As filed with the Securities and Exchange Commission on October 10, 1995
Registration Nos. 33-5033
811-4642
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM N-1A
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 14 [X]
and/or
REGISTRATION STATEMENT
Under
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 17
(check appropriate box or boxes)
--------------------
The Phoenix Edge Series Fund
(Exact Name of Registrant as Specified in Charter)
--------------------
101 Munson Street, Greenfield, Massachusetts 01301
(Address of Principal Executive Offices) (zip code)
c/o Variable Products Operations
Phoenix Home Life Mutual Ins. Company
(800) 447-4312
(Registrant's Telephone Number, including Area Code)
--------------------
Copies to:
Philip R. McLoughlin James Jorden, Esq.
The Phoenix Edge Series Fund Jorden Burt & Berenson
c/o Phoenix Home Life Mutual 1025 Thomas Jefferson Street N.W.
Insurance Company Suite 400 East
One American Row Washington, D.C. 20007-0805
Hartford, Connecticut 06115
Patricia O. McLaughlin, Esq.
(Name and Address of Agent for Service) c/o Phoenix Home Life Mutual
Insurance Company
One American Row
Hartford, CT 06115
--------------------
It is proposed that this filing will become effective (check appropriate box):
[X] Immediately upon filing pursuant to paragraph (b)
[ ] On ( ) pursuant to paragraph (b), or
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] On ( ) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] On ( ) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
--------------------
Declaration Required By Rule 24f-2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
has chosen to register an indefinite number or amount of securities under the
Securities Act of 1933. On February 24, 1995, the Registrant filed its Rule
24f-2 Notice for the Registrant's most recent fiscal year.
--------------------
<PAGE>
THE PHOENIX EDGE SERIES FUND
CROSS-REFERENCE SHEET
Showing location in Prospectus (Part A) and
Statement of Additional Information (Part B)
of Information Required by Form N-1A
Pursuant to Rule 495(a)
PART A
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
-------------- ------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Introduction
3. Condensed Financial Information Condensed Financial Information
4. General Description of Registrant Introduction; Investment Objectives and Policies; Other
Special Investment Methods; The Trust and Its Management
5. Management of the Fund The Trust and Its Management; Custodian, Transfer Agent,
and Dividend Paying Agent
6. Capital Stock and Other Securities The Trust and Its Management; Shares of Beneficial
Interest; Dividends and Distributions; Taxes
7. Purchase of Securities Being Offered Purchase of Shares; Net Asset Value; Redemption of Shares
8. Redemption or Repurchase Purchase of Shares; Net Asset Value; Redemption of Shares
9. Pending Legal Proceedings Not Applicable
PART B
Form N-1A Item Statement of Additional Information Caption
-------------- -------------------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Phoenix Edge Series Fund; Investing in the Trust
13. Investment Objectives and Policies Investment Policies; Investment Restrictions; Portfolio
Turnover
14. Management of the Fund Management of the Trust
15. Control Persons and Principal Holders of Securities Management of the Trust
16. Investment Advisory and Other Services Management of the Trust; The Investment Adviser
17. Brokerage Allocation and other Practices Brokerage Allocation
18. Capital Stock and Other Securities Investing In the Trust; Redemption of Shares
19. Purchase, Redemption and Pricing of Securities Being Offered Determination of Net Asset Value; Investing in
the Trust; Redemption of Shares
20. Tax Status Taxes
21. Underwriters Not Applicable
22. Calculation of Yield Quotations of Money Market Funds Money Market Series
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
SUPPLEMENT TO
THE PHOENIX EDGE SERIES FUND
Prospectus dated May 1, 1995
The following replaces the footnote "+" under "Fund Expenses" on page 2-3 of the
Prospectus:
Phoenix Realty Securities, Inc. and/or Phoenix Home Life and/or PHL Variable
have agreed to reimburse the Real Estate Series operating expenses for the
amount, if any, by which such Series' operating expenses other than the
management fees for any fiscal year exceed .25% of the average net assets for
such Series.
This section replaces "Financial Highlights - Real Estate Series" on page 2-6 of
the Prospectus:
REAL ESTATE SERIES
From Inception
5/1/95 to 6/30/95
(Unaudited)
-----------------
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 (000) $5,970
Ratio to average net asset of:
Operating expenses 1.00%(1)
Net investment income 7.79%(1)
Portfolio turnover rate 16%(1)
(1) Annualized
(2) Includes reimbursement of operating expenses by investment adviser of $0.007
per share.
(3) Not annualized. Total return information does not reflect expenses that
apply to the separate accounts or related contracts; inclusion of these
charges would reduce total return.
The components of income from operations are calculated based on the average
number of shares outstanding.
Under the heading "Portfolio Managers" on page 2-16 of the Prospectus, the
following paragraph should be substituted under the Balanced Series and the
Total Return Series:
Mr. C. Edwin Riley, Jr. serves as portfolio manager of the Balanced Series and
Total Return Series and as such is primarily responsible for the day to day
management of the Series' investments. Mr. Riley is also the portfolio manager
of the Phoenix Total Return Fund, Inc. From 1988 to 1995, Mr. Riley served as
Senior Vice President, Director of Equity Management for Nationsbank Investment
Management.
October 10,1995
<PAGE>
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
Prospectus
May 1, 1995
The Phoenix Edge Series Fund (formerly "The Big Edge Series Fund"), a
Massachusetts Business Trust (the "Trust"), is an open-end management investment
company which is intended to meet a wide range of investment objectives with its
seven separate Series: Money Market, Bond, Growth, Total Return, International,
Balanced and Real Estate Securities. Generally, each Series is in effect a
separate fund issuing its own shares.
The shares of the Trust are not offered to the public directly. You can
invest by buying a Variable Accumulation Annuity Contract from Phoenix Home Life
Mutual Insurance Company ("Phoenix Home Life"), or by buying a Variable
Universal Life Insurance Policy, also offered by Phoenix Home Life, or by buying
a Variable Accumulation Annuity Contract offered by PHL Variable Insurance
Company, and directing the allocation of your payment or payments to the
sub-account(s) corresponding to the Series you wish to invest in. The
sub-accounts will, in turn, invest in shares of the Trust. Not all Series may be
offered through a particular Contract or Policy. The Trust also offers its
shares through other Phoenix Home Life products.
The investment objectives of the Series are as follows:
Bond Series. The investment objective of the Bond Series is to seek long-term
total return by investing in a diversified portfolio of high yield (high risk)
and high quality fixed income securities. The risks of investing in these
securities are outlined in section "Investment Objectives and Policies" of this
Prospectus.
Money Market Series. The investment objective of the Money Market Series is
to provide maximum current income consistent with capital preservation and
liquidity. The Money Market Series invests exclusively in high quality money
market instruments. An investment in the Money Market Series is neither insured
nor guaranteed by the U.S. Government and there can be no assurance that the
Series will be able to maintain a stable net asset value of $1.00 per share.
Growth Series. The investment objective of the Growth Series is to achieve
intermediate and long-term growth of capital, with income as a secondary
consideration. The Growth Series invests principally in common stocks of
corporations believed by management to offer growth potential.
Total Return Series. The investment objective of the Total Return Series is
to realize as high a level of total rate of return over an extended period of
time as is considered consistent with prudent investment risk. The Total Return
Series invests in stocks, bonds and money market instruments in accordance with
the Investment Adviser's appraisal of investments most likely to achieve the
highest total rate of return.
Balanced Series. The investment objectives of the Balanced Series are
reasonable income, long-term capital growth and conservation of capital. It is
intended that this Series will invest in common stocks and fixed income
securities, with emphasis on income-producing securities which appear to have
some potential for capital enhancement.
International Series. The investment objective of the International Series is
to seek a high total return consistent with reasonable risk. The International
Series intends to invest primarily in an internationally diversified portfolio
of equity securities. It intends to reduce its risk by engaging in hedging
transactions involving options, futures contracts and foreign currency
transactions (see "Other Special Investment Methods"). The International
Portfolio provides a means for investors to invest a portion of their assets
outside the United States.
Real Estate Securities Series ("Real Estate Series"). The investment
objective of the Real Estate Series is to seek capital appreciation and income
with approximately equal emphasis. The Real Estate Series intends under normal
circumstances to invest in marketable securities of publicly traded real estate
investment trusts (REITs) and companies that operate, develop, manage and/or
invest in real estate located primarily in the United States.
There can be no assurance that any Series will achieve its objectives.
See "Investment Objectives and Policies."
This Prospectus gives you the facts about the Trust and each of its Series
that you should know before directing investment in the Trust, and it should be
read and kept for future reference. A Statement of Additional Information dated
May 1, 1995, which contains further information about the Trust, has been filed
with the Securities and Exchange Commission and is incorporated by reference in
this Prospectus. A free copy of the Statement of Additional Information 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, PO Box 942, Greenfield, Massachusetts 01302-0942.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus should be read and retained for future reference.
2-1
<PAGE>
THE PHOENIX EDGE SERIES FUND
Table of Contents
Page
Fund Expenses 2-3
Financial Highlights 2-4
Introduction 2-7
Investment Objectives and Policies 2-8
Bond Series 2-8
Money Market Series 2-9
Growth Series 2-10
Total Return Series 2-10
International Series 2-10
Balanced Series 2-12
Real Estate Securities Series 2-12
Other Special Investment Methods 2-14
Repurchase Agreements 2-14
Options 2-14
Financial Futures and Related Options 2-14
Foreign Securities 2-14
Mortgage-backed Securities 2-15
Lending of Portfolio Securities 2-15
Investment Restrictions 2-16
The Trust and Its Management 2-16
Investment Advisers 2-16
Balanced Series 2-16
Bond Series 2-16
Growth Series 2-16
International Series 2-16
Money Market Series 2-17
Total Return Series 2-17
Real Estate Series 2-17
Advisory Fees 2-17
Financial Agent 2-17
Expenses 2-17
Portfolio Transactions and Brokerage 2-17
Performance History 2-18
Shares of Beneficial Interest 2-18
Purchase of Shares 2-19
Net Asset Value 2-19
Redemption of Shares 2-20
Dividends and Distributions 2-20
Taxes 2-20
Custodian, Transfer Agent, and
Dividend Paying Agent 2-20
Other Information 2-21
Portfolio Managers 2-16
Appendix 2-21
No dealer, salesman or other person has been authorized to give any information
or to make any representations, other than those contained in this Prospectus,
and, if given or made, such other information or representation must not be
relied upon as having been authorized by the Trust, the Investment Advisers, or
the Distributor. This Prospectus does not constitute an offering in any state
in which such offering may not lawfully be made.
2-2
<PAGE>
FUND EXPENSES
The following table illustrates all expenses and fees that a shareholder in
each Series of the Fund will incur. Expenses borne by these separate accounts
and by the owners of the contracts and policies are not reflected in the Table.
Please refer to the applicable Variable Contract prospectus for such charges.
The expenses and fees set forth in the table are for the fiscal year ended
December 31, 1994.
Shareholder Transaction Expenses
All Series
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None
Annual Fund Operating Expenses
(as a percentage of average net assets for the year ending Dec 31, 1994)
<TABLE>
<CAPTION>
Total Money Real Estate
Growth Bond Return Market International Balanced [Pro-forma]***
------ ---- ------ ------ ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees
Investment Advisory Fees* .65% .50% .60% .40% .75% .55% .75%
12b-1 Fees None None None None None None None
Other Operating Expenses
(After Reimbursement)** .15% .15% .15% .15% .35% .15% .25%+
Total Fund Operating Expenses .80% .65% .75% .55% 1.10% .70% 1.00%
</TABLE>
Example
The following example illustrates the expenses that you would pay on a $1,000
investment over various time periods assuming (1) a 5% annual rate of return and
(2) redemption at the end of each time period. As noted above, the Fund charges
no redemption fees of any kind.
<TABLE>
<CAPTION>
Total Money
Growth Bond Return Market International Balanced Real Estate
------ ---- ------ ------ ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 8 $ 7 $ 8 $ 6 $ 11 $ 7 $ 10
3 Years $26 $21 $24 $18 $ 35 $22 32
5 Years $44 $36 $42 $31 $ 61 $39 56
10 Years $99 $81 $93 $69 $134 $87 122
</TABLE>
The example should not be considered a representation of past or future
expenses or performance. Actual expenses or performance may be greater or less
than those shown. The purpose of the table is to assist the investor in
understanding the various costs and expenses that an investor will bear directly
or indirectly at the Fund level. See "The Trust and Its Management."
* Advisory fees (management fees) will vary with the asset size of the Fund
(see "Advisory Fee").
** Phoenix Investment Counsel, Inc. ("PIC") has agreed to reimburse the Series
(except the International and Real Estate Series) for the amount, if any, by
which each Series' operating expenses other than the management fee for any
fiscal year exceed .15% of the average net assets of the Series. PIC has
agreed to reimburse the International Series for the account, if any, by
which the Series' operating expenses other than the management fee for any
fiscal year exceed .40% of the average net assets for the Series. If these
reimbursements had not been in place for the fiscal year ended December 31,
1994, total operating expenses for the Money Market Series, Bond Series,
International Series, Balanced Series, Growth and Total Return would have
been approximately 0.58%, 0.72%, 1.10%, 0.70%, 0.82% and 0.75% respectively
of the average net assets of such Series.
*** This series was not available until May 1, 1995. Accordingly, annualized
expenses have been projected for the fiscal period ending December 31, 1995.
+ Phoenix Realty Securities, Inc. and/or Phoenix Home Life and/or PHL Variable
have agreed to reimburse the Real Estate Series' operating expenses for the
amount, if any, by which such Series' operating expenses other than the
management fee for any fiscal year exceed 25% of the average net assets for
such Series.
2-3
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS
(For a share outstanding throughout the indicated period)
The following tables set forth certain financial information for the
respective fiscal years of the Trust. The annual information has been extracted
from the Trust's audited financial statements for the respective periods. The
financial information has been audited by Price Waterhouse LLP, independent
accountants, whose unqualified report thereon is included in the Annual Report
to Shareholders dated December 31, 1994, which is incorporated by reference in
the Statement of Additional Information. The Statement of Additional Information
and the Trust's most recent Annual Report (which contains a discussion of the
Fund's performance) are available at no charge upon request.
MONEY MARKET SERIES
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
Beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $9.47 $8.77
Income from investment
operations
Net investment income 0.38(1) (0.28)(1) (0.35) 0.58 0.79 0.88 0.72 0.63 0.57 0.70
---- ----- ----- ---- ---- ---- ---- ---- ---- ----
Total from investment
operations 0.38 0.28 0.35 0.58 0.79 0.88 0.72 0.63 0.57 0.70
---- ----- ----- ---- ---- ---- ---- ---- ---- ----
Less distributions:
Dividends from net
investment income (0.38) (0.28) (0.35) (0.58) (0.79) (0.88) (0.72) (0.63 ) (0.04) --
---- ----- ----- ---- ---- ---- ---- ---- ---- ----
Total distributions (0.38) (0.28) (0.35) (0.58) (0.79) (0.88) (0.72) (0.63) (0.04) --
---- ----- ----- ---- ---- ---- ---- ---- ---- ----
Change in net asset value -- -- -- -- -- -- -- -- 0.53 0.70
---- ----- ----- ---- ---- ---- ---- ---- ---- ----
Net asset value,
end of period $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $9.47
==== ===== ===== ==== ==== ==== ==== ==== ==== ====
Total Return(2) 3.77% 2.80% 3.50% 5.80% 7.90% 8.80% 7.20% 6.30% 6.02% 7.98%
Ratios/supplemental data:
Net assets, end of period
(thousands) $94,586 $72,946 $69,962 $51,692 $38,709 $28,808 $22,294 $10,749 $3,628 $3,472
Ratio to average net
assets of:
Operating expenses 0.55% 0.55% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Net investment income 3.85% 2.84% 3.49% 5.76% 7.87% 8.96% 7.24% 6.30% 6.27% 7.55%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $.003
and $0.01 per share.
(2) Total return information does not reflect expenses that apply to the
separate accounts or related contracts; inclusion of these charges would
reduce total return for all periods shown.
GROWTH SERIES
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
Beginning of period $16.59 $15.01 $14.43 $11.72 $11.62 $8.83 $8.81 $9.84 $8.19 $6.08
Income from investment
operations
Net investment income 0.23(1) 0.16 0.22 0.39 0.35 0.27 0.32 0.19 0.25 0.25
Net realized and
unrealized gain 0.02 2.77 1.25 4.64 0.10 2.88 0.02 0.45 1.40 1.86
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total from investment
operations 0.25 2.93 1.47 5.03 0.45 3.15 0.34 0.64 1.65 2.11
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Less distributions
Dividends from net
investment income (0.23) (0.15) (0.23) (0.37) (0.35) (0.27) (0.32) (0.21) -- --
Dividends from net
realized gains (0.92) (1.20) (0.66) (1.95) -- (0.09) -- (1.46 ) -- --
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total distributions (1.15) (1.35) (0.89) (2.32) (0.35) (0.36) (0.32) (1.67) -- --
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Change in net asset value (0.90) 1.58 0.58 2.71 0.10 2.79 0.02 (1.03) 1.65 2.11
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value,
end of period $15.69 $16.59 $15.01 $14.43 $11.72 $11.62 $8.83 $8.81 $9.84 $8.19
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
Total Return(2) 1.48% 19.69% 10.29% 43.83% 3.98% 36.06% 3.83% 7.05% 20.15% 34.70%
Ratios/supplemental data:
Net assets, end of period $616,221 $446,36 $245,56 $102,259 $40,061 $29,931 $18,051 $18,860 $13,124 $6,717
Ratio to average
net assets of:
Operating expenses 0.80% 0.79% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Net investment income 1.38% 0.97% 1.66% 2.14% 3.19% 2.51% 3.64% 2.34% 2.47% 3.61%
Portfolio turnover rate 185% 185% 214% 237% 272% 285% 326% 251% 294% 271%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $.003
per share.
(2) Total return information does not reflect expenses that apply to the
separate accounts or related contracts; inclusion of these charges would
reduce total return for all periods shown.
The components of income from investment operations are calculated based on the
average number of shares outstanding at each quarter end.
2-4
<PAGE>
BOND SERIES
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
Beginning of period $10.27 $9.58 $9.33 $8.48 $8.85 $9.11 $9.08 $10.07 $8.43 $7.00
Income from investment
operations
Net investment income 0.72(1) 0.66(1) 0.66 0.74 0.80 0.99 0.92 1.06 1.04 0.71
Net realized and
unrealized gain (loss) (1.28) 0.84 0.25 0.85 (0.37) (0.25) (0.01) (0.93) 0.60 0.72
----- ---- ---- ---- ----- ----- ----- ----- ---- ----
Total from investment
operations (0.56) 1.50 0.91 1.59 0.43 0.74 0.91 0.13 1.64 1.43
----- ---- ---- ---- ----- ----- ----- ----- ---- ----
Less distributions
Dividends from net
investment income (0.73) (0.66) (0.66) (0.74) (0.80) (1.00) (0.88) (1.12) -- --
Dividends from net
realized capital gains -- (0.15) -- -- -- -- -- -- -- --
----- ---- ---- ---- ----- ----- ----- ----- ---- ----
Total distributions (0.73) (0.81) (0.66) (0.74) (0.80) (1.00) (0.88) (1.12) -- --
----- ---- ---- ---- ----- ----- ----- ----- ---- ----
Change in net asset
value (1.29) 0.69 0.25 0.85 (0.37) (0.26) 0.03 (0.99) 1.64 1.43
----- ---- ---- ---- ----- ----- ----- ----- ---- ----
Net asset value,
end of period $8.98 $10.27 $9.58 $9.33 $8.48 $8.85 $9.11 $9.08 $10.07 $8.43
===== ==== ==== ==== ===== ===== ===== ===== ==== ====
Total Return(2) (5.47)% 15.90% 10.03% 19.41% 5.14% 8.30% 10.36% 1.12% 19.45% 20.43%
Ratios/supplemental data:
Net assets, end of period $74,686 $79,393 $43,090 $21,957 $13,558 $13,947 $11,081 $8,389 $7,285 $2,726
Ratio to average net
assets of:
Operating expenses 0.66% 0.65% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Net investment income 7.62% 6.71% 7.47% 8.65% 9.26% 10.99% 10.37% 10.90% 9.75% 9.77%
Portfolio turnover rate 181% 169% 166% 269% 318% 340% 262% 67% 110% 240%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $.006
and $0.005 per share.
(2) Total return information does not reflect expenses that apply to the
separate accounts or related contracts; inclusion of these charges would
reduce total return for all periods shown.
The components of income from investment operations are calculated based on the
average number of shares outstanding at each quarter end.
TOTAL RETURN SERIES
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
Beginning of period $13.71 $12.86 $12.97 $11.07 $11.05 $9.68 $9.87 $9.85 $8.52 $6.70
Income from investment
operations
Net investment income 0.36(1) 0.23 0.37 0.42 0.58 0.51 0.46 0.34 0.36 0.35
Net realized and
unrealized gain (loss) (0.56) 1.17 0.99 2.76 0.02 1.38 (0.24) 0.91 0.97 1.47
----- ---- ---- ---- ---- ---- ----- ---- ---- ----
Total from investment
operations (0.20) 1.40 1.36 3.18 0.60 1.89 0.22 1.25 1.33 1.82
----- ---- ---- ---- ---- ---- ----- ---- ---- ----
Less distributions
Dividends from net
investment income (0.37) (0.23) (0.37) (0.42) (0.58) (0.52) (0.41) (0.40) -- --
Dividends from net
realized gains (0.46) (0.32) (1.10) (0.86) 0.00 0.00 -- (0.83) -- --
----- ---- ---- ---- ---- ---- ----- ---- ---- ----
Total distributions (0.83) (0.55) (1.47) (1.28) (0.58) (0.52) (0.41) (1.23) -- --
----- ---- ---- ---- ---- ---- ----- ---- ---- ----
Change in net asset value (1.03) 0.85 (0.11) 1.90 0.02 1.37 (0.19) 0.02 1.33 1.82
----- ---- ---- ---- ---- ---- ----- ---- ---- ----
Net asset value,
end of period $12.68 $13.71 $12.86 $12.97 $11.07 $11.05 $9.68 $9.87 $9.85 $8.52
===== ==== ==== ==== ==== ==== ===== ==== ==== ====
Total Return(2) (1.45)% 11.02% 10.67% 29.44% 5.62% 19.88% 2.33% 12.58% 15.61% 27.16%
Ratios/supplemental data:
Net assets, end of
period (thousands) $289,083 $256,01 $163,628 $98,415 $62,839 $57,901 $59,109 $68,099 $24,879 $8,795
Ratio to average
net assets of:
Operating expenses 0.74% 0.74% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Net investment income 2.71% 1.82% 2.90% 3.48% 5.39% 4.73% 4.62% 3.67% 3.38% 5.08%
Portfolio turnover rate 220% 269% 326% 255% 302% 302% 314% 359% 311% 303%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $0.001
per share.
(2) Total return information does not reflect expenses that apply to the
separate accounts or related contracts; inclusion of these charges would
reduce total return for all periods shown.
The components of income from investment operations are calculated based on the
average number of shares outstanding at each quarter end.
2-5
<PAGE>
INTERNATIONAL SERIES
<TABLE>
<CAPTION>
From
Year Ended December 31, Inception
---------------------- 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 gain (loss) (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(3) 0.03% 38.44% (12.89%) 19.78% (8.10%)
Ratios/supplemental data:
Net assets, end of period (thousands) $134,627 $61,242 $13,772 $6,119 $2,010
Ratio to average 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.
(3) Total return information does not reflect expenses that apply to the
separate accounts or related contracts; inclusion of these charges would
reduce total return for all periods shown.
The components of income from investment operations are calculated based on the
average number of shares outstanding at each quarter end.
BALANCED SERIES
From
Inception
Year Ended 5/1/92
December 31, to
------------------
1994 1993 12/31/92
------- ------- --------
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 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(3) (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)
(1) Annualized
(2) Includes reimbursement of operating expenses by investment adviser of $0.001
and $0.001 per share.
(3) Total return information does not reflect expenses that apply to the
separate accounts or related contracts; inclusion of these charges would
reduce total return for all periods shown.
The components of income from investment operations are calculated based on the
average number of shares outstanding at each quarter end.
REAL ESTATE SERIES
The Real Estate Sub-account commenced operations as of the date of this
prospectus; therefore, data for this Sub-account is not yet available.
2-6
<PAGE>
INTRODUCTION
This Prospectus describes the shares offered by and the operations of The
Phoenix Edge Series Fund (the "Trust"). The Trust is an open-end management
investment company established as a business trust under the laws of
Massachusetts by an Agreement and Declaration of Trust dated February 18, 1986
(the "Declaration of Trust"). As amended, the Declaration of Trust authorizes
the assets and shares of the Trust to be divided into series (the "Series").
Each Series has a different investment objective, as described on the cover page
of this Prospectus, and is designed to meet different investment needs. In many
respects, each Series operates as if it were a separate mutual fund.
