to receive certain favorable tax
treatments. Based upon the formulation for calculating the turnover rate as
stated above, it is anticipated that the turnover rate for the Bond Series will
not generally exceed 350%; the turnover rate for the Growth Series will not
generally exceed 300%; and the turnover rate for Balanced Series will not
generally exceed 200%. The turnover rates for the stock and bond segments of the
Balanced Series are not expected to exceed 250% and 100% respectively. It is
anticipated that the turnover rate for the Total Return Series will not
generally exceed 350% and that the turnover rates for the stock and bond
segments of the Total Return Series will not generally exceed 350% and 200%
respectively. It is anticipated that the turnover rate for the International
Series will not generally exceed 150%. It is anticipated that the annual
turnover rate of the Real Estate will not exceed 75%.
MANAGEMENT OF THE TRUST
The Trustees and executive officers of the Trust and their principal occupations
for the last five years are set forth below. Unless otherwise noted, the address
of each executive officer and Trustee is One American Row, Hartford, Connecticut
06115. On December 22, 1992, the shareholders elected to fix the number of
Trustees at ten and to elect such number of Trustees. On February 15, 1995, the
Trustees voted to increase the number of Trustees from ten to eleven and to
appoint Lowell P. Weicker, Jr. to fill the vacancy caused by the increase. The
Trustees are listed below.
<TABLE>
<CAPTION>
Position (s) Principal Occupation(s)
Name and Address with the Trust During Past Five Years
---------------- -------------- ------------------------
<S> <C> <C>
C. Duane Blinn Trustee Partner in the law firm of Day, Berry & Howard. Director/Trustee,
City Place Phoenix Funds (1980-present). Director/Trustee, the National Affiliated
Hartford, CT 06103 Investment Companies (until 1993).
Robert Chesek Trustee Trustee/Director, the Phoenix Funds (1981-present) and Chairman
49 Old Post Road (1989-1994). Vice President, Common Stock, Phoenix Home Life Mutual
Wethersfield, CT 06109 Insurance Company (1980-1994). Director/Trustee, the National
Affiliated Investment Companies (until 1993).
E. Virgil Conway Trustee Director/Trustee, Phoenix Funds (1993-present). Trustee/Director,
9 Rittenhouse Road Consolidated Edison Company of New York, Inc. (1970-present), Pace
Bronxville, NY 10708 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), Atlantic Reinsurance Company (1986-present), Blackstone
Fund for Fannie Mae Mortgage Securities (Advisory Director)
(1989-present); Centennial Insurance Company, Josiah Macy, Jr.
Foundation, and The Harlem Youth Development Foundation. Board Member,
Metropolitan Transportation Authority (1992-present). Chairman, Audit
Committee of the City of New York (1981-present). Director/Trustee, the
National Affiliated Investment Companies (1967-1993). Director, Realty
Foundation of New York (1972-present), and the New York Housing
Development Corp. (1981-present). Former Director, New York Chamber of
Commerce and Industry (1974-1990).
Harry Dalzell-Payne Trustee Director/Trustee, Phoenix Funds (1983-present). Director, Farragut
330 East 39th Street Mortgage Co., Inc. (1991-1994). Director/Trustee, the National
Apt. 29G Affiliated Investment Companies (1983-1993). Consultant, The Levett
New York, NY 10016 Group Holding, Inc. (1989-1990). Independent real estate market
consultant (1982-1990). Formerly, a Major General of the British Army.
Leroy Keith, Jr. Trustee Director/Trustee, Phoenix Funds (1980-present). Chairman and Chief
Chairman and Executive Officer, Carson Products Company (1995-present). Director,
Chief Executive Officer Equifax Corporation (1991-present), and Keystone International Fund,
Carson Products Company Inc. (1989-present). Trustee, Keystone Liquid Trust, Keystone Tax
64 Ross Road Exempt Trust, Keystone Tax Free Fund, Master Reserves Tax Free Trust,
Savannah, GA 31405 and Master Reserves Trust. Director/Trustee, the National Affiliated
Investment Companies (until 1993). Director, Blue Cross/Blue Shield
(1989-1993) and First Union Bank of Georgia (1989-1993). President,
Morehouse College (1987-1994). Chairman and Chief Executive Officer,
Keith Ventures (1994-1995).
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<PAGE>
*Philip R. McLoughlin Trustee and President Director (1994-present) and Executive Vice President and Chief
Investment Officer, Phoenix Home Life Mutual Insurance Company
(1987-present). Director/Trustee and President, Phoenix Funds
(1989-present). Director, Phoenix Investment Counsel, Inc.
(1983-present). Director (1984-present) and President (1990-present),
Phoenix Equity Planning Corporation. Director, Phoenix Re Corporation
(Delaware) (1985-present). Director, World Trust Fund (1991-present).
Director (1992-present) and President, (1992-1994), W. S. Griffith &
Co., Inc. and Townsend Financial Advisers, Inc. Director, Chairman and
Chief Executive Officer, National Securities & Research Corporation
(1993-present) and Phoenix Securities Group, Inc. (1993-present).
Director/Trustee, the National Affiliated Investment Companies (until
1993).
James M. Oates Trustee Director/Trustee, Phoenix Funds (1987-present). Managing Director, The
Managing Director Wydown Group (1994-present). Director, Govett Worldwide Opportunity
The Wydown Group Funds, Inc. (1991-present), Massachusetts Bankers Association
50 Congress St. (1990-1993), Stifel Financial Corporation (1986-present), and Savings
Boston, MA 02109 Bank Life Insurance Company (1988-1994). Director/Trustee, the National
Affiliated Investment Companies (until 1993). Director (1984-1994),
President (1984-1994) and Chief Executive Officer (1986-1994), Neworld
Bank.
Philip R. Reynolds Trustee Director/Trustee, Phoenix Funds (1984-present). Director, Vestaur
43 Montclair Drive Securities, Inc. (1972-present). Director/Trustee, the National
West Hartford, CT 06107 Affiliated Investment Companies (until 1993).
Herbert Roth, Jr. Trustee Director/Trustee, Phoenix Funds (1980-present). Director, Boston Edison
134 Lake Street Company (1978-present), Phoenix Home Life Mutual Insurance Company
P. O. Box 909 (1972-present), Landauer, Inc. (medical services)(1970-present), Tech
Sherborn, MA 01770 Ops./Sevcon, Inc. (electronic controllers)(1987-present), Key Energy
Group (oil rig service)(198-1993), and Mark IV Industries (diversified
manufacturer)(1985-present). Director/Trustee, the National Affiliated
Investment Companies (until 1993).
Richard E. Segerson Trustee Director/Trustee, Phoenix Funds (1993-present). Vice President and
102 Valley Road General Manager, Coats & Clark (previously Tootal American,
New Canaan, CT 06840 Inc.)(1991-1993). Consultant, Tootal Group (1989-1991).
Director/Trustee, the National Affiliated Investment Companies
(1983-1993).
Lowell P. Weicker, Jr. Trustee Chairman, Dresing, Lierman, Weicker (1995-present). Trustee/Director,
Dresing, Lierman, Weicker the Phoenix Funds (1995-present). Governor of the State of Connecticut
6931 Arlington Road (1991-1995). President and Chief Executive Officer, Research! America
Suite 501 (1989-1990).
Bethesda, MD 20814
- ---------------
* Trustees identified with an asterisk are considered to be interested persons
of the Trust (within the meaning of the Investment Company Act of 1940, as
amended) because of their affiliation with the Phoenix Investment Counsel,
Inc., Phoenix Realty Securities, Inc. or Phoenix Equity Planning Corporation
Martin J. Gavin Executive Vice Senior Vice President, Investment Products, Phoenix Home Life Mutual
President Insurance Company (1989-present). Director and Executive Vice
President, Phoenix Equity Planning Corporation (1990-present).
Executive Vice President, Phoenix Investment Counsel, Inc.
(1991-present). Direcor and Executive Vice President, PHL Mutual Funds
Holdings, Inc. (1993-present). National Securities & Research
Corporation (1993-present). W.S. Griffith & Co., Inc. (1993-present)
and Townsend Financial Advisers, Inc. (1993-present). Director and Vice
President, PM Holdings, Inc. (1994-present). Executive Vice President, the
Phoenix Funds (1993-present). Executive Vice President, National
Affiliated Investment Companies (until 1993).
12
<PAGE>
Michael E. Haylon Executive Vice President Senior Vice President, Securities Investments, Phoenix Home Life Mutual
Insurance Company (1993-present). Director and Executive Vice President
(1994-present), Vice President (1993-1994), National Securities &
Research Corporation. Vice President, Phoenix Multi-Sector Fixed Income
Fund (1993-present), Phoenix Series Fund (1990-present) and Director
(1994-present) and Vice President (1991-present), Phoenix Investment
Counsel, Inc. Managing Director, Aetna Bond Investors (1989-1990). Vice
President, Aetna Capital Management (1986-1990). Various other
positions with Phoenix Home Life Mutual Insurance Company (1990-1993).
William J. Newman Senior Vice President Vice President, Common Stock and Chief Investment Strategist, Phoenix
Home Life Mutual Insurance Company (1995-present). Senior Vice
President, Phoenix Multi-Protfolio Fund and Phoenix Total Return Fund,
Inc. (1995-present). Executive Vice President, Phoenix Investment
Counsel, Inc. (1995-present). Chief Investment Strategist, Kidder,
Peabody Co., Inc. (1993-1994). Managing Director, Equities, Bankers
Trust (1991-1993) and McKay Shields (1988-1990).
Patricia A. Bannan Vice President Vice President, Common Stock, Phoenix Home Life Mutual Insurance
Company (1992-present). Vice President, Phoenix Series Fund
(1987-present). Director (1993-present) and President (1992-present),
Phoenix Investment Counsel, Inc. Director (1994-present) and Executive
Vice President (1993-present), National Securities & Research
Corporation. Various positions with Phoenix Home Life Mutual Insurance
Company (1982-1992).
Curtiss O. Barrows Vice President Portfolio Manager, Public Bonds, Phoenix Home Life Mutual Insurance
Company (1991-present). Vice President, Phoenix Series Fund
(1985-present) and Phoenix Investment Counsel, Inc. (1991-present).
Vice President, National Securities & Research Corporation
(1993-present). Various other positions with Phoenix Home Life Mutual
Insurance Company (1985-1991).
Mary E. Canning Vice President Associate Portfolio Manager, Common Stock, Phoenix Home Life Mutual
Insurance Company (1989-present). Vice President, Phoenix Series Fund
(1987-present) and Phoenix Investment Counsel, Inc. (1991-present).
Various other positions with Phoenix Home Life Mutual Insurance Company
(1982-1989).
James M. Dolan Vice President Vice President and Compliance Officer (1994-present) and Assistant
100 Bright Meadow Blvd. Secretary (1981-present), Phoenix Equity Planning Corporation. Vice
P.O. Box 2200 President, Phoenix Funds (1989-present). Vice President (1991-present),
Enfield, CT 06083-2200 Assistant Clerk and Assistant Secretary (1982-present), Phoenix
Investment Counsel, Inc. Vice President and Compliance Officer,
Assistant Secretary (1994-present), Assistant Vice President
(1993-1994), National Securities & Research Corporation. Vice
President, the National Affiliated Investment Companies (until 1993).
Various other positions with Phoenix Equity Planning Corporation
(1978-1994).
Jeanne H. Dorey Vice President Portfolio Manager, International, Phoenix Home Life Mutual Insurance
Company. Vice President National Securities & Research Corporation,
Phoenix Multi-Portfolio Fund, Phoenix Investment Counsel, Inc. and
Phoenix Worldwide Opportunities Fund (1993-present).
Christopher J. Kelleher Vice President Portfolio Manager, Public Bonds, Phoenix Home Life Mutual Insurance
Company (1991-present). Vice President, National Securities & Research
Corporation (1993-present), Phoenix Series Fund (1989-present) and
Phoenix Investment Counsel, Inc. (1991-present). Various other
positions with Phoenix Home Life Mutual Insurance Company (1983-1991).
13
<PAGE>
William R. Moyer Vice President Vice President, Investment Products Finance, Phoenix Home Life Mutual
100 Bright Meadow Blvd. Insurance Company (1990-present). Senior Vice President, Finance, and
P.O. Box 2200 Treasurer (1994-present), Phoenix Equity Planning Corporation
Enfield, CT 06083-2200 (1990-present) and Phoenix Investment Counsel, Inc. (1990-present).
Vice President, Phoenix Funds (1990-present). Senior Manager, Price
Waterhouse (1983-1990). Vice President, the National Affiliated
Investment Companies (until 1993). Senior Vice President, Finance,
Phoenix Securities Group, Inc. (1993-present). Senior Vice President,
Finance (1993-present) and Treasurer (1994), National Securities &
Research Corporation (1993-present). Senior Vice President and Chief
Financial Officer (1993-present) and Treasurer (1994-present), Townsend
Financial Advisers, Inc. and W. S. Griffith & Co., Inc.
Scott C. Noble Vice President President, Phoneix Realty Group, Inc. (1995-present). Senior Vice
President, Real Estate, Phoenix Home Life Mutual Insurance Company
(1993-present). Director and Executive Vice President, Phoenix Real
Estate Securities, Inc. (1993-present). Vice President, Phoenix
Multi-Portfolio Fund (1994-present) and The Phoenix Edge Series Fund
(1995-present). Director (1991-present) and President (1993-present),
Phoenix Founders, Inc. Director and President Phoenix Realty Group,
Inc. (1994-present). Director, Phoenix Realty Advisors, Inc.
(1991-present). Director, President and Chief Executive Officer
(1994-present)., Phoenix Realty Investors, Inc. Various other positions
with Phoenix Home Life Insurance Company (1991-1993).
C. Edwin Riley, Jr. Vice President Vice President, Phoenix Total Return Fund, Inc., and The Phoenix Edge
Series Fund(1995-present). Portfolio Manager, Phoenix Home Life Mutual
Insurance Company (1995-present). Sr. Vice President and Director of
Equity Management for Nationsbank Investment Management (1988-1995).
Amy L. Robinson Vice President Managing Director, Securities Administration, Phoenix Home Life Mutual
Insurance Company (1991-present). Vice President, National Securities &
Research Corporation (1993-present), Phoenix Series Fund (1989-present)
and Phoenix Investment Counsel, Inc. (1992-present). Various other
positions with Phoenix Home Life Mutual Insurance Company (1979-1991).
Barbara Rubin Vice President Managing Director, Real Estate, Phoenix Home Life Mutual Insurance
Company (1992-present). Vice President, Phoenix Multi-Portfolio Fund
(1994-present) and The Phoenix Edge Series Fund (1995-present). Second
Vice President, Real Estate, Phoenix Home Life Mutual Insurance Company
(1986-1992). Vice President (1991-present) 238 Columbus Bld. Inc.
Director (1988-present) and Vice President (1993-present), Phoenix
Founders, Inc. Vice President (1993-present) Phoenix Real Estate
Securities, Inc. Director and President (1987-present) Phoenix Realty
Advisors, Inc. Executive Vice President (1994-1995) Phoenix Realty
Securities, Inc. President (1995-present) Phoenix Realty Securities, Inc.
Leonard J. Saltiel Vice President Vice President, Investment Operations, Phoenix Home Life Mutual
100 Bright Meadow Blvd. Insurance Company (1994-present). Senior Vice President, Phoenix Equity
P.O. Box 2200 Planning Corporation (1994-present). Vice President, Phoenix Funds
Enfield, CT 06083-2200 (1994-present). Vice President, National Securities & Research
Corporation (1994-present). Various positions with Home Lofe Insurance
Company and Phoenix Home Life Mutual Insurance Company (1987-1994).
Dorothy J. Skaret Vice President Director, Public Fixed Income, Phoenix Home Life Mutual Insurance
Company (1991-present). Vice President, National Securities & Research
Corporation (1993-present), Phoenix Series Fund (1990-present) and
Phoenix Investment Counsel, Inc. (1991-present). Various other
positions with Phoenix Home Life Mutual Insurance Company (1986-1991).
14
<PAGE>
James D. Wehr Vice President Managing Director, Public Fixed Income, Phoenix Home Life Mutual
Insurance Company (1991-present). Vice President, National Securities &
Research Corporation (1993-present), Phoenix California Tax Exempt Bond
Fund Inc., (1993-present), Phoenix Multi-Portfolio Fund (1988-present),
Phoenix Series Fund (1990-present) and Phoenix Investment Counsel, Inc.
(1991-present). Various other positions with Phoenix Home Life Mutual
Insurance Company (1981-1991).
John T. Wilson Vice President Portfolio Manager, Common Stock, Phoenix Home Life Mutual Insurance
Company (1990-present). Vice President, Phoenix Multi-Portfolio fund,
Phoenix Worldwide Opportunities Fund and National Securities and
Research Corporation (1994-present).
Nancy G. Curtiss Treasurer Second Vice President and Treasurer, Fund Accounting, Phoenix Home Life
Mutual Insurance Company (1994-present). Treasurer, Phoenix Funds
(1994-present). Vice President, Fund Accounting, Phoenix Equity
Planning Corporation (1994-present). Various positions with Phoenix
Home Life Insurance Company (1987-1994).
G. Jeffrey Bohne Secretary Vice President and General Manager, Phoenix Home Life Mutual Insurance
101 Munson Street Company (1993-present). Vice President, Home Life of New York Insurance
Greenfield, MA 01301 Company (1984-1992). Vice President, Transfer Agent Operations, Phoenix
Equity Planning Corporation (1993-present). Secretary, the Phoenix
Funds, (1993-present).
</TABLE>
No person listed in the foregoing table has any immediate family relationship
with any other person listed in the table.
At December 31, 1994, the Trustees and officers as a group owned none of the
then outstanding shares of the Trust.
For services rendered to the Trust during the fiscal year ended December 31,
1994, the Trustees received an aggregate of $81,162 from the Trust as Trustees'
fees. For his services on the Boards of the Phoenix Funds, each Trustee who is
not a full-time employee of the Advisers or any of its affiliates currently
receives a retainer at the annual rate of $30,000 and $2,000 per joint meeting
of the Boards. Each Trustee who serves on the Audit Committee receives a
retainer at the annual rate of $2,000 and $2,000 per joint Audit Committee
meeting attended. Each Trustee who serves on the Executive Committee and who is
not an interested person of the Trust receives a retainer at the annual rate of
$1,000 and $1,000 per joint Executive Committee meeting attended. For the Fund
alone, each Trustee who is not a full-time employee of the Adviser or any of its
affiliates receives for his services a retainer at the annual rate of $3,000 and
a fee of $200 per meeting attended; each Trustee who serves on the Audit
Committee of the Fund receives a retainer at the annual rate of $200 and $200
per Audit Committee meeting attended. The current members of the Audit Committee
are Messrs. Blinn, Conway, Oates, Roth, Segerson and Weicker. Each Trustee who
serves on the Executive Committee and who is not an interested person of the
Trust receives a retainer at the annual rate of $100 and $1,000 per joint
Executive Committee meeting attended. Trustees and officers are compensated for
their services by Phoenix Home Life and receive no compensation from the Trust.
For the Fund's last fiscal Year, the Trustees received the following
compensation:
<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits Estimated Annual from Fund and Fund
Compensation Accrued as Part Benefits Upon Complex (10 Funds)
Name from Fund of Fund Expenses Retirement Paid to Trustees
---- ------------ ------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
C. Duane Blinn $2,000* $50,000
Robert Chesek $1,600 $40,000
E. Virgil Conway $2,080 $52,000
Harry Dalzell-Payne $1,680 $42,000
Leroy Keith, Jr. $1,680 None for None for $42,000
Philip R. McLoughlin $0 any Trustee any Trustee $0
James M. Oates $2,000 $50,000
Philip R. Reynolds $1,680 $42,000
Herbert Roth, Jr. $2,160* $54,000
Richard E. Segerson $2,000 $50,000
</TABLE>
* This compensation (and the earnings thereon) was deferred to the Trustees
Deferred Compensation Plan.
15
<PAGE>
THE INVESTMENT ADVISERS
The Trust has entered into Investment Advisory Agreements ("Agreements") with
Phoenix Investment Counsel, Inc. ("PIC") and Phoenix Realty Securities ("PRS")
whose offices are located at One American Row, Hartford, Connecticut 06115.
Phoenix Home Life is in the business of writing ordinary and group life and
health insurance and annuities. At December 31, 1994, Phoenix Home Life had
total assets of approximately $12 billion and net insurance in force of
approximately $60.6 billion. PHL Variable writes variable annuities, and at
December 31, 1994 had total assets of approximately $9.7 million. Phoenix Equity
Planning Corporation ("PEPCO") performs bookkeeping and pricing and
administrative services for the Trust. It also provides bookkeeping and pricing
services to other investment companies advised by PIC and PRS. PEPCO is
registered as a broker-dealer in fifty states. The executive offices of Phoenix
Home Life are located at One American Row, Hartford, Connecticut 06115 and the
principal offices of Equity Planning are located at 100 Bright Meadow Boulevard,
P.O. Box 2200, Enfield, Connecticut 06083-2200. All of the outstanding stock of
PIC is owned by PEPCO, an indirect subsidiary of Phoenix Home Life Mutual
Insurance Company ("Phoenix Home Life"), Hartford, Connecticut.
PRS was formed in 1994 as an indirect subsidiary of Phoenix Home Life.
ABKB/LaSalle Securities Limited Partnership (ABKB), a subsidiary of LaSalle
Partners, serves as sub-adviser to the Real Estate Series. ABKB's principal
place of business is located at 100 East Pratt Street, Baltimore, Maryland
21202. ABKB has been a registered investment advisor since 1979.
The Agreements provide that the Advisers shall furnish continuously, at its own
expense, an investment program for each of the Series, subject at all times to
the supervision of the Trustees. They also provide that all costs and expenses
not specifically enumerated as payable by the Advisers shall be paid by the
Trust or by Phoenix Home Life and PHL Variable. The Advisers or Phoenix Home
Life and PHL Variable have agreed to reimburse the Trust for certain operating
expenses for all Series. Each Series (except the International and Real Estate
Series) pays a portion or all of its total operating expenses other than the
management fee, up to .15% of its total net assets. The International and Real
Estate Series pays total operating expenses other than the management fee up to
.40% and .25%, respectively, of its total net assets. Expenses above these
limits are paid by the Advisers, Phoenix Home Life, or PHL Variable.
To the extent that any expenses are paid by the Trust, they will be paid by the
Series incurring them or, in the case of general expenses, may be charged among
the Series in relation to the benefits received by the shareholders, as
determined by the financial agent under the supervision of the Board of
Trustees. Such expenses shall include, but shall not be limited to, all expenses
(other than those specifically referred to as being borne by the Advisers,
Phoenix Home Life or PHL Variable) incurred in the operation of the Trust and
any offering of its shares, including, among others, interest, taxes, brokerage
fees and commissions, fees of Trustees, expenses of Trustees' and shareholders'
meetings including the cost of printing and mailing proxies, expenses of
insurance premiums for fidelity and other coverage, expenses of repurchase and
redemption of shares, certain expenses of issue and sale of shares, association
membership dues, charges of custodians, transfer agents, dividend disbursing
agents and financial agents, bookkeeping, auditing and legal expenses. The
Trust, Phoenix Home Life or PHL Variable will also pay the fees and bear the
expense of registering and maintaining the registration of the Trust and its
shares with the Securities and Exchange Commission and registering or qualifying
its shares under state or other securities laws and the expense of preparing and
mailing prospectuses and reports to shareholders.
The Investment Advisory Agreements provide that the Advisers shall not be liable
to the Trust or to any shareholder of the Trust for any error of judgement or
mistake of law or for any loss suffered by the Trust or by any shareholder of
the Trust in connection with the matters to which the Investment Advisory
Agreements relate, 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.
The Investment Advisory Agreements also provide that, as full compensation for
the services and facilities furnished to the Trust, the Advisers shall be
compensated as follows: within five days after the end of each month, the Trust
shall pay the Advisers the following fees:
Phoenix Investment Counsel, Inc.
--------------------------------
Rate for First Rate for Next Rate for Excess
Series $250,000,000 $250,000,000 Over $500,000,000
- ------ -------------- ------------- -----------------
Money Market .40% .35% .30%
Bond .50% .45% .40%
Balanced .55% .50% .45%
Total Return .60% .55% .50%
Growth .70% .65% .60%
International .75% .70% .65%
Phoenix Realty Securities, Inc.
-------------------------------
Rate for First Rate for Next Rate for Excess Over
Series $1,000,000,000 $1,000,000,000 $2,000,000,000
- ------ -------------- -------------- --------------------
Real Estate .75% .70% .65%
The amounts payable to the Advisers shall be based upon the average of the
values of the net assets of the Trust as of the close of business each day.
There can be no assurance that the Trust will reach a net asset level high
enough to realize a reduction in the rate of the advisory fee. Any reduction in
the rate of the advisory fee will be prorated among the Series in proportion to
their respective averages of the aggregate daily net asset values for the period
for which the fee had been paid.
The Investment Advisory Agreements continue in force from year to year for all
Series, provided that, with respect to each Series, the applicable agreement
must be approved at least annually by the Trustees or by vote of a majority of
the outstanding voting securities of that Series. In addition, and in either
event, the terms of the agreements and any renewal thereof must be approved by
the vote of a majority of 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
16
<PAGE>
called for the purpose of voting on such approval. The agreements will terminate
automatically if assigned and may be terminated at any time, without payment of
any penalty, either by the Trust or by the Advisers, on sixty (60) days written
notice.
BROKERAGE ALLOCATION
In effecting portfolio transactions for the Trust, the Advisers and ABKB, as
subadviser to the Real Estate Series, adhere 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 Advisers 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 Advisers determine in good faith that such
amount of commission is reasonable in relation to the value of the brokerage and
research services provided by such broker. 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, the Advisers are considered to be in addition to and not in lieu
of services required to be performed by the Advisers under their contracts with
the Trust under their contracts with the Advisers and may benefit both the Trust
and other clients of the Advisers. Conversely, brokerage and research services
provided by brokers to other clients of the Advisers may benefit the Trust.
If the securities in which a particular Series of the Trust invests are traded
primarily in the over-the-counter market, where possible the Series 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 commissions
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 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 Advisers in
determining the overall reasonableness of brokerage commissions paid by the
Trust.
Investment decisions for the Trust are made independently from those of the
other investment companies or accounts advised by the Advisers. It may
frequently happen that the same security is held in the portfolio of more than
one fund. Simultaneous transactions are inevitable when several funds are
managed by the same investment adviser, particularly when the same security is
suited for the investment objectives of more than one fund. When two or more
funds advised by the Advisers are simultaneously engaged in the purchase or sale
of the same security, the transactions are allocated among the funds in a manner
equitable to each fund. It is recognized that in some cases this system could
have a detrimental effect on the price or volume of the security as far as the
Trust is concerned. In other cases, however, it is believed that the ability of
the Trust to participate in volume transactions will produce better executions
for the Trust. It is the opinion of the Board of Trustees of the Trust that the
desirability of utilizing the Advisers as investment advisers to the Trust as
manager of foreign securities owned by the Trust outweighs the disadvantages
that may be said to exist from simultaneous transactions.
For the fiscal years ended December 31, 1992, 1993, and 1994 brokerage
commissions paid by the Fund on portfolio transactions totalled $1,434,000,
$2,530,449, and $4,360,577 respectively. None of such commissions was paid to a
broker who was an affiliated person of the Fund or an affiliated person of such
a person or, to the knowledge of the Fund, to a broker an affiliated person of
which was an affiliated person of the Fund or the Adviser. Total brokerage
commissions paid during the fiscal year ended December 31, 1994 included
brokerage commissions of $3,913,124 on portfolio transactions aggregating
$2,019,089,547 executed by brokers who provided research and other statistical
and factual information.
DETERMINATION OF NET ASSET VALUE
The net asset value is the redemption price for a share. As described in more
detail in the Prospectus, the net asset value of shares of the Trust is
determined once daily as of the close of trading on the New York Stock Exchange
on each day the Exchange is open for trading or any other day on which there is
a sufficient degree of trading in the investments of any Series that the current
net asset value of such Series might be materially affected. Securities
primarily traded on foreign securities exchanges are generally valued at the
preceding closing values on their respective exchanges.
Growth, Bond, Total Return, Balanced, International and
Real Estate Series
In determining the value of the assets of the Growth, Bond, Total Return,
Balance, International and Real Estate Series, the securities for which market
quotations are readily available are valued at market value, which is currently
determined using the last reported sale price, or, if no sales are reported, as
is the case with many securities traded over-the-counter, the last reported bid
price. Debt securities (other than short-term obligations, which are valued on
the basis of amortized cost as defined below) are normally valued on the basis
of valuations provided by a pricing service when such prices are believed to
reflect the fair value of such securities. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices and take
into account appropriate factors such as institution-size trading in similar
groups of securities, yield, quality of issue, trading characteristics and other
market data. Equity options are valued at last sale price unless the bid price
is higher or the asked price is lower, in which event such bid or asked price is
used. Exchange traded fixed income options are valued at the last sale price
unless there is no sale price, in which event current prices provided by market
makers are used. Over-the-Counter fixed income options are valued based upon
current prices provided by market makers. Financial futures are valued at the
settlement price established each day by the board of trade or exchange on which
they are traded. All
17
<PAGE>
other securities and assets are valued at their fair value as determined in good
faith by the Trustees although the actual calculations are normally made by
persons acting pursuant to the direction of the Trustees.
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 does not take
place for the International Series contemporaneously with the determination of
the prices of the majority of the portfolio securities of the Series. For
purposes of determining the net asset value of the International Series, 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
offered 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.
Money Market Series
The securities of the Money Market Series are valued on the basis of amortized
cost absent extraordinary or unusual market conditions. Under the amortized cost
method of valuation, securities are valued at cost on the date of purchase.
Thereafter, the value of a security is increased or decreased incrementally each
day so that at maturity any purchase discount or premium is fully amortized and
the value of the security is equal to its principal amount. Due to fluctuations
in interest rates, the amortized cost value of the Money Market Series
securities may at times be more or less than their market value. By using
amortized cost valuation the Money Market Series seeks to maintain a constant
net asset value of $1.00 per share despite minor shifts in the market value of
its portfolio securities.
The yield on a shareholder's investment may be more or less than that which
would be recognized if the Series' net asset value per share was not constant
and was permitted to fluctuate with the market value of the Series' portfolio
securities. However, as a result of the following procedures, it is believed
that any difference will normally be minimal. The deviation is monitored
periodically by comparing the Series net asset value per share as determined by
using available market quotations with its net asset value per share as
determined through the use of the amortized cost method of valuation. The
Adviser makes such comparisons at least weekly under the direction of the
Trustees and will advise the Trustees promptly in the event of any significant
deviation. If the deviation exceeds 1/2 of 1%, the Trustees will consider what
action, if any, should be initiated to provide fair valuation of the Series'
portfolio securities and prevent material dilution or other unfair results to
shareholders. Such action may include redemption of shares in kind, selling
portfolio securities prior to maturity, withholding dividends or utilizing a net
asset value per share as determined by using available market quotations.
Furthermore, the assets of the Series will not be invested in any security with
a maturity of greater than 397 days, and the average weighted maturity of its
portfolio will not exceed 90 days. Portfolio investments will be limited to U.S.
dollar-denominated securities which present minimal credit risks and are of high
quality as determined either by a major rating service or, if not rated, by the
Trustees.
INVESTING IN THE TRUST
Shares of the Trust are not available to the public directly. Although shares of
the Trust are owned by the Accounts, Contractowners and Policyowners do have
voting rights with respect to those shares, as described in the Prospectus under
"Shares of Beneficial Interest". You may invest in the Trust by buying a
Variable Accumulation Annuity Contract or a Variable Universal Life Insurance
Policy from Phoenix Home Life or PHL Variable and directing the allocation of
the net purchase payment(s) to the sub-accounts corresponding to the Series of
the Trust. Phoenix Home Life and PHL Variable will, in turn, invest payments in
shares of the Trust as the investor directs at net asset value next determined
with no sales load.
Sales Charge and Surrender Charges
The Trust does not assess any sales charge, either when it sells or when it
redeems securities. The sales charges which may be assessed under the Contracts
or Policies are described in the accompanying prospectus, as are other charges.
REDEMPTION OF SHARES
The Trust will redeem any shares presented by the shareholder Accounts for
redemption. The Account's policies on when and whether to buy or redeem Fund
shares are described in the accompanying prospectus.
At the discretion of the Trustees, the Trust may, to the extent consistent with
state and Federal law, make payment for shares of a particular Series
repurchased or redeemed in whole or in part in securities or other assets of
such Series taken at current values. Should payment be made in securities, the
shareholder Accounts may incur brokerage costs in converting such securities to
cash.
