As filed with the Securities and Exchange Commission on April 29, 1997
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. 20 |X|
AND/OR
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 |X|
AMENDMENT NO. 23 |X|
(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 RICHARD J. WIRTH, ESQ.
THE PHOENIX EDGE SERIES FUND C/O PHOENIX HOME LIFE MUTUAL
C/O PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
INSURANCE COMPANY ONE AMERICAN ROW
ONE AMERICAN ROW HARTFORD, CT 06115
HARTFORD, CONNECTICUT 06115
(NAME AND ADDRESS OF AGENT FOR SERVICE)
-------------------
It is proposed that this filing will become effective (check appropriate
box):
| | Immediately upon filing pursuant to paragraph (b)
|X| On May 1, 1997 pursuant to paragraph (b), 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 21, 1997, 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)
<TABLE>
PART A
<CAPTION>
FORM N-1A ITEM PROSPECTUS CAPTION
-------------- ------------------
<C> <S>
1. Cover Page................................................. Cover Page
2. Synopsis................................................... Introduction
3. Condensed Financial Information............................ Financial Highlights
4. General Description of Registrant.......................... Introduction; Investment Objectives and Policies; Other
Special Investment Methods; The Fund and Its Management
5. Management of the Fund..................................... The Fund and Its Management; Custodian, Transfer Agent
and Dividend Paying Agent
6. Capital Stock and Other Securities......................... The Fund 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 Fund
13. Investment Objectives and Policies......................... Investment Policies; Investment Restrictions;
Portfolio Turnover
14. Management of the Fund..................................... Management of the Fund
15. Control Persons and Principal Holders of Securities........ Management of the Fund
16. Investment Advisory and Other Services..................... Management of the Fund; The Investment Adviser
17. Brokerage Allocation and Other Practices................... Brokerage Allocation
18. Capital Stock and Other Securities......................... Investing In the Fund; Redemption of Shares
19. Purchase, Redemption and Pricing of
Securities Being Offered.................................. Determination of Net Asset Value; Investing in the Fund;
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>
THE PHOENIX EDGE SERIES FUND
HOME OFFICE: PHOENIX VARIABLE PRODUCTS
MAIL OPERATIONS:
101 Munson Street P.O. Box 8027
Greenfield, MA Boston, MA 02266-8027
PROSPECTUS
May 1, 1997
The Phoenix Edge Series Fund (formerly "The Big Edge Series Fund"), a
Massachusetts business trust (the "Fund"), is an open-end management
investment company which is intended to meet a wide range of investment
objectives with its nine separate Series: Money Market, Growth, Multi-Sector
Fixed Income, Strategic Allocation, International, Balanced, Real Estate
Securities, Strategic Theme and Aberdeen New Asia Series. Generally, each Series
is, in effect, a separate fund issuing its own shares.
The shares of the Fund are not directly offered to the public. You can
invest in the Fund only by buying a Variable Accumulation Annuity Contract from
Phoenix Home Life Mutual Insurance Company ("Phoenix"), or by buying a Variable
Universal Life Insurance Policy, also offered by Phoenix, or by buying a
Variable Accumulation Annuity Contract offered by PHL Variable Insurance Company
("PHL Variable"), or by buying a Variable Universal Life Insurance Policy
offered by Phoenix Life and Annuity Company ("PLAC"), and directing the
allocation of your payment or payments to the Subaccount(s) corresponding to
the Series in which you wish to invest. The Subaccounts will, in turn,
invest in shares of the Fund. Not all Series may be offered through a particular
Contract or Policy. The Fund also offers its shares through other Phoenix
products.
The investment objectives of the Series are as follows:
Multi-Sector Fixed Income ("Multi-Sector") Series. The investment
objective of the Multi-Sector Series (formerly the "Bond Series") is to seek
long-term total return by investing in a diversified portfolio of fixed income
securities market sectors encompassing 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 $10.00 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.
Strategic Allocation ("Allocation") Series. The investment objective of
the Allocation Series (formerly 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 Allocation Series invests in
stocks, bonds and money market instruments in accordance with the 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 ("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.
Strategic Theme ("Theme") Series. The investment objective of the Theme
Series is to seek long-term appreciation of capital. This Series seeks to
identify securities benefiting from long-term trends present in the United
States and abroad. The Series intends to invest primarily in common stocks
believed by the Adviser to have substantial potential for capital growth. Since
many trends may be early in their development and no history of industry growth
patterns are available, securities owned may present a high degree of risk.
Aberdeen New Asia ("Asia") Series. This Series seeks as its investment
objective long-term capital appreciation. It is intended that this Series will
invest primarily in a diversified portfolio of equity securities of issuers
located in at least three different countries throughout Asia, other than Japan.
There can be no assurance that any Series will achieve its
objectives. See "Investment Objectives and Policies."
2-1
<PAGE>
This Prospectus gives you the facts about the Fund and each of its Series
that you should know before directing investment in the Fund, and it should be
read and kept for future reference. A Statement of Additional Information dated
May 1, 1997, which contains further information about the Fund, 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 at (800) 447-4312,
or by writing to Phoenix Variable Products Mail Operations at PO Box 8027,
Boston, Massachusetts 02266-8027.
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.
2-2
<PAGE>
THE PHOENIX EDGE SERIES FUND
TABLE OF CONTENTS
Heading Page
- ----------------------------------------------------------------
Fund Expenses............................................ 2-4
Financial Highlights..................................... 2-5
Introduction............................................. 2-10
Investment Objectives and Policies....................... 2-11
Multi-Sector Series.................................. 2-11
Money Market Series.................................. 2-12
Growth Series........................................ 2-12
Allocation Series.................................... 2-13
International Series................................. 2-13
Balanced Series...................................... 2-15
Real Estate Series................................... 2-15
Theme Series......................................... 2-16
Asia Series.......................................... 2-17
Other Special Investment Methods......................... 2-18
Convertible Securities............................... 2-18
Repurchase Agreements................................ 2-18
Options.............................................. 2-18
Financial Futures and Related Options................ 2-18
Foreign Securities................................... 2-19
Leverage............................................. 2-19
Private Placements & Rule 144A Securities............ 2-19
Mortgage-backed Securities........................... 2-20
Lending of Portfolio Securities...................... 2-20
Investment Restrictions.................................. 2-21
Portfolio Turnover....................................... 2-21
The Fund and Its Management.............................. 2-21
Investment Advisers.................................. 2-21
Portfolio Managers................................... 2-22
Balanced Series.................................. 2-22
Allocation Series................................ 2-22
Multi-Sector Series.............................. 2-22
Growth Series.................................... 2-22
International Series............................. 2-22
Money Market Series.............................. 2-22
Real Estate Series............................... 2-22
Theme Series..................................... 2-22
Asia Series...................................... 2-22
Advisory Fees........................................ 2-22
Financial Agent...................................... 2-23
Expenses............................................. 2-23
Portfolio Transactions and Brokerage................. 2-23
Performance History.................................. 2-23
Shares of Beneficial Interest............................ 2-25
Purchase of Shares....................................... 2-25
Net Asset Value.......................................... 2-25
Redemption of Shares..................................... 2-25
Dividends and Distributions.............................. 2-26
Taxes ................................................. 2-26
Custodian, Transfer Agentand
Dividend Paying Agent................................ 2-26
Other Information........................................ 2-26
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 Fund, the Investment Advisers or
the Distributor. This Prospectus does not constitute an offering in any state in
which such offering may not be lawfully made.
2-3
<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, 1996.
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, 1996)
<TABLE>
<CAPTION>
ALLO- MONEY
GROWTH MULTI-SECTOR CATION MARKET INTERNATIONAL BALANCED REAL ESTATE THEME ASIA
------ ------------ ------ ------ ------------- -------- ----------- ----- ----
Management Fees
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees ........ .63% .50% .58% .40% .75% .55% .75% .75% 1.00%
12b-1 Fees........................... None None None None None None None None None
Other Operating Expenses
(After Reimbursement)............ .09%(1) .15%(1) .12%(1) .15%(1) .29%(1) .13%(1) .25%(2) .25%(3) .25%(4)
---- ---- ---- ---- ---- ---- ---- ---- ----
Total Fund Operating Expenses... .72% .65% .70% .55% 1.04% .68% 1.00% 1.00% 1.25%
</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>
ALLO- MONEY
GROWTH MULTI-SECTOR CATION MARKET INTERNATIONAL BALANCED REAL ESTATE THEME ASIA
------ ------------ ------ ------ ------------- -------- ----------- ----- ----
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year.................................. $ 7 $ 7 $ 7 $ 6 $ 11 $ 7 $ 10 $ 10 $ 13
3 Years................................. $23 $21 $22 $18 $ 33 $22 $ 32 $ 32 $ 40
5 Years................................. $40 $36 $39 $31 $ 57 $38 $ 55 $ 55 $ 69
10 Years................................ $89 $81 $87 $69 $127 $85 $122 $122 $151
</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 FUND AND ITS MANAGEMENT."
(1) Phoenix Investment Counsel, Inc. ("PIC") has agreed to reimburse the Series
(except the International) 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 amount, if any, by which the Series'
operating expenses other than the management fee for any fiscal year exceed
.40% of the average net assets of the Series. If these reimbursements had
not been in place for the fiscal year ended December 31, 1996, total
operating expenses for the Multi-Sector Series would have been approximately
.67% of the average net assets of such Series.
(2) Phoenix Realty Securities, Inc. and/or Phoenix 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 of
such Series. If this reimbursement had not been in place for the fiscal year
ended December 31, 1996, total operating expenses for the Real Estate Series
would have been approximately 1.43% of average net asset of such Series.
(3) Phoenix Investment Counsel, Inc. and/or Phoenix and/or PHL Variable have
agreed to reimburse the Theme 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 of such Series. If
this reimbursement had not been in place for the fiscal year ending December
31, 1996, total operating expenses for the Theme Series would have been
approximately 1.28% of the average net assets of such Series.
(4) Phoenix-Aberdeen International Advisors, LLC and/or Phoenix and/or PHL
Variable have agreed to reimburse the Asia 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 of
such Series. If this reimbursement had not been in place for the fiscal year
ending December 31, 1996, total operating expenses for the Asia Series would
have been approximately 2.87% of the average net assets of such Series.
2-4
<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 Fund. The annual information has been extracted
from the Fund'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, 1996, which is included in the Statement of
Additional Information. The Statement of Additional Information and the Fund'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>
YEAR ENDED DECEMBER 31,
-----------------------
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period...... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Income from investment operations
Net investment income.... 0.50 0.56 0.38(1) 0.28(1) 0.35 0.58 0.79 0.88 0.72 0.63
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total from investment
operations............. 0.50 0.56 0.38 0.28 0.35 0.58 0.79 0.88 0.72 0.63
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Less distributions:
Dividends from net investment
income................... (0.50) (0.56) (0.38) (0.28) (0.35) (0.58) (0.79) (0.88) (0.72) (0.63)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions.... (0.50) (0.56) (0.38) (0.28) (0.35) (0.58) (0.79) (0.88) (0.72) (0.63)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Change in net asset value.. - - - - - - - - - -
--- --- --- --- --- --- --- --- --- ---
Net asset value,
end of period.............. $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Total Return(2)............ 4.98% 5.55% 3.77% 2.80% 3.50% 5.80% 7.90% 8.80% 7.20% 6.30%
Ratios/supplemental data:
Net assets, end of period
(thousands).............. $131,361 $102,943 $ 94,586 $ 72,946 $ 69,962 $ 51,692 $ 38,709 $ 28,808 $ 22,294 $ 10,749
Ratio to average net assets of:
Operating expenses....... .55% 0.53%(3) 0.55% 0.55% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Net investment income.... 4.89% 5.57% 3.85% 2.84% 3.49% 5.76% 7.87% 8.96% 7.24% 6.30%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of $.003
and $0.01 per share, respectively.
(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.
(3) For the year ended December 31, 1995, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
GROWTH SERIES
<TABLE>
YEAR ENDED DECEMBER 31,
-----------------------
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period...... $ 18.13 $ 15.69 $ 16.59 $ 15.01 $ 14.43 $ 11.72 $ 11.62 $ 8.83 $ 8.81 $ 9.84
Income from investment operations
Net investment income.... 0.19 0.20 0.23(1,3) 0.16(3) 0.22(3) 0.39(3) 0.35(3) 0.27(3) 0.32(3) 0.19(3)
Net realized and
unrealized gain.......... 2.10 4.60 0.02 2.77 1.25 4.64 0.10 2.88 0.02 0.45
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total from investment
operations............. 2.29 4.80 0.25 2.93 1.47 5.03 0.45 3.15 0.34 0.64
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Less distributions:
Dividends from net investment
income................... (0.18) (0.17) (0.23) (0.15) (0.23) (0.37) (0.35) (0.27) (0.32) (0.21)
Dividends from net realized
gains.................... (1.35) (2.19) (0.92) (1.20) (0.66) (1.95) - (0.09) - (1.46)
------ ------ ------ ------ ------ ------ --- ------ --- ------
Total distributions.... (1.53) (2.36) (1.15) (1.35) (0.89) (2.32) (0.35) (0.36) (0.32) (1.67)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Change in net asset value.. 0.76 2.44 (0.90) 1.58 0.58 2.71 0.10 2.79 0.02 (1.03)
---- ---- ------ ---- ---- ---- ---- ---- ---- ------
Net asset value,
end of period.............. $ 18.89 $ 18.13 $ 15.69 $ 16.59 $ 15.01 $ 14.43 $ 11.72 $ 11.62 $ 8.83 $ 8.81
========== ======== ======== ======== ======= ======== ======== ======== ======== ========
Total Return(2)............ 12.58% 30.85% 1.48% 19.69% 10.29% 43.83% 3.98% 36.06% 3.83% 7.05%
Ratios/supplemental data:
Net assets, end of period
(thousands).............. $1,235,395 $985,389 $616,221 $446,368 $245,565 $102,259 $ 40,061 $ 29,931 $ 18,051 $ 18,860
Ratio to average net assets of:
Operating expenses....... 0.72% 0.75%(4) 0.80% 0.79% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Net investment income.... 1.03% 1.12% 1.38% 0.97% 1.66% 2.14% 3.19% 2.51% 3.64% 2.34%
Portfolio turnover rate.... 1.67% 173% 185% 185% 214% 237% 272% 285% 326% 251%
Average commission
rate paid(5)............... $ 0.0455 N/A N/A N/A N/A N/A N/A N/A N/A N/A
</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.
(3) Computed using average shares outstanding.
(4) For the year ended December 31, 1995, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
(5) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for securities trades on
which commissions are charged. This rate generally does not reflect
mark-ups, mark-downs or spreads on shares traded on a principal basis.
2-5
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
(formerly known as the Bond Series)
<TABLE>
YEAR ENDED DECEMBER 31,
-----------------------
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period...... $ 10.22 $ 8.98 $ 10.27 $ 9.58 $ 9.33 $ 8.48 $ 8.85 $ 9.11 $ 9.08 $ 10.07
Income from investment operations
Net investment income.... 0.79(1) 0.83(1,3) 0.72(1,3) 0.66(1,3) 0.66(3) 0.74(3) 0.80(3) 0.99(3) 0.92(3) 1.06(3)
Net realized and unrealized
gain (loss).............. 0.43 1.22 (1.28) 0.84 0.25 0.85 (0.37) (0.25) (0.01) (0.93)
---- ---- ------ ---- ---- ---- ------ ------ ------ ------
Total from investment
operations............. 1.22 2.05 (0.56) 1.50 0.91 1.59 0.43 0.74 0.91 0.13
---- ---- ------ ---- ---- ---- ---- ---- ---- ----
Less distributions:
Dividends from net investment
income................... (0.78) (0.81) (0.73) (0.66) (0.66) (0.74) (0.80) (1.00) (0.88) (1.12)
Dividends from net realized
gains.................... (0.32) - - (0.15) - - - - - -
------ --- --- ------ --- --- --- --- --- ---
Total distributions.... (1.10) (0.81) (0.73) (0.81) (0.66) (0.74) (0.80) (1.00) (0.88) (1.12)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Change in net asset value.. 0.12 1.24 (1.29) 0.69 0.25 0.85 (0.37) (0.26) 0.03 (0.99)
---- ---- ------ ---- ---- ---- ------ ------ ---- ------
Net asset value,
end of period.............. $ 10.34 $ 10.22 $ 8.98 $ 10.27 $ 9.58 $ 9.33 $ 8.48 $ 8.85 $ 9.11 $ 9.08
======== ======== ======== ======= ======= ======= ====== ======== ======= ========
Total Return(2)............ 12.42% 23.54% (5.47%) 15.90% 10.03% 19.41% 5.14% 8.30% 10.36% 1.12%
Ratios/supplemental data:
Net assets, end of period
(thousands).............. $145,044 $109,046 $74,686 $79,393 $43,090 $21,957 $13,558 $ 13,947 $ 11,081 $ 8,389
Ratio to average net assets of:
Operating expenses...... 0.65% 0.65%(4) 0.66% 0.65% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Net investment income... 7.80% 8.55% 7.62% 6.71% 7.47% 8.65% 9.26% 10.99% 10.37% 10.90%
Portfolio turnover rate..... 191% 147% 181% 169% 166% 269% 318% 340% 262% 67%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.002, $.007, $.006 and $.005 per share, respectively.
(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.
(3) Computed using average shares outstanding.
(4) For the year ended December 31, 1995, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
STRATEGIC ALLOCATION SERIES
(formerly known as the Total Return Series)
<TABLE>
YEAR ENDED DECEMBER 31,
-----------------------
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period...... $ 13.63 $ 12.68 $ 13.71 $ 12.86 $ 12.97 $ 11.07 $ 11.05 $ 9.68 $ 9.87 $ 9.85
Income from investment operations
Net investment income.... 0.32 0.45 0.36(1,3) 0.23(3) 0.37(3) 0.42(3) 0.58(3) 0.51(3) 0.46(3) 0.34(3)
Net realized and unrealized
gain (loss).............. 0.91 1.84 (0.56) 1.17 0.99 2.76 0.02 1.38 (0.24) 0.91
---- ---- ------ ---- ---- ---- ---- ---- ------ ----
Total from investment
operations............. 1.23 2.29 (0.20) 1.40 1.36 3.18 0.60 1.89 0.22 1.25
---- ---- ------ ---- ---- ---- ---- ---- ---- ----
Less distributions:
Dividends from net investment
income................... (0.31) (0.45) (0.37) (0.23) (0.37) (0.42) (0.58) (0.52) (0.41) (0.40)
Dividends from net realized
gains.................... (0.90) (0.89) (0.46) (0.32) (1.10) (0.86) - - - (0.83)
------ ------ ------ ------ ------ ------ --- --- --- ------
Total distributions.... (1.21) (1.34) (0.83) (0.55) (1.47) (1.28) (0.58) (0.52) (0.41) (1.23)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Change in net asset value.. 0.02 0.95 (1.03) 0.85 (0.11) 1.90 0.02 1.37 (0.19) 0.02
---- ---- ------ ---- ------ ---- ---- ---- ------ ----
Net asset value,
end of period.............. $ 13.65 $ 13.63 $ 12.68 $ 13.71 $ 12.86 $ 12.97 $ 11.07 $ 11.05 $ 9.68 $ 9.87
======== ======== ======== ======== ======== ======== ======== ======== ======= ========
Total Return(2)............ 9.05% 18.22% (1.45%) 11.02% 10.67% 29.44% 5.62% 19.88% 2.33% 12.58%
Ratios/supplemental data:
Net assets, end of period
(thousands).............. $374,244 $353,838 $289,083 $256,011 $163,628 $ 98,415 $ 62,839 $ 57,901 $ 59,109 $ 68,099
Ratio to average net assets of:
Operating expenses....... 0.70% 0.67%(4) 0.74% 0.74% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Net investment income.... 2.26% 3.28% 2.71% 1.82% 2.90% 3.48% 5.39% 4.73% 4.62% 3.67%
Portfolio turnover rate.... 287% 170% 220% 269% 326% 255% 302% 302% 314% 359%
Average commission
rate paid(5)............... $ 0.0530 N/A N/A N/A N/A N/A N/A N/A N/A N/A
</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.
(3) Computed using average shares outstanding.
(4) For the year ended December 31, 1995, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
(5) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for securities trades on
which commissions are charged. This rate generally does not reflect
mark-ups, mark-downs or spreads on shares traded on a principal basis.
2-6
<PAGE>
INTERNATIONAL SERIES
<TABLE>
FROM
INCEPTION
YEAR ENDED DECEMBER 31, 5/1/90 TO
-----------------------
<CAPTION>
1996 1995 1994 1993 1992 1991 12/31/90
---- ---- ---- ---- ---- ---- --------
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C>
beginning of period....................... $ 12.70 $ 11.85 $ 12.21 $ 8.82 $ 10.17 $ 9.07 $ 10.00
Income from investment operations
Net investment income(4)................ 0.11 0.12 0.08 0.07(2) 0.09 0.24(2) 0.07(2)
Net realized and unrealized gain (loss). 2.25 1.02 (0.07) 3.32 (1.40) 1.53 (0.88)
---- ---- ------ ---- ------ ---- ------
Total from investment operations...... 2.36 1.14 0.01 3.39 (1.31) 1.77 (0.81)
---- ---- ---- ---- ------ ---- ------
Less distributions:
Dividends from net investment income.... (0.19) (0.04) (0.03) - (0.04) (0.24) (0.07)
Dividends from net realized gains....... (0.33) (0.25) (0.34) - - (0.41) -
Distributions from paid in capital...... - - - - - (0.02) (0.05)
In excess of net investment income...... (0.02) - - - - - -
------ --- --- --- --- --- ---
Total distributions................... (0.54) (0.29) (0.37) - (0.04) (0.67) (0.12)
------ ------ ------ --- ------ ------ ------
Change in net asset value................. 1.82 0.85 (0.36) 3.39 (1.35) 1.10 (0.93)
----- ----- ------ ---- ------ ---- ------
Net asset value, end of period............ $ 14.52 $ 12.70 $ 11.85 $ 12.21 $ 8.82 $ 10.17 $ 9.07
======== ======== ======== ========= ======== ======= ========
Total Return(3)........................... 18.65% 9.59% 0.03% 38.44% (12.89%) 19.78% (8.10%)
Ratios/supplemental data:
Net assets, end of period (thousands)... $172,668 $134,455 $134,627 $ 61,242 $ 13,772 $ 6,119 $ 2,010
Ratio to average net assets of:
Operating expenses...................... 1.04% 1.07% 1.10% 1.15% 1.50% 1.50% 1.50%(1)
Net investment income................... 0.80% 0.95% 0.64% 0.49% 1.13% 2.44% 1.82%(1)
Portfolio turnover rate................... 142% 249% 172% 193% 74% 104% 48%(1)
Average commission rate paid(5)........... $ 0.0213 N/A N/A N/A N/A N/A N/A
</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.
(4) Computed using average shares outstanding.
(5) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for securities trades on
which commissions are charged. This rate generally does not reflect
mark-ups, mark-downs or spreads on shares traded on a principal basis.
BALANCED SERIES
<TABLE>
FROM
INCEPTION
YEAR ENDED DECEMBER 31, 5/1/92 TO
<CAPTION>
1996 1995 1994 1993 12/31/92
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............................... $ 12.30 $ 10.53 $ 11.31 $ 10.77 $ 10.00
Income from investment operations
Net investment income.......................................... 0.36 0.40(4) 0.38(2,4) 0.32(2,4) 0.19(4)
Net realized and unrealized gain (loss)........................ 0.89 2.02 (0.70) 0.60 0.77
---- ---- ------ ---- ----
Total from investment operations............................ 1.25 2.42 (0.32) 0.92 0.96
---- ---- ------ ---- ----
Less distributions:
Dividends from net investment income........................... (0.35) (0.40) (0.36) (0.32) (0.19)
Dividends from net realized gains.............................. (1.14) (0.25) (0.10) (0.06) -
------ ------ ------ ------ ---
Total distributions........................................ (1.49) (0.65) (0.46) (0.38) (0.19)
------ ------ ------ ------ ------
Change in net asset value.......................................... (0.24) 1.77 (0.78) 0.54 0.77
------ ------ ------ ---- ----
Net asset value, end of period..................................... $ 12.06 $ 12.30 $ 10.53 $ 11.31 $ 10.77
======== ======== ======== ======== ========
Total Return(3).................................................... 10.56% 23.28% (2.80%) 8.57% 9.72%(7)
Ratios/supplemental data:
Net assets, end of period (thousands).......................... $204,285 $193,302 $161,105 $158,144 $ 54,467
Ratio to average net assets of:
Operating expenses............................................. 0.68% 0.65%(5) 0.69% 0.70% 0.50%(1)
Net investment income.......................................... 2.93% 3.44% 3.44% 3.16% 3.59%(1)
Portfolio turnover rate............................................ 229% 223% 171% 161% 110%(1)
Average commission rate paid(6).................................... $ 0.0641 N/A N/A N/A N/A
</TABLE>
(1) Annualized.
(2) Includes reimbursement of operating expenses by investment adviser of $0.001
and $0.001 per share, 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.
(4) Computed using average shares outstanding.
(5) For the year ended December 31, 1995, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
(6) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for securities trades on
which commissions are charged. This rate generally does not reflect
mark-ups, mark-downs or spreads on shares traded on a principal basis.
(7) Not annualized.
2-7
<PAGE>
REAL ESTATE SECURITIES SERIES
<TABLE>
<CAPTION>
FROM
YEAR INCEPTION
ENDED 5/1/95 TO
12/31/96 12/31/95
-------- --------
<S> <C> <C>
Net asset value, beginning of period............................................ $ 11.33 $ 10.00
Income from investment operations
Net investment income....................................................... 0.50(2) 0.33(2)
Net realized and unrealized gain............................................ 3.14 1.42
---- ----
Total from investment operations........................................ 3.64 1.75
---- ----
Less distributions:
Dividends from net investment income........................................ (0.50) (0.33)
Dividends from net realized gains........................................... (0.15) (0.06)
Tax return of capital....................................................... - (0.03)
--- ------
Total distributions..................................................... (0.65) (0.42)
------ ------
Change in net asset value....................................................... 2.99 1.33
---- ----
Net asset value, end of period.................................................. $ 14.32 $ 11.33
========= ========
Total Return(4)................................................................. 33.09% 17.79%(3)
Ratios/supplemental data:
Net assets, end of period (thousands)....................................... $ 22,710 $ 8,473
Ratio to average net assets of:
Operating expenses.......................................................... 1.00% 1.00%(1)
Net investment income....................................................... 4.36% 4.80%(1)
Portfolio turnover rate......................................................... 21% 10%(3)
Average commission rate paid(5)................................................. $ 0.0468 N/A
</TABLE>
(1) Annualized.
(2) Includes reimbursement of operating expenses by investment adviser of $0.05
and $0.07 per share, respectively.
(3) Not annualized.
(4) 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 the period shown.
(5) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for securities trades on
which commissions are charged. This rate generally does not reflect
mark-ups, mark-downs or spreads on shares traded on a principal basis.
STRATEGIC THEME SERIES
<TABLE>
<CAPTION>
FROM
INCEPTION
1/29/96 TO
12/31/96
--------
<S> <C>
Net asset value, beginning of period........................................................... $ 10.00
Income from investment operations
Net investment income...................................................................... 0.04(2)
Net realized and unrealized gain........................................................... 0.99
----
Total from investment operations....................................................... 1.03
----
Less distributions:
Dividends from net investment income....................................................... (0.04)
Tax return of capital...................................................................... (0.01)
------
Total distributions.................................................................... (0.05)
------
Change in net asset value...................................................................... 0.98
----
Net asset value, end of period................................................................. $ 10.98
========
Total Return(4)................................................................................ 10.33%(3)
Ratios/supplemental data:
Net assets, end of period (thousands)...................................................... $ 25,972
Ratio to average net assets of:
Operating expenses......................................................................... 1.00%(1)
Net investment income...................................................................... 0.64%(1)
Portfolio turnover rate........................................................................ 391%(3)
Average commission rate paid(5)................................................................ $ 0.0587
</TABLE>
(1) Annualized.
(2) Includes reimbursement of operating expenses by investment adviser of $0.02
per share.
(3) Not annualized.
(4) 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 the period shown.
(5) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for securities trades on
which commissions are charged. This rate generally does not reflect
mark-ups, mark-downs or spreads on shares traded on a principal basis.
2-8
<PAGE>
ABERDEEN NEW ASIA SERIES
<TABLE>
<CAPTION>
FROM
INCEPTION
9/17/96 TO
12/31/96
--------
<S> <C>
Net asset value, beginning of period........................................................... $ 10.00
Income from investment operations
Net investment income...................................................................... 0.05(2)
Net realized and unrealized gain (loss).................................................... (0.04)
------
Total from investment operations....................................................... 0.01
----
Less distributions:
Dividends from net investment income....................................................... (0.05)
------
Total distributions.................................................................... (0.05)
------
Change in net asset value...................................................................... (0.04)
------
Net asset value, end of period................................................................. $ 9.96
=========
Total Return(4)................................................................................ 0.16%(3)
Ratios/supplemental data:
Net assets, end of period (thousands)...................................................... $ 11,585
Ratio to average net assets of:
Operating expenses......................................................................... 1.25%(1)
Net investment income...................................................................... 2.40%(1)
Portfolio turnover rate........................................................................ 2%(3)
Average commission rate paid(5)................................................................ $ 0.0109
</TABLE>
(1) Annualized.
(2) Includes reimbursement of operating expenses by investment adviser of $0.03
per share.
(3) Not annualized.
(4) 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 the period shown.
(5) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for securities trades on
which commissions are charged. This rate generally does not reflect
mark-ups, mark-downs or spreads on shares traded on a principal basis.
2-9
<PAGE>
INTRODUCTION
- --------------------------------------------------------------------------------
This Prospectus describes the shares offered by and the operations of The
Phoenix Edge Series Fund (the "Fund"). The Fund 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"). The Declaration of Trust, as amended authorizes
the assets and shares of the Fund 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 Fund 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; 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;
to the PHL Variable Accumulation Account ("PHL VA Account") to fund benefits
under Contracts issued by PHL Variable; and to the Phoenix Life and Annuity
Variable Universal Life Account (the "PLAC Account") to fund benefits under
Policies issued by PLAC. The VA Account, PHL VA Account, VUL Account and
PLAC VUL Account (collectively the "Accounts") invest in shares of the Fund in
accordance with allocation instructions received from Contract Owners and
Policyowners. Such allocation rights are further described in the accompanying
Prospectus for the Contracts or Policies. Phoenix redeems shares to the extent
necessary to provide benefits under the Contracts and Policies. Phoenix may
establish other separate accounts which may purchase shares in the Fund.
When making allocations from time to time, a Contract Owner or Policyowner
should understand that investment return will affect benefits and the value of
the Contract or Policy. The accompanying Prospectus for the respective
Accounts contains a description of the relationship between increases or
decreases in the net asset value of Fund 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 Fund 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.
\AND PLAC
Shares of the Fund are currently sold to the Accounts as the investment base
for Variable Accumulation Annuity Contracts and Variable Universal Life
Insurance Policies issued by Phoenix, PHL Variable and PLAC. Phoenix is a
mutual life insurance company whose Executive Office is at One American Row,
Hartford, Connecticut 06102-5056, 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 is the
nation's 14th largest mutual life insurance company and has total assets of
approximately $15.5 billion. Phoenix 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. Its Executive
Office is at One American Row, Hartford, Connecticut 06102-5056 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, 1996,
it had admitted assets of $189.5 million.
PLAC is an indirect wholly-owned subsidiary of Phoenix. Its Executive Office
is at One American Row, Hartford, Connecticut 06102-5056, and its main
administrative office is at 100 Bright Meadow Boulevard, Enfield, Connecticut
06083-1900. PLAC is a Missouri stock company formed in March 1996. Formerly, it
was Savers Life Insurance Company of America, chartered in Missouri. On December
31, 1996, it had admitted assets of $11.5 million.
The interests and rights of a Contract Owner 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 Contract Owners and
Policyowners, described in the accompanying Prospectus and in the Contract or
Policy for that particular product. As long as shares of the Fund 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, Multi-Sector, Balanced,
Allocation, Growth, International and Theme Series is Phoenix Investment
Counsel ("PIC" or "Adviser"). PIC is an indirect, less than wholly-owned
subsidiary of Phoenix. For its services, PIC is paid an investment advisory fee
based on the assets of each Series of the Fund as follows:
PHOENIX INVESTMENT COUNSEL, INC.
--------------------------------
RATE FOR
RATE FOR FIRST RATE FOR NEXT EXCESS OVER
SERIES $250,000,000 $250,000,000 $500,000,000
- ------ ------------ ------------ ------------
Money Market..... .40% .35% .30%
Multi-Sector..... .50% .45% .40%
Balanced......... .55% .50% .45%
Allocation....... .60% .55% .50%
Growth........... .70% .65% .60%
International.... .75% .70% .65%
Theme............ .75% .70% .65%
The total advisory fee of 0.75% of the aggregate net assets of the
International and Theme 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
those of the International and Theme Series. Each Series (except the
International, Real Estate, Theme and Asia Series) pays a portion or all of
its other operating expenses, up to .15% of its average net assets. The
International and Theme Series pay other operating expenses up to .40% and
.25% of their average net assets, respectively.
2-10
<PAGE>
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. For its services, PRS is paid an investment advisory fee based on
the assets of the Series of the Fund as follows:
PHOENIX REALTY SECURITIES, INC.
-------------------------------
RATE FOR
RATE FOR FIRST RATE FOR NEXT EXCESS OVER
SERIES $1,000,000,000 $1,000,000,000 $2,000,000,000
- ------ -------------- -------------- --------------
Real Estate...... .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 subadvisory 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 subadvisory agreement between the Fund 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 subadvisory 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.
The Asia Series is managed by Phoenix-Aberdeen International Advisors, LLC
("PAIA" or "Adviser"). PAIA is a joint venture between PM Holdings, Inc., a
direct subsidiary of Phoenix, and Aberdeen Fund Managers, Inc., a wholly-owned
subsidiary of Aberdeen Asset Management plc. For its services, PAIA is paid an
investment advisory fee based on the assets of the Series of the Fund as
follows:
PHOENIX-ABERDEEN INTERNATIONAL ADVISORS, LLC
--------------------------------------------
SERIES
- ------
Asia Series...... 1.00%
The Asia Series pays a portion or all of its other operating expenses up to
.25% of its total net assets.
OFFERING PRICES
Shares in each of the Series of the Fund are offered to the Accounts
continuously at the net asset value determined at the close of business on the
day the application is accepted and paperwork is complete and in good working
order. 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 Fund permits
Contract Owners 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
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 also
will 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 "Financial Highlights." The rate for several
Series has been, and is expected to be, in excess of 100%; accordingly, such
Series will pay more in brokerage commissions than would be the case if they had
lower portfolio turnover rates. (See "Portfolio Transactions and Brokerage.")
MULTI-SECTOR SERIES
The Multi-Sector 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. The Series will seek to achieve its objective by
investing, under normal conditions, at least 80% of the value of the total
assets of the Series in the following sectors of the fixed income securities
markets: high yield (high risk) fixed income securities, (sometimes referred to
as "junk bonds"), high quality fixed income securities, 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 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").
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. However, the Multi-Sector Series will
not invest in securities in the two lowest rating categories (Ca and C for
Moody's and CC and C for S&P) unless PIC believes that the financial condition
of the issuer, or the protections afforded to the particular securities, is
stronger than otherwise would 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.
When a more conservative investment strategy is necessary for temporary
defensive purposes, the 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.
Risk Factors. While the Multi-Sector Series' management will seek
to minimize risk through diversification and continual evaluation of
current developments in interest rates and economic conditions, the
2-11
<PAGE>
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 Multi-Sector 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 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 Multi-Sector 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 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 also may be affected by other factors, including factors
bearing on the creditworthiness of its issuer.
GROWTH SERIES
The investment objective of the Growth Series is to achieve intermediate
and long-term growth of capital, with income as a
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secondary consideration. The Series seeks to achieve its investment objective by
investing principally in common stocks of corporations believed by PIC 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.
PIC intends to diversify investments of the Series among a number of
corporations without concentration in any particular industry. When, in the
opinion of the Fund 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.
ALLOCATION SERIES
The investment objective of the Allocation Series (formerly designated 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 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 Allocation 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 normally will 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 and may include investments of up to 5% of the Series' total
assets in high risk fixed income securities (commonly referred to as "junk
bonds"). 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 in
which the Allocation Series will invest 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 Allocation Series' investment policies.
See Multi-Sector Series and Money Market Series for a description of risks
generally associated with investing in the Allocation Series.
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 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 including, 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
(sometimes referred to as "junk 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
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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 also may 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 be made only 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 also
may 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 Fund could
encounter difficulties involving legal processes abroad.
Foreign securities involve currency risks. Exchange rates are determined by
forces of supply and demand in the foreign exchange markets, and these forces
are in turn affected by a range of economic, political, financial, governmental
and other factors. Exchange rate fluctuations can affect the Portfolio's net
asset value and dividends either positively or negatively depending upon whether
foreign currencies are appreciating or depreciating in value relative to the
U.S. dollar. Exchange rates fluctuate over both the short and long term. 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 also may 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 also is 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.
Particular risks are posed by investments in third world countries or
so-called "emerging markets." These securities may be especially volatile based
on relative economic, political and market conditions present in these
countries. The economics of developing countries generally are heavily dependent
upon international trade and, accordingly, have been and may continue to be
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies
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also have been and may continue to be adversely affected by economic conditions
in the countries with which they trade. Certain emerging market countries are
either comparatively undeveloped or are in the process of becoming developed and
may consequently be economically based on a relatively few or closely
interdependent industries. A high proportion of the shares of many emerging
market issuers also may be held by a limited number of large investors trading
significant blocks of securities. While the Adviser will strive to be sensitive
to publicized reversals of economic conditions, political unrest and adverse
changes in trading status, unanticipated political and social developments may
affect the values of a Portfolio's investments in such countries and the
availability of additional investments in such countries.
For many foreign securities, there are U.S. dollar-denominated American
Depository Receipts ("ADRs"), which are traded in the 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 also may invest in European Depository Receipts ("EDRs"),
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.
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. See "Risk Factors"
described in connection with the Multi-Sector Series for additional information
regarding investing in lower rated securities.
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 also may 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.
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 securities convertible into
common stock.
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The Real Estate Series also may 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 rated 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 flood, earthquakes or other natural
disasters; limitations on and variations in rents; dependency on property
management skill; the appeal of properties to tenants; and changes in interest
rates.
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to the risks of financing projects. The Series 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, REITs are subject to heavy cash
flow dependency, default by borrowers, self-liquidation, and the possibilities
of failing to qualify for the exemption from tax or distributed income under the
Internal Revenue Code of 1986, as amended (the "Code") and failing to maintain
their exemptions from the 1940 Act. REITs whose underlying assets include
long-term health care properties, such as nursing, retirement and assisted
living homes may be impacted by federal regulations concerning the health care
industry. The Series will indirectly bear its proportionate share of any
expenses paid by the Series itself.
REITs (especially mortgage REITs) are subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations usually rises. Conversely, when interest rates rise, the value of a
REIT's investment in fixed rate obligations can be expected to decline. In
contrast, as interest rates on adjustable rate mortgage loans are reset
periodically, yields on a REIT's investment in such loans will gradually align
themselves to reflect changes in market interest rates, causing the value of
such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
In addition, investing in REITs involves risks similar to those associated
with investing in small capitalization companies. REITs may have limited
financial resources, may trade less frequently and in a limited volume and may
be more subject to abrupt or erratic price movements than larger capitalization
stocks included in the S&P 500 Index.
THEME SERIES
The Theme Series seeks as its investment objective long-term appreciation
of capital through investing in securities of companies that the Adviser
believes are particularly well positioned to benefit from cultural, demographic,
regulatory, social or technological changes worldwide. Examples of thematic
investing would include investing in oil and gas exploration companies during
the energy shortage years of the late 1970s, owning companies which benefited
from lower inflation trends during the early 1980s, investing in companies
acquiring cellular franchises in the late 1980s and technology companies
during the 1990s.
The Adviser will not concentrate its investments in amounts greater than
25% of the assets of the Series in any particular "industry(ies)" or group(s) of
"industries" without shareholder
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approval. In determining when and whether to invest in particular industries,
the Adviser will establish strategic (major changes affecting markets for
prolonged periods) and tactical (focused, short-term) investment themes.
Investment themes shall generally reflect trends which appear likely to drive
stocks with similar technologies and products or which embody broad social,
economic, political and technological considerations; offer substantial
appreciation potential; present a visionary idea or creative solution; and
exhibit some independence from economic cycles. The Adviser may change
investment themes once it has determined that an investment theme has become
saturated or fully exploited. The Adviser may pursue one or more investment
themes at any time.
The Adviser will seek to identify companies which, in addition to being
considered well positioned to benefit from investment themes identified, are
also believed to possess attributes such as, but not limited to, good financial
resources, satisfactory return on capital, enhanced industry position and
superior management skills.
The Theme Series also may invest in preferred stocks, investment grade
bonds (Moody's Investors Service, Inc. rating Baa or higher or Standard & Poor's
Ratings Group rating BBB or higher), convertible preferred stocks and
convertible debentures if in the judgment of the Adviser the investment would
further its investment objective. The Series may also engage in certain options
transactions and enter into financial futures contracts and related options for
hedging purposes. The Series also may invest up to 35% of its assets in the
securities of foreign issuers. See "Other Special Investment Methods." Each
security held will be monitored to determine whether it is contributing to the
basic objective of long-term appreciation of capital.
For temporary defensive purposes (as when market conditions for growth
stocks are adverse), investments may be made in fixed income securities with or
without warrants or conversion features. In addition, for such temporary
defensive purposes, the Series may pursue a policy of retaining cash or
investing part or all of its assets in cash equivalents. When the Series' assets
are held in cash or cash equivalents, it is not investing in securities intended
to meet the Series' investment objective.
Risk Factors. To the extent that the Series invests in a single investment
theme, it may be more susceptible to adverse economic, political or regulatory
developments than would be the case if it invested in a broader spectrum of
themes. In addition, the Series' investments in common stocks of companies with
limited operating history may result in higher volatility in returns. Further,
the successful effectuation of the thematic investment strategy used by the
Adviser is dependent upon the Adviser's ability to anticipate emerging market
trends, exploit such investment opportunities and to thereafter divest of such
securities upon saturation. No assurances can be given that the investment
strategies utilized will positively correlate with any or all such marketplace
trends or that other, possibly more profitable, investment trends could be
overlooked.