Shares of the Trust are sold to the Phoenix Home Life Variable Accumulation
Account (the "VA Account") to fund the benefits under Variable Accumulation
Annuity Contracts ("Contracts") issued by Phoenix Home Life Mutual Insurance
Company ("Phoenix Home Life"); to the Phoenix Home Life Variable Universal Life
Account (the "VUL Account") to fund the benefits under Variable Universal Life
Insurance Policies ("Policies") also issued by Phoenix Home Life; and to the PHL
Variable Accumulation Account ("PHL VA Account") to fund the benefits under
Variable Accumulation Annuity Contracts ("Contracts") issued by PHL Variable
Insurance Company ("PHL Variable"). The VA Account, PHL VA Account, and VUL
Account (the "Accounts") invest in shares of the Trust in accordance with
allocation instructions received from Contractowners and Policyowners. Such
allocation rights are further described in the accompanying Prospectus for the
Contracts or Policies. Phoenix Home Life redeems shares to the extent necessary
to provide benefits under the Contracts and Policies. Phoenix Home Life may
establish other separate accounts which may purchase shares in the Trust.
When making allocations from time to time, a Contractowner or Policyowner
should understand that investment return will affect benefits and the value of
the Contract or Policy. The accompanying Prospectus for the VA Account, PHL VA
Account, or VUL Account contains a description of the relationship between
increases or decreases in the net asset value of Trust shares and any
distributions on such shares, and the benefits provided under the Contract or
Policy.
The Trustees have authority to issue an unlimited number of shares of
beneficial interest of each Series. An interest in the Trust is limited to the
assets of the Series in which shares are held, and shareholders are entitled to
a pro rata share of all dividends and distributions arising from the net income
and capital gains on the investments of such Series.
Phoenix Home Life Mutual Insurance Company ("Phoenix Home Life") and PHL
Variable Insurance Company ("PHL Variable")
Shares of the Trust are currently sold to the Accounts as the investment base
for Variable Accumulation Annuity Contracts and Variable Universal Life
Insurance Policies issued by Phoenix Home Life and PHL Variable. Phoenix Home
Life is a mutual life insurance company whose Executive Office is at One
American Row, Hartford, Connecticut 06115 and its main administrative office is
at 100 Bright Meadow Boulevard, Enfield, Connecticut 06083-1900. Its New York
principal office is at 99 Troy Road, East Greenbush, New York 12061. Phoenix
Home Life is the nation's 13th largest mutual life insurance company and has
admitted assets of approximately $12 billion. Phoenix Home Life sells insurance
policies and annuity contracts through its own field force of full time agents
and through brokers. Its operations are conducted in all 50 states, the District
of Columbia, Canada and Puerto Rico.
PHL Variable is a wholly-owned indirect subsidiary of Phoenix Home Life. Its
Executive Office is at One American Row, Hartford, Connecticut 06115 and its
main administrative office is at 100 Bright Meadow Boulevard, Enfield,
Connecticut 06083-1900. PHL Variable is a Connecticut stock company. On December
31, 1994, it had admitted assets of $9,677,290.
The interests and rights of a Contractowner or Policyowner in the shares is
subject to the terms of the Contract or Policy and is described in the
accompanying Prospectus for that particular product. The rights of the Accounts
as shareholders should be distinguished from the rights of Contractowners and
Policyowners, described in the accompanying Prospectus and in the Contract or
Policy for that particular product. As long as shares of the Trust are sold only
to the Accounts, the terms "shareholder" or "shareholders" in this Prospectus
refer to the Accounts.
The Investment Advisers
The investment adviser of the Money Market, Bond, Balanced, Total Return,
Growth and International Series is Phoenix Investment Counsel ("PIC" or
"Adviser"). PIC is a wholly-owned indirect subsidiary of Phoenix Home Life. For
its services, an investment advisory fee is deducted from the assets of each
Series of the Fund as follows:
Rate for Rate for Rate for
First Next Excess Over
Series $250,000,000 $250,000,000 $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%
The total advisory fee of 0.75% of the aggregate net assets of the International
Series is greater than that paid by most mutual funds; however, the Board of
Trustees of the Trust has determined that it is similar to fees charged by other
mutual funds whose investment objectives are similar to those of the
International Series. Each Series (except the International and Real Estate
Series) pays a portion or all of its other operating expenses, up to .15% of its
total net assets. The International Series pays other operating expenses up to
.40% of its total net assets.
The investment adviser for the Real Estate Series is Phoenix Realty
Securities, Inc. ("PRS" or "Adviser"). PRS is a wholly-owned indirect subsidiary
of Phoenix Home Life. For its services, an invest-
2-7
<PAGE>
ment advisory fee is deducted from the assets of the Series of the Fund as
follows:
Rate for Rate for Rate for
First Next Excess Over
$1,000,000,000 $1,000,000,000 $2,000,000,000
-------------- ------------ ------------
Real Estate Series .75% .70% .65%
The Real Estate Series pays a portion or all of its other expenses up to .25%
of its total net assets. 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. In
accordance with the Sub-Advisory Agreement between the Trust and ABKB, ABKB is
paid a monthly fee at the annual rate of 0.45% of the average aggregate daily
net asset values of the Series up to $1 billion; 0.35% of such value between $1
billion and $2 billion; and 0.30% of such value in excess of $2 billion. The
sub-advisory agreement relating to the Real Estate Series provides, among other
things, that ABKB shall effectuate the purchase and sale of securities for the
Series and provide related advisory services.
Offering Prices
Shares in each of the Series of the Trust are offered to the Accounts
continuously at the net asset value determined at the close of business
beginning on the day the application is accepted. For information on pricing for
initial and subsequent purchase payments under Contracts or Policies, see the
accompanying prospectus.
INVESTMENT OBJECTIVES AND POLICIES
To the extent that shares are sold to the Accounts in order to fund the
benefits under the Contracts or Policies, the structure of the Trust permits
Contractowners and Policyowners, within the limitations described in the
Contracts or Policies, to allocate their investments in response to or in
anticipation of changes in market or economic conditions.
Each Series has a different investment objective and is designed to meet
different investment needs. The differences in objectives and policies among the
seven Series can be expected to affect the investment return of each Series and
the degree of market and financial risk to which each Series is subject. The
investment objective of each Series is deemed to be a fundamental policy which
may not be changed without the approval of a vote of a majority of the
outstanding shares of that Series. Since certain risks are inherent in the
ownership of any security, there can be no assurance that any Series will
achieve its investment objective. The investment policies of each Series will
also affect the rate of portfolio turnover. A high rate of portfolio turnover
generally involves correspondingly greater transaction costs, which must be
borne directly by each Series. The portfolio turnover rate for each Series,
except the Money Market Series (which does not normally pay brokerage
commissions), is included under "Selected Per Share Data and Ratios." The rate
for each such Series has been, and is expected to, exceed 100%; accordingly, the
Series will pay more in brokerage commissions than would be the case if they had
lower portfolio turnover rates. It is expected that the portfolio turnover rates
for the common stock and fixed income portions of the Balanced Series will not
generally exceed 250% and 100%, respectively. (See "Portfolio Transactions and
Brokerage.")
Bond Series
The Bond Series' investment objective is to seek long-term total return by
investing in a diversified portfolio of high yield (high risk) and high quality
fixed income securities. Distributions of income are reinvested to purchase
additional shares. Fixed income securities are considered "bonds" for the
purposes of the Series' investment policy.
Higher yields are available ordinarily from securities in the lower rated
categories of recognized rating agencies (Ba to Ca by Moody's Investors Service,
Inc. ("Moody's") or BB to CC by Standard & Poor's Corporation ("S&P")) and from
unrated securities of comparable quality (commonly referred to as "junk bonds").
However, the Bond Series will not invest in securities in the two lowest rating
categories (Ca and C for Moody's and CC and C for Standard & Poor's) unless
management believes that the financial condition of the issuer, or the
protections afforded to the particular securities, is stronger than would
otherwise be indicated by the low ratings. When the investment objective of this
Series can be met by investing in securities in higher rating categories, such
investments will be made. Moreover, the Series may retain securities whose
ratings have changed. The Appendix contains a more detailed description of such
ratings. At Dec. 31, 1994, 39.6% of the Series' assets was invested in so-called
"investment grade" securities. The average percentage of assets the Series had
invested in each rating category for the fiscal year ended December 31, 1994 is
as follows:
Aaa 19.3%
Aa 6.2%
A 5.2%
Baa 8.9%
Ba 7.0%
B 14.6%
Caa 2.1%
Non-Rated 28.9%
Under normal conditions at least 80% of the value of the total assets of the
Bond Series will be invested, consistent with its primary investment objective,
in fixed income securities including preferred stocks, convertible securities,
debt obligations, foreign debt obligations, certificates of deposit, commercial
paper, bankers' acceptances, and government obligations issued or guaranteed by
federal, state or municipal governments or their agencies or instrumentalities.
The Bond Series' remaining assets may be invested in common stock and other
equity securities when such investments are consistent with its primary
investment objective or are acquired as part of a unit consisting of a
combination of fixed income securities and equity securities (see "Other Special
Investment Methods").
When a more conservative investment strategy is necessary for temporary
defensive purposes, the Bond Series may retain cash or invest part or all of its
assets in cash equivalents or in other fixed income securities deemed by
management to be consistent with a temporary defensive posture.
2-8
<PAGE>
Risk Factors. While the Bond Series' management will seek to minimize risk
through diversification and continual evaluation of current developments in
interest rates and economic conditions, the market prices of lower rated
securities generally fluctuate more than those of higher rated securities, and
using credit ratings helps to evaluate the safety of principal and interest but
does not assess market risk. Economic downturns and interest rate increases may
cause a higher incidence of lower-rated securities' defaults. Such fluctuations
in the market value of portfolio securities subsequent to their acquisition by
the Bond Series will not normally affect cash income from such securities but
will be reflected in the Series' net asset value. Additionally, with lower rated
securities there is a greater possibility that an adverse change in the
financial condition of the issuer, particularly a highly leveraged issuer, may
affect its ability to make payments of income and principal. Also, because the
Bond Series intends to invest primarily in securities in the lower rating
categories, the achievement of its goals will be more dependent on management's
credit analysis ability than would be the case if the Series were investing in
securities in the higher rated categories. Lower-rated securities may be thinly
traded and therefore harder to value and more susceptible to adverse publicity
concerning the issuer. In addition, legislation may be enacted in the future
that could depress the price of lower-rated 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 or until maturity
("deferred coupon" or "zero coupon" obligations). The value of these obligations
may fluctuate more in response to interest rate changes than would the value of
debt obligations that make current interest payments. In addition, because the
Series will accrue income on these securities prior to the receipt of each
payment, it may have to dispose of portfolio securities to distribute income to
the Accounts for tax purposes. (See the Statement of Additional Information.)
Money Market Series
The investment objective of the Money Market Series is to provide maximum
current income consistent with capital preservation and liquidity. The Series
seeks to achieve its objective by investing in a managed portfolio of the
following high quality money market instruments:
(a) obligations issued or guaranteed as to principal and interest by the
United States Government or its agencies, authorities or
instrumentalities;
(b) obligations issued by U.S. banks and savings and loan associations (such
as bankers' acceptances, certificates of deposit and time deposits,
including dollar-denominated obligations of foreign branches of U.S.
banks and U.S. branches of foreign banks) and dollar-denominated
obligations unconditionally guaranteed as to payment by such banks or
savings and loan associations, which at the date of investment have
capital, surplus, and undivided profits in excess of $100,000,000 as of
the date of their most recently published financial statements; and
obligations of other banks or savings and loan associations if such
obligations are insured by the Federal Deposit Insurance Corporation or
the Federal Savings and Loan Insurance Corporation;
(c) commercial paper which at the date of investment is issued or guaranteed
by a company whose commercial paper is rated A-1 by Standard & Poor's
Corporation or P-1 by Moody's Investors Service, Inc., or F-1 by Fitch's
Investors Service or, if not rated, is issued or guaranteed by a company
which at the date of the investment has an outstanding debt issue rated
AA or higher by Standard & Poor's or Aa or higher by Moody's;
(d) other corporate obligations maturing in one year or less which at the
date of investment are rated AA or higher by Standard & Poor's or Aa or
higher by Moody's; and
(e) repurchase agreements with recognized securities dealers and member banks
of the Federal Reserve System with respect to any of the foregoing
obligations.
All of the Money Market Series investments will mature in 397 days or less.
In addition, the average maturity of the Series' portfolio securities based on
their dollar value will not exceed 90 days. By limiting the maturity of its
investments, the Money Market Series seeks to lessen the changes in the value of
its assets caused by market factors.
Generally, investments will be limited to securities rated in the two highest
short-term rating categories by at least two nationally recognized statistical
rating organizations, or by one such organization if only one has rated the
security, and comparable unrated securities. In addition, no more than 5% of the
Series' total assets will be invested in securities of any one issuer or in
securities not rated in the highest short-term rating category. Moreover, no
more than the greater of 1% of the Series' total assets or $1 million will be
invested in the securities of any one issuer that are not in the highest
short-term rating category.
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 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 for 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
2-9
<PAGE>
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 creditworthiness
of its issuer.
Growth Series
The investment objective of the Growth Series (formerly designated the "Stock
Series") is to achieve intermediate and long-term growth of capital, with income
as a secondary consideration. The Series seeks to achieve its investment
objective by investing principally in common stocks of corporations believed by
management to offer growth potential over both the intermediate and the long
term. In pursuing capital growth, emphasis is placed on the selection of
securities of well-established corporations with aggressive and experienced
managements. This Series may invest not more than 20% of the market value of its
total assets in convertible securities, that is, debt securities and preferred
stocks which are convertible into, or carry the right to purchase, common stock
or other equity securities. It is not intended at this time that this Series
will invest in warrants.
Although the Growth Series will not make a practice of short-term trading,
purchases and sales of securities will be made, whenever necessary to achieve
the investment objective of the Series without regard to the resulting brokerage
costs.
The Trust management intends to diversify investments of the Series among a
number of corporations without concentration in any particular industry. When,
in the opinion of the Trust management, a temporary defensive position is
warranted, the Series may maintain part or all of its assets in cash or
short-term investments such as United States Treasury bills and commercial
paper; it may also invest in preferred stocks, nonconvertible bonds, notes,
government securities or other fixed-income securities for temporary defensive
purposes.
Total Return Series
The investment objective of the Total Return Series (formerly designated the
"Total-Vest Series") is to realize as high a level of total rate of return over
an extended period of time as is considered consistent with prudent investment
risk. The Series seeks to achieve its investment objective by investing in three
market segments: stocks, bonds, and money market instruments. In addition to
trading techniques described fully in the Statement of Additional Information,
the Series has retained the flexibility to write (sell) covered call options, to
purchase call and put options and to enter into financial futures contracts.
The Total Return Series will adjust the mix of investments among the three
market segments to capitalize on perceived variations in return potential
produced by the interaction of changing financial markets and economic
conditions. It is expected that such adjustments will normally be made in a
gradual manner over a period of time. THERE ARE NO MINIMUM OR MAXIMUM
PERCENTAGES AS TO THE AMOUNT OF THE SERIES' ASSETS WHICH MAY BE INVESTED IN EACH
OF THE MARKET SEGMENTS. MAJOR CHANGES IN INVESTMENT MIX MAY OCCUR SEVERAL TIMES
A YEAR OR OVER SEVERAL YEARS, DEPENDING UPON MARKET AND ECONOMIC CONDITIONS AND
EXCEPT FOR RESTRICTIONS NOTED HEREIN AND UNDER "INVESTMENT RESTRICTIONS," THE
INVESTMENT ADVISER HAS COMPLETE FLEXIBILITY IN DETERMINING THE AMOUNT AND NATURE
OF COMMON STOCK, DEBT OR MONEY MARKET INSTRUMENTS IN WHICH THE SERIES MAY
INVEST.
Investments in one of the three market segments will be made with a specific
purpose in mind. Investments in the stock segment will be for the purpose of
attempting to achieve a superior total rate of return over an extended period of
time from both capital appreciation and current income. Investments in the bond
segment will be for the purpose of attempting to achieve as high a total rate of
return on an annual basis as is considered consistent with the preservation of
capital values. Investments in the money market segment will be for the purpose
of attempting to achieve high current income, the preservation of capital, and
liquidity. The types of securities in each of these three market segments that
the Total Return Series will invest in are listed in the Statement of Additional
Information.
Cash may be held to provide for expenses and anticipated redemption payments
and so that orderly redemption payments may be carried out in accordance with
the Total Return Series' investment policies.
International Series
The International Series seeks as its investment objective a high total
return consistent with reasonable risk. It intends to achieve its objective by
investing primarily in an internationally diversified portfolio of equity
securities. It intends to reduce its risk by engaging in hedging transactions
involving options, futures contracts and foreign currency transactions (see
"Other Special Investment Methods"). Investments may be made for capital growth
or for income or any combination thereof for the purpose of achieving a high
overall return. There can be no assurance that the International Series will
achieve its objective.
There is no limitation on the percentage or amount of the International
Series assets which may be invested for capital growth or income, and therefore
at any particular time the investment emphasis may be placed solely or primarily
on growth of capital or on income. In determining whether the International
Series will be invested for capital growth or income, the Adviser will analyze
the international equity and fixed income markets and seek to assess the degree
of risk and level of return that can be expected from each market. The
International Series will invest primarily in non-United States issuers, and
under normal circumstances, more than 80% of the International Series' total
assets will be invested in non-United States issuers located in not less than
three foreign countries.
In pursuing its objective, the International Series will invest primarily in
common stocks of established non-United States companies believed to have
potential for capital growth, income or both. However, there is no requirement
that the International Series invest exclusively in common stocks or other
equity securities. The International Series may invest in other types of
securities includ-
2-10
<PAGE>
ing, but not limited to, convertible securities, preferred stocks, bonds, notes
and other debt securities of companies (including Euro-currency instruments and
securities) or obligations of domestic or foreign governments and their
political subdivisions, and in foreign currency transactions. The Series may
invest up to 10% of its total assets in bonds considered to be less than
investment grade (but which are not in default at the time of investment), which
may subject the Series to risks attendant to such bonds (see "Risk Factors"
below). When the Adviser believes that the total return potential in debt
securities equals or exceeds the potential return on equity securities, the
Series may substantially increase its holdings in debt securities. The
International Series may establish and maintain part or all of its assets in
reserves for temporary defensive purposes or to enable it to take advantage of
buying opportunities. The International Series reserves may be invested in
domestic as well as foreign short-term money market instruments including, but
not limited to, government obligations, certificates of deposit, bankers'
acceptances, time deposits, commercial paper, short-term corporate debt
securities and repurchase agreements. The International Series may also engage
in certain options transactions, and enter into futures contracts and related
options for hedging purposes, invest in repurchase agreements and lend portfolio
securities (see "Other Special Investment Methods").
The International Series may also invest in the securities of other
investment companies subject to the limitations contained in the 1940 Act (see
"Investment Restrictions" in the Statement of Additional Information). In
certain countries, investments may only be made by investing in other investment
companies that, in turn, are authorized to invest in the securities that are
issued in such countries. The Fund's purchase of securities of such other
investment companies may result in the layering of expenses such that
shareholders indirectly bear a proportionate part of the expenses for such
investment companies including operating costs and investment advisory and
administrative fees.
The International Series makes investments in various countries. Under normal
circumstances, business activities in a number of different foreign countries
will be represented in the International Series' investments. The International
Series may, from time to time, have more than 25% of its assets invested in any
major industrial or developed country which in the view of the Adviser poses no
unique investment risk. The International Series may purchase securities of
companies, wherever organized, which have their principal activities and
interests outside the United States. Under exceptional economic or market
conditions abroad, the International Series may, for temporary defensive
purposes, invest all or a major portion of its assets in U.S. government
obligations or securities of companies incorporated in and having their
principal activities in the United States. The International Series may also
invest its reserves in domestic short-term money-market instruments as described
above.
In determining the appropriate distribution of investments among various
countries and geographic regions, the Adviser ordinarily will consider the
following factors: prospects for relative economic growth among foreign
countries; expected levels of inflation; relative price levels of the various
capital markets; government policies influencing business conditions; the
outlook for currency relationships and the range of individual investment
opportunities available to the international investor.
The International Series may make investments in developing countries, which
involve exposure to economic structures that are generally less diverse and
mature than in the United States, and to political systems which may be less
stable. A developing country can be considered to be a country which is in the
initial stages of its industrialization cycle. In the past, markets of
developing countries have been more volatile than the markets of developed
countries; however, such markets often have provided higher rates of return to
investors. The Adviser believes that these characteristics can be expected to
continue in the future.
Generally, the Series will not trade in securities for short-term profits
but, when circumstances warrant, securities may be sold without regard to the
length of time held.
Risk Factors. There are substantial and different risks involved which should
be carefully considered by any investor considering foreign investments. For
example, there is generally less publicly available information about foreign
companies than is available about companies in the United States. Foreign
companies are generally not subject to uniform audit and financial reporting
standards, practices and requirements comparable to those in the United States.
In addition, if it should become necessary, the Trust could encounter
difficulties involving legal processes abroad.
Foreign securities involve currency risks. The U.S. dollar value of a foreign
security tends to decrease when the value of the dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the dollar falls against such currency. Fluctuations in exchange
rates may also affect the earning power and asset value of the foreign entity
issuing the security. Dividend and interest payments may be repatriated based on
the exchange rate at the time of disbursement, and restrictions on capital flows
may be imposed. Losses and other expenses may be incurred in converting between
various currencies in connection with purchases and sales of foreign securities.
Foreign stock markets are generally not as developed or efficient as those in
the United States. In most foreign markets volume and liquidity are less than in
the United States and, at times, volatility of price can be greater than in the
United States. Fixed commissions on foreign stock exchanges are generally higher
than the negotiated commissions on United States exchanges. There is generally
less government supervision and regulation of foreign stock exchanges, brokers
and companies than in the United States.
There is also the possibility of adverse changes in investment or exchange
control regulations, expropriation or confiscatory taxation, limitations on the
removal of funds or other assets, political or social instability, or diplomatic
developments which could adversely affect investments, assets or securities
transactions of the International Series in some foreign countries. The
International Series is not aware of any investment or exchange control
regulations which might substantially impair the operations of the Series as
described, although this could change at any time.
For many foreign securities, there are U.S. dollar-denominated American
Depository Receipts ("ADR's"), which are traded in the
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United States on exchanges or over the counter and are sponsored and issued by
domestic banks. ADRs represent the right to receive securities of foreign
issuers deposited in a domestic bank or a correspondent bank. ADRs do not
eliminate all the risk inherent in investing in the securities of foreign
issuers. However, by investing in ADRs rather than directly in foreign issuers'
stock, the International Series can avoid currency risks during the settlement
period for either purchases or sales. In general, there is a large, liquid
market in the United States for many ADRs. The information available for ADRs is
subject to the accounting, auditing and financial reporting standards of the
domestic market or exchange// on which they are traded, which standards are more
uniform and more exacting than those to which many foreign issuers may be
subject. The International Series may also invest in European Depository
Receipts ("EDR's"), which are receipts evidencing an arrangement with a European
bank similar to that for ADRs and are designed for use in the European
securities markets. EDRs are not necessarily denominated in the currency of the
underlying security.
The dividends and interest payable on certain of the International Series'
foreign securities may be subject to foreign withholding taxes, thus reducing
the net amount available for distribution to the International Series'
shareholders. Investors should understand that the expense ratio of the
International Series can be expected to be higher than those of investment
companies investing in domestic securities since the costs of operation are
higher. There can be no assurance that the International Series' investment
policy will be successful or that its investment objective will be attained.
Since the International Series may invest up to 10% of its total assets in
bonds considered to be less than investment grade, it may be exposed to greater
risks than if it did not invest in such bonds. With lower rated bonds, there is
a greater possibility that an adverse change in the financial condition of the
issuer may affect its ability to pay principal and interest.
Balanced Series
The Balanced Series seeks as its investment objectives reasonable income,
long-term capital growth and conservation of capital. The Balanced Series
intends to invest based on combined considerations of risk, income, capital
enhancement and protection of capital value.
The Balanced Series may invest in any type or class of security. Normally, the
Balanced Series will invest in common stocks and fixed income securities;
however, it may also invest in securities convertible into common stocks. At
least 25% of the value of its assets will be invested in fixed income senior
securities. The overall economic and financial outlook determines the allocation
of assets between fixed income and common stock investments. Fixed income
investments are typically made in high quality, lower risk securities. Common
stock investments are made in companies with intermediate and long term earnings
growth potential such as are invested in by the Growth Series. The Series
attempts to invest in common stocks belonging to fundamentally attractive
sectors and industries and strives to be overweighted in these areas relative to
their representation in broad market indices such as the Standard & Poor's 500.
The current outlook and the asset allocation are continuously reviewed.
The Series may also engage in certain options transactions and enter into
financial futures contracts and related options for hedging purposes and may
invest in deferred or zero coupon debt obligations. (See "Other Special
Investment Methods" and the Statement of Additional Information.)
In implementing the investment objectives of this Series, management will
select securities believed to have potential for the production of current
income, with emphasis on securities that also have potential for capital
enhancement. In an effort to protect its assets against major market declines,
or for other temporary defensive purposes, the Balanced Series may actively
pursue a policy of retaining cash or investing part or all of its assets in cash
equivalents, such as government securities and high grade commercial paper. Real
Estate Series
The Real Estate Series seeks as its investment objective capital appreciation
and income with approximately equal emphasis. It intends under normal
circumstances to invest in marketable securities of publicly traded real estate
investment trusts ("REITs") and companies that are principally engaged in the
real estate industry. Under normal circumstances, the Series intends to invest
at least 75% of the value of its assets in these securities.