The right of redemption may only be suspended or the payment date postponed for
more than seven days for any period during which trading on the New York Stock
Exchange is closed for other than customary weekend and holiday closings, or
when trading on the New York Stock Exchange is restricted, as determined by the
Securities and Exchange Commission, for any period when an emergency (as defined
by rules of the Commission) exists, or during any period when the Commission
has, by order, permitted such suspension. In case of a suspension of the right
of redemption, the shareholders may withdraw requests for redemption of shares
prior to the next determination of net asset value after the suspension has been
terminated or they will receive payment of the net asset value so determined.
The shareholder Accounts may receive more or less than was paid for the shares,
depending on the net asset value of the shares at the time they are repurchased
or redeemed.
TAXES
As stated in the Prospectus, it will be the policy of the Trust and of each
Series to comply with those provisions of the Internal Revenue Code of 1986, as
amended, ("Code") which relieve investment companies that distribute
substantially all of their net income from Federal income tax on the amounts
distributed. The Trust also intends to comply with pertinent Code provisions in
order to avoid imposition of any Federal excise tax. Dividends
18
<PAGE>
derived from interest and distributions of any realized capital gains are
taxable, under Subchapter M, to the Trust's Shareholders, which in this case are
the Accounts.
Federal income taxation of separate accounts, life insurance companies, and unit
investment trusts are discussed in the accompanying prospectus for the Account.
CUSTODIAN
The securities and cash of all Series except the International and Real Estate
Series are held by The Chase Manhattan Bank, N.A. under the terms of a custodian
agreement. The securities and cash of the International Series are held by Brown
Brothers Harriman & Co. under the terms of a custodian agreement. With respect
to the International Series, the address for the Custodian is Brown Brothers
Harriman & Co., 40 Water Street, Boston, Massachusetts 02109, Attention:
Manager, Securities Department. The securities and cash of the Real Estate
Series are held by State Street Bank and Trust Company, located at 1 Heritage
Drive, P2N, North Quincy, Massachusetts 02171. With respect to Series other than
the International and Real Estate Series, the address for the Custodian is The
Chase Manhattan Bank, N.A., 1 Chase Manhattan Plaza, Floor 13B, New York, NY
10081. The Trust permits the Custodian to deposit some or all of its securities
in central depository systems as allowed by Federal law. The use of foreign
custodians and foreign central depositories has been authorized by the Board of
Trustees of the Trust if certain conditions are met.
Foreign Custodian
The Trust 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 Trust's foreign securities transactions. The use of a foreign
custodian involves 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.
INDEPENDENT ACCOUNTANTS
The Trust's financial statements are audited by Price Waterhouse LLP, 160
Federal Street, Boston, Massachusetts 02110, independent accountants for the
Fund. Phoenix Home Life and PHL Variable have agreed to send a copy of both the
Annual Report and the Semi-Annual Report to Shareholders containing the Fund's
financial statements to every Contractowner or Policyowner having an interest in
the Accounts. The independent accountants also provide other accounting and
tax-related services as requested by the Trust from time to time.
FINANCIAL STATEMENTS
The financial statements and the notes thereto relating to the Trust and the
report of Price Waterhouse LLP with respect thereto for the fiscal year ended
December 31, 1994 are contained in the Trust's Annual Report. The Annual and
Semi-Annual Reports are available by writing or calling Variable Products
Operations at 101 Munson Street, P.O. Box 942, Greenfield, Massachusetts
01302-0942, (800) 447-4312. The Annual Report and the Semi-Annual Report for the
fiscal period ended June 30, 1995 are incorporated into this Statement of
Additional Information by reference. A copy of the Annual and Semi-Annual
Reports must precede or accompany this Statement of Additional Information.
19
<PAGE>
Annual Report
December 31, 1994
The Phoenix Edge Series Fund
<PAGE>
MONEY MARKET SERIES
Short-term interest rates rose by 250 basis points in 1994. The Federal
Reserve Board raised short-term rates on 6 separate occasions in response to
stronger than expected economic growth and rising fears of inflation.
We shortened the average maturity of the fund early in 1994 to take
advantage of rising rates. The fund's average maturity stood at 53 days at
year end. We have maintained our high level (40%) of government type
securities and continue to invest in highly liquid, high quality money market
instruments.
[Line Graph]
Donoghue's Money Market
Money Fund* Series
1/31/94 2.63% 2.88%
2/28/94 2.65 2.86
3/31/94 2.78 2.94
4/30/94 2.99 3.07
5/31/94 3.30 3.45
6/30/94 3.56 3.57
7/31/94 3.73 3.72
8/31/94 3.89 4.28
9/30/94 4.10 4.16
10/31/94 4.29 4.53
11/30/94 4.57 4.70
12/31/94 5.02 5.12
The above graph covers the period from January 31, 1994 to December 31, 1994.
The results are not indicative of the rate of return which may be realized
from an investment made in the Money Market Fund today. The Money Market
Series is neither issued nor guaranteed by the U.S. Government, and there can
be no assurance the Series will be able to maintain a stable Net Asset Value
at $10.00 per share.
*Average monthly yield of taxable Money Market Funds as reported by
Donoghue's Money Fund Report.
SCHEDULE OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
STANDARD
FACE & POOR'S
AMOUNT RATING INTEREST MATURITY
(000) DESCRIPTION (Unaudited) RATE DATE VALUE(a)
------ ------------------------------------------------ -------- ------ -------- --------------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY BILLS--3.2%
$ 670,000 U.S. Treasury Bills AAA 3.45% 01/12/95 $ 669,295
2,500,000 U.S. Treasury Bills AAA 6.74 12/14/95 2,337,585
------------
TOTAL U.S. TREASURY BILLS 3,006,880
------------
FEDERAL AGENCY SECURITIES--22.3%
3,865,000 Federal Home Loan Banks 5.75 01/03/95 3,863,765
2,100,000 Federal Home Loan Banks 3.49 01/05/95 2,099,187
1,300,000 Federal National Mortgage Assn. 3.79 02/24/95 1,299,210
1,500,000 Federal National Mortgage Assn. 3.79 02/24/95 1,499,444
1,675,000 Federal National Mortgage Assn. 6.10 03/08/95 1,656,268
1,500,000 Federal Home Loan Mortgage 6.13 03/16/95 1,481,099
1,000,000 Federal National Mortgage Assn. 6.11 03/20/95 986,762
850,000 Federal Farm Credit Bank 4.43 04/03/95 849,017
1,000,000 Federal Home Loan Banks 5.64 04/24/95 982,297
620,000 Federal Home Loan Banks 5.00 04/28/95 609,897
1,000,000 Federal National Mortgage Assn. 5.80 05/11/95 979,056
1,000,000 Federal Farm Credit Bank 5.82 05/15/95 978,337
210,000 Federal National Mortgage Assn. 6.40 06/16/95 203,803
2,000,000 Federal National Mortgage Assn. 6.51 06/29/95 1,935,262
1,650,000 Federal Farm Credit Bank 6.33 11/01/95 1,648,926
------------
TOTAL FEDERAL AGENCY SECURITIES 21,072,330
------------
RESET
DATE
------
FEDERAL AGENCY SECURITIES--VARIABLE--18.0%
1,500,000 Federal Farm Credit Bank (final maturity 09/01/95) (c) 5.60 01/03/95 1,499,681
1,500,000 Federal Home Loan Banks (final maturity 01/26/98) (c) 5.85 01/03/95 1,482,900
1,500,000 Federal Home Loan Banks (final maturity 01/14/97) (c) 5.95 01/03/95 1,500,000
821,336 Small Bus. Assoc. GLPC Pool #502179 (final maturity
01/25/18) (c) 5.75 01/03/95 821,336
1,397,288 Small Bus. Assoc. GLPC Pool #502208 (final maturity
02/25/18) (c) 5.75 01/03/95 1,397,288
906,256 Small Bus. Assoc. GLPC Pool #502341V (final maturity
06/25/18) (c) 6.50 01/03/95 909,075
3,000,000 Student Loan Marketing Assn. (final maturity 01/28/98) (c) 5.70 01/03/95 2,962,330
3,000,000 Student Loan Marketing Assn. (final maturity 08/16/96) (c) 5.86 01/03/95 3,000,000
2,500,000 Student Loan Marketing Assn. (final maturity 11/24/97) (c) 5.89 01/04/95 2,500,000
1,000,000 Student Loan Marketing Assn. (final maturity 02/22/99) (c) 5.92 01/04/95 1,000,000
------------
FEDERAL AGENCY SECURITIES--VARIABLE 17,072,610
------------
See Notes to Financial Statements
2-2
<PAGE>
MONEY MARKET SERIES
STANDARD
FACE & POOR'S
AMOUNT RATING INTEREST MATURITY
(000) DESCRIPTION (Unaudited) RATE DATE VALUE(a)
------ ---------------------------------------------- ------ ---- ------ ------------
COMMERCIAL PAPER--53.6%
$1,250,000 ESC Securitization, Inc. A-1+ 6.07% 01/04/95 $ 1,249,368
105,000 General Electric Capital Corp. A-1+ 5.90 01/04/95 104,948
2,135,000 BellSouth Telecommunications, Inc. A-1+ 5.97 01/06/95 2,133,230
1,000,000 Albertson's, Inc. A-1 6.02 01/09/95 998,662
2,000,000 ABS Commercial Paper, Inc. A-1 5.83 01/12/95 1,996,437
1,500,000 First Deposit Funding Corp. (d) A-1+ 6.00 01/13/95 1,497,000
3,220,000 Minnesota Mining & Manufacturing A-1+ 5.60 01/13/95 3,213,989
1,075,000 Receivables Capital Corp. A-1 6.12 01/17/95 1,072,076
2,000,000 TDK USA Corp. A-1+ 6.05 01/17/95 1,994,622
1,500,000 Merrill Lynch & Co., Inc. A-1+ 5.77 01/18/95 1,495,913
500,000 Merrill Lynch & Co., Inc. A-1+ 5.80 01/19/95 498,550
1,100,000 Goldman Sachs & Co. A-1+ 5.93 01/20/95 1,096,560
2,675,000 Goldman Sachs & Co. A-1+ 5.95 01/20/95 2,666,600
3,000,000 Kimberly-Clark Corp. A-1+ 5.90 01/23/95 2,989,183
1,250,000 AT&T Corp. A-1+ 5.42 01/24/95 1,245,672
1,800,000 Preferred Receivables Funding Corp. A-1 6.10 01/25/95 1,792,680
890,000 Cargill, Inc. A-1+ 5.46 01/27/95 886,490
2,000,000 Merrill Lynch & Co., Inc. A-1+ 6.10 01/27/95 1,991,189
830,000 Goldman, Sachs & Co. A-1+ 6.10 02/01/95 825,640
2,500,000 BellSouth Telecommunications, Inc. A-1+ 5.60 02/06/95 2,486,000
2,000,000 ABS Commercial Paper, Inc. A-1 6.08 02/15/95 1,984,800
3,000,000 Ameritech Corp. (d) A-1+ 5.47 02/15/95 2,979,487
1,000,000 Beta Finance, Inc. (d) A-1+ 5.77 02/15/95 992,787
1,295,000 General Electric Capital Corp. A-1+ 5.87 02/22/95 1,284,020
2,330,000 Preferred Receivables Funding Corp. A-1 6.07 02/23/95 2,309,178
2,500,000 Cargill, Inc. A-1+ 5.54 02/27/95 2,478,071
2,000,000 CXC, Inc. A-1 6.22 03/15/95 1,974,774
3,000,000 McKenna Triangle Corp. A-1+ 6.55 06/06/95 2,914,850
1,600,000 Corporate Receivables Corp. A-1+ 6.70 07/24/95 1,539,253
------------
TOTAL COMMERCIAL PAPER 50,692,029
------------
VARIABLE RATES--2.1% RESET
DATE
------
1,000,000 Beta Finance, Inc.
(final maturity 04/20/95)(c) A-1+ 5.68 01/03/95 1,000,000
1,000,000 Ciesco L.P. (final maturity 03/03/95) (c) A-1+ 6.31 03/03/95 1,000,000
------------
TOTAL VARIABLE RATES 2,000,000
------------
TOTAL INVESTMENTS--99.2%
(Identified cost $93,843,849) 93,843,849(b)
Cash and receivables, less liabilities--0.8% 742,002
------------
NET ASSETS--100.0% $94,585,851
============
</TABLE>
(a) See Security Valuation under Note 2 of Notes to Financial Statements.
(b) Federal Income Tax Information: At December 31, 1994 the aggregate cost of
securities was the same for book and tax purposes.
(c) Variable rate demand note. The interest rates shown reflect the rate
currently in effect. The maturity dates shown reflect the next interest rate
reset dates.
(d) 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,
1994, these securities amounted to a value of $5,469,274 or 5.8% of net
assets.
See Notes to Financial Statements
2-3
<PAGE>
MONEY MARKET SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $93,843,849) $93,843,849
Cash 572,871
Investment income receivable 236,204
-----------
Total assets 94,652,924
-----------
Liabilities
Investment advisory fee 41,296
Administration fee 4,867
Trustees' fee 9,315
Accrued expenses 11,595
-----------
Total liabilities 67,073
-----------
Net Assets $94,585,851
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $94,571,969
Undistributed net investment income 13,882
-----------
Net Assets $94,585,851
===========
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization 9,457,195
===========
Net asset value and offering price per share $10.00
======
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1994
<TABLE>
<S> <C>
Investment Income
Interest $3,875,751
-----------
Total investment income 3,875,751
-----------
Expenses
Investment advisory fee 352,237
Administration fee 52,836
Trustees' fee 13,527
Custodian 22,252
Audit 8,139
Printing 29,295
Other 30,485
-----------
Total expenses 508,771
Total expenses borne by investment adviser (25,103)
-----------
Net expenses 483,668
-----------
Net investment income 3,392,083
-----------
Net realized gain from investment transactions 100
-----------
Net increase in net assets resulting from operations $3,392,183
===========
</TABLE>
See Notes to Financial Statements
2-4
<PAGE>
MONEY MARKET SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
12/31/94 12/31/93
------------ --------------
<S> <C> <C>
From Operations
Net investment income $ 3,392,083 $ 1,932,861
Net realized gain on securities 100 --
---------- ------------
Net increase in net assets resulting from operations 3,392,183 1,932,861
---------- ------------
From Distributions to Shareholders
Net investment income ($0.38 and $0.28 per share, respectively) (3,378,211) (1,932,861)
Net realized gains ($0.00 and $0.00 per share, respectively) (94) --
---------- ------------
Decrease in net assets resulting from distributions to shareholders (3,378,305) (1,932,861)
---------- ------------
From Shares of Beneficial Interest Transactions
Proceeds from sales of shares (23,586,003 and 15,696,465 shares,
respectively) 235,860,031 156,964,654
Net asset value of shares issued in conjunction with reinvestment of
distributions of net investment income (337,821 and 193,287 shares,
respectively) 3,378,211 1,932,861
Net asset value of shares issued in conjunction with the reinvestment of
distributions of net realized gains (9 and 0 shares, respectively) 94 --
Cost of shares repurchased (21,761,240 and 15,591,369 shares, respectively) (217,612,379) (155,913,697)
---------- ------------
Increase in net assets resulting from share transactions 21,625,957 2,983,818
---------- ------------
Net increase in net assets 21,639,835 2,983,818
Net Assets
Beginning of period 72,946,016 69,962,198
---------- ------------
End of period (including undistributed net investment income of $13,882 and
$776,161, respectively) $ 94,585,851 $ 72,946,016
========== ============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Year ended December 31,
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00
Income from investment operations
Net investment income 0.38(1) 0.28(1) 0.35 0.58 0.79
-------- -------- -------- -------- ----------
Total from investment operations 0.38 0.28 0.35 0.58 0.79
-------- -------- -------- -------- ----------
Less distributions
Dividends from net investment income (0.38) (0.28) (0.35) (0.58) (0.79)
-------- -------- -------- -------- ----------
Total distributions (0.38) (0.28) (0.35) (0.58) (0.79)
-------- -------- -------- -------- ----------
Net asset value, end of period $10.00 $10.00 $10.00 $10.00 $10.00
======== ======== ======== ======== ==========
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Total return 3.77% 2.80% 3.50% 5.80% 7.90%
Ratios/supplemental data:
Net assets, end of period (thousands) $94,586 $72,946 $69,962 $51,692 $38,709
Ratio to average net assets of:
Operating expenses 0.55% 0.55% 0.50% 0.50% 0.50%
Net investment income 3.85% 2.84% 3.49% 5.76% 7.87%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.003 and $0.01 per share, respectively.
See Notes to Financial Statements
2-5
<PAGE>
GROWTH SERIES
While the major stock market indices rallied to finish the year with a
small gain, 1994 proved to be a year where returns on cash proved hard to
beat. In fact, a return of 3%, which was ridiculed just one year ago,
outperformed the vast majority of stock and bond funds in 1994. Once again,
investment professionals learned that it is to fight the Federal Reserve when
it is raising interest rates.
Despite the difficult environment, the true bears on the stock market were
not vindicated either in 1994. In the fourth quarter, the market showed
surprising resilience in response to the sudden bankruptcy filing of Orange
County and the dramatic Mexican peso crisis. While these events clearly had a
major impact on both the municipal and Latin American markets, the pair of
crises failed to incite a broader based selling. This measure of market
stability may provide a foundation of optimism heading into the new year.
In contrast to the glum mood of Wall Street, 1994 proved to be a banner
year for many American workers and consumers as the economy roared,
unemployment tumbled and inflation remained in check. Despite the Fed's
tightening efforts, the economy was more vibrant then either the Fed or most
market watchers had anticipated. While evidence of a tangible economic
slowdown proved elusive, anticipation of a slowdown by investors moved into
full swing in the fourth quarter, as the yield curve between two and thirty
year Treasury securities flattened. While the yield curve is not yet
inverted, a flatter curve is often a precursor to future economic weakness.
Likewise, equity investors acted in advance of a slowdown by selling cyclical
and commodity oriented shares, which had been performing well over the last
two years.
With 1994 now complete, the stock market has completed its third year of
record low volatility combined with modest returns. The stage may be set for
a more volatile market in 1995. Conventional thinking heading into 1995
assumes that the Fed will push short-term rates significantly higher, luring
the public back into CD's and damaging stock valuations. A still more
pessimistic view is that the Fed will overtighten and induce a recession of
serious slowdown in late 1995 or 1996. In any case, with investor spirits now
relatively low and with the bear case for the stock market seeming very
obvious, it makes sense to explore the less apparent bullish camp.
As we enter 1995, the Fed would appear to be mostly through its tightening
phase for this cycle. Given that early February marks the one year
anniversary of Greenspan's first tightening, we now can envision the end of
this round of monetary restraint occurring by midyear. If short-term rates
were to stabilize in the second half and corporate earnings, led by brisk
foreign demand, remain intact, then stocks could rally smartly. Another
bullish development may emerge from the Republican landslide in November.
With an agenda based on balancing the budget, reducing capital gains and
downsizing the federal government, the Republican program potentially is very
favorable for the capital markets. To date, most investors have remained
cautious on the ability of the Republicans to deliver on their contract.
However, should Newt Gingrich and his team begin to show results, a "new era
for Washington" euphoria could materialize in 1995 which would be bullish for
both stocks and bonds.
In short, a reasonable case can be made for equities in 1995. If inflation
proves to be a paper tiger in 1995 then the stock market could be poised for
its best performance since 1991. By reviewing several optimistic
possibilities for the coming year, we do not want to understate the obvious
risks in the market currently. To many investors a one year Treasury yielding
7.25% may be a compelling choice, especially after a difficult year in the
markets in 1994. Nonetheless, given the number of stocks which are now
significantly below their 1993-94 highs, we believe opportunities exist to
purchase growth stocks at attractive levels.
For the year ended December 31, 1994, the Fund's value increased by 1.48%
which compared to a return of 1.28% for the S&P 500 during the comparable
period. Performance of the Fund was aided by its exposure to firms in the
telecommunications and wireless equipment area. These firms continue to
benefit from increased cellular phone utilization on a global basis. The Fund
also benefited from an increased exposure to healthcare and medical
technology firms, which rallied after Federal health legislation failed to
pass. Performance of the Fund was hurt late in the year by weak performance
by retailing stocks and by a small position in Mexico.
Going forward, we continue to search for firms that have strong sales and
earnings growth in addition to solid cash flows and above average balance
sheets. As of December 31, 1994, the Fund was 74.3% in equities, 0.6% in
fixed and 25.1% in cash equivalents.
Thanks for your continued interest in the Fund.
[Line Graph]
Average Annual Total Return:
1 Year Ending 12/31/94 1.48%
5 Years Ending 12/32/94 14.91%
10 Years Ending 12/31/94 17.23%
S & P 500 Stock
Growth Series Stock Index*
1/1/85 $10,000 $10,000
12/31/85 13,470 13,164
12/31/86 16,184 15,615
12/31/87 17,325 16,423
12/31/88 17,989 19,133
12/31/89 24,476 25,177
12/31/90 25,450 24,393
12/31/91 36,605 31,792
12/31/92 40,372 34,211
12/31/93 48,321 37,644
12/31/94 49,036 38,156
This chart assumes an initial gross investment of $10,000 made on 12/31/84.
Returns shown include the reinvestment of all distributions at net asset
value, and the change in share price for the stated period. Returns indicate
past performance, which is not predictive of future performance. Investment
return and principal value will fluctuate so that your shares, when redeemed,
may be worth more or less than the original cost. Foreign investing involves
special risks such as currency fluctuation and less public disclosure, as
well as economic and political risks.
*The S&P 500 Stock Index is an unmanaged but commonly used measure of stock
total return performance.
SCHEDULE OF INVESTMENTS
December 31, 1994
SHARES VALUE(a)
------- ------------
COMMON STOCKS--63.1%
Beverages--2.3%
Coca Cola Co. 270,000 $13,905,000
----------
Computer Software & Services--5.2%
Adobe Systems, Inc. 240,000 7,140,000
Computer Associates International, Inc. 275,000 13,337,500
General Motors Corp. Class E 293,500 11,299,750
----------
31,777,250
----------
Entertainment & Leisure--7.2%
Tele Communications, Inc. (c) 575,000 $12,506,250
Viacom, Inc. Class B (c) 400,000 16,250,000
Walt Disney Co. 335,000 15,451,875
----------
44,208,125
----------
See Notes to Financial Statements
2-6
<PAGE>
GROWTH SERIES
<TABLE>
<CAPTION>
SHARES VALUE(a)
------ ------------
<S> <C> <C>
Food--2.0%
Campbell Soup Co. 285,000 $ 12,575,625
----------
Hospital Management & Services--1.8%
US Healthcare, Inc. 270,000 11,137,500
----------
Hospital Supply--8.4%
Abbott Labs 500,000 16,312,500
Johnson & Johnson 230,000 12,592,500
Medtronic, Inc. 240,700 13,388,937
St. Jude Medical, Inc. 233,500 9,281,625
----------
51,575,562
----------
Insurance--3.6%
American International Group, Inc. 145,000 14,210,000
Humana, Inc. (c) 350,000 7,918,750
----------
22,128,750
----------
Natural Gas--1.1%
Apache Corp. 267,700 6,692,500
----------
Office & Business Equipment--3.7%
Compaq Computer Corp. (c) 250,000 9,875,000
International Business Machines Corp. 180,000 13,230,000
----------
23,105,000
----------
Oil--2.2%
Amoco Corp. 225,000 13,303,125
----------
Pollution Control--4.6%
Browning-Ferris Industries, Inc. 475,000 13,478,125
WMX Technologies, Inc. 570,000 14,962,500
----------
28,440,625
----------
Retail--8.5%
AutoZone, Inc. (c) 300,000 7,275,000
Dayton Hudson Corp. 185,000 13,088,750
Home Depot, Inc. 380,000 17,480,000
The Limited, Inc. 300,000 5,437,500
Toys R Us (c) 300,000 9,150,000
----------
52,431,250
----------
Retail--Food--2.6%
Safeway, Inc. (c) 500,000 15,937,500
----------
Telecommunications Equipment--5.6%
3Com Corp. (c) 200,000 10,312,500
Cisco Systems, Inc. (c) 275,000 9,659,375
Northern Telecom Ltd. 435,000 14,518,125
----------
34,490,000
----------
Tobacco--2.1%
Philip Morris Companies, Inc. 230,000 13,225,000
----------
Utility--Telephone--2.2%
Airtouch Communications, Inc. (c) 475,000 13,834,375
----------
TOTAL COMMON STOCKS
(Identified cost $375,143,038) 388,767,187
----------
FOREIGN COMMON STOCKS--11.2%
Entertainment & Leisure--1.0%
Bell Cablemedia PLC ADR (United Kingdom) (c) 303,000 6,135,750
----------
Oil--4.2%
Royal Dutch Petroleum Co. ADR (Netherlands) 139,000 14,942,500
Total Compagnie Francaise des Petroles ADR (France) (c) 375,000 11,062,500
----------
26,005,000
----------
Computer Software & Services--5.6%
Cap Gemini Sogeti (France) (c) 215,000 6,847,750
Ericsson L.M. Telephone Co. Class B. ADR (Sweden) 160,000 8,820,000
Nokia AB (Finland) 128,000 18,850,560
----------
34,518,310
----------
Utility--Telephone--0.4%
Telecom Brasil ADR (Brazil) 55,000 $ 2,461,091
----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $60,890,958) 69,120,151
----------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
-------- -----
<S> <C> <C> <C>
FOREIGN GOVERNMENT SECURITIES--0.6%
Republic of Argentina Global 8.375%, 12/20/03 BB- $ 5,000 3,562,500
-----------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $4,970,335) 3,562,500
-----------
TOTAL COMMON, FOREIGN COMMON STOCKS &
FOREIGN GOVERNMENT SECURITIES--74.9%
(Identified cost $441,004,331) 461,449,838
-----------
SHORT-TERM OBLIGATIONS--24.1%
Commercial Paper--16.3%
Phillip Morris Cos. 5.90%, 1-4-95 A-1 2,335 2,333,852
Anheuser-Busch Cos., Inc. 6%, 1-5-95 A-1+ 5,000 4,996,667
Private Export Funding Corp. 5.90%, 1-5-95 A-1+ 4,845 4,841,824
Wisconsin Electric Power Co. 5.90%, 1-9-95 A-1+ 10,545 10,531,174
BellSouth Telecommunications, Inc. 5.97%, 1-10-95 A-1+ 15,000 14,977,613
Exxon Imperial U.S., Inc. 5.85%, 1-10-95 A-1+ 2,345 2,341,570
Gannett Co. 5.85%, 1-11-95 A-1+ 6,640 6,629,210
BellSouth Telecommunications, Inc.
5.98%, 1-12-95 A-1+ 6,000 5,989,037
Wisconsin Electric Power Co. 5.95%, 1-12-95 A-1+ 10,000 9,981,820
Anheuser-Busch Cos., Inc. 6.02%, 1-18-95 A-1+ 8,825 8,799,912
Philip Morris Cos., Inc. 5.78%, 1-20-95 A-1 11,505 11,469,903
Goldman, Sachs & Co. 5.95%, 1-24-95 A-1+ 3,595 3,581,334
Goldman, Sachs & Co. 6%, 1-24-95 A-1+ 325 323,755
Anheuser-Busch Cos., Inc. 5.70%, 1-27-95 A-1+ 4,055 4,038,306
Campbell Soup Co. 5.80%, 1-30-95 A-1+ 10,000 9,953,278
-----------
100,789,255
-----------
Federal Agency Securities--7.8%
Federal Home Loan Mortgage 5.90%, 1-3-95 2,905 2,904,048
Student Loan Marketing Assn. 5.65%, 1-3-95 5,905 5,903,147
Student Loan Marketing Assn. 5.78%, 1-6-95 10,000 9,991,972
Federal Home Loan Mortgage 5.86%, 1-11-95 3,050 3,045,035
Federal Home Loan Mortgage 5.94%, 1-13-95 190 189,624
Federal Home Loan Mortgage 5.93%, 1-19-95 5,655 5,638,233
Federal Home Loan Banks 5.95%, 1-23-95 11,360 11,318,693
Federal National Mortgage Assn. 6.08%, 2-28-95 1,215 1,203,098
Federal National Mortgage Assn. 6.51%, 6-29-95 8,300 8,031,336
-----------
48,225,186
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $149,014,441) 149,014,441
-----------
TOTAL INVESTMENTS--99.0%
(Identified cost $590,018,772) 610,464,279(b)
Cash and receivables, less liabilities--1.0% 5,756,793
-----------
NET ASSETS--100.0% $616,221,072
===========
</TABLE>
(a) See Security Valuation under Note 2 of Notes to Financial Statements.
(b) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $33,341,203 and gross
depreciation of $13,291,686 for income tax purposes. At December 31, 1994
the aggregate cost of securities for federal income tax purposes was
$590,414,762.
(c) Non-income producing.
ADR--American Depository Receipt
See Notes to Financial Statements
2-7
<PAGE>
GROWTH SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $590,018,772) $610,464,279
Cash 5,892,297
Investment income receivable 803,305
Tax reclaim receivable 83,940
-----------
Total assets 617,243,821
-----------
Liabilities
Investment advisory fee 365,915
Administration fee 31,182
Trustees' fee 9,315
Accrued expenses 31,834
Net unrealized depreciation on forward currency contracts 584,503
-----------
Total liabilities 1,022,749
-----------
Net Assets $616,221,072
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $596,274,766
Undistributed net investment income 70,685
Accumulated net realized gains 14,617
Net unrealized appreciation 19,861,004
-----------
Net Assets $616,221,072
===========
Shares of beneficial interest outstanding, $1 par value, unlimited
authorization 39,282,018
===========
Net asset value and offering price per share $15.69
===========
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1994
<TABLE>
<S> <C>
Investment Income
Dividends $ 6,325,351
Interest 5,401,445
-----------
Total investment income 11,726,796
-----------
Expenses
Investment advisory fee 3,607,671
Administration fee 323,584
Trustees' fee 13,527
Custodian 138,370
Audit 30,336
Printing 67,909
Other 213,987
-----------
Total expenses 4,395,384
Total expenses borne by investment advisor (106,805)
-----------
Net expenses 4,288,579
-----------
Net investment income 7,438,217
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain from investment transactions 21,286,055
-----------
Net realized loss on foreign currency (91,815)
-----------
Net unrealized appreciation (depreciation) of investment securities
Beginning of period 42,442,229
End of period 20,445,507
-----------
Net change in unrealized depreciation (21,996,722)
-----------
Net unrealized depreciation on forward currency contracts (584,503)
-----------
Net realized and unrealized loss on investments (1,386,985)
-----------
Net increase in net assets resulting from operations $ 6,051,232
===========
</TABLE>
See Notes to Financial Statements
2-8
<PAGE>
GROWTH SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
12/31/94 12/31/93
------------ -------------
<S> <C> <C>
From Operations
Net investment income $ 7,438,217 $ 3,307,834
Net realized gain on securities 21,286,055 38,086,110
Net realized loss on foreign currency (91,815) --
Net change in unrealized (depreciation) appreciation (22,581,225) 23,110,731
---------- -----------
Net increase in net assets resulting from operations 6,051,232 64,504,675
---------- -----------
From Distributions to Shareholders
Net investment income ($0.23 and $0.15 per share, respectively) (7,512,592) (3,147,693)
Net realized gains ($0.92 and $1.20 per share, respectively) (33,881,394) (29,912,973)
---------- -----------
Decrease in net assets resulting from distributions to shareholders (41,393,986) (33,060,666)
---------- -----------
From Shares of Beneficial Interest Transactions
Proceeds from sales of shares (17,499,498 and 14,220,403 shares,
respectively) 293,876,374 228,522,126
Net asset value of shares issued in conjunction with reinvestment of
distributions of net investment income (462,668 and 195,417 shares,
respectively) 7,512,592 3,147,693
Net asset value of shares issued in conjunction with the reinvestment of
distributions of net realized gains (2,158,050 and 1,807,407 shares,
respectively) 33,881,394 29,912,973
Cost of shares repurchased (7,747,001 and 5,677,384 shares, respectively) (130,074,382) (92,223,992)
---------- -----------
Increase in net assets resulting from share transactions 205,195,978 169,358,800
---------- -----------
Net increase in net assets 169,853,224 200,802,809
Net Assets
Beginning of period 446,367,848 245,565,039
---------- -----------
End of period (including undistributed net investment income of $70,685
and $805,585, respectively) $ 616,221,072 $446,367,848
========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.59 $15.01 $14.43 $11.72 $11.62
Income from investment operations
Net investment income 0.23(1) 0.16 0.22 0.39 0.35
Net realized and unrealized (loss) gain 0.02 2.77 1.25 4.64 0.10
------- ------- ------- ------- ---------
Total from investment operations 0.25 2.93 1.47 5.03 0.45
------- ------- ------- ------- ---------
Less distributions
Dividends from net investment income (0.23) (0.15) (0.23) (0.37) (0.35)
Dividends from net realized gains (0.92) (1.20) (0.66) (1.95) --
------- ------- ------- ------- ---------
Total distributions (1.15) (1.35) (0.89) (2.32) (0.35)
------- ------- ------- ------- ---------
Change in net asset value (0.90) 1.58 0.58 2.71 0.10
------- ------- ------- ------- ---------
Net asset value, end of period $15.69 $16.59 $15.01 $14.43 $11.72
======= ======= ======= ======= =========
Total return 1.48% 19.69% 10.29% 43.83% 3.98%
Ratios/supplemental data:
Net assets, end of period (thousands) $616,221 $446,368 $245,565 $102,259 $40,061
Ratio to average net assets of:
Operating expenses 0.80% 0.79% 0.50% 0.50% 0.50%
Net investment income 1.38% 0.97% 1.66% 2.14% 3.19%
Portfolio turnover rate 185% 185% 214% 237% 272%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.003 per share.