ASIA SERIES
The investment objective of the Asia Series is to provide long term capital
appreciation. It is intended that this Series will achieve its objective by
investing under normal market conditions at least 65% of its total assets in a
diversified portfolio of common stocks, convertible securities and preferred
stocks of issuers organized and principally operating in Asia, excluding Japan
(i.e., companies which derive a significant proportion (at least 50%) of their
revenues or profits from goods produced or sold, investments made or services
performed in such countries or which have at least 50% of their assets situated
in such countries) and whose principal securities are actively traded on
recognized stock exchanges of such countries. The Series does not intend to
invest in securities which are traded in markets in Japan or in countries
organized under the laws of Japan.
The Series will invest in countries having more established markets in
regions of Asian countries. The Asian countries to be represented in the Series
ordinarily will consist of three or more of the following countries: China,
Hong Kong, India, Indonesia, South Korea, Malaysia, Pakistan, the Philippines,
Singapore, Sri Lanka, Taiwan and Thailand. From time to time, the Series may
invest in South Pacific nations such as Australia and New Zealand. There is no
requirement that the Series, at any given time, invest in any one particular
country or in all of the countries listed above or in any other Asian countries
or other developing markets that are open to foreign investment. 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 Asian countries; expected levels of
inflation; relative price levels of the various capital markets; governmental
policies influencing business conditions; the outlook for currency relationships
and the range of individual investment opportunities available to the
international investor. The Series may make investments in developing or
emerging market 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.
In certain countries, investments may be made only by investing in other
investment companies that, in turn, are authorized to invest in the securities
that are issued in such countries. The Series may therefore 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). The Series' purchase of the securities of other investment
companies (and closed-end companies) results in the layering of expenses
including operating costs, investment advisory and administrative fees.
The Series may establish and maintain reserves of up to 100% of its assets
for temporary defensive purposes under abnormal market or economic conditions.
The 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. When the Series'
assets are held in cash or cash equivalents, it is not investing in securities
intended to meet the Series' investment objective.
See International Series for a description of risks associated with foreign
investments.
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Additional discussion regarding risks involved in investing in the Series
are described in the "Other Special Investment Methods" section below.
OTHER SPECIAL INVESTMENT METHODS
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CONVERTIBLE SECURITIES
Each Series may invest in convertible securities. A convertible security is
a bond, debenture, note, preferred stock or other security that may be converted
into or exchanged for a prescribed amount of common stock of the same or a
different issuer within a particular period of time at a specified price or
formula. A convertible security entitles the holder to receive interest
generally paid or accrued on debt or the dividend paid on preferred stock until
the convertible security matures or is redeemed, converted or exchanged.
Convertible securities have several unique investment characteristics such as
(1) higher yields than common stocks, but lower yields than comparable
nonconvertible securities, (2) a lesser degree of fluctuation in value than the
underlying stock since they have fixed income characteristics and (3) the
potential for capital appreciation if the market price of the underlying common
stock increases. Up to 5% of each Series' assets may be invested in
convertible securities that are rated below investment grade (commonly referred
to as "junk" securities). Such securities present greater credit and market
risks than investment grade securities. A convertible security might be subject
to redemption at the option of the issuer at a price established in the
convertible security's governing instrument. If a convertible security held by a
Series is called for redemption, the Series may be required to permit the issuer
to redeem the security, convert it into the underlying common stock or sell it
to a third party.
REPURCHASE AGREEMENTS
The Money Market, Real Estate, International, Theme and Asia 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. 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 Multi-Sector, Money Market, Growth, Allocation, Balanced,
International, Theme and Asia 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. Generally, when a Series writes a covered call option, it
will acquire the underlying security or will have absolute and immediate right
to acquire that security without additional consideration upon conversion or
exchange of other securities held by the Series. The Money Market, Growth and
Multi-Sector Series may only purchase call options for the purpose of
terminating a call option previously written. The Allocation, Balanced,
International and Theme Series also may buy exchange-traded call and put
options on equity and debt securities and on stock market indexes. The
International and Theme Series also may write or buy Over-the-Counter (OTC)
options, buy put options on securities indices and enter into options
transactions on a foreign currency. Generally, a put option on a securities
index is similar to a put option on an individual 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. The International,
Theme and Asia Series also may 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.
Options are forms of "derivatives" in that their value is dependent on
fluctuations in the value of other securities.
The Fund 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 Fund 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 Allocation 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. A futures contract on
a debt obligation is a binding contractual commitment which, if held until
maturity, will result in an obligation to make or accept delivery of obligations
having a standard face value and rate of return. 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 Allocation or Balanced
Series' futures contracts (both receipts and delivery) will not exceed 10% of
such Series' total assets.
The International, Theme and Asia Series also may 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,
Theme and Asia 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.
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<PAGE>
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. Futures are forms of derivatives.
A complete description of financial futures and related options is contained
in the Statement of Additional Information.
FOREIGN SECURITIES
The International and Asia Series will purchase foreign securities as
discussed above. In addition, the other Series may invest up to 25% (or 35% as
to the Theme Series) of total net asset value in foreign securities. The
Multi-Sector Series may invest up to 35% of total net asset value in foreign
debt securities. The Series, other than the International, Theme and Asia
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 exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or through forward
contracts to purchase or sell foreign currencies. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded directly between currency traders (usually large
commercial banks) and their customers. At the time of the purchase of a forward
foreign currency exchange contract, any asset, including equity securities and
non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily equal to the market value of the contract, minus the
Series' initial margin deposit with respect thereto, will be deposited in a
segregated account with the Fund'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 also may 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.
LEVERAGE
The Theme Series may, from time to time, increase its ownership of
securities holdings above the amounts otherwise possible by borrowing from banks
at fixed amounts of interest and investing the borrowed funds. The Fund will
borrow only from banks, and only if immediately after such borrowing the value
of the assets of the Series (including the amount borrowed), less its
liabilities (not including any borrowings) is at least three times the amount of
funds borrowed for investment purposes. The Fund may borrow up to 25% of the net
assets of such Series, not including the proceeds of any such borrowings.
However, the amount of the borrowings will be dependent upon the availability
and cost of credit from time to time. If, due to market fluctuations or other
reasons, the value of such Series' assets computed as provided above become less
than three times the amount of the borrowings for investment purposes, the Fund,
within three business days, is required to reduce bank debt to the extent
necessary to meet the required 300% asset coverage.
Interest on money borrowed will be an expense of those Series with respect
to which the borrowing has been made. Because such expense otherwise would not
be incurred, the net investment income of such Series is not expected to be as
high as it otherwise would be during periods when borrowings for investment
purposes are substantial.
Bank borrowings for investment purposes must be obtained on an unsecured
basis. Any such borrowing also must be made subject to an agreement by the
lender that any recourse is limited to the assets of such Series with respect to
which the borrowing has been made.
Any investment gains made with the additional monies borrowed in excess of
interest paid will cause the net asset value of such Series' shares to rise
faster than otherwise would be the case. On the other hand, if the investment
performance of the additional securities purchased fails to cover its cost
(including any interest paid on the monies borrowed) to such Series, the net
asset value of the Series will decrease faster than otherwise would be the case.
PRIVATE PLACEMENTS AND RULE 144A SECURITIES
Each Series may purchase securities which have been privately issued and
are subject to legal restrictions on resale or which are issued to qualified
institutional investors under special rules adopted by the SEC. Such securities
may offer higher yields than comparable publicly traded securities. Such
securities ordinarily can be sold by the Series in secondary market transactions
to certain qualified investors pursuant to rules established by the SEC, in
privately negotiated transactions to a limited number of purchasers or in a
public offering made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"). Public sales of such
securities by the Fund may involve significant delays and expense. Private sales
often require negotiation with one or more
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<PAGE>
purchasers and may produce less favorable prices than the sale of similar
unrestricted securities. Public sales generally involve the time and expense of
the preparation and processing of a registration statement under the 1933 Act
(and the possible decline in value of the securities during such period) and may
involve the payment of underwriting commissions. In some instances, the Series
may have to bear certain costs of registration in order to sell such shares
publicly. Except in the case of securities sold to qualifying institutional
investors under special rules adopted by the SEC for which the Trustees
determine the secondary market is liquid, Rule 144A Securities will be
considered illiquid. Trustees may determine the secondary market is liquid based
upon the following factors which will be reviewed periodically as required
pursuant to procedures adopted by the Series: the number of dealers willing to
purchase or sell the security; the frequency of trades; dealer undertakings to
make a market in the security; and the nature of the security and its market.
Investing in Rule 144A Securities could have the effect of increasing the level
of these Series' illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities. Each Series may
invest up to 15% of its net assets in illiquid securities.
MORTGAGE-BACKED SECURITIES
The Real Estate Series also may invest in 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 prepaid principal on a
CMO are paid, in most cases, semi-annually. CMOs may be collateralized by whole
mortgage loans but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by Government National Mortgage Association
(GNMA), or 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 also may 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 value 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.
Pass-through securities are forms of derivatives.
LENDING OF PORTFOLIO SECURITIES
Subject to certain investment restrictions, a Series may, from time to time,
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% (except the Asia Series which will maintain an
amount equal to at least 102%) 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 the loaned
securities. A Series may pay reasonable fees to persons unaffiliated with the
Fund 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.
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<PAGE>
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The Fund may not invest more than 25% of the assets of any one Series in any
one industry (except that the Money Market and Allocation 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 Fund
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 Fund 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.
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.
PORTFOLIO TURNOVER
- --------------------------------------------------------------------------------
Each Series pays brokerage commissions for purchases and sales of portfolio
securities. A high rate of portfolio turnover involves a correspondingly greater
amount of brokerage commissions and other costs which must be borne directly by
a Series and thus indirectly by its shareholders. It also may result in the
realization of larger amounts of short-term capital gains, which are taxable to
shareholders as ordinary income. The rate of portfolio turnover is not a
limiting factor when the Adviser deems changes appropriate. Although securities
for the Theme Series are not purchased for the short-term, the Adviser's strict
sell discipline may result in rates of portfolio turnover equivalent to those
identified by the SEC as appropriate for capital appreciation funds with
substantial short-term trading. The Adviser's approach dictates that
underperforming securities and securities not consistent with prevailing themes
will be sold. Portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities during the fiscal year by the monthly
average of the value of the Series' securities (excluding short-term
securities). The turnover rate may vary greatly from year to year and may be
affected by cash requirements for redemptions of shares of a Series and by
compliance with provisions of the Internal Revenue Code, relieving investment
companies which distribute substantially all of their net income from federal
income taxation on the amounts distributed. The rates of portfolio turnover for
each Series are set forth under "Financial Highlights." For more information
regarding the consequences related to a high portfolio turnover rate, see
"Portfolio Transactions and Brokerage" and "Dividends, Distributions and Taxes"
in the Statement of Additional Information.
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
The Fund 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 Fund, which is managed on a daily basis by the Fund's
investment advisers. The Fund was organized as a Massachusetts Business Trust on
February 18, 1986. The Fund issues shares of beneficial interest in nine
Series. The Statement of Additional Information contains a list of the members
of the Board of Trustees and the officers of the Fund.
INVESTMENT ADVISERS
The Fund's investment advisers are Phoenix Investment Counsel,
Inc. ("PIC"), Phoenix Realty Securities, Inc. ("PRS") and Phoenix-
Aberdeen International Advisors, LLC ("PAIA," collectively, the
"Advisers"). PIC is located at 56 Prospect Street, Hartford, Connecticut
06115. PRS is located at 38 Prospect Street, Hartford, Connecticut
06115. PAIA is located at One American Row, Hartford, Connecticut
06102.
PIC was originally organized in 1932 as John P. Chase, Inc. In addition to
the Fund, it serves as investment adviser to the Phoenix Series Fund, Phoenix
Strategic Allocation Fund, Inc., Phoenix Strategic Equity Series Fund (all
series other than Equity Opportunities Series) and Phoenix Multi-Portfolio Fund
(all portfolios other than the Real Estate Securities Portfolio) and as
subadviser to Chubb America Fund, Inc. and Sun America Series Trust. PIC also
serves as subadviser to the Asia Series.
All of the outstanding stock of PIC is owned by Phoenix Equity Planning
Corporation ("PEPCO"), a subsidiary of Phoenix Duff & Phelps Corporation
("PD&P"). Phoenix owns a controlling interest in PD&P. PEPCO also performs
bookkeeping, pricing and administrative services for the Fund. PEPCO is
registered as a broker-dealer in 50 states. The executive offices of Phoenix are
located at One American Row, Hartford, Connecticut 06102; the executive offices
of Phoenix Duff & Phelps Corporation are located at 56 Prospect Street,
Hartford, Connecticut 06115, and the principal offices of PEPCO are located at
100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200.
PRS was formed in 1994 as an indirect subsidiary of Phoenix. In addition to
the Fund, it serves as investment adviser to the Real Estate Securities
Portfolio of the Phoenix Multi-Portfolio Fund and to the American Phoenix
Investment Portfolio. As of December 31, 1996, PRS had approximately $1.4
billion in assets under management.
ABKB/LaSalle Securities Limited Partnership (ABKB), a subsidiary of LaSalle
Partners, serves as subadviser 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.
PAIA, a Delaware limited liability company formed in 1996 and jointly owned
and managed by PM Holdings, Inc., is a direct subsidiary of Phoenix and Aberdeen
Fund Managers, Inc., a wholly-owned subsidiary of Aberdeen Asset Management plc.
Aberdeen Asset Management plc is a partially-owned subsidiary of Phoenix.
Aberdeen Fund Managers, Inc. has its principal offices located at 1 Financial
Plaza, Suite 2210, NationsBank Tower, Fort Lauderdale, Florida 33394. While
many of the officers and directors of the Adviser and subadviser have extensive
experience as investment professionals, due to its recent formation, the
Adviser has no prior operating history. Aberdeen Fund Managers, Inc. also
serves as subadviser to the Asia Series.
Aberdeen Asset Management was founded in 1983, and through subsidiaries
operating from offices in Aberdeen, Scotland; London, England; Singapore; and
Fort Lauderdale, Florida, provides investment management services to unit and
investment trusts, segregated
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<PAGE>
pension funds and other institutional and private portfolios. As of September
30, 1996, Aberdeen Asset Management, and its advisory subsidiaries, had
approximately $4 billion in assets under management.
The Advisers continuously furnish 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 Fund are borne by the
Fund, Phoenix, PHL Variable or PLAC. A more detailed discussion of the
Advisers and the Investment Advisory Agreements and Investment Subadvisory
Agreements is contained in the Statement of Additional Information.
PORTFOLIO MANAGERS
Balanced Series. Mr. C. Edwin Riley, Jr. serves as portfolio manager of the
Balanced Series and as such is primarily responsible for the day-to-day
management of the Series' portfolio. Mr. Riley is also vice president of Phoenix
Series Fund and portfolio manager of the Balanced Series of that Fund. Mr. Riley
is a managing director, Equities, of Phoenix Investment Counsel, Inc. and
National Securities & Research Corporation. From 1988 to 1995, Mr. Riley served
as senior vice president and director of Equity Management for Nationsbank
Investment Management.
Allocation Series. Ms. Mary E. Canning serves as portfolio manager of the
Allocation Series and, as such, is primarily responsible for the day-to-day
management of the Series' investments. Ms. Canning has served as manager since
August 1996 and as co-manager since June 1996. She has been a vice president of
Phoenix Investment Counsel, Inc. since 1991 and also is a vice president of the
Fund (since 1987) and of Phoenix Series Fund (since 1987). From June 1991 to
November 1995, Ms. Canning was associate portfolio manager, Common Stock,
Phoenix Home Life Mutual Insurance Company and held various other positions with
Phoenix Home Life from 1982 to 1991.
Multi-Sector Series. Mr. Curtiss O. Barrows has served as portfolio manager
of the Multi-Sector Series since 1986 and, as such, is primarily responsible for
the day-to-day management of the Series' portfolio. Mr. Barrows also is
portfolio manager of the High Yield Series of the Phoenix Series Fund and is a
vice president of PIC. Mr. Barrows also is portfolio manager, Public Bonds,
Phoenix Home Life Mutual Insurance Company.
Growth Series. Mr. Jean Claude Gruet has served as portfolio manager of the
Growth Series since 1996 and, as such, is primarily responsible for the
day-to-day management of the Series' portfolio. He also is vice president of the
Fund. Mr. Gruet previously was vice president and portfolio manager of Atalanta
Sosnoff Capital Corporation from 1994 to 1996, and was vice president and senior
analyst of UBS Securities from 1989 to 1994.
International Series. Ms. Jeanne Dorey and Mr. David Lui are the
coportfolio managers of the International Series and, as such, are primarily
responsible for the day-to-day management of the Series' investments. Ms. Dorey
also is coportfolio manager of the International Portfolio of Phoenix
Multi-Portfolio Fund and of Phoenix Worldwide Opportunities Fund. Ms. Dorey has
served as vice president of PIC since April 1993, and as vice president of
the Fund and portfolio manager of the Fund, Phoenix Worldwide Opportunities
Fund and Phoenix International Portfolio since February 1993. Since May 1993,
she also has served as vice president of National Securities & Research
Corporation, an affiliate of PIC. From 1990 to 1992, Ms. Dorey was an
investment analyst and portfolio manager with Pioneer Group, Inc. Mr. Lui also
is coportfolio manager of Phoenix Worldwide Opportunities Fund and the
International Series of The Phoenix Edge Series Fund. Mr. Lui previously served
as associate portfolio manager of such funds since June 1995. From 1993 to
1995, Mr. Lui was vice president of Asian Equities at Alliance Capital
Management, and from 1990 to 1993, he was an associate, Capital Markets, at
Bankers Trust.
Money Market Series. Ms. Dorothy J. Skaret has served as the portfolio
manager of the Money Market Series since 1990 and, as such, is primarily
responsible for the day-to-day management of the Series' portfolio. Ms. Skaret
also is the portfolio manager of the Money Market Series of the Phoenix Series
Fund. Ms. Skaret also is 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 have shared primary responsibility
for managing the assets of the Real Estate Series from its inception. Ms.
Rubin has over 20 years real estate experience and has been associated with
Phoenix for the past 14 years. Mr. Morrill has over 15 years of investment
experience and has been a portfolio manager with ABKB since 1985.
Theme Series. Mr. William J. Newman serves as portfolio manager of the Theme
Series and, as such, is primarily responsible for the day-to-day management of
the Series' portfolio. Mr. Newman joined Phoenix in March 1995 as chief
investment strategist and managing director for Phoenix Investments. Mr. Newman
also is executive vice president of PIC. Most recently, Mr. Newman was chief
investment strategist for Kidder Peabody in New York from May 1993 to December
1994. He was managing director at Bankers Trust from March 1991 to May 1993.
Asia Series. Mr. Hugh Young is the portfolio manager of the Asia Series and,
as such, is primarily responsible for the day-to-day management of the Series'
portfolio. Mr. Young has been employed as an investment director for Abtrust
Fund Managers (Singapore) Limited since 1988. From 1985 to 1988, Mr. Young was
the Far East investment director for Sentinel Funds Management Ltd. From 1984 to
1985, he was an investment manager with Fidelity International Ltd. From 1981 to
1984, he served as investment analyst-overseas investment manager with MGM
Assurance; and from 1980 to 1981, he was an investment analyst with Beardsley
Bishop Escombe, Stockbrokers.
ADVISORY FEES
As compensation for its services for all Series, the Advisers are entitled
to a fee at an annual rate of the average daily net assets of the Series,
payable monthly, as follows:
2-22
<PAGE>
PHOENIX INVESTMENT COUNSEL, INC.
--------------------------------
RATE FOR
RATE FOR FIRST RATE FOR NEXT EXCESS OVER
SERIES $250,000,000 $250,000,000 $500,000,000
- ------ ------------ ------------ ------------
Money Market..... .40% .35% .30%
Multi-Sector..... .50% .45% .40%
Balanced......... .55% .50% .45%
Allocation....... .60% .55% .50%
Growth........... .70% .65% .60%
International.... .75% .70% .65%
Theme............ .75% .70% .65%
The total advisory fee of 0.75% of the aggregate net assets of the
International and Theme 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 those of the International and Theme Series.
PHOENIX REALTY SECURITIES, INC.
-------------------------------
RATE FOR
RATE FOR FIRST RATE FOR NEXT EXCESS OVER
SERIES $1,000,000,000 $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 subadvisory 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 subadvisory agreement between the Fund 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 subadvisory
agreement relating to the Real Estate Series provides, among other things, that
ABKB shall maintain certain records for the Series and effectuate the purchase
and sale of securities for the Series. ABKB is not affiliated with PRS, PIC,
Phoenix, PHL Variable or PLAC. The Real Estate Series pays other operating
expenses up to .25% of its average net assets.
PHOENIX-ABERDEEN INTERNATIONAL ADVISORS, LLC
--------------------------------------------
SERIES
- ------
Asia Series...... 1.00%
The total advisory fee of 1.00% of the aggregate net assets of the Asia
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 those of the Asia
Series.
The Investment Advisory Agreement with the Fund provides that PAIA will
reimburse the Fund for the amount, if any, by which the total operating expenses
(including PAIA's compensation, but excluding interest, taxes, brokerage fees
and commissions and extraordinary expenses) for any fiscal year exceed the level
of expenses which the Series is permitted to bear under the most restrictive
expense limitation. For providing research and other domestic advisory services
to the Series, PAIA pays to PIC, Inc. a monthly subadvisory fee at an annual
rate equivalent to 0.30% of the average aggregate daily net asset value of the
Series. For implementing certain portfolio transactions and providing research
and other services to the Series, PAIA also pays a monthly subadvisory fee to
Aberdeen Fund Managers Inc. equivalent to 0.40% of the average aggregate daily
net asset value of the Series. For implementing certain portfolio transactions,
providing research and other services with regard to investments in particular
geographic areas, the Aberdeen Fund Managers Inc. shall engage the services of
its affiliates Abtrust Fund Managers Ltd. and Abtrust Fund Managers (Singapore)
Limited for which such entities shall be paid a fee by Aberdeen Fund Managers
Inc.
FINANCIAL AGENT
Under a Financial Agent Agreement, PEPCO acts as financial agent of the
Fund and as such is responsible for certain administrative functions and the
bookkeeping and pricing functions for the Fund. For its services as financial
agent, PEPCO receives a fee based on the average of the aggregate daily net
asset values of the Fund at the annual rate per each $1,000,000 of $600.
EXPENSES
Each Series (except the International, Real Estate, Theme and Asia Series)
pays a portion or all of its total operating expenses other than the management
fee, up to .15% of its total average net assets. The International, Real Estate,
Theme and Asia Series pay total operating expenses other than the management
fee up to .40%, .25%, .25% and .25%, respectively, of its total average net
assets. Expenses above these limits are paid by the Advisers, Phoenix, PHL
Variable or PLAC.
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
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 may use
broker-dealers that may be affiliated with the Advisers, Phoenix, Phoenix Duff &
Phelps Corporation, PHL Variable or PLAC provided that the commissions, fees
or other remuneration received by such affiliated broker is reasonable and fair
compared to those paid to other brokers in connection with comparable
transactions. The Statement of Additional Information contains more information
on brokerage allocation.
PERFORMANCE HISTORY
From time to time, the Fund 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
2-23
<PAGE>
of the Money Market Series, as yield of the Multi-Sector 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 Multi-Sector 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 usually will 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 12/31/96
----------------------------------------------------------
COMMENCEMENT LIFE OF
SERIES DATE 1 YEAR 5 YEARS 10 YEARS FUND
- ------ ---- ------ ------- -------- ----
Multi-Sector.... 1/1/83 12.42% 10.86% 9.77% 10.89%
Balanced........ 5/1/92 10.56% N/A N/A 10.26%
Allocation...... 9/17/84 9.05% 9.32% 11.40% 12.91%
Growth.......... 1/1/83 12.58% 14.56% 16.13% 18.87%
International... 5/1/90 18.65% 9.44% N/A 8.53%
Real Estate .... 5/1/95 33.09% N/A N/A 30.87%
Theme........... 1/29/96 N/A N/A N/A 10.33%
Asia Series..... 9/17/96 N/A N/A N/A 0.16%
ANNUAL TOTAL RETURNS
--------------------
YEAR MULTI-SECTOR BALANCED ALLOCATION GROWTH
- ---- ------------ -------- ---------- ------
1986......... 19.45% N/A 15.61% 20.15%
1987......... 1.12% N/A 12.58% 7.05%
1988......... 10.36% N/A 2.33% 3.83%
1989......... 8.30% N/A 19.88% 36.06%
1990......... 5.14% N/A 5.62% 3.98%
1991......... 19.41% N/A 29.44% 43.83%
1992......... 10.03% 9.72% 10.67% 10.29%
1993......... 15.90% 8.57% 11.02% 19.69%
1994......... (5.47%) (2.80%) (1.45%) 1.48%
1995......... 23.54% 23.28% 18.22% 30.85%
1996......... 12.42% 10.56% 9.05% 12.58%
YEAR International Real Estate Theme Asia Series
- ---- ------------- ----------- ------ -----------
1986......... N/A N/A N/A N/A
1987......... N/A N/A N/A N/A
1988......... N/A N/A N/A N/A
1989......... N/A N/A N/A N/A
1990......... (8.10%) N/A N/A N/A
1991......... 19.78% N/A N/A N/A
1992......... (12.89%) N/A N/A N/A
1993......... 38.44% N/A N/A N/A
1994......... 0.03% N/A N/A N/A
1995......... 9.59% 17.79%* N/A N/A
1996......... 18.65% 33.09% 10.33%* 0.16%*
*Since inception
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 Multi-Sector 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 value of $10.00 per share, 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, 1996.
Assumptions:
Value of hypothetical pre-existing account with
exactly one share at the beginning of the period:. 10.000000
Value of the same account (excluding capital
changes) at the end of the seven-day period:...... 10.009537
Calculation:
Ending account value.............................. 10.009537
Less beginning account value...................... 10.000000
Net change in account value....................... 0.009537
Base period return:
(adjusted change/beginning account value)......... 0.000954
Current yield = return x (365/7) =................... 4.97%
Effective yield = [(1 + return)365/7]-1 =............ 5.10%
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.
2-24
<PAGE>
The Fund'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 Fund currently has nine Series of shares of beneficial interest.
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 Contract Owners 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, PHL Variable or PLAC assets and
Fund shares for which no timely instructions from Contract Owners or
Policyowners are received will be voted by Phoenix, PHL Variable and PLAC 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 Fund 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 Fund.
Any general expenses of the Fund 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 Fund may be liable for
debts or claims against the Fund. The Declaration of Trust provides that
shareholders shall not be subject to any personal liability for the acts or
obligations of the Fund and that every written agreement, undertaking or
obligation made or issued by the Fund shall contain a provision to that effect.
The Declaration of Trust provides for indemnification out of the Fund's property
for all losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of the Accounts, as shareholders,
incurring loss because of shareholder liability is limited to circumstances in
which the Fund itself would be unable to meet its obligations. Phoenix, PHL
Variable and PLAC, as the sole shareholders, have a fiduciary duty to bear this
risk and Contract Owners and Policyowners should be fully and completely
insulated from risk.
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
The Fund 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, PHL Variable
and PLAC. It is contemplated that in the future other separate accounts of
Phoenix, PHL Variable, PLAC or other insurance companies may purchase shares of
the Fund. Shares of the Fund will not be sold to the public. The Fund
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 Fund simultaneously. Although Phoenix, PHL Variable, PLAC or
the Fund currently do not foresee any such disadvantages either to variable life
insurance Policyowners or to variable annuity Contract Owners, the Fund's Board
of Trustees intends to monitor events in order to identify any material
conflicts between such Policyowners and Contract Owners and to determine what
action, if any, including withdrawal by the Separate Account from the Fund,
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 Contract Owners.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value per share of each Series is determined as of the
close of regular trading of the New York Stock Exchange (the "Exchange") on
days when the Exchange is open for trading. The net asset value per share of a
Series is determined by adding the values of all securities and other assets of
the Series, subtracting liabilities and dividing by the total number of
outstanding shares of the Series.
The Series' investments are valued at market value or, where market
quotations are not available, at fair value as determined in good faith by the
Trustees or their delegates. Foreign and domestic debt securities (other than
short-term investments) are valued on the basis of broker quotations or
valuations provided by a pricing service approved by the Trustees when such
prices are believed to reflect the fair value of such securities. Foreign and
domestic equity securities are valued at the last sale price or, if there has
been no sale that day, at the last bid price, generally. Short-term investments
having a remaining maturity of less than 61 days are valued at amortized cost,
which the Trustees have determined approximates market. For further information
about security valuations, see the Statement of Additional Information.
REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
The Fund will redeem all full and fractional shares of the Fund presented
for redemption. The Fund 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 only may be suspended for more than seven days for any period during
which trading on the New York Stock Exchange is
2-25
<PAGE>
restricted as determined by the SEC or such Exchange is closed (other than
customary weekend and holiday closings), for any period during which an
emergency exists as defined by the SEC 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 Multi-Sector, Growth, Allocation, Balanced, International and Theme
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.
The Asia Series will distribute its net investment income to its shareholders on
a semi-annual basis and net realized capital gains, if any, to its shareholders
on an annual basis.
TAXES
- --------------------------------------------------------------------------------
The Fund 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 Fund intends to comply with the investment
diversification requirements for variable contracts contained in the Code.
Moreover, the Fund 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 Fund's
shareholders, which in this case are the Accounts. The International and Asia
Series may incur liability for foreign income and withholding taxes on
investment income. The International and Asia Series intend to qualify for,
and may make an election permitted under, the Code to enable the shareholder
Accounts (and therefore Phoenix) to claim a credit or deduction on Phoenix's
income tax return for the Accounts' pro rata share of the income and withholding
taxes paid by the International and Asia Series to foreign countries. Phoenix
also will treat the foreign income taxes paid by the Series as income. Contract
Owners 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 insure that no more than
25% of its total assets would be invested in the securities of a single issuer
and that at least 50% of its total assets is represented by cash and cash items
and other securities limited in respect of any one issuer to an amount no
greater than 5% of the total value of the assets of the Series.
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 Fund, except the
International, Real Estate and Asia 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 and Asia 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 Fund has
authorized the Custodian to appoint one or more subcustodians of the assets of
the Fund 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 Fund's shares is
Phoenix Equity Planning Corporation, 100 Bright Meadow Boulevard, PO Box 2200,
Enfield, Connecticut 06083-2200.
OTHER INFORMATION
- --------------------------------------------------------------------------------
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as independent accountants for the Fund 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 Phoenix
Variable Products Mail Operations, PO Box 8027, Boston, Massachusetts
02266-8027, or by telephoning Variable Products Operations at (800) 447-4312.
2-26
<PAGE>
THE PHOENIX EDGE SERIES FUND
HOME OFFICE: PHOENIX VARIABLE PRODUCTS
MAIL OPERATIONS:
101 Munson Street P.O. Box 8027
Greenfield, MA Boston, MA 02266-8027
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1997
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 Fund's current Prospectus, dated May 1, 1997, which may be
obtained by calling Variable Products Operations at (800) 447-4312, or by
writing to Phoenix Variable Products Mail Operations at P.O. Box 8027,
Boston, Massachusetts 02266-8027.
------------------
TABLE OF CONTENTS*
PAGE
----
The Phoenix Edge Series Fund (2-1)....................................... 2
Investment Policies (2-11)............................................... 2
Investment Restrictions (2-21)........................................... 11
Portfolio Turnover (2-21)................................................ 12
Management of the Fund (2-21)............................................ 12
Investment Advisers (2-21)............................................... 20
Brokerage Allocation (2-23).............................................. 21
Determination of Net Asset Value (2-25).................................. 22
Investing In the Fund (2-25)............................................. 22
Redemption of Shares (2-25).............................................. 23
Taxes (2-26)............................................................. 23
Custodian (2-26)......................................................... 23
Independent Accountants.................................................. 23
Financial Statements..................................................... 23
Appendix................................................................. 24
* Numbers in parentheses are cross-references to related sections of the
Prospectus.
1
<PAGE>
THE PHOENIX EDGE SERIES FUND
- --------------------------------------------------------------------------------
The Phoenix Edge Series Fund (the "Fund") 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") created on June 21,
1982. The Phoenix Home Life Variable Universal Life Account is a separate
account of Phoenix 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 Phoenix Life and Annuity Variable Universal Life
Account is a separate account of Phoenix Life and Annuity Company ("PLAC")
formed in March 1996. The executive offices of the Accounts, Phoenix, PHL
Variable and PLAC are located at One American Row, Hartford, Connecticut. The
Accounts own the majority of the shares of the Fund.
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
Allocation Series are described below. They also may be used by the
International, Real Estate, Theme and Asia 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 Fund
maintained in a central depository or book-entry system or by physical delivery
of the securities to the Fund'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
Cooperativesand 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.
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
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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 generally will be 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 also may 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."
ALLOCATION SERIES: MARKET SEGMENT INVESTMENTS AND TRADING
Market Segment Investments. The Allocation 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
Allocation Series' total assets;
(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; and
(e) high yield, high risk fixed income securities (commonly referred
to as "junk bonds") having a rating below Baa by Moody's
Investors Service, Inc. or BBB by Standard & Poor's Corporation
or unrated securities of comparable quality provided such
securities do not exceed 5% of the Allocation total assets.
(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 constitutes 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 types
of securities (i.e., common stock, debt, money market instruments) will be of
significance. As a result, the Allocation 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,
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whenever necessary in the Investment Adviser's 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 Allocation Series may enter into
financial futures and options contracts.
FINANCIAL FUTURES AND RELATED OPTIONS
Allocation Series. The Allocation 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 Fund.
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 usually would 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 otherwise would 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 Allocation 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 Allocation 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 any asset, including equity securities and
non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily 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 and Asia Series. The International and Asia 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 position's
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, any asset, including equity securities and
non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily equal to the market value of the futures contract, minus
the initial margin deposit with respect thereto, will be deposited in a
segregated account with the Fund'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 also may
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 also is 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.
Theme Series. The Theme Series may use financial futures contracts and
related options to hedge against changes in the market value of its portfolio
securities which it intends to purchase. Hedging is accomplished when an
investor takes a position in the futures market opposite to his cash market
position. There are two types of hedges--long (or buying) and short (or selling)
hedges. Historically, prices in the futures market have tended to move in
concert with cash market prices, and prices in the futures market have
maintained a fairly predictable relationship to prices in the cash market. Thus,
a decline in the market value of securities in a Series' portfolio may be
protected against to a considerable extent by gains realized on futures
contracts sales. Similarly, it is possible to protect against an increase in the
market price of securities which a Series may wish to purchase in the future by
purchasing futures contracts.
The Theme Series may purchase or sell any financial futures contracts
which are traded on a recognized exchange or board of trade. Financial futures
contracts consist of interest rate futures contracts and securities index
futures contracts. A public market presently exists in interest rate futures
contracts covering long-term U.S. Treasury bonds, U.S. Treasury notes,
three-month U.S. Treasury bills and GNMA certificates. Securities index futures
contracts are currently traded with respect to the Standard & Poor's 500
Composite Stock Price Index. A clearing corporation associated with the exchange
or board of trade on which a financial futures contract trades assumes
responsibility for the completion of transactions and also guarantees that open
futures contracts will be performed.
In contrast to the situation when such Series purchases or sells a security,
no security is delivered or received by the Series upon the purchase or sale of
a financial futures contract. Initially, this Series will be required to deposit
in a segregated account with its custodian bank an amount of cash, U.S. Treasury
bills or liquid high grade debt obligations. This amount is known as initial
margin and is in the nature of a performance bond or good faith deposit on the
contract. The current initial deposit required per contract is approximately 5%
of the contract amount. Brokers may establish deposit requirements higher than
this minimum. Subsequent payments, called variation margin, will be made to and
from the account on a daily basis as the price of the futures contract
fluctuates. This process is known as marking to market.
The writer of an option on a futures contract is required to deposit margin
pursuant to requirements similar to those applicable to futures contracts. Upon
exercise of an option on a futures contract, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's margin
account. This amount will be equal to the amount by which the market price of
the futures contract at the time of exercise exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract. For more information regarding options, see below.
Although financial futures contracts by their terms call for actual delivery
or acceptance of securities, in most cases the contracts are closed out before
the settlement date without the making or taking of delivery. Closing out is
accomplished by effecting an offsetting transaction. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of securities and the same delivery date. If the sale price exceeds the
offsetting purchase price, the seller immediately would be paid the difference
and would realize a gain. If the offsetting purchase price exceeds the sale
price, the seller immediately would pay the difference and would realize a loss.
Similarly, a futures contract purchase is closed out by effecting a futures
contract sale for the same securities and the same delivery date. If the
offsetting sale price exceeds the purchase price, the purchaser would realize a
gain, whereas if the purchase price exceeds the offsetting sale price, the
purchaser would realize a loss.
The Theme Series will pay commissions on financial futures contracts and
related options transactions. These commissions may be higher than those which
would apply to purchases and sales of securities directly.
OPTIONS
MONEY MARKET, GROWTH, BALANCED, INTERNATIONAL, MULTI-SECTOR, ALLOCATION,
THEME AND ASIA SERIES:
Writing Covered Call Options. The Money Market, Growth, Balanced,
Allocation, Theme and Asia 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
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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 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 Fund 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 Fund 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 Fund can minimize the possibility of
a suspended holding period for purposes of the 30 percent rule to the extent the
Fund 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 experiences 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 capital gain. Also, with respect to such options, the holding
period of the underlying security will not include any period during which the
Fund has a written option outstanding.
Buying Call and Put Options. The Allocation, Balanced and Theme 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
Multi-Sector Series may purchase a call option only 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.
A 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.
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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 Allocation 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, THEME AND ASIA SERIES:
In furtherance of its objectives, the 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 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 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.
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, Theme and Asia 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, Theme and Asia
Series intend 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.
7
<PAGE>
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 otherwise might 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 also might find it difficult to terminate its position on a
timely basis in the absence of a secondary market.
The Fund 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 Fund 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 Fund will engage in OTC options transactions only with dealers that meet
certain credit and other criteria established by the Board of Trustees of the
Fund. The Fund and the Adviser believe that the approved dealers present minimal
credit risks to the Fund and, therefore, should be able to enter into closing
transactions if necessary. The Fund currently will not engage in OTC options
transactions if the amount invested by the Fund in OTC options, plus a
"liquidity charge" related to OTC options written by the Fund in illiquid
securities plus any other portfolio securities considered to be illiquid, would
exceed 10% of the Fund's total assets. The "liquidity charge" referred to above
is computed as described below.
The Fund anticipates entering into agreements with dealers to which the Fund
sells OTC options. Under these agreements the Fund 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 underlying security. If there is no such agreement requiring a dealer to
allow the Fund to repurchase a specific OTC option written by the Fund, 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, Theme and Asia 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, any asset, including equity securities and non-investment grade debt
so long as the asset is liquid, unencumbered and marked to market daily equal to
the market value of the contract, minus the Series' initial margin deposit with
respect thereto, will be deposited in a segregated account with the Fund'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 and Asia Series also may 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
8
<PAGE>
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 Multi-Sector 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 generally can 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.
--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 Series, 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 generally can 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.
JUNK BONDS
The International and Allocation Series may invest up to 10% and 5%,
respectively, of total net assets in non-investment grade debt securities. The
market prices of such lower rated securities generally fluctuate in response to
changes in interest rates and economic conditions more than those of higher
rated securities. Additionally, there is a greater possibility that an adverse
change in the financial condition of an issuer, particularly a higher leveraged
issuer, may affect its ability to make payments of income and principal and
increase the expenses of the Series seeking recovery from the issuer. Lower
rated securities may be thinly traded and less liquid than higher rated
securities and therefore harder to value and more susceptible to adverse
publicity concerning the issuer.
9
<PAGE>
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 also are subject to potential defaults by borrowers,
self-liquidationand 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.
EMERGING MARKET SECURITIES
The Asia Series may invest in countries or regions with relatively low gross
national product per capita compared to the world's major economies, and in
countries or regions with the potential for rapid economic growth (emerging
markets). Emerging markets in Asia will include countries: (i) having an
"emerging stock market" as defined by the International Finance Corporation;
(ii) with low-to-middle-income economies according to the International Bank for
Reconstruction and Development (the "World Bank"); (iii) listed in World Bank
publications as developing; or (iv) determined by the Adviser to be an emerging
market as defined above. The Series also may invest in securities of: (i)
companies the principal securities trading market for which is an emerging
market country; (ii) companies organized under the laws of, and with a principal
office in, an emerging market country; or (iii) companies whose principal
activities are located in emerging market countries.
The risks of investing in foreign securities may be intensified in the case
of investments in emerging markets. Securities of many issuers in emerging
markets may be less liquid and more volatile than securities of comparable
domestic issuers. Emerging markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Series is uninvested and
no return is earned thereon. The inability of the Series to make intended
security purchases due to settlement problems could cause the Series to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the
Series due to subsequent declines in value of the portfolio securities or, if
the Series has entered into a contract to sell the security, in possible
liability to the purchaser. Securities prices in emerging markets can be
significantly more volatile than in the more developed nations of the world,
reflecting the greater uncertainties of investing in less established markets
and economies. In particular, countries with emerging markets may have
relatively unstable governments, present the risk of nationalization of
businesses, restrictions on foreign ownershipor prohibitions of repatriation
of assets, and may have less protection of property rights than more developed
countries. The economies of countries with emerging markets may be predominantly
based on only a few industries, may be highly vulnerable to changes in local or
global trade conditions, and may suffer from extreme and volatile debt burdens
or inflation rates. Local securities markets may trade a small number of
securities and may be unable to respond effectively to increases in trading
volume, potentially making prompt liquidation of substantial holdings difficult
or impossible at times. Securities of issuers located in countries with emerging
markets may have limited marketability and may be subject to more abrupt or
erratic price movements.
Certain emerging markets may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. The Series could
be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to the Series any restrictions on investments. Investments in certain foreign
emerging market debt obligations may be restricted or controlled to varying
degrees. These restrictions or controls may at times preclude investment in
certain foreign emerging market debt obligations and increase the expenses of
the Series.