The Series investment objective is a fundamental policy which may not be
changed without shareholder approval. Policies and limitations are considered at
the time of purchase and the sale of instruments is not required in the event of
a change in circumstances. There can be no assurance that the Series will
achieve its objective.
REITs are pooled investment vehicles which invest primarily in income
producing real estate or real estate related loans or interests. Generally,
REITs can be classified as equity REITs, mortgage REITs, or hybrid REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Hybrid REITs combine the
characteristics of both equity REITs and mortgage REITs. The Series intends to
emphasize investment in equity REITs.
In determining whether an issuer is "principally engaged" in the real estate
industry, PRS seeks companies which derive at least 50% of their gross revenues
or net profits from the ownership, development, construction, financing,
management or sale of commercial, industrial or residential real estate. The
equity securities of real estate companies considered for purchase by the Series
will consist of shares of beneficial interest, marketable common stock, rights
or warrants to purchase common stock, and securities with common stock
characteristics such as preferred stock and debt security's convertible into
common stock.
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The Real Estate Series may also invest up to 25% of its total assets in (a)
marketable debt securities of companies principally engaged in the real estate
industry; (b) mortgage-backed securities such as mortgage pass-through
certificates, real estate mortgage investment conduit ("REMIC") certificates and
collateralized mortgage obligations ("CMOs"); or (c) short-term investments
listed below.
The Real Estate Series invests in debt securities only if, at the date of
investment, they are rated within the four highest grades as determined by
Moody's (Aaa, Aa, A or Baa) or by S&P (AAA, AA, A or BBB) or, if not rated or
rated under a different system, are judged by PRS to be of equivalent quality to
debt securities so rated. Securities rated Baa or BBB are medium grade
investment obligations that may have speculative characteristics. Changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments in the case of such obligations
than is the case for higher grade securities. The Series may, but is not
obligated to, dispose of debt securities whose credit quality falls below
investment grade. Unrated debt securities may be less liquid than comparable
rated debt securities and may involve somewhat greater risk than unrated debt
securities.
For temporary defensive purposes (as when market conditions in real estate
securities are extremely adverse such that PRS believes there are extraordinary
risks associated with investment therein), the Series may invest up to 100% of
its total assets in short-term investments such as money market instruments
consisting of securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; repurchase agreements; certificates of deposit
and bankers' acceptances issued by banks or savings and loan associations having
net assets of at least $500 million as of the end of their most recent fiscal
year; high-grade commercial paper rated at time of purchase, in the top two
categories by a national rating agency or determined to be of comparable quality
by PRS or ABKB at the time of purchase; and other long and short-term
instruments which are rated A or higher by S&P or Moody's at the time of
purchase.
Risk Factors. The Real Estate Series is non-diversified under the federal
securities laws. As a non-diversified portfolio, there is no restriction under
the Investment Company Act of 1940 (the"1940 Act") on the percentage of assets
that may be invested at any time in the securities of any one issuer. To the
extent that the Real Estate Series is not fully diversified, it may be more
susceptible to adverse economic, political or regulatory developments affecting
a single issuer than would be the case if it were more broadly diversified. In
addition, investments by the Real Estate Series in securities of companies
providing mortgage servicing will be subject to the risks associated with
refinancings and their impact on servicing rights.
Although the Real Estate Series does not invest directly in real estate, it
does invest primarily in real estate securities and accordingly, the value of
shares of the Real Estate Series will fluctuate in response to changes in
economic conditions within the real estate industry. Risks associated with the
direct ownership of real estate and with the real estate industry in general
include, among other things, possible declines in the value of real estate;
risks related to general and local economic conditions; possible lack of
availability of mortgage funds; over-building; extended vacancies of properties;
increases in competition, property taxes and operating expenses; changes in
zoning laws; costs resulting from the clean-up of, and liability to third
parties for damages resulting from, environmental problems; casualty or
condemnation losses; uninsured damages from floor, earthquakes or other natural
disasters; limitations on and variations in rents; dependency on property
management skill; the appeal of properties to tenants; changes in interest
rates.
Investing in REIT's involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REIT's
may be affected by changes in the value of the underlying property owned by the
REIT's, while mortgage REIT's may be affected by the quality of any credit
extended. REIT's are dependent upon management skills, are not diversified, and
are subject to the risks of financing projects. The Portfolio may invest in new
or unseasoned REIT issuers and it may be difficult or impossible for PRS or ABKB
to ascertain the value of each of such REIT's underlying assets, management
capabilities and growth prospects. In addition, REIT's are subject to heavy cash
flow dependency, default by borrowers, self-liquidation, and the possibilities
of failing to qualify for the exemption from tax or distributed income under the
Internal Revenue Code of 1986, as amended (the "Code") and failing to maintain
their exemptions from the 1940 Act. REIT's whose underlying assets include
long-term health care properties, such as nursing, retirement and assisted
living homes may be impacted by federal regulations concerning the health care
industry. The Series will indirectly bear its proportionate share of any
expenses paid by the Series itself.
REIT's (especially mortgage REIT's) are subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations usually rises. Conversely, when interest rates rise, the value of a
REIT's investment in fixed rate obligations can be expected to decline. In
contrast as interest rates on adjustable rate mortgage loans are reset
periodically, yields on a REIT's investment in such loans will gradually align
themselves to reflect changes in market interest rates, causing the value of
such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
In addition, investing in REIT's involves risks similar to those associated
with investing in small capitalization companies. REIT's may have limited
financial resources, may trade less frequently and in a limited volume and may
be more subject to abrupt or erratic price movements than larger capitalization
stocks included in the S&P 500 Index.
The Series commenced operations on May 1, 1995 based upon an initial
capitalization of $5 million provided by Phoenix Home Life. The ability of the
Series to raise additional capital for investment purposes may directly effect
the spectrum of series holdings and performance. While many of the officers and
directors of PRS are experienced real estate professionals, based upon its
relatively recent formation and involvement with real
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estate securities, PRS does not have an operating history of investing in the
types of real estate securities expected to be held within the Real Estate
Series. Even though PRS is an affiliate of PIC, PRS has no prior experience as
an investment adviser.
OTHER SPECIAL INVESTMENT METHODS
Repurchase Agreements
The Money Market, Real Estate and the International Series may invest in
repurchase agreements. However, no more than 10% of a Series' net assets will be
invested in repurchase agreements having maturities of more than seven days or
in other illiquid securities. A repurchase agreement is a transaction where a
Series buys a security at one price and the seller simultaneously agrees to buy
that same security back at a higher price. Repurchase agreements will be entered
into with commercial banks, brokers and dealers considered by the Board of
Trustees and the Adviser acting at the Board's direction, to be creditworthy. In
addition, the repurchase agreements are always fully collateralized by the
underlying instrument and are marked to market every business day. However, the
use of repurchase agreements involves certain risks such as default by or
insolvency of the other party to the transaction.
Options
The Bond, Money Market, Growth, Total Return, Balanced and International
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. The Money
Market, Growth and Bond Series may only purchase call options for the purpose of
terminating a call option previously written. The Total Return, Balanced, and
International Series may also buy exchange-traded call and put options on equity
and debt securities and on stock market indexes. The International Series may
also write or buy Over-the-Counter (OTC) options, write secured put options and
enter into options transactions on foreign currency. The International Series
may also invest up to 5% of its net assets in warrants and stock rights, which
are almost identical to call options except that they are issued by the issuer
of the underlying security rather than an option writer. However, no more than
2% of its net assets will be invested in warrants and stock rights not traded on
the New York Stock Exchange or American Stock Exchange. A complete description
of options, warrants and stock rights, and their associated risks is contained
in the Statement of Additional Information.
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. 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. A brief description of these procedures and related
limitations appears in the Statement of Additional Information.
Financial Futures and Related Options
The Total Return and Balanced Series may enter into financial futures
contracts for the purchase or sale of debt obligations traded on exchanges
regulated by the Commodity Futures Trading Commission to hedge against
anticipated changes in interest rates that would otherwise have an adverse
effect upon the value of debt securities in its portfolio. Hedging is the
initiation of an offsetting position in the futures market which is intended to
minimize the risk associated with a position's underlying securities in the cash
market. The purchase of such futures contracts will not be for speculation but
will be solely for protection of the Series against declines in value.
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 Total Return
or Balanced Series' futures contracts (both receipts and delivery) will not
exceed 10% of its total assets.
The International Series may also enter into financial futures contracts and
related options to 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. The International Series 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 the Series' total assets.
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
even though the purchase or sale of the contract would not have resulted in a
loss.
A complete description of financial futures and related options is contained
in the Statement of Additional Information.
Foreign Securities
The International Series will purchase foreign securities as discussed above.
In addition, the other Series may invest up to 25% of total net asset value in
foreign securities. The Series other than the International Series will purchase
foreign debt securities only if issued in U.S. dollar denominations. Investments
in foreign securities, particularly those of non-governmental issuers, involve
considerations which are not ordinarily associated with investing in domestic
issuers. Those considerations are discussed under "International Series."
Foreign Currency Transactions. The value of the assets of the Series invested
in foreign securities, as measured in United States dollars, may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and the Series may incur costs in connection with
conversions between various currencies. The Series will conduct foreign currency
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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. A
Series may also hedge its foreign currency exchange rate risk by engaging in
currency financial futures and options transactions. For more information about
foreign currency transactions, see the Statement of Additional Information.
Mortgage-backed securities
The Real Estate Series may also invest in mortgage-backed securities such as
mortgage-backed securities such as mortgage pass-through certificates, real
estate mortgage investment conduit ("REMIC") certificates and collateralized
mortgage obligations ("CMOs"). CMOs are hybrid instruments with characteristics
of both mortgage-backed and mortgage pass-through securities. Similar to a bond,
interest and pre-paid principal on a CMO are paid, in most cases, semiannually.
CMOs may be collateralized by whole mortgage loans but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
Government National Mortgage Association (GNMA), the Federal National Mortgage
Association, or Federal National Mortgage Association. CMOs are structured into
multiple classes, with each class bearing a different stated maturity. Monthly
payments of principal, including prepayments, are first returned to investors
holding the shortest maturity class; investors holding the longer maturity
classes receive principal only after the first class has been retired. REMICs
are similar to CMOs and are fixed pools of mortgages with multiple classes of
interests held by investors.
The Series may also invest in pass-through securities that are derived from
mortgages. A pass-through security is formed when mortgages are pooled together
and undivided interests in the pool or pools are sold. The cash flow from the
mortgages is passed through to the holders of the securities in the form of
periodic payments of interest, principal and prepayments (net of a service fee).
The Series may purchase pass-through securities at a premium or at a
discount. The values of pass-through securities in which the Series may invest
will fluctuate with changes in interest rates. The value of such securities
varies inversely with interest rates, except that when interest rates decline,
the value of pass-through securities may not increase as much as other debt
securities because of the prepayment feature. Changes in the value of such
securities will not affect interest income from those obligations but will be
reflected in the Series' net asset value.
A particular risk associated with pass-through securities involves the
volatility of prices in response to changes in interest rates, or prepayment
risk. Prepayment rates are important because of their effect on the yield and
price of securities. Prepayments occur when the holder of an individual mortgage
prepays the remaining principal before the mortgages' scheduled maturity date.
As a result of the pass-through of prepayments of principal on the underlying
securities, mortgage-backed securities are often subject to more rapid
prepayment of principal than their stated maturity would indicate. Although the
pattern of prepayments is estimated and reflected in the price paid for
pass-through securities at the time of purchase, the actual prepayment behavior
of mortgages cannot be known at that time. Therefore, it is not possible to
predict accurately the realized yield or average life of a particular issue of
pass-through securities. Prepayments that occur faster than estimated adversely
affect yields for pass-throughs purchased at a premium (that is, a price in
excess of principal amount) and may cause a loss of principal because the
premium may not have been fully amortized at the time the obligation is repaid.
The opposite is true for pass-throughs purchased at a discount. Furthermore, the
proceeds from prepayments usually are reinvested at current market rates, which
may be higher than, but usually are lower than, the rates earned on the original
pass-through securities. Prepayments on a pool of mortgage loans are influenced
by a variety of economic, geographic, social and other factors, including
changes in mortgagors' housing needs, job transfers, unemployment, mortgagors;
net equity in the mortgaged properties and servicing decisions. Generally,
however, prepayments on fixed rate mortgage loans will increase during a period
of falling interest rates and decrease during a period of rising interest rates.
Mortgage-backed securities may decrease in value as a result of increases in
interest rates and may benefit less than other fixed income securities or
decline in value from declining interest rates because of risk of prepayment.
Lending of Portfolio Securities
Subject to certain investment restrictions, a Series from time to time may
lend securities from its portfolio to brokers, dealers and financial
institutions deemed creditworthy and receive, as collateral, cash or cash
equivalents which at all times while the loan is outstanding will be maintained
in amounts equal to at least 100% of the current market value of the loaned
securities. Any cash collateral will be invested in short-term securities which
will increase the current income of the Series lending its securities. A Series
will have the right to regain record ownership of loaned securities to exercise
beneficial rights such as voting rights and subscription rights. While a
securities loan is outstanding, the Series is to receive an amount equal to any
dividends, interest or other distributions with respect to
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the loaned securities. A Series may pay reasonable fees to persons unaffiliated
with the Trust for services in arranging such loans.
Even though securities lending usually does not impose market risks on the
lending Series, a Series would be subject to risk of loss due to an increase in
value if the borrower fails to return the borrowed securities for any reason
(such as the borrower's insolvency). Moreover, if the borrower of the securities
is insolvent, under current bankruptcy law, a Series could be ordered by a court
not to liquidate the collateral for an indeterminate period of time. If the
borrower is the subject of insolvency proceedings and the collateral held may
not be liquidated, the result could be a material adverse impact on the
liquidity of the lending Series.
INVESTMENT RESTRICTIONS
The Trust may not invest more than 25% of the assets of any one Series in any
one industry (except that the Money Market and Total Return Series may invest
more than 25% of their assets in the banking industry and the Real Estate Series
may invest at least 75% of its assets in the real estate industry). If the Trust
makes loans of the portfolio securities of any Series, the market value of the
securities loaned may not exceed 25% of the market value of the total assets of
such Series. The Trust may borrow money from a bank provided such borrowing does
not exceed 10% of the net asset value, not considering any such borrowings as
liabilities. Each Series may also borrow for temporary administrative purposes,
provided that any such borrowing does not exceed 5% of the Series' total assets
at the time the loan is made.
In addition to the investment restrictions described above, each Series'
investment program is subject to further restrictions which are described in the
Statement of Additional Information. The restrictions for each Series are
fundamental and may not be changed without shareholder approval.
THE TRUST AND ITS MANAGEMENT
The Trust is a mutual fund, technically known as an open-end, diversified
investment company. The Board of Trustees supervises the business affairs and
investments of the Trust, which is managed on a daily basis by the Trust's
investment advisers. The Trust was organized as a Massachusetts business trust
on February 18, 1986. The Trust is a series fund that issues seven classes of
shares of beneficial interest, one for each Series. The Statement of Additional
Information contains a list of the members of the Board of Trustees and the
officers of the Trust.
Investment Advisers
The Trust's investment advisers are Phoenix Investment Counsel, Inc. ("PIC")
and Phoenix Realty Securities, Inc. ("PRS") (the "Advisers"), both of which are
located at One American Row, Hartford, Connecticut 06115. PIC was originally
organized in 1932 as John P. Chase, Inc. In addition to the Trust, it also
serves as investment adviser to the Phoenix Series Fund, Phoenix Total Return
Fund, Inc. and Phoenix Multi-Portfolio Fund and as sub-adviser to American
Skandia, Chubb America Fund, Inc., Cambridge Series Trust and Sun America Series
Trust.
PRS was formed in 1994 as an indirect subsidiary of Phoenix Home Life. In
addition to the Trust, it also serves as investment adviser to the Real Estate
Portfolio of the Phoenix Multi Portfolio Fund and to the American Phoenix
Investment Portfolio.
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.
All of the outstanding stock of the Advisers is owned by Phoenix Equity
Planning Corporation ("PEPCO"), an indirect subsidiary of Phoenix Home Life.
PEPCO also performs bookkeeping and pricing and administrative services for the
Trust. 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 PEPCO are located at 100 Bright
Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200.
The Advisers furnish continuously an investment program for each Series and
manage the investment and reinvestment of the assets of each Series subject at
all times to the authority and supervision of the Trustees. All costs and
expenses (other than those specifically referred to as being borne by the
Advisers) incurred in the operation of the Account and the Trust are borne by
the Trust, Phoenix Home Life, or PHL Variable. A more detailed discussion of the
Advisers and the Investment Advisory Agreements are contained in the Statement
of Additional Information.
Portfolio Managers
Balanced Series. Mr. John J. McDonald has served as portfolio manager of the
Balanced Series since January, 1995 and as co-manager of the Series since
January, 1994 and as such, is primarily responsible for the day-to-day
management of the Series' portfolio. Mr. McDonald has been an associate
portfolio manager with Phoenix Home Life Mutual Insurance Company since 1990.
From 1989 to 1990, Mr. McDonald was Financial Services Adviser with SMA
Equities.
Bond Series. Mr. Curtiss O. Barrows has served as portfolio manager of the
Bond Series since 1986 and, as such, is primarily responsible for the day-to-day
management of the Series' portfolio. Mr. Barrows is also portfolio manager of
the High Yield Series of the Phoenix Series Fund and is a Vice President of the
Adviser. Mr. Barrows is also Portfolio Manager, Public Bonds, Phoenix Home Life
Mutual Insurance Company.
Growth Series. Mr. John T. Wilson has served as portfolio manager of the
Growth Series since January, 1992 and as such, is primarily responsible for the
day-to-day management of the Series' portfolio. Mr. Wilson is Portfolio Manager,
Common Stock, Phoenix Home Life Mutual Insurance Company since 1990. From 1988
to 1990 Mr. Wilson attended Duke University Business School.
International Series. Ms. Jeanne H. Dorey has served as portfolio manager of
the International Series' since February, 1993 and as such is primarily
responsible for the day-to-day management of the
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Series' portfolio. Ms. Dorey is also the Portfolio Manager of the International
Portfolio of the Phoenix Multi-Portfolio Fund, which is also advised by the
Adviser. Ms. Dorey has served as a Vice President of the Adviser since April,
1993, and as a Vice President of Phoenix Worldwide Opportunities Fund and
National Securities & Research Corporation since May, 1993. Ms. Dorey is also
Portfolio Manager, International, Phoenix Home Life Mutual Insurance Company.
From 1990 to 1992, Ms. Dorey was an Investment Analyst and Portfolio Manager
with Pioneer Group, Inc. From 1989 to 1990, Ms. Dorey was an Investment Analyst
and Portfolio Manager with Bank of Boston.
Money Market Series. Ms. Dorothy J. Skaret has served as the portfolio manager
of the Money Market Series since 1990 and as such, Ms. Skaret is primarily
responsible for the day-to-day management of the Series' portfolio. Ms. Skaret
is also the portfolio manager of the Money Market Series of the Phoenix Series
Fund, which also is advised by the Adviser. Ms. Skaret is also Director, Public
Fixed Income, Phoenix Home Life Mutual Insurance Company, and a Vice President
of National Securities & Research Corporation.
Total Return Series. Mr. Robert J. Milnamow has served as portfolio manager of
the Total Return Series since 1989 and as such is primarily responsible for the
day-to-day management of the Series' portfolio. Mr. Milnamow is also the
portfolio manager of the Phoenix Total Return Fund, Inc., which is advised by
the Adviser. Mr. Milnamow served as portfolio manager of the Phoenix Equity
Opportunities Fund from July, 1993 to August, 1994. Mr. Milnamow has served as a
Vice President of the Adviser since 1991. Since May, 1993, Mr. Milnamow has
served as Vice President of National Securities & Research Corporation. Mr.
Milnamow is also Portfolio Manager, Common Stock, Phoenix Home Life Mutual
Insurance Company.
Real Estate Series. Ms. Barbara Rubin, President of PRS and William K.
Morrill, Jr., Managing Director of ABKB share primary responsibility for
managing the assets of the Real Estate Series from its inception. Barbara Rubin
has over 19 years real estate experience and has been associated with Phoenix
Home Life for the past 13 years. William Morrill has over 15 years of investment
experience and has been a portfolio manager with ABKB since 1985.
Advisory Fees
As compensation for its services for all Series the Advisers are entitled to a
fee, payable within five days after the end of each month, as follows:
Phoenix Investment Counsel, Inc.
--------------------------------
Rate for the Rate for the Rate for Excess
Series First $250,000,000 Next $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%
The total advisory fee of 0.75% of the aggregate net assets of the
International Series is greater than that paid by most mutual funds; however,
the Board of Trustees of the Trust has determined that it is similar to fees
charged by other mutual funds whose investment objectives are similar to those
of the International Series.
Phoenix Realty Securities, Inc.
-------------------------------
Rate for the Rate for the Rate for Excess
Series First $1,000,000,000 Next $1,000,000,000 Over $2,000,000,000
- ------ -------------------- -------------------- -------------------
Real Estate .75% .70% .65%
The total advisory fee of 0.75% of the aggregate net assets of the Real Estate
Series is greater than that paid by most mutual funds; however, the Board of
Trustees of the Fund has determined that it is similar to fees charged by other
mutual funds whose investment objectives are similar to that of the Real Estate
Series. 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. In accordance
with the Sub-Advisory Agreement between the Trust and ABKB, ABKB is paid a
monthly fee at the annual rate of 0.45% of the average aggregate daily net asset
values of the Series up to $1 billion; 0.35% of such value between $1 billion
and $2 billion; and 0.30% of such value in excess of $2 billion. The
sub-advisory agreement relating to the Real Estate Series provides, among other
things, that ABKB shall maintain certain records for the Series, effectuate the
purchase and sale of securities for the Series. ABKB is not affiliated with PRS,
PIC, Phoenix Home Life or PHL Variable. The Real Estate Series pays other
operating expenses up to .25% of its total assets.
Financial Agent
Under a Financial Agent Agreement, Phoenix Home Life acts as financial agent
of the Trust and as such is responsible for certain administrative functions and
the bookkeeping and pricing functions for the Trust. For its services as
financial agent, Phoenix Home Life receives a fee based on the average of the
aggregate daily net asset values of the Trust at the annual rate per each
$1,000,000 of $600. Phoenix Home Life may receive compensation from the Account,
as described in the accompanying prospectus.
Expenses
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.
Portfolio Transactions and Brokerage
No Series has any obligation to deal with any dealer or group of dealers in
the execution of transactions in portfolio securities. Subject to the Statement
of Policy on Brokerage Allocation adopted by the Board of Trustees, the Advisers
(or ABKB) are primarily responsible for the portfolio decisions of each Series
and the placing of its portfolio transactions. In placing orders, it is the
policy of each Series to obtain the most favorable net results, taking into
account various factors, including price, dealer spread or commission, if any,
size of the transaction and difficulty of execution. While the Advisers
generally seek reasonably competitive spreads or commissions, the Series will
2-17
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not necessarily be paying the lowest spread or commission available. The
Advisers have no present intent to use any broker-dealers that may be affiliated
with the Advisers, Phoenix Home Life, PHL Variable or ABKB. The Statement of
Additional Information contains more information on brokerage allocation.
Performance History
From time to time the Trust may include the performance history of any or all
of the Series (along with applicable separate account performance history) in
advertisements, sales literature or reports. Performance information about each
Series is based on that Series' past performance only and is not an indication
of future performance. Performance information may be expressed as yield and
effective yield of the Money Market Series, as yield of the Bond Series, and as
total return of any Series. Current yield for the Money Market Series will be
based on the income earned by the Series over a given 7-day period (less a
hypothetical charge reflecting deductions for expenses taken during the period)
and then annualized, i.e., the income earned in the period is assumed to be
earned every seven days over a 52-week period and is stated in terms of an
annual percentage return on the investment. Effective yield is calculated
similarly but reflects the compounding effect of earnings on reinvested
dividends.
For the Bond Series, quotations of yield will be based on all investment
income per share earned during a given 30-day period (including dividends and
interest), less expenses accrued during the period ("net investment income"),
and are computed by dividing net investment income by the maximum offering price
per share on the last day of the period.
When a Series advertises its total return, it will usually be calculated for
one year, five years, and ten years or since inception if the Series has not
been in existence for at least ten years. Total return is measured by comparing
the value of a hypothetical $1,000 investment in the Series at the beginning of
the relevant period to the value of the investment at the end of the period,
assuming the reinvestment of all distributions at net asset value and the
deduction of the maximum sales charge applicable at the beginning of the
relevant period.