The components of income from investment operations are calculated based on
the average number of shares outstanding at each quarter end.
See Notes to Financial Statements
2-9
<PAGE>
BOND SERIES
The Phoenix Edge Bond Fund invests in a diversified portfolio of
investment grade bonds and high yield bonds. The portfolio will generally
have at least one half of its assets in securities rated investment grade by
Moody's or Standard and Poors. The portfolio invests in a wide range of
sectors in the fixed income market, with the goal of providing the investor
with a high level of income and long-term capital appreciation.
After posting strong results in 1993, the fixed income market suffered
negative returns in 1994. The market suffered from stronger than expected
economic growth and rising fears of inflation. Looking forward, we believe
bonds will benefit from the Federal Reserve's tight monetary policy and an
eventual slowdown in the economy. We believe fears of accelerating inflation
that now exist in the financial markets are unwarranted. Despite rising
commodity prices, the Consumer Price Index rose only 2.7% in 1994. Companies
are experiencing great difficulty passing on price increases to the consumer.
For the twelve months ended December 31, 1994, the Phoenix Edge Bond Fund
produced a negative return of 5.47%. This compares to with a negative return
of 2.92% for the Lehman Brothers Aggregate Bond Index. Our under performance
was due primarily to the substantial under performance of the emerging
markets sector. It is important to note, however, that the emerging markets
sector has produced superior returns over the past several years, and we
expect this long-term trend to continue. Even with recent problems in Mexico,
the economic fundamentals in Latin America remain quite positive.
For 1995 we expect the emerging markets segment to remain volatile in the
first quarter and then gradually improve. In terms of the fixed income
market, we remain constructive. It is our expectation that inflation will be
maintained under control and that domestic economic growth will moderate.
This we believe is good for bonds.
[Line Graph]
Average Annual Total Return:
1 Year Ending 12/31/94 -5.47%
5 Years Ending 12/31/94 8.64%
10 Years Ending 12/31/94 10.16%
Lehman Bros.
Bond Series Aggregate Bond Index
1/1/85 10,000 10,000
12/31/85 12,043 12,210
12/31/86 14,385 14,074
12/31/87 14,546 14,463
12/31/88 16,053 15,603
12/31/89 17,385 17,871
12/31/90 18,279 19,472
12/31/91 21,827 22,588
12/31/92 24,016 24,260
12/31/93 27,835 26,626
12/31/94 26,312 25,849
This chart assumes an initial gross investment of $10,000 made on 12/31/84.
Returns shown include the reinvestment of all distributions at net asset value,
and the change in share price for the stated period. Returns indicate past
performance, which is not predictive of future performance. Investment return
and principal value will fluctuate so that your shares, when redeemed, may be
worth more or less than the original cost. High yield fixed income securities
generally are subject to greater market fluctuations and risk loss of income and
principal than are investments in lower-yielding fixed income securities.
Foreign investing involves special risks such as currency fluctuation and less
public disclosure, as well as economic and political risks.
* The Lehman Brothers' Aggregate Bond Index is an unmanaged but commonly used
measure of bond performance. It is a combination of several Lehman Brothers'
Fixed Income Indexes.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE(a)
-------- ------ ------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--12.2%
U.S. Treasury Bonds--4.3%
U.S. Treasury Bonds 7.875%, '04 Aaa $2,000 $2,005,622
U.S. Treasury Bonds 6.25%, '23 (h) Aaa 1,500 1,218,279
----------
3,223,901
----------
U.S. Treasury Notes--2.6%
U.S. Treasury Notes 6.875%, '96 (h) Aaa 2,000 1,971,700
----------
Mortgage-Backed Securities--5.3%
FHLMC 7.50%, '18 Aaa 1,000 983,459
FNMA 7%, '24 (h) Aaa 1,982 1,802,172
FNMA 7%, '24 Aaa 945 858,630
GNMA Seasoned 8%, '06 Aaa 22 21,108
GNMA Seasoned 8%, '06 Aaa 290 284,494
----------
3,949,863
----------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $9,465,440) 9,145,464
----------
NON-CONVERTIBLE BONDS--40.8%
Airlines--2.1%
GPA Delaware, Inc. 8.75%, '98 Caa 2,000 1,540,000
----------
Asset-Backed Securities--0.8%
Ford 1991-B Guarantor Trust 6.50%, '96 Aaa 68 68,022
Fort Howard Corp. 11%, '02 B 477 489,750
----------
557,772
----------
Building & Materials--4.9%
Schuller Intl Group, Sr Note, 10.875%, '04 Ba 1,500 1,535,625
USG Corp., Sr. Note, Series B 9.25%, '01 B 2,250 2,134,687
----------
3,670,312
----------
Entertainment & Leisure--1.1%
Turner Broadcasting 8.375%, '13 (h) Ba 975 787,312
----------
Hospital Supply--0.7%
Hallmark Healthcare Sr. Sub Nts 10.625%, '03 B 500 496,250
----------
See Notes to Financial Statements
2-10
<PAGE>
BOND SERIES
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE(a)
----------- ------ ------------
Natural Gas--1.3%
Transco Energy 9.625%, '00 Ba $ 950 $ 975,644
----------
Non-Agency Mortgage Backed Securities--16.0%
Chase Mortgage Finance Corp. Pooled 8.02%, '22 AA(f) 958 887,582
Kearny Street 93-1,A Float 7.089%, '00 AA (e) 253 252,704
KPAC 7.18%, '05 BBB(e) 500 443,750
Nomura Asset Sec Corp 94-MD2,A6, Float 7.14%, '03 A (f) 1,676 1,674,639
Prudential Home Mortgage 144A 6.641%, '23 (c), (d) NR 1,500 1,280,156
Residential Funding Corp. 9.50%, '21 A2 442 433,451
Resolution Trust Corp. 7.90%, '23 Aa 1,834 1,793,184
Resolution Trust Corp. 6.55%, '24 AAA 1,629 1,508,990
Resolution Trust Corp. 8%, '26 BBB(e) 1,985 1,768,441
Resolution Trust Corp. 8%, '25 BBB(e) 998 884,794
Ryland Mortgage Securities Corp. 8.33%, '30 A- (e) 1,092 1,025,138
----------
11,952,829
----------
Oil--0.7%
Union Texas Petroleum 8.25%, '99 Ba 500 488,750
----------
Paper & Forest Products--1.0%
SD Warren Co. Sr Sub Nts 144A 12%, '04 (d) B 750 770,625
----------
Publishing, Broadcasting & Printing--1.3%
SCI Television, Sr Note 11%, '05 B 459 464,738
Univision Television, Sr Sub Notes 11.75%, '01 B 500 529,375
----------
994,113
----------
Retail--5.4%
Federated Dept Store W. I. 10%, '02 (g) Ba 4,000 4,030,000
----------
Retail--Food--3.7%
Curtice-Burns Foods, Inc. 144A 12.75%, '05 (d) B 2,750 2,787,813
----------
Retail--Food Service--0.1%
ARA Services, Inc. 10.625%, '00 Ba 54 56,363
----------
Telecommunications Equipment--1.7%
Nextel Comm. Sr Disc. Note (0%, '99), 9.75%, '04 B 1,000 355,000
Panamsat L.P. Sr Sub Note (0%, '98), 11.375%, '03 B 1,500 933,750
----------
1,288,750
----------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $31,599,162) 30,396,533
----------
FOREIGN NON-CONVERTIBLE BONDS--15.3%
Argentina--1.4%
Transport De Gas 144A 7.75%, '98 (d) NR 1,250 1,037,500
----------
Brazil--1.2%
Aracruz Celulose 10.375%, '02 NR 1,000 917,500
----------
Canada--1.8%
Videotron Groupe Ltd. 10.25%, '02 Ba 1,400 1,375,500
----------
Chile--2.2%
CSAV 144A 7.375%, '03 (d) BBB(e) 2,000 1,650,000
----------
Columbia--2.6%
Centragas Yankee 144A 10.65%, '10 (d) BBB-(e) 2,000 1,905,000
----------
Indonesia--1.9%
P.T. Polysindo Sr. Note 13%, '01 B 1,500 1,455,000
----------
Mexico--2.5%
Fomento Economico Mexicano 144A 9.50%, '97 (d) NR $1,000 $ 920,000
Grupo Embotellador 144A 10.75%, '97 (d) NR 1,000 957,500
----------
1,877,500
----------
Philippines--1.7%
Subic Power Corp. 144A 9.50%, '08 (d) NR 1,466 1,231,020
----------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $12,295,625) 11,449,020
----------
FOREIGN GOVERNMENT SECURITIES--7.6%
Argentina--1.2%
Argentina BOC Trust Series Euro 144A 13.375%, '01 (d) NR 500 422,500
Republic of Argentina 8.375%, '03 B 700 498,750
----------
921,250
----------
Brazil--2.3%
Republic of Brazil Par YL4, (4%, '95), 6%, '24 NR 1,000 408,125
Republic of Brazil EI-L Euro Floater 6.6875%, '06 NR 2,000 1,341,250
----------
1,749,375
----------
Costa Rica--1.7%
Central Bank of Costa Rica, 6.25%, '10 NR 2,200 1,232,000
----------
Ecuador--0.5%
Republic of Ecuador, PDI, WI, Euro,
Floater 0%, '14 (g) NR 1,000 370,000
----------
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE(a)
----------- ---- ----------
Poland--1.9%
Poland Discount Global Euro Floater 6.812%, '24 NR 1,500 1,080,000
Poland Global Reg'd Par (2.75%, '96) 5%, '24 NR 1,000 326,250
----------
1,406,250
----------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $5,864,176) 5,678,875
----------
MUNICIPAL TAX-EXEMPT BONDS--16.1%
California--1.1%
San Diego, California 5%, '13 Aaa 1,000 805,000
----------
Colorado--0.5%
Colorado Springs, Co Util Ref A 5.125%, '23 Aa 425 334,688
----------
Florida--4.4%
Florida State Turnpike Authority 5%, '14 Aaa 450 373,500
Jacksonville Electric Authority Rev 5.25%, '21 Aa 1,000 825,000
Orlando & Orange County Expwy Rev 5.25%, '23 Aaa 425 350,094
Orlando Utility Water/Electric Rev A 5.25%, '23 Aa 500 405,000
Palm Beach Waste Rev Proj B 10.50%, '11 NR 1,500 1,365,000
----------
3,318,594
----------
Indiana--0.8%
Indiana Trans Fin Hwy Authority Rev
Series A 5.25%, '15 Aaa 700 576,625
----------
Michigan--0.2%
Brighton School District 0%, '18 Aaa 600 121,500
----------
</TABLE>
See Notes to Financial Statements
2-11
<PAGE>
BOND SERIES
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE(a)
----------- ------ --------
<S> <C> <C> <C>
New York--1.0%
New York Gov. Assistance Series E 5%, '21 A $ 1,000 $ 777,500
----------
Pennsylvania--2.4%
Pennsylvania Financial Development 6.75%, '07 NR 1,950 1,823,250
----------
South Carolina--0.7%
Spartanburg County Solid Waste Rev 7.55%, '24 NR 500 499,375
----------
Texas--1.8%
Lower Colorado River 5.30%, '06 Aaa 550 504,625
Lower Colorado River Authority Rev 5.25%, '15 Aaa 1,000 837,500
----------
1,342,125
----------
Virginia--1.9%
Pittsylvania County Series B 7.65%, '10 NR 1,500 1,438,124
----------
Wisconsin--1.3%
Wisconsin State G.O. 4.50%, '03 Aa 400 347,000
Wisconsin State G.O. 4.85%, '06 Aa 750 655,312
----------
1,002,312
----------
TOTAL MUNICIPAL TAX-EXEMPT BONDS
(Identified cost $12,587,154) 12,039,093
----------
SHARES
------
CONVERTIBLE PREFERRED STOCK--2.2%
Metals & Mining--2.2%
Freeport-McMoRan Copper Cv. Pfd. 5% 78,000 1,618,500
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE(a)
------ ------------
<S> <C> <C>
TOTAL CONVERTIBLE PREFERRED STOCK
(Identified cost $1,828,122) $ 1,618,500
----------
PREFERRED STOCK--1.0%
Paper & Forest Products--1.0%
SD Warren Co., Pfd Unit 144A PIK (d) 30,000 780,000
----------
TOTAL PREFERRED STOCK
(Identified cost $750,000) 780,000
----------
TOTAL U.S. GOVERNMENT SECURITIES, NON-CONVERTIBLE
& FOREIGN NON-CONVERTIBLE BONDS, FOREIGN GOVERNMENT
SECURITIES, MUNICIPAL TAX-EXEMPT BONDS, CONVERTIBLE
PREFERRED & PREFERRED STOCKS--95.2%
(Identified cost $74,389,679) 71,107,485
----------
</TABLE>
<TABLE>
<CAPTION>
MOODY'S
BOND PAR
RATING VALUE
SHORT-TERM OBLIGATIONS--10.3% (Unaudited) (000)
----------- -----
<S> <C> <C> <C>
Commercial Paper--6.2%
Goldman Sachs Co. 6.20%, 1-3-95 P-1 $2,675 2,674,079
Philip Morris Cos. 5.90%, 1-4-95 P-1 1,950 1,949,041
------------
4,623,120
------------
Federal Agency Securities--4.1%
Student Loan Marketing Assn. 5.65%, 1-3-95 3,040 3,039,046
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $7,662,166) 7,662,166
------------
TOTAL INVESTMENTS--105.5%
(Identified cost $82,051,845) 78,769,651(b)
Cash and receivables, less liabilities--(5.5)% (4,083,623)
------------
NET ASSETS--100.0% $74,686,028
============
</TABLE>
(a) See Security Valuation under Note 2 of Notes to Financial Statements.
(b) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $567,864 and gross
depreciation of $3,797,629 for income tax purposes. At December 31, 1994
the aggregate cost of securities for federal income tax purposes was
$81,999,416.
(c) Private Placement.
(d) 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,
1994, these securities amounted to a value of $13,742,114 or 18.4% of net
assets.
(e) As rated by Standard & Poor's.
(f) As rated by Fitch.
(g) When-issued security. See Note 2.
(h) These securities have been segregated for securities purchased on a
when-issued basis. See Note (g).
See Notes to Financial Statements
2-12
<PAGE>
BOND SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at value (Identified cost $82,051,845) $78,769,651
Receivable for investment securities sold 4,273,542
Investment income receivable 1,076,816
Tax reclaim receivable 56,499
----------
Total assets 84,176,508
----------
Liabilities
Cash overdraft 1,174,367
Payable for investment securities purchased 8,274,307
Investment advisory fee 32,309
Administration fee 3,658
Accrued expenses 5,839
----------
Total liabilities 9,490,480
----------
Net Assets $74,686,028
==========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $81,108,695
Undistributed net investment income 23,073
Accumulated net realized losses (3,163,546)
Net unrealized depreciation (3,282,194)
----------
Net Assets $74,686,028
==========
Shares of beneficial interest outstanding, $1 par value, unlimited
authorization 8,315,737
==========
Net asset value and offering price per share $8.98
==========
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest $ 6,113,619
Dividends 106,220
----------
Total investment income 6,219,839
----------
Expenses
Investment advisory fee 375,544
Administration fee 45,065
Trustees' fee 13,527
Custodian 60,393
Audit 6,632
Printing 6,769
Other 32,962
----------
Total expenses 540,892
Less expenses borne by investment adviser (47,356)
----------
Net expenses 493,536
----------
Net investment income 5,726,303
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized loss from investment transactions (4,421,816)
----------
Net unrealized appreciation (depreciation) of investment securities
Beginning of period 2,288,645
End of period (3,282,194)
----------
Net change in unrealized depreciation (5,570,839)
----------
Net realized and unrealized loss on investments (9,992,655)
----------
Net decrease in net assets resulting from operations $(4,266,352)
==========
</TABLE>
See Notes to Financial Statements
2-13
<PAGE>
BOND SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
12/31/94 12/31/93
----------- -------------
<S> <C> <C>
From Operations
Net investment income $ 5,726,303 $ 4,017,024
Net realized (loss) gain on securities (4,421,816) 2,862,522
Net change in unrealized (depreciation) appreciation (5,570,839) 1,411,512
--------- -----------
Net (decrease) increase in net assets resulting from operations (4,266,352) 8,291,058
--------- -----------
From Distributions to Shareholders
Net investment income ($0.73 and $0.66 per share, respectively) (5,746,498) (4,027,774)
Net realized gains ($0 and $0.15 per share, respectively) -- (1,093,428)
--------- -----------
Decrease in net assets resulting from distributions to shareholders (5,746,498) (5,121,202)
--------- -----------
From Shares of Beneficial Interest Transactions
Proceeds from sales of shares (4,380,630 and 5,116,613 shares,
respectively) 42,304,393 52,504,477
Net asset value of shares issued in conjunction with reinvestment of
distributions of net investment income (617,518 and 394,954 shares,
respectively) 5,746,498 4,027,774
Net asset value of shares issued in conjunction with reinvestment of
distributions of net realized gains (0 and 106,468 shares, respectively) -- 1,093,428
Cost of shares repurchased (4,414,044 and 2,385,468 shares, respectively) (42,745,168) (24,492,115)
--------- -----------
Increase in net assets resulting from share transactions 5,305,723 33,133,564
--------- -----------
Net (decrease) increase in net assets (4,707,127) 36,303,420
Net Assets
Beginning of period 79,393,155 43,089,735
--------- -----------
End of period (including undistributed net investment income of $23,073 and
$879,228, respectively) $ 74,686,028 $ 79,393,155
========= ===========
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.27 $ 9.58 $ 9.33 $ 8.48 $ 8.85
Income from investment operations
Net investment income 0.72(1) 0.66(1) 0.66 0.74 0.80
Net realized and unrealized (loss) gain (1.28) 0.84 0.25 0.85 (0.37)
-------- -------- -------- -------- ----------
Total from investment operations (0.56) 1.50 0.91 1.59 0.43
-------- -------- -------- -------- ----------
Less distributions
Dividends from net investment income (0.73) (0.66) (0.66) (0.74) (0.80)
Dividends from net realized capital
gains -- (0.15) -- -- --
-------- -------- -------- -------- ----------
Total distributions (0.73) (0.81) (0.66) (0.74) (0.80)
-------- -------- -------- -------- ----------
Change in net asset value (1.29) 0.69 0.25 0.85 (0.37)
-------- -------- -------- -------- ----------
Net asset value, end of period $ 8.98 $10.27 $ 9.58 $ 9.33 $ 8.48
======== ======== ======== ======== ==========
Total return -5.47% 15.90% 10.03% 19.41% 5.14%
Ratios/supplemental data:
Net assets, end of period (thousands) $74,686 $79,393 $43,090 $21,957 $13,558
Ratio to average net assets of:
Operating expenses 0.66% 0.65% 0.50% 0.50% 0.50%
Net investment income 7.62% 6.71% 7.47% 8.65% 9.26%
Portfolio turnover rate 181% 169% 166% 269% 318%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.006 and $0.005 per share, respectively.
The components of income from investment operations are calculated based on
the average number of shares outstanding at each quarter end.
See Notes to Financial Statements
2-14
<PAGE>
TOTAL RETURN SERIES
The U.S. stock market had a difficult year in 1994, and the bond market
had one of its worst years in decades. The bond market registered declines
ranging from 3.8% on intermediate Treasury bonds to 7.50% on long-term
Treasuries. The Standard & Poor's 500, which is the most representative index
for stocks, increased 1.3% in 1994. Many international stock markets posted
double digit declines.
For our Total Return Series, we compare ourselves against other total
return funds as embodied in the Lipper Analytical Service flexible fund
category. In 1994 the fund declined 1.45% compared to a 2.65% decline for the
average flexible fund.
The fund benefited from a lack of exposure to bonds early in the year, and
a lack of exposure to international markets, such as Mexico.
Unlike last year when we entered the year with 2% in bonds, we begin 1995
with some 20% in bonds. The increase in yields during 1994 have made bond
returns more attractive from a risk/return perspective. All our bonds are
U.S. Treasuries, and unlike many flexible funds, we engage in no derivatives,
structured notes or other illiquid, not publicly prices issues. If interest
rates increase further in 1995, we are likely to add to our existing bond
allocation. As the Federal Reserve tightens monetary policy in 1995, we
expect intermediate and long-term Treasuries to post significantly better
returns than 1994.
The long-term outlook for stocks is improving due to the combination of
recent subpar market performance and rising earnings. This has improved the
overall valuation of stocks. The short-term outlook, however, remains
problematic. The huge cash inflows into equity mutual funds is slowing as
short term interest rates provide more competitive returns. Secondly, the
U.S. economy has reached a stage of expansion where corporate earnings become
more labored. We believe, however, that several areas of speculative excess
have gradually been squeezed out of the market over the past several years
starting with the decline in biotechnology stocks through the recent decline
in Mexican stocks. Thus, we are more receptive to increasing our equity
allocation as opportunities develop. We expect equity returns in 1995 to
exceed last year's returns.
In brief, we have maintained a cautious asset allocation in our Fund over
the past three years. We expect that the next two years will produce better
returns in the bond and stock markets.
Thank you for your continued confidence and participation in the Fund.
[LINE DATA]
Average Annual Total Return:
1 Year Ending 12/31/94 -1.45%
5 Years Ending 12/31/94 10.61%
10 Years Ending 12/31/94 12.89%
Lipper
Total Analytical
Return S&P 500 Service
Series Stock Index* Flexible Fund**
------- ------------ ---------------
12/31/84 10,000 10,000 10,000
12/31/85 12,716 13,164 12,043
12/31/86 14,701 15,615 13,789
12/31/87 16,550 16,423 14,689
12/31/88 16,936 19,133 15,810
12/31/89 20,303 25,177 18,490
12/31/90 21,444 24,393 18,466
12/31/91 27,757 31,792 23,022
12/31/92 30,719 34,211 24,767
12/31/93 34,104 37,644 27,712
12/31/94 33,609 38,155 26,978
This chart assumes an initial gross investment of $10,000 made on 12/31/84.
Returns shown include the reinvestment of all distributions at net asset value,
and the change in share price for the stated period. Returns indicate past
performance, which is not predictive of future performance. Investment return
and principal value will fluctuate, so that your shares, when redeemed, may be
worth more or less than the original cost.
*The S&P 500 Stock Index is an unmanaged but commonly used measure of
stock total return performance.
**The Lipper Analytical Services Flexible Fund category is composed of 223
funds and is based on reinvestment of all distributions.
See Notes to Financial Statements
2-15
<PAGE>
TOTAL RETURN SERIES
SCHEDULE OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE((a))
-------- ------- -------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--18.6%
U.S. TREASURY BONDS--9.6%
U.S. Treasury Bonds 7.875%, '04 AAA $17,000 $17,047,787
U.S. Treasury Bonds 7.50%, '24 AAA 11,300 10,802,077
-----------
27,849,864
-----------
U.S. TREASURY NOTES--9.0%
U.S. Treasury Notes 7.25%, '96 AAA 7,000 6,940,710
U.S. Treasury Notes 7.375%, '97 AAA 7,000 6,918,590
U.S. Treasury Notes 6.50%, '99 AAA 12,800 12,161,920
-----------
26,021,220
-----------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $54,288,463) 53,871,084
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
------
<S> <C> <C>
COMMON STOCKS--28.8%
Advertising--2.4%
Interpublic Group Companies, Inc. 108,400 3,482,350
Omnicom Group, Inc. 65,000 3,363,750
---------
6,846,100
---------
Beverages--0.5%
Coca-Cola Co. 25,000 1,287,500
---------
Chemical--Specialty--0.6%
Loctite Corp. 40,000 1,860,000
---------
Computer Software & Services--2.1%
General Motors Corp. Class E 156,400 6,021,400
---------
Cosmetics & Soaps--0.5%
Procter & Gamble Co. 25,000 1,550,000
---------
Drugs--0.9%
Schering-Plough Corp. 20,000 1,480,000
Warner-Lambert Co. 14,000 1,078,000
---------
2,558,000
---------
Electrical Equipment--0.8%
Emerson Electric Co. 37,000 2,312,500
---------
Entertainment & Leisure--1.6%
Walt Disney Co. 101,700 4,690,912
---------
Food--0.9%
Campbell Soup Co. 61,100 2,696,038
---------
Hospital Supply--1.4%
Abbott Labs 42,000 1,370,250
Johnson & Johnson 40,000 2,190,000
Medtronic, Inc. 8,000 445,000
---------
4,005,250
---------
Lodging & Restaurants--3.0%
Marriott International, Inc. 72,100 2,027,812
McDonald's Corp. 230,000 6,727,500
---------
8,755,312
---------
Miscellaneous--3.5%
Eastman Kodak Co. 119,000 5,682,250
Minnesota Mining & Manufacturing Co. 83,000 4,430,125
---------
10,112,375
---------
Office & Business Equipment--0.6%
Xerox Corp. 17,800 1,762,200
---------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE(a)
------ -----------
<S> <C> <C>
Professional Services--0.1%
First Data Systems Corp. 7,700 $ 364,788
---------
Publishing, Broadcasting & Printing--5.4%
CBS, Inc. 96,500 5,343,688
Capital Cities/ABC, Inc. 35,000 2,983,750
Gannett, Inc. 135,000 7,188,750
---------
15,516,188
---------
Retail--1.9%
Federated Department Stores, Inc.(c) 84,400 1,624,700
Toys R Us(c) 32,000 976,000
Wal-Mart Stores, Inc. 140,000 2,975,000
---------
5,575,700
---------
Retail--Food--0.4%
Sysco Corp. 40,000 1,030,000
---------
Telecommunications Equipment--0.9%
Motorola, Inc. 45,000 2,604,375
---------
Utility--Telephone--1.3%
Airtouch Communications, Inc.(c) 126,000 3,669,750
---------
TOTAL COMMON STOCKS
(Identified cost $80,950,246) 83,218,388
---------
FOREIGN COMMON STOCKS--5.6%
Beverages--1.0%
LVMH Moet Hennessy FRF10 (France) 18,500 2,922,260
---------
Conglomerates--0.3%
Grupo Carso (Mexico),(c) 130,000 963,300
---------
Machinery--0.7%
Fanuc (Japan) 45,000 2,115,450
---------
Retail--1.0%
Hennes & Mauritz (Sweden) 55,000 2,818,750
---------
Telecommunications Equipment--1.0%
Ericsson L.M. Telephone Co. Class B. ADR (Sweden) 52,000 2,866,500
---------
Utility--Electric--0.6%
Huaneng Power International, Inc. ADR (China),(c) 101,800 1,501,550
---------
Utility--Telephone--1.0%
Vodafone Group PLC ADR (United Kingdom) 85,000 2,858,125
---------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $17,083,023) 16,045,935
---------
TOTAL U.S. GOVERNMENT SECURITIES, COMMON
AND FOREIGN COMMON STOCKS--53.0%
(Identified cost $152,321,732) 153,135,407
---------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
-------- -----
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--46.8%
Commerical Paper--26.0%
Exxon Imperial U.S., Inc. 5.95%, 1-5-95 A-1+ $6,500 6,495,703
Amoco Co. 5.90%, 1-6-95 A-1+ 2,784 2,781,719
Wisconsin Electric Power Co. 5.90%, 1-9-95 A-1+ 4,455 4,449,159
BellSouth Capital Funding Corp. 5.70%, 1-10-95 A-1+ 5,000 4,992,875
Gannett Co. 5.85%, 1-11-95 (d) A-1+ 6,360 6,349,665
General Re Corp. 5.97%, 1-11-95 A-1+ 2,370 2,366,070
BellSouth Telecommunications, Inc. 5.80%, 1-12-95 A-1+ 6,000 5,989,366
</TABLE>
See Notes to Financial Statements
2-16
<PAGE>
TOTAL RETURN SERIES
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE(a)
-------- ----- -------------
<S> <C> <C> <C>
Commercial Paper--continued
Exxon Imperial U.S., Inc. 5.825%, 1-12-95 A-1+ $ 1,115 $ 1,113,015
Anheuser-Busch Cos., Inc. 5.925%, 1-17-95 A-1+ 5,000 4,986,834
Anheuser-Busch Cos., Inc. 6.02%, 1-18-95 A-1+ 6,175 6,157,446
BellSouth Telecommunications, Inc. 5.68%, 1-18-95 A-1+ 3,020 3,011,900
Southwestern Bell Telephone 5.85%, 1-19-95 A-1+ 5,475 5,458,985
Philip Morris Cos. 5.78%, 1-20-95 A-1 3,495 3,484,339
Goldman Sachs Co. 6%, 1-24-95 A-1+ 5,710 5,688,112
Campbell Soup Co. 5.80%, 1-26-95 A-1+ 10,000 9,959,722
Minnesota Mining & Manufacturing 5.87%, 1-30-95 A-1+ 2,000 1,990,543
-----------
75,275,453
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000) VALUE(a)
----- -------------
<S> <C> <C>
Federal Agency Securities--20.8%
Federal Home Loan Mortgage 5.90%, 1-3-95 $ 6,925 $ 6,922,730
Student Loan Marketing Assn. 5.75%, 1-4-95 5,255 5,252,482
Federal Farm Credit Bank 5.87%, 1-6-95 4,800 4,796,086
Federal National Mortgage Assn. 5.95%, 1-9-95 4,000 3,994,711
Federal Home Loan Mortgage 5.94%, 1-13-95 10,810 10,788,596
Tennessee Valley Authority 5.90%, 1-19-95 6,000 5,982,300
Federal Home Loan Banks 5.95%, 1-23-95 5,350 5,330,547
Federal Home Loan Banks 5.93%, 1-25-95 2,960 2,948,298
Federal National Mortgage Assn. 5.85%, 2-1-95 1,465 1,457,620
Federal Farm Credit Bank 6%, 2-2-95 3,730 3,710,107
Federal National Mortgage Assn. 5.95%, 2-17-95 4,915 4,876,820
Federal National Mortgage Assn. 6.51%, 6-29-95 4,255 4,117,269
-----------
60,177,566
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $135,453,019) 135,453,019
-----------
TOTAL INVESTMENTS--99.8%
(Identified cost $287,774,751) 288,588,426(b)
Cash and receivables, less liabilites--0.2% 494,965
-----------
NET ASSETS--100.0% $289,083,391
===========
</TABLE>
(a) See Security Valuation under Note 2 of Notes to Financial Statements.
(b) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $4,733,931 and gross
depreciation of $4,064,348 for income tax purposes. At December 31, 1994
the aggregate cost of securities for federal income tax purposes was
$287,918,843.
(c) Non-income producing.
(d) Security is a private placement and represents 2.2% (at market value) of
the net assets at December 31, 1994. The security was purchased on
December 8, 1994, with a cost of $6,324,861. The Series will bear any
cost, including those involved in registration under the Securities Act
of 1933, in connection with the disposition of this security.