ADDITIONAL RISK FACTORS. As a result of its investments in foreign
securities, the Series may receive interest or dividend payments, or the
proceeds of the sale or redemption of such securities, in the foreign currencies
in which such securities are denominated. In that event, the Series may convert
such currencies into dollars at the then current exchange rate. Under certain
circumstances, however, such as where the Adviser believes that the applicable
rate is unfavorable at the time the currencies are received or the Adviser
anticipates, for any other reason, that the exchange rate will improve, the
Series may hold such currencies for an indefinite period of time.
In addition, the Series may be required to receive delivery of the foreign
currency underlying forward foreign currency contracts it has entered into. This
could occur, for example, if an option written by the Fund is exercised or the
Fund is unable to close out a forward contract. The Series may hold foreign
currency in anticipation of purchasing foreign securities. The Series also may
elect to take delivery of the currencies underlying options or forward contracts
if, in the judgment of the Adviser, it is in the best interest of the Series to
do so. In such instances as well, the Series may convert the foreign
10
<PAGE>
currencies to dollars at the then current exchange rate, or may hold such
currencies for an indefinite period of time.
While the holding of currencies will permit the Series to take advantage of
favorable movements in the applicable exchange rate, it also exposes the Series
to risk of loss if such rates move in a direction adverse to the Series'
position. Such losses could reduce any profits or increase any losses sustained
by the Series from the sale or redemption of securities, and could reduce the
dollar value of interest or dividend payments received. ln addition, the holding
of currencies could adversely affect the Series' profit or loss on currency
options or forward contracts, as well as its hedging strategies.
INDUSTRY CLASSIFICATIONS
For the purposes of establishing industry classifications for the Theme
Series, the Adviser utilizes the William O'Neil & Co., Inc. Industry Group
Index. The William O'Neil & Co., Inc. Industry Group Index is presently
comprised of 197 industry classifications. Classifications are determined based
on the following broad sectors: Basic Material, Energy, Capital Equipment,
Technology, Consumer Cyclical, Retail, Consumer Staple, Health Care,
Transportation, Financialand Utilities. Sectors are then divided into industry
groups based upon income sources and other economically relevant criteria as
determined by O'Neil & Co., Inc.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The Fund'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 Fund.
The following investment restrictions are fundamental policies of the Fund
with respect to all Series and may not be changed except as described above. The
Fund 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.
(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 Allocation 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 and Asia
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 and Asia 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 Fund may borrow money for any
general purpose from a bank provided such borrowing does not exceed
10% of the net asset value of the Fund, not considering any such
borrowings as liabilities. The Allocation, International and Asia
Series may borrow money to the extent of financial futures
transactions and reverse repurchase agreements, provided that such
borrowings are limited to 331/3% of the value of the total assets of
the Series.
(6) Invest in illiquid securities in an amount greater than 15% of the net
asset 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 assetsor (d) together with investment companies having
the same investment adviser as the Fund (and
11
<PAGE>
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 and Asia Series,
other than foreign government securities), or, with respect
to the Allocation 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 Fund's
total assets. However, the Money Market Series and
Allocation 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' net 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 also may be affected by cash requirements
for redemptions of each Series' shares by requirements which enable the Fund to
receive certain favorable tax treatments.
BALANCED SERIES
In the fiscal years ended December 31, 1995 and December 31, 1996, the
turnover rates for the equity portion of the Balanced Series were 256% and
288%, respectively. The turnover rates for the fixed income securities were 175%
and 117%, respectively for the same periods.
ALLOCATION SERIES
In the fiscal years ended December 31, 1995 and December 31, 1996, the
turnover rates for the equity portion of the Allocation Series were 195% and
280%, respectively. The turnover rates for the fixed income securities were 112%
and 253%, respectively for the same periods.
MANAGEMENT OF THE FUND
The Trustees and executive officers of the Fund 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 06102.The Trustees and executive officers are listed below.
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
C. Duane Blinn (69) Trustee Partner in the law firm of Day, Berry & Howard. Director/Trustee, Phoenix
Day, Berry & Howard Funds (1980-present). Trustee, Phoenix-Aberdeen Series Fund and Phoenix
City Place Duff & Phelps Institutional Mutual Funds (1996-present). Director/Trustee,
Hartford, CT 06103 the National Affiliated Investment Companies (until 1993).
Robert Chesek (62) Trustee Trustee/Director, Phoenix Funds (1981-present) and Chairman
49 Old Post Road (1989-1994). Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff &
Wethersfield, CT 06109 Phelps Institutional Mutual Funds (1996-present). Director/Trustee, the
National Affiliated Investment Companies (until 1993). Vice President,
Common Stock, Phoenix Home Life Mutual Insurance Company
(1980-1994).
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
E. Virgil Conway (67) Trustee Chairman, (1992-present), Metropolitan Transportation Authority.
9 Rittenhouse Road Trustee/Director, Consolidated Edison Company of New York, Inc.
Bronxville, NY 10708 (1970-present), Pace University (1978-present), Atlantic Mutual Insurance
Company (1974-present), HRE Properties (1989-present), Greater New
York Councils, Boy Scouts of America (1985-present), Union Pacific Corp.
(1978-present), Blackrock Fund for Fannie Mae Mortgage Securities
(Advisory Director) (1990-present); Centennial Insurance Company
(1974-present), Josiah Macy, Jr. Foundation (1975-present), and The
Harlem Youth Development Foundation (1987-present). Chairman, Audit
Committee of the City of New York (1981-1996). Director/Trustee, the
National Affiliated Investment Companies (until 1993). Director/Trustee,
Phoenix Funds (1993-present). Trustee, Phoenix-Aberdeen Series Fund and
Phoenix Duff & Phelps Institutional Mutual Funds (1996-present). Director,
Duff & Phelps Utilities Tax-Free Income Inc. and Duff & Phelps Utility and
Corporate Bond Trust Inc. (1995-present). Director, Accuhealth
(1994-present), Trism, Inc. (1994-present)and Realty Foundation of New
York (1972-present). Chairman, New York Housing Partnership
Development Corp. (1981-present)., and Blackrock Fannie Mae Mortgage
Securities Fund (Advisory Director) (1989-1996) and Advisory Director,
Fund Directions (1993-present). Chairman, Financial Accounting Standards
Advisory Council (1992-1995).
Harry Dalzell-Payne (67) Trustee Director/Trustee, Phoenix Funds (1983-present). Trustee, Phoenix-
330 East 39th Street Aberdeen Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
Apt. 29G (1996-present). Director Duff & Phelps Utilities Tax-Free Income Inc. and
New York, NY 10016 Duff & Phelps Utility and Corporate Bond Trust Inc. (1995-present).
Director, Farragut Mortgage Co., Inc. (1991-1994). Director/Trustee, the
National Affiliated Investment Companies (1983-1993). Formerly, a Major
General of the British Army.
*Francis E. Jeffries (66) Trustee Director and Chairman of the Board, Phoenix Duff & Phelps Corporation
6585 Nicholas Blvd. (1995-present). Director/Trustee, Phoenix Funds (1995-present). Trustee,
Apt. 1601 Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps Institutional
Naples, FL 33963 Mutual Funds (1996-present). Director, Duff & Phelps Utilities Income Fund
(1987-present), Duff & Phelps Utilities Electric Company (1984-present).
Director (1989-1995), Chairman of the Board (1993-1995), President
(1989-1993), and Chief Executive Officer (1989-1995) and Duff & Phelps
Corporation.
Leroy Keith, Jr. (58) Trustee Chairman and Chief Executive Officer, Carson Products Company
64 Ross Road (1995-present). Director/Trustee, Phoenix Funds (1980-present). Trustee,
Savannah, GA 31405 Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps Institutional
Mutual Funds (1996-present). Director, Equifax Corporation
(1991-present), and Keystone International Fund, Inc. (1989-present).
Trustee, Keystone Liquid Trust, Keystone Tax Exempt Trust, Keystone Tax
Free Fund, Master Reserves Tax Free Trust, and Master Reserves Trust.
Trustee, 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).
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
*Philip R. McLoughlin (50) Trustee and President Director, Vice Chairman and Chief Executive Officer, Phoenix Duff & Phelps
Corporation (1995-present). Director (1994-present) and Executive Vice
President , Investments, Phoenix Home Life Mutual Insurance Company
(1988-present). Director/Trustee and President, Phoenix Funds
(1989-present). Trustee, Phoenix -Aberdeen Series Fund and Phoenix
Duff & Phelps Institutional Mutual Funds (1996-present). Director, Duff &
Phelps Utilities Tax-Free Income Inc. (1995-present) and Duff & Phelps
Utility and Corporate Bond Trust Inc. (1995-present), Director
(1983-present) and Chairman (1995-present), Phoenix Investment
Counsel, Inc. Director (1984-present) and President (1990-present),
Phoenix Equity Planning Corporation. Director, Phoenix Realty Group, Inc.
(1994-present), Phoenix Realty Advisors, Inc. (1987-present), Phoenix
Realty Investors, Inc. (1994-present), Phoenix Realty Securities, Inc.
(1994-present), PXRE Corporation (Delaware) (1985-present)and
World Trust Fund (1991-present). Director and Executive Vice President,
Phoenix Life and Annuity Company (1996-present), Director and Executive
Vice President, PHL Variable Insurance Company (1995-present) and
Director, Phoenix Charter Oak Trust Company (1996-present).
Director/Trustee, the National Affiliated Investment Companies (until 1993).
Director (1994-present), Chairman (1996-present) and Chief Executive
Officer (1995-1996), National Securities & Research Corporation, and
Director and President, Phoenix Securities Group, Inc. (1993-1995).
Director (1992-present) and President (1992-1994)W. S. Griffith & Co.,
Inc. and Director (1992-1995) and President (1992-1994), Townsend
Financial Advisers, Inc. Director and Vice President, PM Holdings, Inc.
(1985-present).
Everett L. Morris (68) Trustee Vice President, W. H. Reaves and Company (1993-present).
164 Laird Road Director/Trustee, Phoenix Funds (1995-present). Trustee, Duff & Phelps
Colts Neck, NJ 07722 Mutual Funds (1994-present). Trustee, Phoenix-Aberdeen Series Fund and
Phoenix Duff & Phelps Institutional Mutual Funds (1996-present). Director,
Duff & Phelps Utilities Tax-Free Income Inc. (1991-present), Incorporated
(1989-1993). Senior Executive Vice President and Chief Financial Officer,
Public Service Electric and Gas Company (1986-1992). Director, First
Fidelity Bank, N.A. (1984-1991).
*James M. Oates (50) Trustee Managing Director, The Wydown Group (1994-present). Chairman, IBEX
60 State Street Capital Markets LLC (1997-present). Director, Phoenix Duff & Phelps
Suite 950 Corporation (1995-present). Director/Trustee, Phoenix Funds, Chairman
Boston, MA 02109 IBEX Capital Markets LLC (1987-present). Trustee, Phoenix-Aberdeen
Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Director, Govett Worldwide Opportunity Funds, Inc.
(1991-present), Blue Cross and Blue Shield of New Hampshire
(1994-present), Stifel Financial (1996-present), Investors Bank and Trust
Corporation (1995-present), Investors Financial Services Corporation
(1995-present), and Plymouth Rubber Co. (1995-present). Member,
Chief Executives Organization (1996-present). Director/Trustee, the National
Affiliated Investment Companies (until 1993). Director (1984-1994),
President (1984-1994) and Chief Executive Officer (1986-1994).
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
*Calvin J. Pedersen (55) Trustee Director and President, Phoenix Duff & Phelps Corporation (1995-present).
55 East Monroe Street Director/Trustee, Phoenix Funds (1984-present). Trustee, Phoenix-
Suite 3600 Aberdeen Series Fund and Phoenix Duff & Phelps Institutional Mutual
Chicago, IL 60603 Funds (1996-present). President and Chief Executive Officer, Duff & Phelps
Utilities Tax-Free Income Inc. (1995-present), Duff & Phelps Utilities Income
Fund (since inception), and Duff & Phelps Utility and Corporate Bond Trust
Inc. (1995-present). Director (1986-1995), President (1993-1995) and
Executive Vice President (1992-1993), Duff & Phelps Corporation.
Philip R. Reynolds (69) Trustee Director/Trustee, Phoenix Funds (1984-present). Trustee, Phoenix-
43 Montclair Drive Aberdeen Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
West Hartford, CT 06107 (1996-present). Director, Vestaur Securities, Inc. (1972-present). Trustee
and Treasurer, J. Walton Bissell Foundation, Inc., (1988-present).
Director/Trustee, the National Affiliated Investment Companies (until 1993).
Herbert Roth, Jr. (68) Trustee Director/Trustee, Phoenix Funds (1980-present). Trustee, Phoenix-
134 Lake Street Aberdeen Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
P. O. Box 909 (1996-present). Director, Boston Edison Company (1972-present),
Sherborn, MA 01770 Landauer, Inc. (medical services) (1970-present), Tech Ops./Sevcon, Inc.
(electronic controllers) (1987-present), Key Energy Group (oil rig service)
(1988-1994), and Mark IV Industries (diversified manufacturer)
(1985-present). Director/Trustee, the National Affiliated Investment
Companies (until 1993).
Richard E. Segerson (51) Trustee Director/Trustee, Phoenix Funds (1993-present). Trustee, Phoenix-
102 Valley Road Aberdeen Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
New Canaan, CT 06840 (1996-present). Managing Director, Mullin Associates (1993-present). Vice
President and General Manager, Coates & Clark, Inc. (previously Tootal
American, Inc.) (1991-1993). Director/Trustee, the National Affiliated
Investment Companies (1984-1993).
Lowell P. Weicker, Jr. (65) Trustee Trustee/Director, the Phoenix Funds (1995-present). Trustee, Phoenix-
731 Lake Avenue Aberdeen Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
Greenwich, CT 06830 (1995-present). Director, UST, Inc. (1995-present) and HPSC, Inc.
(1995-present), Compuware (1996-present), Visiting Professor, University of
Virginia (1997-present), Duty Free International (1997-present) and
Chairman, Dresing, Lierman, Weicker (1995-1996). Former Governor of the
State of Connecticut (1991-1995).
</TABLE>
- ---------------
* Trustees identified with an asterisk are considered to be interested persons
of the Fund (within the meaning of the Investment Company Act of 1940, as
amended) because of their affiliation with the Phoenix Investment Counsel,
Inc., Phoenix Realty Securities, Inc.or Phoenix Equity Planning
Corporation.
<TABLE>
<S> <C> <C>
Michael E. Haylon (39) Executive Director and Executive Vice President, Investments, Phoenix Duff & Phelps
Vice President Corporation (1995-present). Senior Vice President, Securities Investments,
Phoenix Home Life Mutual Insurance Company (1993-1995). Executive
Vice President, the Phoenix Funds (1995-present), Phoenix-Aberdeen
Series Fund (1996-present, and Vice President, Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Director (1994-present), President
(1995-present), and Executive Vice President (1994-1995), Phoenix Investment
Counsel, Inc. Director (1994-present), President (1996-present) and
Executive Vice President (1994-1996), National Securities & Research
Corporation. Director, Phoenix Equity Planning Corporation (1995-present).
Various other positions with Phoenix Home Life Mutual Insurance Company
(1990-1993).
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
David R. Pepin (54) Executive Executive Vice President, Phoenix Funds, Phoenix-Aberdeen Series Fund and
Vice President Phoenix Duff & Phelps Institutional Mutual Funds (1996-present). Director,
Phoenix Investment Counsel, Inc., National Securities & Research
Corporation, and Phoenix Equity Planning Corporation, and (1996-present).
Executive Vice President, Mutual Fund Sales and Operations, Phoenix Equity
Planning Corporation (1996-present). Managing Director, Phoenix-
Aberdeen International Advisors, LLC (1996-present). Executive Vice
President (1996-present) and Director (1997-present), Phoenix Duff &
Phelps Corporation. Vice President, Phoenix Home Life Mutual Insurance
Company (1994-1995). Vice President and General Managerof Digital
Equipment Corporation (1980-1994).
William J. Newman (58) Senior Vice President Executive Vice President (1995-present) and Chief Investment Strategist
(1996-present), Phoenix Investment Counsel, Inc. Senior Vice President
(1995-1996), Executive Vice President and Chief Investment Strategist
(1996-present), National Securities & Research Corporation. Senior Vice
President, Phoenix Equity Planning Corporation (1995-1996). Vice
President, Common Stock and Chief Investment Strategist, Phoenix Home
Life Insurance Company (April 1995-November 1995). Senior Vice
President, Phoenix Strategic Equity Series Fund, Inc. (1996-present),
The Phoenix Edge Series Fund (1996-present), Phoenix Multi-Portfolio
Fund (1995-present), Phoenix Income and Growth Fund (1996-present),
Phoenix Series Fund (1995-present), Phoenix Strategic Allocation Fund,
Inc. (1996-present), Phoenix Worldwide Opportunities Fund
(1996-present), Phoenix Duff & Phelps Institutional Funds
(1996-present), and Phoenix-Aberdeen Series Fund (1996-present). Chief
Investment Strategist, Kidder, Peabody Co., Inc. (1993-1994) and Managing
Director, Equities, Bankers Trust Company (1991-1993).
Hugh Young (38) Senior Senior Vice President, Phoenix-Aberdeen Series Fund (1996-present).
Abtrust Fund Managers LTD Vice President Director, Phoenix-Aberdeen International Advisors, LLC. Far East
88A Circular Road Investment Director, Abtrust Fund Managers (Singapore) Limited
Singapore 049439 (1988-present). Managing Director, Abtrust Fund Managers (Singapore)
Limited (1992-present). Director, Abtrust Asian Smaller Companies
Investment Trust plc (1995-present), Abtrust New Dawn Investment Trust
plc (1989-present), Abtrust Emerging Asia Investment Trust Limited
(1990-present), JF Philippine Fund Inc. and Apollo Tiger.
Curtiss O. Barrows (45) Vice President Managing Director, Fixed Income (1996-present), Vice President
(1991-1996), Phoenix Investment Counsel, Inc. Portfolio Manager, Public
Bonds, Phoenix Home Life Mutual Insurance Company (1991-1995). Vice
President, Phoenix Series Fund (1985-present), Phoenix Multi-Portfolio
Fund (1995-present). Managing Director, Fixed Income (1996-present),
Vice President (1993-1996), National Securities & Research Corporation.
Various other positions with Phoenix Home Life Mutual Insurance Company
(1985-1991).
Mary E. Canning (40) Vice President Managing Director and Investment Strategist (1996-present), Vice President
(1991-1996), Phoenix Investment Counsel, Inc. Managing Director and
Investment Strategist, National Securities & Research Corporation
(1996-present). Associate Portfolio Manager, Common Stock, Phoenix
Home Life Mutual Insurance Company (1989-1995). Vice President,
Phoenix Series Fund (1987-present). Phoenix Strategic Allocation Fund
(1996-present). Various other positions with Phoenix Home Life Mutual
Insurance Company (1982-1989).
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
Jeanne H. Dorey (35) Vice President Managing Director, Equities (1996-present), Vice President (1993-1996),
Phoenix Investment Counsel, Inc. Managing Director, Equities,
(1996-present), Vice President (1993-1996), National Securities &
Research Corporation. Vice President, Phoenix Multi-Portfolio Fund
(1993-present) and Phoenix Worldwide Opportunities Fund
(1993-present). Portfolio Manager, International, Phoenix Home Life Mutual
Insurance Company (until 1995). Investment Analyst and Portfolio
Manager, Pioneer Group, Inc. (1990-1992).
Jean Claude Gruet Vice President Portfolio Manager and Vice President, The Phoenix Edge Series Fund
(1996-present). Vice President and Portfolio Manager, Atalanta Sosnoff
Capital Corporation (1994-1996). Vice President and Senior Analyst, UBS
Securities (1989-1994).
William E. Keen III (33) Vice President Assistant Vice President (1996-present), Director of Mutual Fund
100 Bright Meadow Blvd. Compliance (1995-1996), Phoenix Equity Planning Corporation. Vice
P.O. Box 2200 President, Phoenix Funds, Phoenix-Aberdeen Series Fund and Phoenix Duff
Enfield, CT 06083-2200 & Phelps Institutional Mutual Funds (1996-present). Assistant Vice
President, US Affinity Investments L.P. (1994-1995). Treasurer and
Secretary, US Affinity Funds (1994-1995). Manager, Fund Administration,
SEI Corporation (1991-1994).
Christopher J. Kelleher (42) Vice President Managing Director, Fixed Income (1996-present). Vice President (1991-
1996), Phoenix Investment Counsel, Inc. Portfolio Manager, Public Bonds,
Phoenix Home Life Mutual Insurance Company (1991-1995). Managing
Director, Fixed Income (1996-present). Vice President (1993-1996),
National Securities & Research Corporation. Vice President, Phoenix Series
Fund (1989-present), Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Various other positions with Phoenix Home Life Mutual
Insurance Company (1983-1991).
David Lui (37) Vice President Portfolio Manager, Equities, Phoenix Investment Counsel, Inc. and National
Securities & Research Corporation (1996-present). Vice President, Phoenix
Worldwide Opportunities Fund and Phoenix Multi-Portfolio Fund
(1996-present). Associate Portfolio Manager, International Portfolios,
Phoenix Home Life Mutual Insurance Company (1995-1996). Vice
President, Asian Equities, Alliance Capital Management (1993-1995).
Associate, Global Markets, Bankers Trust (1990-1993).
William R. Moyer (52) Vice President Senior Vice President and Chief Financial Officer, Phoenix Duff & Phelps
100 Bright Meadow Blvd. Corporation (1995-present). Vice President, Investment Products Finance,
P.O. Box 2200 Phoenix Home Life Mutual Insurance Company (1990-1995). Senior Vice
Enfield, CT 06083-2200 President (1990-present), Chief Financial Officer (1996-present), Finance
(until 1996) and Treasurer (1994-1996), Phoenix Equity Planning
Corporation. Senior Vice President (1990-present), Chief Financial Officer
(1996-present), Finance (until 1996) and Treasurer (1994-present),
Phoenix Investment Counsel, Inc. Senior Vice President (1994-present),
Chief Financial Officer (1996-present), Finance (until 1996), and Treasurer
(1994-present), National Securities & Research Corporation. Vice President,
Phoenix Funds (1990-present), Phoenix Duff & Phelps Institutional Mutual
Funds (1996-present) and Phoenix-Aberdeen Series Fund (1996-present).
Vice President, the National Affiliated Companies (until 1993). Senior Vice
President, Finance, Phoenix Securities Group, Inc. (1993-present). Senior
Vice President and Chief Financial Officer (1993-1995) and Treasurer
(1994-1995), W.S. Griffith & Co., Inc. and Townsend Financial Advisers,
Inc. Senior Vice President and Chief Financial Officer, Phoenix Duff &
Phelps Investment Management Co. (1996-present).
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
Scott C. Noble (50) Vice President Senior Vice President, Real Estate, Phoenix Home Life Mutual Insurance
Company (1991-present). Director and Executive Vice President, Phoenix
Real Estate Securities, Inc. (1993-present). Vice President, Phoenix Multi-
Portfolio Fund (1994-present) and Phoenix Duff & Phelps Institutional
Mutual Funds (1997-present). Director (1991-present) and President
(1993-present), Phoenix Founders, Inc. Director and President
(1994-present), Chief Executive Officer (1995-present), Phoenix Realty
Group, Inc. Director and Chief Executive Officer (1991-present), President
(1991-1995), Phoenix Realty Advisors, Inc. 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. (43) Vice President Managing Director, Equities, Vice President (1995-1996), Phoenix
Investment Counsel, Inc. Managing Director, Equities, National Securities
& Research Corporation (1996-present). Vice President, Phoenix Strategic
Allocation Fund, Inc. (1995-present), Phoenix Series Fund (1996-present).
Portfolio Manager, Phoenix Home Life Mutual Insurance Company (1995).
Senior Vice President and Director of Equity Management for Nationsbank
Investment Management (1988-1995).
Amy L. Robinson (41) Vice President Managing Director, Equity Trading (1996-present), Vice President
(1992-1996), Phoenix Investment Counsel, Inc. Managing Director,
Securities Administration, Phoenix Home Life Mutual Insurance Company
(1991-1995). Managing Director, Equity Trading (1996-present), Vice
President (1993-1996), National Securities & Research Corporation, Vice
President, Phoenix Series Fund (1989-present). Various other positions
with Phoenix Home Life Mutual Insurance Company (1979-1991).
Barbara Rubin (43) Vice President Vice President, (1995-present), Managing Director (1992-1995), Second
Vice President (1986-1992), Real Estate, Phoenix Home Life Mutual
Insurance Company. Vice President, Phoenix Multi-Portfolio Fund
(1994-present) and Phoenix Duff & Phelps Institutional Mutual Funds
(1997-present). Vice President (1991-present), 238 Columbus Blvd., Inc.
Director (1988-present) and Vice President (1993-present), Phoenix
Founders, Inc. Vice President (1993-present), Phoenix Real Estate
Securities, Inc. Director and President (1987-1991), Executive Vice
President (1991-1994), Phoenix Realty Advisors, Inc. Executive Vice
President, Phoenix Realty Group, Inc. (1994-present). President
(1995-present), Executive Vice President (1994-1995), Phoenix Realty
Securities, Inc.
Leonard J. Saltiel (43) Vice President Managing Director, Operationsand Service (1996-present), Senior Vice
100 Bright Meadow Blvd. President (1994-1996), Phoenix Equity Planning Corporation. Vice
P.O. Box 2200 President, Phoenix Funds (1994-present), Phoenix Duff & Phelps
Enfield, CT 06083-2200 Institutional Mutual Funds (1996-present) and National Securities &
Research Corporation (1994-present). Vice President, Investment
Operations, Phoenix Home Life Mutual Insurance Company (1994-1995).
Various positions with Home Life Insurance Company and Phoenix Home
Life Mutual Insurance Company (1987-1994).
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
Dorothy J. Skaret (44) Vice President Director, Money Market Trading (1996-present), Vice President
(1991-1996), Phoenix Investment Counsel, Inc. Director, Public Fixed
Income, Phoenix Home Life Mutual Insurance Company (1991-1995).
Director, Money Market Trading (1996-present), Vice President
(1993-1996), National Securities & Research Corporation, Vice President,
Phoenix Series Fund (1990-present), Phoenix Realty Securities, Inc.
(1995-present), Phoenix-Aberdeen Series Fund (1996-present) and
Phoenix Duff & Phelps Institutional Mutual Funds (1996-present). Various
other positions with Phoenix Home Life Mutual Insurance Company
(1986-1991).
James D. Wehr (39) Vice President Managing Director, Fixed Income (1996-present), Vice President (1991-1996),
Phoenix Investment Counsel, Inc. Managing Director, Fixed Income
(1996-present), Vice President (1993-1996), National Securities & Research
Corporation. Vice President, Phoenix Multi-Portfolio Fund (1988-present),
Phoenix Series Fund (1990-present), Phoenix California Tax Exempt Bonds, Inc.
(1993-present) and Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Managing Director, Public Fixed Income, Phoenix Home Life
Insurance Company (1991-1995). Various positions with Phoenix Home Life
Mutual Insurance Company (1981-1991).
Nancy G. Curtiss (44) Treasurer Treasurer(1996-present), Vice President, Fund Accounting
(1994-1996), Phoenix Equity Planning Corporation. Treasurer, Phoenix
Funds (1994-present), Phoenix-Aberdeen Series Fund (1996-present) and
Phoenix Duff & Phelps Institutional Mutual Funds (1996-present). Second
Vice President and Treasurer, Fund Accounting, Phoenix Home Life Mutual
Insurance Company (1994-1995). Various positions with Phoenix Home
Life Mutual Insurance Company (1987-1994).
G. Jeffrey Bohne (49) Secretary Vice President, Mutual Fund Customer Service, (1996-present), Vice
101 Munson Street President, Transfer Agent Operations (1993-1996), Phoenix Equity Planning
Greenfield, MA 01301 Corporation. Clerk, Phoenix Investment Counsel, Inc. (1995-present).
Secretary, the Phoenix Funds (1993-present) and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Clerk and Secretary, Phoenix-
Aberdeen Series Fund (1996-present). Vice President and General Manager,
Phoenix Home Life Mutual Insurance Company (1993-present). Assistant
Vice President, Phoenix Home Life Mutual Insurance Company
(1992-1993).
</TABLE>
No person listed in the foregoing table has any immediate family relationship
with any other person listed in the table.
At December 31, 1996, the Trustees and officers as a group owned none of the
then outstanding shares of the Fund.
For services rendered to the Fund during the fiscal year ended December 31,
1996, the Trustees received an aggregate of $143,625 from the Fund as
Trustees' fees. For service 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 $40,000 and $2,500 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. The current members of the Audit Committee are
Messrs. Blinn, Conway, Roth, Segerson and Weicker. Each Trustee who serves on
the Executive Committee and who is not an interested person of the Fund receives
a retainer at the annual rate of $1,000 and $1,000 per joint Executive Committee
meeting attended. The current members of the Executive Committee are Messrs.
Conway, Dalzell-Payne, McLoughlin, Morris, Oates and Roth. The function of the
Executive Committee is to serve as a contract review, compliance review and
performance review delegate of the full Board of Trustees. The foregoing fees
do not include the reimbursement of expenses incurred in connection with
meeting attendance. Trustee costs are allocated equally to each of the Series
of the Funds within the Fund complex. Officers and employees of the Adviser who
are interested persons are compensated by the Adviser and receive no
compensation from the Fund. Any other interested persons who are not
compensated by the Adviser receive fees from the Fund.
19
<PAGE>
For the Fund's last fiscal year, the Trustees received the following
compensation:
<TABLE>
<CAPTION>
TOTAL COMPENSATION
PENSION OR FROM FUND AND
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FUND COMPLEX
COMPENSATION ACCRUED AS PART OF BENEFITS UPON (11 FUNDS)
NAME FROM FUND FUND EXPENSES RETIREMENT PAID TO TRUSTEES
---- --------- ------------- ---------- ----------------
<S> <C> <C> <C> <C>
C. Duane Blinn $13,875* $60,500
Robert Chesek $12,125 $53,500
E. Virgil Conway $14,125 $61,750
Harry Dalzell-Payne $12,125 None for None for $53,750
Francis E. Jeffries $0 any Trustee any Trustee $0
Leroy Keith, Jr. $12,125 $53,500
Philip R. McLoughlin $0 $0
Everett L. Morris $11,375 $50,750
James M. Oates $13,250 $58,000
Calvin J. Pedersen $0 $0
Philip R. Reynolds $12,125 $53,500
Herbert Roth, Jr. $14,875* $64,750
Richard E. Segerson $13,750 $60,250
Lowell P. Weicker, Jr. $13,875 $60,500
</TABLE>
* At the request of Messrs. Blinn and Roth, arrangements have been made to
permit their compensation (and the earnings thereon) to be deferred until
their retirement or resignation from the Board of Trustees, or their death
or permanent disability.
THE INVESTMENT ADVISERS
- --------------------------------------------------------------------------------
The Fund has entered into Investment Advisory Agreements ("Agreements") with
Phoenix Investment Counsel, Inc. ("PIC"), Phoenix Realty Securities ("PRS") and
Phoenix-Aberdeen International Advisors, LLC ("PAIA") whose offices are located
in Hartford, Connecticut.
Phoenix is in the business of writing ordinary and group life and health
insurance and annuities. At December 31, 1996, Phoenix had total assets of
approximately $15.5 billion. PHL Variable writes variable annuities, and at
December 31, 1996 had total assets of approximately $189.5 million. PLAC
writes variable universal life insurance policies and at December 31, 1996 had
total assets of approximately $11.5 million. PEPCO performs bookkeeping and
pricing and administrative services for the Fund. It also provides bookkeeping
and pricing services to other investment companies advised by PIC and PRS. PEPCO
is registered as a broker-dealer in 50 states. The executive offices of Phoenix
and PAIA are located at One American Row, Hartford, Connecticut 06102 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, a subsidiary of
Phoenix Duff & Phelps Corporation ("PD&P") of Chicago, Illinois. Phoenix owns
a majority interest in PD&P. PIC also serves as subadviser to the Asia Series.
PRS was formed in 1994 as an indirect subsidiary of Phoenix. ABKB/LaSalle
Securities Limited Partnership (ABKB), a subsidiary of LaSalle Partners, serves
as subadviser 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.
PAIA, a Delaware limited liability company formed in 1996 and jointly owned
and managed by PM Holdings, Inc, is a direct subsidiary of Phoenix and Aberdeen
Fund Managers, Inc., a wholly-owned subsidiary of Aberdeen Asset Management plc.
Aberdeen Fund Managers, Inc. has its principal offices located at 1 Financial
Plaza, Suite 2210, NationsBank Tower, Fort Lauderdale, Florida 33394. While
many of the officers and directors of the Adviser have extensive experience as
investment professionals, due to its recent formation, the Adviser has no
prior operating history. Aberdeen Fund Managers, Inc. also serves as
subadviser for the Asia Series.
Aberdeen Asset Management was founded in 1983 and through subsidiaries
operating from offices in Aberdeen, Scotland; London, England; Singapore and
Fort Lauderdale, Florida, provides investment management services to unit and
investment trusts, segregated pension funds and other institutional and private
portfolios. As of September 30, 1996, Aberdeen Asset Management, and its
advisory subsidiaries, had approximately $4 billion in assets under management.
The Agreements provide that each Adviser 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 Fund or by Phoenix, PHL Variable and PLAC. The Advisers or Phoenix, PHL
Variable and PLAC have agreed to reimburse the Fund for certain operating
expenses for all Series. Each Series (except the International, Real Estate,
Theme and Asia Series) pays a portion or all of its total operating expenses
other than the management fee, up to .15% of its total average net assets. The
International, Real Estate, Theme and Asia Series pay total operating expenses
other than the management fee up to .40%, .25%, .25% and .25%, respectively, of
its total average net assets. Expenses above these limits are paid by the
Advisers, Phoenix, PHL Variable or PLAC.
20
<PAGE>
To the extent that any expenses are paid by the Fund, 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, PHL Variable or PLAC) incurred in the operation of the Fund 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 Fund,
Phoenix, PHL Variable or PLAC also will pay the fees and bear the expense of
registering and maintaining the registration of the Fund and its shares with the
Securities and Exchange Commission and the expense of preparing and mailing
prospectuses and reports to shareholders.
The Investment Advisory Agreements provide that the Advisers shall not be
liable to the Fund or to any shareholder of the Fund for any error of judgement
or mistake of law or for any loss suffered by the Fund or by any shareholder of
the Fund in connection with the matters to which the Investment Advisory
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 Fund, the Advisers shall be
compensated as follows: within five days after the end of each month, the Fund
shall pay the Advisers the following fees:
PHOENIX INVESTMENT COUNSEL, INC.
--------------------------------
RATE FOR
RATE FOR FIRST RATE FOR NEXT EXCESS OVER
SERIES $250,000,000 $250,000,000 $500,000,000
- ------ ------------ ------------ ------------
Money Market.... .40% .35% .30%
Multi-Sector.... .50% .45% .40%
Balanced........ .55% .50% .45%
Allocation...... .60% .55% .50%
Growth.......... .70% .65% .60%
International... .75% .70% .65%
Theme........... .75% .70% .65%
PHOENIX REALTY SECURITIES, INC.
-------------------------------
RATE FOR
RATE FOR FIRST RATE FOR NEXT EXCESS OVER
SERIES $1,000,000,000 $1,000,000,000 $2,000,000,000
- ------ -------------- -------------- --------------
Real Estate..... .75% .70% .65%
PHOENIX-ABERDEEN INTERNATIONAL ADVISORS, LLC
--------------------------------------------
SERIES
- ------
Asia............ 1.00%
The amounts payable to the Advisers shall be based upon the average of the
values of the net assets of the Fund as of the close of business each day. There
can be no assurance that the Fund will reach a net asset level high enough to
realize a reduction in the rate of the advisory fee.
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 called for the purpose of
voting on such approval. The agreements will terminate automatically if assigned
and may be terminated at any time, without payment of any penalty, either by the
Fund or by the Advisers, on sixty (60) days written notice.
BROKERAGE ALLOCATION
- --------------------------------------------------------------------------------
In effecting portfolio transactions for the Fund, the Advisers and
Subadvisers, adhere to the Fund's policy of seeking best execution and price,
determined as described below, except to the extent it is permitted to pay
higher brokerage commissions for "brokerage and research services" as defined
herein. The Advisers may cause the Fund to pay a broker an amount of commission
for effecting a securities transaction in excess of the amount of commission
which another broker or dealer would have charged for effecting the transaction,
if the Advisers determine in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker. 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 Fundor to 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 Fund
under their contracts with the Advisers and may benefit both the Fund and other
clients of the Advisers. Conversely, brokerage and research services provided by
brokers to other clients of the Advisers may benefit the Fund.
If the securities in which a particular Series of the Fund 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 Fund (involving both price paid or received and any commissions
and other costs paid), the efficiency
21
<PAGE>
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 Fund.
For the fiscal years ended December 31, 1994, 1995, and 1996 brokerage
commissions paid by the Fund on portfolio transactions totaled $4,360,577,
$5,452,277 and $6,749,696, 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 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, 1996 included
brokerage commissions of $5,789,323 on portfolio transactions aggregating
$4,201,850,149 executed by brokers who provided research and other statistical
and factual information.
Investment decisions for the Fund 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
Fund is concerned. In other cases, however, it is believed that the ability of
the Fund to participate in volume transactions will produce better executions
for the Fund. It is the opinion of the Board of Trustees of the Fund that the
desirability of utilizing the Advisers as investment advisers to the Fund as
manager of foreign securities owned by the Fund outweighs the disadvantages that
may be said to exist from simultaneous transactions.
The Fund has adopted a policy and procedures governing the execution of
aggregated advisory client orders ("bunching procedures") in an attempt to lower
commission costs on a per-share and per-dollar basis. According to the bunching
procedures, the Adviser shall aggregate transactions unless it believes in its
sole discretion that such aggregation is consistent with its duty to seek best
execution (which shall include the duty to seek best price) for the Fund. No
advisory account of the Adviser is to be favored over any other account and each
account that participates in an aggregated order is expected to participate at
the average share price for all transactions of the Adviser in that security on
a given business day, with all transaction costs shared pro rata based on the
Fund's participation in the transaction. If the aggregated order is filled in
its entirety, it shall be allocated among the Adviser's accounts in accordance
with the allocation order, and if the order is partially filled, it shall be
allocated pro rata based on the allocation order. Notwithstanding the foregoing,
the order may be allocated on a basis different from that specified in the
allocation order if all accounts of the Adviser whose orders are allocated
receive fair and equitable treatment and the reason for such different
allocation is explained in writing and is approved in writing by the Adviser's
compliance officer as soon as practicable after the opening of the markets on
the trading day following the day on which the order is executed. If an
aggregated order is partially filled and allocated on a basis different from
that specified in the allocation order, no account that is benefited by such
different allocation may intentionally and knowingly effect any purchase or sale
for a reasonable period following the execution of the aggregated order that
would result in it receiving or selling more shares than the amount of shares it
would have received or sold had the aggregated order been completely filled. The
Trustees will annually review these procedures or as frequently as shall appear
appropriate.
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value per share of each Series is determined as of the close
of regular trading of the New York Stock Exchange (the "Exchange") on days when
the Exchange is open for trading . The Exchange will be closed on the following
observed national holidays: New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Since the Fund does not price securities on weekends or United States national
holidays, the net asset value of a Series' foreign assets may be significantly
affected on days when the investor has no access to the Fund. The net asset
value per share of a Series is determined by adding the values of all securities
and other assets of the Series, subtracting liabilities and dividing by the
total number of outstanding shares of the Series. Assets and liabilities are
determined in accordance with generally accepted accounting principles and
applicable rules and regulations of the Securities and Exchange Commission.
A security that is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary exchange for such
security by the Trustees or their delegates. Because of the need to obtain
prices as of the close of trading on various exchanges throughout the world, the
calculation of net asset value may not take place for any Series which
invests in foreign securities contemporaneously with the determination of the
prices of the majority of the portfolio securities of such 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 ask
quotations of such currencies against United States dollars as last quoted by
any recognized dealer. If an event were to occur after the value of an
investment was so established but before the net asset value per share was
determined, which was likely to materially change the net asset value, then the
instrument would be valued using fair value considerations by the Trustees or
their delegates. If at any time a Series has investments where market quotations
are not readily available, such investments are valued at the fair value thereof
as determined in good faith by the Trustees although the actual calculations may
be made by persons acting pursuant to the direction of the Trustees.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
Shares of the Fund are not available to the public directly. Although shares
of the Fund are owned by the Accounts, Contract Owners and Policyowners do have
voting rights with respect to those shares, as described in the Prospectus under
"Shares of Beneficial
22
<PAGE>
Interest." You may invest in the Fund by buying a Variable Accumulation Annuity
Contract or a Variable Universal Life Insurance Policy from Phoenix , PHL
Variable or PLAC and directing the allocation of the net purchase payment(s) to
the Subaccounts corresponding to the Series of the Fund. Phoenix, PHL Variable
and PLAC will, in turn, invest payments in shares of the Fund as the investor
directs at net asset value next determined with no sales load.
SALES CHARGE AND SURRENDER CHARGES
The Fund 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 Fund 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 Fund 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 Fund 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 Fund also intends to comply with pertinent Code provisions in
order 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 Fund'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, Asia 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 and Asia
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, Real Estate and Asia
Series, the address for the Custodian is The Chase Manhattan Bank, N.A., 1 Chase
Manhattan Plaza, Floor 13B, New York, NY 10081. The Fund 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 Fund if certain
conditions are met.
FOREIGN CUSTODIAN
The Fund 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 Fund'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 Fund's financial statements are audited by Price Waterhouse LLP, 160
Federal Street, Boston, Massachusetts 02110, independent accountants for the
Fund. The independent accountants also provide other accounting and tax-related
services as requested by the Fund from time to time.
FINANCIAL STATEMENTS
The financial statements and the notes thereto relating to the Fund and the
report of Price Waterhouse LLP with respect thereto for the fiscal year ended
December 31, 1996 are contained in the Fund's Annual Report. The Annual Report
is available by calling Variable Products Operations at (800) 447-4312 or
writing to Phoenix Variable Products Mail Operations, P.O. Box 8027, Boston, MA
02266-8027. Phoenix, PHL Variable and PLAC 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 Contract Owner or
23
<PAGE>
Policyowner having an interest in the Accounts. The Annual Report for the fiscal
period ended December 31, 1996 is included in this Statement of Additional
Information.