Average Annual Total Return for
the Period Ending 12/31/94
--------------------------
Commencement Life of
Series Date 1 Year 5 Years 10 Years Fund
- ------ ------------ ------ ------- -------- -------
Bond ................. 1/1/83 -5.47% 8.64% 10.16% 9.90%
Balanced ............. 5/1/92 -2.80% N/A N/A 5.65%
Total Return.......... 9/17/84 -1.45% 10.61% 12.89% 12.43%
Growth ............... 1/1/83 1.48% 14.91% 17.23 17.92%
International ........ 5/1/90 0.03% N/A N/A 6.26%
Real Estate .......... 5/1/95 N/A N/A N/A N/A
Annual Total Returns
Total Inter- Real
Year Bond Balanced Return Growth national Estate
- ---- ---- ------- ------ ------ -------- ------
1984 11.46% N/A -0.59% 10.55% N/A N/A
1985 20.43% N/A 27.16% 34.70% N/A N/A
1986 19.45% N/A 15.61% 20.15% N/A N/A
1987 1.12% N/A 12.58% 7.05% N/A N/A
1988 10.36% N/A 2.33% 3.83% N/A N/A
1989 8.30% N/A 19.88% 36.06% N/A N/A
1990 5.14% N/A 5.62% 3.98% -8.10% N/A
1991 19.41% N/A 29.44% 43.83% 19.78% N/A
1992 10.03% 9.72% 10.67% 10.29% -12.89% N/A
1993 15.90% 8.57% 11.02% 19.69% 38.44% N/A
1994 -5.47% -2.80% -1.45% 1.48% 0.03% N/A
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Principal and investment return
(except Money Market Series) will vary and you may have a gain or loss when you
withdraw your money. The Bond Series includes high yielding, lower-rated
securities which are subject to greater price volatility and may involve greater
risk of default. The market for these securities may be less liquid. While Money
Market Series seeks to maintain a stable $1.00 share price, there is no
assurance that it will be able to do so.
Yield calculations of the Money Market Series used for illustration purposes
are based on the consideration of a hypothetical investment account having a
balance of exactly one Share at the beginning of a seven day period, which
period will end on the date of the most recent financial statements. The yield
for the Series during this seven day period will be the change in the value of
the hypothetical investment account's original Share. The following is an
example of this yield calculation for the Money Market Series based on a seven
day period ending December 31, 1994.
Assumptions:
Value of hypothetical pre-existing
account with exactly one share at
the beginning of the period: ................ 1.000000
Value of the same account
(excluding capital changes)
at the end of the seven day period: ......... 1.000538
Calculation:
Ending account value ....................... 1.000538
Less beginning account value ............... 1.000000
Net change in account value ................ 0.000538
Base period return:
(adjusted change/beginning account value) .. 0.000538
Current yield = return x (365/7) = .......... 2.80%
Effective yield = [(1 + return)(365/7)] - 1 = 2.85%
The current yield and effective yield information will fluctuate, and
publication of yield information may not provide a basis for comparison with
bank deposits, other investments which are insured and/or pay a fixed yield for
a stated period of time.
The Advisers have voluntarily agreed to reimburse certain expenses as
described under "Expenses" above. If the Advisers had not reimbursed certain
expenses during the periods shown, the returns for these funds would have been
lower. Performance numbers are net of all fund operating expenses, but do not
include any insurance charges imposed by your insurance company's separate
account. If performance information included the effect of these additional
charges, it would be lower.
The Trust's Annual Report, available upon request and without charge, contains
a discussion of the performance of each Series and a comparison of that
performance to a securities market index.
2-18
<PAGE>
SHARES OF BENEFICIAL INTEREST
The Trust currently has seven classes of shares of beneficial interest, one
for each Series. Shares (including fractional shares) of each Series have equal
rights with regard to voting, redemptions, dividends, distributions, and
liquidations with respect to that Series. All voting rights of the Accounts as
shareholders are passed through to the Contractowners and Policyowners.
Shareholders of all Series currently vote on the election of Trustees and other
matters. On matters affecting an individual Series (such as approval of an
Investment Advisory Agreement or a change in fundamental investment policies), a
separate vote of that Series is required.
Fund shares attributable to any Phoenix Home Life or PHL Variable assets and
Fund shares for which no timely instructions from Contract owners or
Policyowners are received will be voted by Phoenix Home Life and PHL Variable in
the same proportion as those shares in that Series for which instructions are
received.
Shares are fully paid, nonassessable, redeemable and fully transferable when
they are issued. Shares do not have cumulative voting rights, preemptive rights
or subscription rights.
The assets received by the Trust for the issue or sale of shares of each
Series, and all income, earnings, profits and proceeds thereof, subject only to
the rights of creditors, are allocated to such Series, and constitute the
underlying assets of such Series. The underlying assets of each Series are
required to be segregated on the books of account, and are to be charged with
the expenses of the Series and with a share of the general expenses of the
Trust. Any general expenses of the Trust not readily identifiable as belonging
to a particular Series shall be allocated by or under the direction of the
Trustees in such manner as the Trustees determine to be fair and equitable.
Unlike the stockholders of a corporation, there is a possibility that the
Accounts as shareholders of a business trust such as the Trust may be liable for
debts or claims against the Trust. The Declaration of Trust provides that
shareholders shall not be subject to any personal liability for the acts or
obligations of the Trust and that every written agreement, undertaking or
obligation made or issued by the Trust shall contain a provision to that effect.
The Declaration of Trust provides for indemnification out of the Trust property
for all losses and expenses of any shareholder held personally liable for the
obligations of the Trust. Thus, the risk of the Accounts, as shareholders,
incurring loss because of shareholder liability is limited to circumstances in
which the Trust itself would be unable to meet its obligations. Phoenix Home
Life and PHL Variable, as the sole shareholders, have a fiduciary duty to bear
this risk and Contractowners and Policyowners should be fully and completely
insulated from risk.
PURCHASE OF SHARES
The Trust offers its shares, without sales charge, for purchase by the
Accounts as an investment medium for the Variable Accumulation Annuity Contracts
and Variable Universal Life Insurance Policies issued by Phoenix Home Life and
PHL Variable. It is contemplated that in the future other separate accounts of
Phoenix Home Life, PHL Variable or other insurance companies may purchase shares
of the Trust. Shares of the Trust will not be sold to the public. The Trust
continuously offers shares in each Series to the Accounts at prices equal to the
respective net asset values of those Series. Net asset value is determined in
the manner set forth below under "NET ASSET VALUE."
It is conceivable that in the future it may be disadvantageous for variable
life insurance separate accounts and variable annuity separate accounts to
invest in the Trust simultaneously. Although Phoenix Home Life, PHL Variable or
the Trust currently do not foresee any such disadvantages either to variable
life insurance Policyowners or to variable annuity Contractowners, the Trust's
Board of Trustees intends to monitor events in order to identify any material
conflicts between such Policyowners and Contractowners and to determine what
action, if any, should be taken in response thereto. Material conflicts could
result from, for example, (1) changes in state insurance laws, (2) changes in
Federal income tax laws, (3) changes in the investment management of any
portfolio of the Fund, or (4) differences in voting instructions between those
given by Policyowners and those given by Contractowners.
NET ASSET VALUE
The net asset value of the shares of each Series of the Trust is determined
once daily as of the close of regular trading of the New York Stock Exchange, or
on each day during which there is a sufficient degree of trading in any of the
securities held in a Series of the Fund that the current net asset value of the
shares of the Series might be materially affected. The Board of Directors of the
Exchange reserves the right to change this schedule as conditions warrant.
Net asset value of a Series' shares is computed by dividing the value of the
net assets of the Series by the total number of Series shares outstanding.
Securities that are traded on the stock exchange are valued at the last sale
price as of the close of business on the day the securities are being valued,
or, lacking any sales, at the mean between closing bid and asked price.
Securities traded in the over-the-counter market are valued at the mean between
the bid and asked prices or yield equivalent as obtained from one or more
dealers that make markets in the securities. Series' securities that are traded
both in the over-the-counter market and on an exchange are valued according to
the broadest and most representative market. Securities and assets for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees, and
may include valuations furnished by a pricing service that may be retained by
the Fund with the Trustees' approval.
Money market securities held by the Fund are valued on an amortized cost
basis, absent extraordinary or unusual market conditions, which involves valuing
a portfolio instrument at its cost initially and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods when value, as
determined by amortized cost, is higher or lower than the price the Fund would
receive if it sold the security. The Statement of Additional Information
contains a more detailed discussion on amortized cost.
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<PAGE>
Securities which are primarily traded on foreign securities exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges where primarily traded. (See Statement of Additional
Information.) Over-the-Counter traded 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.
Because of the need to obtain prices as of the close of trading on various
exchanges in different time zones throughout the world, the calculation of net
asset value does not take place for the International Series at the same time as
the determination of prices of the majority of the portfolio securities of the
International 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. If at any time a Series has other investments, such investments
are valued at the fair value thereof as determined in good faith by the Trustees
although the actual calculations may be made by persons acting pursuant to the
direction of the Trustees.
REDEMPTION OF SHARES
The Trust will redeem all full and fractional shares of the Trust presented
for redemption. The Trust may, at the discretion of the Trustees and to the
extent consistent with state and Federal law, make payment for shares of a
particular Series redeemed in whole or in part in securities or other assets of
such Series taken at current values. The redemption price is the net asset value
per share next determined after the initial receipt of proper notice of
redemption.
The right to redeem shares or to receive payment with respect to any
redemption may only be suspended for more than seven days for any period during
which trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission or such Exchange is closed (other than
customary weekend and holiday closings), for any period during which an
emergency exists as defined by the Securities and Exchange Commission as a
result of which disposal of portfolio securities or determination of the net
asset value of each Series is not reasonably practicable, and for such other
periods as the Securities and Exchange Commission may by order permit for the
protection of shareholders of each Series.
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions with respect to the shares of any Series will
be payable in shares of such Series at net asset value or, at the option of the
Account as shareholder, in cash.
The net investment income of the Money Market Series will be declared as
dividends daily. Dividends will be distributed and reinvested in additional
shares on the last business day of every month. The net income of the Money
Market Series for Saturdays, Sundays and other days on which the New York Stock
Exchange is closed will be declared as dividends on the next business day.
The Bond, Growth, Total Return, Balanced and International Series will
distribute substantially all net investment income and net realized capital
gains, if any, to shareholders at least annually, although it is anticipated
that these distributions will be made on a quarterly basis. The Real Estate
Series will distribute its net investment income to its shareholders quarterly
and net realized capital gains, if any, to its shareholders annually.
TAXES
The Trust intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code ("Code") and so qualified for its last
taxable year. In addition, the Trust intends to comply with the investment
diversification requirements for variable contracts contained in the Code.
Moreover, the Trust will distribute sufficient income to avoid imposition of any
Federal excise tax. Dividends 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. The International Series may
incur liability for foreign income and withholding taxes on investment income.
The International Series intends to qualify for, and make an election permitted
under, the Code to enable the shareholder Accounts (and therefore Phoenix Home
Life) to claim a credit or deduction on Phoenix Home Life's income tax return
for the Accounts' pro rata share of the income and withholding taxes paid by the
International Series to foreign countries. Phoenix Home Life will also treat the
foreign income taxes paid by the Series as income. Contractowners and
Policyowners will not be required to treat the foreign income taxes paid by the
Series as income or be able to claim a credit or deduction for these taxes on
their income tax returns. For a discussion of the taxation of the Accounts, see
"Federal Tax Considerations" included in the Accounts' prospectuses.
Although the Real Estate Series may be a non-diversified portfolio, the Fund
intends to comply with the diversification and other requirements of the Code
applicable to "regulated investment companies" so that it will not be subject to
U.S. federal income tax on income and capital gain distributions to
shareholders. Accordingly, the Real Estate Series will not purchase securities
if, as a result, more than 25% of its total assets would be invested in the
securities of a single issuer or, with respect to 50% of its total assets, more
than 5% of such assets would be invested in the securities of a single issuer.
In addition, if the Real Estate Series has rental income or income from the
disposition of real property acquired as a result of a default on securities the
Real Estate Series may own, the receipt of such income may adversely affect its
ability to retain its tax status as a regulated investment company.
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND PAYING AGENT
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<PAGE>
The Custodian of the assets of all Series of the Trust, except the
International and Real Estate Series, is The Chase Manhattan Bank, N.A., 1 Chase
Manhattan Plaza, Floor 3B, New York, NY 10081. The Custodian of the assets of
the International Series is Brown Brothers Harriman & Co., 40 Water Street,
Boston, Massachusetts 02109, Attention: Manager, Securities Division. The
Custodian of the assets of the Real Estate Series is State Street Bank & Trust,
1 Heritage Drive, P2N, North Quincy, Massachusetts 02171. The Trust has
authorized the Custodian to appoint one or more subcustodians of the assets of
the Trust held outside the United States. The securities and other assets of
each Series will be held by the Custodians or any subcustodian separate from the
securities and assets of each other Series.
The Transfer Agent and the Dividend Paying Agent for the Trust's shares is
Phoenix Equity Planning Corporation, 100 Bright Meadow Boulevard, P.O. Box 2200,
Enfield, Connecticut 06083-2200.
OTHER INFORMATION
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110, serves
as independent accountants for the Trust and audits its financial statements
annually.
Inquiries and requests for the Statement of Additional Information and the
Annual Report to Shareholders should be directed in writing to Variable Products
Operations, Phoenix Home Life Mutual Insurance Company, 101 Munson Street, P.O.
Box 942, Greenfield, Massachusetts 01302-0942, or by telephoning Variable
Products Operations at (800) 447-4312.
APPENDIX
A-1 and P-1 Commercial Paper Ratings
The Money Market Series will only invest in commercial paper which at the date
of investment is rated A-1 by Standard & Poor's Corporation or P-1 by Moody's
Investors Services, Inc., or, if not rated, is issued or guaranteed by companies
which at the date of investment have an outstanding debt issue rated AA or
higher by Standard & Poor's or Aa or higher by Moody's.
Commercial paper rated A-1 by Standard & Poor's Corporation ("S&P") has the
following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long-term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend with allowance made for unusual circumstances.
Typically, the issuer's industry is well established and the issuer has a strong
position within the industry. The reliability and quality of management are
unquestioned.
The rating P-1 is the highest commercial paper rating assigned by Moody's
Investors Services, Inc. ("Moody's"). Among the factors considered by Moody's in
assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationship which exists with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations.
Moody's Investors Service, Inc., Corporate Bond Ratings
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they compromise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
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<PAGE>
C -- Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Standard and Poor's Corporation's Corporate Bond Ratings
AAA -- This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA -- Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A -- Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
BB-B-CCC-CC -- Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
D -- Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
2-22
<PAGE>
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
Prospectus
October 10, 1995
The Phoenix Edge Series Fund (formerly "The Big Edge Series Fund"), a
Massachusetts Business Trust (the "Trust"), is an open-end management investment
company which is intended to meet a wide range of investment objectives with its
seven separate Series: Money Market, Bond, Growth, Total Return, International,
Balanced and Real Estate Securities. Generally, each Series is in effect a
separate fund issuing its own shares.
The shares of the Trust are not offered to the public directly. You can invest
by buying a Variable Accumulation Annuity Contract from Phoenix Home Life Mutual
Insurance Company ("Phoenix Home Life"), or by buying a Variable Universal Life
Insurance Policy, also offered by Phoenix Home Life, or by buying a Variable
Accumulation Annuity Contract offered by PHL Variable Insurance Company, and
directing the allocation of your payment or payments to the sub-account(s)
corresponding to the Series you wish to invest in. The sub-accounts will, in
turn, invest in shares of the Trust. Not all Series may be offered through a
particular Contract or Policy. The Trust also offers its shares through other
Phoenix Home Life products.
The investment objectives of the Series are as follows:
Bond Series. The investment objective of the Bond Series is to seek long-term
total return by investing in a diversified portfolio of high yield (high risk)
and high quality fixed income securities. The risks of investing in these
securities are outlined in section "Investment Objectives and Policies" of this
Prospectus.
Money Market Series. The investment objective of the Money Market Series is to
provide maximum current income consistent with capital preservation and
liquidity. The Money Market Series invests exclusively in high quality money
market instruments. An investment in the Money Market Series is neither insured
nor guaranteed by the U.S. Government and there can be no assurance that the
Series will be able to maintain a stable net asset value of $1.00 per share.
Growth Series. The investment objective of the Growth Series is to achieve
intermediate and long-term growth of capital, with income as a secondary
consideration. The Growth Series invests principally in common stocks of
corporations believed by management to offer growth potential.
Total Return Series. The investment objective of the Total Return Series is to
realize as high a level of total rate of return over an extended period of time
as is considered consistent with prudent investment risk. The Total Return
Series invests in stocks, bonds and money market instruments in accordance with
the Investment Adviser's appraisal of investments most likely to achieve the
highest total rate of return.
Balanced Series. The investment objectives of the Balanced Series are reasonable
income, long-term capital growth and conservation of capital. It is intended
that this Series will invest in common stocks and fixed income securities, with
emphasis on income-producing securities which appear to have some potential for
capital enhancement.
International Series. The investment objective of the International Series is to
seek a high total return consistent with reasonable risk. The International
Series intends to invest primarily in an internationally diversified portfolio
of equity securities. It intends to reduce its risk by engaging in hedging
transactions involving options, futures contracts and foreign currency
transactions (see "Other Special Investment Methods"). The International
Portfolio provides a means for investors to invest a portion of their assets
outside the United States.
Real Estate Securities Series ("Real Estate Series"). The investment objective
of the Real Estate Series is to seek capital appreciation and income with
approximately equal emphasis. The Real Estate Series intends under normal
circumstances to invest in marketable securities of publicly traded real estate
investment trusts (REITs) and companies that operate, develop, manage and/or
invest in real estate located primarily in the United States.
There can be no assurance that any Series will achieve its objectives. See
"Investment Objectives and Policies."
This Prospectus gives you the facts about the Trust and each of its Series that
you should know before directing investment in the Trust, and it should be read
and kept for future reference. A Statement of Additional Information dated
October 10, 1995, which contains further information about the Trust, has been
filed with the Securities and Exchange Commission and is incorporated by
reference in this Prospectus. A free copy of the Statement of Additional
Information 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, PO Box 942, Greenfield, Massachusetts
01302-0942.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospsectus should be read and retained for future reference.
2-1
<PAGE>
THE PHOENIX EDGE SERIES FUND
TABLE OF CONTENTS
Page
----
Fund Expenses 2-3
Financial Highlights 2-4
Introduction 2-8
Investment Objectives and Policies 2-9
Bond Series 2-9
Money Market Series 2-10
Growth Series 2-11
Total Return Series 2-11
International Series 2-11
Balanced Series 2-13
Real Estate Securities Series 2-13
Other Special Investment Methods 2-15
Repurchase Agreements 2-15
Options 2-15
Financial Futures and Related Options 2-15
Foreign Securities 2-15
Mortgage-backed Securities 2-16
Lending of Portfolio Securities 2-16
Investment Restrictions 2-17
The Trust and Its Management 2-17
Investment Advisers 2-17
Portfolio Managers 2-17
Balanced Series 2-17
Bond Series 2-17
Growth Series 2-17
International Series 2-17
Money Market Series 2-18
Total Return Series 2-18
Real Estate Series 2-18
Advisory Fees 2-18
Financial Agent 2-18
Expenses 2-18
Portfolio Transactions and Brokerage 2-18
Performance History 2-19
Shares of Beneficial Interest 2-19
Purchase of Shares 2-20
Net Asset Value 2-20
Redemption of Shares 2-21
Dividends and Distributions 2-21
Taxes 2-21
Custodian, Transfer Agent, and
Dividend Paying Agent 2-21
Other Information 2-22
Appendix 2-22
No dealer, salesman or other person has been authorized to give any information
or to make any representations, other than those contained in this Prospectus,
and, if given or made, such other information or representations must not be
relied upon as having been authorized by the Trust, the Investment Advisers, or
the Distributor. This Prospectus does not constitute an offering in any state in
which such offering may not lawfully be made.
2-2
<PAGE>
FUND EXPENSES
The following table illustrates all expenses and fees that a shareholder in each
Series of the Fund will incur. Expenses borne by these separate accounts and by
the owners of the contracts and policies are not reflected in the Table. Please
refer to the applicable Variable Contract prospectus for such charges. The
expenses and fees set forth in the table are for the fiscal year ended December
31, 1994.
Shareholder Transaction Expenses
All Series
-----------
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None
Annual Fund Operating Expenses
(as a percentage of average net assets for the year ending Dec 31, 1994)
<TABLE>
<CAPTION>
Real Estate
Growth Bond Total Return Money Market International Balanced (Pro-forma)***
------ ---- ------------ ------------ ------------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees
Investment Advisory Fees* .65% .50% .60% .40% .75% .55% .75%
12b-1 Fees None None None None None None None
Other Operating Expenses
(After Reimbursement)** .15% .15% .15% .15% .35% .15% .25%+
Total Fund Operating Expenses .80% .65% .75% .55% 1.10% .70% 1.00%
</TABLE>
Example
The following example illustrates the expenses that you would pay on a $1,000
investment over various time periods assuming (1) a 5% annual rate of return and
(2) redemption at the end of each time period. As noted above, the Fund charges
no redemption fees of any kind.
<TABLE>
<CAPTION>
Growth Bond Total Return Money Market International Balanced Real Estate
------ ---- ------------ ------------ ------------- -------- -----------
<C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 8 $ 7 $ 8 $ 6 $ 11 $ 7 $ 10
3 Years $26 $21 $24 $18 $ 35 $22 32
5 Years $44 $36 $42 $31 $ 61 $39 56
10 Years $99 $81 $93 $69 $134 $87 122
</TABLE>
The example should not be considered a representation of past or future expenses
or performance. Actual expenses or performance may be greater or less than those
shown. The purpose of the table is to assist the investor in understanding the
various costs and expenses that an investor will bear directly or indirectly at
the Fund level. See "The Trust and Its Management."
* Advisory fees (management fees) will vary with the asset size of the Fund
(see "Advisory Fee").
** Phoenix Investment Counsel, Inc. ("PIC") has agreed to reimburse the Series
(except the International and Real Estate Series) for the amount, if any, by
which each Series' operating expenses other than the management fee for any
fiscal year exceed .15% of the average net assets of the Series. PIC has
agreed to reimburse the International Series for the account, if any, by
which the Series' operating expenses other than the management fee for any
fiscal year exceed .40% of the average net assets for the Series. If these
reimbursements had not been in place for the fiscal year ended December 31,
1994, total operating expenses for the Money Market Series, Bond Series,
International Series, Balanced Series, Growth and Total Return would have
been approximately 0.58%, 0.72%, 1.10%, 0.70%, 0.82% and 0.75% respectively
of the average net assets of such Series.
*** This series was not available until May 1, 1995. Accordingly, annualized
expenses have been projected for the fiscal period ending December 31, 1995.
+ Phoenix Realty Securities, Inc. and/or Phoenix Home Life and/or PHL Variable
have agreed to reimburse the Real Estate Series' operating expenses for the
amount, if any, by which such Series' operating expenses other than the
management fees for any fiscal year exceed .25% of the average net assets
for such Series.
2-3
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS
(For a share outstanding throughout the indicated period)
The following tables set forth certain financial information for the respective
fiscal years of the Trust. The annual information has been extracted from the
Trust's audited financial statements for the respective periods. The financial
information has been audited by Price Waterhouse LLP, independent accountants,
whose unqualified report thereon is included in the Annual Report to
Shareholders dated December 31, 1994, which is incorporated by reference in the
Statement of Additional Information. The Statement of Additional Information and
the Trust's most recent Annual Report (which contains a discussion of the Fund's
performance) are available at no charge upon request.
MONEY MARKET SERIES
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
Beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 9.47 $ 8.77
Income from investment operations
Net investment income 0.38(1) 0.28(1) 0.35 0.58 0.79 0.88 0.72 0.63 0.57 0.70
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
Total from investment operations 0.38 0.28 0.35 0.58 0.79 0.88 0.72 0.63 0.57 0.70
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
Less distributions:
Dividends from net investment income (0.38) (0.28) (0.35) (0.58) (0.79) (0.88) (0.72) (0.63) (0.04) --
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
Total distributions (0.38) (0.28) (0.35) (0.58) (0.79) (0.88) (0.72) (0.63) (0.04) --
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
Change in net asset value -- -- -- -- -- -- -- -- 0.53 0.70
------- ------- ------- ------- ------- ------- ------- ------- ------ ------
Net asset value, end of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $10.00 $ 9.47
======= ======= ======= ======= ======= ======= ======= ======= ====== ======
Total Return(2) 3.77% 2.80% 3.50% 5.80% 7.90% 8.80% 7.20% 6.30% 6.02% 7.98%
Ratios/supplemental data:
Net assets, end of period (thousands) $94,586 $72,946 $69,962 $51,692 $38,709 $28,808 $22,294 $10,749 $3,628 $3,472
Ratio to average net assets of:
Operating expenses 0.55% 0.55% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Net investment income 3.85% 2.84% 3.49% 5.76% 7.87% 8.96% 7.24% 6.30% 6.27% 7.55%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $.003
and $0.01 per share.
(2) Total return information does not reflect expenses that apply to the
separate accounts or related contracts; inclusion of these charges would
reduce total return for all periods shown.