ADR--American Depository Receipt
See Notes to Financial Statements
2-17
<PAGE>
TOTAL RETURN SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at value (Identified cost $287,774,751) $288,588,426
Cash 74,313
Investment income receivable 689,164
-----------
Total assets 289,351,903
-----------
Liabilities
Investment advisory fee 173,437
Administration fee 14,601
Trustees' fee 9,315
Accrued expenses 71,159
-----------
Total liabilities 268,512
-----------
Net Assets $289,083,391
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $288,414,648
Distributions in excess of net investment income (22,102)
Accumulated net realized losses (122,830)
Net unrealized appreciation 813,675
-----------
Net Assets $289,083,391
===========
Shares of beneficial interest outstanding, $1 par value, unlimited
authorization 22,791,111
===========
Net asset value and offering price per share $12.68
===========
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Dividends $ 2,026,632
Interest 7,541,388
-----------
Total investment income 9,568,020
-----------
Expenses
Investment advisory fee 1,648,730
Administration fee 166,225
Trustees' fee 13,527
Custodian 46,652
Audit 17,528
Printing 61,857
Other 120,905
-----------
Total expenses 2,075,424
Less expenses borne by investment adviser (12,848)
-----------
Net expenses 2,062,576
-----------
Net investment income 7,505,444
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized loss from investment transactions (3,638,256)
-----------
Net realized loss on foreign currency and foreign currency related
transactions (130,541)
-----------
Net unrealized appreciation (depreciation) of investment securities
Beginning of period 8,187,979
End of period 813,675
-----------
Net change in unrealized depreciation (7,374,304)
-----------
Net realized and unrealized loss on investments (11,143,101)
-----------
Net decrease in net assets resulting from operations $ (3,637,657)
===========
</TABLE>
See Notes to Financial Statements
2-18
<PAGE>
TOTAL RETURN SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
12/31/94 12/31/93
----------- -------------
<S> <C> <C>
From Operations
Net investment income $ 7,505,444 $ 3,743,095
Net realized (loss) gain on securities (3,638,256) 17,421,132
Net realized loss on foreign currency and foreign currency related
transactions (130,541) --
Net change in unrealized depreciation (7,374,304) (40,889)
--------- -----------
Net (decrease) increase in net assets resulting from operations (3,637,657) 21,123,338
--------- -----------
From Distributions to Shareholders
Net investment income ($0.37 and $0.23 per share, respectively) (7,923,603) (3,713,654)
Net realized gains ($0.46 and $0.32 per share, respectively) (9,607,065) (5,146,543)
--------- -----------
Decrease in net assets resulting from distributions to shareholders (17,530,668) (8,860,197)
--------- -----------
From Shares of Beneficial Interest Transactions
Proceeds from sales of shares (6,357,542 and 6,738,361 shares, respectively) 84,155,117 90,685,833
Net asset value of shares issued in conjunction with the reinvestment of
distributions of net investment income (616,310 and 274,890 shares,
respectively) 7,923,603 3,713,654
Net asset value of shares issued in conjunction with the reinvestment of
distributions of net realized gains (751,139 and 383,492 shares,
respectively) 9,607,065 5,146,543
Cost of shares repurchased (3,611,175 and 1,442,456 shares, respectively) (47,445,390) (19,425,620)
--------- -----------
Increase in net assets resulting from share transactions 54,240,395 80,120,410
--------- -----------
Net increase in net assets 33,072,070 92,383,551
Net Assets
Beginning of period 256,011,321 163,627,770
--------- -----------
End of period (including distributions in excess of net investment income
and undistributed net investment income of $22,102 and $795,544,
respectively) $289,083,391 $256,011,321
========= ===========
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.71 $12.86 $12.97 $11.07 $11.05
Income from investment operations
Net investment income 0.36(1) 0.23 0.37 0.42 0.58
Net realized and unrealized (loss) gain (0.56) 1.17 0.99 2.76 0.02
------- ------- ------- ------ ------
Total from investment operations (0.20) 1.40 1.36 3.18 0.60
------- ------- ------- ------ ------
Less distributions
Dividends from net investment income (0.37) (0.23) (0.37) (0.42) (0.58)
Dividends from net realized gains (0.46) (0.32) (1.10) (0.86) --
------- ------- ------- ------ ------
Total distributions (0.83) (0.55) (1.47) (1.28) (0.58)
------- ------- ------- ------ ------
Change in net asset value (1.03) 0.85 (0.11) 1.90 0.02
------- ------- ------- ------ ------
Net asset value, end of period $12.68 $13.71 $12.86 $12.97 $11.07
======= ======= ======= ====== ======
Total return -1.45% 11.02% 10.67% 29.44% 5.62%
Ratios/supplemental data:
Net assets, end of period (thousands) $289,083 $256,011 $163,628 $98,415 $62,839
Ratio to average net assets of:
Operating expenses 0.74% 0.74% 0.50% 0.50% 0.50%
Net investment income 2.71% 1.82% 2.90% 3.48% 5.39%
Portfolio turnover rate 220% 269% 326% 255% 302%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.001 per share.
The components of income from investment operations are calculated based on
the average number of shares outstanding at each quarter end.
See Notes to Financial Statements
2-19
<PAGE>
INTERNATIONAL SERIES
Most global markets experienced difficulty in 1994 after the U.S. Federal
Reserve began raising interest rates in February. The economic recovery which
was well established in the U.S. spread to the hard core markets of Europe.
Growth throughout the year was better than initially expected, causing
estimates for both 1994 and 1995 GDP to be continually revised upward.
Earnings were generally in line with expectations, although companies closer
to the consumer experienced very sluggish conditions, while those exposed to
basic and industrial goods saw better demand and better pricing for their
products. Asia and Latin America continued to expand faster than the
developed world; however, their link to the U.S. dollar and U.S. interest
rates has hampered their markets' performance. The exception to solid
economic growth in 1994 was Japan. It provided both the best stock market
performance and the worst economic performance--both economic and corporate
profits projections were scaled back continually over the course of the year.
The economy has bottomed, but is recovering very slowly, hampered by the
strong yen and weak domestic consumption.
The fund rose 0.03% over the fiscal year ending December 31, 1994 vs. the
MSCIP EAFE index which rose 7.8% (in U.S.$) and the Lipper International Fund
subgroup which fell -0.71%. The Japanese market was the major contributor to
the EAFE index, increasing 21.4% in U.S. dollars and 8.6% when measured in
yen. Excluding Japan, the rest of the index declined 1.1% in U.S. dollar
terms. Apart from the currency gain due to the weakness of the U.S. dollar,
most markets showed declines when measured in their local currencies. Europe
fell 8.5% (+2.3% in $) while the Pacific Basin excluding Japan fell 19.5%
(-14.3% in $).
In local currency terms, the best performing markets other than Japan were
Finland (+24.5%), Norway (+11.1%), Italy (+5.7%), and Sweden (+5.5%). The
worst performing markets were Hong Kong (-28.8%), Malaysia (-24.1%), Austria
(-16.2%), France (-14.3%), Spain (-12.3%), and the U.K. (-7.0%). The fund was
helped by its overweight positions in Finland and Sweden, as well as in Italy
earlier in the year. It also benefited by not holding currency hedges, as the
dollar was weak throughout most of the year. The fund was hurt by being
underweight in Japan in the first two calendar quarters of 1994, and by being
more exposed to France than Germany since the French market underperformed
the German one for most of the year. Also of benefit was the gradual
reaccumulation of Asian stocks in July and August, as those markets began
outperforming Japan from that point in time.
World markets are closely following trends in the United States. As the
interest rate curve in the U.S. continues to flatten, foreign bond markets
are showing signs of stabilization. However, it is likely that as 1995 wears
on, strong growth in Europe will provoke a tightening from those central
banks, perhaps as early as the first quarter of 1995. Since long bonds have
already risen in lock step with those in the U.S., it seems likely that
equity markets will re-focus on earnings growth. We expect that solid
economic progress coupled with benefits from restructuring will provide good
corporate profits growth in most countries in 1995. In the shorter term,
fears of rising interest rates will dominate. However, in 1995 as U.S. growth
begins to slow, growth abroad, particularly in Europe and Japan, should
accelerate. Asian and Latin markets may make little progress in the near term
due to their links with U.S. interest rates and their own strong domestic
growth which will continue to put pressure on short-term interest rates.
However, Asian markets in particular will provide above average returns over
the long- term, and the fund will look for buying opportunities. We recently
increased exposure to Japan which had been quite underweight both its
benchmark and its peer group. Many Japanese companies and the economy as a
whole should see better progress with a slightly weaker yen. Growth in Japan
will not be exceptionally strong, but it remains the country with the most
overcapacity and the least need to raise interest rates. We think a rising
dollar (within its past 1-2 year trading range) is likely as long as the Fed
retains its anti-inflation credibility. The fund has begun hedging part of
its foreign currency exposure. The current structure of interest rates means
we can do so at almost no cost to the fund.
[LINE DATA]
Average Annual Total Return:
1 Year Ending 12/31/94 0.03%
Inception to 12/31/94 6.26%
Europe, Australia EAFE
International and the Excluding
Series Far East (EAFE)* JAPAN
------------- ----------------- ---------
5/1/85 10,000 10,000 10,000
12/31/90 9,190 10,962 10,998
12/31/91 11,008 12,291 12,684
12/31/92 9,589 10,795 12,255
12/31/93 13,275 14,310 16,786
12/31/94 13,279 15,423 16,598
This chart assumes an initial gross investment of $10,000 made on 5/1/90
(inception of the Fund). Returns shown include the reinvestment of all
distributions at net asset value, and the change in share price for the
stated period. Returns indicate past performance, which is not predictive of
future performance. Investment return and principal value will fluctuate, so
that your shares, when redeemed, may be worth more or less than the original
cost. Foreign investing involves special risks such as currency fluctuation
and less public disclosure, as well as economic and political risks.
*The Morgan Stanley Capital International EAFE index is an unmanaged but
commonly used measure of foreign stock fund performance which includes
dividends reinvested. The EAFE index is an aggregate of 15 individual country
indexes in Europe, Australia, New Zealand and the Far East.
See Notes to Financial Statements
2-20
<PAGE>
INTERNATIONAL SERIES
SCHEDULE OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
SHARES VALUE(a)
-------- -------------
<S> <C> <C>
EQUITIES AND EQUIVALENTS--81.6%
ARGENTINA--0.5%
Quilmes Industrial SA (Beverages) 28,000 $ 672,000
-----------
AUSTRALIA--1.8%
Broken Hill Proprietary Company, Ltd. (Retail) 67,000 1,017,577
Woolworths Ltd. (Retail) 657,000 1,426,931
-----------
2,444,508
-----------
BELGIUM--1.0%
Arbed SA GDS (Metals & Mining) (c) 9,000 1,348,728
-----------
CHILE--1.1%
Compania de Telefonos de Chile ADR
(Utilities--Electric) 18,000 1,417,500
-----------
CHINA--0.8%
Huaneng Power International, Inc. ADR
(Utility--Electric) (c) 75,000 1,106,250
-----------
FINLAND--6.4%
Benefon OY (Electronics) (c) 6,570 2,148,644
Nokia AB (Telecommunications Equipment) 36,400 5,360,734
Valmet (Machinery) (c) 56,800 1,079,793
-----------
8,589,171
-----------
FRANCE--5.4%
Cie Francaise de Petroleum TOTAL (Oil) 28,000 1,627,523
Ecco (Professional Services) 8,010 951,588
Ecco Travail Temporaire SA (Professional
Services) 10,060 563,633
Epeda-Bertrand Faure (Auto Parts) 6,165 1,047,774
Moulinex (Household Furniture & Appliances) 33,366 628,344
Pinault-Printemps, SA (Retail) 7,668 1,362,127
Societe Televison Francais 1 (Publishing,
Broadcasting & Printing) 12,700 1,152,274
-----------
7,333,263
-----------
GERMANY--3.2%
Fresenius AG (Medical Technology) 3,900 1,882,065
Jungheinrich AG (Machinery) 4,566 1,045,761
SAP AG (Computer Software & Services) 2,400 1,359,484
-----------
4,287,310
-----------
HONG KONG--1.1%
Hutchison Whampoa (Miscellaneous) 238,000 962,828
National Mutual Asia Ltd. (Insurance) 770,000 507,561
-----------
1,470,389
-----------
INDONESIA--1.4%
PT Astra International Indonesia (Conglomerates) 120,000 229,300
PT International Bank of Indonesia (Banks) 518,000 1,649,681
-----------
1,878,981
-----------
ITALY--0.9%
Telecom Italia SPA (Utility--Telephone) 455,000 1,183,603
-----------
JAPAN--19.4%
Amada Metrecs (Machinery) 68,000 1,165,481
Canon Sales (Miscellaneous) 41,000 1,241,054
Daikin Manufacturing (Auto & Truck Parts) 55,000 1,157,662
Daiwa Securities Company Ltd. (Financial
Services) 136,000 1,962,915
Fanuc (Machinery) 25,000 1,175,203
Futaba Industrial (Auto & Truck Parts) 54,000 1,125,789
Nichiei Company Ltd. (Financial Services) 11,000 705,623
Nippon Telegraph & Telephone Corp.
(Utility--Telephone) 180 1,589,456
Nippondenso Co. Ltd. (Auto & Truck Parts) 102,000 2,146,938
Nisshin Steel Co. Ltd. (Metals & Mining) 344,000 1,730,861
Omron Corp. (Electrical Equipment) 68,000 1,254,084
Rohm Co. (Electronics) 46,000 1,945,675
SMC Corp. (Machinery) 22,000 1,250,276
Sankyo Co. Ltd. (Chemical Specialty) 48,000 1,193,144
Sega Enterprise (Entertainment & Leisure) 30,000 1,728,977
Sharp Corp. (Electronics) 83,000 1,497,444
Sumitomo Metal Industries (Metals & Mining) (c) 450,000 1,456,851
TDK Corp. (Electronics) 37,000 1,791,220
-----------
26,118,653
-----------
KOREA--1.2%
Korea Growth Trust (Miscellaneous) 20 680,000
Pohang Iron & Steel Co. Ltd. ADR (Metals &
Mining) (c) 34,000 994,500
-----------
1,674,500
-----------
MALAYSIA--0.9%
Aokam Perdana Berhad (Paper & Forest Products) 18,000 111,377
Public Bank Berhad (Banks) 140,000 279,616
Technology Resources Industries Berhad
(Miscellaneous) 275,000 877,717
-----------
1,268,710
-----------
MEXICO--1.2%
Grupo Situr SA de CV (Lodging & Restaurants) 501,909 1,039,486
Tolmex SA de CV (Building & Materials) 65,000 554,315
-----------
1,593,801
-----------
NETHERLANDS--5.2%
Akzo Nobel (Chemical) 12,600 1,455,103
Hagemeyer N.V. (Conglomerates) 19,836 1,617,469
N.V. Koninklijke Sphinx (Building & Materials) 41,175 1,276,560
Randstad Holdings N.V. (Professional Services) 30,300 1,639,584
Royal PTT Nederland N.V. (Utility-- Telephone) 30,000 1,011,353
-----------
7,000,069
-----------
PERU--1.0%
Compania Peruano de Telefonos (Utility--
Telephone) 1,125,000 1,305,021
-----------
PHILLIPPINES--0.7%
J.G. Summit Holdings (Conglomerates) 1,700,000 620,082
Manila Electric Co. (Utility--Electric) 24,500 336,373
-----------
956,455
-----------
SINGAPORE--2.8%
City Developments Ltd. (Property Development) 244,000 1,364,017
United Overseas Bank Ltd. (Banks) 126,000 1,330,955
United Overseas Land Ltd. (Property Development) 589,000 1,135,256
-----------
3,830,228
-----------
SWEDEN--8.3%
Allgon AB (Telecommunications Equipment) 54,000 1,016,949
Arjo AB (Hospital Supply) (c) 159,500 2,917,945
Astra AB (Drugs) 100,350 2,591,767
Catena Corp. (Retail) (c) 109,200 932,768
Hennes & Mauritz AB (Retail) 39,900 2,044,915
Volvo AB (Auto & Trucks) 85,750 1,614,878
-----------
11,119,222
-----------
See Notes to Financial Statements
2-21
<PAGE>
INTERNATIONAL SERIES
SWITZERLAND--2.3%
BBC Brown Boveri AG Bearer (Electrical Equipment) 1,380 $ 1,188,492
BBC Brown Boveri AG Registered (Electrical
Equipment) 11,500 1,898,211
-----------
3,086,703
-----------
THAILAND--2.3%
Advanced Info Service Plc (Utility--Telephone) 28,000 388,130
PTT Exploration & Production (Oil) 154,000 1,594,901
Thai Farmers Bank Ltd. Plc (Banks) 129,000 1,048,237
-----------
3,031,268
-----------
UNITED KINGDOM--12.7%
Astec (BSR) (Electronics) 1,110,000 1,467,611
Bell Cablemedia ADR (Entertainment & Leisure) (c) 37,600 761,400
Blue Circle Industries (Building & Materials) 383,000 1,689,970
British Petroleum Co. (Oil) 200,248 1,333,211
Carlton Communications (Telecommunications
Equipment) 96,000 1,346,644
Compass Group (Lodging & Restaurant) 33,000 174,010
East Midlands Electricity (Utility--Electric) 110,880 1,459,084
House of Fraser (Retail) 394,500 1,077,144
Next (Retail) 414,500 1,666,821
Powergen (Utility--Electric) 167,911 1,405,608
Takare Plc (Hospital Management & Services) 497,000 1,710,843
Vodafone Group ADR (Utilities--Telephone) 45,000 1,513,125
WPP Group Plc (Advertising) 874,000 1,497,465
-----------
17,102,936
-----------
TOTAL EQUITIES AND EQUIVALENTS
(Identified cost $105,998,595) 109,819,269
-----------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
-------- ------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--18.2%
Commerical Paper--14.4%
Student Loan Marketing Assn. 5.65%,
1-3-95 A-1+ $5,440 5,438,293
Philip Morris Cos., Inc. 5.90%, 1-4-95 A-1+ 3,615 3,613,222
H.J. Heinz Co. 6.00%, 1-5-95 A-1+ 3,700 3,697,534
BellSouth Telecommunications Inc. 5.85%,
1-6-95 A-1+ 1,635 1,633,671
Goldman Sachs & Co. 5.95%, 1-9-95 A-1+ 4,705 4,698,779
Southwestern Bell Telephone Co. 5.85%,
1-19-95 A-1+ 380 378,889
---------
19,460,388
---------
Federal Agency Securities--3.8%
Federal Home Loan Banks 5.75%, 1-3-95 770 769,754
Federal Home Loan Banks 5.75%, 1-17-95 4,340 4,328,523
---------
5,098,277
---------
</TABLE>
<TABLE>
<CAPTION>
VALUE(a)
-------------
<S> <C>
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $24,558,665) $ 24,558,665
-----------
TOTAL INVESTMENTS--99.8%
(Identified cost $130,557,260) 134,377,934(b)
Cash and receivables, less liabilities--0.2% 249,277
-----------
NET ASSETS--100.0% $134,627,211
===========
</TABLE>
INDUSTRY DIVERSIFICATION
As a Percentage of Total Value of Equities
and Equivalents
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Advertising 1.4%
Auto & Truck Parts 6.5
Banks 3.9
Beverages 0.6
Building & Materials 3.2
Chemical Specialty 2.4
Computer Software & Services 1.2
Conglomerates 2.2
Drugs 2.4
Electrical Equipment 4.0
Electronics 8.1
Entertainment & Leisure 2.3
Financial Services 2.4
Hospital Management & Services 4.2
Household Furniture & Appliances 0.6
Insurance 0.5
Lodging & Restaurants 1.1
Machinery 5.2
Medical Technology 1.7
Metals & Mining 5.0
Miscellaneous 3.4
Oil 4.1
Paper & Forest Products 0.1
Professional Services 2.9
Property Development 2.3
Publishing, Broadcasting & Printing 1.0
Retail 8.7
Telecommunications Equipment 7.0
Utility--Telephone 11.6
----
100.0%
====
</TABLE>
(a) See Security valuation under Note 2 of Notes to Financial Statements.
(b) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $7,977,196 and gross
depreciation of $4,358,632 for income tax purposes. At December 31, 1994
the aggregate cost of securities for federal income tax purposes was
$130,759,370.
(c) Non-income producing.
ADR--American Depository Receipt
See Notes to Financial Statements
2-22
<PAGE>
INTERNATIONAL SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at market (Identified cost $130,557,260) $134,377,934
Foreign currency at market (Identified cost $1,803,821) 1,802,818
Cash 582,850
Receivable for investment securities sold 3,177,811
Investment income receivable 94,444
Tax reclaim 60,339
-----------
Total Assets 140,096,196
-----------
Liabilities
Payable for investment securities purchased 4,858,132
Investment advisory fee 79,658
Administration fee 6,805
Trustees' fee 9,315
Custodian fee 30,312
Accrued expenses 75,123
Net unrealized depreciation on foreign forward currency contracts 409,640
-----------
Total Liabilities 5,468,985
-----------
Net Assets $134,627,211
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $132,360,540
Undistributed net investment income 388,998
Accumulated net realized losses (1,564,692)
Net unrealized appreciation of investment securities, foreign currency
and foreign currency related transactions 3,442,365
-----------
Net Assets $134,627,211
===========
Shares of beneficial interest outstanding, $1 par value, unlimited authorization 11,359,581
===========
Net asset value and offering price per share $11.85
===========
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Investment income
Dividends $ 1,411,826
Interest 655,501
Foreign taxes withheld (194,700)
-----------
Total investment income 1,872,627
-----------
Expenses
Investment advisory fee 800,178
Administration fee 64,014
Trustees' fee 13,527
Custodian 153,371
Audit 11,156
Printing 20,349
Miscellaneous 118,249
-----------
Total expenses 1,180,844
-----------
Net investment income 691,783
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on investment securities 279,322
-----------
Net realized loss on foreign currency and foreign currency related transactions (9,582)
-----------
Net realized loss on foreign forward currency contracts (344,566)
-----------
Net unrealized appreciation (depreciation) of investment securities
Beginning of period 7,426,397
End of period 3,820,674
-----------
Net change in unrealized depreciation (3,605,723)
-----------
Net change in unrealized depreciation in foreign currency and foreign currency
related transactions (378,309)
-----------
Net realized and unrealized loss on investments (4,058,858)
-----------
Net decrease in net assets resulting from operations $(3,367,075)
===========
</TABLE>
See Notes to Financial Statements
2-23
<PAGE>
INTERNATIONAL SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
12/31/94 12/31/93
----------- ------------
<S> <C> <C>
From Operations
Net investment income $ 691,783 $ 137,772
Net realized gain on securities 279,322 2,328,182
Net realized loss on foreign currency and foreign currency related
transactions (9,582) (80,867)
Net realized loss on forward currency contracts (344,566) (224,492)
Net change in unrealized (depreciation) appreciation (3,984,032) 8,313,394
--------- ----------
Net (decrease) increase in net assets resulting from operations (3,367,075) 10,473,989
--------- ----------
From Distributions to Shareholders
Net investment income ($0.03 and $0 per share, respectively) (257,332) --
Net realized gains ($0.34 and $0 per share, respectively) (3,156,656) --
--------- ----------
Decrease in net assets resulting from distributions to shareholders (3,413,988) --
--------- ----------
From Shares of Beneficial Interest Transactions
Proceeds from sales of shares (9,181,135 and 4,124,712 shares, respectively) 115,954,555 43,912,602
Net asset value of shares issued in conjunction with the reinvestment of
distributions of net investment income (20,337 and 0 shares, respectively) 257,332 --
Net asset value of shares issued in conjunction with the reinvestment of
distributions of net realized gains (262,468 and 0 shares, respectively) 3,156,656 --
Cost of shares repurchased (3,121,639 and 668,748 shares, respectively) (39,201,848) (6,917,324)
--------- ----------
Increase in net assets resulting from share transactions 80,166,695 36,995,278
--------- ----------
Net increase in net assets 73,385,632 47,469,267
Net Assets
Beginning of period 61,241,579 13,772,312
--------- ----------
End of period (including undistributed net investment income of $388,998 and
$134,653, respectively) $134,627,211 $61,241,579
========= ==========
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding through the indicated period)
<TABLE>
<CAPTION>
From
Inception
Year Ended December 31, 5/1/90 to
1994 1993 1992 1991 12/31/90
------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.21 $ 8.82 $ 10.17 $ 9.07 $10.00
Income from investment operations
Net investment income 0.08 0.07(2) 0.09 0.24(2) 0.07(2)
Net realized and unrealized (loss) gain (0.07) 3.32 (1.40) 1.53 (0.88)
----- ------ ------ ------ -------
Total from investment operations 0.01 3.39 (1.31) 1.77 (0.81)
----- ------ ------ ------ -------
Less distributions
Dividends from net investment income (0.03) -- (0.04) (0.24) (0.07)
Dividends from net realized gain (0.34) -- -- (0.41) --
Distributions from paid in capital -- -- -- (0.02) (0.05)
----- ------ ------ ------ -------
Total distributions (0.37) -- (0.04) (0.67) (0.12)
----- ------ ------ ------ -------
Change in net asset value (0.36) 3.39 (1.35) 1.10 (0.93)
----- ------ ------ ------ -------
Net asset value, end of period $11.85 $12.21 $ 8.82 $10.17 $ 9.07
===== ====== ====== ====== =======
Total return 0.03% 38.44% -12.89% 19.78% -8.10%
Ratio/supplemental data:
Net assets, end of period (thousands) $134,627 $61,242 $13,772 $6,119 $2,010
Ratio to average of net assets of:
Operating expenses 1.10% 1.15% 1.50% 1.50% 1.50%(1)
Net investment income 0.64% 0.49% 1.13% 2.44% 1.82%(1)
Portfolio turnover rate 172% 193% 74% 104% 48%(1)
</TABLE>
(1) Annualized
(2) Includes reimbursement of operating expenses by investment adviser of
$0.05, $0.02 and $0.07, respectively.
The components of income from investment operations are calculated based on
the average number of shares outstanding at each quarter end.
See Notes to Financial Statements
2-24
<PAGE>
BALANCED SERIES
Despite robust economic growth and strong corporate earnings, 1994 proved
to be a difficult investment environment for the financial markets. Interest
rates rose dramatically as the Federal Reserve continued its tightening
stance, creating the worst climate for bonds in several years. Although stock
market indices managed to post very modest gains, a closer look at individual
stocks showed that the average stock was actually down for the year.
The Balanced Fund Series underperformed the Balanced benchmark in 1994.
Several factors affected performance of the fund. Holding high cash reserves
throughout the year benefited performance as cash outperformed both stocks
and bonds. On the fixed income side, the emphasis on short to intermediate
government issues helped buffer the decline in bond prices. Equity
performance was hurt in the first half of 1994 by continued underperformance
of quality growth stocks. In the latter half of the year, a resurgence of
growth stocks was concentrated mainly in high valuation, high volatility, and
small capitalization stocks. Technology issues performed particularly well.
Although strength in select technology issues helped performance slightly, we
remained underweighted in this sector due to concerns about valuations and
our cautious outlook for the equity market.
Looking forward, we believe the Federal Reserve will continue to raise
rates until the economy shows some definitive signs of slowing. For this
reason we are optimistic about the outlook for quality growth stocks as we
believe that investors gravitate toward the highest quality companies with
earnings predictability in time of economic uncertainty. The fund currently
holds 46.8% in equity and related securities, 27.7% in fixed income and 25.5%
in cash reserves. Our defensive posture in equities reflects our concerns
regarding high expectations for earnings growth and high valuations. We look
forward to getting more invested in equities as excesses are corrected. While
we remain cautiously postured in the fixed income portion of the portfolio
due to strong economic growth and potential inflationary pressures, we
believe an outlook for better returns in bonds lies ahead.
[LINE DATA]
Average Annual Total Return:
1 Year Ending 12/31/94 -2.80%
Inception to 12/31/94 5.65%
Balanced Balanced
Series Benchmark*
-------- ----------
5/1/92 10,000 10,000
12/31/92 10,972 10,712
12/31/93 11,912 11,702
12/31/94 11,578 11,725
This chart assumes an initial gross investment of $10,000 made on 5/1/92
(inception of the Fund). Returns shown include the reinvestment of all
distributions at net asset value, and the change in share price for the
stated period. Returns indicate past performance, which is not predictive of
future performance. Investment return and principal value will fluctuate so
that your shares, when redeemed, may be worth more or less than the original
cost.
*The Balanced Benchmark is calculated based upon the performance of the
following indices: 55% S&P 500/35% Lehman Brothers' Aggregate Bond Index
10%/U.S. Treasury Bills and is produced by Frank Russell Company.
SCHEDULE OF INVESTMENTS
December 31, 1994
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE(a)
-------- ----- -------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--27.7%
U.S. Treasury Bonds--2.3%
U.S. Treasury Bonds 7.875%, '04 AAA $ 625 $ 626,757
U.S. Treasury Bonds 7.50%, '24 AAA 3,250 3,106,792
-----------
3,733,549
-----------
U.S. Treasury Notes--25.4%
U.S. Treasury Notes 4.125%, '95 AAA 400 395,368
U.S. Treasury Notes 4.625%, '95 AAA 3,500 3,450,615
U.S. Treasury Notes 5.125%, '95 AAA 1,000 982,930
U.S. Treasury Notes 4.25%, '96 AAA 750 718,447
U.S. Treasury Notes 4.625%, '96 AAA 3,125 3,032,437
U.S. Treasury Notes 4.625%, '96 AAA 1,750 1,696,397
U.S. Treasury Notes 7.25%, '96 AAA 7,625 7,560,416
U.S. Treasury Notes 7.375%, '96 AAA 400 399,252
U.S. Treasury Notes 4.75%, '97 AAA 4,250 4,000,313
U.S. Treasury Notes 5.50%, '97 AAA 200 189,248
U.S. Treasury Notes 5.50%, '97 AAA 750 707,513
U.S. Treasury Notes 5.625%, '97 AAA 600 568,692
U.S. Treasury Notes 5.75%, '97 AAA 750 710,640
U.S. Treasury Notes 6.50%, '97 AAA 1,500 1,458,750
U.S. Treasury Notes 6.875%, '97 AAA 1,800 1,765,998
U.S. Treasury Notes 6.875%, '97 AAA 300 294,213
U.S. Treasury Notes 7.375%, '97 AAA 375 370,639
U.S. Treasury Notes 4.75%, '98 AAA 1,500 1,346,790
U.S. Treasury Notes 4.75%, '98 AAA 2,000 1,803,980
U.S. Treasury Notes 5.125%, '98 AAA 3,375 3,113,775
U.S. Treasury Notes 5.125%, '98 AAA 2,800 2,568,412
U.S. Treasury Notes 5.625%, '98 AAA 300 281,802
U.S. Treasury Notes 6%, '99 AAA 2,500 2,319,325
U.S. Treasury Notes 7.25%, '04 AAA 1,250 1,200,389
-----------
40,936,341
-----------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $46,458,573) 44,669,890
-----------
CONVERTIBLE BONDS--2.9%
Conglomerates--1.1%
Hanson America, Inc. Cv. 144A 2.39%,
'01 (d) A+ 2,500 1,784,375
-----------
Entertainment & Leisure--0.6%
Time Warner, Inc., HASBRO 0%, '12 BBB- 3,000 915,000
-----------
Insurance--1.2%
Chubb Corp. Cv. 6%, '98 AA 2,000 2,020,000
-----------
TOTAL CONVERTIBLE BONDS
(Identified cost $5,023,086) 4,719,375
-----------
SHARES
-----
CONVERTIBLE PREFERRED STOCKS--3.2%
Banks--1.0%
Citicorp PERCS 85,000 1,625,625
-----------
Professional Services--0.8%
American Express Co. DECS First Data '96 32,000 1,364,000
-----------
</TABLE>
See Notes to Financial Statements
2-25
<PAGE>
BALANCED SERIES
<TABLE>
<CAPTION>
SHARES VALUE(a)
------ -------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS--continued
Retail--1.4%
Sears Roebuck & Co. PERCS 40,000 $ 2,225,000
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified cost $5,075,420) 5,214,625
-----------
COMMON STOCKS--39.7%
Aerospace & Defense--2.9%
Loral Corp. 67,000 2,537,625
McDonnell Douglas Corp. 14,500 2,059,000
-----------
4,596,625
-----------
Computer Software & Services--2.3%
Computer Associates International, Inc. 35,000 1,697,500
Computer Sciences Corp.(c) 40,000 2,040,000
-----------
3,737,500
-----------
Conglomerates--1.0%
Tyco International Ltd. 35,000 1,662,500
-----------
Cosmetics & Soaps--1.1%
Procter & Gamble Co. 28,000 1,736,000
-----------
Drugs--3.2%
Amgen, Inc.(c) 30,000 1,770,000
Pfizer, Inc. 20,000 1,545,000
Schering-Plough Corp. 24,000 1,776,000
-----------
5,091,000
-----------
Electrical Equipment--1.4%
General Electric Co. 43,000 2,193,000
-----------
Entertainment & Leisure--2.5%
Mattel, Inc. 70,000 1,758,750
Viacom, Inc. Class B(c) 57,000 2,315,625
-----------
4,074,375
-----------
Financial Services--1.0%
Equifax, Inc. 63,000 1,661,625
-----------
Hospital Management & Services--2.1%
Columbia/HCA Healthcare Corp. 42,000 1,533,000
Integrated Health Services, Inc. 47,000 1,856,500
-----------
3,389,500
-----------
Hospital Supply--1.2%
Abbott Labs 57,000 1,859,625
-----------
Household Furnishing & Appliances--1.1%
Sunbeam-Oster 66,300 1,707,225
-----------
Insurance--1.8%
American International Group, Inc. 30,000 2,940,000
-----------
Lodging & Restaurants--1.0%
Wendy's International, Inc. 110,000 1,581,250
-----------
Miscellaneous--1.9%
Duracell International, Inc. 38,000 1,648,250
Service Corp International 50,500 1,401,375
-----------
3,049,625
-----------
Oil--2.5%
Mobil Corp. 28,000 2,359,000
Tosco Corp. 55,000 1,601,875
-----------
3,960,875
-----------
REITS--2.1%
Meditrust Corp. 60,000 1,815,000
Nationwide Health Properties, Inc. 45,000 1,608,750
-----------
3,423,750
-----------
Retail--4.9%
Ann Taylor Stores Corp.(c) 45,000 1,546,875
Dayton Hudson Corp. 33,000 2,334,750
Home Depot, Inc. 52,000 2,392,000
Tiffany & Co. 40,000 1,560,000
-----------
7,833,625
-----------
Retail--Food--0.9%
Kroger Co.(c) 63,000 1,519,875
-----------
Telecommunications Equipment--0.7%
Motorola, Inc. 21,000 1,215,375
-----------
Utility--Telephone--4.1%
Airtouch Communications, Inc.(c) 52,000 1,514,500
Ameritech Corp. 39,000 1,574,625
GTE Corp. 63,000 1,913,625
Southwestern Bell Corp. 38,000 1,534,250
-----------
6,537,000
-----------
TOTAL COMMON STOCKS
(Identified cost $60,921,547) 63,770,350
-----------
FOREIGN COMMON STOCK--1.0%
Oil--1.0%
Total Compagnie Francaise des Petroles ADR
(France) 55,000 1,622,500
-----------
TOTAL FOREIGN COMMON STOCK
(Identified cost $1,740,805) 1,622,500
-----------
TOTAL U.S. GOVERNMENT SECURITIES,
CONVERTIBLE BONDS, CONVERTIBLE PREFERRED,
COMMON & FOREIGN COMMON STOCKS--74.5%
(Identified cost $119,219,431) 119,996,740
-----------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
------ -----
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--24.6%
Commercial Paper--17.7%
Goldman Sachs Co. 6.20%, 1-3-95 A-1+ $4,435 4,433,472
Exxon Imperial U.S., Inc. 5.85%, 1-4-95 A-1+ 5,450 5,447,343
McDonald' s Corp. 5.95%, 1-5-95 A-1+ 3,570 3,567,641
Private Export Funding Corp. 5.90%,
1-5-95 A-1+ 705 704,538
BellSouth Telecommunications, Inc. 5.85%,
1-6-95 A-1+ 5,125 5,120,836
General Re Corp. 5.97%, 1-11-95 A-1+ 2,330 2,326,136
Wisconsin Electric Power Co. 5.82%,
1-26-95 A-1+ 7,000 6,971,707
-----------
28,571,673
-----------
Federal Agency Securities--6.9%
Federal National Mortgage Assn. 5.95%, 1-9-95 3,035 3,030,987
Federal Home Loan Mortgage 5.86%, 1-11-95 1,630 1,627,347
Federal Home Loan Banks 5.95%, 1-23-95 4,200 4,184,728
Federal National Mortgage Assn. 6.51%, 6-29-95 2,445 2,365,858
-----------
11,208,920
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $39,780,593) 39,780,593
-----------
TOTAL INVESTMENTS--99.1%
(Identified cost $159,000,024) 159,777,333(b)
Cash and receivables, less liabilities--0.9% 1,327,898
-----------
NET ASSETS--100.0% $161,105,231
===========
</TABLE>
(a) See Security Valuation under Note 2 of Notes to Financial Statements.