APPENDIX
- --------------------------------------------------------------------------------
A-1 AND P-1 COMMERCIAL PAPER RATINGS
The Money Market Series will invest only in commercial paper which at the
date of investment is rated A-1 by Standard & Poor's Corporation ("S&P") 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 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 10 years; (7) financial strength of a parent
company and the relationship which exists with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS
AAA--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
AA--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
STANDARD AND POOR'S CORPORATION'S CORPORATE BOND RATINGS
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
BB-B-CCC-CC--Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
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.
24
<PAGE>
ANNUAL REPORT
DECEMBER 31, 1996
THE PHOENIX EDGE SERIES FUND
2-1
<PAGE>
MONEY MARKET SERIES
Over the last twelve months, Phoenix Edge Money Market Series continued to
produce strong results for its shareholders. As of December 31, 1996, the
current yield on the Fund was 4.97%, versus the 4.82% seven-day average yield
of taxable money market funds reported by IBC Donoghue's Money Market Report.
The current yield is a seven-day annualized yield computed by dividing the
average net income earned per share during the seven-day period preceding the
date of calculation by the average daily net asset value per share for the
same period, with the resulting figure multiplied by 365.
Shifting market opinion over the direction of the U.S. economy was
responsible for much of the volatility in short-term interest rates during
this latest twelve-month reporting period. In January, the Central Bank cut
the Fed Funds Rate from 5.50% to 5.25% in an effort to stimulate what was
believed to be a sluggish economy. Although it was widely anticipated that
the Federal Reserve would have to lower rates again, a surprisingly strong
February employment report provided conflicting evidence about the economy's
health. As more data became available, it became evident that the economy had
grown robustly during the first half of 1996. During this period, short-term
interest rates moved higher as the financial markets had to consider the
threat of future inflation.
By late summer, the consensus view on Wall Street shifted once again as
signs of more moderate economic growth became increasingly apparent and
concerns over inflation declined. With the exception of the last few weeks in
December, short-term interest rates trended lower for the remainder of this
reporting period. In the end, despite all these market gyrations during 1996,
the 90-day Treasury bill finished the year yielding 5.19%--only 12 basis
points higher than where it stood one year ago.
Looking ahead, the Fund continues to focus on high-quality assets as
represented by the portfolio's average credit quality of A1/P1 as of December
31, 1996. In terms of our asset allocation strategy, we are currently
emphasizing top-tier commercial paper, variable-rate instruments and U.S.
Government obligations. As always, we remain committed to carefully
monitoring the short-term markets for attractive investment opportunities.
- --------------------------------------------------------------------------------
[DESCRIPTION OF LINE CHART]
MONTHLY YIELD COMPARISON
IBC Donoghue Money
Money Fund Report* Market Series
1/31/96 5.03 5.01
2/29/96 4.8 4.82
3/31/96 4.69 4.77
4/30/96 4.68 4.77
5/31/96 4.67 4.78
6/30/96 4.7 4.86
7/31/96 4.73 4.86
8/31/96 4.74 4.75
9/30/96 4.75 4.91
10/31/96 4.75 4.82
11/30/96 4.75 4.84
12/31/96 4.78 4.97
- --------------------------------------------------------------------------------
The above graph covers the period from January 1, 1996 to December 31, 1996.
The results are not indicative of the rate of return which may be realized
from an investment made in the Money Market Series 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 IBC
Donoghue's Money Fund Report.
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
FACE
VALUE INTEREST MATURITY
(000) DESCRIPTION RATE DATE VALUE
- --------- --------------------------------------------------------------- -------- ---------- -------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--3.8%
U.S. Treasury Bills--1.5%
$2,000 U.S. Treasury Bills 4.80% 02/06/97 $ 1,990,400
-------------
U.S. Treasury Notes--2.3%
3,000 U.S. Treasury Notes 6.88 02/28/97 3,008,112
-------------
TOTAL U.S. GOVERNMENT SECURITIES 4,998,512
-------------
FEDERAL AGENCY SECURITIES--8.6%
2,175 Federal National Mortgage Assoc. 5.34 02/24/97 2,157,578
1,500 Federal Home Loan Banks 5.27 02/28/97 1,500,000
4,190 Federal National Mortgage Assoc. 5.36 03/27/97 4,136,973
2,000 Federal Farm Credit Banks 5.40 04/01/97 1,999,441
1,500 Federal Home Loan Banks 5.69 11/20/97 1,500,000
-------------
TOTAL FEDERAL AGENCY SECURITIES 11,293,992
-------------
</TABLE>
See Notes to Financial Statements
2-2
<PAGE>
MONEY MARKET SERIES
<TABLE>
<CAPTION>
FACE
VALUE INTEREST RESET
(000) DESCRIPTION RATE DATE VALUE
- --------- ---------------------------------------------------------------- --------- ----------- -------------
<S> <C> <C> <C> <C>
FEDERAL AGENCY SECURITIES--VARIABLE--12.0% (b)
$1,500 Federal Farm Credit Banks (final maturity 02/24/97) 5.51% 01/02/97 $ 1,499,957
4,500 Federal Farm Credit Banks (final maturity 07/24/00) 5.54 01/02/97 4,501,807
1,500 Federal Home Loan Banks (final maturity 01/14/97) 5.70 01/02/97 1,500,000
2,500 Student Loan Marketing Assoc. (final maturity 11/24/97) 5.39 01/07/97 2,500,000
1,500 Student Loan Marketing Assoc. (final maturity 11/10/98) 5.41 01/07/97 1,498,532
1,000 Student Loan Marketing Assoc. (final maturity 02/22/99) 5.42 01/07/97 1,000,000
1,600 Student Loan Marketing Assoc. (final maturity 10/30/97) 5.57 01/07/97 1,600,731
1,650 Federal National Mortgage Assoc. (
final maturity 12/14/98) 5.18 03/14/97 1,648,237
-----------
TOTAL FEDERAL AGENCY SECURITIES--VARIABLE 15,749,264
-----------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
FACE & POOR'S
VALUE RATING INTEREST MATURITY
(000) DESCRIPTION (Unaudited) RATE DATE VALUE
- -------- ------------------------------------------------- ------------ --------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER--74.0%
1,500 Campbell Soup Co. A-1+ 6.75 01/02/97 1,499,719
4,280 Cargill, Inc. A-1+ 6.95 01/02/97 4,279,174
1,500 AlliedSignal, Inc. A-1 6.10 01/03/97 1,499,492
725 Abbott Laboratories A-1+ 5.75 01/07/97 724,305
1,940 DuPont (E.I.) de Nemours & Co. A-1+ 5.29 01/09/97 1,937,719
2,775 Merrill Lynch & Co., Inc. A-1+ 5.48 01/09/97 2,771,621
3,000 Heinz (H.J.) Co. A-1 5.40 01/10/97 2,995,950
1,160 Heinz (H.J.) Co. A-1 5.40 01/10/97 1,158,434
4,500 Exxon Imperial U.S., Inc. A-1+ 5.41 01/13/97 4,491,885
3,500 Greenwich Funding Corp. A-1+ 5.60 01/15/97 3,492,378
2,500 Receivables Capital Corp. A-1 5.73 01/15/97 2,494,429
1,500 Preferred Receivables Funding Corp. A-1 5.35 01/16/97 1,496,656
1,500 General Electric Capital Corp. A-1+ 5.32 01/17/97 1,500,000
2,140 Cargill, Inc. A-1+ 5.41 01/22/97 2,133,247
3,500 General Electric Capital Corp. A-1+ 5.31 01/22/97 3,500,000
2,500 AlliedSignal, Inc. A-1 5.47 01/23/97 2,491,643
2,335 AlliedSignal, Inc. A-1 5.65 01/23/97 2,326,938
2,000 Preferred Receivables Funding Corp. A-1 5.45 01/23/97 1,993,339
2,165 Goldman Sachs & Co. A-1+ 5.45 01/24/97 2,157,462
915 Merrill Lynch & Co., Inc. A-1+ 5.33 01/24/97 911,884
2,000 Albertson's, Inc. A-1 5.38 01/27/97 1,992,229
555 First Deposit Funding Trust A-1 5.34 01/30/97 552,613
500 United Parcel Service of America, Inc. A-1+ 5.35 01/30/97 497,845
1,300 Heinz (H.J.) Co. A-1 5.40 02/03/97 1,293,565
450 DuPont (E.I.) de Nemours & Co. A-1+ 5.55 02/07/97 447,433
709 Kellogg Co. A-1+ 5.37 02/07/97 705,087
2,500 Vermont American Corp. A-1+ 5.47 02/07/97 2,485,945
2,500 Private Export Funding Corp. A-1+ 5.28 02/10/97 2,485,333
3,000 CXC, Inc. A-1+ 5.35 02/11/97 2,981,721
2,230 Corporate Receivables Corp. A-1 5.37 02/12/97 2,216,029
1,175 First Deposit Funding Trust A-1 5.32 02/12/97 1,167,707
2,500 Kimberly-Clark Corp. A-1+ 5.42 02/12/97 2,484,192
2,500 Preferred Receivables Funding Corp. A-1 5.35 02/13/97 2,484,024
3,140 Goldman Sachs & Co. A-1+ 5.35 02/14/97 3,119,468
1,500 Kimberly-Clark Corp. A-1+ 5.42 02/14/97 1,490,063
4,500 Southwestern Bell Telephone Co. A-1+ 5.37 02/18/97 4,467,780
1,355 Corporate Receivables Corp. A-1 5.35 02/20/97 1,344,932
1,500 Southwestern Bell Telephone Co. A-1+ 5.43 02/25/97 1,487,556
2,000 Greenwich Funding Corp. A-1+ 5.47 02/28/97 1,982,374
619 Greenwich Funding Corp. A-1+ 5.35 03/03/97 613,389
4,500 Bellsouth Telecommunications, Inc. A-1+ 5.34 03/04/97 4,458,615
2,100 CXC, Inc. A-1+ 5.32 03/17/97 2,076,725
3,000 Asset Securitization Cooperative Corp. A-1+ 5.37 03/27/97 2,961,963
3,700 Receivables Capital Corp. A-1 5.39 05/01/97 3,633,523
1,000 CXC, Inc. A-1+ 5.35 05/15/97 980,086
1,000 Beta Finance, Inc. A-1+ 5.80 08/14/97 1,000,000
------------
TOTAL COMMERCIAL PAPER 97,266,472
------------
TOTAL INVESTMENTS--98.4%
(Identified cost $129,308,240) 129,308,240(a)
Cash and receivables, less liabilities--1.6% 2,053,166
------------
NET ASSETS--100.0% $131,361,406
============
</TABLE>
(a) Federal Income Tax Information: At December 31, 1996, the aggregate cost
of securities was the same for book and tax purposes.
(b) Variable rate demand note. The interest rates shown reflect the rate
currently in effect. The maturity dates shown reflect the next
interest rate reset dates.
See Notes to Financial Statements
2-3
<PAGE>
MONEY MARKET SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at value (Identified cost $129,308,240) $129,308,240
Cash 526,466
Receivable for fund shares sold 1,267,063
Interest receivable 354,789
------------
Total assets 131,456,558
------------
Liabilities
Investment advisory fee 43,068
Trustees' fee 8,091
Financial agent fee 6,397
Accrued expenses 37,596
------------
Total liabilities 95,152
------------
Net Assets $131,361,406
============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $131,361,403
Undistributed net investment income 3
------------
Net Assets $131,361,406
============
Shares of beneficial interest outstanding, $1 par value, unlimited authorization 13,136,138
============
Net asset value and offering price per share $10.00
======
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
Investment Income
Interest $ 5,865,100
------------
Total investment income 5,865,100
------------
Expenses
Investment advisory fee 431,032
Financial agent fee 64,655
Printing 33,528
Professional 24,087
Trustees 18,073
Custodian 16,377
Miscellaneous 2,783
------------
Total expenses 590,535
------------
Net investment income 5,274,565
------------
Net increase in net assets resulting from operations $ 5,274,565
============
</TABLE>
See Notes to Financial Statements
2-4
<PAGE>
MONEY MARKET SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
12/31/96 12/31/95
---------------- ----------------
<S> <C> <C>
From Operations
Net investment income $ 5,274,565 $ 5,070,409
-------------- ---------------
Net increase in net assets resulting from operations 5,274,565 5,070,409
-------------- ---------------
From Distributions to Shareholders
Net investment income (5,303,654) (5,055,199)
-------------- ---------------
Decrease in net assets from distributions to shareholders (5,303,654) (5,055,199)
-------------- ---------------
From Share Transactions
Proceeds from sales of shares (31,500,976 and 19,415,954 shares,
respectively) 315,009,761 194,159,531
Net asset value of shares issued from reinvestment of distributions
(530,365 and 505,520 shares, respectively) 5,303,654 5,055,199
Cost of shares repurchased (29,186,637 and 19,087,235 shares,
respectively) (291,866,357) (190,872,354)
-------------- ---------------
Increase in net assets from share transactions 28,447,058 8,342,376
-------------- ---------------
Net increase in net assets 28,417,969 8,357,586
Net Assets
Beginning of period 102,943,437 94,585,851
-------------- ---------------
End of period (including undistributed net investment income of $3 and
$29,092, respectively) $ 131,361,406 $ 102,943,437
============== ===============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Year ended December 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<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 0.50 0.56 0.38(1) 0.28(1) 0.35
-------- -------- ------- ------- -------
Total from investment operations 0.50 0.56 0.38 0.28 0.35
-------- -------- ------- ------- -------
Less distributions
Dividends from net investment income (0.50) (0.56) (0.38) (0.28) (0.35)
-------- -------- ------- ------- -------
Total distributions (0.50) (0.56) (0.38) (0.28) (0.35)
-------- -------- ------- ------- -------
Net asset value, end of period $10.00 $10.00 $10.00 $10.00 $10.00
======== ======== ======= ======= =======
Total return 4.98% 5.55% 3.77% 2.80% 3.50%
Ratios/supplemental data:
Net assets, end of period (thousands) $131,361 $102,943 $94,586 $72,946 $69,962
Ratio to average net assets of:
Operating expenses 0.55% 0.53%(2) 0.55% 0.55% 0.50%
Net investment income 4.89% 5.57% 3.85% 2.84% 3.49%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.003 and $0.01 per share, respectively.
(2) The ratio of operating expenses to average net assets excludes the
effect of expense offsets for custodian fees; if expense offsets were
included, the ratio would not significantly differ.
See Notes to Financial Statements
2-5
<PAGE>
GROWTH SERIES
With the stock market continuing its remarkable rally dating back to
December 1994, Phoenix Edge Growth Series posted double-digit gains during
this reporting cycle. For the twelve-month period ended December 31, 1996,
the Fund posted a total return of 12.58%, while the Standard & Poor's 500
Stock Index, a commonly used measure of U.S. stock market performance,
returned 23.25%. All of these figures assume reinvestment of any
distributions, but exclude the effect of sales charges.
We have viewed the stock market as in the late stages of a cyclical upswing.
Since October 1990, stocks have moved higher virtually without major
interruption. The excellent returns have bred an environment of complacency
and high expectations that have pushed investors further out on the risk
spectrum. During the second quarter of 1996, we witnessed a tremendous influx
of money into aggressive growth and smaller company funds that showcased this
speculative impulse. The correction of July 1996 cleansed the excesses in
this area of the market. Since July, the focus has shifted to larger company
outperformance. Investors have poured money into very large companies
believed to provide steady growth characteristics and ample liquidity. This
more recent tactic has pushed market indices (such as S&P 500 and the Dow
Jones Industrials) higher, while broader measures of stock performance have
lagged.
In retrospect, the Fund's performance was held back by a more guarded stance
toward the stock market. Our approach of lowering the portfolio's risk
profile by holding cash reserves met with good results through August 1996,
and especially in the difficult market environment during July. But the
dramatic rebound in equity prices during the remainder of the year served as
the primary reason for lagging the S&P 500 Stock Index. Positive contributors
to performance during the reporting period included our excellent stock
selection in both the energy and financial sectors as well as our decision to
avoid the poorly performing utility group. Specific areas which hindered our
relative equity performance included weakness in some of our technology and
capital goods holdings.
While valuation levels have clearly risen over the last two years, we do not
believe that the stock market is presently overvalued. As we move into 1997,
the Fund is currently focusing on stable growth stocks as well as companies
with improving earnings prospects. In terms of sector allocation, the
portfolio is currently overweighted in the health care and financial sectors,
and underweighted in basic materials and consumer cyclical stocks. Although
we believe the technology group still offers excellent long-term growth
opportunities, we are maintaining a market weighting in this volatile sector,
while waiting for a more favorable time to selectively increase our exposure
in this area.
In conclusion, after back-to-back years of powerful performance, the equity
risk is rising. We believe that the key to 1997 outperformance lies in taking
advantage of market inefficiencies within a volatile trading range combined
with individual stock selection.
- --------------------------------------------------------------------------------
[DESCRIPTION OF LINE CHART
Growth Series S&P 500 Stock Index
12/31/86 $10,000 $10,000
12/31/87 10,705 10,517
12/31/88 11,115 12,253
12/31/89 15,123 16,104
12/31/90 15,725 15,590
12/31/91 22,617 20,352
12/31/92 24,945 21,917
12/31/93 29,856 24,109
12/31/94 30,298 24,427
12/31/95 39,645 33,590
12/31/96 44,632 41,398
- --------------------------------------------------------------------------------
Average Annual Total Returns for Periods Ending 12/31/96
1 Year 5 Years 10 Years
- ---------------------------------------------------------------------
Growth Series 12.58% 14.56% 16.13%
- ---------------------------------------------------------------------
S&P 500 Stock Index* 23.25% 15.26% 15.27%
- ---------------------------------------------------------------------
This chart assumes an initial gross investment of $10,000 made on 12/31/86.
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 net asset 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.
2-6
<PAGE>
GROWTH SERIES
SCHEDULE OF INVESTMENTS
December 31, 1996
SHARES VALUE
--------- ----------------
COMMON STOCKS--96.5%
Aerospace & Defense--2.0%
Boeing Co. 121,200 $ 12,892,650
United Technologies Corp. 174,400 11,510,400
-------------
24,403,050
-------------
Banks--7.5%
Ahmanson (H.F.) & Co. 388,500 12,626,250
BankAmerica Corp. 124,500 12,418,875
Chase Manhattan Corp. 207,100 18,483,675
Citicorp 180,500 18,591,500
Nationsbank Corp. 63,800 6,236,450
Republic New York Corp. 149,800 12,227,425
Wells Fargo & Co. 45,300 12,219,675
-------------
92,803,850
-------------
Beverages--3.8%
Coca-Cola Co. 488,900 25,728,363
PepsiCo, Inc. 292,900 8,567,325
Seagram Ltd. 317,200 12,291,500
-------------
46,587,188
-------------
Chemical--2.0%
Du Pont (E.I.) de Nemours & Co. 130,300 12,297,063
IMC Global, Inc. 328,600 12,856,475
-------------
25,153,538
-------------
Computer Software & Services--5.1%
Adaptec, Inc. (b) 281,600 11,264,000
Computer Associates International, Inc. 300,100 14,929,975
First Data Corp. 320,200 11,687,300
Microsoft Corp. (b) 295,200 24,390,900
Sterling Commerce, Inc. (b) 1 35
-------------
62,272,210
-------------
Conglomerates--2.0%
AlliedSignal, Inc. 184,600 12,368,200
Tyco International Ltd. 236,400 12,499,650
-------------
24,867,850
-------------
Containers--1.1%
Crown Cork & Seal, Inc. 238,600 12,973,875
-------------
Cosmetics & Soaps--3.2%
Colgate Palmolive Co. 136,700 12,610,575
Gillette Co. 179,300 13,940,575
Procter & Gamble Co. 115,500 12,416,250
-------------
38,967,400
-------------
Diversified Financial Services--6.2%
American Express Co. 229,400 12,961,100
Conseco, Inc. 197,700 12,603,375
Federal National Mortgage Assoc. 305,900 11,394,775
First USA, Inc. 379,700 13,147,113
MBNA Corp. 322,300 13,375,450
Travelers Group, Inc. 282,300 12,809,362
-------------
76,291,175
-------------
Diversified Miscellaneous--1.2%
Eastman Kodak Co. 77,800 6,243,450
Equifax, Inc. 294,700 9,025,188
-------------
15,268,638
-------------
Electrical Equipment--3.8%
Checkpoint Systems, Inc. (b) 176,800 4,375,800
General Electric Co. 243,900 24,115,612
Raychem Corp. 232,700 18,645,087
-------------
47,136,499
-------------
Electronics--6.8%
Atmel Corp. (b) 181,600 $ 6,015,500
Intel Corp. 290,200 37,998,062
Perkin Elmer Corp. 215,100 12,664,012
S3, Inc. (b) 342,100 5,559,125
3Com Corp. (b) 295,800 21,704,325
-------------
83,941,024
-------------
Healthcare--Diversified--2.5%
American Home Products Corp. 210,600 12,346,425
Mallinckrodt, Inc. 280,800 12,390,300
Warner-Lambert Co. 80,400 6,030,000
-------------
30,766,725
-------------
Healthcare--Drugs--7.5%
Amgen, Inc. (b) 217,000 11,799,375
Centocor, Inc. (b) 176,500 6,309,875
Merck & Co., Inc. 462,600 36,661,050
Pfizer, Inc. 297,000 24,613,875
Pharmacia & Upjohn, Inc. 325,400 12,893,975
-------------
92,278,150
-------------
Hospital Management & Services--1.0%
Columbia/HCA Healthcare Corp. 307,500 12,530,625
-------------
Insurance--1.5%
Allstate Corp. 212,400 12,292,650
SunAmerica, Inc. 150,100 6,660,688
-------------
18,953,338
-------------
Medical Products & Supplies--3.0%
Boston Scientific Corp. (b) 210,100 12,606,000
Johnson & Johnson 248,100 12,342,975
Medtronic, Inc. 187,000 12,716,000
-------------
37,664,975
-------------
Natural Gas--1.5%
Anadarko Petroleum Corp. 185,600 12,017,600
Burlington Resources, Inc. 118,500 5,969,437
-------------
17,987,037
-------------
Office & Business Equipment--3.9%
Compaq Computer Corp. (b) 244,200 18,131,850
Hewlett Packard Co. 120,500 6,055,125
International Business Machines Corp. 158,500 23,933,500
-------------
48,120,475
-------------
Oil--1.0%
Louisiana Land & Exploration Co. 225,800 12,108,525
-------------
Oil Service & Equipment--8.9%
BJ Services Co. (b) 376,800 19,216,800
Diamond Offshore Drilling (b) 322,700 18,393,900
Dresser Industries, Inc. 229,100 7,102,100
ENSCO International, Inc. (b) 297,000 14,404,500
Halliburton Co. 307,500 18,526,875
Rowan Companies, Inc. (b) 262,400 5,936,800
Schlumberger Ltd. 119,800 11,965,025
Tidewater, Inc. 323,800 14,651,950
-------------
110,197,950
-------------
Professional Services--2.1%
ADT Ltd. (b) 547,700 12,528,637
Cognizant Corp. 387,000 12,771,000
-------------
25,299,637
-------------
Rails--1.5%
Burlington Northern, Inc. 219,500 18,959,313
-------------
See Notes to Financial Statements
2-7
<PAGE>
GROWTH SERIES
SHARES VALUE
--------- ----------------
Retail--7.2%
CVS Corp. 312,300 $ 12,921,412
Federated Department Stores, Inc. (b) 374,000 12,762,750
Footstar, Inc. (b) 1 12
Home Depot, Inc. 495,000 24,811,875
Price/Costco, Inc. (b) 755,500 18,981,938
TJX Companies, Inc. 417,600 19,783,800
--------------
89,261,787
--------------
Retail--Food--1.0%
American Stores Co. 307,500 12,569,062
--------------
Telecommunications Equipment--3.0%
Cisco Systems, Inc. (b) 583,900 37,150,638
--------------
Tobacco--3.0%
Philip Morris Companies, Inc. 330,400 37,211,300
--------------
Utility--Telephone--3.2%
Ameritech Corp. 221,300 13,416,313
GTE Corp. 293,900 13,372,450
SBC Communications, Inc. 251,800 13,030,650
--------------
39,819,413
--------------
TOTAL COMMON STOCKS
(Identified cost $1,117,867,582) 1,191,545,247
--------------
FOREIGN COMMON STOCKS--3.2%
Chemical--1.0%
Potash Corp. of Saskatchewan, Inc. (Canada) 152,600 12,971,000
--------------
Cosmetics & Soaps--1.1%
Unilever NV (Netherlands) 74,200 13,003,550
--------------
Oil Service & Equipment--1.1%
Elf Aquitane Sponsored ADR (France) 307,600 13,918,900
--------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $32,799,274) 39,893,450
--------------
TOTAL LONG-TERM INVESTMENTS--99.7%
(Identified cost $1,150,666,856) 1,231,438,697
--------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ -------- -----------------
SHORT-TERM OBLIGATIONS--5.4%
Commercial Paper--3.5%
Private Export Funding Corp. 5.30%,
1-28-97 A-1+ $ 2,145 $ 2,135,863
Albertson's, Inc. 5.48%, 1-29-97 A-1 4,675 4,655,074
Cargill, Inc. 5.33%, 1-31-97 A-1+ 3,000 2,986,675
Southwestern Bell Telephone Co.
5.30%, 1-31-97 A-1+ 3,300 3,283,917
Corporate Receivables Corp. 5.37%,
2-12-97 A-1 3,410 3,387,885
General Re Corp. 5.30%, 2-14-97 A-1+ 5,000 4,964,959
Goldman Sachs & Co. 5.35%, 2-14-97 A-1+ 6,380 6,335,287
Receivables Capital Corp. 5.40%,
2-14-97 A-1 3,565 3,539,989
Beta Finance, Inc. 5.38%, 2-25-97 A-1+ 3,000 2,973,864
Southwestern Bell Telephone Co.
5.43%, 2-25-97 A-1+ 5,000 4,956,210
Cargill, Inc., 5.30%, 3-6-97 A-1+ 4,000 3,958,680
--------------
43,178,403
--------------
Federal Agency Securities--1.9%
Federal Home Loan Mortgage Corp. 5.31%, 2-21-97 2,065 2,048,541
Federal National Mortgage Assoc. 5.24%, 2-27-97 5,000 4,955,787
Federal Farm Credit Banks 5.20%, 5-6-97 2,000 1,963,240
Federal Home Loan Banks 5.29%,
8-8-97 (c) 5,000 5,000,000
Federal National Mortgage Assoc. 5.37%,
12-9-97 (c) 10,000 9,995,500
--------------
23,963,068
--------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $67,163,196) 67,141,471
--------------
TOTAL INVESTMENTS--105.1%
(Identified cost $1,217,830,052) 1,298,580,168(a)
Cash and receivables, less liabilities---(5.1%) (63,185,635)
--------------
NET ASSETS--100.0% $1,235,394,533
==============
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $102,899,035 and gross
depreciation of $22,857,753 for income tax purposes. At December 31,
1996, the aggregate cost of securities for federal income tax purposes
was $1,218,538,886.
(b) Non-income producing.
(c) Variable rate security. The interest rates shown reflect the rate
currently in effect.
See Notes to Financial Statements
2-8
<PAGE>
GROWTH SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $1,217,830,052) $1,298,580,168
Receivable for investment securities sold 61,614,267
Interest and dividends receivable 1,359,744
Tax reclaim receivable 150,324
-------------
Total assets 1,361,704,503
-------------
Liabilities
Custodian 6,928,727
Payable for investment securities purchased 118,208,858
Payable for fund shares repurchased 312,495
Investment advisory fee 663,971
Financial agent fee 63,221
Trustees' fee 8,862
Accrued expenses 123,836
-------------
Total liabilities 126,309,970
-------------
Net Assets $1,235,394,533
=============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $1,077,175,658
Undistributed net investment income 739,354
Accumulated net realized gain 76,729,405
Net unrealized appreciation 80,750,116
-------------
Net Assets $1,235,394,533
=============
Shares of beneficial interest outstanding, $1 par value, unlimited authorization 65,390,920
=============
Net asset value and offering price per share $18.89
======
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Dividends $ 11,473,651
Interest 8,182,579
------------
Total investment income 19,656,230
------------
Expenses
Investment advisory fee 7,114,489
Financial agent fee 673,949
Printing 139,045
Custodian 107,732
Professional 35,542
Trustees 18,816
Miscellaneous 23,040
------------
Total expenses 8,112,613
------------
Net investment income 11,543,617
------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 151,656,728
Net realized loss on foreign currency transactions (25,548)
Net change in unrealized appreciation (depreciation) on investments (28,811,458)
------------
Net gain on investments 122,819,722
------------
Net increase in net assets resulting from operations $134,363,339
============
</TABLE>
See Notes to Financial Statements
2-9
<PAGE>
GROWTH SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
12/31/96 12/31/95
--------------- ----------------
<S> <C> <C>
From Operations
Net investment income $ 11,543,617 $ 8,919,570
Net realized gain 151,631,180 111,984,233
Net change in unrealized appreciation (depreciation) (28,811,458) 89,700,570
------------- --------------
Net increase in net assets resulting from operations 134,363,339 210,604,373
------------- --------------
From Distributions to Shareholders
Net investment income (10,973,300) (7,451,972)
Net realized gains (82,322,855) (105,927,796)
------------- --------------
Decrease in net assets from distributions to shareholders (93,296,155) (113,379,768)
------------- --------------
From Share Transactions
Proceeds from sales of shares (16,369,935 and 16,787,870 shares,
respectively) 309,035,692 302,038,455
Net asset value of shares issued from reinvestment of distributions
(4,853,881 and 6,290,645 shares, respectively) 93,296,155 113,379,768
Cost of shares repurchased (10,173,971 and 8,019,458 shares, respectively) (193,393,445) (143,474,953)
------------- --------------
Increase in net assets from share transactions 208,938,402 271,943,270
------------- --------------
Net increase in net assets 250,005,586 369,167,875
Net Assets
Beginning of period 985,388,947 616,221,072
------------- --------------
End of period (including undistributed net investment income of $739,354 and
$194,585, respectively) $1,235,394,533 $ 985,388,947
============= ==============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992
-------------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $18.13 $15.69 $16.59 $15.01 $14.43
Income from investment
operations
Net investment income 0.19 0.20 0.23(1)(3) 0.16(3) 0.22(3)
Net realized and unrealized
gain 2.10 4.60 0.02 2.77 1.25
---------- -------- -------- -------- --------
Total from investment
operations 2.29 4.80 0.25 2.93 1.47
---------- -------- -------- -------- --------
Less distributions
Dividends from net investment
income (0.18) (0.17) (0.23) (0.15) (0.23)
Dividends from net realized
gains (1.35) (2.19) (0.92) (1.20) (0.66)
---------- -------- -------- -------- --------
Total distributions (1.53) (2.36) (1.15) (1.35) (0.89)
---------- -------- -------- -------- --------
Change in net asset value 0.76 2.44 (0.90) 1.58 0.58
---------- -------- -------- -------- --------
Net asset value, end of period $18.89 $18.13 $15.69 $16.59 $15.01
========== ======== ======== ======== ========
Total return 12.58% 30.85% 1.48% 19.69% 10.29%
Ratios/supplemental data:
Net assets, end of period
(thousands) $1,235,395 $985,389 $616,221 $446,368 $245,565
Ratio to average net assets of:
Operating expenses 0.72% 0.75%(2) 0.80% 0.79% 0.50%
Net investment income 1.03% 1.12% 1.38% 0.97% 1.66%
Portfolio turnover rate 167% 173% 185% 185% 214%
Average commission rate paid(4) $0.0455 N/A N/A N/A N/A
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.003 per share.
(2) The ratio of operating expenses to average net assets excludes the effect
of expense offsets for custodian fees; if expense offsets were included,
the ratio would not significantly differ.
(3) Computed using average shares outstanding.
(4) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs, or spreads on shares traded on a principal
basis.
See Notes to Financial Statements
2-10
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
After posting stellar gains in 1995, last year's bond market results were
clearly less than impressive. Most of the disappointing performance occurred
in the first half of 1996, when nervous investors pushed interest rates
higher (and bond prices lower) in response to the unexpectedly strong U.S.
economy. The consensus opinion on Wall Street was that too much economic
growth could lead to higher inflation. For the first six months of the year,
the fixed-income market, as measured by the Lehman Brothers Aggregate Bond
Index, returned a discouraging -1.22%.
By late summer, market sentiment had turned positive again and interest
rates finally broke out of their trading range and headed downward. This more
optimistic mood among fixed-income investors was based on numerous reports
suggesting that the U.S. economy was now growing at a more moderate pace and
that core inflation was still in check. In this declining interest rate
environment, the bond market recouped all of its losses from the first half
of the year and moved into positive territory. Based on the Lehman Brothers
Aggregate Bond Index, bond market performance improved considerably during
the second-half of 1996, returning a respectable 4.90% over this latest
six-month period.
Generally speaking, bond investors were well rewarded for moving down the
credit-risk spectrum in 1996. The emerging markets sector finally received
front-page recognition as this group significantly outperformed all other
bond categories as well as most of the world's equity markets. Domestic
high-yield bonds also posted double-digit returns last year, aided by a
favorable economic climate and strong demand from mutual fund investors.
Conversely, the more conservative fixed-income sectors (treasuries, agencies
and top-tier investment-grade corporates) generally lagged the overall market
in 1996, as the bond market clearly favored higher yield over higher credit
quality.
Phoenix Edge Multi-Sector Fixed Income Series posted very strong results in
1996. For the twelve-month period ended December 31, 1996, the Fund provided
a total return of 12.42%. These results significantly outpaced its benchmark,
the Lehman Brothers Aggregate Bond Index, which returned 3.63% over the same
period. All of these figures assume reinvestment of any distributions, but
exclude the effect of sales charges.
Our emphasis on the less traditional sectors of the fixed-income market paid
off handsomely and contributed to much of the Fund's outperformance during
the year. Over the last twelve months, performance in the emerging markets
and domestic high-yield sectors continued to surpass all other fixed-income
categories and the portfolio benefited from its exposure in these areas.
Additionally, our decision to focus on commercial and non-agency residential
mortgage-backed securities, rather than more conventional agency
mortgage-backed securities, proved to be rewarding as these less efficient
sectors continued to produce strong results.
As we head into the new year, the U.S. economy currently appears to be in
good shape. The core inflation rate (CPI excluding food and energy costs)
rose just 2.6% in 1996 and the economy now appears to be growing at a more
moderate and sustainable pace. While news of this nature can go a long way in
restoring confidence in a shaky bond market, we are not convinced that the
threat of inflation is completely behind us. Although it may currently be
well contained, it is always a risk to the bond market.
With a few minor adjustments, we believe that the investment strategy we
successfully implemented last year can also perform well in 1997. In the
mortgage-backed arena, we are of the opinion that commercial and non-agency
residential securities continue to offer better relative value than their
agency counterparts. We also like the underfollowed taxable municipal sector,
which currently provides a significant yield advantage over comparably rated
corporate bonds. Lastly, despite its extended rally, we remain bullish on
emerging markets debt. While last year's gains were exceptionally strong
relative to other fixed-income groups, returns of this nature are not
unprecedented for this sector.
Overall, we are pleased with the Fund's performance during 1996 and believe
that the portfolio is well positioned for the new year. As always, we will
continue to overweight undervalued sectors of the bond market as our primary
means of adding value relative to our benchmark, the Lehman Brothers
Aggregate Bond Index.
2-11
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
- --------------------------------------------------------------------------------
[DESCRIPTION OF LINE CHART
Multi-Sector Lehman Brothers
Fixed Income Aggregate
Series Bond Index*
12/31/86 $10,000 $10,000
12/31/87 10,112 10,276
12/31/88 11,160 11,087
12/31/89 12,086 12,698
12/31/90 12,707 13,836
12/31/91 15,174 16,050
12/31/92 16,695 17,238
12/31/93 19,350 18,919
12/31/94 18,292 18,367
12/31/95 22,597 21,761
12/31/96 25,404 22,551
- --------------------------------------------------------------------------------
Average Annual Total Returns for Periods Ending 12/31/96
1 Year 5 Years 10 Years
- ------------------------------------------------------------------------
Multi-Sector Fixed Income Series 12.42% 10.86% 9.77%
- ------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index* 3.63% 7.04% 8.47%
- ------------------------------------------------------------------------
This chart assumes an initial gross investment of $10,000 made on 12/31/86.
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 net asset 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 of
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, 1996
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ --------- ---------------
U.S. GOVERNMENT AND AGENCY SECURITIES--22.1%
U.S. Treasury Bonds--7.1%
U.S. Treasury Bonds 6%, '26 (h) Aaa $11,300 $ 10,279,462
------------
U.S. Treasury Notes--12.2%
U.S. Treasury Notes 5.75%, '98 Aaa 750 748,043
U.S. Treasury Notes 5.875%, '99 Aaa 3,150 3,137,202
U.S. Treasury Notes 6.125%, '01 Aaa 1,500 1,493,640
U.S. Treasury Notes 6.50%, '06 Aaa 12,250 12,318,906
------------
17,697,791
------------
Agency Mortgage-Backed Securities--2.8%
FHLMC 7.50%, '18 Aaa 296 296,861
GNMA 8%, '06 Aaa 189 195,128
GNMA 6.50%, '23 Aaa 2,221 2,131,617
GNMA 6.50%, '25 Aaa 942 898,296
GNMA 6.50%, '26 Aaa 584 557,261
------------
4,079,163
------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(Identified cost $32,090,576) 32,056,416
------------
NON-CONVERTIBLE BONDS--40.6%
Asset-Backed Securities--4.2%
Airplanes Pass Through Trust 1D
10.875%, '19 Ba $ 1,500 $ 1,654,605
Green Tree Financial Corp. 94-1, B2
7.85%, '19 Baa 3,000 3,032,344
Team Fleet Financing Corp., 96-1, B
144A 7.10%, '02 (b) BBB(c) 1,425 1,414,313
------------
6,101,262
------------
Chemical--1.1%
General Chemical, Inc., 9.25%, '03 B 1,500 1,541,250
------------
Conglomerates--0.7%
Allied Waste North America 144A
10.25%, '06 (b) B 1,000 1,055,000
------------
Containers--1.5%
Owens-Illinois, Inc. 11%, '03 Ba 2,000 2,235,000
------------
Entertainment, Leisure & Gaming--0.7%
Comcast Corp. 9.375%, '05 B 1,000 1,040,000
------------
See Notes to Financial Statements
2-12
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ --------- ---------------
Hospital Management & Services--1.7%
Tenet Healthcare Corp. Sr. Note
9.625%, '02 Ba $ 500 $ 548,750
Tenet Healthcare Corp. Sr. Sub. Note
10.125%, '05 Ba 1,750 1,935,938
------------
2,484,688
------------
Non-Agency Mortgage-Backed Securities--27.1%
Equitable Life 174, D1 144A 7.77%,
'06 (b) Baa 2,000 2,045,000
FDIC Remic Trust 96-C1, 1D 7.25%,
'26 Baa 1,500 1,464,609
General Electric Co. 96-8, 2A5
7.50%, '26 AAA(c) 995 1,002,399
Kidder Peabody Acceptance Corp.
94-C2, D 7.18%, '05 BBB(c) 500 501,875
Lehman Structured Securities Corp.
96-1, E1 7.955%, '26 BBB(c) 2,457 2,497,318
Morgan Stanley Capital Corp. 144A I
96-WFI, C 6.59%, '06 (b) A 1,250 1,200,781
Mortgage Capital Funding, Inc. 96-M
C2, D 7.257%, '06 Baa(c) 2,000 1,976,563
Oakwood Mortgage Investors 96-C, A2
6.45%, '27 AAA(c) 1,750 1,747,813
Residential Asset Securitization
Trust 96-A4, A13 7.50%, '26 AAA(c) 1,000 991,250
Residential Asset Securitization
Trust 96-A8, A1 8%, '26 AAA(c) 1,916 1,944,258
Resolution Trust Corp. 92-C8, D
8.835%, '23 Baa 1,927 1,987,008
Resolution Trust Corp. 93-C3, A4
6.55%, '24 Aaa 351 349,793
Resolution Trust Corp. 94-C2, D 8%,
'25 BBB(c) 1,705 1,738,268
Resolution Trust Corp. 95-C1, B
6.90%, '27 Aa 2,250 2,229,609
Resolution Trust Corp. 95-C2, C 7%,
'27 A 1,880 1,860,825
Resolution Trust Corp. 95-C2, E 7%,
'27 Ba 1,482 1,351,569
Resolution Trust Corp. 95-1, M2
7.50%, '28 Aa 2,131 2,153,922
Resolution Trust Corp. 95-2, C1
7.45%, '29 Baa 1,630 1,626,983
Resolution Trust Corp. 95-2, M1
7.15%, '29 Aa 1,663 1,665,962
Ryland Mortgage Securities Corp. III
92-A, 1A 8.33%, '30 A-(c) 923 926,346
Securitized Asset Sales, Inc. 95-6,
B3 144A 7%, '10 (b) NR 1,397 1,210,167
Securitized Asset Sales, Inc. 95-A,
M 7.53%, '24 Aa 1,818 1,800,216
Structured Asset Securities Corp.
95-C1, D 7.375%, '24 BBB(c) 2,000 1,984,375
Structured Asset Securities Corp.
96-CFL, E 7.75%, '28 BB(c) 1,975 1,944,141
Structured Asset Securities Corp.