GROWTH SERIES
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
Beginning of period $ 16.59 $ 15.01 $ 14.43 $ 11.72 $ 11.62 $ 8.83 $ 8.81 $ 9.84 $ 8.19 $ 6.08
Income from investment operations
Net investment income 0.23(1) 0.16 0.22 0.39 0.35 0.27 0.32 0.19 0.25 0.25
Net realized and unrealized gain 0.02 2.77 1.25 4.64 0.10 2.88 0.02 0.45 1.40 1.86
-------- -------- -------- -------- -------- -------- ------- ------- ------- ------
Total from investment operations 0.25 2.93 1.47 5.03 0.45 3.15 0.34 0.64 1.65 2.11
-------- -------- -------- -------- -------- -------- ------- ------- ------- ------
Less distributions
Dividends from net investment income (0.23) (0.15) (0.23) (0.37) (0.35) (0.27) (0.32) (0.21) -- --
Dividends from net realized gains (0.92) (1.20) (0.66) (1.95) -- (0.09) -- (1.46) -- --
-------- -------- -------- -------- -------- -------- ------- ------- ------- ------
Total distributions (1.15) (1.35) (0.89) (2.32) (0.35) (0.36) (0.32) (1.67) -- --
-------- -------- -------- -------- -------- -------- ------- ------- ------- ------
Change in net asset value (0.90) 1.58 0.58 2.71 0.10 2.79 0.02 (1.03) 1.65 2.11
-------- -------- -------- -------- -------- -------- ------- ------- ------- ------
Net asset value, end of period $ 15.69 $ 16.59 $ 15.01 $ 14.43 $ 11.72 $ 11.62 $ 8.83 $ 8.81 $ 9.84 $ 8.19
======== ======== ======== ======== ======== ======== ======= ======= ======= ======
Total Return(2) 1.48% 19.69% 10.29% 43.83% 3.98% 36.06% 3.83% 7.05% 20.15% 34.70%
Ratios/supplemental data:
Net assets, end of period (thousands) $616,221 $446,368 $245,565 $102,259 $40,061 $29,931 $18,051 $18,860 $13,124 $6,717
Ratio to average net assets of:
Operating expenses 0.80% 0.79% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Net investment income 1.38% 0.97% 1.66% 2.14% 3.19% 2.51% 3.64% 2.34% 2.47% 3.61%
Portfolio turnover rate 185% 185% 214% 237% 272% 285% 326% 251% 294% 271%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $.003
per share.
(2) Total return information does not reflect expenses that apply to the
separate accounts or related contracts; inclusion of these charges would
reduce total return for all periods shown.
The components of income from investment operations are calculated based on the
average number of shares outstanding at each quarter end.
2-4
<PAGE>
BOND SERIES
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
Beginning of period $ 10.27 $ 9.58 $ 9.33 $ 8.48 $ 8.85 $ 9.11 $ 9.08 $10.07 $ 8.43 $ 7.00
Income from investment operations
Net investment income 0.72(1) 0.66(1) 0.66 0.74 0.80 0.99 0.92 1.06 1.04 0.71
Net realized and unrealized gain (loss) (1.28) 0.84 0.25 0.85 (0.37) (0.25) (0.01) (0.93) 0.60 0.72
------- ------- ------- ------- ------- ------- ------- ------ ------ ------
Total from investment operations (0.56) 1.50 0.91 1.59 0.43 0.74 0.91 0.13 1.64 1.43
------- ------- ------- ------- ------- ------- ------- ------ ------ ------
Less distributions
Dividends from net investment income (0.73) (0.66) (0.66) (0.74) (0.80) (1.00) (0.88) (1.12) -- --
Dividends from net realized capital gains -- (0.15) -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------ ------ ------
Total distributions (0.73) (0.81) (0.66) (0.74) (0.80) (1.00) (0.88) (1.12) -- --
------- ------- ------- ------- ------- ------- ------- ------ ------ ------
Change in net asset value (1.29) 0.69 0.25 0.85 (0.37) (0.26) 0.03 (0.99) 1.64 1.43
------- ------- ------- ------- ------- ------- ------- ------ ------ ------
Net asset value, end of period $ 8.98 $ 10.27 $ 9.58 $ 9.33 $ 8.48 $ 8.85 $ 9.11 $ 9.08 $10.07 $ 8.43
======= ======= ======= ======= ======= ======= ======= ====== ====== ======
Total Return(2) (5.47)% 15.90% 10.03% 19.41% 5.14% 8.30% 10.36% 1.12% 19.45% 20.43%
Ratios/supplemental data:
Net assets, end of period (thousands) $74,686 $79,393 $43,090 $21,957 $13,558 $13,947 $11,081 $8,389 $7,285 $2,726
Ratio to average net assets of:
Operating expenses 0.66% 0.65% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Net investment income 7.62% 6.71% 7.47% 8.65% 9.26% 10.99% 10.37% 10.90% 9.75% 9.77%
Portfolio turnover rate 181% 169% 166% 269% 318% 340% 262% 67% 110% 240%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $.006
and $0.005 per share.
(2) Total return information does not reflect expenses that apply to the
separate accounts or related contracts; inclusion of these charges would
reduce total return for all periods shown.
The components of income from investment operations are calculated based on the
average number of shares outstanding at each quarter end.
TOTAL RETURN SERIES
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
Beginning of period $ 13.71 $ 12.86 $ 12.97 $ 11.07 $ 11.05 $ 9.68 $ 9.87 $ 9.85 $ 8.52 $ 6.70
Income from investment operations
Net investment income 0.36(1) 0.23 0.37 0.42 0.58 0.51 0.46 0.34 0.36 0.35
Net realized and unrealized gain (loss) (0.56) 1.17 0.99 2.76 0.02 1.38 (0.24) 0.91 0.97 1.47
-------- -------- -------- ------- ------- ------- ------- ------- ------- ------
Total from investment operations (0.20) 1.40 1.36 3.18 0.60 1.89 0.22 1.25 1.33 1.82
-------- -------- -------- ------- ------- ------- ------- ------- ------- ------
Less distributions
Dividends from net investment income (0.37) (0.23) (0.37) (0.42) (0.58) (0.52) (0.41) (0.40) -- --
Dividends from net realized gains (0.46) (0.32) (1.10) (0.86) 0.00 0.00 -- (0.83) -- --
-------- -------- -------- ------- ------- ------- ------- ------- ------- ------
Total distributions (0.83) (0.55) (1.47) (1.28) (0.58) (0.52) (0.41) (1.23) -- --
-------- -------- -------- ------- ------- ------- ------- ------- ------- ------
Change in net asset value (1.03) 0.85 (0.11) 1.90 0.02 1.37 (0.19) 0.02 1.33 1.82
-------- -------- -------- ------- ------- ------- ------- ------- ------- ------
Net asset value, end of period $ 12.68 $ 13.71 $ 12.86 $ 12.97 $ 11.07 $ 11.05 $ 9.68 $ 9.87 $ 9.85 $ 8.52
======== ======== ======== ======= ======= ======= ======= ======= ======= ======
Total Return(2) (1.45)% 11.02% 10.67% 29.44% 5.62% 19.88% 2.33% 12.58% 15.61% 27.16%
Ratios/supplemental data:
Net assets, end of period (thousands) $289,083 $256,011 $163,628 $98,415 $62,839 $57,901 $59,109 $68,099 $24,879 $8,795
Ratio to average net assets of:
Operating expenses 0.74% 0.74% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Net investment income 2.71% 1.82% 2.90% 3.48% 5.39% 4.73% 4.62% 3.67% 3.38% 5.08%
Portfolio turnover rate 220% 269% 326% 255% 302% 302% 314% 359% 311% 303%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $0.001
per share.
(2) Total return information does not reflect expenses that apply to the
separate accounts or related contracts; inclusion of these charges would
reduce total return for all periods shown.
The components of income from investment operations are calculated based on the
average number of shares outstanding at each quarter end.
2-5
<PAGE>
INTERNATIONAL SERIES
<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 gain (loss) (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(3) 0.03% 38.44% (12.89%) 19.78% (8.10%)
Ratios/supplemental data:
Net assets, end of period (thousands) $134,627 $61,242 $ 13,772 $6,119 $2,010
Ratio to average 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.
(3) Total return information does not reflect expenses that apply to the
separate accounts or related contracts; inclusion of these charges would
reduce total return for all periods shown.
The components of income from investment operations are calculated based on the
average number of shares outstanding at each quarter end.
BALANCED SERIES
<TABLE>
<CAPTION>
Year Ended From
December 31, Inception
------------------- 5/1/92 to
1994 1993 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 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(3) (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.
(3) Total return information does not reflect expenses that apply to the
separate accounts or related contracts; inclusion of these charges would
reduce total return for all periods shown.
The components of income from investment operations are calculated based on the
average number of shares outstanding at each quarter end.
2-6
<PAGE>
REAL ESTATE SERIES
<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. Total return information does not reflect expenses that
apply to the separate accounts or related contracts; inclusion of these
charges would reduce total return.
The components of income from operations are calculated based on the average
number of shares outstanding.
2-7
<PAGE>
INTRODUCTION
This Prospectus describes the shares offered by and the operations of The
Phoenix Edge Series Fund (the "Trust"). The Trust is an open-end management
investment company established as a business trust under the laws of
Massachusetts by an Agreement and Declaration of Trust dated February 18, 1986
(the "Declaration of Trust"). As amended, the Declaration of Trust authorizes
the assets and shares of the Trust to be divided into series (the "Series").
Each Series has a different investment objective, as described on the cover page
of this Prospectus, and is designed to meet different investment needs. In many
respects, each Series operates as if it were a separate mutual fund.
Shares of the Trust are sold to the Phoenix Home Life Variable Accumulation
Account (the "VA Account") to fund the benefits under Variable Accumulation
Annuity Contracts ("Contracts") issued by Phoenix Home Life Mutual Insurance
Company ("Phoenix Home Life"); to the Phoenix Home Life Variable Universal Life
Account (the "VUL Account") to fund the benefits under Variable Universal Life
Insurance Policies ("Policies") also issued by Phoenix Home Life; and to the PHL
Variable Accumulation Account ("PHL VA Account") to fund the benefits under
Variable Accumulation Annuity Contracts ("Contracts") issued by PHL Variable
Insurance Company ("PHL Variable"). The VA Account, PHL VA Account, and VUL
Account (the "Accounts") invest in shares of the Trust in accordance with
allocation instructions received from Contractowners and Policyowners. Such
allocation rights are further described in the accompanying Prospectus for the
Contracts or Policies. Phoenix Home Life redeems shares to the extent necessary
to provide benefits under the Contracts and Policies. Phoenix Home Life may
establish other separate accounts which may purchase shares in the Trust.
When making allocations from time to time, a Contractowner or Policyowner should
understand that investment return will affect benefits and the value of the
Contract or Policy. The accompanying Prospectus for the VA Account, PHL VA
Account, or VUL Account contains a description of the relationship between
increases or decreases in the net asset value of Trust shares and any
distributions on such shares, and the benefits provided under the Contract or
Policy.
The Trustees have authority to issue an unlimited number of shares of beneficial
interest of each Series. An interest in the Trust is limited to the assets of
the Series in which shares are held, and shareholders are entitled to a pro rata
share of all dividends and distributions arising from the net income and capital
gains on the investments of such Series.
Phoenix Home Life Mutual Insurance Company ("Phoenix Home Life") and PHL
Variable Insurance Company ("PHL Variable")
Shares of the Trust are currently sold to the Accounts as the investment base
for Variable Accumulation Annuity Contracts and Variable Universal Life
Insurance Policies issued by Phoenix Home Life and PHL Variable. Phoenix Home
Life is a mutual life insurance company whose Executive Office is at One
American Row, Hartford, Connecticut 06115 and its main administrative office is
at 100 Bright Meadow Boulevard, Enfield, Connecticut 06083-1900. Its New York
principal office is at 99 Troy Road, East Greenbush, New York 12061. Phoenix
Home Life is the nation's 13th largest mutual life insurance company and has
admitted assets of approximately $12 billion. Phoenix Home Life sells insurance
policies and annuity contracts through its own field force of full time agents
and through brokers. Its operations are conducted in all 50 states, the District
of Columbia, Canada and Puerto Rico.
PHL Variable is a wholly-owned indirect subsidiary of Phoenix Home Life. Its
Executive Office is at One American Row, Hartford, Connecticut 06115 and its
main administrative office is at 100 Bright Meadow Boulevard, Enfield,
Connecticut 06083-1900. PHL Variable is a Connecticut stock company. On December
31, 1994, it had admitted assets of $9,677,290.
The interests and rights of a Contractowner or Policyowner in the shares is
subject to the terms of the Contract or Policy and is described in the
accompanying Prospectus for that particular product. The rights of the Accounts
as shareholders should be distinguished from the rights of Contractowners and
Policyowners, described in the accompanying Prospectus and in the Contract or
Policy for that particular product. As long as shares of the Trust are sold only
to the Accounts, the terms "shareholder" or "shareholders" in this Prospectus
refer to the Accounts.
The Investment Advisers
The investment adviser of the Money Market, Bond, Balanced, Total Return, Growth
and International Series is Phoenix Investment Counsel ("PIC" or "Adviser"). PIC
is a wholly-owned indirect subsidiary of Phoenix Home Life. For its services, an
investment advisory fee is deducted from the assets of each Series of the Fund
as follows:
Rate for First Rate for Next Rate for Excess Over
Series $250,000,000 $250,000,000 $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%
The total advisory fee of 0.75% of the aggregate net assets of the International
Series is greater than that paid by most mutual funds; however, the Board of
Trustees of the Trust has determined that it is similar to fees charged by other
mutual funds whose investment objectives are similar to those of the
International Series. Each Series (except the International and Real Estate
Series) pays a portion or all of its other operating expenses, up to .15% of its
total net assets. The International Series pays other operating expenses up to
.40% of its total net assets.
The investment adviser for the Real Estate Series is Phoenix Realty Securities,
Inc. ("PRS" or "Adviser"). PRS is a wholly-owned indirect subsidiary of Phoenix
Home Life. For its services, an invest-
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ment advisory fee is deducted from the assets of the Series of the Fund as
follows:
Rate for First Rate for Next Rate for Excess Over
$1,000,000,000 $1,000,000,000 $2,000,000,000
-------------- -------------- --------------------
Real Estate Series .75% .70% .65%
The Real Estate Series pays a portion or all of its other expenses up to .25% of
its total net assets. 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. In
accordance with the Sub-Advisory Agreement between the Trust and ABKB, ABKB is
paid a monthly fee at the annual rate of 0.45% of the average aggregate daily
net asset values of the Series up to $1 billion; 0.35% of such value between $1
billion and $2 billion; and 0.30% of such value in excess of $2 billion. The
sub-advisory agreement relating to the Real Estate Series provides, among other
things, that ABKB shall effectuate the purchase and sale of securities for the
Series and provide related advisory services.
Offering Prices
Shares in each of the Series of the Trust are offered to the Accounts
continuously at the net asset value determined at the close of business
beginning on the day the application is accepted. For information on pricing for
initial and subsequent purchase payments under Contracts or Policies, see the
accompanying prospectus.
INVESTMENT OBJECTIVES AND POLICIES
To the extent that shares are sold to the Accounts in order to fund the benefits
under the Contracts or Policies, the structure of the Trust permits
Contractowners and Policyowners, within the limitations described in the
Contracts or Policies, to allocate their investments in response to or in
anticipation of changes in market or economic conditions.
Each Series has a different investment objective and is designed to meet
different investment needs. The differences in objectives and policies among the
seven Series can be expected to affect the investment return of each Series and
the degree of market and financial risk to which each Series is subject. The
investment objective of each Series is deemed to be a fundamental policy which
may not be changed without the approval of a vote of a majority of the
outstanding shares of that Series. Since certain risks are inherent in the
ownership of any security, there can be no assurance that any Series will
achieve its investment objective. The investment policies of each Series will
also affect the rate of portfolio turnover. A high rate of portfolio turnover
generally involves correspondingly greater transaction costs, which must be
borne directly by each Series. The portfolio turnover rate for each Series,
except the Money Market Series (which does not normally pay brokerage
commissions), is included under "Selected Per Share Data and Ratios." The rate
for each such Series has been, and is expected to, exceed 100%; accordingly, the
Series will pay more in brokerage commissions than would be the case if they had
lower portfolio turnover rates. It is expected that the portfolio turnover rates
for the common stock and fixed income portions of the Balanced Series will not
generally exceed 250% and 100%, respectively. (See "Portfolio Transactions and
Brokerage.")
Bond Series
The Bond Series' investment objective is to seek long-term total return by
investing in a diversified portfolio of high yield (high risk) and high quality
fixed income securities. Distributions of income are reinvested to purchase
additional shares. Fixed income securities are considered "bonds" for the
purposes of the Series' investment policy.
Higher yields are available ordinarily from securities in the lower rated
categories of recognized rating agencies (Ba to Ca by Moody's Investors Service,
Inc. ("Moody's") or BB to CC by Standard & Poor's Corporation ("S&P")) and from
unrated securities of comparable quality (commonly referred to as "junk bonds").
However, the Bond Series will not invest in securities in the two lowest rating
categories (Ca and C for Moody's and CC and C for Standard & Poor's) unless
management believes that the financial condition of the issuer, or the
protections afforded to the particular securities, is stronger than would
otherwise be indicated by the low ratings. When the investment objective of this
Series can be met by investing in securities in higher rating categories, such
investments will be made. Moreover, the Series may retain securities whose
ratings have changed. The Appendix contains a more detailed description of such
ratings. At Dec. 31, 1994, 39.6% of the Series' assets was invested in so-called
"investment grade" securities. The average percentage of assets the Series had
invested in each rating category for the fiscal year ended December 31, 1994 is
as follows:
Aaa 19.3%
Aa 6.2%
A 5.2%
Baa 8.9%
Ba 7.0%
B 14.6%
Caa 2.1%
Non-Rated 28.9%
Under normal conditions at least 80% of the value of the total assets of the
Bond Series will be invested, consistent with its primary investment objective,
in fixed income securities including preferred stocks, convertible securities,
debt obligations, foreign debt obligations, certificates of deposit, commercial
paper, bankers' acceptances, and government obligations issued or guaranteed by
federal, state or municipal governments or their agencies or instrumentalities.
The Bond Series' remaining assets may be invested in common stock and other
equity securities when such investments are consistent with its primary
investment objective or are acquired as part of a unit consisting of a
combination of fixed income securities and equity securities (see "Other Special
Investment Methods").
When a more conservative investment strategy is necessary for temporary
defensive purposes, the Bond Series may retain cash or invest part or all of its
assets in cash equivalents or in other fixed income securities deemed by
management to be consistent with a temporary defensive posture.
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<PAGE>
Risk Factors. While the Bond Series' management will seek to minimize risk
through diversification and continual evaluation of current developments in
interest rates and economic conditions, the market prices of lower rated
securities generally fluctuate more than those of higher rated securities, and
using credit ratings helps to evaluate the safety of principal and interest but
does not assess market risk. Economic downturns and interest rate increases may
cause a higher incidence of lower-rated securities' defaults. Such fluctuations
in the market value of portfolio securities subsequent to their acquisition by
the Bond Series will not normally affect cash income from such securities but
will be reflected in the Series' net asset value. Additionally, with lower rated
securities there is a greater possibility that an adverse change in the
financial condition of the issuer, particularly a highly leveraged issuer, may
affect its ability to make payments of income and principal. Also, because the
Bond Series intends to invest primarily in securities in the lower rating
categories, the achievement of its goals will be more dependent on management's
credit analysis ability than would be the case if the Series were investing in
securities in the higher rated categories. Lower-rated securities may be thinly
traded and therefore harder to value and more susceptible to adverse publicity
concerning the issuer. In addition, legislation may be enacted in the future
that could depress the price of lower-rated 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 or until maturity
("deferred coupon" or "zero coupon" obligations). The value of these obligations
may fluctuate more in response to interest rate changes than would the value of
debt obligations that make current interest payments. In addition, because the
Series will accrue income on these securities prior to the receipt of each
payment, it may have to dispose of portfolio securities to distribute income to
the Accounts for tax purposes. (See the Statement of Additional Information.)
Money Market Series
The investment objective of the Money Market Series is to provide maximum
current income consistent with capital preservation and liquidity. The Series
seeks to achieve its objective by investing in a managed portfolio of the
following high quality money market instruments:
(a) obligations issued or guaranteed as to principal and interest by the United
States Government or its agencies, authorities or instrumentalities;
(b) obligations issued by U.S. banks and savings and loan associations (such as
bankers' acceptances, certificates of deposit and time deposits, including
dollar-denominated obligations of foreign branches of U.S. banks and U.S.
branches of foreign banks) and dollar-denominated obligations
unconditionally guaranteed as to payment by such banks or savings and loan
associations, which at the date of investment have capital, surplus, and
undivided profits in excess of $100,000,000 as of the date of their most
recently published financial statements; and obligations of other banks or
savings and loan associations if such obligations are insured by the Federal
Deposit Insurance Corporation or the Federal Savings and Loan Insurance
Corporation;
(c) commercial paper which at the date of investment is issued or guaranteed by
a company whose commercial paper is rated A-1 by Standard & Poor's
Corporation or P-1 by Moody's Investors Service, Inc., or F-1 by Fitch's
Investors Service or, if not rated, is issued or guaranteed by a company
which at the date of the investment has an outstanding debt issue rated AA
or higher by Standard & Poor's or Aa or higher by Moody's;
(d) other corporate obligations maturing in one year or less which at the date
of investment are rated AA or higher by Standard & Poor's or Aa or higher by
Moody's; and
(e) repurchase agreements with recognized securities dealers and member banks of
the Federal Reserve System with respect to any of the foregoing obligations.
All of the Money Market Series investments will mature in 397 days or less. In
addition, the average maturity of the Series' portfolio securities based on
their dollar value will not exceed 90 days. By limiting the maturity of its
investments, the Money Market Series seeks to lessen the changes in the value of
its assets caused by market factors.
Generally, investments will be limited to securities rated in the two highest
short-term rating categories by at least two nationally recognized statistical
rating organizations, or by one such organization if only one has rated the
security, and comparable unrated securities. In addition, no more than 5% of the
Series' total assets will be invested in securities of any one issuer or in
securities not rated in the highest short-term rating category. Moreover, no
more than the greater of 1% of the Series' total assets or $1 million will be
invested in the securities of any one issuer that are not in the highest
short-term rating category.
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 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 for 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
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<PAGE>
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 creditworthiness
of its issuer.
Growth Series
The investment objective of the Growth Series (formerly designated the "Stock
Series") is to achieve intermediate and long-term growth of capital, with income
as a secondary consideration. The Series seeks to achieve its investment
objective by investing principally in common stocks of corporations believed by
management to offer growth potential over both the intermediate and the long
term. In pursuing capital growth, emphasis is placed on the selection of
securities of well-established corporations with aggressive and experienced
managements. This Series may invest not more than 20% of the market value of its
total assets in convertible securities, that is, debt securities and preferred
stocks which are convertible into, or carry the right to purchase, common stock
or other equity securities. It is not intended at this time that this Series
will invest in warrants.
Although the Growth Series will not make a practice of short-term trading,
purchases and sales of securities will be made, whenever necessary to achieve
the investment objective of the Series without regard to the resulting brokerage
costs.
The Trust management intends to diversify investments of the Series among a
number of corporations without concentration in any particular industry. When,
in the opinion of the Trust management, a temporary defensive position is
warranted, the Series may maintain part or all of its assets in cash or
short-term investments such as United States Treasury bills and commercial
paper; it may also invest in preferred stocks, nonconvertible bonds, notes,
government securities or other fixed-income securities for temporary defensive
purposes.
Total Return Series
The investment objective of the Total Return Series (formerly designated the
"Total-Vest Series") is to realize as high a level of total rate of return over
an extended period of time as is considered consistent with prudent investment
risk. The Series seeks to achieve its investment objective by investing in three
market segments: stocks, bonds, and money market instruments. In addition to
trading techniques described fully in the Statement of Additional Information,
the Series has retained the flexibility to write (sell) covered call options, to
purchase call and put options and to enter into financial futures contracts.
The Total Return Series will adjust the mix of investments among the three
market segments to capitalize on perceived variations in return potential
produced by the interaction of changing financial markets and economic
conditions. It is expected that such adjustments will normally be made in a
gradual manner over a period of time. THERE ARE NO MINIMUM OR MAXIMUM
PERCENTAGES AS TO THE AMOUNT OF THE SERIES' ASSETS WHICH MAY BE INVESTED IN EACH
OF THE MARKET SEGMENTS. MAJOR CHANGES IN INVESTMENT MIX MAY OCCUR SEVERAL TIMES
A YEAR OR OVER SEVERAL YEARS, DEPENDING UPON MARKET AND ECONOMIC CONDITIONS AND
EXCEPT FOR RESTRICTIONS NOTED HEREIN AND UNDER "INVESTMENT RESTRICTIONS," THE
INVESTMENT ADVISER HAS COMPLETE FLEXIBILITY IN DETERMINING THE AMOUNT AND NATURE
OF COMMON STOCK, DEBT OR MONEY MARKET INSTRUMENTS IN WHICH THE SERIES MAY
INVEST.
Investments in one of the three market segments will be made with a specific
purpose in mind. Investments in the stock segment will be for the purpose of
attempting to achieve a superior total rate of return over an extended period of
time from both capital appreciation and current income. Investments in the bond
segment will be for the purpose of attempting to achieve as high a total rate of
return on an annual basis as is considered consistent with the preservation of
capital values. Investments in the money market segment will be for the purpose
of attempting to achieve high current income, the preservation of capital, and
liquidity. The types of securities in each of these three market segments that
the Total Return Series will invest in are listed in the Statement of Additional
Information.
Cash may be held to provide for expenses and anticipated redemption payments and
so that orderly redemption payments may be carried out in accordance with the
Total Return Series' investment policies.
International Series
The International Series seeks as its investment objective a high total return
consistent with reasonable risk. It intends to achieve its objective by
investing primarily in an internationally diversified portfolio of equity
securities. It intends to reduce its risk by engaging in hedging transactions
involving options, futures contracts and foreign currency transactions (see
"Other Special Investment Methods"). Investments may be made for capital growth
or for income or any combination thereof for the purpose of achieving a high
overall return. There can be no assurance that the International Series will
achieve its objective.