(b) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $4,520,984 and gross
depreciation of $3,878,609 for income tax purposes. At December 31, 1994
the aggregate cost of securities for federal income tax purposes was
$159,134,958.
(c) Non-income producing.
(d) 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,
1994, these securities amounted to a value of $1,784,375 or 1.1% of net
assets.
See Notes to Financial Statements
2-26
<PAGE>
BALANCED SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at value (Identified cost $159,000,024) $159,777,333
Cash 278,949
Receivable for investment securities sold 3,374,502
Investment income receivable 892,578
-----------
Total assets 164,323,362
-----------
Liabilities
Payable for investment securities purchased 3,045,418
Investment advisory fee 100,445
Administration fee 8,186
Trustees' fee 9,315
Accrued expenses 54,767
-----------
Total liabilities 3,218,131
-----------
Net Assets $161,105,231
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $166,567,081
Undistributed net investment income 208,187
Accumulated net realized losses (6,447,346)
Net unrealized appreciation 777,309
-----------
Net Assets $161,105,231
===========
Shares of beneficial interest outstanding, $1 par value, unlimited
authorization 15,305,547
===========
Net asset value and offering price per share $10.53
===========
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Dividends $ 1,852,191
Interest 4,988,557
-----------
Total investment income 6,840,748
-----------
Expenses
Investment advisory fee 909,828
Administration fee 99,254
Trustees' fee 13,527
Custodian 44,079
Audit 10,688
Printing 15,697
Other fees 71,628
-----------
Total expenses 1,164,701
Less expenses borne by investment adviser (16,062)
-----------
Net expenses 1,148,639
-----------
Net investment income 5,692,109
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized loss from investment transactions (6,373,826)
-----------
Net unrealized appreciation of investment securities
Beginning of period 4,780,040
End of period 777,309
-----------
Net change in unrealized depreciation (4,002,731)
-----------
Net realized and unrealized loss on investments (10,376,557)
-----------
Net decrease in net assets resulting from operations $ (4,684,448)
===========
</TABLE>
See Notes to Financial Statements
2-27
<PAGE>
BALANCED SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
12/31/94 12/31/93
----------- -------------
<S> <C> <C>
From Operations
Net investment income $ 5,692,109 $ 3,544,441
Net realized (loss) gain on securities (6,373,826) 2,210,744
Net change in unrealized (depreciation) appreciation (4,002,731) 2,797,666
--------- -----------
Net (decrease) increase in net assets resulting from operations (4,684,448) 8,552,851
--------- -----------
From Distributions to Shareholders
Net investment income ($0.36 and $0.32 per share, respectively) (5,536,378) (3,510,949)
Net realized gains ($0.10 and $0.06 per share, respectively) (1,538,238) (838,160)
--------- -----------
Decrease in net assets resulting from distributions to shareholders (7,074,616) (4,349,109)
--------- -----------
From Shares of Beneficial Interest Transactions
Proceeds from sales of shares (5,359,333 and 10,149,064 shares, respectively) 59,085,232 113,329,337
Net asset value of shares issued in conjunction with reinvestment of
distributions of net investment income (517,485 and 311,041 shares,
respectively) 5,536,378 3,510,949
Net asset value of shares issued in conjunction with reinvestment of
distributions of net realized gains (143,225 and 73,977 shares, respectively) 1,538,238 838,160
Cost of shares repurchased (4,699,191 and 1,609,578 shares, respectively) (51,439,961) (18,205,004)
--------- -----------
Increase in net assets resulting from share transactions 14,719,887 99,473,442
--------- -----------
Net increase in net assets 2,960,823 103,677,184
Net Assets
Beginning of period 158,144,408 54,467,224
--------- -----------
End of period (including undistributed net investment income of $208,187 and
$16,886, respectively) $161,105,231 $158,144,408
========= ===========
</TABLE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
From
Inception
5/1/92
Year Ended to
12/31/94 12/31/93 12/31/92
--------- --------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.31 $ 10.77 $10.00
Income from investment operations
Net investment income 0.38(2) 0.32(2) 0.19
Net realized and unrealized (loss) gain (0.70) 0.60 0.77
------- ------- ---------
Total from investment operations (0.32) 0.92 0.96
------- ------- ---------
Less distributions
Dividends from net investment income (0.36) (0.32) (0.19)
Dividends from net realized gains (0.10) (0.06) --
------- ------- ---------
Total distributions (0.46) (0.38) (0.19)
------- ------- ---------
Change in net asset value (0.78) 0.54 0.77
------- ------- ---------
Net asset value, end of period $ 10.53 $ 11.31 $10.77
======= ======= =========
Total return -2.80% 8.57% 9.72%
Ratios/supplemental data:
Net assets, end of period (thousands) $161,105 $158,144 $54,467
Ratio to average net assets of:
Operating expenses 0.69% 0.70% 0.50%(1)
Net investment income 3.44% 3.16% 3.59%(1)
Portfolio turnover rate 171% 161% 110%(1)
</TABLE>
(1) Annualized
(2) Includes reimbursement of operating expenses by investment adviser of
$0.001 and $0.001 per share, respectively.
The components of income from operations are calculated based on the average
number of shares outstanding at each quarter end.
See Notes to Financial Statements
2-28
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS
Note 1--Organization
The Phoenix Edge Series Fund (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment Company
established as a Massachusetts business trust. As of the date of this report,
the Fund is comprised of the Money Market, Growth, Bond, Total Return,
International and Balanced Series. The Fund was established as part of the
December 8, 1986 reorganization of the Phoenix Home Life Variable
Accumulation Account (the Account) from a management investment company to a
unit investment trust under the Investment Company Act of 1940. The Fund is
organized with Series which are available only to the sub-accounts of the
Phoenix Home Life Variable Accumulation Account and the Phoenix Home Life
Variable Universal Life Account.
Note 2--Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. Security Valuation
In determining the value of the Growth Series, Bond Series, Total Return
Series, International Series and the Balanced Series, the securities for
which market quotations are readily available are valued at market value,
which is currently determined using the last reported sale price, or if no
sales are reported--as is the case with most securities traded over-the-
counter--the last reported bid price. Debt securities (other than short-term
obligations) are valued on the basis of independent broker quotations or
valuations provided by an independent pricing service when such prices are
believed to reflect the fair value of such securities. Prices provided by the
pricing service may be determined without exclusive reliance on quoted prices
and take into account appropriate factors such as institution-size trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data. Use of an independent
pricing service has been approved by the Trustees. Short-term securities are
valued at amortized cost, which approximates market. All other securities are
carried at their fair market value 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.
The Money Market Series 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
Series' 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 fair valuation. This valuation procedure allows the
Series attempts to maintain a constant net asset value of $10 per share. The
assets of the Series will not be invested in any security with a maturity of
greater than 397 days, and the weighted average maturity of its portfolio
will not exceed 90 days.
B. Investment Transactions and Related Income
Investment transactions are accounted for on the trade date (date the order
to buy or sell is executed). Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date, or in the case of
certain foreign securities, as soon as the Fund is notified. In determining
the net realized gains or losses on investments sold, cost of securities is
determined on the identified cost basis. The Fund does not amortize premiums
except for the Money Market Series, but does amortize discounts for book
purposes over the life of the respective securities using the effective
interest method.
Securities purchased or sold on a when-issued or delayed delivery basis
may be settled a month or more after the trade date; interest income is not
accrued until settlement date.
C. Foreign Currency Translation
Investment valuations, other assets and liabilities initially expressed as
foreign currencies are translated each business day into U.S. dollars based
upon current exchange rates. Purchases and sales of foreign investments and
income and expenses are translated into U.S. dollars based upon exchange
rates prevailing on the respective dates of such transactions. That portion
of unrealized gains or losses on investments due to fluctuations in foreign
currency exchange rates is not separately disclosed. The gain or loss
resulting from a change in exchange rates between the trade and settlement
dates of a portfolio transaction or between the date income is accrued and
paid is treated as a gain or loss on foreign currency.
2-29
<PAGE>
D. 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. Upon entering into a futures
contract the Fund 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 Fund
agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in the value of the contract. Such receipts or payments are
known as variation margins and are recorded by the Fund as unrealized gains
or losses. When the contract is closed, the Fund 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. There are no open futures
contracts at December 31, 1994.
E. Foreign Forward Currency Contracts
Each Series 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.
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 the Series as an unrealized gain (or loss). When
the contract is closed, the Series 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.
F. Income Taxes
Each of the Series is a separate taxable entity. It is the policy of each
Series to comply with the requirements of the Internal Revenue Code,
applicable to regulated investment companies, and to distribute all of its
taxable income and capital gains, if any, to its shareholders; therefore no
provision for related federal income or state taxes is required.
G. Distributions to Shareholders
Distributions are recorded by the Fund on the record date and all
distributions are reinvested into the Fund.
H. Trust Expenses:
Expenses incurred by the Series with respect to any two or more Series are
allocated in proportion to the net assets of each Series, except where
allocation of direct expense to each Series or an alternative allocation
method can be more fairly made.
Note 3--Purchases and Sales of Securities
Purchases and sales of securities during the year ended December 31, 1994
(excluding U.S. Government securities, short- term securities, options
written and forward currency contracts) aggregated the following:
<TABLE>
<CAPTION>
Purchases Sales
----------- -------------
<S> <C> <C>
Bond Series $106,151,993 $104,966,805
Growth Series 888,018,155 779,674,316
Total Return Series 265,813,333 278,909,786
International Series 211,500,051 154,189,159
Balanced Series 178,037,532 181,689,863
</TABLE>
There were no purchases or sales of such securities in the Money Market
Series.
Purchases and sales of long-term U.S. Government securities during the
year ended December 31, 1994 aggregated the following:
<TABLE>
<CAPTION>
Purchases Sales
---------- ------------
<S> <C> <C>
Bond Series $29,986,917 $27,768,000
Total Return Series 71,015,399 15,864,875
Balanced Series 47,095,371 34,597,819
</TABLE>
There were no purchases or sales of long-term U.S. Government securities
in the Money Market, Growth or International Series.
2-30
<PAGE>
Note 4--Investment Advisory Fees and Related Party Transactions
As compensation for its services to the Fund, the Adviser, Phoenix Investment
Counsel, Inc. is entitled to a monthly fee, based upon the following annual
rates as a percentage of the average aggregate daily net asset values of each
separate Series.
<TABLE>
<CAPTION>
Rate for first Rate for next Rate for excess
Series $250 million $250 million over $500 million
- ------------- -------------- -------------- --------------------
<S> <C> <C> <C>
Money Market .40% .35% .30%
Bond .50 .45 .40
Balanced .55 .50 .45
Total Return .60 .55 .50
Growth .70 .65 .60
International .75 .70 .65
</TABLE>
All fees are payable within five days after the end of each month. The
amounts payable to the Adviser are based on the average daily net assets at
the close of business each day.
Each Series (except the International Series) pays a portion or all of its
other operating expenses (not including management fee, interest, taxes,
brokerage fees and commissions), up to .15% of its total net assets. The
International Series pays other operating expenses up to .40% of its total
net assets. Expenses above these limits are paid by the Adviser. For the year
ended December 31, 1994, the Adviser reimbursed the Fund $25,103, $106,805,
$47,356, $12,848 and $16,062 for the benefit of the Money Market Series,
Growth Series, Bond Series, Total Return Series and the Balanced Series,
respectively.
As Financial Agent to the Fund and to each Series, Phoenix Home Life received
an aggregate of $750,978 in administration fees for services rendered to such
Series during the year ended December 31, 1994.
Note 5--Commitments
At December 31, 1994, the following Series have entered into various forward
currency contracts which contractually obligate the Series to deliver
currencies at specified dates. Open contracts were as follows:
<TABLE>
<CAPTION>
International Series:
- ------------------------------------------------------------------------------
Net
In Unrealized
Contracts Exchange Settlement Appreciation
to Deliver For Date Value (Depreciation)
---------- --------------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
FM 33,300,000 US$ 6,826,498 3/6/95 $ 7,041,013 $(214,515)
FF 35,000,000 US$ 6,531,313 5/2/95 6,554,038 (22,725)
Yen 650,000,000 US$ 6,561,680 3/7/95 6,563,310 (1,630)
Yen 670,000,000 US$ 6,735,022 3/9/95 6,766,084 (31,062)
Yen 650,000,000 US$ 6,607,396 5/1/95 6,610,760 (3,364)
SK 75,000,000 US$ 9,876,868 3/6/95 10,013,212 (136,344)
-----------
$(409,640)
===========
Growth Series:
- ------------------------------------------------------------------------------
FM 85,000,000 US$ 17,389,597 3/8/95 $17,974,100 $(584,503)
===========
</TABLE>
FM = Finnish Marka
FF = French Francs
SK = Swedish Krona
Yen = Japanese Yen
US$ = U.S. Dollar
2-31
<PAGE>
Note 6--Reclassification of Capital Accounts
In accordance with approved accounting pronouncements, the Series of the
Fund have recorded several reclassifications in the capital accounts. As of
December 31, 1994, the Series recorded the following reclassifications:
<TABLE>
<CAPTION>
Capital paid
Undistributed Accumulated in on shares
net investment net realized of beneficial
income gains/(losses) interest
-------------- -------------- ---------------
<S> <C> <C> <C>
Money Market $(776,151) $ (6) 776,157
Growth (660,525) (2,379,702) 3,040,227
Bond (835,960) (357,283) 1,193,243
Total Return (399,487) (2,251,892) 2,651,379
International (180,106) 180,106 --
Balanced 35,570 (35,958) 388
</TABLE>
Note 7--Capital Loss Carryforwards
At December 31, 1994, the Series of the Fund had available for federal
income tax purposes unused capital losses as follows:
<TABLE>
<CAPTION>
Expiring on 2002
------------------
<S> <C>
Bond $3,163,546
Total Return 482,970
Balanced 3,252,863
</TABLE>
Under current tax law, capital losses realized after October 31, 1994 may
be deferred and treated as occurring on the first day of the following
calendar year. For the calendar year ended December 31, 1994, the following
Series of the Fund have elected to defer losses occurring between November 1,
1994 and December 31, 1994 under these rules as follows:
<TABLE>
<CAPTION>
Capital
losses deferred
------------------
<S> <C>
International $4,037,301
Balanced 3,047,431
</TABLE>
2-32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
To the Shareholders and Trustees of
The Phoenix Edge Series Fund
In our opinion, the accompanying statements of assets and liabilities,
including the schedules 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 the Money Market
Series, Growth Series, Bond Series, Total Return Series, International Series
and Balanced Series (constituting The Phoenix Edge Series Fund, hereafter
referred to as the "Fund") at December 31, 1994, and the results of their
operations, the changes in 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, 1994 by
correspondence with the custodian 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.
[SIGNATURE]
Boston, Massachusetts
February 17, 1995
2-33
<PAGE>
THE PHOENIX EDGE SERIES FUND
101 Munson Street
Greenfield, Massachusetts 01301
Board of Trustees
C. Duane Blinn
Robert Chesek
E. Virgil Conway
Harry Dalzell-Payne
Leroy Keith, Jr.
Philip R. McLoughlin
James M. Oates
Philip R. Reynolds
Herbert Roth, Jr.
Richard E. Segerson
Officers
Philip R. McLoughlin, President
Patricia A. Bannan, Vice President
Curtiss O. Barrows, Vice President
Mary E. Canning, Vice President
James M. Dolan, Vice President
Jeanne H. Dorey, Vice President
Jeanne T. Hanley, Vice President
Michael E. Haylon, Vice President
Christopher J. Kelleher, Vice President
Robert J. Milnamow, Vice President
William R. Moyer, Vice President
Amy L. Robinson, Vice President
Leonard J. Saltiel, Vice President
Dorothy J. Skaret, Vice President
James D. Wehr, Vice President
John T. Wilson, Vice President
Nancy G. Curtiss, Treasurer
G. Jeffrey Bohne, Secretary
Investment Adviser
Phoenix Investment Counsel, Inc.
One American Row
Hartford, Connecticut 06115
Custodian
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
Floor 3B
New York, New York 10081
International Series Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
Transfer Agent
Phoenix Equity Planning Corporation
P.O. Box 2200
100 Bright Meadow Boulevard
Enfield, Connecticut 06083-2200
Legal Counsel
Jorden Burt & Berenson
Suite 400 East
1025 Thomas Jefferson Street N.W.
Washington, D.C. 20007-0805
This report is not authorized for distribution to prospective investors in
The Phoenix Edge Series Fund unless preceded or accompanied by an effective
Prospectus which includes information concerning the sales charge and other
pertinent information.
<PAGE>
42
THIS PAGE LEFT INTENTIONALLY BLANK.
<PAGE>
43
THIS PAGE LEFT INTENTIONALLY BLANK.
<PAGE>
Semi-Annual Report
June 30, 1995
The Phoenix Edge Series Fund
<PAGE>
MONEY MARKET SERIES
The Money Market Series continued to perform solidly during this six-month
reporting period. On June 30, the Fund's current yield was 5.50%. This
compares favorably with the 5.43% average yield of taxable money market funds
reported by Donoghue's Money Fund Report.
Throughout this reporting period, the debate about the strength of the
economy and the Federal Reserve Board's most likely course of action
continued. Many observers, concerned that the economy was slowing too much
after a year of restrictive monetary policy, called for the Fed to lower
interest rates. But despite these concerns, the Fed made no accommodative
move during the quarter. Short-term interest rates did drop slightly over the
second half of this reporting period, in anticipation that the Fed would soon
ease.
We have maintained our focus on floating-rate securities for the Fund, an
appropriate strategy in view of the uncertainty concerning monetary policy
for much of 1995. Although the Fed made one accommodative move shortly after
the close of this reporting period--reducing the Federal Funds rate from
6.00% to 5.75%--we believe floating-rate securities will continue to offer
the potential for attractive returns in the short-term marketplace.
We have also maintained our emphasis on quality assets. While U.S.
government-backed securities have been strong contributors to first-half
results, valuations are currently not as compelling. We will continue,
however, to look for opportunities to increase exposure to government-backed
issues, primarily through floating-rate securities.
SCHEDULE OF INVESTMENTS
June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT INTEREST MATURITY
(000) DESCRIPTION RATE DATE VALUE
- ------ ------------------------------------------------------------- ------ ------- -----------
<S> <C> <C> <C> <C>
FEDERAL AGENCY SECURITIES--13.2%
$ 775 Federal National Mortgage Assoc. 5.89% 08/15/95 $ 769,294
3,000 Federal Home Loan Banks 6.54 10/25/95 3,000,000
1,650 Federal Farm Credit Bank 6.33 11/01/95 1,649,566
1,000 Federal Home Loan Banks 5.52 12/15/95 974,393
2,000 Federal National Mortgage Assoc. 5.50 01/08/96 1,941,639
830 Federal Home Loan Banks 6.52 01/19/96 799,635
3,500 Federal Home Loan Banks 7.15 01/26/96 3,500,323
---------
TOTAL FEDERAL AGENCY SECURITIES 12,634,850
---------
RESET
DATE
-----
FEDERAL AGENCY SECURITIES--VARIABLE--16.8% (b)
1,500 Federal Farm Credit Bank (final maturity 02/24/97) 6.26 07/03/95 1,499,430
1,500 Federal Home Loan Banks (final maturity 01/14/97) 6.45 07/03/95 1,500,000
1,500 Federal Home Loan Mortgage Corp. (final maturity 06/15/96) 6.35 07/03/95 1,502,951
3,000 Student Loan Marketing Assoc. (final maturity 08/16/96) 6.36 07/03/95 3,000,000
1,500 Student Loan Marketing Assoc. (final maturity 08/10/95) 5.54 07/04/95 1,500,000
500 Student Loan Marketing Assoc. (final maturity 07/19/96) 5.66 07/04/95 500,000
2,500 Student Loan Marketing Assoc. (final maturity 11/24/97) 5.68 07/04/95 2,500,000
1,500 Student Loan Marketing Assoc. (final maturity 11/10/98) 5.70 07/04/95 1,497,341
1,000 Student Loan Marketing Assoc. (final maturity 02/22/99) 5.71 07/04/95 1,000,000
1,650 Federal National Mortgage Assoc. (final maturity 12/14/98) 5.96 09/14/95 1,646,876
---------
TOTAL FEDERAL AGENCY SECURITIES--VARIABLE 16,146,598
---------
STANDARD
& POOR'S
RATING
-----
COMMERCIAL PAPER--68.9%
2,000 CXC, Inc. (c) A-1 6.25 07/03/95 1,999,306
2,440 First Deposit Funding Trust (c) A-1+ 6.02 07/05/95 2,438,368
570 BellSouth Telecommunications, Inc. A-1+ 6.10 07/06/95 569,517
4,000 Asset Securitization Cooperative Corp. A-1+ 5.97 07/07/95 3,996,020
2,500 H.J. Heinz Co. (c) A-1 5.95 07/07/95 2,497,521
1,500 Kimberly-Clark Corp. A-1+ 6.02 07/10/95 1,497,743
2,000 Merrill Lynch & Co. A-1+ 6.00 07/10/95 1,997,000
4,000 McKenna Triangle Corp. (c) A-1+ 5.95 07/11/95 3,993,389
1,275 BellSouth Telecommunications, Inc. A-1+ 5.98 07/12/95 1,272,670
3,500 Preferred Receivables Funding Corp. A-1 5.95 07/12/95 3,493,637
1,900 Goldman, Sachs & Co. A-1+ 5.95 07/17/95 1,894,976
3,500 Exxon Imperial U.S., Inc. (c) A-1+ 5.95 07/18/95 3,490,166
3,500 ABS Commercial Paper, Inc. A-1 5.98 07/19/95 3,489,535
1,000 ABS Commercial Paper, Inc. A-1 6.00 07/20/95 996,833
1,460 TDK USA Corp. A-1+ 5.97 07/20/95 1,455,400
</TABLE>
See Notes to Financial Statements
2-2
<PAGE>
MONEY MARKET SERIES
<TABLE>
<CAPTION>
STANDARD
FACE &
AMOUNT POOR'S INTEREST MATURITY
(000) DESCRIPTION RATING RATE DATE VALUE
- ------- ------------------------------------------ ------- ------ ------- --------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER--continued
$1,500 TDK USA Corp. A-1+ 6.05% 07/20/95 $ 1,495,210
3,000 Corporate Asset Securitization Ltd. A-1+ 5.98 07/21/95 2,990,033
1,600 Corporate Receivables Corp. A-1 6.70 07/24/95 1,593,151
930 First Deposit Funding Trust (c) A-1+ 6.25 07/24/95 926,286
1,000 Preferred Receivables Funding Corp. A-1 5.98 07/25/95 996,020
520 Receivables Capital Corp. (c) A-1 5.98 07/25/95 517,927
1,755 Beta Finance, Inc. (c) A-1+ 5.98 07/26/95 1,747,712
3,035 Receivables Capital Corp. (c) A-1 6.00 07/26/95 3,022,354
2,500 Albertson's, Inc. A-1 5.95 07/27/95 2,489,257
1,200 Coca Cola Co. (c) A-1+ 5.78 08/04/95 1,193,449
2,500 CXC, Inc. (c) A-1 6.36 08/07/95 2,483,658
1,880 Corporate Receivables Corp. (c) A-1 5.97 08/10/95 1,867,529
855 E.I. du Pont de Nemours & Co. (c) A-1+ 5.92 08/11/95 849,235
1,500 Corporate Asset Securitization Ltd. (c) A-1+ 6.00 08/15/95 1,488,750
3,750 Cargill, Inc. A-1+ 5.92 08/23/95 3,717,317
1,135 Campbell Soup Co. A-1+ 6.52 10/27/95 1,110,744
2,550 Ameritech Capital Funding Corp. (c) A-1+ 5.66 11/28/95 2,489,863
-----------
TOTAL COMMERCIAL PAPER 66,060,576
------------
TOTAL INVESTMENTS--98.9%
(Identified cost $94,842,024) 94,842,024(a)
Cash and receivables, less liabilities--1.1% 1,042,489
------------
NET ASSETS--100.0% $95,884,513
============
</TABLE>
(a) Federal Income Tax Information: At June 30, 1995 the aggregate cost of
securities was the same for book and tax purposes.
(b) Variable rate demand note. The interest rates shown reflect the rate
currently in effect.
(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 June 30,
1995, these securities amounted to a value of $31,005,513 or 32.3% of net
assets.
See Notes to Financial Statements
2-3
<PAGE>
MONEY MARKET SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at value (Identified cost $94,842,024) $94,842,024
Cash 824,248
Investment income receivable 293,237
----------
Total assets 95,959,509
----------
Liabilities
Investment advisory fee 49,708
Trustees' fee 4,333
Administration fee 4,341
Accrued expenses 16,614
----------
Total liabilities 74,996
----------
Net Assets $95,884,513
==========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $95,884,509
Undistributed net investment income 4
----------
Net Assets $95,884,513
==========
Shares of beneficial interest outstanding, $1 par value, unlimited
authorization 9,588,450
==========
Net asset value and offering price per share $10.00
==========
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest $2,772,597
----------
Total investment income 2,772,597
----------
Expenses
Investment advisory fee 177,917
Administration fee 26,687
Audit 12,412
Printing 11,956
Custodian 8,118
Trustees' 4,388
Miscellaneous 3,157
----------
Total expenses 244,635
----------
Net investment income 2,527,962
----------
Net increase in net assets resulting from operations $2,527,962
==========
</TABLE>
See Notes to Financial Statements
2-4
<PAGE>
MONEY MARKET SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year
6/30/95 Ended
(Unaudited) 12/31/94
----------- --------------
<S> <C> <C>
From Operations
Net investment income $ 2,527,962 $ 3,392,083
Net realized gains -- 100
--------- ------------
Net increase in net assets resulting from operations 2,527,962 3,392,183
--------- ------------
From Distributions to Shareholders
Net investment income (2,541,840) (3,378,211)
Net realized gains -- (94)
--------- ------------
Decrease in net assets from distributions to shareholders (2,541,840) (3,378,305)
--------- ------------
From Share Transactions
Proceeds from sales of shares (8,796,026 and 23,586,003 shares,
respectively) 87,960,260 235,860,031
Net asset value of shares issued from reinvestment of distributions
(254,185 and 337,830, respectively) 2,541,840 3,378,305
Cost of shares repurchased (8,918,956 and 21,761,240 shares,
respectively) (89,189,560) (217,612,379)
--------- ------------
Increase in net assets from share transactions 1,312,540 21,625,957
--------- ------------
Net increase in net assets 1,298,662 21,639,835
Net Assets
Beginning of period 94,585,851 72,946,016
--------- ------------
End of period (including undistributed net investment income of $4 and
$13,882, respectively) $ 95,884,513 $ 94,585,851
========= ============
</TABLE>
STOCK SERIESFINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1995 Year ended December 31,
(Unaudited) 1994 1993 1992 1991 1990
-------------- ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
Income from investment operations
Net investment income 0.28 0.38(1) 0.28(1) 0.35 0.58 0.79
------------ ---- ---- ---- ---- ------
Total from investment operations 0.28 0.38 0.28 0.35 0.58 0.79
------------ ---- ---- ---- ---- ------
Less distributions
Dividends from net investment income (0.28) (0.38) (0.28) (0.35) (0.58) (0.79)
------------ ---- ---- ---- ---- ------
Total distributions (0.28) (0.38) (0.28) (0.35) (0.58) (0.79)
------------ ---- ---- ---- ---- ------
Net asset value, end of period $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
============ ==== ==== ==== ==== ======
Total return 2.83%(3) 3.77% 2.80% 3.50% 5.80% 7.90%
Ratios/supplemental data:
Net assets, end of period (thousands) $95,885 $94,586 $72,946 $69,962 $51,692 $38,709
Ratio to average net assets of:
Operating expenses 0.55%(2) 0.55% 0.55% 0.50% 0.50% 0.50%
Net investment income 5.64%(2) 3.85% 2.84% 3.49% 5.76% 7.87%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.003 and $0.01 per share, respectively.
(2) Annualized
(3) Not annualized
See Notes to Financial Statements
2-5
<PAGE>
GROWTH SERIES
During this six-month reporting period, the stock market has advanced
strongly, with the technology and financial services sectors leading the way.
Propelled by falling interest rates and increasing investor confidence that
the Federal Reserve Board may have successfully guided the economy to a "soft
landing," we saw a combination of interest-sensitive sectors and technology
and capital goods stocks outperform most other groups.
Phoenix Edge Growth Series made very strong absolute gains over this
reporting period. For the six months ended June 30, 1995, the Fund provided a
total return of 15.80%. According to the Standard & Poor's 500 Composite
Stock Index, a commonly used, unmanaged measure of stock performance, the
market returned 20.19% in the same period. (All of these figures assume
reinvestment of any distributions.)
Several factors early in this reporting period held performance back.