96-C3, C 144A 7.375%, '30 (b) A(c) 1,150 1,147,125
------------
39,348,175
------------
Oil Service & Equipment--0.6%
Noble Drilling Corp. 9.125%, '06 Ba 750 806,250
------------
Paper & Forest Products--0.7%
Buckeye Cellulose Corp. 8.50%, '05 Ba 950 952,375
------------
Publishing, Broadcasting, Printing & Cable--1.1%
Poland Communications, Inc. 144A
9.875%, '03 (b) B 1,650 1,640,314
------------
Retail--Food Service--0.0%
ARA Services, Inc. 10.625%, '00 Ba 54 60,008
------------
Telecommunications--1.2%
Call-Net Enterprises 0%, '04 (d) B $ 2,000 $ 1,652,500
------------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $57,918,684) 58,916,822
------------
FOREIGN NON-CONVERTIBLE BONDS--9.4%
Argentina--1.2%
Bridas Corp. Sr. Note 12.50%, '99 B 1,600 1,712,000
------------
Brazil--2.1%
Globo Comunicacoes 144A 10.50%,
'06 (b) B(c) 2,000 2,010,000
Tevecap SA 144A 12.625%, '04 (b) B 1,000 1,026,250
------------
3,036,250
------------
Canada--1.0%
Videotron Ltd. Sr. Sub. Note 10.25%,
'02 Ba 1,400 1,498,000
------------
Chile--1.4%
CSAV 144A 7.375%, '03 (b) BBB(c) 2,000 1,970,000
------------
Mexico--1.9%
Coca-Cola Femsa 8.95%, '06 Ba 2,000 2,002,500
Grupo Televisa SA 0%, '08 (d) Ba 1,200 792,000
------------
2,794,500
------------
Philippines--0.9%
Subic Power Corp. 144A 9.50%,
'08 (b) NR 1,245 1,311,883
------------
Qatar--0.9%
Ras Laffan Gas 144A 7.628%, '06 (b) A 1,300 1,304,875
------------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $12,890,485) 13,627,508
------------
FOREIGN GOVERNMENT SECURITIES--12.1%
Colombia--0.3%
Republic of Colombia Euro 9%, '97 Baa 500 503,960
------------
Croatia--2.6%
Croatia Series A 6.688%, '10 (d) NR 2,238 2,166,663
Croatia Series A 144A 6.688%, '10
(b)(d) NR 1,500 1,452,188
Croatia Series B 6.688%, '06 (d) NR 146 142,259
------------
3,761,110
------------
Dominican Republic--0.3%
Dominican Republic BR-PDI 6.563%,
'09 (d) NR 500 396,250
------------
Mexico--0.9%
United Mexican States Discount A
6.453%, '19 (d)(e) Ba 1,525 1,315,313
------------
Morocco--1.1%
Morocco R&C Agreement Series A
6.375%, '09 (d) NR 2,000 1,650,000
------------
Panama--1.9%
Panama PDI 144A, PIK interest
capitalization, 6.75%, '16 (b)(d) NR 3,500 2,773,688
------------
Philippines--0.9%
Republic of Philippines 144A 8.75%,
'16 (b) B 1,301 1,353,853
------------
Russia--1.3%
Russian Interest Notes 6.41% WI
(d)(g) NR 1,000 695,000
Russian Principal Loans 6.41% WI
(d)(g) NR 2,000 1,176,250
------------
1,871,250
------------
See Notes to Financial Statements
2-13
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
MOODY'S
BOND PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ --------- -------------
Slovenia--0.2%
Republic of Slovenia Series 1 144A
6.375%, '06 (b)(d) A(c) $ 145 $ 145,181
Republic of Slovenia Series 2 144A
6%, '06 (b)(d) A(c) 76 74,789
------------
219,970
------------
Venezuela--2.6%
Republic of Venezuela DCB Euro
6.50%, '07 (d) Ba 2,000 1,765,000
Republic of Venezuela FLIRB A Euro
6.625%, '07 (d) Ba 1,000 892,500
Republic of Venezuela Series A NMB
6.625%, '05 (d) Ba 1,250 1,106,250
------------
3,763,750
------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $15,306,745) 17,609,144
------------
MUNICIPAL BONDS--10.7%
California--1.8%
Orange County Pension A Taxable
7.67%, '09 Aaa 2,500 2,606,825
------------
Florida--2.6%
Dade County Florida Ed. Facs.
Authority 5.75%, '20 Aaa 475 480,833
Palm Beach Waste Revenue Project B
Taxable 10.50%, '11 NR 1,500 1,492,935
University Miami Exchange Revenue A
Taxable 7.65%, '20 Aaa 1,795 1,811,747
------------
3,785,515
------------
Michigan--0.8%
Hartland Consolidated School
District 5.125%, '22 Aaa 1,280 1,191,654
------------
Pennsylvania--3.0%
Pennsylvania Economic Development
9.50%, '12 NR 2,500 2,348,000
Pennsylvania Economic Development
6.75%, '07 NR 1,950 1,996,332
------------
4,344,332
------------
Texas--0.9%
Texas State Turnpike Authority
Dallas 5.25%, '23 Aaa 1,280 1,222,489
------------
Virginia--1.6%
Newport News Taxable Series B 7.05%,
'25 Aa 750 707,145
Pittsylvania County Series B
7.65%, '10 NR 1,500 1,603,695
------------
2,310,840
------------
TOTAL MUNICIPAL BONDS
(Identified cost $15,306,344) 15,461,655
------------
CONVERTIBLE BONDS--0.7%
Entertainment, Leisure & Gaming--0.7%
Comcast Corp. Cv. 1.125%, '07 (d) B $ 2,000 $ 1,015,000
------------
TOTAL CONVERTIBLE BONDS
(Identified cost $1,103,735) 1,015,000
------------
FOREIGN CONVERTIBLE BONDS--0.8%
Mexico--0.8%
Empresas ICA Sociedad Euro 5%, '04 B(c) 1,700 1,200,625
------------
TOTAL FOREIGN CONVERTIBLE BONDS
(Identified cost $1,107,962) 1,200,625
------------
SHARES
--------
WARRANTS--0.1%
Paper & Forest Products--0.1%
SD Warren Warrants 144A (b)(f) 30,000 150,000
------------
TOTAL WARRANTS
(Identified cost $142,500) 150,000
------------
PREFERRED STOCKS--1.2%
Paper & Forest Products--0.6%
SD Warren Co. Pfd. PIK 144A
Series B (b) 30,000 857,393
------------
Telecommunications Equipment--0.6%
Cablevision Systems Pfd. M B3 PIK 11.125% 10,000 880,000
------------
TOTAL PREFERRED STOCKS
(Identified cost $1,492,500) 1,737,393
------------
TOTAL LONG-TERM INVESTMENTS--97.7%
(Identified cost $137,359,531) 141,774,563
------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------ ---------
SHORT-TERM OBLIGATIONS--1.2%
Commercial Paper--1.2%
Abbott Laboratories 5.42%, 1-7-97 A-1+ $ 1,690 1,688,473
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $1,688,473) 1,688,473
------------
TOTAL INVESTMENTS--98.9%
(Identified cost $139,048,004) 143,463,036(a)
Cash and receivables, less liabilities--1.1% 1,581,374
------------
NET ASSETS--100.0% $145,044,410
============
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $5,489,857 and gross
depreciation of $1,096,529 for income tax purposes. At December 31, 1996,
the aggregate cost of securities for federal income tax purposes was
$139,069,708.
(b) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration normally to qualified institutional buyers. At December 31,
1996, these securities amounted to a value of $24,142,800 or 16.6% of net
assets.
(c) As rated by Standard & Poor's, Fitch or Duff & Phelps.
(d) Variable or step coupon obligation; interest rate shown reflects the rate
currently in effect.
(e) Rights incorporated as a unit.
(f) Non-income producing.
(g) When issued.
(h) Segregated as collateral.
See Notes to Financial Statements
2-14
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Assets
Investment securities at value (Identified cost $139,048,004) $143,463,036
Cash 23,003
Receivable for investment securities sold 4,075,807
Receivable for fund shares sold 61,173
Interest receivable 2,840,294
------------
Total assets 150,463,313
------------
Liabilities
Payable for investment securities purchased 5,298,125
Investment advisory fee 53,876
Trustees' fee 8,255
Financial agent fee 7,176
Accrued expenses 51,471
------------
Total liabilities 5,418,903
------------
Net Assets $145,044,410
============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $138,951,243
Undistributed net investment income 426,754
Accumulated net realized gain 1,251,381
Net unrealized appreciation 4,415,032
------------
Net Assets $145,044,410
============
Shares of beneficial interest outstanding, $1 par value, unlimited authorization 14,026,293
============
Net asset value and offering price per share $10.34
======
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
Investment Income
Interest $ 9,625,540
Dividends 623,497
------------
Total investment income 10,249,037
------------
Expenses
Investment advisory fee 606,445
Financial agent fee 72,793
Custodian 48,902
Printing 37,165
Professional 20,660
Trustees 18,393
Miscellaneous 5,301
Expenses borne by investment adviser (21,281)
------------
Total expenses 788,378
------------
Net investment income 9,460,659
------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 7,367,063
Net change in unrealized appreciation (depreciation) on investments (2,309,914)
------------
Net gain on investments 5,057,149
------------
Net increase in net assets resulting from operations $14,517,808
============
</TABLE>
See Notes to Financial Statements
2-15
<PAGE>
MULTI-SECTOR FIXED INCOME SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
12/31/96 12/31/95
--------------- ---------------
<S> <C> <C>
From Operations
Net investment income $ 9,460,659 $ 7,829,504
Net realized gain 7,367,063 1,405,058
Net change in unrealized appreciation (depreciation) (2,309,914) 10,007,140
------------ ------------
Net increase in net assets resulting from operations 14,517,808 19,241,702
------------ ------------
From Distributions to Shareholders
Net investment income (9,238,947) (7,763,175)
Net realized gains (4,270,844) --
------------ ------------
Decrease in net assets from distributions to shareholders (13,509,791) (7,763,175)
------------ ------------
From Share Transactions
Proceeds from sales of shares (6,711,402 and 4,715,281 shares,
respectively) 69,891,527 45,595,165
Net asset value of shares issued from reinvestment of distributions
(1,316,308 and 796,247 shares, respectively) 13,509,791 7,763,175
Cost of shares repurchased (4,670,077 and 3,158,605 shares,
respectively) (48,410,465) (30,477,355)
------------ ------------
Increase in net assets from share transactions 34,990,853 22,880,985
------------ ------------
Net increase in net assets 35,998,870 34,359,512
Net Assets
Beginning of period 109,045,540 74,686,028
------------ ------------
End of period (including undistributed net investment income of $426,754
and $135,344, respectively) $145,044,410 $109,045,540
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992
---------- ------------ ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.22 $8.98 $10.27 $ 9.58 $9.33
Income from investment operations
Net investment income 0.79(1) 0.83(1)(2) 0.72(1)(2) 0.66(1)(2) 0.66(2)
Net realized and unrealized gain (loss) 0.43 1.22 (1.28) 0.84 0.25
-------- -------- ------- ------- -------
Total from investment operations 1.22 2.05 (0.56) 1.50 0.91
-------- -------- ------- ------- -------
Less distributions
Dividends from net investment income (0.78) (0.81) (0.73) (0.66) (0.66)
Dividends from net realized gains (0.32) -- -- (0.15) --
-------- -------- ------- ------- -------
Total distributions (1.10) (0.81) (0.73) (0.81) (0.66)
-------- -------- ------- ------- -------
Change in net asset value 0.12 1.24 (1.29) 0.69 0.25
-------- -------- ------- ------- -------
Net asset value, end of period $10.34 $10.22 $8.98 $10.27 $9.58
======== ======== ======= ======= =======
Total return 12.42% 23.54% -5.47% 15.90% 10.03%
Ratios/supplemental data:
Net assets, end of period (thousands) $145,044 $109,046 $74,686 $79,393 $43,090
Ratio to average net assets of:
Operating expenses 0.65% 0.65%(3) 0.66% 0.65% 0.50%
Net investment income 7.80% 8.55% 7.62% 6.71% 7.47%
Portfolio turnover rate 191% 147% 181% 169% 166%
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.002, $0.007, $0.006 and $0.005 per share, respectively.
(2) Computed using average shares outstanding.
(3) The ratio of operating expenses to average net assets excludes the effect
of expense offsets for custodian fees; if expense offsets were included,
the ratio would not significantly differ.
See Notes to Financial Statements
2-16
<PAGE>
TOTAL RETURN SERIES
Despite increasing interest rates and waning corporate earnings momentum,
U.S. stock prices forged higher over this reporting period, fueled by
unprecedented cash inflows into equity mutual funds and continued corporate
share buybacks. Although this remarkable rally dates back to December 1994,
the past year has been one of tremendous rotation among various sectors of
the stock market--a manifestation of increasing investor uncertainty over the
direction of interest rates and the economy. As measured by the Standard &
Poor's 500 Stock Index, the U.S. equity market returned an impressive 23.25%
during 1996.
While it may have been another record year for U.S. equities, the overall
bond market produced less than stellar results. For the twelve months ended
December 31, 1996, the Lehman Brothers Aggregate Bond Index, an unmanaged
gauge of bond market performance, returned a mere 3.63%. Shifting market
opinion over the direction of the U.S. economy contributed to much of the
volatility in interest rates during this reporting period. As measured by the
30-year Treasury bond, interest rates started the year at 5.95%, climbed as
high as 7.19% in July, and finished 1996 yielding 6.64%. Generally speaking,
investors were well rewarded for moving down the credit-risk spectrum last
year, as lower-quality bonds generally outperformed higher-quality issues.
For the twelve months ended December 31, 1996, Phoenix Edge Total Return
Series posted a respectable 9.05%. Over the same period, it's peer group
average--the 185 retail funds tracked by Lipper Analytical Services--earned
13.59%. As with the broad market returns noted above, all of these figures
assume reinvestment of any distributions, but exclude the effect of sales
charges.
During this latest reporting period, Fund performance was held back
primarily because of weakness in some of our consumer cyclical, technology
and health care stocks. Positive contributors to equity performance included
our strong stock selection in the energy, finance and capital goods sectors.
The fixed-income segment of the Fund also boosted results as it continued to
significantly outperform its benchmark, the Lehman Brothers Aggregate Bond
Index. Our decision to emphasize such non-traditional sectors of the bond
market such as taxable municipals, commercial and non-agency residential
mortgage-backed securities and emerging market debt, paid off handsomely
during the year.
After two back-to-back years of powerful performance, the equity risk level
is clearly rising. In a stock market caught between long-term concerns and
intermediate opportunities, we are focusing our equity exposure on growth
companies that have some sensitivity to the domestic economy and/or foreign
sales growth. The Fund is currently emphasizing such timely investment themes
as Capital Goods--The Long Wave (capital goods), Software Solutions
(technology) and Energy Technology (energy). Looking ahead, we believe that
the key to outperformance lies in taking advantage of market inefficiencies
within a volatile trading range combined with individual stock selection.
With a few minor adjustments, we believe that the fixed-income investment
strategy we successfully implemented last year can also perform well in 1997.
In the mortgage-backed arena, we are of the opinion that commercial and
non-agency residential securities continue to offer better relative value
than their agency counterparts. We also like the underfollowed taxable
municipal sector, which currently provides a significant yield advantage over
comparably rated corporate bonds. Lastly, despite its extended rally, we
remain bullish on emerging market debt. While last year's gains were
exceptionally strong relative to other fixed-income groups, returns of this
nature are not unprecedented for this sector.
Overall, we believe the Fund is well positioned for the new year. As of
December 31, 1996, the Fund's asset allocation mix was 73% equities, 16%
fixed income and 11% cash equivalents. As always, we remain committed to the
Fund's primary goal of generating a high level of capital appreciation, but
with less risk than a typical equity fund.
2-17
<PAGE>
TOTAL RETURN SERIES
- --------------------------------------------------------------------------------
[DESCRIPTION OF LINE CHART
Total Lipper Analytical
Return S&P 500 Services Flexible
Series Stock Index* Fund**
12/31/86 $10,000 $10,000 $10,000
12/31/87 11,258 10,517 10,620
12/31/88 11,520 12,253 11,547
12/31/89 13,811 16,104 13,546
12/31/90 14,587 15,590 13,446
12/31/91 18,881 20,352 16,866
12/31/92 20,896 21,917 18,251
12/31/93 23,198 24,109 20,275
12/31/94 22,862 24,427 19,823
12/31/95 27,027 33,590 24,759
12/31/96 29,473 41,398 28,127
- --------------------------------------------------------------------------------
Average Annual Total Returns for Periods Ending 12/31/96
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
Total Return Series 9.05% 9.32% 11.40%
- --------------------------------------------------------------------------------
Lipper Analytical Services Flexible Fund** 13.59% 10.75% 10.89%
- --------------------------------------------------------------------------------
S&P 500 Stock Index* 23.25% 15.26% 15.27%
- --------------------------------------------------------------------------------
This chart assumes an initial gross investment of $10,000 made on 12/31/86.
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 net asset 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 an average
composed of 185 funds; the 5 and 10 year returns are derived from
compounding the yearly returns. Performance is based on the
reinvestment of all distributions and does not reflect the effects of
sales charges.
SCHEDULE OF INVESTMENTS
December 31, 1996
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ -------- ---------------
U.S GOVERNMENT SECURITIES--4.3%
U.S. Treasury Bonds--0.7%
U.S. Treasury Bonds 6%, '26 AAA $ 2,850 $ 2,592,608
------------
U.S. Treasury Notes--3.6%
U.S. Treasury Notes 5.75%, '98 AAA 11,000 10,971,290
U.S. Treasury Notes 5.875%, '99 AAA 1,650 1,643,296
U.S. Treasury Notes 6.50%, '06 AAA 1,000 1,005,625
------------
13,620,211
------------
TOTAL U.S. GOVERNMENT SECURITIES
(Identified cost $16,120,992) 16,212,819
------------
SHARES
-------
COMMON STOCKS--70.5%
Advertising--0.7%
Omnicom Group, Inc. 56,500 2,584,875
------------
Aerospace & Defense--2.0%
Boeing Co. 70,600 7,510,075
------------
SHARES VALUE
--------- ------------
Banks--4.0%
Ahmanson (H.F.) & Co. 91,400 $ 2,970,500
Golden West Financial Corp. 50,000 3,156,250
Great Western Financial Corp. 159,100 4,613,900
Wells Fargo & Co. 15,100 4,073,225
----------
14,813,875
----------
Beverages--1.0%
Seagram Ltd. 94,700 3,669,625
----------
Chemical--2.3%
Du Pont (E.I.) de Nemours & Co. 47,000 4,435,625
Monsanto Co. 109,800 4,268,475
----------
8,704,100
----------
Computer Software & Services--8.1%
Computer Associates International, Inc. 93,400 4,646,650
Fiserv, Inc. (b) 117,900 4,332,825
HBO & Co. 27,900 1,656,563
Microsoft Corp. (b) 86,200 7,122,275
See Notes to Financial Statements
2-18
<PAGE>
TOTAL RETURN SERIES
SHARES VALUE
--------- --------------
Computer Software & Services--continued
Oracle Corp. (b) 96,500 $ 4,028,875
Parametric Technology Corp. (b) 96,800 4,973,100
Sungard Data Systems, Inc. (b) 91,700 3,622,150
-----------
30,382,438
-----------
Conglomerates--2.2%
AlliedSignal, Inc. 80,800 5,413,600
Tyco International Ltd. 55,500 2,934,563
-----------
8,348,163
-----------
Containers--1.1%
Crown Cork & Seal, Inc. 76,300 4,148,812
-----------
Cosmetics & Soaps--2.1%
Colgate Palmolive Co. 50,400 4,649,400
Procter & Gamble Co. 28,900 3,106,750
-----------
7,756,150
-----------
Diversified Financial Services--1.0%
Federal National Mortgage Assoc. 104,100 3,877,725
-----------
Diversified Miscellaneous--1.0%
CUC International, Inc. (b) 152,700 3,626,625
-----------
Electrical Equipment--1.9%
General Electric Co. 30,500 3,015,687
Honeywell, Inc. 64,000 4,208,000
-----------
7,223,687
-----------
Electronics--1.2%
Intel Corp. 35,400 4,635,188
-----------
Healthcare--Diversified--3.0%
American Home Products Corp. 121,200 7,105,350
Warner-Lambert Co. 54,000 4,050,000
-----------
11,155,350
-----------
Healthcare--Drugs--3.3%
Biochem Pharmaceutical, Inc. (b) 77,900 3,914,475
Lilly (Eli) & Co. 49,800 3,635,400
Pfizer, Inc. 60,400 5,005,650
-----------
12,555,525
-----------
Lodging & Restaurants--1.6%
Marriott International, Inc. 106,000 5,856,500
-----------
Machinery--1.7%
Caterpillar, Inc. 36,400 2,739,100
Deere & Co. 87,100 3,538,437
-----------
6,277,537
-----------
Medical Products & Supplies--3.2%
Boston Scientific Corp. (b) 101,400 6,084,000
Medtronic, Inc. 86,500 5,882,000
-----------
11,966,000
-----------
Metals & Mining--1.1%
Aluminum Company of America 64,700 4,124,625
-----------
Natural Gas--6.1%
Anadarko Petroleum Corp. 56,800 3,677,800
Apache Corp. 115,000 4,068,125
Coastal Corp. 18,400 899,300
Columbia Gas System, Inc. 13,100 833,488
KN Energy, Inc. 22,000 863,500
PanEnergy Corp. 53,300 2,398,500
Questar Corp. 22,000 808,500
Sonat, Inc. 82,000 4,223,000
Tejas Gas Corp. (b) 21,000 1,000,125
Williams Companies, Inc. 107,250 4,021,875
-----------
22,794,213
-----------
Office & Business Equipment--1.2%
Hewlett Packard Co. 87,300 $ 4,386,825
-----------
Oil--0.5%
Triton Energy Ltd. (b) 39,200 1,901,200
-----------
Oil Service & Equipment--6.8%
BJ Services Co. (b) 91,600 4,671,600
Baker Hughes, Inc. 150,500 5,192,250
Halliburton Co. 99,600 6,000,900
Noble Drilling Corp. (b) 241,500 4,799,813
Varco International, Inc. (b) 121,000 2,798,125
Weatherford Enterra, Inc. (b) 60,500 1,815,000
-----------
25,277,688
-----------
Retail--3.6%
Home Depot, Inc. 108,000 5,413,500
TJX Companies, Inc. 90,300 4,277,962
Tiffany & Co. 106,000 3,882,250
-----------
13,573,712
-----------
Telecommunications Equipment--6.5%
Andrew Corp. (b) 30,700 1,629,019
Ascend Communications, Inc. (b) 54,900 3,410,663
Cisco Systems, Inc. (b) 180,400 11,477,950
Lucent Technologies, Inc. 113,200 5,235,500
Tellabs, Inc. (b) 66,500 2,502,062
-----------
24,255,194
-----------
Textile & Apparel--3.3%
Liz Claiborne, Inc. 86,300 3,333,337
Nautica Enterprises, Inc. (b) 68,000 1,717,000
Nike, Inc. Class B 69,900 4,176,525
Tommy Hilfiger Corp. (b) 63,300 3,038,400
-----------
12,265,262
-----------
TOTAL COMMON STOCKS
(Identified cost $247,433,533) 263,670,969
-----------
FOREIGN COMMON STOCKS--2.0%
Chemical--1.1%
Potash Corp. of Saskatchewan, Inc.
(Canada) 50,000 4,250,000
-----------
Textile & Apparel--0.9%
Gucci Group NV-NY (Italy) 51,600 3,295,950
-----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $7,536,032) 7,545,950
-----------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------ ---------
MUNICIPAL BONDS--2.6%
California--1.3%
Kern County Pension Obligation
Taxable 7.26%, '14 AAA $ 1,500 1,478,490
Long Beach Pension Obligation
Taxable 6.87%, '06 AAA 840 841,907
San Bernardino County Obligation
Revenue Taxable 6.87%, '08 AAA 410 407,007
San Bernardino County Obligation
Revenue Taxable 6.94%, '09 AAA 1,110 1,106,215
Ventura County Pension Taxable
6.54%, '05 AAA 975 960,267
------------
4,793,886
------------
See Notes to Financial Statements
2-19
<PAGE>
TOTAL RETURN SERIES
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ --------- --------------
Florida--1.3%
Dade County Ed. Facs. Authority
5.75%, '20 AAA $ 285 $ 288,500
Miami Beach Special Obligation
Taxable 8.60%, '21 AAA 3,210 3,513,249
University Miami Exchange Revenue A
Taxable 7.65%, '20 AAA 1,080 1,090,076
----------
4,891,825
----------
TOTAL MUNICIPAL BONDS
(Identified cost $9,731,150) 9,685,711
----------
NON-CONVERTIBLE BONDS--5.7%
Asset-Backed Securities--0.7%
Airplanes Pass Through Trust 1D
10.875%, '19 BB 560 617,719
Fleetwood Credit Corp. 96-B, A
6.90%, '12 AAA 948 957,182
Green Tree Financial Corp. 96-2, M1
7.60%, '27 AA- 1,075 1,079,367
----------
2,654,268
----------
Non-Agency Mortgage-Backed Securities--4.9%
CS First Boston Mortgage 95-AE1, B
7.182%, '27 AA- 1,350 1,344,305
GE Capital Mortgage Service 96-8, M
7.25%, '26 AA 249 242,177
Lehman Commercial Conduit 95-C2, B
7.184%, '05 AA 1,650 1,657,734
Merrill Lynch Mortgage, Inc. 95-C2,
B 7.61%, '21 Aa(c) 893 904,589
Merrill Lynch Mortgage, Inc. 96-C1,
B 7.42%, '28 AA 660 667,116
Nationslink Funding Corp. 96-1, B
7.69%, '05 AA 450 466,875
Residential Asset Securitization
Trust 96-A8, A1 8%, '26 AAA 958 972,129
Residential Funding Mortgage 96-S1,
A11 7.10%, '26 AAA 1,500 1,459,453
Residential Funding Mortgage 96-S4,
M1 7.25%, '26 AA 993 964,401
Resolution Trust Corp. 93-C1, B
8.75%, '24 Aa(c) 1,600 1,636,500
Resolution Trust Corp. 95-C2, B
6.80%, '27 Aa(c) 887 877,338
Resolution Trust Corp. 95-C1, B
6.90%, '27 Aa(c) 1,900 1,882,781
Resolution Trust Corp. 95-2, M1
7.15%, '29 Aa(c) 1,413 1,416,052
Securitized Asset Sales, Inc. 93-J,
2B 6.808%, '23 A(c) 978 911,978
Structured Asset Securities Corp.
95-C1, C 7.375%, '24 A 930 929,855
Structured Asset Securities Corp.
95-C4, B 7%, '26 AA 1,650 1,627,313
Structured Asset Securities Corp.
96-CFL, C 6.525%, '28 A 520 508,300
----------
18,468,896
----------
Paper & Forest Products--0.1%
Buckeye Cellulose Corp. 9.25%, '08 BB- 350 364,875
----------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $21,435,236) 21,488,039
----------
FOREIGN GOVERNMENT SECURITIES--2.4%
Argentina--0.4%
Republic of Argentina Discount L-GL
Euro 6.375%, '23 (e) BB- $ 1,800 $ 1,389,375
----------
Brazil--0.3%
Republic of Brazil Discount ZL Euro
6.50%, '24 (e) B+ 800 617,500
Republic of Brazil Par Z-L Euro
4.25%, '24 (e) B(c) 1,000 630,000
----------
1,247,500
----------
Colombia--0.9%
Republic of Colombia Yankee 7.25%,
'04 BBB- 3,500 3,412,500
----------
Mexico--0.4%
United Mexican States 144A 7.563%,
'01 (d) (e) Baa(c) 350 350,822
United Mexican States Euro D 6.352%,
'19 (e) (f) BB 1,300 1,121,250
----------
1,472,072
----------
Panama--0.4%
Panama IRB 144A 3.50%,
'14 (d) (e) NR 700 486,938
Panama PDI 144A, PIK interest
capitalization, 6.75%, '16 (d) (e) NR 1,150 911,355
----------
1,398,293
----------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $7,885,326) 8,919,740
----------
FOREIGN NON-CONVERTIBLE BONDS--1.0%
Chile--0.1%
Petropower Funding 144A 7.36%,
'14 (d) BBB 500 477,150
----------
Colombia--0.9%
Financiera Energ. Nacional EMTN Euro
9%, '99 BBB- 3,200 3,356,000
----------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $3,776,800) 3,833,150
----------
TOTAL LONG-TERM INVESTMENTS--88.5%
(Identified cost $313,919,069) 331,356,378
----------
SHORT-TERM OBLIGATIONS--11.4%
Commercial Paper--10.0%
Abbott Laboratories 5.42%, 1-7-97 A-1+ 3,770 3,766,595
Cargill, Inc. 5.43%, 1-10-97 A-1+ 1,015 1,013,622
Bellsouth Capital Funding Corp.
5.40%, 1-14-97 A-1+ 2,375 2,370,369
Receivables Capital Corp. 5.45%,
1-17-97 A-1+ 724 722,246
Private Export Funding Corp. 5.30%,
1-28-97 A-1+ 2,855 2,842,839
General Electric Capital Corp.
5.50%, 1-30-97 A-1+ 3,500 3,500,000
Southwestern Bell Telephone Co.
5.30%, 1-31-97 A-1+ 4,000 3,980,505
Kellogg Co. 5.35%, 2-5-97 A-1+ 2,000 1,989,597
Preferred Receivables Funding Corp.
5.35%, 2-13-97 A-1 5,000 4,966,098
General Re Corp. 5.30%, 2-14-97 A-1+ 2,500 2,482,479
See Notes to Financial Statements
2-20
<PAGE>
TOTAL RETURN SERIES
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ --------- --------------
Commercial Paper--continued
First Deposit Funding Trust 5.33%,
3-14-97 A-1 $ 3,617 $ 3,575,405
Asset Securitization Cooperative
Corp. 5.36%, 3-18-97 A-1+ 4,435 4,381,292
Receivables Capital Corp. 5.39%,
5-1-97 A-1+ 2,000 1,963,560
----------
37,554,607
----------
PAR
VALUE
(000) VALUE
--------- ---------------
Federal Agency Securities--1.4%
Federal National Mortgage Assoc. 5.24%,
2-27-97 $ 5,065 $ 5,020,212
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $42,590,757) 42,574,819
------------
TOTAL INVESTMENTS--99.9%
(Identified cost $356,509,826) 373,931,197(a)
Cash and receivables, less liabilities--0.1% 312,478
------------
NET ASSETS--100.0% $374,243,675
============
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $24,226,359 and gross
depreciation of $6,804,988 for income tax purposes. At December 31, 1996,
the aggregate cost of securities for federal income tax purposes was
$356,509,826.
(b) Non-income producing.
(c) As rated by Moodys, Fitch or Duff & Phelps.
(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,
1996, these securities amounted to a value of $2,226,265 or 0.6% of net
assets.
(e) Variable or step coupon bond; interest rate shown reflects the rate
currently in effect.
(f) Rights incorporated as a unit.
See Notes to Financial Statements
2-21
<PAGE>
TOTAL RETURN SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $356,509,826) $373,931,197
Receivable for investment securities sold 926
Receivable for fund shares sold 112,271
Interest and dividends receivable 1,117,628
------------
Total assets 375,162,022
------------
Liabilities
Custodian 623,987
Investment advisory fee 185,569
Financial agent fee 19,089
Trustees' fee 8,466
Accrued expenses 81,236
------------
Total liabilities 918,347
------------
Net Assets $374,243,675
============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $351,775,454
Undistributed net investment income 414,865
Accumulated net realized gain 4,631,985
Net unrealized appreciation 17,421,371
------------
Net Assets $374,243,675
============
Shares of beneficial interest outstanding, $1 par value, unlimited authorization 27,417,598
============
Net asset value and offering price per share $13.65
======
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
Investment Income
Interest $ 8,131,784
Dividends 2,771,915
------------
Total investment income 10,903,699
------------
Expenses
Investment advisory fee 2,146,571
Financial agent fee 220,535
Printing 89,724
Custodian 62,021
Professional 28,906
Trustees 18,612
Miscellaneous 22,054
------------
Total expenses 2,588,423
------------
Net investment income 8,315,276
------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 25,862,109
Net realized loss on foreign currency transactions (10,202)
Net change in unrealized appreciation (depreciation) on investments (2,475,007)
------------
Net gain on investments 23,376,900
------------
Net increase in net assets resulting from operations $31,692,176
============
</TABLE>
See Notes to Financial Statements
2-22
<PAGE>
TOTAL RETURN SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
12/31/96 12/31/95
--------------- ---------------
<S> <C> <C>
From Operations
Net investment income $ 8,315,276 $ 10,538,823
Net realized gain 25,851,907 23,632,796
Net change in unrealized appreciation (depreciation) (2,475,007) 19,082,703
------------ ------------
Net increase in net assets resulting from operations 31,692,176 53,254,322
------------ ------------
From Distributions to Shareholders
Net investment income (7,996,685) (10,497,130)
Net realized gains (23,234,158) (21,419,046)
------------ ------------
Decrease in net assets from distributions to shareholders (31,230,843) (31,916,176)
------------ ------------
From Share Transactions
Proceeds from sales of shares (4,387,120 and 5,465,213 shares,
respectively) 61,269,234 75,182,133
Net asset value of shares issued from reinvestment of distributions
(2,254,196 and 2,341,879 shares, respectively) 31,230,843 31,916,176
Cost of shares repurchased (5,175,253 and 4,646,668 shares,
respectively) (72,555,884) (63,681,697)
------------ ------------
Increase in net assets from share transactions 19,944,193 43,416,612
------------ ------------
Net increase in net assets 20,405,526 64,754,758
Net Assets
Beginning of period 353,838,149 289,083,391
------------ ------------
End of period (including undistributed net investment income of $414,865
and $154,166, respectively) $374,243,675 $353,838,149
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.63 $12.68 $13.71 $12.86 $12.97
Income from investment operations
Net investment income 0.32 0.45 0.36(1)(3) 0.23(3) 0.37(3)
Net realized and unrealized gain
(loss) 0.91 1.84 (0.56) 1.17 0.99
-------- -------- -------- -------- --------
Total from investment operations 1.23 2.29 (0.20) 1.40 1.36
-------- -------- -------- -------- --------
Less distributions
Dividends from net investment
income (0.31) (0.45) (0.37) (0.23) (0.37)
Dividends from net realized gains (0.90) (0.89) (0.46) (0.32) (1.10)
-------- -------- -------- -------- --------
Total distributions (1.21) (1.34) (0.83) (0.55) (1.47)
-------- -------- -------- -------- --------
Change in net asset value 0.02 0.95 (1.03) 0.85 (0.11)
-------- -------- -------- -------- --------
Net asset value, end of period $13.65 $13.63 $12.68 $13.71 $12.86
======== ======== ======== ======== ========
Total return 9.05% 18.22% -1.45% 11.02% 10.67%
Ratios/supplemental data:
Net assets, end of period
(thousands) $374,244 $353,838 $289,083 $256,011 $163,628
Ratio to average net assets of:
Operating expenses 0.70% 0.67%(2) 0.74% 0.74% 0.50%
Net investment income 2.26% 3.28% 2.71% 1.82% 2.90%
Portfolio turnover rate 287% 170% 220% 269% 326%
Average commission rate paid(4) $0.0530 N/A N/A N/A N/A
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.001 per share.
(2) The ratio of operating expenses to average net assets excludes the effect
of expense offsets for custodian fees; if expense offsets were included,
the ratio would not significantly differ.
(3) Computed using average shares outstanding.
(4) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs, or spreads on shares traded on a principal
basis.
See Notes to Financial Statements
2-23
<PAGE>
INTERNATIONAL SERIES
Most foreign equity markets have produced excellent returns over the last
twelve months, despite a rising U.S. dollar. In addition to the continued
strong performance in the U.S., Europe also stood out. Almost all European
markets benefited from corporate restructuring, falling interest rates and
the likelihood of more shareholder-friendly policies. Additionally, countries
such as Germany, Sweden, Finland and the United Kingdom have been further
bolstered by share buybacks as well as merger and acquisition activity.
Despite a strong start, Japan's performance over this reporting period has
been a major disappointment. Poor corporate earnings growth and a weak
domestic economy led to a serious deterioration in investor sentiment. In
contrast to Japan, other Far East countries such as Taiwan, Malaysia,
Indonesia and Hong Kong posted stellar gains during this twelve-month period.
Lastly, most Latin American markets moved higher over this reporting period,
earning double digit returns. An improved economic outlook, lower interest
rates and strong capital inflows served as catalysts for this solid
performance. As measured in U.S. dollars, Venezuela, Brazil and Argentina
were among the best performing countries in this region, while Chile and Peru
were among the laggards.
Phoenix Edge International Series posted very strong results over this
reporting cycle. For the twelve months ended December 31, 1996, the Fund
provided a total return of 18.65%. These results compared very favorably to
the Morgan Stanley International EAFE Index, which gained 6.36% over the same
period. All of these figures assume reinvestment of any distributions, but
exclude the effect of sales charges.
During the year, Fund performance benefited from the portfolio's modest
overweighting in Europe and its underweighted position in Japan. Strong stock
selection in Europe and our continued focus on such themes as Corporate
Restructuring and Growth in Services also boosted results. Other positive
contributors included our recent overweighting of certain Asian countries,
particularly Hong Kong and Taiwan, as well as the Fund's use of currency
hedges.
After a dismal first half in 1996, European economic growth is beginning to
improve. We expect 1997 GDP to grow at about 2.5%, but it is unlikely that
demand will be strong enough to exert much upward pressure on interest rates
until late in the year. Except for the United Kingdom and a few smaller
European countries, unemployment is showing no signs of declining. Moreover,
the pressure on governments to cut spending will continue to be a drag on
growth going forward. This, coupled with both public and private sector
restructuring, means it will be even more important to focus on those
companies that are making the difficult choices that will deliver value to
their shareholders.
In Japan, the outlook for 1997 is also modest. It appears that most globally
active companies in this country have already done as much restructuring as
possible without a radical philosophical change towards "U.S. style
restructuring." This would entail layoffs and unfriendly takeovers, supported
by government deregulation and tax-reform, and it is doubtful that this type
of change will occur in the near term. On the positive side, the potential
for improved economic growth in the rest of the world could tighten overall
capacity and allow even the weakest Japanese companies to improve their
profit margins. We will continue to monitor Japan's economy for signs of
improvement, but currently see better prospects elsewhere.
In Asia, we remain very positive on Hong Kong's near-term outlook. As a
country, we believe that Hong Kong will remain self-confident immediately
prior to and after the handover to China on June 30, 1997. We also expect
Taiwan and Malaysia to continue to do well. However, our outlook for
Singapore is rather negative due to slowing economic growth and a lack of
choice in this market. We are also concerned about the prospects for India
and Thailand, given their weak governments and the severe structural changes
needed to turn around both economies.
In Latin America, Mexico and Argentina are seeing economic re-acceleration
after the severe recession of 1995 and early 1996. While this is clearly good
news, flawed economic reform processes still remain and are now causing
problems in Brazil. The Fund intends to have exposure to this region, but
potential currency depreciation may limit prospective gains. Since other
emerging countries may provide better opportunities, we will look for new
markets which can provide above-average economic and earnings growth.
Overall, we expect foreign markets to continue to perform well in 1997 due
to low interest rates, improved economic growth and corporate restructuring
efforts. If world economic growth begins to accelerate dramatically, we will
increase the Fund's exposure to economically sensitive stocks. At present,
however, we continue to focus on themes that should provide secular growth
and hence, strong performance. Moving forward, we believe the Fund is well
positioned for the coming new year.
2-24
<PAGE>
INTERNATIONAL SERIES
- --------------------------------------------------------------------------------
[DESCRIPTION OF LINE CHART
International MSCI EAFE MSCI EAFE
Series Index* Excluding JAPAN
5/1/90 $10,000 $10000 $10,000
12/31/90 9,190 9,640 10,014
12/31/91 11,008 10,884 11,608
12/31/92 9,589 9,559 11,270
12/31/93 13,275 12,708 15,498
12/31/94 13,279 13,732 15,379
12/31/95 14,552 15,318 18,541
12/31/96 17,266 16,293 22,514
- --------------------------------------------------------------------------------
Average Annual Total Returns for Periods Ending 12/31/96
From
Inception
5/1/90 to
1 Year 5 Years 12/31/96
- ----------------------------------------------------------------------
International Series 18.65% 9.44% 8.53%
- ----------------------------------------------------------------------
MSCI EAFE Index* 6.36% 8.48% 7.59%
- ----------------------------------------------------------------------
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 net asset 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 net
dividends reinvested. The EAFE index is an aggregate of 19 individual
country indexes in Europe, Australia, New Zealand and the Far East.