There is no limitation on the percentage or amount of the International Series
assets which may be invested for capital growth or income, and therefore at any
particular time the investment emphasis may be placed solely or primarily on
growth of capital or on income. In determining whether the International Series
will be invested for capital growth or income, the Adviser will analyze the
international equity and fixed income markets and seek to assess the degree of
risk and level of return that can be expected from each market. The
International Series will invest primarily in non-United States issuers, and
under normal circumstances, more than 80% of the International Series' total
assets will be invested in non-United States issuers located in not less than
three foreign countries.
In pursuing its objective, the International Series will invest primarily in
common stocks of established non-United States companies believed to have
potential for capital growth, income or both. However, there is no requirement
that the International Series invest exclusively in common stocks or other
equity securities. The International Series may invest in other types of
securities includ-
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ing, but not limited to, convertible securities, preferred stocks, bonds, notes
and other debt securities of companies (including Euro-currency instruments and
securities) or obligations of domestic or foreign governments and their
political subdivisions, and in foreign currency transactions. The Series may
invest up to 10% of its total assets in bonds considered to be less than
investment grade (but which are not in default at the time of investment), which
may subject the Series to risks attendant to such bonds (see "Risk Factors"
below). When the Adviser believes that the total return potential in debt
securities equals or exceeds the potential return on equity securities, the
Series may substantially increase its holdings in debt securities. The
International Series may establish and maintain part or all of its assets in
reserves for temporary defensive purposes or to enable it to take advantage of
buying opportunities. The International Series reserves may be invested in
domestic as well as foreign short-term money market instruments including, but
not limited to, government obligations, certificates of deposit, bankers'
acceptances, time deposits, commercial paper, short-term corporate debt
securities and repurchase agreements. The International Series may also engage
in certain options transactions, and enter into futures contracts and related
options for hedging purposes, invest in repurchase agreements and lend portfolio
securities (see "Other Special Investment Methods").
The International Series may also invest in the securities of other investment
companies subject to the limitations contained in the 1940 Act (see "Investment
Restrictions" in the Statement of Additional Information). In certain countries,
investments may only be made by investing in other investment companies that, in
turn, are authorized to invest in the securities that are issued in such
countries. The Fund's purchase of securities of such other investment companies
may result in the layering of expenses such that shareholders indirectly bear a
proportionate part of the expenses for such investment companies including
operating costs and investment advisory and administrative fees.
The International Series makes investments in various countries. Under normal
circumstances, business activities in a number of different foreign countries
will be represented in the International Series' investments. The International
Series may, from time to time, have more than 25% of its assets invested in any
major industrial or developed country which in the view of the Adviser poses no
unique investment risk. The International Series may purchase securities of
companies, wherever organized, which have their principal activities and
interests outside the United States. Under exceptional economic or market
conditions abroad, the International Series may, for temporary defensive
purposes, invest all or a major portion of its assets in U.S. government
obligations or securities of companies incorporated in and having their
principal activities in the United States. The International Series may also
invest its reserves in domestic short-term money-market instruments as described
above.
In determining the appropriate distribution of investments among various
countries and geographic regions, the Adviser ordinarily will consider the
following factors: prospects for relative economic growth among foreign
countries; expected levels of inflation; relative price levels of the various
capital markets; government policies influencing business conditions; the
outlook for currency relationships and the range of individual investment
opportunities available to the international investor.
The International Series may make investments in developing countries, which
involve exposure to economic structures that are generally less diverse and
mature than in the United States, and to political systems which may be less
stable. A developing country can be considered to be a country which is in the
initial stages of its industrialization cycle. In the past, markets of
developing countries have been more volatile than the markets of developed
countries; however, such markets often have provided higher rates of return to
investors. The Adviser believes that these characteristics can be expected to
continue in the future.
Generally, the Series will not trade in securities for short-term profits but,
when circumstances warrant, securities may be sold without regard to the length
of time held.
Risk Factors. There are substantial and different risks involved which should be
carefully considered by any investor considering foreign investments. For
example, there is generally less publicly available information about foreign
companies than is available about companies in the United States. Foreign
companies are generally not subject to uniform audit and financial reporting
standards, practices and requirements comparable to those in the United States.
In addition, if it should become necessary, the Trust could encounter
difficulties involving legal processes abroad.
Foreign securities involve currency risks. The U.S. dollar value of a foreign
security tends to decrease when the value of the dollar rises against the
foreign currency in which the security is denominated and tends to increase when
the value of the dollar falls against such currency. Fluctuations in exchange
rates may also affect the earning power and asset value of the foreign entity
issuing the security. Dividend and interest payments may be repatriated based on
the exchange rate at the time of disbursement, and restrictions on capital flows
may be imposed. Losses and other expenses may be incurred in converting between
various currencies in connection with purchases and sales of foreign securities.
Foreign stock markets are generally not as developed or efficient as those in
the United States. In most foreign markets volume and liquidity are less than in
the United States and, at times, volatility of price can be greater than in the
United States. Fixed commissions on foreign stock exchanges are generally higher
than the negotiated commissions on United States exchanges. There is generally
less government supervision and regulation of foreign stock exchanges, brokers
and companies than in the United States.
There is also the possibility of adverse changes in investment or exchange
control regulations, expropriation or confiscatory taxation, limitations on the
removal of funds or other assets, political or social instability, or diplomatic
developments which could adversely affect investments, assets or securities
transactions of the International Series in some foreign countries. The
International Series is not aware of any investment or exchange control
regulations which might substantially impair the operations of the Series as
described, although this could change at any time.
For many foreign securities, there are U.S. dollar-denominated American
Depository Receipts ("ADR's"), which are traded in the
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United States on exchanges or over the counter and are sponsored and issued by
domestic banks. ADRs represent the right to receive securities of foreign
issuers deposited in a domestic bank or a correspondent bank. ADRs do not
eliminate all the risk inherent in investing in the securities of foreign
issuers. However, by investing in ADRs rather than directly in foreign issuers'
stock, the International Series can avoid currency risks during the settlement
period for either purchases or sales. In general, there is a large, liquid
market in the United States for many ADRs. The information available for ADRs is
subject to the accounting, auditing and financial reporting standards of the
domestic market or exchange on which they are traded, which standards are more
uniform and more exacting than those to which many foreign issuers may be
subject. The International Series may also invest in European Depository
Receipts ("EDR's"), which are receipts evidencing an arrangement with a European
bank similar to that for ADRs and are designed for use in the European
securities markets. EDRs are not necessarily denominated in the currency of the
underlying security.
The dividends and interest payable on certain of the International Series'
foreign securities may be subject to foreign withholding taxes, thus reducing
the net amount available for distribution to the International Series'
shareholders. Investors should understand that the expense ratio of the
International Series can be expected to be higher than those of investment
companies investing in domestic securities since the costs of operation are
higher. There can be no assurance that the International Series' investment
policy will be successful or that its investment objective will be attained.
Since the International Series may invest up to 10% of its total assets in bonds
considered to be less than investment grade, it may be exposed to greater risks
than if it did not invest in such bonds. With lower rated bonds, there is a
greater possibility that an adverse change in the financial condition of the
issuer may affect its ability to pay principal and interest.
Balanced Series
The Balanced Series seeks as its investment objectives reasonable income,
long-term capital growth and conservation of capital. The Balanced Series
intends to invest based on combined considerations of risk, income, capital
enhancement and protection of capital value.
The Balanced Series may invest in any type or class of security. Normally, the
Balanced Series will invest in common stocks and fixed income securities;
however, it may also invest in securities convertible into common stocks. At
least 25% of the value of its assets will be invested in fixed income senior
securities. The overall economic and financial outlook determines the allocation
of assets between fixed income and common stock investments. Fixed income
investments are typically made in high quality, lower risk securities. Common
stock investments are made in companies with intermediate and long term earnings
growth potential such as are invested in by the Growth Series. The Series
attempts to invest in common stocks belonging to fundamentally attractive
sectors and industries and strives to be overweighted in these areas relative to
their representation in broad market indices such as the Standard & Poor's 500.
The current outlook and the asset allocation are continuously reviewed.
The Series may also engage in certain options transactions and enter into
financial futures contracts and related options for hedging purposes and may
invest in deferred or zero coupon debt obligations. (See "Other Special
Investment Methods" and the Statement of Additional Information.)
In implementing the investment objectives of this Series, management will select
securities believed to have potential for the production of current income, with
emphasis on securities that also have potential for capital enhancement. In an
effort to protect its assets against major market declines, or for other
temporary defensive purposes, the Balanced Series may actively pursue a policy
of retaining cash or investing part or all of its assets in cash equivalents,
such as government securities and high grade commercial paper.
Real Estate Series
The Real Estate Series seeks as its investment objective capital appreciation
and income with approximately equal emphasis. It intends under normal
circumstances to invest in marketable securities of publicly traded real estate
investment trusts ("REITs") and companies that are principally engaged in the
real estate industry. Under normal circumstances, the Series intends to invest
at least 75% of the value of its assets in these securities.
The Series investment objective is a fundamental policy which may not be changed
without shareholder approval. Policies and limitations are considered at the
time of purchase and the sale of instruments is not required in the event of a
change in circumstances. There can be no assurance that the Series will achieve
its objective.
REITs are pooled investment vehicles which invest primarily in income producing
real estate or real estate related loans or interests. Generally, REITs can be
classified as equity REITs, mortgage REITs, or hybrid REITs. Equity REITs invest
the majority of their assets directly in real property and derive income
primarily from the collection of rents. Equity REITs can also realize capital
gains by selling properties that have appreciated in value. Mortgage REITs
invest the majority of their assets in real estate mortgages and derive income
from the collection of interest payments. Hybrid REITs combine the
characteristics of both equity REITs and mortgage REITs. The Series intends to
emphasize investment in equity REITs.
In determining whether an issuer is "principally engaged" in the real estate
industry, PRS seeks companies which derive at least 50% of their gross revenues
or net profits from the ownership, development, construction, financing,
management or sale of commercial, industrial or residential real estate. The
equity securities of real estate companies considered for purchase by the Series
will consist of shares of beneficial interest, marketable common stock, rights
or warrants to purchase common stock, and securities with common stock
characteristics such as preferred stock and debt security's convertible into
common stock.
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The Real Estate Series may also invest up to 25% of its total assets in (a)
marketable debt securities of companies principally engaged in the real estate
industry; (b) mortgage-backed securities such as mortgage pass-through
certificates, real estate mortgage investment conduit ("REMIC") certificates and
collateralized mortgage obligations ("CMOs"); or (c) short-term investments
listed below.
The Real Estate Series invests in debt securities only if, at the date of
investment, they are rated within the four highest grades as determined by
Moody's (Aaa, Aa, A or Baa) or by S&P (AAA, AA, A or BBB) or, if not rated or
rated under a different system, are judged by PRS to be of equivalent quality to
debt securities so rated. Securities rated Baa or BBB are medium grade
investment obligations that may have speculative characteristics. Changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments in the case of such obligations
than is the case for higher grade securities. The Series may, but is not
obligated to, dispose of debt securities whose credit quality falls below
investment grade. Unrated debt securities may be less liquid than comparable
rated debt securities and may involve somewhat greater risk than unrated debt
securities.
For temporary defensive purposes (as when market conditions in real estate
securities are extremely adverse such that PRS believes there are extraordinary
risks associated with investment therein), the Series may invest up to 100% of
its total assets in short-term investments such as money market instruments
consisting of securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; repurchase agreements; certificates of deposit
and bankers' acceptances issued by banks or savings and loan associations having
net assets of at least $500 million as of the end of their most recent fiscal
year; high-grade commercial paper rated at time of purchase, in the top two
categories by a national rating agency or determined to be of comparable quality
by PRS or ABKB at the time of purchase; and other long and short-term
instruments which are rated A or higher by S&P or Moody's at the time of
purchase.
Risk Factors. The Real Estate Series is non-diversified under the federal
securities laws. As a non-diversified portfolio, there is no restriction under
the Investment Company Act of 1940 (the "1940 Act") on the percentage of assets
that may be invested at any time in the securities of any one issuer. To the
extent that the Real Estate Series is not fully diversified, it may be more
susceptible to adverse economic, political or regulatory developments affecting
a single issuer than would be the case if it were more broadly diversified. In
addition, investments by the Real Estate Series in securities of companies
providing mortgage servicing will be subject to the risks associated with
refinancings and their impact on servicing rights.
Although the Real Estate Series does not invest directly in real estate, it does
invest primarily in real estate securities and accordingly, the value of shares
of the Real Estate Series will fluctuate in response to changes in economic
conditions within the real estate industry. Risks associated with the direct
ownership of real estate and with the real estate industry in general include,
among other things, possible declines in the value of real estate; risks related
to general and local economic conditions; possible lack of availability of
mortgage funds; over-building; extended vacancies of properties; increases in
competition, property taxes and operating expenses; changes in zoning laws;
costs resulting from the clean-up of, and liability to third parties for damages
resulting from, environmental problems; casualty or condemnation losses;
uninsured damages from floor, earthquakes or other natural disasters;
limitations on and variations in rents; dependency on property management skill;
the appeal of properties to tenants; changes in interest rates.
Investing in REIT's involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REIT's
may be affected by changes in the value of the underlying property owned by the
REIT's, while mortgage REIT's may be affected by the quality of any credit
extended. REIT's are dependent upon management skills, are not diversified, and
are subject to the risks of financing projects. The Portfolio may invest in new
or unseasoned REIT issuers and it may be difficult or impossible for PRS or ABKB
to ascertain the value of each of such REIT's underlying assets, management
capabilities and growth prospects. In addition, REIT's are subject to heavy cash
flow dependency, default by borrowers, self-liquidation, and the possibilities
of failing to qualify for the exemption from tax or distributed income under the
Internal Revenue Code of 1986, as amended (the "Code") and failing to maintain
their exemptions from the 1940 Act. REIT's whose underlying assets include
long-term health care properties, such as nursing, retirement and assisted
living homes may be impacted by federal regulations concerning the health care
industry. The Series will indirectly bear its proportionate share of any
expenses paid by the Series itself.
REIT's (especially mortgage REIT's) are subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations usually rises. Conversely, when interest rates rise, the value of a
REIT's investment in fixed rate obligations can be expected to decline. In
contrast as interest rates on adjustable rate mortgage loans are reset
periodically, yields on a REIT's investment in such loans will gradually align
themselves to reflect changes in market interest rates, causing the value of
such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
In addition, investing in REIT's involves risks similar to those associated with
investing in small capitalization companies. REIT's may have limited financial
resources, may trade less frequently and in a limited volume and may be more
subject to abrupt or erratic price movements than larger capitalization stocks
included in the S&P 500 Index.
The Series commenced operations on May 1, 1995 based upon an initial
capitalization of $5 million provided by Phoenix Home Life. The ability of the
Series to raise additional capital for investment purposes may directly effect
the spectrum of series holdings and performance. While many of the officers and
directors of PRS are experienced real estate professionals, based upon its
relatively recent formation and involvement with real
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estate securities, PRS does not have an operating history of investing in the
types of real estate securities expected to be held within the Real Estate
Series. Even though PRS is an affiliate of PIC, PRS has no prior experience as
an investment adviser.
OTHER SPECIAL INVESTMENT METHODS
Repurchase Agreements
The Money Market, Real Estate and the International Series may invest in
repurchase agreements. However, no more than 10% of a Series' net assets will be
invested in repurchase agreements having maturities of more than seven days or
in other illiquid securities. A repurchase agreement is a transaction where a
Series buys a security at one price and the seller simultaneously agrees to buy
that same security back at a higher price. Repurchase agreements will be entered
into with commercial banks, brokers and dealers considered by the Board of
Trustees and the Adviser acting at the Board's direction, to be creditworthy. In
addition, the repurchase agreements are always fully collateralized by the
underlying instrument and are marked to market every business day. However, the
use of repurchase agreements involves certain risks such as default by or
insolvency of the other party to the transaction.
Options
The Bond, Money Market, Growth, Total Return, Balanced and International 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. The Money Market,
Growth and Bond Series may only purchase call options for the purpose of
terminating a call option previously written. The Total Return, Balanced, and
International Series may also buy exchange-traded call and put options on equity
and debt securities and on stock market indexes. The International Series may
also write or buy Over-the-Counter (OTC) options, write secured put options and
enter into options transactions on foreign currency. The International Series
may also invest up to 5% of its net assets in warrants and stock rights, which
are almost identical to call options except that they are issued by the issuer
of the underlying security rather than an option writer. However, no more than
2% of its net assets will be invested in warrants and stock rights not traded on
the New York Stock Exchange or American Stock Exchange. A complete description
of options, warrants and stock rights, and their associated risks is contained
in the Statement of Additional Information.
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. 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. A brief description of these procedures and related
limitations appears in the Statement of Additional Information.
Financial Futures and Related Options
The Total Return and Balanced Series may enter into financial futures contracts
for the purchase or sale of debt obligations traded on exchanges regulated by
the Commodity Futures Trading Commission to hedge against anticipated changes in
interest rates that would otherwise have an adverse effect upon the value of
debt securities in its portfolio. Hedging is the initiation of an offsetting
position in the futures market which is intended to minimize the risk associated
with a position's underlying securities in the cash market. The purchase of such
futures contracts will not be for speculation but will be solely for protection
of the Series against declines in value. 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 Total Return or Balanced Series' futures
contracts (both receipts and delivery) will not exceed 10% of its total assets.
The International Series may also enter into financial futures contracts and
related options to 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. The International Series 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 the Series' total assets.
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
even though the purchase or sale of the contract would not have resulted in a
loss.
A complete description of financial futures and related options is contained in
the Statement of Additional Information.
Foreign Securities
The International Series will purchase foreign securities as discussed above. In
addition, the other Series may invest up to 25% of total net asset value in
foreign securities. The Series other than the International Series will purchase
foreign debt securities only if issued in U.S. dollar denominations. Investments
in foreign securities, particularly those of non-governmental issuers, involve
considerations which are not ordinarily associated with investing in domestic
issuers. Those considerations are discussed under "International Series."
Foreign Currency Transactions. The value of the assets of the Series invested in
foreign securities, as measured in United States dollars, may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and the Series may incur costs in connection with
conversions between
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various currencies. The Series will conduct foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or through forward contracts to purchase
or sell foreign currencies. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These contracts are
traded directly between currency traders (usually large commercial banks) and
their customers. At the time of the purchase of a forward foreign currency
exchange contract, 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. A
Series may also hedge its foreign currency exchange rate risk by engaging in
currency financial futures and options transactions. For more information about
foreign currency transactions, see the Statement of Additional Information.
Mortgage-backed securities
The Real Estate Series may also invest in mortgage-backed securities such as
mortgage-backed securities such as mortgage pass-through certificates, real
estate mortgage investment conduit ("REMIC") certificates and collateralized
mortgage obligations ("CMOs"). CMOs are hybrid instruments with characteristics
of both mortgage-backed and mortgage pass-through securities. Similar to a bond,
interest and pre-paid principal on a CMO are paid, in most cases, semiannually.
CMOs may be collateralized by whole mortgage loans but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
Government National Mortgage Association (GNMA), the Federal National Mortgage
Association, or Federal National Mortgage Association. CMOs are structured into
multiple classes, with each class bearing a different stated maturity. Monthly
payments of principal, including prepayments, are first returned to investors
holding the shortest maturity class; investors holding the longer maturity
classes receive principal only after the first class has been retired. REMICs
are similar to CMOs and are fixed pools of mortgages with multiple classes of
interests held by investors.
The Series may also invest in pass-through securities that are derived from
mortgages. A pass-through security is formed when mortgages are pooled together
and undivided interests in the pool or pools are sold. The cash flow from the
mortgages is passed through to the holders of the securities in the form of
periodic payments of interest, principal and prepayments (net of a service fee).
The Series may purchase pass-through securities at a premium or at a
discount. The values of pass-through securities in which the Series may invest
will fluctuate with changes in interest rates. The value of such securities
varies inversely with interest rates, except that when interest rates decline,
the value of pass-through securities may not increase as much as other debt
securities because of the prepayment feature. Changes in the value of such
securities will not affect interest income from those obligations but will be
reflected in the Series' net asset value.
A particular risk associated with pass-through securities involves the
volatility of prices in response to changes in interest rates, or prepayment
risk. Prepayment rates are important because of their effect on the yield and
price of securities. Prepayments occur when the holder of an individual mortgage
prepays the remaining principal before the mortgages' scheduled maturity date.
As a result of the pass-through of prepayments of principal on the underlying
securities, mortgage-backed securities are often subject to more rapid
prepayment of principal than their stated maturity would indicate. Although the
pattern of prepayments is estimated and reflected in the price paid for
pass-through securities at the time of purchase, the actual prepayment behavior
of mortgages cannot be known at that time. Therefore, it is not possible to
predict accurately the realized yield or average life of a particular issue of
pass-through securities. Prepayments that occur faster than estimated adversely
affect yields for pass-throughs purchased at a premium (that is, a price in
excess of principal amount) and may cause a loss of principal because the
premium may not have been fully amortized at the time the obligation is repaid.
The opposite is true for pass-throughs purchased at a discount. Furthermore, the
proceeds from prepayments usually are reinvested at current market rates, which
may be higher than, but usually are lower than, the rates earned on the original
pass-through securities. Prepayments on a pool of mortgage loans are influenced
by a variety of economic, geographic, social and other factors, including
changes in mortgagors' housing needs, job transfers, unemployment, mortgagors;
net equity in the mortgaged properties and servicing decisions. Generally,
however, prepayments on fixed rate mortgage loans will increase during a period
of falling interest rates and decrease during a period of rising interest rates.
Mortgage-backed securities may decrease in value as a result of increases in
interest rates and may benefit less than other fixed income securities or
decline in value from declining interest rates because of risk of prepayment.
Lending of Portfolio Securities
Subject to certain investment restrictions, a Series from time to time may lend
securities from its portfolio to brokers, dealers and financial institutions
deemed creditworthy and receive, as collateral, cash or cash equivalents which
at all times while the loan is outstanding will be maintained in amounts equal
to at least 100% of the current market value of the loaned securities. Any cash
collateral will be invested in short-term securities which will increase the
current income of the Series lending its securities. A Series will have the
right to regain record ownership of loaned securities to exercise beneficial
rights such as voting rights and subscription rights. While a securities loan is
outstanding, the Series is to receive an amount
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equal to any dividends, interest or other distributions with respect to the
loaned securities. A Series may pay reasonable fees to persons unaffiliated with
the Trust for services in arranging such loans.
Even though securities lending usually does not impose market risks on the
lending Series, a Series would be subject to risk of loss due to an increase in
value if the borrower fails to return the borrowed securities for any reason
(such as the borrower's insolvency). Moreover, if the borrower of the securities
is insolvent, under current bankruptcy law, a Series could be ordered by a court
not to liquidate the collateral for an indeterminate period of time. If the
borrower is the subject of insolvency proceedings and the collateral held may
not be liquidated, the result could be a material adverse impact on the
liquidity of the lending Series.
INVESTMENT RESTRICTIONS
The Trust may not invest more than 25% of the assets of any one Series in any
one industry (except that the Money Market and Total Return Series may invest
more than 25% of their assets in the banking industry and the Real Estate Series
may invest at least 75% of its assets in the real estate industry). If the Trust
makes loans of the portfolio securities of any Series, the market value of the
securities loaned may not exceed 25% of the market value of the total assets of
such Series. The Trust may borrow money from a bank provided such borrowing does
not exceed 10% of the net asset value, not considering any such borrowings as
liabilities. Each Series may also borrow for temporary administrative purposes,
provided that any such borrowing does not exceed 5% of the Series' total assets
at the time the loan is made.
In addition to the investment restrictions described above, each Series'
investment program is subject to further restrictions which are described in the
Statement of Additional Information. The restrictions for each Series are
fundamental and may not be changed without shareholder approval.
THE TRUST AND ITS MANAGEMENT
The Trust is a mutual fund, technically known as an open-end, diversified
investment company. The Board of Trustees supervises the business affairs and
investments of the Trust, which is managed on a daily basis by the Trust's
investment advisers. The Trust was organized as a Massachusetts business trust
on February 18, 1986. The Trust is a series fund that issues seven classes of
shares of beneficial interest, one for each Series. The Statement of Additional
Information contains a list of the members of the Board of Trustees and the
officers of the Trust.
Investment Advisers
The Trust's investment advisers are Phoenix Investment Counsel, Inc. ("PIC") and
Phoenix Realty Securities, Inc. ("PRS") (the "Advisers"), both of which are
located at One American Row, Hartford, Connecticut 06115. PIC was originally
organized in 1932 as John P. Chase, Inc. In addition to the Trust, it also
serves as investment adviser to the Phoenix Series Fund, Phoenix Total Return
Fund, Inc. and Phoenix Multi-Portfolio Fund and as sub-adviser to American
Skandia, Chubb America Fund, Inc., Cambridge Series Trust and Sun America Series
Trust.
PRS was formed in 1994 as an indirect subsidiary of Phoenix Home Life. In
addition to the Trust, it also serves as investment adviser to the Real Estate
Portfolio of the Phoenix Multi Portfolio Fund and to the American Phoenix
Investment Portfolio.
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.