First, holdings in smaller and mid-sized companies did not perform as well as
larger issues earlier in the year. For the balance of the year, however, we
believe smaller issues will show better relative performance. Higher cash
reserves at the start of the year also hurt performance slightly; however, we
brought cash levels down significantly during the period. Finally,
underweighting in the financial services sector coming into 1995 was a
negative factor, but our moves to increase holdings benefited the portfolio
over the remainder of this period.
On the positive side, several factors worked well for the portfolio during
this reporting period. Increased exposure to health care and pharmaceutical
stocks helped performance. Also, while consumer-oriented holdings have
produced good results, we have begun to reduce these holdings and increase
weightings in the capital goods sector, which we believe has good earnings
potential in the months ahead. Technology stocks have maintained their
leadership in a dramatic fashion over the past six months and have been
strong contributors to the portfolio. Currently, the portfolio is
overweighted in the technology sector, which we expect will continue to
provide market leadership despite the potential for increased volatility
moving forward.
For the balance of 1995, we believe further stock market gains will be
difficult to attain. Since earnings growth is expected to moderate in the
months ahead, market expectations may need to be adjusted. Nevertheless, we
believe many strong growth and good quality companies will provide attractive
investment opportunities during the second half of the year.
SCHEDULE OF INVESTMENTS
June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
SHARES VALUE
------ -------------
<S> <C> <C>
COMMON STOCKS--84.1%
Aerospace & Defense--2.3%
Boeing Company 290,000 $18,161,250
-----------
Airlines--1.0%
AMR Corp. (b) 100,000 7,462,500
-----------
Bank--2.1%
Citicorp 285,000 16,494,375
-----------
Chemical--Specialty--1.3%
Morton International, Inc. 350,000 10,237,500
-----------
Computer Software & Services--2.9%
HBO & Co. 180,000 9,810,000
Microsoft Corp. (b) 90,000 8,133,750
Oak Technology, Inc. (b) 144,200 5,299,350
-----------
23,243,100
-----------
Conglomerates--2.0%
ITT Corp. 135,000 15,862,500
-----------
Electrical Equipment--1.9%
Honeywell, Inc. 350,000 15,093,750
-----------
Electronics--6.0%
Applied Materials, Inc. (b) 100,000 8,662,500
Cypress Semiconductors Co. (b) 250,000 10,125,000
Intel Corp. 245,000 15,511,563
National Semiconductor Corp. (b) 475,000 13,181,250
-----------
47,480,313
-----------
Entertainment, Leisure & Gaming--3.4%
Viacom, Inc. Class B (b) 275,000 12,753,125
Walt Disney Co. 260,000 14,462,500
-----------
27,215,625
-----------
Financial Services--8.4%
Dean Witter Discover & Co. 310,000 $14,570,000
Federal National Mortgage Assoc. 176,000 16,610,000
H & R Block, Inc. 104,000 4,277,000
Morgan Stanley Group, Inc. 100,000 8,100,000
Student Loan Marketing Association 320,000 15,000,000
Travelers Group, Inc. 175,000 7,656,250
-----------
66,213,250
-----------
Food--1.3%
Ralston Purina Co. 200,000 10,200,000
-----------
Health Care--Diversified--1.0%
American Home Products Corp. 96,800 7,489,900
-----------
Health Care--Drugs--6.0%
Amgen, Inc. (b) 215,000 17,294,062
Lilly (Eli) & Co. 190,000 14,915,000
Merck & Co., Inc. 307,500 15,067,500
-----------
47,276,562
-----------
Hospital Management & Services--3.3%
Columbia/HCA Healthcare Corp. 450,000 19,462,500
PhyCor, Inc. (b) 192,500 6,761,562
-----------
26,224,062
-----------
Insurance--6.0%
Aetna Life & Casualty Co. 295,000 18,548,125
American International Group, Inc. 125,000 14,250,000
General Re Corp. 110,100 14,739,637
-----------
47,537,762
-----------
Medical Products & Supplies--6.7%
Baxter International, Inc. 415,000 15,095,625
Boston Scientific Corp. (b) 245,000 7,809,375
See Notes to Financial Statements
2-6
<PAGE>
Medical Products & Supplies--continued
Johnson & Johnson 115,000 $ 7,776,875
Medtronic, Inc. 100,000 7,712,500
St. Jude Medical, Inc. 283,500 14,210,438
-----------
52,604,813
-----------
Miscellaneous--1.1%
Eastman Kodak Co. 145,000 8,790,625
-----------
Natural Gas--1.4%
Apache Corp. 407,700 11,160,788
-----------
Office & Business Equipment--1.7%
Compaq Computer Corp. (b) 300,000 13,612,500
-----------
Oil Service & Equipment--3.6%
BJ Services Co. (b) 500,000 11,375,000
Schlumberger Ltd. 275,000 17,084,375
-----------
28,459,375
-----------
Paper, Packaging & Forest Products--1.1%
Bowater, Inc. 200,000 8,975,000
-----------
Pollution Control--3.6%
Browning-Ferris Industries, Inc. 340,000 12,282,500
WMX Technologies, Inc. 570,000 16,173,750
-----------
28,456,250
-----------
Professional Services--1.7%
First Data Systems Corp. 240,000 13,650,000
-----------
Retail--4.3%
Federated Department Stores, Inc. (b) 315,000 8,111,250
Office Depot, Inc. (b) 300,000 8,437,500
Staples, Inc. (b) 250,000 7,218,750
Wal-Mart Stores, Inc. 367,100 9,819,925
-----------
33,587,425
-----------
Retail--Food--1.1%
Safeway, Inc. (b) 225,000 8,409,375
-----------
Telecommunications Equipment--7.6%
Bay Networks, Inc. (b) 180,000 7,447,500
cisco Systems, Inc. (b) 289,000 14,612,563
General Instrument Corp. (b) 250,000 9,593,750
Northern Telecom Ltd. 132,000 4,818,000
StrataCom, Inc. (b) 275,000 13,406,250
U.S. Robotics Corp. 91,000 9,919,000
-----------
59,797,063
-----------
Tobacco--1.3%
Philip Morris Companies, Inc. 135,000 10,040,625
-----------
TOTAL COMMON STOCKS
(Identified cost $587,618,359) 663,736,288
-----------
FOREIGN COMMON STOCKS--5.3%
Computer Software & Services--1.7%
Cap Gemini Sogeti (France) 215,000 $ 6,652,100
Standard Application Software AG-Vorzug (Germany) 5,245 6,603,140
-----------
13,255,240
-----------
Oil--2.1%
Royal Dutch Petroleum Co. ADR (Netherlands) 139,000 16,940,625
-----------
Telecommunications Equipment--1.1%
Ericsson L.M. Telephone Co. Class B ADR (Sweden) 420,000 8,400,000
-----------
Utility--Telephone--0.4%
DDI Corp. (Japan) 415 3,323,913
-----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $36,125,153) 41,919,778
-----------
TOTAL LONG-TERM INVESTMENTS--89.4%
(Identified cost $623,743,512) 705,656,066
-----------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
-------- -----
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--8.6%
Commercial Paper--7.7%
Philip Morris Cos., Inc. 6.10%, 7-3-95 A-1 $ 830 829,719
Goldman, Sachs & Co. 5.95%, 7-6-95 A-1+ 4,215 4,211,517
BellSouth Telecommunications, Inc. 5.93%, 7-10-95 A-1+ 5,810 5,801,387
Exxon Imperial U.S., Inc. 5.95%, 7-11-95 A-1+ 8,360 8,346,183
Goldman, Sachs & Co. 5.95%, 7-12-95 A-1+ 5,000 4,990,910
Pfizer, Inc. 5.93%, 7-12-95 A-1+ 6,300 6,288,585
Pfizer, Inc. 5.93%, 7-13-95 A-1+ 2,270 2,265,513
H.J. Heinz Co. 5.85%, 7-21-95 A-1 12,735 12,693,611
Campbell Soup Co. 5.93%, 7-27-95 A-1+ 5,265 5,242,451
Shell Oil Co. 5.82%, 7-31-95 A-1+ 10,000 9,951,500
-----------
60,621,376
-----------
Federal Agency Securities--0.9%
Federal National Mortgage Assoc. 5.90%, 8-14-95 3,885 3,856,826
Student Loan Marketing Assoc. 5.66%, 11-9-95 3,500 3,500,000
-----------
7,356,826
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $67,978,360) 67,978,202
-----------
TOTAL INVESTMENTS--98.0%
(Identified cost $691,721,872) 773,634,268(a)
Cash and receivables, less liabilities--2.0% 15,655,610
-----------
NET ASSETS--100.0% $789,289,878
===========
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $86,379,231 and gross
depreciation of $4,438,332 for income tax purposes. At June 30, 1995 the
aggregate cost of securities for federal income tax purposes was
$691,693,369.
(b) Non-income producing.
ADR--American Depository Receipt
See Notes to Financial Statements
2-7
<PAGE>
GROWTH SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at value (Identified cost $691,721,872) $773,634,268
Receivable for investment securities sold 18,968,397
Investment income receivable 1,154,527
Tax reclaim receivable 116,382
Other receivable 123,025
-----------
Total assets 793,996,599
-----------
Liabilities
Custodian 493,723
Payable for investment securities purchased 3,681,217
Investment advisory fee 414,214
Administration fee 38,339
Trustees' fee 3,155
Accrued expenses 76,073
-----------
Total liabilities 4,706,721
-----------
Net Assets $789,289,878
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $670,759,646
Undistributed net investment income 153,682
Accumulated net realized gains 36,464,154
Net unrealized appreciation 81,912,396
-----------
Net Assets $789,289,878
===========
Shares of beneficial interest outstanding, $1 par value, unlimited
authorization 43,747,603
===========
Net asset value and offering price per share $18.04
===========
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Dividends $ 4,447,935
Interest 3,591,835
-----------
Total investment income 8,039,770
-----------
Expenses
Investment advisory fee 2,252,885
Administration fee 206,693
Trustees' 5,210
Custodian 91,129
Audit 19,698
Printing 23,407
Miscellaneous 17,066
-----------
Total expenses 2,616,088
Net investment income 5,423,682
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 37,897,309
Net realized loss on foreign currency transactions (1,447,772)
Net unrealized appreciation on investments 62,051,392
-----------
Net gain on investments 98,500,929
-----------
Net increase in net assets resulting from operations $103,924,611
===========
</TABLE>
See Notes to Financial Statements
2-8
<PAGE>
GROWTH SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year
6/30/95 Ended
(Unaudited) 12/31/94
----------- --------------
<S> <C> <C>
From Operations
Net investment income $ 5,423,682 $ 7,438,217
Net realized gains 36,449,537 21,194,240
Net unrealized appreciation (depreciation) 62,051,392 (22,581,225)
--------- ------------
Net increase in net assets resulting from operations 103,924,611 6,051,232
--------- ------------
From Distributions to Shareholders
Net investment income (5,340,685) (7,512,592)
Net realized gains -- (33,881,394)
--------- ------------
Decrease in net assets from distributions to shareholders (5,340,685) (41,393,986)
--------- ------------
From Share Transactions
Proceeds from sales of shares (8,486,747 and 17,499,498 shares,
respectively) 141,214,279 293,876,374
Net asset value of shares issued from reinvestment of distributions
(305,393 and 2,620,718, respectively) 5,340,745 41,393,986
Cost of shares repurchased (4,326,555 and 7,747,001 shares, respectively) (72,070,144) (130,074,382)
--------- ------------
Increase in net assets from share transactions 74,484,880 205,195,978
--------- ------------
Net increase in net assets 173,068,806 169,853,224
Net Assets
Beginning of period 616,221,072 446,367,848
--------- ------------
End of period (including undistributed net investment income of $153,682
and $70,685, respectively) $789,289,878 $ 616,221,072
========= ============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Six
Months
Ended
June 30, 1995 Year Ended December 31,
(Unaudited) 1994 1993 1992 1991 1990
------------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.69 $16.59 $15.01 $14.43 $11.72 $11.62
Income from investment operations
Net investment income 0.13 0.23(1) 0.16 0.22 0.39 0.35
Net realized and unrealized gain 2.35 0.02 2.77 1.25 4.64 0.10
------------ ----- ----- ----- ----- ------
Total from investment operations 2.48 0.25 2.93 1.47 5.03 0.45
------------ ----- ----- ----- ----- ------
Less distributions
Dividends from net investment income (0.13) (0.23) (0.15) (0.23) (0.37) (0.35)
Dividends from net realized gains -- (0.92) (1.20) (0.66) (1.95) --
------------ ----- ----- ----- ----- ------
Total distributions (0.13) (1.15) (1.35) (0.89) (2.32) (0.35)
------------ ----- ----- ----- ----- ------
Change in net asset value 2.35 (0.90) 1.58 0.58 2.71 0.10
------------ ----- ----- ----- ----- ------
Net asset value, end of period $18.04 $15.69 $16.59 $15.01 $14.43 $11.72
============ ===== ===== ===== ===== ======
Total return 15.80%(3) 1.48% 19.69% 10.29% 43.83% 3.98%
Ratios/supplemental data:
Net assets, end of period (thousands) $789,290 $616,221 $446,368 $245,565 $102,259 $40,061
Ratio to average net assets of:
Operating expenses 0.77%(2) 0.80% 0.79% 0.50% 0.50% 0.50%
Net investment income 1.55%(2) 1.38% 0.97% 1.66% 2.14% 3.19%
Portfolio turnover rate 181%(2) 185% 185% 214% 237% 272%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.003 per share.
(2) Annualized
(3) Not annualized
The components of income from investment operations are calculated based on
the average number of shares outstanding.
See Notes to Financial Statements
2-9
<PAGE>
BOND SERIES
Over this six-month reporting period, the domestic fixed-income markets
made a remarkable recovery from their dismal 1994 performance. Aided by the
slowing economy and controlled inflation, all sectors produced solidly
positive results. High-yield bonds and mortgage-backed securities were among
the top-performing markets. In addition, the emerging debt markets, which
struggled over the early months of 1995, made a strong comeback in the second
half of the period and outperformed all fixed- income markets for the final
three months of the period.
The Phoenix Edge Bond Series had an excellent first half, posting gains
well ahead of the market. For the six months ended June 30, 1995, the fund
returned 13.01%. According to the Lehman Brothers Aggregate Bond Index, an
unmanaged commonly used measure of bond performance, the market returned
11.44% in the same period. (All of these figures assume reinvestment of any
distributions.)
During this reporting period, we stressed U.S. government securities,
non-agency mortgage-backed securities and emerging market debt--all of which
were strong contributors to first-half results. The emerging markets, in
particular, enhanced performance over the second half of the period. Despite
the intense sell off experienced in the first calendar quarter--triggered by
the Mexican peso crisis last December--emerging debt markets rebounded
dramatically in the second calendar quarter.
As of June 30, approximately 21% of the portfolio was invested in emerging
market securities. This allocation remains well- diversified among nine
countries, with Argentina and Brazil as the two largest holdings.
Our long-term outlook for the emerging markets sector remains positive,
particularly for countries where local governments remain committed to
market-based reforms, including Argentina, Brazil and Poland. In addition to
the emerging markets, we also expect the portfolio will continue to benefit
from its holdings in the U.S. government securities sector.
SCHEDULE OF INVESTMENTS
JUNE 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
MOODY'S PAR
BOND VALUE
RATING (000) VALUE
----- ------- -------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--23.2%
U.S. Treasury Bonds--16.8%
U.S. Treasury Bonds 6.50%, '05 Aaa $10,950 $11,181,702
U.S. Treasury Bonds 6.25%, '23 Aaa 1,000 945,050
U.S. Treasury Bonds 7.625%, '25 Aaa 3,200 3,612,832
-----------
15,739,584
-----------
U.S. Treasury Notes--2.1%
U.S. Treasury Notes 6.50%, '97 Aaa 1,000 1,011,160
U.S. Treasury Notes 6.125%, '98 Aaa 1,000 1,006,290
-----------
2,017,450
-----------
Mortgage-Backed Securities--4.3%
FHLMC 7.50%, '18 Aaa 978 985,191
FNMA 7%, '24 Aaa 2,848 2,802,268
GNMA Seasoned 8%, '06 Aaa 279 285,705
-----------
4,073,164
-----------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $21,222,786) 21,830,198
-----------
NON-CONVERTIBLE BONDS--33.3%
Airlines--1.8%
GPA Delaware, Inc. 8.75%, '98 Caa 2,000 1,720,000
-----------
Chemical--Specialty--1.3%
Borden Chemical & Plastics 9.50%, '05 Ba 1,200 1,218,000
-----------
Containers--2.4%
Owens-Illinois, Inc., 11%, '03 Ba 2,000 2,210,000
-----------
Hospital Management & Services--1.4%
National Medical Enterprises 9.625%, '02 Ba 500 531,250
National Medical Enterprises 10.125%, '05 Ba 750 796,875
-----------
1,328,125
-----------
Machinery--1.6%
Cincinnati Milacron, Inc. 8.375%, '04 Ba 1,500 1,505,625
-----------
Non-Agency Mortgage Backed Securities--15.4%
Chase Mortgage Finance Corp. 8.02%, '22 NR 940 957,251
Kearny Street 93-1, A Float 7.025%, '00 AA(b) 115 115,016
KPAC 7.18%, '05 BBB(b) 500 484,688
Nomura Asset Securities Corp. 94-MD2,
A6, Float 7.3275%, '03 A(b) 1,676 1,670,344
Prudential Home Mortgage 144A 6.641%, '23 (c) NR 1,500 1,404,141
Resolution Trust Corp. 7.90%, '23 Aa 1,360 1,368,623
Resolution Trust Corp. 6.55%, '24 Aaa 1,538 1,519,342
Resolution Trust Corp. 8%, '25 BBB(b) 989 980,000
Resolution Trust Corp. 8%,'26 BBB(b) 1,946 1,931,769
Resolution Trust Corp. 7.50%, '28 AA(b) 2,948 2,981,094
Ryland Mortgage Securities Corp. 8.33%, '30 A(b) 1,048 1,046,508
-----------
14,458,776
-----------
Paper & Forest Products--0.9%
SD Warren Co. Series B 12%, '04 B 750 810,000
-----------
Publishing, Broadcasting, Printing & Cable--4.2%
Paramount Communications 8.25%, '22 B 2,000 1,924,700
SCI Television 11%, '05 B 1,459 1,522,831
Univision Television 11.75%, '01 B 500 531,875
-----------
3,979,406
-----------
Retail--Food Service--3.2%
ARA Services, Inc. 10.625%, '00 Ba 54 60,075
Curtice-Burns Foods, Inc. 12.25%, '05 B 2,750 2,908,125
-----------
2,968,200
-----------
Telecommunications Equipment--1.1%
Panamsat L.P. (0%, '98) 11.375%, '03 B 1,500 1,072,500
-----------
</TABLE>
See Notes to Financial Statements
2-10
<PAGE>
BOND SERIES
<TABLE>
<CAPTION>
MOODY'S PAR
BOND VALUE
RATING (000) VALUE
------ ----- -----------
<S> <C> <C> <C>
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $30,214,889) $31,270,632
-----------
FOREIGN NON-CONVERTIBLE BONDS--11.9%
Argentina--1.6%
Bridas Corp. Yankee 12.50%, '99 B $1,600 1,456,000
-----------
Brazil--1.0%
Aracruz Celulose 10.375%, '02 NR 1,000 932,500
-----------
Canada--1.5%
Videotron Groupe Ltd. 10.25%, '02 Ba 1,400 1,445,500
-----------
Chile--2.0%
CSAV 144A 7.375%, '03 (c) BBB(b) 2,000 1,860,000
-----------
Columbia--2.8%
Centragas Yankee 144A 10.65%, '10 (c) BBB(b) 2,500 2,584,375
-----------
Indonesia--1.6%
P.T. Polysindo 13%, '01 B 1,500 1,522,500
-----------
Philippines--1.4%
Subic Power Corp. 144A 9.50%, '08 (c) NR 1,398 1,296,389
-----------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $10,857,860) 11,097,264
-----------
FOREIGN GOVERNMENT SECURITIES--12.1%
Argentina--3.6%
Republic of Argentina Bear FRB Float 7.3125%, '05 BB(b) 3,500 2,165,625
Republic of Argentina Par L-GP (5%,'96) 6%, '23 B 2,500 1,193,875
-----------
3,359,500
-----------
Brazil--3.4%
Republic of Brazil EI-L Euro Floater 6.6875%, '06 NR 2,000 1,197,500
Republic of Brazil Par YL4 (4.25%,'96) 6%, '24 NR 1,000 446,250
Republic of Brazil 20 yr. Series C Euro 8%, '14 NR 3,121 1,533,290
-----------
3,177,040
-----------
Costa Rica--1.2%
Central Bank of Costa Rica 6.25%, '10 NR 2,200 1,144,000
-----------
Ecuador--1.0%
Republic of Ecuador PDI 20 yr Euro 7.25%, '15 NR 3,000 982,500
-----------
Mexico--1.3%
United Mexican States Series B Euro 6.25% '19 Ba 2,000 1,220,000
-----------
Poland--1.6%
Poland Global Bearer PDI (3.25%,'95) 7%, '14 NR 2,500 1,500,000
-----------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $10,137,218) 11,383,040
-----------
MUNICIPAL TAX-EXEMPT BONDS--9.0%
Florida--1.6%
Palm Beach Waste Revenue Project B 10.50%, '11 NR 1,500 1,511,055
-----------
Michigan--0.2%
Brighton School District 0%, '18 Aaa 600 149,190
-----------
Pennsylvania--4.8%
Pennsylvania Economic Development 10.375%, '12 NR 2,500 2,526,225
Pennsylvania Financial Development 6.75%, '07 NR 1,950 1,957,469
-----------
4,483,694
-----------
Virginia--1.7%
Pittsylvania County Series B 7.65%, '10 NR 1,500 1,595,385
-----------
Wisconsin--0.7%
Wisconsin G.O. Series 5 4.85%, '06 Aa 750 693,097
-----------
TOTAL MUNICIPAL TAX-EXEMPT BONDS
(Identified cost $8,194,875) 8,432,421
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-----
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS--1.8%
Metals & Mining--1.8%
Freeport-McMoRan Copper Cv. Pfd. (5%,'96) 7%, '02 78,000 1,686,750
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified cost $1,828,122) 1,686,750
----------
PREFERRED STOCKS--4.1%
Paper, Packaging & Forest Products--0.8%
SD Warren Co. Pfd. Unit 144A PIK Series B (c) 30,000 786,580
----------
Telecommunications Equipment--3.3%
Panamsat Corp. Pfd. 12.75%, '05 3,050 3,082,025
----------
TOTAL PREFERRED STOCKS
(Identified cost $3,729,500) 3,868,605
----------
WARRANTS--0.2%
Paper, Packaging & Forest Products--0.2%
SD Warren Warrants 30,000 180,000
----------
TOTAL WARRANTS
(Identified cost $142,500) 180,000
----------
TOTAL LONG-TERM INVESTMENTS--95.6%
(Identified cost $86,327,750) 89,748,910
----------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000)
-----
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--2.1%
Commercial Paper--2.1%
Anheuser-Busch Cos., Inc. 5.93%, 7-6-95 P-1 $ 95 94,922
BellSouth Telecommunications, Inc. 6.10%, 7-6-95 P-1 880 879,254
BellSouth Telecommunications, Inc. 6.10%, 7-10-95 P-1 1,000 998,475
----------
1,972,651
----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $1,972,651) 1,972,651
------------
TOTAL INVESTMENTS--97.7%
(Identified cost $88,300,401) 91,721,561(a)
Cash and receivables, less liabilities--2.3% 2,155,089
------------
NET ASSETS--100.0% $93,876,650
============
</TABLE>
(a) Federal Income Tax Information; Net unrealized appreciation of investment
securities is comprised of gross appreciation of $4,340,884 and gross
depreciation of $951,519 for income tax purposes. At June 30, 1995 the
aggregate cost of securities for federal income tax purposes was
$88,332,196.
(b) As rated by Standard & Poor's, Duff & Phelps or Fitch.
(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 June 30,
1995, these securities amounted to a value of $7,931,485 or 8.4% of net
assets.
See Notes to Financial Statements
2-11
<PAGE>
BOND SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at value (Identified cost $88,300,401) $91,721,561
Cash 40,793
Receivable for investment securities sold 2,607,715
Investment income receivable 1,813,289
Other receivable 15,030
----------
Total assets 96,198,388
----------
Liabilities
Payable for investment securities purchased 2,259,620
Investment advisory fee 9,454
Administration fee 4,603
Trustees' fee 4,903
Accrued expenses 43,158
----------
Total liabilities 2,321,738
----------
Net Assets $93,876,650
==========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $93,664,465
Undistributed net investment income 154,661
Accumulated net realized losses (3,363,636)
Net unrealized appreciation 3,421,160
----------
Net Assets $93,876,650
==========
Shares of beneficial interest outstanding, $1 par value, unlimited
authorization 9,644,532
==========
Net asset value and offering price per share $9.73
==========
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest $ 3,781,214
Dividends 238,138
----------
Total investment income 4,019,352
----------
Expenses
Investment advisory fee 205,219
Administration fee 24,626
Custodian 42,403
Audit 19,549
Printing 10,291
Trustees' 7,711
Miscellaneous 9,099
----------
Total expenses 318,898
Less expenses borne by investment adviser (52,038)
----------
Net expenses 266,860
----------
Net investment income 3,752,492
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized loss on securities (200,090)
Net unrealized appreciation on investments 6,703,354
----------
Net gain on investments 6,503,264
----------
Net increase in net assets resulting from operations $10,255,756
==========
</TABLE>
See Notes to Financial Statements
2-12
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year
6/30/95 Ended
(Unaudited) 12/31/94
----------- -------------
<S> <C> <C>
From Operations
Net investment income $ 3,752,492 $ 5,726,303
Net realized losses (200,090) (4,421,816)
Net unrealized appreciation (depreciation) 6,703,354 (5,570,839)
--------- -----------
Net increase (decrease) in net assets resulting from operations 10,255,756 (4,266,352)
--------- -----------
From Distributions to Shareholders
Net investment income (3,620,904) (5,746,498)
--------- -----------
Decrease in net assets from distributions to shareholders (3,620,904) (5,746,498)
--------- -----------
From Share Transactions
Proceeds from sales of shares (2,781,039 and 4,380,630 shares,
respectively) 26,204,014 42,304,393
Net asset value of shares issued from reinvestment of distributions
(384,241 and 617,518, respectively) 3,620,904 5,746,498
Cost of shares repurchased (1,836,485 and 4,414,044 shares, respectively) (17,269,148) (42,745,168)
--------- -----------
Increase in net assets from share transactions 12,555,770 5,305,723
--------- -----------
Net increase (decrease) in net assets 19,190,622 (4,707,127)
Net Assets
Beginning of period 74,686,028 79,393,155
--------- -----------
End of period (including undistributed net invesment income of $154,661 and
$23,073, respectively) $ 93,876,650 $ 74,686,028
========= ===========
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Six
Months
Ended
June 30, 1995 Year Ended December 31,
(Unaudited) 1994 1993 1992 1991 1990
-------------- ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.98 $10.27 $ 9.58 $ 9.33 $ 8.48 $ 8.85
Income from investment operations
Net investment income 0.41(1) 0.72(1) 0.66(1) 0.66 0.74 0.80
Net realized and unrealized gain (loss) 0.74 (1.28) 0.84 0.25 0.85 (0.37)
------------ ---- ---- ---- ---- ------
Total from investment operations 1.15 (0.56) 1.50 0.91 1.59 0.43
------------ ---- ---- ---- ---- ------
Less distributions
Dividends from net investment income (0.40) (0.73) (0.66) (0.66) (0.74) (0.80)
Dividends from net realized capital
gains -- -- (0.15) -- -- --
------------ ---- ---- ---- ---- ------
Total distributions (0.40) (0.73) (0.81) (0.66) (0.74) (0.80)
------------ ---- ---- ---- ---- ------
Change in net asset value 0.75 (1.29) 0.69 0.25 0.85 (0.37)
------------ ---- ---- ---- ---- ------
Net asset value, end of period $ 9.73 $ 8.98 $10.27 $ 9.58 $ 9.33 $ 8.48
============ ==== ==== ==== ==== ======
Total return 13.01%(3) -5.47% 15.90% 10.03% 19.41% 5.14%
Ratios/supplemental data:
Net assets, end of period (thousands) $93,877 $74,686 $79,393 $43,090 $21,957 $13,558
Ratio to average net assets of:
Operating expenses 0.65%(2) 0.66% 0.65% 0.50% 0.50% 0.50%
Net investment income 9.07%(2) 7.62% 6.71% 7.47% 8.65% 9.26%
Portfolio turnover rate 174%(2) 181% 169% 166% 269% 318%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.006, $0.006 and $0.005 per share, respectively.
(2) Annualized
(3) Not annualized
The components of income from investment operations are calculated based on
the average number of shares outstanding.
See Notes to Financial Statements
2-13
<PAGE>
TOTAL RETURN SERIES
Moderating economic growth and relatively subdued inflation provided a
positive climate for the financial markets over the first six months of 1995.
Aided by the strong rally in the bond markets, equities remained on a fast
track throughout this six-month reporting period. As measured by the Standard
& Poor's 500 Composite Stock Index, a commonly used, unmanaged indicator of
stock performance, the equity market returned 20.19% for the first half of
1995.
Fixed-income markets also showed remarkable strength, with all sectors
providing solidly positive first-half performance. Yields on the 30-year
Treasury bond declined significantly over this reporting period, dropping
from 7.89% at yearend to 6.62% on June 30. As measured by the Lehman Brothers
Aggregate Bond Index, a commonly used, unmanaged gauge of market performance,
bonds returned 11.44% over this six-month period.
Phoenix Edge Total Return Series posted strong absolute gains over this
reporting period. For the six months ended June 30, 1995, The Fund returned
11.05%. In contrast, its peer group's average--the 175 flexible funds tracked
by Lipper Analytical Services--was 12.48%. As the broad market returns noted
above, all of these figures assume reinvestment of any distributions.
The portfolio's relative underperformance was due primarily to its lower
bond allocation versus its peer group. Although we had increased the bond
allocation to 20% moving into 1995, we underestimated the strength of the
bond market rally from its 1994 lows.
In anticipation of an improving stock market, we also increased the
portfolio's equity allocation to 55%. This proved to be an appropriate move,
with strong contributions from a number of areas. Technology, the
top-performing industry over the first half, was well represented in the
portfolio, with names such as Intel, Microsoft and Ericsson. Other equity
holdings that posted favorable results included Medtronic, McDonald's,
Disney, Eastman Kodak and ITT.
As noted in our last report, we expected that 1995 would be a better year
for the financial markets; however, we underestimated the strength of the
stock market rally. Over the second half of 1995, we expect gains in the
stock market to be more labored and speculative in nature. Also, as the
Federal Reserve shifts from a policy of tightening to one of ease, the bond
market is not likely to repeat its first-half performance over the balance of
the year. Although short-term rates are likely to decline, longer- term bonds
will be hard pressed to show much price appreciation. Therefore, we have
begun reducing our bond allocation.
In conclusion, we expect the remainder of 1995 to be more volatile than
the first half and further gains in the market to be more difficult.