SCHEDULE OF INVESTMENTS
December 31, 1996
SHARES VALUE
------------ --------------
COMMON STOCKS--88.5%
Belgium--1.4%
Credit Communal Holding/Dexia (Banks) (b) 26,000 $ 2,369,626
----------
Brazil--1.8%
Telebras Sponsored ADR (Utility--Telephone) 40,000 3,060,000
----------
France--8.0%
AXA SA (Insurance) 33,369 2,118,178
BIC SA (Miscellaneous) 13,000 1,945,486
Cardif SA (Insurance) 15,000 2,063,016
Carrefour Supermarche (Retail--Food) 3,520 2,285,864
Louis Dreyfus Citrus (Food) (b) 42,500 1,389,771
Rexel SA (Wholesale & Distribution) 4,350 1,317,878
Salomon SA (Entertainment, Leisure & Gaming) 20,000 1,711,966
Sommer-Allibert (Auto & Truck Parts) 33,600 1,001,789
----------
13,833,948
----------
Germany--5.0%
Adidas AG (Textile & Apparel) 27,300 $ 2,356,044
BASF AG (Chemical) 63,000 2,423,360
SGL Carbon AG (Chemical) 17,400 2,190,384
VEBA AG (Utility--Electric) 28,400 1,640,127
----------
8,609,915
----------
Hong Kong--13.8%
Cheung Kong Holdings Ltd. (Real Estate) 514,200 4,570,356
Dao Heng Bank Group Ltd. (Banks) 188,000 901,731
Great Eagle Holdings Ltd. (Real Estate) 228,000 940,310
Guoco Group Ltd. (Diversified Financial
Services) 281,000 1,573,039
Henderson China Holding Ltd. (Real Estate) 828 1,884
Henderson Land Development Co. Ltd. (Real
Estate) 586,000 5,909,320
Hutchison Whampoa Ltd. (Conglomerates) 564,000 4,429,663
Hysan Development Co. Ltd. (Real Estate) 454,000 1,807,806
New World Development Co. Ltd. (Real Estate) 192,000 1,296,979
Sun Hung Kai Properties Ltd. (Real Estate) 195,000 2,388,686
----------
23,819,774
----------
See Notes to Financial Statements
2-25
<PAGE>
INTERNATIONAL SERIES
SHARES VALUE
------------ --------------
Indonesia--1.6%
PT Semen Gresik (Building & Materials) 690,000 $ 2,219,682
Wicaksana Overseas International (Wholesale &
Distribution) 462,000 528,000
-----------
2,747,682
-----------
Italy--4.8%
Fila Holding SPA ADR (Textile & Apparel) 51,600 2,999,250
Gucci Group NV (Textile & Apparel) 20,600 1,381,511
Gucci Group NV-NY (Textile & Apparel) 32,500 2,075,938
Stet-Societa Finanziaria Telefonica SPA
(Utility--Telephone) 400,000 1,815,192
-----------
8,271,891
-----------
Japan--10.3%
Canon, Inc. (Office & Business Equipment) 87,000 1,918,842
Circle K Japan Co. Ltd. (Retail--Food) 37,000 1,593,866
Hitachi Maxell (Electronics) 42,000 926,338
Honda Motor Co. Ltd. (Autos & Trucks) 81,000 2,309,899
Keyence Corp. Ltd. (Electronics) 13,000 1,601,620
Nintendo Corp. Ltd. (Entertainment, Leisure &
Gaming) 27,000 1,928,405
Nippon Television Network ( Publishing,
Broadcasting, Printing & Cable) 5,000 1,507,711
TDK Corp. (Electronics) 27,000 1,756,268
Takeda Chemical Industries (Health Care--
Drugs) 91,000 1,905,143
Toyota Motor Corp. (Autos & Trucks) 63,000 1,807,444
Xebio Co. Ltd. (Retail) 21,000 624,192
-----------
17,879,728
-----------
Malaysia--3.1%
Commerce Asset Holding Berhad (Banks) 240,000 1,805,583
Renong Berhad (Engineering & Construction) 1,000,000 1,773,906
United Engineers Ltd. (Building & Materials) 201,000 1,814,611
-----------
5,394,100
-----------
Mexico--2.9%
Apasco SA de CV (Building & Materials) 230,000 1,577,744
Grupo Carso SA de CV Series A1 (Conglomerates) 350,000 1,845,147
Grupo Industrial Maseca SA de CV Class B
(Food) 1,310,000 1,660,798
-----------
5,083,689
-----------
Netherlands--5.1%
Ahrend Groep NV (Office & Business Equipment) 33,348 1,856,630
Akzo Nobel (Chemical) 12,000 1,637,278
IHC Caland (Oil Service & Equipment) 36,750 2,097,026
Samas Groep-CVA (Office & Business Equipment) 20,742 887,384
VNU-Verenigd Bezit (Publishing, Broadcasting,
Printing & Cable) 113,000 2,358,386
-----------
8,836,704
-----------
Norway--1.0%
Storebrand ASA (Insurance) (b) 287,000 1,663,039
-----------
Peru--0.8%
Telefonica Del Peru SA (Utility--Telephone) 708,945 1,326,713
-----------
Portugal--3.1%
Cimpor-Cimentos de Portugal SA (Building &
Materials) 81,000 1,741,565
Portugal Telecom SA (Utility--Telephone) 68,700 1,955,903
Telecel-Comunicacoes Pessoais (Utility--
Telephone) 26,700 1,702,609
-----------
5,400,077
-----------
Spain--1.8%
Empresa Nacional de Electricidad SA
(Utility--Electric) 21,000 $ 1,491,755
Telefonica de Espana (Utility--Telephone) 67,700 1,569,214
-----------
3,060,969
-----------
Sweden--2.3%
Frontec AB Series B (Computer Software &
Services) (b) 128,000 2,212,068
Nordbanken AB (Banks) 59,000 1,784,344
-----------
3,996,412
-----------
Switzerland--4.5%
Ares-Serono Group B (Health Care--Drugs) 1,730 1,645,349
CS Holding AG Registered Shares (Banks) 18,200 1,863,782
Novartis AG Registered Shares (Health
Care--Drugs) 2,310 2,637,395
Swiss Reinsurance--Registered (Insurance) 1,500 1,596,410
-----------
7,742,936
-----------
Taiwan--0.0%
China Bills Finance Corp. (Commercial Finance)
(b) 70,345 64,717
-----------
United Kingdom--16.3%
Astec (BSR) PLC (Electronics) 466,000 1,256,118
Barclays PLC (Diversified Financial Services) 103,000 1,763,674
British Aerospace PLC (Aerospace & Defense) 155,500 3,406,469
Carlton Communications PLC (Publishing,
Broadcasting, Printing & Cable) 208,000 1,831,525
Compass Group PLC (Lodging & Restaurants) 304,000 3,212,733
Granada Group PLC (Entertainment, Leisure &
Gaming) 143,000 2,108,412
Lloyds TSB Group PLC (Diversified Financial
Services) 255,000 1,878,787
Next PLC (Retail) 154,000 1,495,721
Rolls-Royce PLC (Aerospace & Defense) 410,000 1,806,863
Shell Transport & Trading Co. PLC (Oil) 153,000 2,648,631
Siebe PLC (Electrical Equipment) 156,000 2,888,790
WPP Group PLC (Advertising) 876,000 3,808,044
-----------
28,105,767
-----------
United States--0.9%
Latin American Discovery Fund, Inc.
(Multi-Industry) 121,000 1,512,500
-----------
TOTAL COMMON STOCKS
(Identified cost $129,202,891) 152,780,187
-----------
PREFERRED STOCKS--1.2%
Germany--0.7%
Porsche AG (Autos & Trucks) 1,300 1,147,231
-----------
United Kingdom--0.5%
Egypt Investment Co. (Multi-Industry) (b) 74,000 925,000
-----------
TOTAL PREFERRED STOCKS
(Identified cost $1,656,158) 2,072,231
-----------
TOTAL LONG-TERM INVESTMENTS--89.7%
(Identified cost $130,859,049) 154,852,418
-----------
See Notes to Financial Statements
2-26
<PAGE>
INTERNATIONAL SERIES
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ --------- ---------------
SHORT-TERM OBLIGATIONS--8.4%
Commercial Paper--8.4%
Corporate Asset Funding Co. 6%, 1-6-97 A-1+ $ 1,900 $ 1,898,417
Kimberly-Clark Corp. 5.35%, 1-13-97 A-1+ 2,315 2,310,872
Greenwich Funding Corp. 5.49%, 1-14-97 A-1+ 1,695 1,691,640
General Electric Capital Corp. 5.40%,
1-16-97 A-1+ 1,000 997,750
Cargill, Inc. 5.45%, 1-17-97 A-1+ 930 927,747
Ciesco L.P. 5.65%, 1-22-97 A-1+ 4,160 4,146,289
GTE North, Inc. 5.48%, 1-22-97 (c) A-1+ 2,550 2,541,848
-------------
14,514,563
-------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $14,514,563) 14,514,563
-------------
TOTAL INVESTMENTS--98.1%
(Identified cost $145,373,612) 169,366,981(a)
Cash and receivables, less liabilities--1.9% 3,300,674
-------------
NET ASSETS--100.0% $172,667,655
=============
INDUSTRY DIVERSIFICATION
As a Percentage of Total Value of
Total Long-Term Investments
(Unaudited)
Advertising 2.5%
Aerospace & Defense 3.4
Auto & Truck Parts 0.6
Autos & Trucks 3.4
Banks 5.6
Building & Materials 4.7
Chemical 4.0
Commercial Finance 0.0
Computer Software & Services 1.4
Conglomerates 4.1
Diversified Financial Services 3.4
Electrical Equipment 1.9
Electronics 3.6
Engineering & Construction 1.1
Entertainment, Leisure & Gaming 3.7
Food 2.0
Health Care--Drugs 4.0
Insurance 4.8
Lodging & Restaurants 2.1
Miscellaneous 1.3
Multi-Industry 1.6
Office & Business Equipment 3.0
Oil 1.7
Oil Service & Equipment 1.4
Publishing, Broadcasting, Printing & Cable 3.7
Real Estate 10.9
Retail 1.3
Retail--Food 2.5
Textile & Apparel 5.7
Utility--Electric 2.0
Utility--Telephone 7.4
Wholesale & Distribution 1.2
-----
100.0%
=====
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $25,748,811 and gross
depreciation of $1,913,191 for income tax purposes. At December 31, 1996,
the aggregate cost of securities for federal income tax purposes was
$145,531,361.
(b) Non-income producing.
(c) Segregated as collateral for forward currency contracts. At December 31,
1996, these securities amounted to $2,541,848 or 1.5% of net assets.
See Notes to Financial Statements
2-27
<PAGE>
INTERNATIONAL SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $145,373,612) $169,366,981
Foreign currency at value (Identified cost $2,182,271) 2,184,603
Cash 25,516
Interest and dividends receivable 218,008
Tax reclaim receivable 47,888
Net unrealized appreciation on forward currency contracts 1,072,470
------------
Total assets 172,915,466
------------
Liabilities
Payable for fund shares repurchased 4,025
Investment advisory fee 106,199
Trustees' fee 8,723
Financial agent fee 8,046
Accrued expenses 120,818
------------
Total liabilities 247,811
------------
Net Assets $172,667,655
============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $141,596,053
Undistributed net investment income 1,390,579
Accumulated net realized gain 4,614,897
Net unrealized appreciation 25,066,126
------------
Net Assets $172,667,655
============
Shares of beneficial interest outstanding, $1 par value, unlimited authorization 11,894,980
============
Net asset value and offering price per share $14.52
======
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
Investment Income
Dividends $ 2,402,413
Interest 690,679
Foreign taxes withheld (237,840)
------------
Total investment income 2,855,252
------------
Expenses
Investment advisory fee 1,167,034
Financial agent fee 93,363
Custodian 201,283
Printing 78,728
Professional 30,861
Trustees 18,764
Miscellaneous 26,314
------------
Total expenses 1,616,347
------------
Net investment income 1,238,905
------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 9,973,733
Net realized gain on foreign currency transactions 2,075,251
Net change in unrealized appreciation (depreciation) on investments 12,109,055
Net change in unrealized appreciation (depreciation) on foreign currency and foreign
currency transactions 962,538
------------
Net gain on investments 25,120,577
------------
Net increase in net assets resulting from operations $26,359,482
============
</TABLE>
See Notes to Financial Statements
2-28
<PAGE>
INTERNATIONAL SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
12/31/96 12/31/95
--------------- ---------------
<S> <C> <C>
From Operations
Net investment income $ 1,238,905 $ 1,247,800
Net realized gain 12,048,984 1,951,578
Net change in unrealized appreciation (depreciation) 13,071,593 8,552,168
------------ ------------
Net increase in net assets resulting from operations 26,359,482 11,751,546
------------ ------------
From Distributions to Shareholders
Net investment income (2,156,537) (455,953)
In excess of net investment income (272,380) --
Net realized gains (3,811,548) (2,629,683)
------------ ------------
Decrease in net assets from distributions to shareholders (6,240,465) (3,085,636)
------------ ------------
From Share Transactions
Proceeds from sales of shares (3,516,722 and 3,785,668, respectively) 48,544,295 45,431,812
Net asset value of shares issued from reinvestment of distributions
(435,075 and 238,826 shares, respectively) 6,240,465 3,085,636
Cost of shares repurchased (2,645,302 and 4,795,590 shares,
respectively) (36,690,696) (57,355,995)
------------ ------------
Increase (decrease) in net assets from share transactions 18,094,064 (8,838,547)
------------ ------------
Net increase (decrease) in net assets 38,213,081 (172,637)
Net Assets
Beginning of period 134,454,574 134,627,211
------------ ------------
End of period (including undistributed net investment income of
$1,390,579 and $917,632, respectively) $172,667,655 $134,454,574
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding through the indicated period)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992
-------------- -------------- ---------------------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $12.70 $11.85 $12.21 $8.82 $10.17
Income from investment
operations
Net investment income 0.11(3) 0.12(3) 0.08(3) 0.07(1)(3) 0.09(3)
Net realized and unrealized
gain (loss) 2.25 1.02 (0.07) 3.32 (1.40)
-------- -------- -------- ------- -------
Total from investment
operations 2.36 1.14 0.01 3.39 (1.31)
-------- -------- -------- ------- -------
Less distributions
Dividends from net investment
income (0.19) (0.04) (0.03) -- (0.04)
In excess of net investment
income (0.02) -- -- -- --
Dividends from net realized
gains (0.33) (0.25) (0.34) -- --
-------- -------- -------- ------- -------
Total distributions (0.54) (0.29) (0.37) -- (0.04)
-------- -------- -------- ------- -------
Change in net asset value 1.82 0.85 (0.36) 3.39 (1.35)
-------- -------- -------- ------- -------
Net asset value, end of period $14.52 $12.70 $11.85 $12.21 $ 8.82
======== ======== ======== ======= =======
Total return 18.65% 9.59% 0.03% 38.44% -12.89%
Ratio/supplemental data:
Net assets, end of period
(thousands) $172,668 $134,455 $134,627 $61,242 $13,772
Ratio to average of net assets
of:
Operating expenses 1.04% 1.07% 1.10% 1.15% 1.50%
Net investment income 0.80% 0.95% 0.64% 0.49% 1.13%
Portfolio turnover rate 142% 249% 172% 193% 74%
Average commission rate paid(2) $0.0213 N/A N/A N/A N/A
</TABLE>
(1) Includes reimbursement of operating expenses by investment adviser of
$0.05.
(2) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs, or spreads on shares traded on a principal
basis.
(3) Computed using average shares outstanding.
See Notes to Financial Statements
2-29
<PAGE>
BALANCED SERIES
Despite increasing interest rates and waning corporate earnings momentum,
U.S. stock prices forged higher over this reporting period, fueled by
unprecedented cash inflows into equity mutual funds and continued corporate
share buybacks. Although this remarkable rally dates back to December 1994,
the past year has been one of tremendous rotation among various sectors of
the stock market--a manifestation of increasing investor uncertainty over the
direction of interest rates and the economy. As measured by the Standard &
Poor's 500 Stock Index, the U.S. equity market returned an impressive 23.25%
during 1996.
While it may have been another record year for U.S. equities, the overall
bond market produced less than stellar results. For the twelve months ended
December 31, 1996, the Lehman Brothers Aggregate Bond Index, an unmanaged
gauge of bond market performance, returned a mere 3.63%. Shifting market
opinion over the direction of the U.S. economy contributed to much of the
volatility in interest rates during this reporting period. As measured by the
benchmark 30-year Treasury bond, interest rates started the year at 5.95%,
climbed as high as 7.19% in July, and finished 1996 yielding 6.64%. Generally
speaking, investors were well rewarded for moving down the credit-risk
spectrum last year, as lower-quality bonds generally outperformed
higher-quality issues.
Aided by the long bull market in U.S. stocks, Phoenix Edge Balanced Series
posted double-digit gains during this latest fiscal year. For the twelve
months ended December 31, 1996, the Fund provided a total return of 10.56%.
Despite these respectable results, the Fund trailed its composite benchmark,
which returned 14.33% over the same period.* All of these figures assume
reinvestment of any distributions, but exclude the effect of sales charges.
Fund results over this latest reporting cycle were held back primarily
because of weakness in some of our technology, consumer cyclical and health
care holdings. Positive contributors to performance included excellent stock
selection within the energy, consumer staples and basic materials sectors as
well as a modest overweighting within the strongly performing capital goods
group. Additionally, the portfolio's fixed-income segment continued to
outperform its benchmark, the Lehman Brothers Aggregate Bond Index,
throughout this reporting period. Our exposure to such non-traditional
sectors of the bond market such as taxable municipals, commercial and
non-agency residential mortgage-backed securities, and emerging markets debt
paid off handsomely during the year.
As we head into 1997, our near-term outlook calls for continued moderate
economic growth, mild inflation and decelerating earnings growth. Given this
investment environment, our equity strategy currently emphasizes quality,
large-cap growth stocks and focuses on such compelling investment themes as
21st Century Medicine (health care), Hybrid Network (technology) and
Deregulating Financial Services (financial services). In terms of our
fixed-income allocation, we continue to follow our sector rotation approach,
with a strong emphasis on U.S. Treasuries and mortgage-backed securities. As
of December 31, 1996, the Fund's asset allocation mix was 57% equity, 38%
fixed income and 5% cash equivalents.
*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% 90-day Treasury Bills.
2-30
<PAGE>
BALANCED SERIES
- --------------------------------------------------------------------------------
[DESCRIPTION OF LINE CHART
Balanced Balanced
Benchmark* Series
5/1/92 $10,000 $10,000
12/31/92 10,712 10,972
12/31/93 11,702 11,912
12/31/94 11,725 11,579
12/31/95 14,917 14,274
12/31/96 17,056 15,782
- --------------------------------------------------------------------------------
Average Annual Total Returns for Periods Ending 12/31/96
From
Inception
5/1/92 to
1 Year 12/31/96
- ----------------------------------------------------------
Balanced Series 10.56% 10.26%
- ----------------------------------------------------------
Balanced Benchmark* 14.33% 12.11%
- ----------------------------------------------------------
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 net asset 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%
90-day Treasury Bills and is produced by Frank Russell Company.
SCHEDULE OF INVESTMENTS
December 31, 1996
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ -------- ---------------
U.S. GOVERNMENT AND AGENCY SECURITIES--24.3%
U.S. Treasury Bonds--2.0%
U.S. Treasury Bonds 6%, '26 AAA $ 4,595 $ 4,180,012
------------
U.S. Treasury Notes--19.5%
U.S. Treasury Notes 6.375%, '99 AAA 3,775 3,808,031
U.S. Treasury Notes 6.875%, '00 AAA 3,500 3,578,365
U.S. Treasury Notes 6.625%, '01 AAA 4,400 4,470,123
U.S. Treasury Notes 6.50%, '05 AAA 3,300 3,319,206
U.S. Treasury Notes 6.50%, '06 AAA 22,235 22,360,072
U.S. Treasury Notes 6.875%, '06 AAA 2,150 2,216,515
------------
39,752,312
------------
Agency Mortgage-Backed Securities--2.8%
GNMA 6.50%, '23-'26 AAA 5,962 5,718,193
------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(Identified cost $50,088,128) 49,650,517
------------
NON-CONVERTIBLE BONDS--6.9%
Asset-Backed Securities--1.1%
Airplanes Pass Through Trust 1D
10.875%, '19 BB 150 165,460
Fleetwood Credit Corp. 96-B, A
6.90%, '12 AAA 758 765,746
Green Tree Financial Corp. 96-2, M1
7.60%, '27 AA- 675 677,742
Green Tree Financial Corp. 96-3, B1
7.70%, '27 BBB+ 625 629,883
------------
2,238,831
------------
Non-Agency Mortgage-Backed Securities--5.4%
CS First Boston Mortgage 95-AE1, B
7.182%, '27 AA- $ 425 $ 423,207
DLJ Mortgage Acceptance 96-CF1, A1B
144A 7.58%, '28 (c) AAA 400 413,500
GE Capital Mortgage Service 96-8, M
7.25%, '26 AA 249 242,177
Lehman Commercial Conduit 95-C2, B
7.184%, '05 AA 425 426,992
Merrill Lynch Mortgage, Inc. 95-C2,
B 7.61%, '21 AA(d) 223 226,147
Merrill Lynch Mortgage, Inc. 95-C3,
B 7.149%, '25 AA 400 399,000
Merrill Lynch Mortgage, Inc. 96-C1,
B 7.42%, '28 AA 650 657,008
Nationslink Funding Corp. 96-1, B
7.69%, '05 AA 450 466,875
Residential Asset Securitization
Trust 96-A8, A1 8%, '26 AAA 671 680,490
Residential Funding Mortgage 96-S1,
A11 7.10%, '26 AAA 1,000 972,969
Residential Funding Mortgage 96-S4,
M1 7.25%, '26 AA 993 964,402
Residential Funding Mortgage 96-S8,
A-4 6.75%, '11 AAA 680 665,435
Resolution Trust Corp. 93-C1, B
8.75%, '24 AA(d) 425 434,695
Resolution Trust Corp. 95-2, M1
7.15%, '29 AA(d) 624 624,729
See Notes to Financial Statements
2-31
<PAGE>
BALANCED SERIES
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ -------- ---------------
Non-Agency Mortgage-Backed Securities--continued
Resolution Trust Corp. 95-C1, B
6.90%, '27 AA(d) $ 525 $ 520,242
Resolution Trust Corp. 95-C2, B
6.80%, '27 AA(d) 1,135 1,122,992
Structured Asset Securities Corp.
95-C1, C 7.375%, '24 A 930 929,855
Structured Asset Securities Corp.
96-CFL, C 6.525%, '28 A 480 469,200
TLFC 96-1A, 5.98%, '02 AAA 289 288,738
-----------
10,928,653
-----------
Paper & Forest Products--0.3%
Buckeye Cellulose Corp. 8.50%, '05 BB- 700 701,750
-----------
Truckers & Marine--0.1%
Teekay Shipping Corp. 8.32%, '08 BB 230 230,575
-----------
TOTAL NON-CONVERTIBLE BONDS
(Identified cost $14,089,854) 14,099,809
-----------
FOREIGN NON-CONVERTIBLE BONDS--1.0%
Chile--0.2%
Petropower Funding 144A 7.36%,
'14 (c) BBB 350 334,005
-----------
Colombia--0.2%
Financiera Energ. Nacional EMTN Euro
9%, '99 BBB- 440 461,450
-----------
Indonesia--0.2%
Asia Pulp & Paper Co. Yankee 11.75%,
'05 BB 400 431,000
-----------
Philippines--0.2%
Central Bank of Philippines NMB Euro
6.563%, '05 (e) BB 500 491,875
-----------
Sweden--0.2%
Astra Overseas Financial 144A 8.75%,
'03 (c) NR 350 354,375
-----------
TOTAL FOREIGN NON-CONVERTIBLE BONDS
(Identified cost $2,002,428) 2,072,705
-----------
FOREIGN GOVERNMENT SECURITIES--3.7%
Argentina--0.6%
Republic of Argentina Bearer FRB
6.625%, '05 (e) BB- 1,078 939,881
Republic of Argentina Par L-GP
5.25%, '23 (e) BB- 500 318,750
-----------
1,258,631
-----------
Brazil--0.4%
Republic of Brazil C Bond, PIK
interest capitalization, 8%, '14
(e) B+ 732 544,197
Republic of Brazil DCB-L Euro
6.563%, '12 (e) B+ 500 379,063
-----------
923,260
-----------
Colombia--0.8%
Republic of Colombia 7.25%, '03 BBB- 500 483,880
Republic of Colombia Euro 9%, '97 BBB- 700 705,544
Republic of Colombia Yankee 7.25%,
'04 BBB- 475 463,125
-----------
1,652,549
-----------
Croatia--0.3%
Croatia Series B 6.688%, '06 (e) NR 600 584,625
-----------
Mexico--0.7%
United Mexican States 144A 7.563%,
'01 (c)(e) Baa(d) $ 400 $ 400,940
United Mexican States Discount A
6.453%, '19 (e)(f) BB 325 280,313
United Mexican States Euro D 6.352%,
'19 (e)(f) BB 250 215,625
United Mexican States Series A Euro
6.25%, '19 (f) BB 300 220,125
United Mexican States Series B Euro
6.25%, '19 (f) BB 350 256,813
-----------
1,373,816
-----------
Panama--0.6%
Republic of Panama PDI 144A,
PIK interest capitalization,
6.75%, '16 (c)(e) NR 1,470 1,164,949
-----------
Poland--0.3%
Poland Discount Euro 6.50%, '24 (e) BBB- 600 583,500
-----------
TOTAL FOREIGN GOVERNMENT SECURITIES
(Identified cost $6,892,374) 7,541,330
-----------
MUNICIPAL BONDS--2.2%
California--1.0%
Kern County Pension Obligation
Taxable 7.26%, '14 AAA 420 413,977
Long Beach Pension Obligation
Taxable 6.87%, '06 AAA 230 230,522
Orange County Pension Series A
Taxable 7.62%, '08 AAA 650 676,345
San Bernardino County Obligation
Revenue Taxable 6.87%, '08 AAA 110 109,197
San Bernardino County Obligation
Revenue Taxable 6.94%, '09 AAA 300 298,977
Ventura County Pension Taxable
6.54%, '05 AAA 260 256,071
-----------
1,985,089
-----------
Florida--0.8%
Dade County Ed. Facs. Authority
5.75%, '20 AAA 145 146,781
Miami Beach Special Obligation
Taxable 8.60%, '21 AAA 875 957,661
University Miami Exchange Revenue A
Taxable 7.65%, '20 AAA 535 539,992
-----------
1,644,434
-----------
Virginia--0.4%
Newport News Taxable Series B 7.05%,
'25 AA- 1,000 942,860
-----------
TOTAL MUNICIPAL BONDS
(Identified cost $4,609,830) 4,572,383
-----------
SHARES
--------
COMMON STOCKS--55.9%
Aerospace & Defense--1.8%
Boeing Co. 15,100 1,606,262
United Technologies Corp. 31,200 2,059,200
-----------
3,665,462
-----------
Autos & Trucks--0.2%
Chrysler Corp. 11,800 389,400
-----------
See Notes to Financial Statements
2-32
<PAGE>
BALANCED SERIES
SHARES VALUE
-------- ---------------
Banks--2.2%
BankAmerica Corp. 12,400 $ 1,236,900
Chase Manhattan Corp. 11,400 1,017,450
Citicorp 10,000 1,030,000
Mellon Bank Corp. 11,300 802,300
Nationsbank Corp. 4,300 420,325
-------------
4,506,975
-------------
Beverages--1.7%
Coca-Cola Co. 20,900 1,099,862
PepsiCo, Inc. 76,300 2,231,775
Seagram Ltd. 5,100 197,625
-------------
3,529,262
-------------
Chemical--1.7%
Du Pont (E.I.) de Nemours & Co. 15,200 1,434,500
Monsanto Co. 43,000 1,671,625
Philip Environmental, Inc. (b) 30,000 435,000
-------------
3,541,125
-------------
Computer Software & Services--2.7%
Computer Associates International, Inc. 29,400 1,462,650
First Data Corp. 36,000 1,314,000
Microsoft Corp. (b) 13,500 1,115,438
Oracle Corp. (b) 40,000 1,670,000
-------------
5,562,088
-------------
Conglomerates--2.0%
AlliedSignal, Inc. 14,900 998,300
Thermo Electron Corp. (b) 11,000 453,750
Tyco International Ltd. 50,100 2,649,038
-------------
4,101,088
-------------
Cosmetics & Soaps--2.1%
Colgate Palmolive Co. 6,800 627,300
Gillette Co. 18,500 1,438,375
Procter & Gamble Co. 19,900 2,139,250
-------------
4,204,925
-------------
Diversified Financial Services--3.3%
Conseco, Inc. 24,900 1,587,375
First USA, Inc. 48,900 1,693,163
MBNA Corp. 16,000 664,000
T. Rowe Price Associates 28,350 1,233,225
Travelers Group, Inc. 33,433 1,517,022
-------------
6,694,785
-------------
Diversified Miscellaneous--0.5%
Minnesota Mining & Manufacturing Co. 11,200 928,200
-------------
Electrical Equipment--1.6%
Emerson Electric Co. 2,400 232,200
General Electric Co. 21,100 2,086,262
Westinghouse Electric Corp. 45,000 894,375
-------------
3,212,837
-------------
Electronics--3.0%
Intel Corp. 23,800 3,116,313
Micron Technology, Inc. 14,600 425,225
Perkin Elmer Corp. 17,200 1,012,650
Texas Instruments, Inc. 9,200 586,500
3Com Corp. (b) 13,300 975,888
-------------
6,116,576
-------------
Entertainment, Leisure & Gaming--0.5%
Walt Disney Co. 13,500 939,937
-------------
Food--1.1%
Campbell Soup Co. 12,000 $ 963,000
Hudson Foods, Inc. Class A 65,700 1,248,300
-------------
2,211,300
-------------
Healthcare--Diversified--1.6%
American Home Products Corp. 21,500 1,260,438
Bristol-Myers Squibb Co. 15,300 1,663,875
Warner-Lambert Co. 5,400 405,000
-------------
3,329,313
-------------
Healthcare--Drugs--2.2%
Amgen, Inc. (b) 13,500 734,062
Lilly (Eli) & Co. 5,400 394,200
Merck & Co., Inc. 25,600 2,028,800
Pfizer, Inc. 17,000 1,408,875
-------------
4,565,937
-------------
Hospital Management & Services--1.1%
Columbia/HCA Healthcare Corp. 55,000 2,241,250
-------------
Household Furnishings & Appliances--0.9%
Sunbeam Corp., Inc. 75,300 1,938,975
-------------
Insurance--2.5%
Allstate Corp. 36,400 2,106,650
American International Group, Inc. 12,000 1,299,000
Chubb Corp. 7,600 408,500
ITT Hartford Group, Inc. (b) 4,000 270,000
TIG Holdings, Inc. 31,600 1,070,450
-------------
5,154,600
-------------
Lodging & Restaurants--0.9%
Hilton Hotels Corp. 74,000 1,933,250
-------------
Machinery--0.5%
Deere & Co. 23,900 970,937
-------------
Medical Products & Supplies--1.2%
Abbott Laboratories 7,500 380,625
Boston Scientific Corp. (b) 18,000 1,080,000
Johnson & Johnson 20,000 995,000
-------------
2,455,625
-------------
Natural Gas--2.1%
Apache Corp. 23,100 817,162
Columbia Gas System, Inc. 9,600 610,800
Consolidated Natural Gas Co. 14,600 806,650
Enron Corp. 47,800 2,061,375
-------------
4,295,987
-------------
Office & Business Equipment--2.5%
International Business Machines Corp. 16,500 2,491,500
Sun Microsystems, Inc. (b) 67,200 1,726,200
Xerox Corp. 16,200 852,525
-------------
5,070,225
-------------
Oil--2.5%
Chevron Corp. 25,300 1,644,500
Exxon Corp. 13,000 1,274,000
Mobil Corp. 1,800 220,050
Noble Affiliates, Inc. 39,800 1,905,425
-------------
5,043,975
--------------
See Notes to Financial Statements
2-33
<PAGE>
BALANCED SERIES
SHARES VALUE
-------- ---------------
Oil Service & Equipment--4.1%
Noble Drilling Corp. (b) 95,700 $ 1,902,037
Schlumberger Ltd. 10,100 1,008,738
Seacor Holdings, Inc. (b) 32,900 2,072,700
Transocean Offshore, Inc. 20,000 1,252,500
Western Atlas, Inc. (b) 30,500 2,161,688
------------
8,397,663
------------
Pollution Control--0.7%
Republic Industries, Inc. (b) 13,500 421,031
U.S.A. Waste Services, Inc. (b) 32,300 1,029,562
------------
1,450,593
------------
Professional Services--2.0%
Cognizant Corp. 36,000 1,188,000
Corrections Corporation of America (b) 20,000 612,500
HFS, Inc. (b) 22,400 1,338,400
Marsh & McLennan Cos., Inc. 9,000 936,000
------------
4,074,900
------------
Publishing, Broadcasting, Printing & Cable--0.2%
New York Times Co. 13,000 494,000
------------
Real Estate Investment Trusts--0.2%
Redwood Trust, Inc. 11,200 417,200
------------
Retail--2.1%
Office Depot, Inc. (b) 20,000 355,000
Sears Roebuck & Co. 30,000 1,383,750
Staples, Inc. (b) 54,000 975,375
TJX Companies, Inc. 31,600 1,497,050
------------
4,211,175
------------
Retail--Food--1.0%
Safeway, Inc. (b) 50,000 2,137,500
------------
Telecommunications Equipment--2.0%
Cisco Systems, Inc. (b) 60,000 3,817,500
Lucent Technologies, Inc. 4,200 194,250
------------
4,011,750
------------
Textile & Apparel--0.8%
Nike, Inc. Class B 26,000 1,553,500
------------
Utility--Telephone--0.4%
Ameritech Corp. 7,300 442,562
Bell Atlantic Corp. 6,700 433,825
------------
876,387
------------
TOTAL COMMON STOCKS
(Identified cost $103,215,557) $114,228,702
------------
FOREIGN COMMON STOCKS--1.0%
Oil--1.0%
British Petroleum PLC ADR (United Kingdom) 6,100 862,387
Royal Dutch Petroleum Co. ADR NY Registered
Shares (Netherlands) 6,200 1,058,650
------------
1,921,037
------------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $1,803,661) 1,921,037
------------
TOTAL LONG-TERM INVESTMENTS--95.0%
(Identified cost $182,701,832) 194,086,483
------------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ ------- ---------------
SHORT-TERM OBLIGATIONS--4.4%
Commercial Paper--3.3%
Cargill, Inc. 6.95%, 1-2-97 A-1+ $ 165 $ 164,968
Abbott Laboratories 5.42%, 1-7-97 A-1+ 1,530 1,528,618
Bellsouth Capital Funding Corp.
5.40%, 1-14-97 A-1+ 2,500 2,495,125
Southwestern Bell Telephone Co.
5.34%, 2-18-97 A-1+ 2,525 2,505,752
------------
6,694,463
------------
Federal Agency Securities--1.1%
Federal Home Loan Mortgage Corp. 5.29%, 1-14-97 2,195 2,190,807
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $8,886,540) 8,885,270
------------
TOTAL INVESTMENTS--99.4%
(Identified cost $191,588,372) 202,971,753(a)
Cash and receivables, less liabilities--0.6% 1,313,479
------------
NET ASSETS--100.0% $204,285,232
============
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $13,992,659 and gross
depreciation of $2,784,718 for income tax purposes. At December 31, 1996,
the aggregate cost of securities for federal income tax purposes was
$191,763,812.
(b) Non-income producing.
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1996, these securities amounted to a value of $2,667,769 or 1.3% of net
assets.
(d) As rated by Moody's, Fitch or Duff & Phelps.
(e) Variable or step coupon bond; interest rate shown reflects the rate
currently in effect.
(f) Rights incorporated as a unit.
See Notes to Financial Statements
2-34
<PAGE>
BALANCED SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $191,588,372) $202,971,753
Cash 97,977
Interest and dividends receivable 1,404,630
Receivable for investment securities sold 1,107
------------
Total assets 204,475,467
------------
Liabilities
Payable for fund shares repurchased 12,117
Payable for investment securities purchased 10,890
Investment advisory fee 95,346
Financial agent fee 10,401
Trustees' fee 7,941
Accrued expenses 53,540
------------
Total liabilities 190,235
------------
Net Assets $204,285,232
============
Net Assets Consist of:
Capital paid in on shares of beneficial interest $186,762,034
Undistributed net investment income 351,214
Accumulated net realized gain 5,788,603
Net unrealized appreciation 11,383,381
------------
Net Assets $204,285,232
============
Shares of beneficial interest outstanding, $1 par value, unlimited authorization 16,941,850
============
Net asset value and offering price per share $12.06
======
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
Investment Income
Interest $ 5,995,642
Dividends 1,161,737
------------
Total investment income 7,157,379
------------
Expenses
Investment advisory fee 1,089,976
Financial agent fee 118,907
Custodian 34,584
Printing 55,128
Professional 25,334
Trustees 17,873
Miscellaneous 8,802
------------
Total expenses 1,350,604
------------
Net investment income 5,806,775
------------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 16,867,817
Net change in unrealized appreciation (depreciation) on investments (2,671,304)
------------
Net gain on investments 14,196,513
------------
Net increase in net assets resulting from operations $20,003,288
============
</TABLE>
See Notes to Financial Statements
2-35
<PAGE>
BALANCED SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
12/31/96 12/31/95
--------------- ---------------
<S> <C> <C>
From Operations
Net investment income $ 5,806,775 $ 5,964,289
Net realized gain 16,867,817 17,178,873
Net change in unrealized appreciation (depreciation) (2,671,304) 13,277,376
------------ ------------
Net increase in net assets resulting from operations 20,003,288 36,420,538
------------ ------------
From Distributions to Shareholders
Net investment income (5,536,811) (6,004,047)
Net realized gains (18,064,626) (3,833,294)
------------ ------------
Decrease in net assets from distributions to shareholders (23,601,437) (9,837,341)
------------ ------------
From Share Transactions
Proceeds from sales of shares (2,805,856 and 2,915,001 shares,
respectively) 34,642,833 33,778,188
Net asset value of shares issued from reinvestment of distributions
(1,949,091 and 828,862 shares, respectively) 23,601,437 9,837,341
Cost of shares repurchased (3,529,372 and 3,333,135 shares,
respectively) (43,662,808) (38,002,038)
------------ ------------
Increase in net assets from share transactions 14,581,462 5,613,491
------------ ------------
Net increase in net assets 10,983,313 32,196,688
Net Assets
Beginning of period 193,301,919 161,105,231
------------ ------------
End of period (including undistributed net investment income of $351,214
and $74,806, respectively) $204,285,232 $193,301,919
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
From Inception
5/1/92
Year Ended December 31, to
1996 1995 1994 1993 12/31/92
----------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $12.30 $10.53 $11.31 $10.77 $10.00
Income from investment operations
Net investment income 0.36 0.40(3) 0.38(2)(3) 0.32(2)(3) 0.19(3)
Net realized and unrealized gain
(loss) 0.89 2.02 (0.70) 0.60 0.77
-------- -------- -------- -------- -------
Total from investment operations 1.25 2.42 (0.32) 0.92 0.96
-------- -------- -------- -------- -------
Less distributions
Dividends from net investment
income (0.35) (0.40) (0.36) (0.32) (0.19)
Dividends from net realized gains (1.14) (0.25) (0.10) (0.06) --
-------- -------- -------- -------- -------
Total distributions (1.49) (0.65) (0.46) (0.38) (0.19)
-------- -------- -------- -------- -------
Change in net asset value (0.24) 1.77 (0.78) 0.54 0.77
-------- -------- -------- -------- -------
Net asset value, end of period $12.06 $12.30 $10.53 $11.31 $10.77
======== ======== ======== ======== =======
Total return 10.56% 23.28% -2.80% 8.57% 9.72%(5)
Ratios/supplemental data:
Net assets, end of period
(thousands) $204,285 $193,302 $161,105 $158,144 $54,467
Ratio to average net assets of:
Operating expenses 0.68% 0.65%(4) 0.69% 0.70% 0.50%(1)
Net investment income 2.93% 3.44% 3.44% 3.16% 3.59%(1)
Portfolio turnover rate 229% 223% 171% 161% 110%(1)
Average commission rate paid(6) $0.0641 N/A N/A N/A N/A
</TABLE>
(1) Annualized
(2) Includes reimbursement of operating expenses by investment adviser of
$0.001 and $0.001 per share, respectively.
(3) Computed using average shares outstanding.
(4) The ratio of operating expenses to average net assets excludes the
effect of expense offsets for custodian fees; if expense offsets were
included, the ratio would not significantly differ.
(5) Not annualized
(6) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for
securities trades on which commissions are charged. This rate
generally does not reflect mark-ups, mark-downs, or spreads on shares
traded on a principal basis.
See Notes to Financial Statements
2-36
<PAGE>
REAL ESTATE SERIES
The real estate markets continued to stabilize over the last twelve months.
Leasing activity, rents, and market values all moved ahead as the economy
continued to improve and construction activity on a national basis supplied
less space than required by increased demand. Transaction prices in the
private real estate markets shot up, with capitalization rates falling by at
least one-half of a percentage point. In some regions, market prices on
existing properties are beginning to approach replacement cost, leading to
investor concerns of overbuilding in some sectors.
Performance by property type has varied considerably over this reporting
period. The apartment sector, which enjoyed the recovery in advance of most
other property types, has experienced more modest rental rate growth as
market vacancy rates have reached equilibrium. In the office sector, we
continued to see declines in vacancy rates--at least a 2% drop in 1996--and
strong gains in rental rates. Concerns about oversupply in the retail sector
have reduced investor demand for that product. However, construction in this
sector has finally slowed and there has been increased interest in certain
categories, namely regional malls and anchored community centers.
Full-service hotels have seen limited new construction, continued strong
demand, and very high occupancy levels. By comparison, economy hotels are
experiencing significant overbuilding and accompanying deterioration in
occupancy levels and room rates.
REITs posted very strong results over the past year. The best performing
property sectors during this period were office and hotel REITs. However, all
sectors other than the outlet center REITs generated very attractive returns.
Stock prices were propelled upward by strong growth in funds from operations
resulting from positive trends in occupancy levels and rental rates and by
expanding market capitalizations generated from both significant capital
inflow and aggressive acquisition programs.
The real estate securities market has continued to expand at a dramatic
pace, notwithstanding the modest volume of IPOs during the year. Growth has
been driven both by strong performance of the held assets and by an active
secondary market. During the year, there were 83 equity offerings raising a
total of $8.4 billion. In addition, unsecured debt offerings raised another
$4.2 billion.
Phoenix Edge Real Estate Series posted a strong 33.09% return for the twelve
months ended December 31, 1996. During the same period, the NAREIT Equity
Index posted a total return of 35.25%. All of these figures assume
reinvestment of any distributions, but exclude the effect of sales charges.
The Fund's investment strategy is to focus on market sectors which have
strong underlying fundamentals and prospects for growth in excess of market
averages over the intermediate and long-term. We also look for sectors that
are significantly undervalued on a risk-adjusted basis. Three of the targeted
sectors are apartment, hotel, and office/industrial REITs.
The Fund has been consistently overweighted in the apartment sector, which
we believe will offer stable earnings growth and reduced risk. The apartment
REITs as a group have had strong earnings growth over the last two years, yet
their stock prices have failed to keep pace with the broader REIT averages
due to investor fears of overbuilding.
We have also been significantly overweighted in the hotel sector, which has
posted very strong returns over the reporting period. Our outlook for hotels
remains positive, given the limited amount of new construction in the full
service sector which comprises the bulk of the product held by the REITs
represented in the Fund.
Finally, the Fund has had an increasing allocation to the office/industrial
sector, which participated in the overall real estate recovery later than
other property types and has strong upside potential. Office/industrial REITs
were among the top performers in 1996.
The Fund has maintained a neutral posture with respect to regional mall
REITs, which significantly outperformed last year. At the same time, we
remained underweighted in strip retail REITs because of concerns with respect
to underlying market fundamentals. Strip retail REITs generated market-based
returns during the last twelve months.
Looking ahead, we anticipate continued strong performance in the REIT market
for a number of reasons. First, the underlying markets are continuing to
strengthen and, with construction levels lower than projected demand in
nearly all property types, the outlook remains very positive. Second, there
is increasing interest by both individual and institutional investors in REIT
stocks. We attribute this to increased liquidity, attractive current yields
and the enhanced diversification benefits provided by these secu-
2-37
<PAGE>
REAL ESTATE SERIES
rities. Lastly, the increases in REIT prices experienced during 1996 have
been more or less in line with the increases in funds from operation, and
accordingly, multiples have not been driven up in line with the broader
markets.
Over the long-term, we expect to see continued growth in total market
capitalization, although limited if any growth in the numbers of companies as
focus on efficiencies of scale leads to more mergers and larger companies.