All of the outstanding stock of the Advisers is owned by Phoenix Equity Planning
Corporation ("PEPCO"), an indirect subsidiary of Phoenix Home Life. PEPCO also
performs bookkeeping and pricing and administrative services for the Trust.
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 PEPCO are located at 100 Bright Meadow Boulevard,
P.O. Box 2200, Enfield, Connecticut 06083-2200.
The Advisers furnish continuously an investment program for each Series and
manage the investment and reinvestment of the assets of each Series subject at
all times to the authority and supervision of the Trustees. All costs and
expenses (other than those specifically referred to as being borne by the
Advisers) incurred in the operation of the Account and the Trust are borne by
the Trust, Phoenix Home Life, or PHL Variable. A more detailed discussion of the
Advisers and the Investment Advisory Agreements are contained in the Statement
of Additional Information.
Portfolio Managers
Balanced Series and Total Return Series. Mr. C. Edwin Riley, Jr. serves as
portfolio manager of the balanced Series and Total Return Series and as such is
primarily responsible for the day to day management of the Series' investments.
Mr. Riley is also the portfolio manager of the Phoenix Total Return, Inc. From
1988 to 1995, Mr. Riley served as Senior Vice President and Director of Equity
Management for Nationsbank Investment Management.
Bond Series. Mr. Curtiss O. Barrows has served as portfolio manager of the Bond
Series since 1986 and, as such, is primarily responsible for the day-to-day
management of the Series' portfolio. Mr. Barrows is also portfolio manager of
the High Yield Series of the Phoenix Series Fund and is a Vice President of the
Adviser. Mr. Barrows is also Portfolio Manager, Public Bonds, Phoenix Home Life
Mutual Insurance Company.
Growth Series. Mr. John T. Wilson has served as portfolio manager of the Growth
Series since January, 1992 and as such, is primarily responsible for the
day-to-day management of the Series' portfolio. Mr. Wilson is Portfolio Manager,
Common Stock, Phoenix Home Life Mutual Insurance Company since 1990. From 1988
to 1990 Mr. Wilson attended Duke University Business School.
International Series. Ms. Jeanne H. Dorey has served as portfolio manager of the
International Series' since February, 1993 and as such is primarily responsible
for the day-to-day management of the Series' portfolio. Ms. Dorey is also the
Portfolio Manager of the Inter-
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national Portfolio of the Phoenix Multi-Portfolio Fund, which is also advised by
the Adviser. Ms. Dorey has served as a Vice President of the Adviser since
April, 1993, and as a Vice President of Phoenix Worldwide Opportunities Fund and
National Securities & Research Corporation since May, 1993. Ms. Dorey is also
Portfolio Manager, International, Phoenix Home Life Mutual Insurance Company.
From 1990 to 1992, Ms. Dorey was an Investment Analyst and Portfolio Manager
with Pioneer Group, Inc. From 1989 to 1990, Ms. Dorey was an Investment Analyst
and Portfolio Manager with Bank of Boston.
Money Market Series. Ms. Dorothy J. Skaret has served as the portfolio manager
of the Money Market Series since 1990 and as such, Ms. Skaret is primarily
responsible for the day-to-day management of the Series' portfolio. Ms. Skaret
is also the portfolio manager of the Money Market Series of the Phoenix Series
Fund, which also is advised by the Adviser. Ms. Skaret is also Director, Public
Fixed Income, Phoenix Home Life Mutual Insurance Company, and a Vice President
of National Securities & Research Corporation.
Real Estate Series. Ms. Barbara Rubin, President of PRS and William K. Morrill,
Jr., Managing Director of ABKB share primary responsibility for managing the
assets of the Real Estate Series from its inception. Barbara Rubin has over 19
years real estate experience and has been associated with Phoenix Home Life for
the past 13 years. William Morrill has over 15 years of investment experience
and has been a portfolio manager with ABKB since 1985.
Advisory Fees
As compensation for its services for all Series the Advisers are entitled to a
fee, payable within five days after the end of each month, as follows:
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%
The total advisory fee of 0.75% of the aggregate net assets of the International
Series is greater than that paid by most mutual funds; however, the Board of
Trustees of the Trust has determined that it is similar to fees charged by other
mutual funds whose investment objectives are similar to those of the
International Series.
Phoenix Realty Securities, Inc.
-------------------------------
Rate for First Rate for Next Rate for Excess Over
Series $1,000,000,00 $1,000,000,000 $2,000,000,000
- ------ -------------- -------------- --------------------
Real Estate .75% .70% .65%
The total advisory fee of 0.75% of the aggregate net assets of the Real Estate
Series is greater than that paid by most mutual funds; however, the Board of
Trustees of the Fund has determined that it is similar to fees charged by other
mutual funds whose investment objectives are similar to that of the Real Estate
Series. 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. In accordance
with the Sub-Advisory Agreement between the Trust and ABKB, ABKB is paid a
monthly fee at the annual rate of 0.45% of the average aggregate daily net asset
values of the Series up to $1 billion; 0.35% of such value between $1 billion
and $2 billion; and 0.30% of such value in excess of $2 billion. The
sub-advisory agreement relating to the Real Estate Series provides, among other
things, that ABKB shall maintain certain records for the Series, effectuate the
purchase and sale of securities for the Series. ABKB is not affiliated with PRS,
PIC, Phoenix Home Life or PHL Variable. The Real Estate Series pays other
operating expenses up to .25% of its total assets.
Financial Agent
Under a Financial Agent Agreement, Phoenix Home Life acts as financial agent of
the Trust and as such is responsible for certain administrative functions and
the bookkeeping and pricing functions for the Trust. For its services as
financial agent, Phoenix Home Life receives a fee based on the average of the
aggregate daily net asset values of the Trust at the annual rate per each
$1,000,000 of $600. Phoenix Home Life may receive compensation from the Account,
as described in the accompanying prospectus.
Expenses
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.
Portfolio Transactions and Brokerage
No Series has any obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to the Statement of
Policy on Brokerage Allocation adopted by the Board of Trustees, the Advisers
(or ABKB) are primarily responsible for the portfolio decisions of each Series
and the placing of its portfolio transactions. In placing orders, it is the
policy of each Series to obtain the most favorable net results, taking into
account various factors, including price, dealer spread or commission, if any,
size of the transaction and difficulty of execution. While the Advisers
generally seek reasonably competitive spreads or commissions, the Series will
not necessarily be paying the lowest spread or commission available. The
Advisers have no present intent to use any broker-dealers that may be affiliated
with the Advisers, Phoenix Home Life, PHL Variable or ABKB. The Statement of
Additional Information contains more information on brokerage allocation.
Performance History
From time to time the Trust may include the performance history of any or all of
the Series (along with applicable separate account performance history) in
advertisements, sales literature or reports. Performance information about each
Series is based on that Series' past performance only and is not an indication
of future performance. Performance information may be expressed
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as yield and effective yield of the Money Market Series, as yield of the Bond
Series, and as total return of any Series. Current yield for the Money Market
Series will be based on the income earned by the Series over a given 7-day
period (less a hypothetical charge reflecting deductions for expenses taken
during the period) and then annualized, i.e., the income earned in the period is
assumed to be earned every seven days over a 52-week period and is stated in
terms of an annual percentage return on the investment. Effective yield is
calculated similarly but reflects the compounding effect of earnings on
reinvested dividends.
For the Bond Series, quotations of yield will be based on all investment income
per share earned during a given 30-day period (including dividends and
interest), less expenses accrued during the period ("net investment income"),
and are computed by dividing net investment income by the maximum offering price
per share on the last day of the period.
When a Series advertises its total return, it will usually be calculated for one
year, five years, and ten years or since inception if the Series has not been in
existence for at least ten years. Total return is measured by comparing the
value of a hypothetical $1,000 investment in the Series at the beginning of the
relevant period to the value of the investment at the end of the period,
assuming the reinvestment of all distributions at net asset value and the
deduction of the maximum sales charge applicable at the beginning of the
relevant period.
Average Annual Total Return for
the Period Ending 12/31/94
-------------------------------
Commencement Life of
Series Date 1 Year 5 Years 10 Years Fund
- ------ ------------ ------ ------- -------- -------
Bond 1/1/83 -5.47% 8.64% 10.16% 9.90%
Balanced 5/1/92 -2.80% N/A N/A 5.65%
Total Return 9/17/84 -1.45% 10.61% 12.89% 12.43%
Growth 1/1/83 1.48% 14.91% 17.23% 17.92%
International 5/1/90 0.03% N/A N/A 6.26%
Real Estate 5/1/95 N/A N/A N/A N/A
Annual Total Returns
Total Inter- Real
Year Bond Balanced Return Growth national Estate
- ---- ---- -------- ------ ------ -------- ------
1984 11.46% N/A -0.59% 10.55% N/A N/A
1985 20.43% N/A 27.16% 34.70% N/A N/A
1986 19.45% N/A 15.61% 20.15% N/A N/A
1987 1.12% N/A 12.58% 7.05% N/A N/A
1988 10.36% N/A 2.33% 3.83% N/A N/A
1989 8.30% N/A 19.88% 36.06% N/A N/A
1990 5.14% N/A 5.62% 3.98% -8.10% N/A
1991 19.41% N/A 29.44% 43.83% 19.78% N/A
1992 10.03% 9.72% 10.67% 10.29% -12.89% N/A
1993 15.90% 8.57% 11.02% 19.69% 38.44% N/A
1994 -5.47% -2.80% -1.45% 1.48% 0.03% N/A
Performance data is historical and includes changes in share price and
reinvestment of dividends and capital gains. Principal and investment return
(except Money Market Series) will vary and you may have a gain or loss when you
withdraw your money. The Bond Series includes high yielding, lower-rated
securities which are subject to greater price volatility and may involve greater
risk of default. The market for these securities may be less liquid. While Money
Market Series seeks to maintain a stable $1.00 share price, there is no
assurance that it will be able to do so.
Yield calculations of the Money Market Series used for illustration purposes are
based on the consideration of a hypothetical investment account having a balance
of exactly one Share at the beginning of a seven day period, which period will
end on the date of the most recent financial statements. The yield for the
Series during this seven day period will be the change in the value of the
hypothetical investment account's original Share. The following is an example of
this yield calculation for the Money Market Series based on a seven day period
ending December 31, 1994.
Assumptions:
Value of hypothetical pre-existing account with
exactly one share at the beginning of the period: 1.000000
Value of the same account (excluding capital
changes) at the end of the seven day period: 1.000538
Calculation:
Ending account value 1.000538
Less beginning account value 1.000000
Net change in account value 0.000538
Base period return:
(adjusted change/beginning account value) 0.000538
Current yield = return x (365/7) = 2.80%
Effective yield = [(1 + return)365/7] - 1 = 2.85%
The current yield and effective yield information will fluctuate, and
publication of yield information may not provide a basis for comparison with
bank deposits, other investments which are insured and/or pay a fixed yield for
a stated period of time.
The Advisers have voluntarily agreed to reimburse certain expenses as described
under "Expenses" above. If the Advisers had not reimbursed certain expenses
during the periods shown, the returns for these funds would have been lower.
Performance numbers are net of all fund operating expenses, but do not include
any insurance charges imposed by your insurance company's separate account. If
performance information included the effect of these additional charges, it
would be lower.
The Trust's Annual Report, available upon request and without charge, contains a
discussion of the performance of each Series and a comparison of that
performance to a securities market index.
SHARES OF BENEFICIAL INTEREST
The Trust currently has seven classes of shares of beneficial interest, one for
each Series. Shares (including fractional shares) of each Series have equal
rights with regard to voting, redemptions, dividends, distributions, and
liquidations with respect to that Series. All voting rights of the Accounts as
shareholders are passed through to the Contractowners and Policyowners.
Shareholders of all Series currently vote on the election of Trustees and other
matters. On matters affecting an individual Series (such as approval of an
Investment Advisory Agreement or a change in fundamental investment policies), a
separate vote of that Series is required.
2-19
<PAGE>
Fund shares attributable to any Phoenix Home Life or PHL Variable assets and
Fund shares for which no timely instructions from Contract owners or
Policyowners are received will be voted by Phoenix Home Life and PHL Variable in
the same proportion as those shares in that Series for which instructions are
received.
Shares are fully paid, nonassessable, redeemable and fully transferable when
they are issued. Shares do not have cumulative voting rights, preemptive rights
or subscription rights.
The assets received by the Trust for the issue or sale of shares of each Series,
and all income, earnings, profits and proceeds thereof, subject only to the
rights of creditors, are allocated to such Series, and constitute the underlying
assets of such Series. The underlying assets of each Series are required to be
segregated on the books of account, and are to be charged with the expenses of
the Series and with a share of the general expenses of the Trust. Any general
expenses of the Trust not readily identifiable as belonging to a particular
Series shall be allocated by or under the direction of the Trustees in such
manner as the Trustees determine to be fair and equitable.
Unlike the stockholders of a corporation, there is a possibility that the
Accounts as shareholders of a business trust such as the Trust may be liable for
debts or claims against the Trust. The Declaration of Trust provides that
shareholders shall not be subject to any personal liability for the acts or
obligations of the Trust and that every written agreement, undertaking or
obligation made or issued by the Trust shall contain a provision to that effect.
The Declaration of Trust provides for indemnification out of the Trust property
for all losses and expenses of any shareholder held personally liable for the
obligations of the Trust. Thus, the risk of the Accounts, as shareholders,
incurring loss because of shareholder liability is limited to circumstances in
which the Trust itself would be unable to meet its obligations. Phoenix Home
Life and PHL Variable, as the sole shareholders, have a fiduciary duty to bear
this risk and Contractowners and Policyowners should be fully and completely
insulated from risk.
PURCHASE OF SHARES
The Trust offers its shares, without sales charge, for purchase by the Accounts
as an investment medium for the Variable Accumulation Annuity Contracts and
Variable Universal Life Insurance Policies issued by Phoenix Home Life and PHL
Variable. It is contemplated that in the future other separate accounts of
Phoenix Home Life, PHL Variable or other insurance companies may purchase shares
of the Trust. Shares of the Trust will not be sold to the public. The Trust
continuously offers shares in each Series to the Accounts at prices equal to the
respective net asset values of those Series. Net asset value is determined in
the manner set forth below under "NET ASSET VALUE."
It is conceivable that in the future it may be disadvantageous for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the Trust simultaneously. Although Phoenix Home Life, PHL Variable or the Trust
currently do not foresee any such disadvantages either to variable life
insurance Policyowners or to variable annuity Contractowners, the Trust's Board
of Trustees intends to monitor events in order to identify any material
conflicts between such Policyowners and Contractowners and to determine what
action, if any, should be taken in response thereto. Material conflicts could
result from, for example, (1) changes in state insurance laws, (2) changes in
Federal income tax laws, (3) changes in the investment management of any
portfolio of the Fund, or (4) differences in voting instructions between those
given by Policyowners and those given by Contractowners.
NET ASSET VALUE
The net asset value of the shares of each Series of the Trust is determined once
daily as of the close of regular trading of the New York Stock Exchange, or on
each day during which there is a sufficient degree of trading in any of the
securities held in a Series of the Fund that the current net asset value of the
shares of the Series might be materially affected. The Board of Directors of the
Exchange reserves the right to change this schedule as conditions warrant.
Net asset value of a Series' shares is computed by dividing the value of the net
assets of the Series by the total number of Series shares outstanding.
Securities that are traded on the stock exchange are valued at the last sale
price as of the close of business on the day the securities are being valued,
or, lacking any sales, at the mean between closing bid and asked price.
Securities traded in the over-the-counter market are valued at the mean between
the bid and asked prices or yield equivalent as obtained from one or more
dealers that make markets in the securities. Series' securities that are traded
both in the over-the-counter market and on an exchange are valued according to
the broadest and most representative market. Securities and assets for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees, and
may include valuations furnished by a pricing service that may be retained by
the Fund with the Trustees' approval.
Money market securities held by the Fund are valued on an amortized cost basis,
absent extraordinary or unusual market conditions, which involves valuing a
portfolio instrument at its cost initially and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods when value, as
determined by amortized cost, is higher or lower than the price the Fund would
receive if it sold the security. The Statement of Additional Information
contains a more detailed discussion on amortized cost.
Securities which are primarily traded on foreign securities exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges where primarily traded. (See Statement of Additional
Information.) Over-the-Counter traded 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.
Because of the need to obtain prices as of the close of trading on various
exchanges in different time zones throughout the world, the
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<PAGE>
calculation of net asset value does not take place for the International Series
at the same time as the determination of prices of the majority of the portfolio
securities of the International 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. If at any time a Series has other investments, such investments
are valued at the fair value thereof as determined in good faith by the Trustees
although the actual calculations may be made by persons acting pursuant to the
direction of the Trustees.
REDEMPTION OF SHARES
The Trust will redeem all full and fractional shares of the Trust presented for
redemption. The Trust may, at the discretion of the Trustees and to the extent
consistent with state and Federal law, make payment for shares of a particular
Series redeemed in whole or in part in securities or other assets of such Series
taken at current values. The redemption price is the net asset value per share
next determined after the initial receipt of proper notice of redemption.
The right to redeem shares or to receive payment with respect to any redemption
may only be suspended for more than seven days for any period during which
trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission or such Exchange is closed (other than
customary weekend and holiday closings), for any period during which an
emergency exists as defined by the Securities and Exchange Commission as a
result of which disposal of portfolio securities or determination of the net
asset value of each Series is not reasonably practicable, and for such other
periods as the Securities and Exchange Commission may by order permit for the
protection of shareholders of each Series.
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions with respect to the shares of any Series will be
payable in shares of such Series at net asset value or, at the option of the
Account as shareholder, in cash.
The net investment income of the Money Market Series will be declared as
dividends daily. Dividends will be distributed and reinvested in additional
shares on the last business day of every month. The net income of the Money
Market Series for Saturdays, Sundays and other days on which the New York Stock
Exchange is closed will be declared as dividends on the next business day.
The Bond, Growth, Total Return, Balanced and International Series will
distribute substantially all net investment income and net realized capital
gains, if any, to shareholders at least annually, although it is anticipated
that these distributions will be made on a quarterly basis. The Real Estate
Series will distribute its net investment income to its shareholders quarterly
and net realized capital gains, if any, to its shareholders annually.
TAXES
The Trust intends to qualify as a regulated investment company under Subchapter
M of the Internal Revenue Code ("Code") and so qualified for its last taxable
year. In addition, the Trust intends to comply with the investment
diversification requirements for variable contracts contained in the Code.
Moreover, the Trust will distribute sufficient income to avoid imposition of any
Federal excise tax. Dividends 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. The International Series may
incur liability for foreign income and withholding taxes on investment income.
The International Series intends to qualify for, and make an election permitted
under, the Code to enable the shareholder Accounts (and therefore Phoenix Home
Life) to claim a credit or deduction on Phoenix Home Life's income tax return
for the Accounts' pro rata share of the income and withholding taxes paid by the
International Series to foreign countries. Phoenix Home Life will also treat the
foreign income taxes paid by the Series as income. Contractowners and
Policyowners will not be required to treat the foreign income taxes paid by the
Series as income or be able to claim a credit or deduction for these taxes on
their income tax returns. For a discussion of the taxation of the Accounts, see
"Federal Tax Considerations" included in the Accounts' prospectuses.
Although the Real Estate Series may be a non-diversified portfolio, the Fund
intends to comply with the diversification and other requirements of the Code
applicable to "regulated investment companies" so that it will not be subject to
U.S. federal income tax on income and capital gain distributions to
shareholders. Accordingly, the Real Estate Series will not purchase securities
if, as a result, more than 25% of its total assets would be invested in the
securities of a single issuer or, with respect to 50% of its total assets, more
than 5% of such assets would be invested in the securities of a single issuer.
In addition, if the Real Estate Series has rental income or income from the
disposition of real property acquired as a result of a default on securities the
Real Estate Series may own, the receipt of such income may adversely affect its
ability to retain its tax status as a regulated investment company.
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND PAYING AGENT
The Custodian of the assets of all Series of the Trust, except the International
and Real Estate Series, is The Chase Manhattan Bank, N.A., 1 Chase Manhattan
Plaza, Floor 3B, New York, NY 10081. The Custodian of the assets of the
International Series is Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts 02109, Attention: Manager, Securities Division. The Custodian of
the assets of the Real Estate Series is State Street Bank & Trust, 1 Heritage
Drive, P2N, North Quincy, Massachusetts 02171. The Trust has authorized the
Custodian to appoint
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one or more subcustodians of the assets of the Trust held outside the United
States. The securities and other assets of each Series will be held by the
Custodians or any subcustodian separate from the securities and assets of each
other Series.
The Transfer Agent and the Dividend Paying Agent for the Trust's shares is
Phoenix Equity Planning Corporation, 100 Bright Meadow Boulevard, P.O. Box 2200,
Enfield, Connecticut 06083-2200.
OTHER INFORMATION
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110, serves as
independent accountants for the Trust and audits its financial statements
annually.
Inquiries and requests for the Statement of Additional Information and the
Annual Report to Shareholders should be directed in writing to Variable Products
Operations, Phoenix Home Life Mutual Insurance Company, 101 Munson Street, P.O.
Box 942, Greenfield, Massachusetts 01302-0942, or by telephoning Variable
Products Operations at (800) 447-4312.
APPENDIX
A-1 and P-1 Commercial Paper Ratings
The Money Market Series will only invest in commercial paper which at the date
of investment is rated A-1 by Standard & Poor's Corporation or P-1 by Moody's
Investors Services, Inc., or, if not rated, is issued or guaranteed by companies
which at the date of investment have an outstanding debt issue rated AA or
higher by Standard & Poor's or Aa or higher by Moody's.
Commercial paper rated A-1 by Standard & Poor's Corporation ("S&P") has the
following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long-term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend with allowance made for unusual circumstances.
Typically, the issuer's industry is well established and the issuer has a strong
position within the industry. The reliability and quality of management are
unquestioned.
The rating P-1 is the highest commercial paper rating assigned by Moody's
Investors Services, Inc. ("Moody's"). Among the factors considered by Moody's in
assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationship which exists with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations.
Moody's Investors Service, Inc., Corporate Bond Ratings
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they compromise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Standard and Poor's Corporation's Corporate Bond Ratings
AAA -- This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
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AA -- Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A -- Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
BB-B-CCC-CC -- Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
D -- Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
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<PAGE>
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 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.
----------------
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.
1
<PAGE>
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.
2
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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
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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
10
<PAGE>
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).
11
<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
$----------------- 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.
<PAGE>
THE PHOENIX EDGE SERIES FUND
PART C--OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements.
1. Condensed Financial Information is included in Part A of the
Registration Statement.
2. Financial Statements are included in Part B of the
Registration Statement:
The following unaudited financial statements, but no other
part of the report, are incorporated by reference to the
following portions of Registrant's Semi-Annual Report to
shareholders of The Phoenix Edge Series Fund for the period
ended June 30, 1995:
(bullet) Schedule of Investments at June 30, 1995
(bullet) Statement of Assets and Liabilities at June 30, 1995
(bullet) Statement of Operations at June 30, 1995
(bullet) Statement of Changes in Net Assets for the period
ended June 30, 1995
(bullet) Financial Highlights
(bullet) Notes to financial statements
(b) Exhibits:
1. Declaration of Trust of the Registrant dated February 18, 1986,
filed with the Registration Statement on Form N-1A on April 18,
1986.
1.1 Amendment to Declaration of Trust, establishing the International
Series, filed with Post-Effective Amendment No. 7 on March 2, 1992.
1.2 Amendment to Declaration of Trust, conforming Fund's borrowing
restrictions to California Department's Borrowing Guidelines, filed
with Post-Effective Amendment No. 7 on March 2, 1992.
1.3 Amendment to Declaration of Trust, establishing the Balanced
Series, filed with Post-Effective Amendment No. 8 on April 28,
1992.
1.4 Amendment to Declaration of Trust, establishing the Real Estate
Securities Series, filed with Post- Effective Amendment No. 12 on
February 16, 1995.
2. Not Applicable.
3. Not Applicable.
4. Not Applicable.
5. Form of Investment Advisory Agreement between Registrant and
Phoenix Investment Counsel, Inc. covering the Balanced, Bond,
Growth, Money Market, Total Return and International Series, filed
with Post-Effective Amendment No. 11 on May 2, 1994.
5.1 Form of Investment Advisory Agreement between Registrant and
Phoenix Realty Securities, Inc. covering the Phoenix Real Estate
Securities Series, filed with Post-Effective Amendment No. 13, on
April 28, 1995.
5.2 Form of Subadvisory Agreement among the Registrant, Phoenix Realty
Securities, Inc. and ABKB/ LaSalle Partners Limited Partnership,
covering the Phoenix Real Estate Securities Series, filed with
Post-Effective Amendment No. 13 on April 28, 1995.
6. Not Applicable.
7. Not Applicable.
8. Form of Custodian Agreement between Registrant and The Chase
Manhattan Bank, N.A. covering the International Series, filed with
Post-Effective Amendment No. 4 on March 13, 1990.
C-1
<PAGE>
8.1 Form of Amendment to Custodian Agreement covering International,
Money Market, Growth, Bond, Total Return and Balanced Series, filed
with Post-Effective Amendment No. 7 on March 2, 1992.
8.2 Custodian Agreement between Registrant and Brown Brothers Harriman
& Co. covering the International Series, filed with Post-Effective
Amendment No. 12 on February 16, 1995.