See Notes to Financial Statements
2-14
<PAGE>
TOTAL RETURN SERIES
SCHEDULE OF INVESTMENTS
June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
STANDARD
& PAR
POOR'S VALUE
RATING (000) VALUE
------ ------- -------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--16.0%
U.S. TREASURY BONDS--2.9%
U.S. Treasury Bonds 7.875%, '04 AAA $ 8,500 $ 9,468,235
-----------
U.S. Treasury Notes--13.1%
U.S. Treasury Notes 7.25%, '96 AAA 7,000 7,131,040
U.S. Treasury Notes 7.375%, '97 AAA 7,000 7,227,360
U.S. Treasury Notes 7.50%, '97 AAA 14,500 14,858,875
U.S. Treasury Notes 6.50%, '99 AAA 12,800 13,018,752
-----------
42,236,027
-----------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $49,725,871) 51,704,262
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
------
<S> <C> <C>
COMMON STOCKS--51.2%
Advertising--2.0%
Interpublic Group Companies, Inc. 89,800 3,367,500
Omnicom Group, Inc. 52,000 3,152,500
---------
6,520,000
---------
Aerospace & Defense--3.3%
Boeing Company 70,000 4,383,750
Rockwell International Corp. 70,000 3,202,500
United Technologies Corp. 40,000 3,125,000
---------
10,711,250
---------
Beverages--0.5%
Coca Cola Co. 25,000 1,593,750
---------
Chemical--1.0%
Monsanto Co. 36,000 3,244,500
---------
Chemical--Specialty--1.7%
Engelhard Corp. 85,000 3,644,375
Loctite Corp. 40,000 1,820,000
---------
5,464,375
---------
Computer Software & Services--1.6%
Microsoft Corp. (b) 34,000 3,072,750
Sybase, Inc. (b) 69,300 2,035,687
---------
5,108,437
---------
Conglomerates--0.6%
ITT Corp. 16,000 1,880,000
---------
Electrical Equipment--3.6%
Emerson Electric Co. 74,000 5,291,000
Honeywell, Inc. 145,000 6,253,125
---------
11,544,125
---------
Electronics--0.6%
Amphenol Corp. Class A (b) 15,500 451,438
Intel Corp. 26,000 1,646,125
---------
2,097,563
---------
Entertainment, Leisure & Gaming--4.2%
Gaylord Entertainment Co. Class A 120,750 3,048,937
Time Warner, Inc. 150,000 6,168,750
Viacom, Inc. Class B (b) 30,000 1,391,250
Walt Disney Co. 51,700 2,875,813
---------
13,484,750
---------
Financial Services--2.1%
American Express Co. 90,000 3,161,250
Travelers Group, Inc. 80,000 3,500,000
---------
6,661,250
---------
Food--1.5%
Ralston Purina Co. 92,000 4,692,000
---------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<S> <C> <C>
Health Care--Diversified--1.5%
Warner-Lambert Co. 57,000 $ 4,923,375
----------
Health Care--Drugs--3.5%
Lilly (Eli) & Co. 34,000 2,669,000
Merck & Co., Inc. 120,000 5,880,000
Schering-Plough Corp. 60,000 2,647,500
----------
11,196,500
----------
Household Furnishing & Appliance--1.9%
Whirlpool Corp. 112,400 6,182,000
----------
Insurance--0.2%
American International Group, Inc. 4,300 490,200
----------
Lodging & Restaurants--1.1%
McDonald's Corp. 90,000 3,521,250
Medical Products & Supplies--1.4%
Becton Dickinson & Co. 50,200 2,924,150
Medtronic, Inc. 22,000 1,696,750
----------
4,620,900
----------
Miscellaneous--3.1%
Eastman Kodak Co. 100,000 6,062,500
Minnesota Mining & Manufacturing Co. 67,000 3,835,750
----------
9,898,250
----------
Office & Business Equipment--1.6%
Compaq Computer Corp. (b) 75,000 3,403,125
Silicon Graphics, Inc. (b) 42,000 1,674,750
----------
5,077,875
----------
Professional Services--1.1%
First Data Systems Corp. 65,400 3,719,625
----------
Publishing, Broadcasting, Printing & Cable--3.2%
Capital Cities/ABC, Inc. 29,000 3,132,000
Gannett, Inc. 100,000 5,425,000
Lin Television Corp. (b) 50,400 1,694,700
----------
10,251,700
----------
Retail--9.0%
Barnes & Noble, Inc. (b) 75,000 2,550,000
Dillard Department Stores, Inc. 105,000 3,084,375
Federated Department Stores, Inc. (b) 120,000 3,090,000
Kohls Corp. (b) 63,100 2,878,938
May Department Stores Co. 80,000 3,330,000
Nordstrom, Inc. 82,300 3,405,162
Pep Boys--Manny, Moe & Jack 69,000 1,845,750
Talbots, Inc. 75,700 3,009,075
Wal-Mart Stores, Inc. 218,000 5,831,500
----------
29,024,800
----------
Telecommunications Equipment--0.9%
Motorola, Inc. 45,000 3,020,625
----------
TOTAL COMMON STOCKS
(Identified cost $149,523,785) 164,929,100
----------
FOREIGN COMMON STOCKS--2.8%
Chemical--0.2%
Potash Corp. of Saskatchewan, Inc. (Canada) 9,600 536,400
----------
Oil Service & Equipment--0.6%
Petroleum Geo-Services ADR (Norway) (b) 69,500 1,998,125
----------
Telecommunications Equipment--1.0%
Ericsson L.M. Telephone Co. Class B ADR
(Sweden) 163,000 3,260,000
----------
Utility--Telephone--1.0%
Vodafone Group PLC ADR (United Kingdom) 85,000 3,219,375
----------
</TABLE>
See Notes to Financial Statements
2-15
<PAGE>
TOTAL RETURN SERIES
<TABLE>
<CAPTION>
VALUE
-----------
<S> <C>
TOTAL FOREIGN COMMON STOCKS
(Identified cost $7,808,776) $ 9,013,900
---------
TOTAL LONG-TERM INVESTMENTS--70.0%
(Identified cost $207,058,432) 225,647,262
---------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR's VALUE
RATING (000)
-------- ------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--28.7%
Commercial Paper--26.8%
Goldman, Sachs & Co. 5.95%, 7-6-95 A-1+ $8,850 8,842,686
Exxon Imperial U.S., Inc. 5.95%,
7-7-95 A-1+ 7,505 7,497,558
BellSouth Telecommunications, Inc.
5.95%, 7-10-95 A-1+ 5,180 5,172,295
Exxon Imperial U.S., Inc. 5.95%,
7-11-95 A-1+ 5,120 5,111,538
Goldman, Sachs & Co. 5.95%, 7-12-95 A-1+ 5,000 4,990,910
Philip Morris Cos., Inc. 5.92%,
7-13-95 A-1 8,000 7,984,213
AT&T 5.87%, 7-14-95 A-1+ 5,000 4,989,401
McDonald's Corp. 5.93%, 7-17-95 A-1+ 8,740 8,716,965
Unilever Capital Corp. 5.90%, 7-17-95 A-1+ 4,855 4,842,269
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR's VALUE
RATING (000) VALUE
-------- ----- -----------
<S> <C> <C> <C>
BellSouth Telecommunications, Inc.
5.95%, 7-19-95 A-1+ $ 3,600 $ 3,589,290
H.J. Heinz Co. 5.85%, 7-21-95 A-1 10,310 10,276,492
Campbell Soup Co. 5.93%, 7-27-95 A-1+ 4,435 4,416,006
Shell Oil Co. 5.82%, 7-31-95 A-1+ 10,000 9,951,500
---------
86,381,123
---------
Federal Agency Securities--1.9%
Federal National Mortgage Assoc.
5.90%, 8-14-95 1,225 1,216,117
Student Loan Marketing Assoc. 5.66%, 11-9-95 5,000 5,000,000
---------
6,216,117
---------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $92,597,291) 92,597,240
---------
TOTAL INVESTMENTS--98.7%
(Identified cost $299,655,723) 318,244,502(a)
Cash and receivables, less liabilities--1.3% 4,301,051
---------
NET ASSETS--100.0% $322,545,553
=========
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $19,653,065 and gross
depreciation of $1,208,378 for income tax purposes. At June 30, 1995 the
aggregate cost of securities for federal income tax purposes was
$299,799,815.
(b) Non-income producing.
ADR--American Depository Receipt
See Notes to Financial Statements
2-16
<PAGE>
TOTAL RETURN SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at value (Identified cost $299,655,723) $318,244,502
Receivable for investment securities sold 4,334,895
Investment income receivable 1,022,801
Tax reclaim receivable 9,439
Other receivable 50,216
-----------
Total assets 323,661,853
-----------
Liabilities
Custodian 282,622
Payable for investment securities purchased 528,480
Investment advisory fee 187,110
Administration fee 15,858
Trustees' fee 2,494
Accrued expenses 99,736
-----------
Total liabilities 1,116,300
-----------
Net Assets $322,545,553
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $295,497,891
Undistributed net investment income 93,247
Accumulated net realized gains 8,365,636
Net unrealized appreciation 18,588,779
-----------
Net Assets $322,545,553
===========
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization 23,315,452
===========
Net asset value and offering price per share $13.83
===========
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Dividends $ 1,121,341
Interest 5,089,017
-----------
Total investment income 6,210,358
-----------
Expenses
Investment advisory fee 894,369
Administration fee 90,805
Custodian 18,026
Printing 13,567
Audit 9,523
Trustees' 2,894
Miscellaneous 16,528
-----------
Total expenses 1,045,712
-----------
Net investment income 5,164,646
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 9,090,550
Net realized loss on foreign currency transactions (2,054)
Net unrealized appreciation on investments 17,775,104
-----------
Net gain on investments 26,863,600
-----------
Net increase in net assets resulting from operations $32,028,246
===========
</TABLE>
See Notes to Financial Statements
2-17
<PAGE>
TOTAL RETURN SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year
6/30/95 Ended
(Unaudited) 12/31/94
----------- --------
<S> <C> <C>
From Operations
Net investment income $ 5,164,646 $ 7,505,444
Net realized gains (losses) 9,088,496 (3,768,797)
Net unrealized appreciation (depreciation) 17,775,104 (7,374,304)
--------- -----------
Net increase (decrease) in net assets resulting from operations 32,028,246 (3,637,657)
--------- -----------
From Distributions to Shareholders
Net investment income (5,049,297) (7,923,603)
Net realized gains (600,030) (9,607,065)
--------- -----------
Decrease in net assets from distributions to shareholders (5,649,327) (17,530,668)
--------- -----------
From Share Transactions
Proceeds from sales of shares (2,603,521 and 6,357,542 shares, respectively) 34,611,837 84,155,117
Net asset value of shares issued from reinvestment of distributions (415,583
and 1,367,449 shares, repectively) 5,649,327 17,530,668
Cost of shares repurchased (2,494,763 and 3,611,175 shares, respectively) (33,177,921) (47,445,390)
--------- -----------
Increase in net assets from share transactions 7,083,243 54,240,395
--------- -----------
Net increase in net assets 33,462,162 33,072,070
Net Assets
Beginning of period 289,083,391 256,011,321
--------- -----------
End of period (including undistributed net investment income and
distributions in excess of net investment income of $93,247 and ($22,102),
respectively) $322,545,553 $289,083,391
========= ===========
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Six
Months
Ended
June 30, 1995 Year Ended December 31,
(Unaudited) 1994 1993 1992 1991 1990
-------------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $12.68 $13.71 $12.86 $12.97 $11.07 $11.05
Income from investment operations
Net investment income 0.23 0.36(1) 0.23 0.37 0.42 0.58
Net realized and unrealized gain
(loss) 1.17 (0.56) 1.17 0.99 2.76 0.02
------------ ----- ----- ----- ---- ----
Total from investment operations 1.40 (0.20) 1.40 1.36 3.18 0.60
------------ ----- ----- ----- ---- ----
Less distributions
Dividends from net investment
income (0.22) (0.37) (0.23) (0.37) (0.42) (0.58)
Dividends from net realized gains (0.03) (0.46) (0.32) (1.10) (0.86) --
------------ ----- ----- ----- ---- ----
Total distributions (0.25) (0.83) (0.55) (1.47) (1.28) (0.58)
------------ ----- ----- ----- ---- ----
Change in net asset value 1.15 (1.03) 0.85 (0.11) 1.90 0.02
------------ ----- ----- ----- ---- ----
Net asset value, end of period $13.83 $12.68 $13.71 $12.86 $12.97 $11.07
============ ===== ===== ===== ==== ====
Total return 11.05%(3) -1.45% 11.02% 10.67% 29.44% 5.62%
Ratios/supplemental data:
Net assets, end of period
(thousands) $322,546 $289,083 $256,011 $163,628 $98,415 $62,839
Ratio to average net assets of:
Operating expenses 0.69%(2) 0.74% 0.74% 0.50% 0.50% 0.50%
Net investment income 3.38%(2) 2.71% 1.82% 2.90% 3.48% 5.39%
Portfolio turnover rate 159%(2) 220% 269% 326% 255% 302%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.001 per share.
(2) Annualized
(3) Not annualized
The components of income from investment operations are calculated based on
the average number of shares outstanding.
See Notes to Financial Statements
2-18
<PAGE>
INTERNATIONAL SERIES
The last six months have seen widely divergent performance from world
equity markets and currencies. The Mexican peso crisis in December, high
interest rates in non-core European markets and the sharp decline of the U.S.
dollar in the first calendar quarter put tremendous pressure on equities.
More recently, markets have rallied strongly on the back of the booming U.S.
stock and bond markets. Interest rates on long bonds have fallen 80 to 100
basis points throughout most of Europe, helping to boost stocks. Asia and
Latin America also rallied when fears of rising U.S. interest rates faded.
While 1994 earnings growth in Europe was above expectations,
economically-sensitive sectors are already anticipating slower economic
growth ahead. Most of Asia had earnings consistent with expectations, except
for Hong Kong, where weak real estate activity and retail demand have pulled
the market down. Japan has been one of the biggest disappointments, with the
sharp appreciation of the yen worrying both corporations and consumers alike.
Companies that have moved production offshore or been exposed to strong U.S.
and Asian demand reported better-than-expected profits. However, those
companies with significant exposure to the domestic economy are still
suffering. Over this reporting period, the best performers included
Switzerland, the Netherlands, Belgium, Finland and Denmark. Japan and Latin
America were among the worst-performing markets.
For the six months ended June 30, 1995, Phoenix Edge International Fund
produced a total return of 3.71%. As measured by the Morgan Stanley Capital
International EAFE Index, the market gained 2.76% in the same period.* (All
of these figures assume reinvestment of any distributions.)
During this reporting period, the portfolio benefited from its exposure to
Scandinavia, Switzerland, and Southeast Asia. Underweighting in Japan has
also been a positive factor for the portfolio, as well as stronger
performance from European assets late in the period. Finally, good stock
selection overall has helped the portfolio produce its strong relative
performance.
The outlook for European economies is positive, with growth anticipated
between 2.5% and 3% this year. There are few signs of inflationary pressures
in Europe, and bond yields have fallen over the last few months. The main
driver of economic growth has come from industrial companies where
restructuring, strong exports and the start of recovery in Europe has led to
a sharp pick up in activity and a rebound in corporate profits. While the
consumer climate remains quite weak, we expect improvement later in 1995 and
have added to our positions in consumer and domestic demand stocks. We
continue to hold our positions in companies that should benefit from
outsourcing, productivity enhancement and capital investments as Europe works
to improve its global competitiveness.
Strong growth in Asia continues, with the region expected to grow at a
pace of 5% to 8% in 1995. Despite fears of a currency collapse similar to
Mexico's, Asian governments responded quickly, raising interest rates to
protect their currencies and slow overheating economies. We expect to further
increase our overweight position in the region on any market weakness and
look forward to renewed growth in 1996.
Latin America remains difficult. If Mexico stabilizes and does not cause
similar problems for the governments of Brazil and Argentina, there is every
reason to remain sanguine about the long-term outlook. However, we expect
slow economic growth and poor corporate profits in 1995 and will wait to add
to positions until the situation improves.
The Fund has increased holdings in Europe and the Pacific Basin,
particularly in financial stocks that are expected to benefit from lower
interest rates. We plan to increase exposure to the United Kingdom in hope
that the upcoming election spurs the government to create a "feel good"
environment for consumers. We also expect to maintain an underweighting in
Japan until it becomes evident that a serious effort is being made to resolve
fundamental problems in the financial system.
*The Morgan Stanley Capital International EAFE Index is an unmanaged,
commonly used measure of foreign stock performance. This index is an
aggregate of 15 individual country indexes in Europe, Australia and the Far
East.
See Notes to Financial Statements
2-19
<PAGE>
INTERNATIONAL SERIES
SCHEDULE OF INVESTMENTS
June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
SHARES VALUE
-------- -----------
<S> <C> <C>
COMMON STOCKS--90.7%
Argentina--0.6%
Quilmes (Beverages) 42,000 $ 819,000
---------
Australia--2.1%
Australia & New Zealand Banking Group (Banks) 350,000 1,240,519
News Corp. (Publishing, Broadcasting & Printing) 267,000 1,487,644
---------
2,728,163
---------
Belgium--1.0%
Kredietbank NV (Banks) 5,300 1,259,005
---------
Chile--1.1%
Compania de Telefonos de Chile ADR
(Utility--Telephone) 18,000 1,464,750
---------
Denmark--2.6%
Danisco A/S (Food) 47,000 2,010,183
Unidanmark (Banks) 27,300 1,339,474
---------
3,349,657
---------
Finland--3.4%
Benefon OY (Electronics) 50,700 1,920,140
Nokia AB (Telecommunications Equipment) 21,600 1,262,420
Valmet (Machinery) 56,800 1,281,403
--------
4,463,963
--------
France--7.8%
Carrefour Supermarche (Retail--Food) 2,100 1,076,534
Castorama Dubois (Retail) 9,600 1,592,243
Christian Dior SA (Retail) 6,600 581,644
Legrand (Electrical Equipment) 8,750 1,389,892
LVMH (Beverages) 8,800 1,584,817
Moulinex (Household Furnishing & Appliances) (b) 33,366 807,392
Total Compagnie Francaise des Petroles (Oil) 28,000 1,686,643
Valeo (Auto & Truck Parts) 29,500 1,435,596
--------
10,154,761
--------
Germany--8.4%
Buderus AG (Building & Materials) 1,350 648,616
Commerzbank AG (Banks) 8,200 1,959,801
Fresenius AG (Medical Technology) 2,390 1,611,061
Gehe AG (Health Care--Drugs) 2,900 1,330,467
Moebel Walther AG (Household Furnishing & Appliances) 3,080 1,557,691
Standard Application Software AG--Vorzug (Computer
Software & Services) 2,550 3,210,299
Wella AG (Cosmetics & Soaps) 850 675,529
--------
10,993,464
--------
Hong Kong--7.5%
CDL Hotels International (Lodging & Restaurants) 2,500,000 1,219,709
Consolidated Electric Power Asia (Utility-- Electric) 770,000 1,786,300
Dao Heng Bank Group, Ltd. (Banks) 200,000 610,016
First Pacific Company Ltd. (Conglomerates) 2,250,000 1,991,922
HSBC Holdings plc (Banks) 147,000 1,885,590
Hutchison Whampoa (Conglomerates) 295,000 1,425,913
Sun Hung Kai Properties (Property Development) 130,000 961,874
--------
9,881,324
--------
Indonesia--3.5%
Astra International (Auto & Truck Parts) 483,000 856,691
Indonesia Satellite (Indosat) (Utility-- Telephone) 122,000 465,649
Indonesia Satellite (Indosat) ADR (Utility--
Telephone) 22,800 872,100
Matahari Putra Prima (Retail) 294,000 $ 468,657
Matahari Putra Prima Rights (Retail) 147,000 141,917
Semen Gresik (Building & Materials) 137,000 919,690
Wicaksana Overseas (International Trade) 320,000 898,069
--------
4,622,773
--------
Italy--0.8%
Telecom Italia (Utility--Telephone) 363,000 983,448
--------
Japan--8.3%
Hoya (Machinery & Engineering) 20,000 588,929
Kyocera Corp. (Electronics) 12,000 986,574
Mitsui Marine & Fire Insurance (Insurance) 128,000 838,258
Murata Manufacturing (Electronics) 35,000 1,323,323
Nippon Steel (Metals & Mining) 73,000 237,315
Nippon Telegraph & Telephone (Utility--Telephone) 90 752,651
Omron Corp. (Electrical & Electronics) 44,000 839,577
Oriental Construction Co. (Construction) 62,000 1,299,884
Rohm Co. (Electronics) 25,000 1,289,754
Sankyo Co. (Health Care--Diversified) 31,800 737,881
Shohkoh Fund & Co. (Financial Services) 7,300 1,306,951
SMC Corp. (Machinery) 11,000 630,978
--------
10,832,075
--------
Korea--2.0%
Korea Electric Power Corp. (Utility-- Electric) 34,210 1,281,324
Samsung Electronics (Electronics) 24,500 1,274,000
--------
2,555,324
--------
Malaysia--0.4%
Magnum Corporation (Entertainment, Leisure & Gaming) 140,000 327,331
Technology Resources Industries (Utility-- Telephone) 70,000 200,993
--------
528,324
--------
Netherlands--6.0%
Ahrend Group NV (Office & Business Equipment) 14,100 1,859,690
Getronics NV (Computer Software & Services) 15,900 778,336
IHC Caland NV (Oil Service & Equipment) 57,500 1,631,732
Polygram NV (Entertainment, Leisure & Gaming) 3,500 206,546
Sphinx Kon CVA (Building & Materials) 41,175 1,471,200
VNU (Publishing, Broadcasting & Printing) 16,300 1,950,113
--------
7,897,617
--------
Norway--3.4%
Nera AS (Telecommunications Equipment) 20,000 567,721
Petroleum Geo-Services (Oil Service & Equipment) 60,000 1,725,000
Uni Storebrand (Insurance) 482,000 2,165,677
--------
4,458,398
--------
Peru--1.2%
CPT (Utility--Telephone) 893,945 1,525,366
--------
Philippines--1.0%
Metropolitan Bank & Trust Co. (Banks) 60,000 1,303,837
--------
Portugal--1.2%
Portugal Telecom (Utility--Telephone) 80,000 1,529,532
--------
Singapore--1.8%
City Developments Ltd. (Property Development) 100,000 611,807
Development Bank of Singapore (Banks) 131,000 1,490,447
United Overseas Bank Ltd. (Banks) 25,200 238,025
--------
2,340,279
--------
</TABLE>
See Notes to Financial Statements
2-20
<PAGE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Spain--3.5%
Banco Central Hispanoamericano, SA (Banks) 57,000 $ 1,207,408
Centros Comerciales Continente SA (Retail) 64,000 1,538,030
Repsol SA (Oil) 58,000 1,824,924
------------
4,570,362
------------
Sweden--4.6%
Allgon AB (Telecommunications Equipment) 54,000 1,282,960
Astra AB (Health Care--Drugs) 49,050 1,512,267
Autoliv AB (Auto & Truck Parts) 37,000 1,976,626
SKF AB (Industrial Components) 62,000 1,251,648
------------
6,023,501
------------
Switzerland--5.5%
Brown Boveri & Cie Bearer (Electrical Equipment) 520 538,009
Brown Boveri B Reg. (Electrical Equipment) 6,500 1,303,273
Roche Holdings (Health Care--Diversified) 300 1,932,124
Sandoz AG (Health Care--Diversified) 2,050 1,412,811
Winterthur Insurance Co. (Insurance) 3,400 2,042,184
------------
7,228,401
------------
Thailand--1.7%
Bangkok Bank Company Ltd. (Banks) 57,000 628,074
PTT Exploration & Production (Oil) 104,000 1,120,681
Industrial Finance Corporation of Thailand (Financial
Services) 200,000 526,636
------------
2,275,391
------------
United Kingdom--11.3%
Allied Irish Banks plc (Banks) 28,000 1,327,605
British Sky Broadcasting Group plc (Publishing,
Broadcasting, Printing & Cable) 113,000 493,532
BSR International (Electronics) 893,000 1,392,426
Carlton Communications (Publishing & Broadcasting) 117,000 1,774,081
Glaxo Welcome plc (Health Care--Drugs) 106,000 1,301,177
Granada Group (Entertainment, Leisure & Gaming) 139,000 1,344,662
Lonrho plc (Conglomerates) 478,000 1,125,601
Next plc (Retail) 266,000 1,445,330
Siebe plc (Industrial & Electrical Machinery) 66,000 657,375
Smithkline Beecham plc (Health Care-- Diversified) 38,000 1,719,500
Takare (Hospital Management & Services) 497,000 1,518,282
TLG plc (Electrical Equipment) 290,000 729,036
------------
14,828,607
------------
TOTAL COMMON STOCKS
(Identified cost $108,741,845) 118,617,322
------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- ------ -------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--6.7%
Commercial Paper U.S.--6.7%
Wal-Mart Stores, Inc. 5.97%, 7-3-95 A-1+ $4,430 $ 4,428,531
AT&T Capital Corp. 5.97%, 7-6-95 A-1 2,470 2,467,952
McDonald's Corp. 5.93%, 7-11-95 A-1+ 1,880 1,876,903
------------
8,773,386
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $8,773,386) 8,773,386
------------
TOTAL INVESTMENTS--97.4%
(Identified cost $117,515,231) 127,390,708(a)
Cash and receivables, less liabilities--2.6% 3,390,875
------------
NET ASSETS--100.0% $130,781,583
===========
</TABLE>
INDUSTRY DIVERSIFICATION
As a Percentage of Total Value of Common Stock
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Auto & Truck Parts 3.6%
Banks 12.2
Beverages 2.0
Building & Materials 2.6
Computer Software & Services 3.4
Conglomerates 3.8
Construction 1.1
Cosmetics & Soaps 0.6
Electrical Equipment 3.3
Electronics 7.6
Entertainment, Leisure & Gaming 1.6
Financial Services 1.5
Food 1.7
Health Care--Diversified 4.9
Health Care--Drugs 3.5
Hospital Management & Services 1.3
Household Furnishing & Appliances 2.0
Industrial & Electrical Machinery 0.6
Industrial Components 1.1
Insurance 4.2
International Trade 0.7
Lodging & Restaurants 1.0
Machinery 1.6
Machinery & Engineering 0.5
Medical Technology 1.4
Metals & Mining 0.2
Office & Business Equipment 1.6
Oil and Oil Service & Equipment 6.7
Publishing, Broadcasting, Printing & Cable 4.8
Property Development 1.3
Retail 4.9
Retail--Food 0.9
Telecommunications Equipment 2.6
Utility--Electric 2.6
Utility--Telephone 6.6
----
100.0%
====
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $11,564,508 and gross
depreciation of $1,715,817 for income tax purposes. At June 30, 1995 the
aggregate cost of securities for federal income tax purposes was
$117,542,017.
(b) Non-income producing.
ADR--American Depository Receipt
See Notes to Financial Statements
2-21
<PAGE>
INTERNATIONAL SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Investment securities at market (Identified cost $117,515,231) $127,390,708
Foreign currency at market (Identified cost $975,947) 984,970
Receivable for investment securities sold 5,156,297
Investment income receivable 322,321
Tax reclaim receivable 51,077
------------
Total Assets 133,905,373
------------
Liabilities
Custodian 161,817
Payable for investment securities purchased 2,267,930
Investment advisory fee 76,700
Administration fee 6,477
Trustees' fee 4,925
Accrued expenses 120,450
Net unrealized depreciation on forward currency contracts 485,491
------------
Total Liabilities 3,123,790
------------
Net Assets $130,781,583
============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $124,087,708
Undistributed net investment income 1,433,927
Accumulated net realized losses (4,145,430)
Net unrealized appreciation 9,405,378
------------
Net Assets $130,781,583
============
Shares of beneficial interest outstanding, $1 par value, unlimited
authorization 10,639,937
============
Net asset value and offering price per share $12.29
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Investment Income
<S> <C>
Dividends $ 1,307,543
Interest 573,109
Foreign taxes withheld (154,609)
------------
Total investment income 1,726,043
------------
Expenses
Investment advisory fee 478,586
Administration fee 38,287
Custodian 112,512
Printing 16,712
Audit 13,571
Trustees' 7,980
Miscellaneous 13,466
------------
Total expenses 681,114
------------
Net investment income 1,044,929
------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized loss on securities (1,182,031)
Net realized loss on foreign currency transactions (1,398,707)
Net unrealized appreciation on investment securities 6,054,799
Net unrealized depreciation on foreign currency transactions (91,786)
------------
Net gain on investments 3,382,275
------------
Net increase in net assets resulting from operations $ 4,427,204
============
</TABLE>
See Notes to Financial Statements
2-22
<PAGE>
INTERNATIONAL SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year
6/30/95 Ended
(Unaudited) 12/31/94
----------- -------------
<S> <C> <C>
From Operations
Net investment income $ 1,044,929 $ 691,783
Net realized losses (2,580,738) (74,826)
Net change in unrealized appreciation (depreciation) 5,963,013 (3,984,032)
--------- -----------
Net increase (decrease) in net assets resulting from operations 4,427,204 (3,367,075)
--------- -----------
From Distributions to Shareholders
Net investment income -- (257,332)
Net realized gains -- (3,156,656)
--------- -----------
Decrease in net assets from distributions to shareholders -- (3,413,988)
--------- -----------
From Share Transactions
Proceeds from sales of shares (2,397,058 and 9,181,135 shares, respectively) 27,847,088 115,954,555
Net asset value of shares issued from reinvestment of distributions (0 and
282,805 shares, respectively) -- 3,413,988
Cost of shares repurchased (3,116,702 and 3,121,639 shares, respectively) (36,119,920) (39,201,848)
--------- -----------
(Decrease) increase in net assets from share transactions (8,272,832) 80,166,695
--------- -----------
Net (decrease) increase in net assets (3,845,628) 73,385,632
Net Assets
Beginning of period 134,627,211 61,241,579
--------- -----------
End of period (including undistributed net investment income of $1,433,927 and
$388,998, respectively) $130,781,583 $134,627,211
========= ===========
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding through the indicated period)
<TABLE>
<CAPTION>
Six
Months From
Ended Inception
June 30, 1995 Year Ended December 31, 5/1/90 to
(Unaudited) 1994 1993 1992 1991 12/31/90
------------- ------- ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.85 $12.21 $ 8.82 $ 10.17 $ 9.07 $10.00
Income from investment operations
Net investment income 0.10 0.08 0.07(2) 0.09 0.24(2) 0.07(2)
Net realized and unrealized gain
(loss) 0.34 (0.07) 3.32 (1.40) 1.53 (0.88)
------------ ----- ---- ---- ---- --------
Total from investment operations 0.44 0.01 3.39 (1.31) 1.77 (0.81)
------------ ----- ---- ---- ---- --------
Less distributions
Dividends from net investment income -- (0.03) -- (0.04) (0.24) (0.07)
Dividends from net realized gains -- (0.34) -- -- (0.41) --
Distributions from paid in capital -- -- -- -- (0.02) (0.05)
------------ ----- ---- ---- ---- --------
Total distributions -- (0.37) -- (0.04) (0.67) (0.12)
------------ ----- ---- ---- ---- --------
Change in net asset value 0.44 (0.36) 3.39 (1.35) 1.10 (0.93)
------------ ----- ---- ---- ---- --------
Net asset value, end of period $12.29 $11.85 $12.21 $ 8.82 $10.17 $ 9.07
============ ===== ==== ==== ==== ========
Total return 3.71%(3) 0.03% 38.44% -12.89% 19.78% -8.10%(3)
Ratio/supplemental data:
Net assets, end of period (thousands) $130,782 $134,627 $61,242 $13,772 $6,119 $2,010
Ratio to average net assets of:
Operating expenses 1.06%(1) 1.10% 1.15% 1.50% 1.50% 1.50%(1)
Net investment income 1.62%(1) 0.64% 0.49% 1.13% 2.44% 1.82%(1)
Portfolio turnover rate 268%(1) 172% 193% 74% 104% 48%(1)
</TABLE>
(1) Annualized
(2) Includes reimbursement of operating expenses by investment adviser of
$0.05, $0.02 and $0.07, respectively.
(3) Not annualized
The components of income from investment operations are calculated based on
the average number of shares outstanding.
See Notes to Financial Statements
2-23
<PAGE>
BALANCED SERIES
Moderating economic growth and relatively subdued inflation have provided a
much improved investment environment for the financial markets over this
six-month reporting period. For the six months ended June 30,1995, the
Balanced Series provided a total return of 10.12%. The Fund's Balanced
Benchmark returned 15.28% in the same period.* (All of these figures assume
reinvestment of any distributions.)
While our efforts to keep the Fund more fully invested have helped the
portfolio over the first half of 1995, most of the underperformance came
early in the period. On balance, the fixed-income holdings produced solid
results. A shorter duration versus the benchmark held performance back
somewhat; however, the portfolio benefited as we extended duration over the
second calendar quarter. At present we expect to maintain a longer duration,
in light of a slowing economy that has helped calm fears of inflation.
In the equity segment, we increased exposure to the technology, financial
services and capital goods sectors, with good results overall. Strong
contributors to the portfolio included such names as cisco, Travelers Group,
First Financial Management and Boeing. We also worked to reduce holdings in
the weaker sectors--particularly consumer staples and consumer cyclicals--
that pulled performance down in the period. Finally, while the technology and
financial services holdings posted strong results, underweightings in these
areas moving into the period hurt the portfolio.
In the coming months, we expect to keep the portfolio more fully invested.
We believe the recent adjustments to the portfolio's sector weightings have
positioned the Fund to benefit from some of the most promising growth trends
in the marketplace.
*The Balanced Benchmark is calculated by Frank Russell Company based on the
performance of the following indexes: 55% S&P 500, 35% Lehman Brothers
Aggregate Bond Index and 10% U.S. Treasury bills.