Nineteen companies today have market capitalizations in excess of $1 billion.
We expect that number will grow to as many as forty companies by the year
2000. The Fund will attempt to take advantage of this trend by focusing on
market dominant companies that have the potential to significantly increase
in size because they are positioned to acquire smaller private and public
companies. We will also continue to look for smaller undervalued companies
that are attractive takeover candidates for some of the larger REITs.
- --------------------------------------------------------------------------------
[DESCRIPTION OF LINE CHART
Real Estate
Series NAREIT*
5/1/95 $10,000 $10,000
12/31/95 11,779 11,548
12/31/96 15,677 15,618
- --------------------------------------------------------------------------------
Average Annual Total Returns for Periods Ending 12/31/96
From
Inception
5/1/95 to
1 Year 12/31/96
- ----------------------------------------------------------
Real Estate Series 33.09% 30.87%
- ----------------------------------------------------------
NAREIT Equity Index* 35.25% 30.58%
- ----------------------------------------------------------
This chart assumes an initial gross investment of $10,000 made on 5/1/95
(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 net asset value will fluctuate, so
that your shares, when redeemed, may be worth more or less than the original
cost.
*The National Association of Real Estate Investment Trusts (NAREIT) Equity
Index is a commonly used, unmanaged indicator of REIT performance.
SCHEDULE OF INVESTMENTS
December 31, 1996
SHARES VALUE
--------------- ----------------
COMMON STOCKS--95.0%
REAL ESTATE INVESTMENT TRUSTS--91.1%
COMMERCIAL--23.6%
Office/Industrial--17.0%
Arden Realty Group, Inc. 3,800 $ 105,450
Beacon Properties Corp. 8,900 325,962
Cali Realty Corp. 4,900 151,287
CarrAmerica Realty Corp. 7,800 228,150
Duke Realty Investments, Inc. 18,400 708,400
Highwoods Properties, Inc. 28,600 965,250
Spieker Properties, Inc. 22,900 824,400
Weeks Corp. 16,300 541,975
-----------
3,850,874
-----------
Storage--6.6%
Public Storage, Inc. 22,300 691,300
Shurgard Storage Centers, Inc. 9,300 275,512
Storage USA, Inc. 14,300 538,038
-----------
1,504,850
-----------
Total Commercial 5,355,724
-----------
HEALTH CARE--5.6%
Health Care Properties Inv., Inc. 15,500 542,500
Nationwide Health Properties, Inc. 30,400 737,200
-----------
1,279,700
-----------
RESIDENTIAL--29.8%
Apartments--26.0%
Avalon Properties, Inc. 15,100 434,125
Bay Apartments Communities, Inc. 18,300 658,800
Camden Property Trust 11,700 334,913
Columbus Realty Trust 7,600 172,900
Equity Residential Properties Trust 16,100 664,125
Evans Withycombe Residential, Inc. 25,400 533,400
Irvine Apartment Communities, Inc. 21,600 540,000
Merry Land & Investment Co. 34,500 741,750
Oasis Residential, Inc. 19,000 432,250
Post Properties, Inc. 17,800 716,450
United Dominion Realty Trust 43,100 668,050
-----------
5,896,763
-----------
Manufactured Homes--3.8%
Manufactured Home Communities 15,800 367,350
Sun Communities, Inc. 14,400 496,800
-----------
864,150
-----------
Total Residential 6,760,913
-----------
RETAIL--32.1%
Community/Neighborhood--9.1%
Developers Diversified Realty Corp. 14,600 542,025
Federal Realty Investment Trust 14,300 387,887
Kimco Realty Corp. 12,500 435,938
Regency Realty Corp. 5,900 154,875
Vornado Realty Trust 10,400 546,000
-----------
2,066,725
-----------
Factory Outlet--2.0%
Chelsea G.C.A. Realty, Inc. 13,200 457,050
-----------
Hotels--13.4%
Capstar Hotel Company (b) 25,800 506,325
FelCor Suite Hotels, Inc. 23,500 831,312
Patriot American Hospitality, Inc. 22,300 961,688
Starwood Lodging Trust 13,400 738,675
-----------
3,038,000
-----------
See Notes to Financial Statements
2-38
<PAGE>
REAL ESTATE SERIES
SHARES VALUE
-------- -------------
Regional Mall--7.6%
Rouse Co. 8,000 $ 254,000
Simon DeBartolo Group, Inc. 23,096 715,976
Taubman Centers, Inc. 51,400 661,775
The Macerich Co. 3,900 101,888
----------
1,733,639
----------
Total Retail 7,295,414
----------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(Identified cost $16,370,698) 20,691,751
----------
REAL ESTATE OPERATING COMPANIES--3.9%
Hotels--3.9%
Host Marriott Corp. (b) 44,800 716,800
Interstate Hotels Company (b) 4,000 113,000
Red Roof Inns, Inc. (b) 3,400 52,700
----------
882,500
----------
TOTAL REAL ESTATE OPERATING COMPANIES
(Identified cost $788,346) 882,500
----------
TOTAL COMMON STOCKS
(Identified cost $17,159,044) 21,574,251
----------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000) VALUE
------------ --------- ----------------
SHORT-TERM OBLIGATIONS--5.9%
Commercial Paper--3.3%
Ameritech Capital Funding 6.25%,
1-2-97 A-1+ $470 $ 469,918
Campbell Soup Co. 6.75%, 1-2-97 A-1+ 280 279,948
------------
749,866
------------
Federal Agency Securities--2.6%
Federal Home Loan Mortgage Corp. 5.42%, 1-22-97 585 583,150
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $1,333,016) 1,333,016
------------
TOTAL INVESTMENTS--100.9%
(Identified cost $18,492,060) 22,907,267(a)
Cash and receivables, less liabilities--(0.9)% (197,507)
------------
NET ASSETS--100.0% $22,709,760
============
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $4,419,211 and gross
depreciation of $4,004 for income tax purposes. At December 31, 1996, the
aggregate cost of securities for federal income tax purposes was
$18,492,060.
(b) Non-income producing.
See Notes to Financial Statements
2-39
<PAGE>
REAL ESTATE SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $18,492,060) $22,907,267
Cash 1,172
Receivable for investment securities sold 148,032
Interest and dividends receivable 108,273
Receivable for fund shares sold 65,426
----------
Total assets 23,230,170
----------
Liabilities
Payable for investment securities purchased 463,909
Investment advisory fee 21,208
Trustees' fee 7,559
Financial agent fee 1,013
Accrued expenses 26,721
----------
Total liabilities 520,410
----------
Net Assets $22,709,760
==========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $18,162,625
Undistributed net investment income 8,742
Accumulated net realized gain 123,186
Net unrealized appreciation 4,415,207
----------
Net Assets $22,709,760
==========
Shares of beneficial interest outstanding, $1 par value, unlimited authorization 1,585,644
==========
Net asset value and offering price per share $14.32
======
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
Investment Income
Dividends $645,491
Interest 16,241
----------
Total investment income 661,732
----------
Expenses
Investment advisory fee 92,546
Financial agent fee 7,404
Printing 21,801
Trustees 18,641
Professional 18,309
Custodian 10,810
Miscellaneous 6,369
Expenses borne by investment adviser (52,485)
----------
Total expenses 123,395
----------
Net investment income 538,337
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 357,371
Net change in unrealized appreciation (depreciation) on investments 3,569,257
----------
Net gain on investments 3,926,628
----------
Net increase in net assets resulting from operations $4,464,965
==========
</TABLE>
See Notes to Financial Statements
2-40
<PAGE>
REAL ESTATE SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year From Inception
Ended 5/1/95 to
12/31/96 12/31/95
-------------- ----------------
<S> <C> <C>
From Operations
Net investment income $ 538,337 $ 215,523
Net realized gain 357,371 44,211
Net change in unrealized appreciation (depreciation) 3,569,257 845,950
----------- ----------
Net increase in net assets resulting from operations 4,464,965 1,105,684
----------- ----------
From Distributions to Shareholders
Net investment income (529,595) (215,523)
Net realized gains (234,185) (44,211)
Tax return of capital -- (19,252)
Distribution in excess of net realized gains -- (80)
----------- ----------
Decrease in net assets from distributions to shareholders (763,780) (279,066)
----------- ----------
From Share Transactions
Proceeds from sales of shares (1,121,196 and 784,136 shares,
respectively) 14,117,141 8,019,985
Net asset value of shares issued from reinvestment of distributions
(59,531 and 25,636 shares, respectively) 763,780 279,066
Cost of shares repurchased (342,758 and 62,097 shares, respectively) (4,344,888) (653,127)
----------- ----------
Increase in net assets from share transactions 10,536,033 7,645,924
----------- ----------
Net increase in net assets 14,237,218 8,472,542
Net Assets
Beginning of period 8,472,542 0
----------- ----------
End of period (including undistributed net investment income of $8,742
and $0, respectively) $22,709,760 $8,472,542
=========== ==========
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Year From Inception
Ended 5/1/95 to
12/31/96 12/31/95
-------------- --------------
<S> <C> <C>
Net asset value, beginning of period $11.33 $10.00
Income from investment operations
Net investment income 0.50(3) 0.33(3)
Net realized and unrealized gain 3.14 1.42
------- ------
Total from investment operations 3.64 1.75
------- ------
Less distributions
Dividends from net investment income (0.50) (0.33)
Dividends from net realized gains (0.15) (0.06)
Tax return of capital -- (0.03)
------- ------
Total distributions (0.65) (0.42)
------- ------
Change in net asset value 2.99 1.33
------- ------
Net asset value, end of period $14.32 $11.33
======= ======
Total return 33.09% 17.79%(2)
Ratios/supplemental data:
Net assets, end of period (thousands) $22,710 $8,473
Ratio to average net assets of:
Operating expenses 1.00% 1.00%(1)
Net investment income 4.36% 4.80%(1)
Portfolio turnover rate 21% 10%(2)
Average commission rate paid(4) $0.0468 N/A
</TABLE>
(1) Annualized
(2) Not annualized
(3) Includes reimbursement of operating expenses by investment adviser of
$0.05 and $0.07 per share, respectively.
(4) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs, or spreads on shares traded on a principal
basis.
See Notes to Financial Statements
2-41
<PAGE>
STRATEGIC THEME SERIES
Aided by record mutual fund inflows and corporate share buybacks, the U.S.
equity market continued to climb dramatically higher in 1996, breaking one
record after another in its wake. The widely followed Dow Jones Industrial
Average finished the year at a remarkable 6448 --some 1331 points above where
it stood twelve months ago. Given last year's investment climate of slower
earnings growth and higher interest rates, combined with the stellar equity
returns posted during 1995, many on Wall Street were surprised by the stock
market's continued strength.
Market volatility increased and sector rotation intensified during 1996, as
investor opinion shifted dramatically over the direction of the economy and
interest rates. We believe that this type of market environment should be
expected in the later stages of a long bull market as it illustrates some of
the uncertainty felt by investors. In the end, large-cap stocks significantly
outdistanced their small-cap counterparts, while technology and finance
companies provided some of last year's biggest gains.
Since the Fund's inception on January 29, 1996 through December 31,1996, the
Phoenix Edge Strategic Theme Series has posted a total return of 10.33%.
During this same period, the Standard & Poor's 500 Stock Index, a commonly
used measure of U.S. stock market performance, returned 21.44%. All of these
figures assume reinvestment of any distributions, but exclude the effect of
sales charges.
After posting strong gains in the first half of 1996, Fund performance over
the last six months has lagged the market primarily because of weakness in
some of our technology, capital goods and health care holdings. Our
underweighting in large-cap stocks also held back results as these non-theme
related blue-chip companies led the market during the second half of the
year. Positive contributors to performance during this period included our
strong stock selection in energy as well as our tactical strategy of raising
the Portfolio's cash holdings during the market selloff in July.
Despite the extended rally in the U.S. equity market, thematically, we
continue to identify a number of areas that should provide above-average
long-term growth as we head into 1997. Our Software Solutions theme focuses
on companies that increase organizational efficiency by providing products
and services to manage the proliferation of new technology and solve
increasingly complex user problems. Deregulating Financial Services is
another high conviction theme that we developed in response to the
demographic shift to savings and investments and the continued trend of
government deregulation. Lastly, we continue to emphasize our Energy
Technology theme which represents energy service companies that provide
productivity enhancing solutions to exploration and production companies.
Moving forward, we believe our key investment themes will serve us well in
this challenging market environment, given their ability to capture change
and identify strong earnings growth in a timely manner. As of December 31,
1996, the Fund's asset allocation mix was 98% equities and 2% cash
equivalents.
- --------------------------------------------------------------------------------
[DESCRIPTION OF PIE CHART
Short-term Obligations and Cash 2.1%
Environmental Crisis Recycled 2.0%
Move to Outsourcing 2.2%
Clean Energy Demand 5.0%
Return to Real Assets 7.7%
Next Generation Semiconductors 7.8%
Special Situations 9.9%
Hybrid Network 10.5%
Software Solutions 11.6%
Deregulating Financial Services 12.2%
21st Century Medicine 13.1%
Energy Technology 15.9%
- --------------------------------------------------------------------------------
2-42
<PAGE>
STRATEGIC THEME SERIES
Strategic Theme Series Line
- --------------------------------------------------------------------------------
[DESCRIPTION OF LINE CHART
S&P 500 Strategic
Stock Index* Theme Series
1/29/96 $10,000 $10,000
12/31/96 12,144 11,033
- --------------------------------------------------------------------------------
Total Returns for Period Ending 12/31/96
From
Inception
1/29/96 to
12/31/96
- --------------------------------------------------------
Strategic Theme Series 10.33%
- --------------------------------------------------------
S&P 500 Stock Index* 21.44%
- --------------------------------------------------------
This chart assumes an initial gross investment of $10,000 made on 1/29/96
(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 net asset 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.
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE
-------- ----------------
<S> <C> <C>
COMMON STOCKS--97.9%
Banks--Money Center--2.2%
Bankers Trust New York Corp. 3,000 $ 258,750
Citicorp 3,000 309,000
--------------
567,750
--------------
Commercial--Leasing Companies--1.6%
Prime Services, Inc. (b) 15,000 412,500
--------------
Commercial Services--Miscellaneous--1.4%
Equifax, Inc. 12,000 367,500
--------------
Computer--Local Networks--4.0%
3Com Corp. (b) 9,000 660,375
Cisco Systems, Inc. (b) 6,000 381,750
--------------
1,042,125
--------------
Computer--Mainframes--1.2%
International Business Machines Corp. 2,000 302,000
--------------
Computer--Memory Devices--3.2%
EMC Corp. (b) 13,000 430,625
Seagate Technology, Inc. (b) 10,000 395,000
--------------
825,625
--------------
Computer--Mini/Micro--2.1%
Compaq Computer Corp. (b) 7,500 556,875
--------------
Computer--Services--2.2%
Microsoft Corp. (b) 7,000 578,375
--------------
Computer--Software--10.5%
Baan Company N.V. (b) 7,000 243,250
Compuware Corp. (b) 7,000 350,875
MDSI Mobile Data Solutions, Inc. (b) 20,000 317,500
National Instruments Corporation (b) 12,000 384,000
Natural Microsystems Corp. (b) 12,000 378,000
Netscape Communications Corp. (b) 5,000 284,375
Peoplesoft, Inc. (b) 9,000 431,438
Rogue Wave Software, Inc. (b) 21,500 338,625
--------------
2,728,063
--------------
Electric--Miscellaneous Components--2.3%
Sawtek, Inc. (b) 15,000 594,375
--------------
Electric--Semiconductor Manufacturers--4.8%
ESS Technology, Inc. (b) 12,000 $ 337,500
Maxim Integrated Products, Inc. (b) 6,000 259,500
Oak Technology, Inc. (b) 34,000 382,500
Vitesse Semiconductor Corp. (b) 6,000 273,000
--------------
1,252,500
--------------
Electric Products--Miscellaneous--0.9%
Firearms Training Systems, Inc. (b) 20,000 235,000
--------------
Electrical--Connectors--3.0%
Intel Corp. 6,000 785,625
--------------
Finance--Equity Real Estate Investment Trust--6.7%
Avalon Properties, Inc. 10,000 287,500
Chelsea G.C.A. Realty, Inc. 8,000 277,000
Equity Residential Properties Trust 9,000 371,250
Essex Property Trust, Inc. 10,000 293,750
Security Capital Pacific Trust 10,000 228,750
Starwood Lodging Trust 5,000 275,625
--------------
1,733,875
--------------
Finance--Investment Bankers--6.6%
Alex Brown, Inc. 4,000 290,000
Charles Schwab Corp. 18,000 576,000
Edwards (A.G.), Inc. 8,000 269,000
Merrill Lynch & Company, Inc. 7,000 570,500
--------------
1,705,500
--------------
Financial--Mortgage Real Estate Investment Trust--1.0%
Redwood Trust, Inc. 7,000 260,750
--------------
Financial Services--Miscellaneous--1.0%
Hambrecht & Quist Group, Inc. (b) 12,000 259,500
--------------
Insurance--Life--2.5%
Conseco, Inc. 10,000 637,500
--------------
Leisure--Toys/Games & Hobby--1.4%
Action Performance Cos., Inc. (b) 20,000 360,000
--------------
Medical--Biomed/Genetics--4.1%
Alpha-Beta Technology, Inc. (b) 25,000 264,063
Amgen, Inc. (b) 5,000 271,875
Biogen, Inc. (b) 10,000 387,500
Liposome Company, Inc. (b) 7,000 133,875
--------------
1,057,313
---------------
</TABLE>
See Notes to Financial Statements
2-43
<PAGE>
STRATEGIC THEME SERIES
<TABLE>
<CAPTION>
SHARES VALUE
-------- ----------------
<S> <C> <C>
Medical--Drug/Diversified--1.0%
Abbott Laboratories 5,000 $ 253,750
------------
Medical--Ethical Drugs--3.1%
Dura Pharmaceuticals, Inc. (b) 10,000 477,500
Merck & Co., Inc. 4,000 317,000
------------
794,500
------------
Medical--Instruments--4.8%
Biopsys Medical, Inc. (b) 11,000 239,250
Heartstream, Inc. (b) 16,000 200,000
Medtronic, Inc. 12,000 816,000
------------
1,255,250
------------
Medical--Products--1.8%
Boston Scientific Corp. (b) 8,000 480,000
------------
Oil & Gas--Canadian Exploration & Production--1.5%
Flores & Rucks, Inc. (b) 7,500 399,375
------------
Oil & Gas--Drilling--1.1%
Nabors Industries, Inc. (b) 15,000 288,750
------------
Oil & Gas--Field Services--2.9%
Schlumberger Ltd. 7,500 749,062
------------
Oil & Gas--Machinery/Equipment--5.7%
Camco International, Inc. 4,500 207,562
Energy Ventures, Inc. (b) 5,500 279,812
Smith International, Inc. (b) 12,000 538,500
Varco International, Inc. (b) 20,000 462,500
------------
1,488,374
------------
Oil & Gas--Product/Pipeline--1.4%
Sonat, Inc. 7,000 $ 360,500
------------
Oil & Gas--U.S. Exploration & Production--8.2%
3DX Technologies, Inc. (b) 30,000 330,000
Parker & Parsley Petroleum Co. 8,000 294,000
Pogo Producing Co. 9,000 425,250
The Houston Exploration Co. (b) 5,400 94,500
Titan Exploration, Inc. (b) 5,000 60,000
Tom Brown, Inc. (b) 20,000 417,500
United Meridian Corp. (b) 10,000 517,500
------------
2,138,750
------------
Pollution Control--Equipment--0.9%
Cuno, Inc. (b) 15,000 223,125
------------
Pollution Control--Services--1.1%
Newpark Resources, Inc. (b) 8,000 298,000
------------
Real Estate Operations--1.0%
Fairfield Communities, Inc. (b) 10,000 247,500
------------
Retail--Wholesale Computers--0.7%
Tech Data Corp. (b) 7,000 191,625
------------
TOTAL COMMON STOCKS
(Identified cost $23,910,176) 25,431,312
------------
TOTAL INVESTMENTS--97.9%
(Identified cost $23,910,176) 25,431,312(a)
Cash and receivables, less liabilities--2.1% 540,697
------------
NET ASSETS--100.0% $25,972,009
============
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $1,902,955 and gross
depreciation of $400,085 for income tax purposes. At December 31, 1996,
the aggregate cost of securities for federal income tax purposes was
$23,928,442.
(b) Non-income producing.
See Notes to Financial Statements
2-44
<PAGE>
STRATEGIC THEME SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $23,910,176) $25,431,312
Cash 787,660
Receivable for fund shares sold 37,641
Interest and dividends receivable 24,815
----------
Total assets 26,281,428
----------
Liabilities
Payable for investment securities purchased 263,750
Investment advisory fee 16,609
Trustees' fee 3,096
Financial agent fee 1,377
Accrued expenses 24,587
----------
Total liabilities 309,419
----------
Net Assets $25,972,009
==========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $24,889,007
Accumulated net realized loss (438,134)
Net unrealized appreciation 1,521,136
----------
Net Assets $25,972,009
==========
Shares of beneficial interest outstanding, $1 par value, unlimited authorization 2,365,493
==========
Net asset value and offering price per share $10.98
======
</TABLE>
STATEMENT OF OPERATIONS
From inception January 29, 1996 to December 31, 1996
<TABLE>
<S> <C>
Investment Income
Interest $ 153,055
Dividends 87,336
----------
Total investment income 240,391
----------
Expenses
Investment advisory fee 109,725
Financial agent fee 8,778
Printing 19,739
Custodian 17,586
Trustees 15,978
Professional 13,215
Miscellaneous 1,697
Expenses borne by investment adviser (40,418)
----------
Total expenses 146,300
----------
Net investment income 94,091
----------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized loss on securities (438,134)
Net change in unrealized appreciation (depreciation) on investments 1,521,136
----------
Net gain on investments 1,083,002
----------
Net increase in net assets resulting from operations $1,177,093
==========
</TABLE>
See Notes to Financial Statements
2-45
<PAGE>
STRATEGIC THEME SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
1/29/96 to
12/31/96
----------------
<S> <C>
From Operations
Net investment income $ 94,091
Net realized loss (438,134)
Net change in unrealized appreciation (depreciation) 1,521,136
-------------
Net increase in net assets resulting from operations 1,177,093
-------------
From Distributions to Shareholders
Net investment income (94,091)
Tax return of capital (21,960)
-------------
Decrease in net assets from distributions to shareholders (116,051)
-------------
From Share Transactions
Proceeds from sales of shares (3,425,481 shares) 36,431,726
Net asset value of shares issued from reinvestment of distributions (10,456 shares) 116,051
Cost of shares repurchased (1,070,444 shares) (11,636,810)
-------------
Increase in net assets from share transactions 24,910,967
-------------
Net increase in net assets 25,972,009
Net Assets
Beginning of period 0
-------------
End of period (including undistributed net investment income of $0) $ 25,972,009
=============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
From Inception
1/29/96 to
12/31/96
----------------
<S> <C>
Net asset value, beginning of period $10.00
Income from investment operations
Net investment income 0.04(2)
Net realized and unrealized gain 0.99
------
Total from investment operations 1.03
------
Less distributions
Dividends from net investment income (0.04)
Tax return of capital (0.01)
------
Total distributions (0.05)
------
Change in net asset value 0.98
------
Net asset value, end of period $10.98
======
Total return 10.33%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $25,972
Ratio to average net assets of:
Operating expenses 1.00%(1)
Net investment income 0.64%(1)
Portfolio turnover rate 391%(3)
Average commission rate paid(4) $0.0587
</TABLE>
(1) Annualized
(2) Includes reimbursement of operating expenses by investment adviser of
$0.02 per share.
(3) Not annualized
(4) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs, or spreads on shares traded on a principal
basis.
See Notes to Financial Statements
2-46
<PAGE>
ABERDEEN NEW ASIA SERIES
The performance of Asian equity markets since the launch of the Aberdeen New
Asia Series has been mixed, with the solid gains in Hong Kong, Malaysia and
Indonesia to some extent offset by falls in Thailand and South Korea. Since
its inception on September 17, 1996 through December 31, 1996, the Fund has
returned 0.16%. During this same period, its benchmark, the Morgan Stanley
Capital International AC Asia Pacific ex Japan Index, returned 3.30%.* All of
these figures assume reinvestment of any distributions.
A key factor in the Fund trailing the market has been the surge in the Hong
Kong stock market and in particular, local property stocks that dominate the
Hang Seng Index. We continue to hold the view that the risk in the property
sector, with prices now amongst the highest in the world, is high and further
upside is limited. We therefore have minimal exposure to Hong Kong property
in the portfolio.
In 1996, the emerging markets of the Far East enjoyed another year of strong
economic growth, with average GDP growth of around 7%. Earnings growth has
come in at the healthy level of 10-15%.
We have overweighted the stock markets of Indonesia and the Philippines,
which are benefiting from improved economic fundamentals. The Malaysian
economy is fulfilling our expectations although stock market valuations
appear stretched. Meanwhile, our investments in Australia are concentrated in
the industrial, commercial and financial sectors and generally have as a
common theme exposure to Asia and the added growth to be obtained from
transferring their proven expertise to the region.
The Indian sub-continent, although far from a mirror image of the
traditional Asian tiger, offers tremendous growth potential and
encouragingly, corporate management of the highest quality can be found.
Where we have been disappointed is in Korea and Thailand, but at current
stock market levels, feel the concerns overdone. Although the brightest light
economically has been China, it is frustrating that there are few companies
of sufficient quality in which to invest and our investment exposure remains
minimal.
Looking ahead, 1997 promises to be very similar to 1996. Average GDP growth
will be strong, running at around 7%, whilst governments continue to put the
economy at the top of their list of priorities. With trade becoming even more
intra regional and businesses moving across borders, our investment emphasis
will be keenly focused at the company level. We believe that quality
management and product as well as financial strength are crucial to long-term
investment returns. To identify these characteristics, our management team in
Singapore made well over 600 company visits in 1996.
Total Returns for Period Ending 12/31/96
From
Inception
9/17/96 to
12/31/96
------------------------------------------- ------------
Aberdeen New Asia Series 0.16%
------------------------------------------- ----------
MSCI AC Asia Pacific Ex Japan Index* 3.30%
------------------------------------------- ----------
*Morgan Stanley Capital International All Country Asia Pacific (excluding
Japan) Index is a market-value weighted average of the performance of
approximately 690 securities listed on the stock exchanges of 14 countries
in Asia and the Pacific Basin. Performance is calculated on a total return
basis, as reported by Frank Russell Company.
2-47
<PAGE>
ABERDEEN NEW ASIA SERIES
SCHEDULE OF INVESTMENTS
December 31, 1996
SHARES VALUE
------------ ------------
COMMON STOCKS--91.2%
Australia--13.1%
Australian Gas Light Co. Ltd. (Utility-Gas) 70,000 $ 398,094
Davids Ltd. (Retail) 220,000 309,293
Pacific BBA Ltd. (Miscellaneous) 110,000 387,053
QBE Insurance Group Ltd. (Insurance) 80,000 421,287
---------
1,515,727
---------
Hong Kong--23.7%
CDL Hotels International Ltd. (Hotels) 600,000 343,249
Giordano International Ltd. (Retail) 300,000 255,983
HSBC Holdings PLC (Banks) 24,800 530,634
Hongkong Electric Holdings Ltd.
(Utility-Electric) 110,000 365,486
National Mutual Asia Ltd. (Insurance) 376,000 357,290
Qingling Motors Co. (Autos & Trucks) 254,000 140,383
Smartone Telecommunications (Utility-Telephone)
(b) 175,000 334,846
Swire Pacific Ltd. Class B (Miscellaneous) 275,000 415,972
---------
2,743,843
---------
India--6.9%
Grasim Industries Ltd. Sponsored GDR
(Engineering & Construction) 30,000 457,500
Industrial Credit & Investment Corporation of
India Ltd. Sponsored GDR (Diversified
Financial Services) (b) 35,000 341,250
---------
798,750
---------
Indonesia--9.4%
PT Bank Bali (Banks) 165,000 412,064
PT Duta Anggada Realty (Property) 200,000 186,243
PT Indosat (Utility-Telephone) 180,000 495,238
---------
1,093,545
---------
Malaysia--9.2%
AMMB Holdings Berhad (Diversified Financial
Services) 60,000 503,663
Malaysian Oxygen Berhad (Chemical) 65,000 334,587
Sime UEP Properties Berhad (Property) 90,000 231,637
---------
1,069,887
---------
Philippines--6.6%
Ayala Land, Inc. Class B (Property) 335,000 382,129
Philippine Long Distance Telephone Co.
Sponsored ADR (Utility-Telephone) 7,500 382,500
---------
764,629
---------
Singapore--8.0%
Development Bank of Singapore Ltd. (Banks) 30,000 405,347
Robinson & Co. Ltd. (Retail) 60,000 242,351
Rothmans Industries Ltd. (Tobacco) 65,000 276,487
---------
924,185
---------
South Korea--6.0%
Korea Electric Power Corp. Sponsored ADR
(Utility-Electric) 20,000 $ 410,000
Samsung Electronics Sponsored GDR 144A
(Electronics) (c) 15,000 285,000
---------
695,000
---------
Thailand--8.3%
Ruam Pattana Fund II (Closed End Mutual Fund) 1,000,000 409,516
Siam Cement Co. Ltd. (Building & Construction) 9,500 297,894
Siam Commercial Bank Public Co. Ltd. (Banks) 35,000 253,900
---------
961,310
---------
TOTAL COMMON STOCKS
(Identified cost $10,571,928) 10,566,876
---------
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
------------ -------
CONVERTIBLE BONDS--0.8%
Thailand--0.8%
Siam Commercial Bank Public Co. Ltd.
Cv. 3.25%, '04 (Banks) NR $ 100 87,500
------------
TOTAL CONVERTIBLE BONDS
(Identified cost $105,000) 87,500
------------
TOTAL LONG-TERM INVESTMENTS--92.0%
(Identified cost $10,676,928) 10,654,376
------------
SHORT-TERM OBLIGATIONS--11.2%
Brown Brothers Harriman repurchase agreement,
5.75%, dated 12/31/96 due 1/2/97, repurchase
price $1,300,415, collateralized by U.S.
Treasury Note 6.50%, 4/30/97, market value
$1,327,670 1,300 1,300,000
------------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $1,300,000) 1,300,000
------------
TOTAL INVESTMENTS--103.2%
(Identified cost $11,976,928) 11,954,376(a)
Cash and receivables, less liabilities--(3.2%) (369,170)
------------
NET ASSETS--100.0% $11,585,206
============
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $465,515 and gross
depreciation of $509,532 for income tax purposes. At December 31, 1996
the aggregate cost of securities for federal income tax purposes was
$11,998,393.
(b) Non-income producing.
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration normally to qualify institutional buyers. At December 31,
1996, these securities amounted to a value of $285,000 or 2.5% of net
assets.
See Notes to Financial Statements
2-48
<PAGE>
ABERDEEN NEW ASIA SERIES
INDUSTRY DIVERSIFICATION
As a Percentage of Total Value of Total Long-Term Investments
(Unaudited)
Autos & Trucks 1.3%
Banks 15.9
Building & Construction 2.8
Chemical 3.1
Closed End Mutual Fund 3.9
Diversified Financial Services 7.9
Electronics 2.7
Engineering & Construction 4.3
Hotels 3.2
Insurance 7.3
Miscellaneous 7.5
Property 7.5
Retail 7.6
Tobacco 2.6
Utility-Electric 7.3
Utility-Gas 3.7
Utility-Telephone 11.4
-----
100.0%
=====
See Notes to Financial Statements
2-49
<PAGE>
ABERDEEN NEW ASIA SERIES
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
Assets
Investment securities at value (Identified cost $10,676,928) $10,654,376
Repurchase agreement (Identified cost $1,300,000) 1,300,000
Cash 57,338
Interest and dividends receivable 22,224
Receivable from adviser 11,584
Tax reclaim receivable 129
----------
Total assets 12,045,651
----------
Liabilities
Payable for investment securities purchased 386,031
Payable for fund shares repurchased 33,218
Trustees' fee 2,910
Financial agent fee 1,457
Accrued expenses 36,829
----------
Total liabilities 460,445
----------
Net Assets $11,585,206
==========
Net Assets Consist of:
Capital paid in on shares of beneficial interest $11,604,992
Distributions in excess of net investment income (3,944)
Accumulated net realized gain 6,760
Net unrealized depreciation (22,602)
----------
Net Assets $11,585,206
==========
Shares of beneficial interest outstanding, $1 par value, unlimited authorization 1,162,650
==========
Net asset value and offering price per share $9.96
=====
</TABLE>
STATEMENT OF OPERATIONS
From inception September 17, 1996 to December 31, 1996
<TABLE>
<S> <C>
Investment Income
Interest $49,108
Dividends 46,457
Foreign taxes withheld (6,838)
--------
Total investment income 88,727
--------
Expenses
Investment advisory fee 24,279
Financial agent fee 1,457
Custodian 24,539
Printing 7,235
Trustees 6,104
Professional 4,791
Miscellaneous 1,223
Expenses borne by investment adviser (39,279)
--------
Total expenses 30,349
--------
Net investment income 58,378
--------
Net Realized and Unrealized Gain (Loss) on Investments
Net realized gain on securities 6,760
Net realized loss on foreign currency transactions (3,432)
Net change in unrealized appreciation (depreciation) on investments (22,552)
Net change in unrealized appreciation (depreciation) on foreign currency and foreign
currency transactions (50)
--------
Net loss on investments (19,274)
--------
Net increase in net assets resulting from operations $39,104
========
</TABLE>
See Notes to Financial Statements
2-50
<PAGE>
ABERDEEN NEW ASIA SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From Inception
9/17/96 to
12/31/96
----------------
<S> <C>
From Operations
Net investment income $ 58,378
Net realized gain 3,328
Net change in unrealized appreciation (depreciation) (22,602)
-------------
Net increase in net assets resulting from operations 39,104
-------------
From Distributions to Shareholders
Net investment income (58,378)
In excess of net investment income (512)
-------------
Decrease in net assets from distributions to shareholders (58,890)
-------------
From Share Transactions
Proceeds from sales of shares (1,343,657 shares) 13,400,256
Net asset value of shares issued from reinvestment of distributions (5,928 shares) 58,890
Cost of shares repurchased (186,935 shares) (1,854,154)
-------------
Increase in net assets from share transactions 11,604,992
-------------
Net increase in net assets 11,585,206
Net Assets
Beginning of period 0
-------------
End of period (including distributions in excess of net investment income of $3,944) $11,585,206
=============
</TABLE>
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
From Inception
9/17/96 to
12/31/96
----------------
<S> <C>
Net asset value, beginning of period $10.00
Income from investment operations
Net investment income 0.05(2)
Net realized and unrealized gain (loss) (0.04)
------
Total from investment operations 0.01
------
Less distributions
Dividends from net investment income (0.05)
------
Total distributions (0.05)
------
Change in net asset value (0.04)
------
Net asset value, end of period $9.96
======
Total return 0.16%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) $11,585
Ratio to average net assets of:
Operating expenses 1.25%(1)
Net investment income 2.40%(1)
Portfolio turnover rate 2%(3)
Average commission rate paid(4) $0.0109
</TABLE>
(1) Annualized
(2) Includes reimbursement of operating expenses by investment adviser of
$0.03 per share.
(3) Not annualized
(4) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for
securities trades on which commissions are charged. This rate
generally does not reflect mark-ups, mark-downs, or spreads on shares
traded on a principal basis.
See Notes to Financial Statements
2-51
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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, Multi-Sector Fixed Income (formerly
Bond), Total Return, International, Balanced, Real Estate Securities
("Real Estate"), Strategic Theme and Aberdeen New Asia Series. The Board
of Trustees voted to change the name of the Total Return Series to the
Strategic Allocation Series, which name will be used starting in 1997. 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, the Phoenix Home Life Variable Universal Life
Account, the PHL Variable Accumulation Account, and the Phoenix Home Life
Separate Accounts B, C, and D.
Each Series has distinct investment objectives. The Money Market Series
seeks to provide maximum current income consistent with capital
preservation and liquidity. The Growth Series seeks to achieve
intermediate and long-term growth of capital, with income as a secondary
consideration. The Multi-Sector Fixed Income Series seeks to provide
long-term total return by investing in a diversified portfolio of high
yield and high quality fixed income securities. The Total Return Series
seeks 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 by
investing in three market segments; stocks, bonds and money market
instruments. The International Series seeks as its investment objective a
high total return consistent with reasonable risk by investing primarily
in an internationally diversified portfolio of equity securities. The
Balanced Series seeks to provide reasonable income, long-term growth and
conservation of capital. The Real Estate Series seeks to achieve capital
appreciation and income with approximately equal emphasis through
investments in real estate investment trusts and companies that operate,
manage, develop or invest in real estate. The Strategic Theme Series seeks
long-term appreciation of capital by investing in securities that the
adviser believes are well positioned to benefit from cultural,
demographic, regulatory, social or technological changes worldwide. The
Aberdeen New Asia Series seeks to provide long-term capital appreciation
by investing primarily in diversified equity securities of issuers
organized and principally operating in Asia, excluding Japan.
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
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses. Actual results could differ from those estimates.
A. Security Valuation
Equity securities are valued at the last sale price, or if there had been
no sale that day, at the last bid price. Debt securities are valued on the
basis of broker quotations or valuations provided by a pricing service
which utilizes information with respect to recent sales, market
transactions in comparable securities, quotations from dealers, and
various relationships between securities in determining value. Short-term
investments having a remaining maturity of 60 days or less are valued at
amortized cost which approximates market. All other securities and assets
are valued at their fair value as determined in good faith by or under the
direction of the Trustees.
The Money Market 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.
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 Series 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.
2-52
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1996
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 or if the
counterparty does not perform under the contract.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any number of days from
the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are traded directly between currency
traders and their customers. The contract is marked-to-market daily and
the change in market value is recorded by the Series as an unrealized gain
(or loss). When the contract is closed or offset with the same
counterparty, 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 or offset.
G. Futures Contracts
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. A Series may enter into
financial futures contracts as a hedge against anticipated changes in the
market value of their portfolio securities. Upon entering into a futures
contract, the Series 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 Series 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 Series as unrealized gains or losses. When the contract is closed, the
Series records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time
it was closed. The potential risk to the Series is that the change in
value of the futures contract may not correspond to the change in value of
the hedged instruments.
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.
I. Credit Risk
In countries with limited or developing markets, investments may present
greater risks than in more developed markets and the prices of such
investments may be volatile. The consequences of political, social or
economic changes in these markets may have disruptive effects on the
market prices of these investments and the income they generate, as well
as a fund's ability to repatriate such amounts.
J. When-Issued and Delayed Delivery Transactions
Each Series may engage in when-issued or delayed delivery transactions.
The Series record when-issued securities on the trade date and maintain
collateral for the securities purchased. Securities purchased on a
when-issued or delayed delivery basis begin earning interest on the
settlement date.
K. Repurchase Agreements
A repurchase agreement is a transaction where a Series acquires a security
for cash and obtains a simultaneous commitment from the seller to
repurchase the security at an agreed upon price and date. The Series,
through its custodian, takes possession of securities collateralizing the
repurchase agreement. The collateral is marked to market daily to ensure
that the market value of the underlying assets remains sufficient to
protect the Series in the event of default by the seller. If the seller
defaults and the value of the collateral declines or, if the seller enters
insolvency proceedings, realization of collateral may be delayed or
limited.
Note 3--Investment Advisory Fees and Related Party Transactions
As compensation for its advisory services to the Fund, Phoenix Investment
Counsel, Inc. ("PIC"), an indirect majority-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 listed below:
2-53
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1996
Rate for first Rate for next Rate for excess
Series $250 million $250 million over $500 million
- ------------------------- ------------- ------------- -----------------
Money Market 0.40% 0.35% 0.30%
Multi-Sector Fixed Income 0.50 0.45 0.40
Balanced 0.55 0.50 0.45
Total Return 0.60 0.55 0.50
Growth 0.70 0.65 0.60
International 0.75 0.70 0.65
Strategic Theme 0.75 0.70 0.65
The investment adviser for the Real Estate Series is Phoenix Realty
Securities, Inc. ("PRS"). PRS is an indirect, wholly-owned subsidiary 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 Series, 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 Series for the first $1
billion.
Phoenix-Aberdeen International Advisors, LLC ("PAIA") serves as the
investment adviser to the Aberdeen New Asia Series. PAIA is a joint venture
between PM Holdings, Inc., a direct subsidiary of PHL, and Aberdeen Fund
Managers, Inc. ("Aberdeen"), a wholly-owned subsidiary of Aberdeen Trust
PLC. PAIA is entitled to a fee, at an annual rate of 1.00% of the average
daily net assets of the Aberdeen New Asia Series. Pursuant to Sub-advisory
agreements, PAIA delegates certain investment decisions and functions to
other entities. PIC receives a fee of 0.30% of the average daily net assets
of the Aberdeen New Asia Series from PAIA for providing research and other
domestic advisory services, as needed. In addition, PAIA also pays a
sub-advisory fee to Aberdeen of 0.40% of the average daily net assets of the
Aberdeen New Asia Series for implementing certain portfolio transactions and
providing research and other services.
Each Series (except the International, Real Estate, Strategic Theme and
Aberdeen New Asia Series) pays a portion or all of its other operating
expenses (not including management fee, interest, taxes, brokerage fees and
commissions), up to 0.15% of its average net assets. The International, Real
Estate, Strategic Theme and Aberdeen New Asia Series pay other operating
expenses up to 0.40%, 0.25%, 0.25% and 0.25%, respectively, of its average
net assets. Expenses above these limits are paid by the Advisers, PIC, PRS,
PAIA and/or PHL and/or PHL Variable Insurance Company.
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 of each Series for
bookkeeping, administrative and pricing services.
At December 31, 1996, PHL and affiliates held shares in the Phoenix Edge
Series Fund and/or in the underlying unit investment trusts which had the
following aggregate value:
Growth Series $7,778,391
Real Estate Series 7,679,000
Strategic Theme Series 2,422,000
Aberdeen New Asia Series 2,994,000
Note 4--Purchases and Sales of Securities
Purchases and sales of securities during the year ended December 31, 1996
(excluding U.S. Government securities, short-term securities, and forward
currency contracts) aggregated the following:
Purchases Sales
--------------- ---------------
Growth Series $1,865,968,350 $1,647,416,886
Multi-Sector Fixed Income Series 137,698,754 116,707,797
Total Return Series 759,164,211 694,169,119
International Series 207,432,815 200,198,274
Balanced Series 338,117,817 337,496,248
Real Estate Series 12,152,673 2,561,373
Strategic Theme Series 75,112,297 50,743,367
Aberdeen New Asia Series 10,809,057 138,890
There were no purchases or sales of such securities in the Money Market
Series.