8.3 Form of Custodian Agreement between Registrant and State Street
Bank and Trust Company covering the Real Estate Securities Series,
filed with Post-Effective Amendment No. 12 on February 16, 1995.
9.1. Form of Transfer Agency Agreement, filed with original Registration
Statement on Form N-1A on April 18, 1986.
9.2. Form of Financial Agent Agreement, filed with Post-Effective
Amendment No. 11 on May 2, 1994.
10. Opinion and Consent of Counsel covering shares of the
International, Bond, Growth, Money Market, Balanced and Total
Return Series, filed with Post-Effective Amendment No. 7 on March
2, 1992.
10.1 Opinion and Consent of Counsel covering shares of Real Estate
Securities Series, filed with Post- Effective Amendment No. 13 on
April 28, 1995.
11. Written Consent of Price Waterhouse LLP, filed herewith.
12. Not Applicable.
13. Not Applicable.
14. Not Applicable.
15. Not Applicable.
16. Not Applicable.
17. Financial Data Schedule filed herewith and reflected on Edgar as
Exhibit 27.
18. Powers of Attorney filed with Post-Effective Amendments Nos. 11 and
12 on May 2, 1994 and February 16, 1995, respectively, and Power of
Attorney filed herewith.
C-2
<PAGE>
Item 25. Persons Controlled by or Under Common Control With Registrant
The following diagram illustrates the Registrant's place in the
organizational structure:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Phoenix Home Life
Mutual Insurance
Company
NY Corp. (succ. by
merger 1992)
Separate Variable Accumulation Variable Universal
Accounts B, C, Account Life Account PM Holdings, Inc.
and D NY Sep. Account NY Sep. Account CT Corp.
NY Sep. Accts. (7/1/92) (6/21/82) (6/17/85) (1/8/81)
The Phoenix Edge Series Fund Phoenix Equity
Mass. Bus. Trust Planning Corp.
(2/18/86) CT Corp. (7/15/68)
PHL Variable Insurance Company
CT Stock Co. (4/24/81)
PHL Variable Phoenix Investment
Accumulation Account Counsel, Inc.
CT Sep. Acct. Mass Corp. acquired
(12/7/94) (6/5/75)
</TABLE>
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of August 31, 1995
- ----------------------- --------------------------
Bond Series 2
Money Market Series* 2
Growth Series 5
Total Return Series 2
Balanced Series 2
International Series 2
Real Estate Series 0
- -----------
*Phoenix Mutual purchased 1 share of the Money Market Series at a price of
$10.00 per share on February 18, 1986.
Item 27. Indemnification
The Declaration of Trust provides that the Trust shall indemnify each of its
Trustees and officers against liabilities arising by reason of being or
having been a Trustee or officer, except for matters as to which such Trustee
or officer shall have been finally adjudicated not to have acted in good
faith and except for liabilities arising by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of duties.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore,
C-3
<PAGE>
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Advisers
The Trust's investment advisers are Phoenix Investment Counsel, Inc. ("PIC")
and Phoenix Realty Securities ("PRS"), which are located at One American Row,
Hartford, Connecticut 06115. PIC also serves as the investment adviser to
other investment companies: Phoenix Total Return Fund, Inc., Phoenix Series
Fund and Phoenix Multi-Portfolio Fund and as the sub-adviser to American
Skandia Trust, Chubb America Fund, Inc., JNL Series Trust and SunAmerica
Series Trust. PRS also serves as the investment adviser to the Real Estate
Portfolio of the Phoenix Multi-Portfolio Fund. One or more of these companies
may have investment objectives similar to those of one or more Series of the
Trust.
Set forth below is a list of each executive officer and director of
Phoenix Investment Counsel, Inc., indicating the business, profession,
vocation, or employment in which each person has been engaged at any time
during the past two fiscal years, for his own account or in the capacity of
director, officer, partner, or trustee.
<TABLE>
<CAPTION>
Name and Position with Other Business, Profession,
Phoenix Investment Counsel, Inc. Vocation, or Employment
- ----------------------------------- ----------------------------------------------------------------
<S> <C>
Robert W. Fiondella Chairman, President and Chief Executive Officer, Phoenix Home
Director Life Mutual Insurance Company. Director, Phoenix Securities
Group, Inc., National Securities & Research Corporation, Phoenix
Equity Planning Corporation, Townsend Financial Advisers, Inc.,
W.S. Griffith & Co., Inc., Phoenix Realty Advisors, Inc.,
Phoenix Realty Group, Inc., Phoenix Realty Investors, Inc. and
Phoenix Realty Securities, Inc. Director and President, PM
Holdings, Inc.
Martin J. Gavin Senior Vice President, Investment Products, Phoenix Home Life
Director and Executive Vice Mutual Insurance Company. Director and Executive Vice President,
President National Securities & Research Corporation, Phoenix Equity
Planning Corporation and Phoenix Securities Group, Inc.
Director, Townsend Financial Advisers, Inc. and W.S. Griffith &
Co., Inc. Director and Vice President, PM Holdings, Inc.
Executive Vice President, Phoenix Asset Reserve, Phoenix
California Tax Exempt Bonds, Inc., Phoenix Equity Opportunities
Fund, Phoenix Income and Growth Fund, Phoenix Multi-Sector Fixed
Income Fund, Inc. and Phoenix Worldwide Opportunities Fund.
Michael E. Haylon Senior Vice President, Securities Investments, Phoenix Home Life
Director and President Mutual Insurance Company. Vice President, The Phoenix Edge
Series Fund, Phoenix Multi-Sector Fixed Income Fund and Phoenix
Series Fund. Director and Executive Vice President, National
Securities & Research Corporation.
Philip R. McLoughlin Executive Vice President and Chief Investment Officer,
Director and Chairman Investments, and Director, Phoenix Home Life Mutual Insurance
Company. Director/Trustee of the Phoenix Funds. Director and
President, Phoenix Equity Planning Corporation, Phoenix Re
Corporation (Delaware), World Trust Fund and Phoenix Securities
Group, Inc. Director, Townsend Financial Advisers, Inc., W.S.
Griffith & Co., Inc., Phoenix Realty Advisors, Inc., Phoenix
Realty Group, Inc., Phoenix Realty Investors, Inc. and Phoenix
Realty Securities, Inc., Director, Chairman and Chief Executive
Officer, National Securities & Research Corporation. Director
and Vice President, PM Holdings, Inc.
C-4
<PAGE>
Richard C. Shaw Senior Vice President, International and Corporate Development,
Director and Senior Vice President Phoenix Home Life Mutual Insurance Company. Executive Vice
President, Offshore Investment Funds Phoenix Equity Planning
Corporation. Director, President, Chief Executive Officer,
Worldwide Phoenix Offshore, Inc. Chairman, American Phoenix
Corporation. President, Worldwide Phoenix, Limited. Director,
American Phoenix Investment Portfolios, National Securities &
Research Corporation.
Dona D. Young Executive Vice President, Individual Insurance, and General
Director Counsel, Phoenix Home Life Mutual Insurance Company. Director,
Phoenix Securities Group, Inc., Phoenix American Life Insurance
Company, 238 Columbus Blvd., Inc., American Phoenix Life and
Reassurance Company, PHL Variable Insurance Company, Worldwide
Phoenix Offshore, Inc., Phoenix Equity Planning Corporation,
Phoenix Realty Securities, Inc. and Phoenix Realty Group, Inc.
W.S. Griffith & Co., Inc., and Townsend Financial Advisers, Inc.
Director and Vice President, PM Holdings, Inc.
Paul A. Atkins Vice President, Institutional Investment Sales, Phoenix Home
Senior Vice President Life Mutual Insurance Company.
William R. Moyer Vice President, Investment Products Finance, Phoenix Home Life
Senior Vice President, Finance, and Mutual Insurance Company. Senior Vice President, Finance,
Treasurer Phoenix Equity Planning Corporation and Phoenix Securities
Group, Inc. Senior Vice President, Chief Financial Officer and
Treasurer, Townsend Financial Advisers, Inc. and W.S. Griffith &
Co., Inc. Senior Vice President, Finance and Treasurer, National
Securities & Research Corporation. Vice President, the Phoenix
Funds.
David L. Albrycht Portfolio Manager, Phoenix Home Life Mutual Insurance Company.
Vice President Vice President, Phoenix Asset Reserve, Phoenix Multi-Portfolio
Fund and Phoenix Multi-Sector Fixed Income Fund, Inc.
Michael K. Arends Portfolio Manager, Phoenix Home Life Mutual Insurance Company.
Vice President Vice President, Phoenix Series Fund, and National Securities &
Research Corporation. Portfolio Manager, Kemper Investment
Portfolio Growth Fund (until 1994).
Patricia A. Bannan Vice President, Common Stock, Phoenix Home Life Mutual Insurance
Director and Vice President Company. Vice President, Phoenix Series Fund and The Phoenix
Edge Series Fund. Executive Vice President, National Securities
& Research Corporation.
Holly S. Barrett Regional Vice President, Phoenix Home Life Mutual Insurance
Vice President Company.
Curtiss O. Barrows Portfolio Manager, Public Bonds, Phoenix Home Life Mutual
Vice President Insurance Company. Vice President, National Securities &
Research Corporation, The Phoenix Edge Series Fund and Phoenix
Series Fund.
Sandra L. Becker Managing Director, Private Placements, Phoenix Home Life Mutual
Vice President Insurance Company.
Kathleen A. Bloomquist Vice President, Institutional Client Relations/Service,
Vice President Phoenix Home Life Mutual Insurance Company. Vice President,
Worldwide Phoenix Limited.
C-5
<PAGE>
James C. Bly Regional Group Pension Manager, Phoenix Home Life Mutual
Vice President Insurance Company.
Mary E. Canning Associate Portfolio Manager, Common Stock, Phoenix Home Life
Vice President Mutual Insurance Company. Vice President, The Phoenix Edge
Series Fund and Phoenix Series Fund.
Paul M. Chute Managing Director, Private Placements, Phoenix Home Life Mutual
Vice President Insurance Company.
Nelson Correa Managing Director, Private Placements, Phoenix Home Life Mutual
Vice President Insurance Company.
James M. Dolan Vice President and Compliance Officer, Phoenix Equity Planning
Vice President, Assistant Clerk Corporation. Vice President, the Phoenix Funds. Vice President
and Assistant Secretary and Compliance Officer, Assistant Secretary, National Securities
& Research Corporation. Vice President and Chief Compliance
Officer, Phoenix Realty Advisors, Inc. and Chief Compliance
Officer, Phoenix Realty Securities, Inc.
Jeanne H. Dorey Portfolio Manager, International, Phoenix Home Life Mutual
Vice President Insurance Company. Vice President, National Securities &
Research Corporation, The Phoenix Edge Series Fund, Phoenix
Multi-Portfolio Fund and Phoenix Worldwide Opportunities Fund.
Catherine Dudley Portfolio Manager, Common Stock, Phoenix Home Life Mutual
Vice President Insurance Company. Vice President, National Securities &
Research Corporation, Phoenix Multi-Portfolio Fund, Phoenix
Series Fund and The Phoenix Edge Series Fund.
John M. Hamlin Portfolio Manager, Common Stock, Phoenix Home Life Mutual
Vice President Insurance Company.
Christopher J. Kelleher Portfolio Manager, Public Bonds, Phoenix Home Life Mutual
Vice President Insurance Company. Vice President, National Securities &
Research Corporation, The Phoenix Edge Series Fund and Phoenix
Series Fund.
Peter S. Lannigan Director, Public Fixed Income, Phoenix Home Life Mutual
Vice President Insurance Company. Vice President, Phoenix Multi-Portfolio Fund.
Associate Director, Bond Rating Group, Standard & Poor's Corp.
(until 1993).
Thomas S. Melvin, Jr. Portfolio Manager, Common Stock, Phoenix Home Life Mutual
Vice President Insurance Company. Vice President, Phoenix Multi-Portfolio Fund
and National Securities & Research Corporation.
Charles L. Olson Regional Marketing Manager, Phoenix Home Life Mutual Insurance
Vice President Company.
Lawrence D. Reitman Director, Corporate Portfolio, Phoenix Home Life Mutual
Vice President Insurance Company
Amy L. Robinson Managing Director, Securities Administration, Phoenix Home Life
Vice President Mutual Insurance Company. Vice President, National Securities &
Research Corporation, The Phoenix Edge Series Fund and Phoenix
Series Fund.
C-6
<PAGE>
Christopher J. Saner Director, Corporate Portfolio, Phoenix Home Life Mutual
Vice President Insurance Company.
David M. Schans, C.L.U. Regional Group Pension Manager, Phoenix Home Life Mutual
Vice President Insurance Company.
Dorothy J. Skaret Director, Public Fixed Income, Phoenix Home Life Mutual
Vice President Insurance Company. Vice President, National Securities &
Research Corporation, The Phoenix Edge Series Fund and Phoenix
Series Fund.
Rosemary T. Strekel Vice President, Private Placements, Phoenix Home Life Mutual
Vice President Insurance Company.
James D. Wehr Managing Director, Public Fixed Income, Phoenix Home Life Mutual
Vice President Insurance Company. Vice President, National Securities &
Research Corporation, Phoenix California Tax Exempt Bond Fund,
Phoenix Multi-Portfolio Fund, The Phoenix Edge Series Fund and
Phoenix Series Fund.
John T. Wilson Portfolio Manager, Common Stock, Phoenix Home Life Mutual
Vice President Insurance Company. Vice President, Phoenix Multi-Portfolio Fund,
Phoenix Series Fund, Phoenix Worldwide Opportunities Fund and
National Securities & Research Corporation.
Anthony J. Zeppetella Vice President, Portfolio Management, Phoenix Home Life Mutual
Vice President Insurance Company.
G. Jeffrey Bohne Vice President and General Manager, Phoenix Home Life Mutual
Clerk Insurance Company. Vice President, Transfer Agent Operations,
Phoenix Equity Planning Corporation. Secretary, the Phoenix
Funds. Clerk, Phoenix Total Return Fund, Inc.
Patricia O. McLaughlin Counsel, Phoenix Home Life Mutual Insurance Company. Secretary,
Secretary and Assistant Clerk National Securities & Research Corporation, Townsend Financial
Advisers, Inc. and W.S. Griffith & Co., Inc.
</TABLE>
Phoenix Realty Securities, Inc.
Phoenix Realty Securities, Inc., is a registered investment adviser which
serves as investment adviser to the Registrant's Real Estate Securities
Portfolio.
There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each director or
officer of Phoenix Realty Securities, Inc. is, or at any time during the past
two years has been, engaged for his or her own account or in the capacity of
director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Name and Position with Other Business, Profession,
Phoenix Realty Securities, Inc. Vocation, or Employment
- ----------------------------------- ----------------------------------------------------------------
<S> <C>
Robert W. Fiondella Chairman, President and Chief Executive Officer, Phoenix Home
Director Life Mutual Insurance Company. Director, Phoenix Equity Planning
Corporation, Phoenix Securities Group, Inc., National Securities
& Research Corporation, Townsend Financial Advisers, Inc.,
Phoenix Realty Advisors, Inc., Phoenix Realty Investors, Inc.
and Phoenix Realty Group, Inc. Director and Vice President of PM
Holdings, Inc.
C-7
<PAGE>
Philip R. McLoughlin Executive Vice President, Chief Investment Officer and Director,
Director Phoenix Home Life Mutual Insurance Company. Director/Trustee,
President, Phoenix Funds. Director and President, Phoenix Equity
Planning Corporation, and Phoenix Securities Group, Inc.
Director, Chairman, and Chief Executive Officer, National
Securities & Research Corporation. Director and Vice President,
PM Holdings, Inc., Director, Phoenix Re Corporation (Delaware).
World Trust Fund, W.S. Griffith & Co., Townsend Financial
Advisers, Inc., Phoenix Realty Group, Inc., Phoenix Realty
Advisors, Inc., Phoenix Realty Investors, Inc. and Phoenix
Investment Counsel, Inc.
Scott C. Noble Senior Vice President, Real Estate, Phoenix Home Life Mutual
Director and Chief Executive Insurance Company. Director and Executive Vice President,
Officer Phoenix Real Estate Securities, Inc. Vice President, Phoenix
Multi-Portfolio Fund and The Phoenix Edge Series Fund. Director
and President, Phoenix Founders, Inc., Phoenix Realty Advisors,
Inc. and Phoenix Realty Group, Inc. Director, President and
Chief Executive Officer, Phoenix Realty Investors, Inc.
Charles J. Paydos Executive Vice President and Director, Phoenix Home Life Mutual
Director Insurance Company. Director, Phoenix Equity Planning
Corporation, National Securities & Research Corporation, W.S.
Griffith & Co., Inc., Townsend Financial Advisers, Inc., Phoenix
Securities Group, Inc., and Phoenix Realty Group, Inc. Director
and Vice President, PM Holdings, Inc.
David W. Searfoss Executive Vice President and Chief Financial Officer, Phoenix
Director and Treasurer Home Life Mutual Insurance Company. Director, Phoenix Equity
Planning Corporation. Director, Vice President and Treasurer. PM
Holdings, Inc. Director and Treasurer, Phoenix Realty Group,
Inc. Treasurer, Phoenix Realty Advisors, Inc. and Phoenix Realty
Investors, Inc.
Dona D. Young Executive Vice President, Individual Insurance, and General
Director Counsel, Phoenix Home Life Mutual Insurance Company. Director,
Executive Vice President and General Counsel, Phoenix American
Life Insurance Company. Director and Vice President, PM
Holdings, Inc. Director, 238 Columbus Blvd., Inc., American
Phoenix Life and Reassurance Company, PHL Variable Insurance
Company, Worldwide Phoenix Offshore, Inc., Phoenix Equity
Planning Corporation, Phoenix Investment Counsel, Inc., Townsend
Financial Advisers, Inc., W.S. Griffith & Co., Inc., and Phoenix
Realty Group, Inc.
Barbara Rubin Vice President, Real Estate, Phoenix Home Life Mutual Insurance
Executive Vice President Company. Vice President, Phoenix Multi-Portfolio Fund and The
Phoenix Edge Series Fund. Director, Phoenix Home Life Federal
Credit Union, VNA Health Care, Inc. and Broad Park Development
Corporation. Vice President, 238 Columbus Blvd., Inc., Director
and Vice President, Phoenix Founders, Inc. Vice President,
Phoenix Real Estate Securities, Inc. Executive Vice President,
Phoenix Realty Group, Inc.
Steven R. Blomquist Managing Director, Real Estate, Phoenix Home Life Mutual
Senior Vice President Insurance Company. Senior Vice President, Phoenix Realty Group,
Inc. Executive Vice President, Phoenix Realty Investors, Inc.
Douglas G. Denyer Managing Director, Real Estate, Phoenix Home Life Mutual
Senior Vice President Insurance Company. Senior Vice President and Treasurer, Phoenix
Realty Group, Inc. Senior Vice President, Phoenix Realty
Advisors, Inc.
C-8
<PAGE>
Terence P. O'Day Managing Director, Real Estate, Phoenix Home Life Mutual
Senior Vice President Insurance Company. Senior Vice President, Phoenix Realty
Advisors, Inc. and Phoenix Realty Group, Inc.
James M. Dolan Vice President and Compliance Officer, Phoenix Equity Planning
Chief Compliance Officer Corporation and Phoenix Realty Advisors, Inc. Vice President,
the Phoenix Funds, and National Securities & Research
Corporation.
Edward F. Kaeser, Jr. Director, Real Estate, Phoenix Home Life Mutual Insurance
Vice President Company. Vice President, Phoenix Realty Advisors, Inc. and
Phoenix Realty Group, Inc.
Rodney E. Pelletier Director, Real Estate, Phoenix Home Life Mutual Insurance
Vice President Company. Vice President, Phoenix Realty Group, Inc.
Antonia G. Rhodus Director, Real Estate, Phoenix Home Life Mutual Insurance
Vice President Company. Vice President, Phoenix Realty Group, Inc. and Phoenix
Realty Advisors, Inc.
Dorothy J. Skaret Director, Public Fixed Income, Phoenix Home Life Mutual Insurance
Vice President Company, Vice President, Phoenix Series Fund, the Phoenix Edge
Series Fund, Phoenix Investment Counsel, Inc. and National
Securities and Research Corporation.
Stephen Swett Director, Real Estate, Phoenix Home Life Mutual Insurance
Vice President Company. Vice President, Phoenix Realty Group, Inc.
Keith D. Robbins Vice President and Investment Counsel, Phoenix Home Life Mutual
Secretary Insurance Company.
</TABLE>
The respective principal addresses of the companies or other entities
named above are as follows:
Phoenix Equity Planning Corporation 100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, CT 06083-2200
Phoenix Home Life Mutual One American Row
Insurance Company Hartford, CT 06115
American Phoenix Corporation 302 West Main Street
Avon, CT 06001
American Phoenix Investment 13, rue Goethe
Portfolios L-2014 Luxembourg
American Phoenix Life and
Reassurance One American Row
Company Hartford, CT 06115
Kemper Financial Services 120 South LaSalle Street
Chicago, IL 60603
National Securities & Research One American Row
Corporation Hartford, CT 06115
PHL Variable Insurance Company One American Row
Hartford, CT 06115
Phoenix American Life Insurance One American Row
Company Hartford, CT 06115
C-9
<PAGE>
Phoenix Re Corporation (Delaware) 80 Maiden Lane
New York, NY 10038
Phoenix Realty Advisors, Inc. One American Row
Hartford, CT 06115
Phoenix Realty Group, Inc. One American Row
Hartford, CT 06115
Phoenix Realty Investors, Inc. One American Row
Hartford, CT 06115
Phoenix Realty Securities, Inc. One American Row
Hartford, CT 06115
Phoenix Securities Group, Inc. One American Row
Hartford, CT 06115
PM Holdings, Inc. One American Row
Hartford, CT 06115
The Phoenix Funds 101 Munson Street
Greenfield, MA 01301
Townsend Financial Advisers, Inc. 100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, CT 06083-2200
W.S. Griffith & Co., Inc. 101 Bright Meadow Boulevard
P.O. Box 2200
Enfield, CT 06083-2200
238 Columbus Blvd., Inc. One American Row
Hartford, CT 06115
World Trust Fund KREDIETRUST
Societe Anonyme
11, rue Aldringen
L-2690 Luxembourg
R.C. Luxembourg B 10.750
Worldwide Phoenix Limited 41 Cedar House
Hamilton HM 12, Bermuda
Worldwide Phoenix Offshore, Inc. One American Row
Hartford, CT 06115
Item 29. Principal Underwriters
Not Applicable.
C-10
<PAGE>
Item 30. Location of Accounts and Records
Phoenix Home Life Mutual Insurance Company
One American Row
Hartford, Connecticut 06115
and
101 Munson Street
P.O. Box 942
Greenfield, Massachusetts 01302-0942
Item 31. Management Services
All management-related service contracts are discussed in Part A or
B of this Registration Statement.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) The information called for by Item 5A of Form N-1A is contained
in the Fund's annual report to shareholders; accordingly, the
Fund hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Fund's latest annual
report, upon request and without charge.
C-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to the Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Hartford and the State of
Connecticut on the 9th day of October, 1995.
THE PHOENIX EDGE SERIES FUND
Attest: /s/ Patricia O. McLaughlin By: /s/ Philip R. McLoughlin
-------------------------- ------------------------
Assistant Secretary President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities indicated on this 9th day of October, 1995.
Signature Title
--------- -----
- --------------------------------------------- Trustee
C. Duane Blinn*
- --------------------------------------------- Trustee
Robert Chesek*
- --------------------------------------------- Trustee
E. Virgil Conway*
- --------------------------------------------- Treasurer
Nancy G. Curtiss* (Principal Financial and
Accounting Officer)
- --------------------------------------------- Trustee
Harry Dalzell-Payne*
- --------------------------------------------- Trustee
Leroy Keith, Jr.*
/s/ Philip R. McLoughlin Trustee and President
- --------------------------------------------- Principal Executive Officer)
Philip R. McLoughlin
- --------------------------------------------- Trustee
James M. Oates*
- --------------------------------------------- Trustee
Philip R. Reynolds*
- --------------------------------------------- Trustee
Herbert Roth, Jr.*
- --------------------------------------------- Trustee
Richard E. Segerson*
- --------------------------------------------- Trustee
Lowell P. Weicker, Jr.**
By: /s/ Philip R. McLoughlin
* Philip R. McLoughlin, pursuant to powers of attorney filed previously under
this Registration Statement.
** Philip R. McLoughlin, pursuant to power of attorney filed herewith.
S-1(C)
EXHIBIT 11
Written Consent of Price Waterhouse LLP
EXHIBIT 18
POWER OF ATTORNEY
I, the undersigned member of the Board of Trustees of The Phoenix Edge Series
Fund, hereby constitute and appoint Philip R. McLoughlin and Patricia O.
McLaughlin as my true and lawful attorneys and agents with full power to sign
for me in the capacity indicated below, any or all Registration Statements or
amendments thereto filed with the Securities and Exchange Commission under the
Securities Act of 1933 and/or the Investment company Act of 1940 relating to The
Phoenix Edge Series Fund, and hereby ratify and confirm my signature as it may
be signed by said attorneys and agents.
WITNESS my hand and seal on the date set forth below.
6/6, 1995 /s/Lowell P. Weicker, Jr., Trustee
-----------------------------------
Lowell P. Weicker, Jr.
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