SCHEDULE OF INVESTMENTS
June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- ----------- ------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--38.4%
U.S. Treasury Bonds--17.8%
U.S. Treasury Bonds 6.50%, '05 AAA $ 7,000 $ 7,148,120
U.S. Treasury Bonds 7.50%, '05 AAA 6,750 7,353,113
U.S. Treasury Bonds 7.50%, '16 AAA 9,000 9,804,960
U.S. Treasury Bonds 7.50%, '24 AAA 5,500 6,088,280
----------
30,394,473
----------
U.S. Treasury Notes--17.7%
U.S. Treasury Notes 4.625%, '95 AAA 3,000 2,996,244
U.S. Treasury Notes 7.25%, '96 AAA 11,000 11,205,920
U.S. Treasury Notes 4.75%, '98 AAA 1,500 1,445,820
U.S. Treasury Notes 4.75%, '98 AAA 2,000 1,932,160
U.S. Treasury Notes 6%, '99 AAA 2,500 2,500,975
U.S. Treasury Notes 6.875%, '00 AAA 9,850 10,189,727
----------
30,270,846
----------
Mortgage-Backed Securities--2.9%
GNMA 6.50%, '23 AAA 1,960 1,885,893
GNMA 9%, '23-'25 AAA 2,940 3,089,765
----------
4,975,658
----------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $64,363,947) 65,640,977
----------
CONVERTIBLE BONDS--2.3%
Computer Software & Services--1.2%
First Financial Management Corp. Cv.
5%, '99 A 1,500 2,032,500
----------
Electronics--0.7%
Integrated Device Technology Cv. 5.50%, '02 B 1,125 1,178,438
----------
Lodging & Restaurants--0.4%
Boston Chicken Cv. Notes 0%, '15 B 3,350 720,250
----------
TOTAL CONVERTIBLE BONDS
(Identified cost $3,676,098) 3,931,188
----------
CONVERTIBLE PREFERRED STOCKS--2.7%
Insurance--0.4%
St. Paul Capital LLC Cv. Pfd. 6%, '25 12,500 $ 653,125
----------
Pollution Control--0.5%
Browning-Ferris Industries, Inc. Cv. Pfd. 7.25% 20,000 730,000
----------
Professional Services--0.9%
American Express Co. DECS First Data '96 32,000 1,552,000
----------
Telecommunications Equipment--0.9%
MFS Communications Cv. Pfd. DECS 8%, '98 46,500 1,604,250
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified cost $4,157,864) 4,539,375
----------
COMMON STOCKS--47.7%
Aerospace & Defense--3.9%
Boeing Company 25,000 1,565,625
Lockheed Martin Corp. 32,000 2,020,000
Loral Corp. 27,000 1,397,250
Rockwell Internatiomal Corp. 38,000 1,738,500
----------
6,721,375
----------
Bank--3.0%
Chase Manhattan Corp. 35,000 1,645,000
Golden West Financial Corp. 37,500 1,767,188
Signet Banking Corp. 80,000 1,750,000
----------
5,162,188
----------
Chemical--1.3%
W. R. Grace & Co. 34,500 2,117,438
----------
Chemical--Specialty--1.0%
Air Products & Chemicals, Inc. 30,000 1,672,500
----------
Computer Software & Services--3.1%
Cadence Design Systems, Inc. (b) 50,000 1,618,750
Computer Sciences Corp. (b) 30,000 1,706,250
Microsoft Corp. (b) 16,000 1,446,000
Sybase, Inc. (b) 17,000 499,375
----------
5,270,375
----------
</TABLE>
See Notes to Financial Statements
2-24
<PAGE>
BALANCED SERIES
SHARES VALUE
------ -----
Conglomerates--3.3%
Alco Standard Corp. 23,000 $ 1,837,125
ITT Corp. 16,500 1,938,750
Tyco International Ltd. 33,000 1,782,000
---------
5,557,875
---------
Diversified Financial Services--3.6%
Equifax, Inc. 53,000 1,768,875
Federal National Mortgage Assoc. 10,000 943,750
Green Tree Financial Corp. 35,000 1,553,125
Travelers Group, Inc. 43,000 1,881,250
---------
6,147,000
---------
Electronics--1.0%
Applied Materials, Inc. (b) 20,000 1,732,500
---------
Engineering & Construction--1.1%
Fluor Corp. 35,000 1,820,000
---------
Entertainment, Leisure & Gaming--3.5%
King World Productions, Inc. (b) 22,000 891,000
Mattel, Inc. 67,500 1,755,000
Viacom, Inc. Class B (b) 36,000 1,669,500
Walt Disney Co. 30,000 1,668,750
---------
5,984,250
---------
Health Care--Drugs--1.9%
Amgen, Inc. (b) 17,000 1,367,437
Genzyme Corp. 48,000 1,920,000
---------
3,287,437
---------
Insurance--2.2%
Aetna Life & Casualty Co. 30,000 1,886,250
American International Group, Inc. 16,000 1,824,000
---------
3,710,250
---------
Medical Products & Supplies--1.0%
Medtronic, Inc. 22,000 1,696,750
---------
Miscellaneous--1.1%
CUC International, Inc. (b) 43,000 1,806,000
---------
Natural Gas--1.1%
Enron Corp. 54,000 1,896,750
---------
Office & Business Equipment--3.7%
Compaq Computer Corp. (b) 40,000 1,815,000
Hewlett Packard Co. 13,000 968,500
Silicon Graphics, Inc. (b) 45,000 1,794,375
Sun Microsystems, Inc. (b) 35,000 1,697,500
---------
6,275,375
---------
Oil--3.0%
Atlantic Richfield Co. 15,000 1,646,250
Mobil Corp. 20,000 1,920,000
Union Texas Petroleum Holdings, Inc. 76,500 1,616,062
---------
5,182,312
---------
Oil Service & Equipment--1.7%
BJ Services Co. (b) 70,000 1,592,500
J Ray McDermott SA 61,000 1,349,625
---------
2,942,125
---------
Pollution Control--0.6%
Browning-Ferris Industries, Inc. 30,000 1,083,750
---------
Reits--0.8%
Nationwide Health Properties, Inc. 35,000 1,365,000
---------
Retail--1.7%
Borders Group, Inc. (b) 80,000 1,150,000
Sears Roebuck & Co. 30,000 1,796,250
---------
2,946,250
---------
Telecommunications Equipment--3.2%
ADC Telecommunications, Inc. (b) 30,000 1,072,500
cisco Systems, Inc. (b) 30,000 1,516,875
Qualcomm, Inc. (b) 30,000 1,036,875
Tele-Communications, Inc. Class A (b) 80,000 1,875,000
---------
5,501,250
---------
Tobacco--0.9%
Philip Morris Companies, Inc. 20,000 1,487,500
---------
TOTAL COMMON STOCKS
(Identified cost $73,610,252) 81,366,250
---------
FOREIGN COMMON STOCKS--0.8%
Oil Service & Equipment--0.8%
Petroleum Geo-Services ADR (Norway) (b) 50,000 1,437,500
---------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $1,541,060) 1,437,500
---------
TOTAL LONG-TERM INVESTMENTS--91.9%
(Identified cost $147,349,221) 156,915,290
---------
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000)
-------- ---- -------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--6.5%
Commercial Paper--6.5%
Philip Morris Cos., Inc. 6.10%, 7-3-95 A-1 $ 250 249,915
McDonald's Corp. 5.93%, 7-11-95 A-1+ 4,480 4,472,620
McDonald's Corp. 5.93%, 7-11-95 A-1+ 2,890 2,885,240
Goldman, Sachs & Co. 5.95%, 7-12-95 A-1+ 3,530 3,523,582
-----------
11,131,357
-----------
TOTAL SHORT TERM OBLIGATIONS
(Identified cost $11,131,357) 11,131,357
-----------
TOTAL INVESTMENTS--98.4%
(Identified cost $158,480,578) 168,046,647(a)
Cash and receivables, less liabilities--1.6% 2,723,963
-----------
NET ASSETS--100.0% $170,770,610
===========
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $10,710,539 and gross
depreciation of $1,156,987 for income tax purposes. At June 30, 1995 the
aggregate cost of securities for federal income tax purposes was
$158,493,095.
(b) Non-income producing.
ADR-American Depository Receipt
See Notes to Financial Statements
2-25
<PAGE>
BALANCED SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at value (Identified cost $158,480,578) $168,046,647
Receivable for investment securities sold 2,936,373
Investment income receivable 964,372
Other receivable 34,514
-----------
Total assets 171,981,906
-----------
Liabilities
Custodian 24,854
Payable for investment securities purchased 990,375
Investment advisory fee 83,537
Trustees' fee 6,970
Administration fee 1,917
Accrued expenses 103,643
-----------
Total liabilities 1,211,296
-----------
Net Assets $170,770,610
===========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $163,319,543
Distributions in excess of net investment income (49,889)
Accumulated net realized losses (2,065,113)
Net unrealized appreciation 9,566,069
-----------
Net Assets $170,770,610
===========
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization 15,003,218
===========
Net asset value and offering price per share $11.38
===========
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Dividends $ 739,161
Interest 2,695,627
-----------
Total investment income 3,434,788
-----------
Expenses
Investment advisory fee 451,472
Administration fee 42,751
Printing 18,118
Custodian 17,699
Audit 12,801
Trustees' 4,096
Miscellaneous 13,103
-----------
Total expenses 560,040
-----------
Net investment income 2,874,748
-----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 4,418,996
Net realized loss on foreign currency transactions (36,763)
Net unrealized appreciation on investments 8,788,760
-----------
Net gain on investments 13,170,993
-----------
Net increase in net assets resulting from operations $16,045,741
===========
</TABLE>
See Notes to Financial Statements
2-26
<PAGE>
BALANCED SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year
6/30/95 Ended
(Unaudited) 12/31/94
----------- -------------
<S> <C> <C>
From Operations
Net investment income $ 2,874,748 $ 5,692,109
Net realized gains (losses) 4,382,233 (6,373,826)
Net unrealized appreciation (depreciation) 8,788,760 (4,002,731)
--------- -----------
Net increase (decrease) in net assets resulting from operations 16,045,741 (4,684,448)
--------- -----------
From Distributions to Shareholders
Net investment income (3,132,824) (5,536,378)
Net realized gains -- (1,538,238)
--------- -----------
Decrease in net assets from distributions to shareholders (3,132,824) (7,074,616)
--------- -----------
From Share Transactions
Proceeds from sales of shares (1,366,364 and 5,359,333 shares, respectively) 15,032,325 59,085,232
Net asset value of shares issued from reinvestment of distributions (281,090
and 660,710 shares, respectively) 3,132,824 7,074,616
Cost of shares repurchased (1,949,783 and 4,699,191 shares, respectively) (21,412,687) (51,439,961)
--------- -----------
(Decrease) increase in net assets from share transactions (3,247,538) 14,719,887
--------- -----------
Net increase in net assets 9,665,379 2,960,823
Net Assets
Beginning of period 161,105,231 158,144,408
--------- -----------
End of period (including distributions in excess of net investment income and
undistributed net investment income of ($49,889) and $208,187, respectively) $170,770,610 $161,105,231
========= ===========
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Six From
Months Inception
Ended 5/1/92
June 30, 1995 Year Ended to
(Unaudited) 12/31/94 12/31/93 12/31/92
------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.53 $11.31 $10.77 $10.00
Income from investment operations
Net investment income 0.19 0.38(2) 0.32(2) 0.19
Net realized and unrealized gain (loss) 0.87 (0.70) 0.60 0.77
----------- ------- ------- -------
Total from investment operations 1.06 (0.32) 0.92 0.96
----------- ------- ------- -------
Less distributions
Dividends from net investment income (0.21) (0.36) (0.32) (0.19)
Dividends from net realized gains -- (0.10) (0.06) --
----------- ------- ------- -------
Total distributions (0.21) (0.46) (0.38) (0.19)
----------- ------- ------- -------
Change in net asset value 0.85 (0.78) 0.54 0.77
----------- ------- ------- -------
Net asset value, end of period $11.38 $10.53 $11.31 $10.77
=========== ======= ======= =======
Total return 10.12%(3) -2.80% 8.57% 9.72%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $170,771 $161,105 $158,144 $54,467
Ratio to average net assets of:
Operating expenses 0.68%(1) 0.69% 0.70% 0.50%(1)
Net investment income 3.47%(1) 3.44% 3.16% 3.59%(1)
Portfolio turnover rate 242%(1) 171% 161% 110%(1)
</TABLE>
(1) Annualized
(2) Includes reimbursement of operating expenses by investment adviser of
$0.001 and $0.001 per share, respectively.
(3) Not annualized
The components of income from operations are calculated based on the average
number of shares outstanding at each quarter end.
See Notes to Financial Statements
2-27
<PAGE>
REAL ESTATE SERIES
Phoenix Edge Real Estate Fund was launched on May 1, 1995. For the two
months ended June 30, 1995, the portfolio posted a total return of 5.32%. The
performance was solid compared to the NAREIT* Equity Index, which recorded a
total return of 5.9% during this period. (All of these figures assume
reinvestment of any distributions.)
The portfolio benefited from strong performance by some of its key
holdings. Bay Apartment Communities, Inc. (apartments), Weeks Corp.
(industrial), Sun Communities, Inc. (manufactured housing) and Highwoods
Properties (office) enjoyed growing market interest due to favorable growth
forecasts. The portfolio is weighted heaviest in the apartment (29.5%) and
retail (30.2%) sectors; however, we have begun to reduce exposure to retail
in favor of opportunities in the office and industrial sectors. This is due
to the underlying improvement in office and industrial market fundamentals as
well as growing concern regarding turmoil in the broad retail industry.
Performance in the REIT industry remains divergent by sector. For example,
performance has been strong in the office and self-storage sectors, which
recorded total returns of 11.7% and 12.8% year-to-date, respectively.
Investors have pushed yields lower in these sectors because of excellent
growth prospects. The retail sector has posted weaker returns year-to-date
with a total return of 1.5%. This is due to moderating growth forecasts for
retail sales and a fierce battle for the consumer dollar that is being waged
between newer and more traditional retail formats.
On the whole, the real estate industry is in a cyclical recovery since the
crash of the late-1980s. New supply remains constrained in most markets while
moderately increasing demand continues to fill vacant space. Landlords have
shown an increasing ability to raise rental rates and property incomes are
rising. With values stabilized, liquidity has returned to the real estate
markets. The industry is watching diligently for signs of renewed
construction but so far building is limited to isolated apartment markets in
the south and mountain regions. As long as new supply is constrained, market
fundamentals should continue to improve.
This outlook is translating into strong consensus growth estimates for
Funds From Operations (FFO) in the REIT sector. REIT FFOs are forecasted to
grow 8.0% in 1995. Share prices in the last twelve months have not kept pace
with income growth. Price multiples have declined and current dividend yields
are well above the levels seen in 1993 and early 1994. Currently, the average
dividend yield for Equity REITs is approximately 7.7%. Based on our analysis,
REITs are trading at a discount to the estimated aggregate market values of
their assets.
We believe that improving fundamentals in the real estate industry will
continue to translate into earnings growth for REITs. With already high
income yields, share prices should rise with income growth. We continue to
concentrate on those sectors which offer the best prospects for income
growth. We will also continue to focus on companies with excellent track
records and conservative financial structures.
* The National Association of Real Estate Investment Trusts (NAREIT) Equity
Index is a commonly used, unmanaged indicator of REIT performance.
SCHEDULE OF INVESTMENTS
June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Shares Value
----- -----------
<S> <C> <C>
COMMON STOCKS--97.3%
COMMERCIAL--18.3%
Industrial--5.0%
Security Capital Industrial Trust 5,300 $ 86,125
Weeks Corporation 8,400 210,000
---------
296,125
---------
Office--7.6%
Duke Realty Investments, Inc. 4,200 118,650
Highwoods Properties, Inc. 8,500 216,750
Spieker Properties, Inc. 5,300 118,588
---------
453,988
---------
Storage--5.7%
Shurgard Storage Centers, Inc. 6,200 142,600
Storage Trust Realty, Inc. 1,400 28,350
Storage USA, Inc. 6,000 170,250
---------
341,200
---------
TOTAL COMMERCIAL 1,091,313
---------
DIVERSIFIED--1.9%
Colonial Properties Trust 5,000 115,000
---------
TOTAL DIVERSIFIED 115,000
---------
HEALTH CARE--7.8%
Health Care Properties Inv., Inc. 7,300 233,600
Nationwide Health Properties, Inc. 6000 234,000
---------
467,600
---------
TOTAL HEALTH CARE 467,600
---------
HOTEL--2.9%
FelCor Suite Hotels, Inc. 4,400 112,200
Starwood Lodging Trust (b) 2,500 58,750
---------
170,950
---------
TOTAL HOTEL 170,950
---------
RESIDENTIAL--36.2%
Apartment--29.5%
Avalon Properties, Inc. 5,600 111,300
Bay Apartment Community, Inc. 9,000 175,500
Camden Property Trust 4,900 107,187
Equity Residential Properties Trust 7,000 195,125
Evans Withycombe Residential 8,700 177,262
Merry Land & Investment Co. 9,800 199,675
Oasis Residential, Inc. 7,600 165,300
Post Properties, Inc. 5,400 163,350
Security Capital Pacific Trust 10,000 173,750
South West Property Trust 9,800 112,700
United Dominion Realty Trust 12,200 179,950
---------
1,761,099
---------
See Notes to Financial Statements
2-28
<PAGE>
REAL ESTATE SERIES
Shares Value
------- ---------
Manufactured Homes--6.7%
Chateau Properties, Inc. 6,300 $ 131,512
Manufactured Home Communities 5,400 83,025
Sun Communities, Inc. 7,300 182,500
---------
397,037
---------
TOTAL RESIDENTIAL 2,158,136
---------
RETAIL--30.2%
Community/Neighborhood--14.3%
Developers Diversified Realty Corp. 7,000 201,250
Federal Realty Investment Trust 6,700 144,888
Kimco Realty Corp. 2,700 102,600
Regency Realty Corp. 3,200 54,400
Vornado Realty Trust 4,900 170,887
Weingarten Realty Investors 3,100 117,025
Western Investment Real Estate Trust 5,200 61,750
---------
852,800
---------
Factory Outlet--5.7%
Chelsea G.C.A. Realty, Inc. 8,400 226,800
Horizon Outlet Center 4,900 113,925
---------
340,725
---------
Regional Mall--10.2%
DeBartolo Realty Corp. 8,100 118,464
J.P. Realty, Inc. 8,300 170,150
Simon Property Group, Inc. 7,200 180,900
Taubman Centers, Inc. 14,800 140,600
---------
610,114
---------
TOTAL RETAIL 1,803,639
---------
TOTAL COMMON STOCKS
(Identified cost $5,599,018) 5,806,638
---------
</TABLE>
<TABLE>
<CAPTION>
STANDARD PAR
& POOR'S VALUE
RATING (000) VALUE
-------- ---- -------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--2.0%
Commercial Paper--2.0%
BellSouth Telecommunications,
Inc. 6.10%, 7-10-95 A-1+ $120 $ 119,817
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $119,817) 119,817
-----------
TOTAL INVESTMENTS--99.3%
(Identified cost $5,718,835) 5,926,455(a)
Cash and receivables, less liabilities--0.7% 43,580
-----------
NET ASSETS--100.0% $5,970,035
===========
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $241,863 and gross
depreciation of $34,626 for income tax purposes. At June 30, 1995 the
aggregate cost of securities for federal income tax purposes was
$5,719,218.
(b) Non-income producing.
See Notes to Financial Statements
2-29
<PAGE>
REAL ESTATE SERIES
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at value (Identified cost $5,718,835) $5,926,455
Cash 22,346
Receivable for investment securities sold 29,224
Receivable from adviser 235
Investment income receivable 57,931
---------
Total assets 6,036,191
---------
Liabilities
Payable for investment securities purchased 62,120
Trustees' fee 1,350
Administration fee 286
Accrued expenses 2,400
---------
Total liabilities 66,156
---------
Net Assets $5,970,035
=========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $5,755,107
Undistributed net investment income 4,024
Accumulated net realized gains 3,284
Net unrealized appreciation 207,620
---------
Net Assets $5,970,035
=========
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization 573,385
=========
Net asset value and offering price per share $10.41
=========
</TABLE>
STATEMENT OF OPERATIONS
From Inception May 1, 1995 to June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Dividends $ 72,109
Interest 8,900
--------
Total investment income 81,009
--------
Expenses
Investment advisory fee 6,910
Administration fee 553
Custodian 3,300
Trustees' 1,350
Audit 450
Printing 200
Miscellaneous 260
--------
Total expenses 13,023
--------
Less expenses borne by investment adviser (3,810)
--------
Net expenses 9,213
--------
Net investment income 71,796
--------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 3,284
Net unrealized appreciation on investments 207,620
Net gain on investments 210,904
--------
Net increase in net assets resulting from operations $282,700
========
</TABLE>
See Notes to Financial Statements
2-30
<PAGE>
REAL ESTATE SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
5/1/95 to
6/30/95
(Unaudited)
--------------
<S> <C>
From Operations
Net investment income $ 71,796
Net realized gains 3,284
Net unrealized appreciation 207,620
------------
Net increase in net assets resulting from operations 282,700
------------
From Distributions to Shareholders
Net investment income (67,772)
------------
Decrease in net assets from distributions to shareholders (67,772)
------------
From Shares of Beneficial Interest Transactions
Proceeds from sales of shares (597,521 shares) 6,006,243
Net asset value of shares issued in conjunction with
reinvestment of distributions (6,612 shares) 67,772
Cost of shares repurchased (30,748 shares) (318,908)
------------
Increase in net assets from share transactions 5,755,107
------------
Net increase in net assets 5,970,035
Net Assets
Beginning of period --
------------
End of period (including undistributed net investment income
of $4,024) $5,970,035
============
</TABLE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
From Inception
5/1/95 to
6/30/95
(Unaudited)
-----------
<S> <C>
Net asset value, beginning of period $10.00
Income from investment operations
Net investment income 0.13(2)
Net realized and unrealized gain 0.40
------------
Total from investment operations 0.53
------------
Less distributions
Dividends from net investment income (0.12)
------------
Total distributions (0.12)
------------
Change in net asset value 0.41
------------
Net asset value, end of period $10.41
============
Total return 5.32%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $5,970
Ratio to average net assets of:
Operating expenses 1.00%(1)
Net investment income 7.79%(1)
Portfolio turnover rate 16%(1)
</TABLE>
(1) Annualized
(2) Includes reimbursement of operating expenses by investment adviser of
$0.007 per share.
(3) Not annualized
The components of income from operations are calculated based on the average
number of shares outstanding.
See Notes to Financial Statements
2-31
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
(Unaudited)
Note 1--Organization
The Phoenix Edge Series Fund (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. The Fund is comprised
of the Money Market, Growth, Bond, Total Return, International, Balanced and
Real Estate Series. The Fund was established as part of the December 8, 1986
reorganization of the Phoenix Home Life Variable Accumulation Account (the
Account) from a management investment company to a unit investment trust
under the Investment Company Act of 1940. The Fund is organized with Series
which are available only to the sub-accounts of the Phoenix Home Life
Variable Accumulation Account and the Phoenix Home Life Variable Universal
Life Account.
Note 2--Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. Security Valuation
In determining the value of the investments of the Growth Series, Bond
Series, Total Return Series, International Series, the Balanced Series and
the Real Estate Series, the securities for which market quotations are
readily available are valued at market value, which is currently determined
using the last reported sale price, or if no sales are reported, the last
reported bid price. Debt securities (other than short-term obligations) are
valued on the basis of broker quotations or valuations provided by a pricing
service when such prices are believed to reflect the fair value of such
securities. Prices provided by the pricing service may be determined without
exclusive reliance on quoted prices and take into account appropriate factors
such as institution-size trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics and
other market data. Use of pricing services has been approved by the Trustees.
Short-term securities having a remaining maturity of less than sixty days,
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 Series 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
Series' 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 fair valuation. The Series attempts to maintain a
constant net asset value of $10 per share. The assets of the Series will not
be invested in any security with a maturity of greater than 397 days, and the
weighted average maturity of its portfolio will not exceed 90 days.
B. Security Transactions and Related Income
Security transactions are recorded on the trade date. Interest income is
recorded on the accrual basis. Dividend income is recorded on the ex-dividend
date, or in the case of certain foreign securities, as soon as the Fund is
notified. The Fund does not amortize premiums except for the Money Market
Series, but does amortize discounts using the effective interest method.
Realized gains and losses are determined on the identified cost basis.
C. Income Taxes
Each of the Series is treated as a separate taxable entity. It is the policy
of each Series to comply with the requirements of the Internal Revenue Code,
applicable to regulated investment companies, and to distribute substantially
all of its taxable income to its shareholders. In addition, each Portfolio
intends to distribute an amount sufficient to avoid imposition of any excise
tax under Section 4982 of the Code. Therefore, no provision for federal
income taxes or excise taxes has been made.
D. Distributions to Shareholders
Distributions are recorded by each series on the ex-dividend date and all
distributions are reinvested into the Fund. 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, expiring capital loss
carryforwards, 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.
2-32
<PAGE>
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.
Purchases and sales of foreign investments and income and expenses are
translated into U.S. dollars based upon exchange rates prevailing on the
respective dates of such transactions. The gain or loss resulting from a
change in exchange rates between the trade and settlement dates of a
portfolio transaction or 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 Series 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.
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 the Series as an unrealized gain (or loss). When
the contract is closed, the Series 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.
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. Upon entering into a futures
contract the Fund 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 Fund
agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in the value of the contract. Such receipts or payments are
known as variation margins and are recorded by the Fund as unrealized gains
or losses. When the contract is closed, the Fund 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.
H. Trust Expenses:
Expenses incurred by the Fund with respect to any two or more Series are
allocated in proportion to the net assets of each Series, except where
allocation of direct expense to each Series or an alternative allocation
method can be more fairly made.
Note 3--Investment Advisory Fees and Related Party Transactions
As compensation for its services to the Fund, the Adviser, Phoenix Investment
Counsel, Inc. ("PIC"), an indirect wholly-owned subsidiary of Phoenix Home
Life Insurance Company ("PHL") is entitled to a fee, based upon the following
annual rates as a percentage of the average daily net assets of each separate
Series.
<TABLE>
<CAPTION>
Rate for excess
Rate for first Rate for next over $500
Series $250 million $250 million million
---------------- -------------- ------------- ----------------
<S> <C> <C> <C>
Money Market .40% .35% .30%
Bond .50 .45 .40
Balanced .55 .50 .45
Total Return .60 .55 .50
Growth .70 .65 .60
International .75 .70 .65
</TABLE>
The investment adviser for the Real Estate Series is Phoenix Realty
Securities, Inc. ("PRS"). PRS is an indirect wholly-owned subisidary of PHL.
For its services, PRS is entitled to a fee at an annual rate of 0.75% of the
average daily net assets for the first $1 billion.
Pursuant to a Sub-Advisory Agreement with the Fund, PRS delegates certain
investment decisions and research functions to ABKB/LaSalle Securities
Limited Partnership ("ABKB") for which ABKB is paid a fee by PRS equal to
0.45% of the average daily net assets of the Real Estate Securities Portfolio
for the first $1 billion.
Each Series (except the International and Real Estate Securities Series) pays
a portion or all of its other operating expenses (not including management
fee, interest, taxes, brokerage fees and commissions), up to .15% of its
average net assets.
2-33
<PAGE>
The International and Real Estate Series pay other operating expenses up to
.40% and .25%, respectively, of its average net assets. Expenses above these
limits are paid by the Adviser.
As Financial Agent to the Fund and to each Series, PHL receives a fee at an
annual rate of 0.06% of the average daily net assets for bookkeeping,
administrative and pricing services.
Note 4--Purchases and Sales of Securities
Purchases and sales of securities during the period ended June 30, 1995
(excluding U.S. Government securities, short-term securities, options written
and forward currency contracts) aggregated the following:
<TABLE>
<CAPTION>
Purchases Sales
---------- ------------
<S> <C> <C>
Bond Series $ 48,830,632 $ 48,476,771
Growth Series 668,689,990 524,028,376
Total Return Series 186,491,842 135,408,096
International Series 143,033,988 139,108,711
Balanced Series 118,844,229 112,819,252
Real Estate Series 5,731,116 135,281
</TABLE>
There were no purchases or sales of such securities in the Money Market
Series.
Purchases and sales of long-term U.S. Government securities during the period
ended June 30, 1995 aggregated the following:
<TABLE>
<CAPTION>
Purchases Sales
---------- ------------
<S> <C> <C>
Bond Series $31,337,265 $20,019,365
Total Return Series 14,589,492 20,055,281
Balanced Series 75,264,841 57,703,543
</TABLE>
There were no purchases or sales of long-term U.S. Government securities in
the Money Market, Growth, International, or Real Estate Series.
Note 5--Forward Currency Contracts
At June 30, 1995, the International Series had entered into various forward
currency contracts which contractually obligate the Series to deliver currencies
at specified dates. Open contracts were as follows:
<TABLE>
<CAPTION>
Net
In Unrealized
Contracts Exchange Settlement Appreciation
to Deliver For Date Value (Depreciation)
---------- --------------- -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
AUD 1,500,000 USD 1,089,000 8/1/95 $1,060,431 $ 28,569
FRF 33,500,000 USD 6,473,180 9/1/95 6,884,994 (411,814)
YEN 566,000,000 USD 6,606,747 9/1/95 6,723,288 (116,541)
SEK 13,700,000 USD 1,877,715 7/3/95 1,881,109 (3,394)
SEK 35,300,000 USD 4,822,734 8/1/95 4,838,065 (15,331)
USD 1,863,819 SEK 13,700,000 7/3/95 1,881,109 17,290
USD 1,793,405 SEK 13,200,000 8/1/95 1,809,135 15,730
-------------
$(485,491)
=============
</TABLE>
AUD = Australian Dollar
FRF = French Franc
SEK = Swedish Krona
USD = U.S. Dollar
YEN = Japanese Yen
2-34
<PAGE>
Note 6--Capital Loss Carryforwards
As of the most recent tax year end, the following Series of the Fund have
available for federal income tax purposes unused capital losses that may be used
to offset capital gains generated in subsequent years:
<TABLE>
<CAPTION>
Expiring in
2002
-------------
<S> <C>
Bond $1,602,485
Balanced 3,251,289
</TABLE>
In addition, under current tax law, capital losses realized after October 31,
1994 may be deferred and treated as occurring on the first day of the following
tax year. For the tax year ended December 31, 1994, the following Series of the
Fund have elected to defer losses occurring between November 1, 1994 and
December 31, 1994:
<TABLE>
<CAPTION>
Capital
losses
deferred
------------
<S> <C>
International $4,037,301
Balanced 3,047,431
</TABLE>
2-35
<PAGE>
THE PHOENIX EDGE SERIES FUND
101 Munson Street
Greenfield, Massachusetts 01301
Board of Trustees
C. Duane Blinn
Robert Chesek
E. Virgil Conway
Harry Dalzell-Payne
Leroy Keith, Jr.
Philip R. McLoughlin
James M. Oates
Philip R. Reynolds
Herbert Roth, Jr.
Richard E. Segerson
Lowell P. Weicker, Jr.
Officers
Philip R. McLoughlin, President
Patricia A. Bannan, Vice President
Curtiss O. Barrows, Vice President
Mary E. Canning, Vice President
James M. Dolan, Vice President
Jeanne H. Dorey, Vice President
Jeanne T. Hanley, Vice President
Michael E. Haylon, Vice President
Christopher J. Kelleher, Vice President
John J. McDonald, Vice President
Robert J. Milnamow, Vice President
William R. Moyer, Vice President
Scott C. Noble, Vice President
Amy L. Robinson, Vice President
Barbara Rubin, Vice President
Leonard J. Saltiel, Vice President
Dorothy J. Skaret, Vice President
James D. Wehr, Vice President
John T. Wilson, Vice President
Nancy G. Curtiss, Treasurer
G. Jeffrey Bohne, Secretary
Investment Adviser
Phoenix Investment Counsel, Inc.
One American Row
Hartford, Connecticut 06115
Investment Adviser (Real Estate)
Phoenix Realty Securities, Inc.
One American Row
Hartford, CT 06115-2520
Custodian
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
Floor 3B
New York, New York 10081
International Series Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Real Estate Series Custodian
State Street Bank and Trust
P.O. Box 351
Boston, Massachusetts 02101
Transfer Agent
Phoenix Equity Planning Corporation
P.O. Box 2200
100 Bright Meadow Boulevard
Enfield, Connecticut 06083-2200
Legal Counsel
Jorden Burt & Berenson
Suite 400 East
1025 Thomas Jefferson Street N.W.
Washington, D.C. 20007-0805
This report is not authorized for distribution to prospective investors in
The Phoenix Edge Series Fund unless preceded or accompanied by an effective
Prospectus which includes information concerning the sales charge and other
pertinent information.