2-54
<PAGE>
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1996
Purchases and sales of long-term U.S. Government securities during the year
ended December 31, 1996 aggregated the following:
Purchases Sales
--------------- ---------------
Multi-Sector Fixed Income Series $113,666,060 $104,348,297
Total Return Series 159,225,544 193,278,713
Balanced Series 68,657,655 61,795,350
There were no purchases or sales of long-term U.S. Government securities in
the Money Market, Growth, International, Strategic Theme, Real Estate, or
Aberdeen New Asia Series.
Note 5--Forward Currency Contracts
At December 31, 1996, 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>
In Net
Short Contracts Exchange Settlement Unrealized
to Deliver For Date Value Appreciation
- ----------------------- ------------------------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
DM 9,630,000 USD 6,321,387 1/6/97 $ 6,205,293 $ 116,094
SF 7,640,000 USD 6,133,098 1/6/97 5,676,499 456,599
YEN 1,252,000,000 USD 11,330,829 1/6/97 10,831,052 499,777
-----------
$1,072,470
===========
</TABLE>
DM = German Deutsche Mark
SF = Swiss Franc
YEN = Japanese Yen
USD = U.S. Dollar
Note 6--Reclassification of Capital Accounts
In accordance with accounting pronouncements, the Series of the Fund have
recorded several reclassifications in the capital accounts. As of December
31, 1996, the Series recorded the following reclassifications to increase
(decrease) the accounts listed below:
<TABLE>
<CAPTION>
Capital paid
Undistributed Accumulated in on shares
net investment net realized of beneficial
income gains/(losses) interest
---------------- --------------- ---------------
<S> <C> <C> <C>
Growth Series $ (25,548) $ 25,548 $ --
Multi-Sector Fixed Income Series 69,698 (69,698) --
Total Return Series (57,892) 57,891 1
International Series 1,662,959 (2,091,139) 428,180
Balanced Series 6,444 (748) (5,696)
Aberdeen New Asia Series (3,432) 3,432 --
Real Estate Series -- 80 (80)
</TABLE>
Note 7--Capital Loss Carryovers
At December 31, 1996, the Strategic Theme Series had available for federal
income tax purposes unused capital losses of $396,065 expiring in 2003. In
addition, the Multi-Sector Fixed Income Series was able to utilize losses
deferred in the prior year against current year capital gains in the
amount of $1,708,357.
Under current tax law, capital losses realized after October 31, 1996 may
be deferred and treated as occurring on the first day of the following tax
year. For the calendar year ended December 31, 1996, the Growth and
Aberdeen New Asia Series elected to defer $613 and $1,755, respectively,
in losses occurring between November 1, 1996 and December 31, 1996. In
addition, the International Series was able to utilize losses deferred in
the prior year against current year capital gains in the amount of
$1,730,497.
TAX INFORMATION NOTICE (Unaudited)
For the fiscal year ended December 31, 1996, the following Series
distributed long-term capital gains dividends as follows:
Growth Series $33,007,184
Multi-Sector Fixed Income Series 2,669,277
Total Return Series 9,454,283
International Series 2,935,239
Balanced Series 5,689,751
Real Estate Series 130,779
2-55
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP [PRICE WATERHOUSE LOGO]
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 (except for bond ratings), and the
related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the financial
position of the Money Market Series, Growth Series, Multi-Sector Fixed Income
(formerly Bond) Series, Total Return Series, International Series, Balanced
Series, Real Estate Series, Strategic Theme Series and Aberdeen New Asia
Series (constituting The Phoenix Edge Series Fund, hereafter referred to as
the "Fund") at December 31, 1996, 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, 1996 by
correspondence with the custodians and brokers (and the application of
alternative auditing procedures where confirmations from brokers were not
received), provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Boston, Massachusetts
February 12, 1997
2-56
<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
Francis E. Jeffries
Leroy Keith, Jr.
Philip R. McLoughlin
Everett L. Morris
James M. Oates
Calvin J. Pedersen
Philip R. Reynolds
Herbert Roth, Jr.
Richard E. Segerson
Lowell P. Weicker, Jr.
Officers
Philip R. McLoughlin, President
Michael E. Haylon, Executive Vice President
David R. Pepin, Executive Vice President
William J. Newman, Senior Vice President
Hugh Young, Senior Vice President
Curtiss O. Barrows, Vice President
Mary E. Canning, Vice President
Jeanne H. Dorey, Vice President
Jean Claude Gruet, Vice President
William E. Keen III, Vice President
Christopher J. Kelleher, Vice President
David Lui, Vice President
William R. Moyer, Vice President
Scott C. Noble, Vice President
C. Edwin Riley, Jr., 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
Nancy G. Curtiss, Treasurer
G. Jeffrey Bohne, Secretary
Investment Advisers
Phoenix Investment Counsel, Inc.
56 Prospect Street
Hartford, Connecticut 06115-0480
Phoenix Realty Securities, Inc.
(Real Estate Series)
38 Prospect Street
Hartford, Connecticut 06115-0479
Phoenix-Aberdeen International Advisors, LLC
(Aberdeen New Asia Series)
56 Prospect Street
Hartford, Connecticut 06115-0480
Custodians
The Chase Manhattan Bank
1 Chase Manhattan Plaza
Floor 3B
New York, New York 10081
Brown Brothers Harriman & Co.
(Aberdeen New Asia Series and International Series)
40 Water Street
Boston, Massachusetts 02109
State Street Bank and Trust Company
(Real Estate Series)
P.O. Box 351
Boston, Massachusetts 02101
Legal Counsel
Jorden Burt, Berenson & Johnson LLP
Suite 400 East
1025 Thomas Jefferson Street N.W.
Washington, D.C. 20007-0805
Transfer Agent
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P.O. Box 2200
Enfield, Connecticut 06083-2200
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, Massachusetts 02110
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 Fund's Record 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 and Notes, thereto, and reports of
Independent Accountants are included in the Annual Report to
Shareholders for the year ended December 31, 1996,
incorporated by reference.
(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 and filed via Edgar with Post-Effective
Amendment No. 18 on June 20, 1996.
1.1 Amendment to Declaration of Trust, establishing the
International Series, filed with Post-Effective Amendment
No. 7 on March 2, 1992 and filed via Edgar herewith.
1.2 Amendment to Declaration of Trust, conforming the Fund's
borrowing restrictions to California Department's Borrowing
Guidelines, filed with Post-Effective Amendment No. 7 on
March 2, 1992 and filed via Edgar herewith.
1.3 Amendment to Declaration of Trust, establishing the Balanced
Series, filed with Post-Effective Amendment No. 8 on April
28, 1992 and filed via Edgar herewith.
1.4 Amendment to Declaration of Trust, establishing the Real
Estate Securities Series, filed with Post-Effective
Amendment No. 12 on February 16, 1995 and filed via Edgar
herewith.
1.5 Amendment to Declaration of Trust, establishing the
Strategic Theme Series, filed via Edgar with Post-Effective
Amendment No. 16 on January 29, 1996.
1.6 Amendment to Declaration of Trust, changing the name of the
Series currently designated "Bond Series" to the "Multi-
Sector Fixed Income Series," filed via Edgar with
Post-Effective Amendment No. 17 on April 17, 1996.
1.7 Amendment to Declaration of Trust, establishing the Aberdeen
New Asia Series, filed via Edgar with Post-Effective
Amendment No. 19 on September 3, 1996.
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 and filed via Edgar herewith.
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 and filed via Edgar
herewith.
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 and filed via Edgar herewith.
5.3 Form of Investment Advisory Agreement between Registrant and
Phoenix-Aberdeen International Advisors, LLC covering the
Aberdeen New Asia Series, filed via Edgar with
Post-Effective Amendment No. 18 on June 20, 1996.
5.4 Form of Subadvisory Agreement between The Phoenix Edge
Series Fund and Aberdeen Fund Managers, Inc. filed via Edgar
with Post-Effective Amendment No. 19 on September 3, 1996.
5.5 Form of Subadvisory Agreement between The Phoenix Edge
Series Fund and Phoenix Investment Councel, Inc. filed via
Edgar with Post-Effective Amendment No. 19 on September 3,
1996.
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
and filed via Edgar herewith.
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 and filed via Edgar herewith.
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 and
filed via Edgar herewith.
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 and filed via Edgar herewith.
8.4 Amendment to Custodian Contract between Registrant and State
Street Bank and Trust Company dated October 17, 1996 and
filed via Edgar herewith.
9.1 Form of Transfer Agency Agreement, filed with original
Registration Statement on Form N-1A on April 18, 1986 and
filed via Edgar herewith.
9.2 Form of Financial Agent Agreement, filed via Edgar with
Post-Effective Amendment No. 16 on January 29, 1996.
9.3 Form of Financial Agent Agreement filed via Edgar herewith.
10. Opinion and Consent of Counsel covering shares of the
International, Multi-Sector Fixed Income, Growth, Money
Market, Balanced and Strategic Allocation Series, filed with
Post-Effective Amendment No. 7 on March 2, 1992 and filed
via Edgar herewith.
10.1 Opinion and Consent of Counsel covering shares of the Real
Estate Securities Series, filed with Post-Effective
Amendment No. 13 on April 28, 1995 and filed via Edgar
herewith.
10.2 Opinion and Consent of Counsel covering shares of the
Strategic Theme Series, filed via Edgar with Post-Effective
Amendment No. 16 on January 29, 1996.
10.3 Opinion and Consent of Counsel covering shares of the
Aberdeen New Asia Series, filed via Edgar with
Post-Effective Amendment No. 19 on September 3, 1996.
11. Written Consent of Price Waterhouse LLP, filed via Edgar
herewith.
12. Not Applicable.
13. Not Applicable.
14. Not Applicable.
15. Not Applicable.
16. Not Applicable.
17. Financial Data Schedule filed via Edgar herewith and
reflected on Edgar as Exhibit 27.
18. Powers of Attorney, filed via Edgar with Post-Effective
Amendment No. 17 on April 17, 1996.
- ---------------------
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:
[GRAPHIC OMITTED]
C-3
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
NUMBER OF RECORD HOLDERS
TITLE OF CLASS AS OF MAY 1, 1997
- --------------- -----------------
Multi-Sector Series 4
Money Market Series* 4
Growth Series 7
Allocation Series 4
Balanced Series 4
International Series 4
Real Estate Series 5
Theme Series 5
Asia Series 5
- ---------------------
*Phoenix Mutual Life Insurance Company 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 Fund 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 wilful 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, 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 ADVISER.
See "Management of the Fund" in the Prospectus and "Management of the Fund"
in the Statement of Additional Information for information regarding the
business of the Adviser. For information as to the business, profession,
vocation or employment of a substantial nature of directors and officers of the
Adviser, reference is made to the Adviser's current Form ADV (SEC File Nos.
801-5995 for Phoenix Investment Counsel Inc.; 801-8177 for National Securities
and Research Corporation; 801-52167 for Phoenix-Aberdeen International Advisors,
LLC) filed under the Investment Advisers Act of 1940, incorporated herein by
reference.
ITEM 29. PRINCIPAL UNDERWRITERS
Not Applicable.
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.
C-4
<PAGE>
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.
(d) Registrant undertakes to provide the information specified
pursuant to Regulation S-K, Item 512 (Reg.ss.229.512), as
applicable, the terms of which are incorporated herein by
reference.
(e) Registrant undertakes to call a special meeting of shareholders
for the purpose of voting upon the question of removal of a
trustee or trustees and to assist in communications with other
shareholders, as required by Section 16(c) of the 1940 Act, if
requested to do so by holders of at least 10% of a Portfolio's
outstanding shares.
C-5
<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 Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Hartford and the State of Connecticut
on the 29th day of April, 1997.
THE PHOENIX EDGE SERIES FUND
Attest: /s/ Thomas N. Steenburg By: /s/ Philip R. McLoughlin
----------------------------- ------------------------------
Thomas N. Steenburg Philip R. McLoughlin
Assistant Secretary President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities indicated on this 29th day of April, 1997.
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
- ------------------------------
Francis E. Jeffries*
Trustee
- ------------------------------
Leroy Keith, Jr.*
/s/ Philip R. McLoughlin Trustee and President
- ------------------------------
Philip R. McLoughlin (Principal Executive Officer)
Trustee
- ------------------------------
Everett L. Morris*
Trustee
- ------------------------------
James M. Oates*
Trustee
- ------------------------------
Calvin J. Pedersen*
Trustee
- ------------------------------
Philip R. Reynolds*
Trustee
- ------------------------------
Herbert Roth, Jr.*
S-1(C)
<PAGE>
Trustee
- ------------------------------
Richard E. Segerson*
Trustee
- ------------------------------
Lowell P. Weicker, Jr.*
By: /s/ Philip R. McLoughlin
------------------------
* Philip R. McLoughlin, pursuant to powers of attorney filed previously.
S-2(C)
EXHIBIT 1.1
Amendment to Declaration of Trust
<PAGE>
THE BIG EDGE SERIES FUND
AMENDMENT TO DECLARATION OF TRUST
We, the undersigned, being a majority of the members of the Board of
Trustees of The Big Edge Series Fund, a Massachusetts business trust organized
under a Declaration of Trust dated February 18, 1986, pursuant to Section 7.3 of
ARTICLE VII of said Declaration of Trust for the purpose of establishing and
designating a new Series of Shares denominated International Series, hereby
amend said Declaration of Trust, effective February 28, 1990, by deleting the
first paragraph of Section 4.2 of ARTICLE IV thereof and by inserting in lieu of
such paragraph the following paragraph:
"Without limiting the authority of the Trustees set forth in
Section 4.1 to establish and designate any further Series, the
following six Series are hereby established and designated:
"Bond Series", "Stock Series", "Total-Vest Series", "Money
Market Series", "Zero Bond II Series" and "International
Series".
WITNESS our hands this twenty-eighth day of February, 1990.
/s/ C. Duane Blinn /s/ Philip R. McLoughlin
- ------------------------------------ -----------------------------------
C. Duane Blinn Philip R. McLoughlin
/s/ Robert Chesek /s/ James M. Oates
- ------------------------------------ -----------------------------------
Robert Chesek James M. Oates
/s/ James R. Dempsey /s/ Philip R. Reynolds
- ------------------------------------ -----------------------------------
James R. Dempsey Philip R. Reynolds
/s/ Leroy Keith, Jr. /s/ Herbert Roth, Jr.
- ------------------------------------ -----------------------------------
Leroy Keith, Jr. Herbert Roth, Jr.
/s/ Richard Scheuch
-----------------------------------
Richard Scheuch
EXHIBIT 1.2
Amendment to Declaration of Trust
<PAGE>
THE BIG EDGE SERIES FUND
AMENDMENT TO DECLARATION OF TRUST
We, the undersigned, being a majority of the members of the Board of
Trustees of The Big Edge Series Fund, a Massachusetts business trust organized
under a Declaration of Trust dated February 18, 1986, as amended December 9,
1986 and February 28, 1990, and acting pursuant to ARTICLE VII Section 7.3 of
said Declaration of Trust, hereby further amend said Declaration of Trust,
effective November 14, 1991, by:
(1) deleting the following Section 3.1, paragraph (5) of ARTICLE III:
Borrow money, except as a temporary measure where such
borrowing would not exceed 5% of the market value of total
assets at the time each such borrowing is made. The Trust may
borrow money from a bank provided such borrowing does not
exceed 50% of the net asset value of the Trust, not
considering any such borrowings as liabilities. The Total-Vest
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 Total-Vest Series.
and
(2) inserting the following paragraph (5) in lieu thereof:
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-Vest 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.
<PAGE>
- 2 -
WITNESS our hands this 30th day of December, 1991.
/s/ C. Duane Blinn /s/ Philip R. McLoughlin
- ------------------------------------ -----------------------------------
C. Duane Blinn Philip R. McLoughlin
/s/ Robert Chesek /s/ James M. Oates
- ------------------------------------ -----------------------------------
Robert Chesek James M. Oates
/s/ James R. Dempsey /s/ Philip R. Reynolds
- ------------------------------------ -----------------------------------
James R. Dempsey Philip R. Reynolds
/s/ Leroy Keith, Jr. /s/ Herbert Roth, Jr.
- ------------------------------------ -----------------------------------
Leroy Keith, Jr. Herbert Roth, Jr.
/s/ Richard Scheuch
-----------------------------------
Richard Scheuch
EXHIBIT 1.3
Amendment to Declaration of Trust
<PAGE>
THE BIG EDGE SERIES FUND
AMENDMENT TO DECLARATION OF TRUST
We, the undersigned, being a majority of the members of the Board of
Trustees of The Big Edge Series Fund, a Massachusetts business trust organized
under a Declaration of Trust dated February 18, 1986, as amended December 9,
1986, February 28, 1990, and November 14, 1991, and acting pursuant to ARTICLE
VII Section 7.3 of said Declaration of Trust for the purposes of (a) changing
the name of the Trust from "The Big Edge Series Fund" to "The Phoenix Edge
Series Fund"; (b) changing the name of the "Stock Series" to the "Growth
Series"; (c) changing the name of the "Total-Vest Series" to the "Total Return
Series"; and (d) establishing and designating a new Series of Shares denominated
the "Balanced Series," hereby further amend said Declaration of Trust, effective
May 1, 1992, as follows:
1. by deleting in Section 1.1 of ARTICLE I the words 'The Big Edge Series
Fund,' and inserting in lieu thereof the words 'The Phoenix Edge Series
Fund';
2. by deleting the first paragraph of Section 4.2 of ARTICLE IV thereof and by
inserting in lieu of such paragraph the following paragraph:
"Without limiting the authority of the Trustees set forth in Section
4.1 to establish and designate any further Series, the following six
Series are hereby established and designated: 'Balanced Series,' 'Bond
Series,' 'Growth Series,' 'International Series,' 'Money Market
Series' and 'Total Return Series.'"
WITNESS our hands this 26th day of February, 1992.
/s/ C. Duane Blinn /s/ Philip R. McLoughlin
- ------------------------------------ -----------------------------------
C. Duane Blinn Philip R. McLoughlin
/s/ Robert Chesek /s/ James M. Oates
- ------------------------------------ -----------------------------------
Robert Chesek James M. Oates
/s/ Leroy Keith, Jr. /s/ Philip R. Reynolds
- ------------------------------------ -----------------------------------
Leroy Keith, Jr. Philip R. Reynolds
/s/ Herbert Roth, Jr.
-----------------------------------
Herbert Roth, Jr.
EXHIBIT 1.4
Amendment to Declaration of Trust
<PAGE>
THE PHOENIX EDGE SERIES FUND
AMENDMENT TO DECLARATION OF TRUST
We, the undersigned, being all of the members of the Board of Trustees
of The Phoenix Edge Series Fund, a Massachusetts business trust organized under
a Declaration of Trust dated February 18, 1986, as amended December 9, 1986,
February 28, 1990, November 14, 1991, and May 1, 1992, acting pursuant to
ARTICLE VII Section 7.3 of said Declaration of Trust for the purpose of
establishing and designating a new Series of Shares denominated the "Real Estate
Securities Series," hereby further amend said Declaration of Trust, effective
January 1, 1995, by deleting the first paragraph of Section 4.2 of ARTICLE IV
thereof and by inserting in lieu of such paragraph the following paragraph:
"Without limiting the authority of the Trustees set forth in Section
4.1 to establish and designate any further Series, the following seven
Series are hereby established and designated: 'Balanced Series,' 'Bond
Series,' 'Growth Series,' 'International Series,' 'Money Market
Series,' 'Real Estate Securities,' and 'Total Return Series.'"
WITNESS our hands this 16th day of November, 1994.
/s/ C. Duane Blinn /s/ Philip R. McLoughlin
- ------------------------------------ -----------------------------------
C. Duane Blinn Philip R. McLoughlin
/s/ Robert Chesek /s/ James M. Oates
- ------------------------------------ -----------------------------------
Robert Chesek James M. Oates
/s/ E. Virgil Conway /s/ Philip R. Reynolds
- ------------------------------------ -----------------------------------
E. Virgil Conway Philip R. Reynolds
/s/ Harry Dalzell-Payne /s/ Herbert Roth, Jr.
- ------------------------------------ -----------------------------------
Harry Dalzell-Payne Herbert Roth, Jr.
/s/ Leroy Keith, Jr. /s/ Richard E. Segerson
- ------------------------------------ -----------------------------------
Leroy Keith, Jr. Richard E. Segerson
EXHIBIT 5
Investment Advisory Agreement
<PAGE>
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this 1st day of January, 1993, by and between
The Phoenix Edge Series Fund (the "Trust"), a Massachusetts business trust
authorized to issue shares of beneficial interest in separate series, and
Phoenix Investment Counsel, Inc. (the "Adviser"), a Massachusetts corporation.
WITNESSETH THAT:
1. The Trust hereby appoints the Adviser to act as investment adviser
to the Trust and to each of the Series of the Trust established and designated
by the Trustees on or before the date hereof, namely the Money Market Series,
Bond Series, Growth Series, Total Return Series, Balanced Series and
International Series (collectively the "Existing Series"), for the period and on
the terms set forth herein. The Adviser accepts such appointment and agrees to
render the services described in this Agreement for the compensation herein
provided.
2. In the event that the Trustees desire to retain the Adviser to
render investment advisory services hereunder with respect to one or more
additional Series ("Additional Series"), the Trust shall notify the Adviser in
writing. If the Adviser is willing to render such services, it shall notify the
Trust in writing, whereupon such Additional Series shall become subject to the
terms and conditions of this Agreement.
3. The Adviser shall furnish continuously an investment program for
each of the Existing Series and any Additional Series which may become subject
to the terms and conditions set forth herein (collectively, "Series") and shall
manage, or cause to be managed, the investment and reinvestment of the assets of
each Series, subject at all times to the supervision of the Trustees.
4. With respect to managing the investment and reinvestment of the
Trust's assets, the Adviser shall provide, or cause to be provided, at its own
expense:
(a) Investment research, advice and supervision;
(b) An investment program for each Series consistent with its
investment objectives;
(c) Implementation of the investment program for each Series including
the purchase and sale of securities;
(d) Advice and assistance on the general operations of the Trust; and
(e) Regular reports to the Trustees on the implementation of each
Series' investment program.
(f) Continuous monitoring and evaluation of the performance and
investment style of any Subadviser recommended by the Adviser and
appointed to act on behalf of the Trust.
5. The Adviser shall, for all purposes herein, be deemed to be an
independent contractor.
<PAGE>
6. The Adviser shall furnish at its own expense or pay the expenses
of the Trust for the following:
(a) Personnel necessary to perform the functions required to manage
the investment and reinvestment of the Trust's assets (including
those required for research, statistical and investment work).
(b) Any Subadviser recommended by Adviser and appointed to act on
behalf of the Trust.
7. All costs and expenses not specifically enumerated herein as
payable by the Adviser shall be paid by the Trust or by Phoenix Home Life Mutual
Insurance Company ("Phoenix Home Life"). Such expenses shall include, but shall
not be limited to, all expenses (other than those specifically referred to as
being borne by the Adviser) incurred in the operation of the Trust and any
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
or Phoenix Home Life 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.
8. For providing the services and assuming the expenses outlined
herein, the Trust agrees that the Adviser shall be compensated as follows:
(a) Within five days after the end of each month, the Trust shall pay
the Adviser a fee based on an annual percentage rate of the
average of the aggregate daily net asset values of each Series of
the Trust as outlined below. The amounts payable to the Adviser
shall be based upon the average of the values of the net assets of
the Series as of the close of business each day.
================================================================================
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%
- --------------------------------------------------------------------------------
Growth .70% .65% .60%
- --------------------------------------------------------------------------------
Bond .50% .45% .40%
- --------------------------------------------------------------------------------
Total Return .60% .55% .50%
- --------------------------------------------------------------------------------
International .75% .70% .65%
- --------------------------------------------------------------------------------
Balanced .55% .50% .45%
================================================================================
- 2 -
<PAGE>
(b) Compensation shall accrue immediately upon the effective date of
this Agreement.
(c) If there is termination of this Agreement during a month, the fee
for that month shall be proportionately computed upon the average
of the aggregate daily net asset values of the Series for such
partial period in such month.
(d) The Adviser agrees to reimburse the Trust for the amount, if any,
by which the total operating and management expenses for the
Series (including the Adviser's compensation, pursuant to this
paragraph, but excluding taxes, interest, costs of portfolio
acquisitions and dispositions and extraordinary expenses), for any
"fiscal year" exceed the level of expenses which such Series is
permitted to bear under the most restrictive expense limitation
imposed on open-end investment companies by any state in which
shares of such Series are then qualified. Phoenix Home Life
agrees, in turn, to reimburse the Adviser for such payments to the
Trust. Such reimbursement, if any, will be made by the Adviser to
the Trust within five days after the end of each month. For the
purpose of this subparagraph (d), the term "fiscal year" shall
include the portion of the then current fiscal year which shall
have elapsed at the date of termination of this Agreement.
9. The services of the Adviser to the Trust are not to be deemed
exclusive; the Adviser is free to render services to others and to engage in
other activities. Without relieving the Adviser of its duties hereunder and
subject to the prior approval of the Trustees and subject further to compliance
with the applicable provisions of the Investment Company Act of 1940, as
amended, the Adviser may appoint one or more agents to perform any of the
functions and services which are to be provided under the terms of this
Agreement upon such terms and conditions as may be mutually agreed upon among
the Trust, the Adviser and any such Agent.
10. The Adviser shall not be liable to the Trust or to any shareholder
of the Trust for any error of judgment or mistake of law or for any loss
suffered by the Trust or by any shareholder of the Trust in connection with the
matters to which this Agreement or any Subadvisory Agreement relates, except a
loss resulting from willful misfeasance, bad faith, gross negligence or reckless
disregard on the part of the Adviser in the performance of its duties hereunder.
11. It is understood that:
(a) Trustees, officers, employees, agents and shareholders of the
Trust or Phoenix Home Life are or may be "interested persons" of
the Adviser or any Subadviser as directors, officers, stockholders
or otherwise;
(b) Directors, officers, employees, agents and stockholders of the
Adviser or any Subadviser are or may be "interested persons" of
the Trust or Phoenix Home Life as Trustees, officers, shareholders
or otherwise;
(c) The existence of any such dual interest shall not affect the
validity hereof or of any transactions hereunder.
- 3 -
<PAGE>
12. This Agreement shall become effective with respect to the Existing
Series as of the date hereof (the "Contract Date"), and, with respect to any
Additional Series, on the date specified in the notice to the Trust from the
Adviser in accordance with paragraph 2 hereof that the Adviser is willing to
serve as Adviser with respect to such Additional Series. Unless terminated as
herein provided, this Agreement shall remain in full force and effect with
respect to the Existing Series for a period of one year following the Contract
Date and, with respect to each Additional Series, until the next anniversary of
the Contract Date following the date on which such Additional Series became
subject to the terms and conditions of this Agreement, and shall continue in
full force and effect for periods of one year thereafter with respect to each
Series so long as (a) such continuance with respect to any such Series is
approved at least annually by either the Trustees or by a "vote of the majority
of the outstanding shares" of such Series and (b) the terms and any renewal of
this Agreement with respect to any such Series have been approved by a vote of a
majority of the Trustees who are not parties to this Agreement or "interested
persons" of any such party cast in person at a meeting called for the purpose of
voting on such approval; provided, however, that the continuance of this
Agreement with respect to each Additional Series is subject to its approval by a
"vote of a majority of the outstanding shares" of any such Additional Series on
or before the next anniversary of the Contract Date following the date on which
such Additional Series became a Series hereunder.
Any approval of this Agreement by a vote of the holders of a "majority
of the outstanding shares" of any Series shall be effective to continue this
Agreement with respect to any such Series notwithstanding (a) that this
Agreement has not been approved by a "vote of a majority of the outstanding
shares" of any other Series affected thereby and (b) that this Agreement has not
been approved by the holders of a "vote of a majority of the outstanding shares"
of the Trust, unless either such additional approval shall be required by any
other applicable law or otherwise.
13. The Adviser shall furnish any state insurance commissioner with
such information or reports in connection with the services provided under this
Agreement as the Commissioner may request in order to ascertain whether variable
life insurance or variable annuity operations are being conducted in accordance
with applicable law or regulations. The Trust shall own and control all records
that pertain to the services provided under this Agreement and such records
shall be open to inspection, audit and photocopying during regular business
hours by the Trustees, Officers, Counsel and Auditors of the Trust.
14. The Trust may terminate this Agreement with respect to the Trust
or to any Series upon 60 days' written notice to the Adviser at any time,
without the payment of any penalty, by vote of the Trustees or, as to each
Series, by a "vote of a majority of the outstanding shares" of such Series. The
Adviser may terminate this Agreement with respect to any Series upon 60 days'
written notice to the Trust, without the payment of any penalty. This Agreement
shall immediately terminate in the event of its "assignment."
15. The terms "interested persons" and "assignment", when used herein,
shall have the respective meanings specified in the Investment Company Act of
1940, as amended.
16. The term "majority of the outstanding shares" when used herein
shall have the meaning specified for the term "majority of the outstanding
voting securities" in the Investment Company Act of 1940, as amended.
- 4 -
<PAGE>
17. It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but bind only the trust property of
the Trust, as provided in the Declaration of Trust. The execution and delivery
of this Agreement have been authorized by the Trustees and shareholders of the
Trust and signed by the President of the Trust, acting as such, and neither such
authorization by such Trustees and shareholders nor such execution and delivery
by such officer shall be deemed to have been made by any of them individually or
be binding upon or impose any liability on any of them personally, but shall
bind only the trust property of the Trust as provided in its Declaration of
Trust. The Declaration of Trust is on file with the Secretary of The
Commonwealth of Massachusetts.
18. This Agreement shall be construed and the rights and obligations
of the parties hereunder enforced in accordance with the laws of The
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
THE PHOENIX EDGE SERIES FUND PHOENIX INVESTMENT COUNSEL, INC.
By /s/ Philip R. McLoughlin By /s/ Patricia A. Bannan
------------------------------- -----------------------------
Philip R. McLoughlin, President Patricia A. Bannan, President
Consented to by: PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
By /s/ Dona D. Young
--------------------------------------------------------
Dona D. Young, Senior Vice President and General Counsel
- 5 -
EXHIBIT 5.1
Investment Advisory Agreement
<PAGE>
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT made effective as of the 1st day of May, 1995 by and
between The Phoenix Edge Series Fund (the "Trust"), and Phoenix Realty
Securities, Inc. (the "Adviser").
WITNESSETH THAT:
1. The Trust hereby appoints the Adviser to act as investment adviser
to the Trust on behalf of the Phoenix Real Estate Securities Series (the
"Portfolio" or "Series"), for the period and on the terms set forth herein. The
Adviser accepts such appointment and agrees to render the services described in
this Agreement for the compensation herein provided.
2. In the event that the Trustees desire to retain the Adviser to
render investment advisory services hereunder with respect to one or more
additional series ("Additional Series"), the Trust shall notify the Adviser in
writing. If the Adviser is willing to render such services, it shall notify the
Trust in writing, whereupon such Additional Series shall become subject to the
terms and conditions of this Agreement.
3. The Adviser shall furnish continuously an investment program for the
Portfolio and any Additional Series which may become subject to the terms and
conditions set forth herein (sometimes collectively referred to as the "Series")
and shall manage the investment and reinvestment of the assets of each Series,
subject at all times to the supervision of the Trustees.
4. With respect to managing the investment and reinvestment of the
Series' assets, the Adviser shall provide, at its own expense:
(a) Investment research, advice and supervision;
(b) An investment program for each Series consistent with its investment
objectives;
(c) Implementation of the investment program for each Series including
the purchase and sale of securities;
(d) Advice and assistance on the general operations of the Trust;
(e) Regular reports to the Trustees on the implementation of each
Series' investment program; and
(f) Continuous monitoring and evaluation of the performance and
investment style of any subadviser recommended by Adviser and
appointed to act on behalf of the Trust.
5. The Adviser shall, for all purposes herein, be deemed to be an
independent contractor.
6. The Adviser shall furnish at its own expense, or pay the expenses of
the Trust, for the following:
(a) Office facilities, including office space, furniture and equipment;
(b) Personnel necessary to perform the functions required to manage the
investment and reinvestment of each Series' assets (including those
required for research, statistical and
<PAGE>
investment work);
(c) Personnel to serve without salaries from the Trust as officers or
agents of the Trust. The Adviser need not provide personnel to
perform, or pay the expenses of the Trust for, services customarily
performed for an open-end management investment company by its
national distributor, custodian, financial agent, transfer agent,
auditors and legal counsel;
(d) Compensation and expenses, if any, of the Trustees who are also
full-time employees of the Adviser or any of its affiliates; and
(e) Any subadviser recommended by Adviser and appointed to act on behalf
of the Trust.
7. All costs and expenses not specifically enumerated herein as
payable by the Adviser shall be paid by the Trust. Such expenses shall include,
but shall not be limited to, all expenses (other than those specifically
referred to as being borne by the Adviser) incurred in the operation of the
Trust and any public offering of its shares, including, among others, interest,
taxes, brokerage fees and commissions, fees of Trustees who are not full-time
employees of the Adviser or any of its affiliates, expenses of Trustees' and
shareholders' meetings including the cost of printing and mailing proxies,
expenses of insurance premiums for fidelity and other coverage, expenses of
repurchase and redemption of shares, expenses of issue and sale of shares (to
the extent not borne by its national distributor under its agreement with the
Trust), expenses of printing and mailing stock certificates representing shares
of the Trust, association membership dues, charges of custodians, transfer
agents, dividend disbursing agents and financial agents, bookkeeping, auditing
and legal expenses. The Trust will also pay the fees and bear the expense of
registering and maintaining the registration of the Trust and its shares with
the Securities and Exchange Commission and registering or qualifying its shares
under state or other securities laws and the expense of preparing and mailing
prospectuses and reports to shareholders. Additionally, if authorized by the
Trustees, the Trust shall pay for extraordinary expenses and expenses of a
non-recurring nature which may include, but not be limited to the reasonable and
proportionate cost of any reorganization or acquisition of assets and the cost
of legal proceedings to which the Trust is a party.
8. For providing the services and assuming the expenses outlined
herein, the Trust agrees that the Adviser shall be compensated as follows:
(a) Within five days after the end of each month, the Trust shall pay
the Adviser a fee based on the following annual rates as a
percentage of the average aggregate daily net asset values of the
Portfolio: 0.75% of the first $1 billion; 0.70% of the next billion
dollars and 0.65% of all sums in excess of the foregoing. The
amounts payable to the Adviser with respect to the Portfolio shall
be based upon the average of the values of the net assets of such
Portfolio as of the close of business each day, computed in
accordance with the Declaration of Trust.
(b) Compensation shall accrue immediately upon the effective date of
this Agreement.
(c) If there is termination of this Agreement during a month, each
Series' fee for that month shall be proportionately computed upon
the average of the daily net asset values of such Series for such
partial period in such month.
(d) The Adviser agrees to reimburse the Trust for the amount, if any, by
which the total operating and management expenses for any Series
(including the Adviser's compensation, pursuant to this paragraph,
but excluding taxes, interest, costs of portfolio acquisitions and
dispositions and extraordinary expenses), for any "fiscal year"
exceed the level of expenses which such Series
- 2 -
<PAGE>
is permitted to bear under the most restrictive expense limitation
(which is not waived by the State) imposed on open-end investment
companies by any state in which shares of such Series are then
qualified. Such reimbursement, if any, will be made by the Adviser
to the Trust within five days after the end of each month. For the
purpose of this subparagraph (d), the term "fiscal year" shall
include the portion of the then current fiscal year which shall have
elapsed at the date of termination of this Agreement.
9. The services of the Adviser to the Trust are not to be deemed
exclusive, the Adviser being free to render services to others and to engage in
other activities. Without relieving the Adviser of its duties hereunder and
subject to the prior approval of the Trustees and subject further to compliance
with applicable provisions of the Investment Company Act of 1940, as amended,
the Adviser may appoint one or more agents to perform any of the functions and
services which are to be provided under the terms of this Agreement upon such
terms and conditions as may be mutually agreed upon among the Trust, the Adviser
and any such agent.
10. The Adviser shall not be liable to the Trust or to any shareholder
of the Trust for any error of judgment or mistake of law or for any loss
suffered by the Trust or by any shareholder of the Trust in connection with the
matters to which this Agreement or any Subadvisory Agreement relates, except a
loss resulting from willful misfeasance, bad faith, gross negligence or reckless
disregard on the part of the Adviser in the performance of its duties hereunder.
11. It is understood that:
(a) Trustees, officers, employees, agents and shareholders of the Trust
are or may be "interested persons" of the Adviser or any subadviser
as directors, officers, stockholders or otherwise;
(b) Directors, officers, employees, agents and stockholders of the
Adviser or any subadviser are or may be "interested persons" of the
Trust as Trustees, officers, shareholders or otherwise; and
(c) The existence of any such dual interest shall not affect the
validity hereof or of any transactions hereunder.
12. This Agreement shall become effective with respect to the Portfolio
as of the date stated above (the "Contract Date") and with respect to any
Additional Series, on the date specified in the notice to the Trust from the
Adviser in accordance with paragraph 2 hereof that the Adviser is willing to
serve as Adviser with respect to such Additional Series. Unless terminated as
herein provided, this Agreement shall remain in full force and effect for a
period of one year following the Contract Date, and, with respect to each
Additional Series, until the next anniversary of the Contract Date on which such
Additional Series became subject to the terms and conditions of this Agreement
and shall continue in full force and effect for periods of one year thereafter
with respect to each Series so long as (a) such continuance with respect to any
such Series is approved at least annually by either the Trustees or by a "vote
of the majority of the outstanding voting securities" of such Series and (b) the
terms and any renewal of this Agreement with respect to any such Series have
been approved by a vote of a majority of the Trustees who are not parties to
this Agreement or "interested persons" of any such party cast in person at a
meeting called for the purpose of voting on such approval; provided, however,
that the continuance of this Agreement with respect to each Additional Series is
subject to its approval by a "vote of a majority of the outstanding voting
securities" of any such Additional Series on or before the next anniversary of
the Contract Date following the date on which such Additional Series became a
Series hereunder.
Any approval of this Agreement by a vote of the holders of a "majority
of the outstanding voting securities"' of any Series shall be effective to
continue this Agreement with respect to such Series
- 3 -
<PAGE>
notwithstanding (a) that this Agreement has not been approved by a "vote of a
majority of the outstanding voting securities" of any other Series of the Trust
affected thereby and (b) that this Agreement has not been approved by the
holders of a "vote of a majority of the outstanding voting securities" of the
Trust, unless either such additional approval shall be required by any other
applicable law or otherwise.
13. The Trust may terminate this Agreement with respect to the Trust or
to the Portfolio upon 60 days' written notice to the Adviser at any time,
without the payment of any penalty, by vote of the Trustees or, as to each
Series, by a "vote of the majority of the outstanding voting securities" of such
Series. The Adviser may terminate this Agreement upon 60 days' written notice to
the Trust, without the payment of any penalty. This Agreement shall immediately
terminate in the event of its "assignment".
14. The terms "majority of the outstanding voting securities",
"interested persons" and "assignment", when used herein, shall have the
respective meanings in the Investment Company Act of 1940, as amended.
15. In the event of termination of this Agreement, or at the request of
the Adviser, the Trust will eliminate all reference to "Phoenix" from its name,
an will not thereafter transact business in a name using the word "Phoenix" in
any form or combination whatsoever, or otherwise use the word "Phoenix" as part
of its name. The Trust will thereafter in all prospectuses, advertising
materials, letterheads, and other material designed to be read by investors and
prospective investors delete from its name the word "Phoenix" or any
approximation thereof. If the Adviser chooses to withdraw the Trust's right to
use the word "Phoenix", it agrees to submit the question of continuing this
Agreement to a vote of the Trust's shareholders at the time of such withdrawal.
16. It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but bind only the trust property of
the Trust, as provided in the Declaration of Trust. The execution and delivery
of this Agreement have been authorized by the Trustees and shareholders of the
Trust and signed by the President of the Trust, acting as such, and neither such
authorization by such Trustees and shareholders nor such execution and delivery
by such officer shall be deemed to have been made by any of them individually or
be binding upon or impose any liability on any of them personally, but shall
bind only the trust property of the Trust as provided in its Declaration of
Trust. The Declaration of Trust, as amended, is or shall be on file with the
Secretary of The Commonwealth of Massachusetts.
17. This Agreement shall be construed and the rights and obligations
of the parties hereunder enforced in accordance with the laws of The
Commonwealth of Massachusetts.
- 4 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
THE PHOENIX EDGE SERIES FUND
By: /s/ Philip R. McLoughlin
-------------------------------------
Philip R. McLoughlin, President
PHOENIX REALTY SECURITIES, INC.
By: /s/ Barbara Rubin
-------------------------------------
Barbara Rubin, President
- 5 -
EXHIBIT 5.2
Subadvisory Agreement
<PAGE>
THE PHOENIX EDGE SERIES FUND
SUBADVISORY AGREEMENT
---------------------
May 1, 1995
ABKB/LaSalle Securities Limited Partnership
100 East Pratt Street
Baltimore, MD 21202
RE: SUBADVISORY AGREEMENT
Gentlemen:
The Phoenix Edge Series Fund (the "Fund") is a diversified open-end investment
company of the series type registered under the Investment Company Act of 1940
(the "Act"), and is subject to the rules and regulations promulgated thereunder.
The shares of the Fund are offered in seven series, one of which is the Real
Estate Securities Series (the "Series").
Phoenix Realty Securities, Inc. (the "Adviser") evaluates and recommends series
advisers for the Series and is responsible for the day-to-day management of the
Series.
1. EMPLOYMENT AS A SUBADVISER. The Adviser, being duly authorized, hereby
employs ABKB/LaSalle Securities Limited Partnership (the "Subadviser") as
a discretionary series adviser to invest and reinvest the assets of the
Series on the terms and conditions set forth herein. The services of the
Subadviser hereunder are not to be deemed exclusive; the Subadviser may
render services to others and engage in other activities which do not
conflict in any material manner in the Subadviser's performance hereunder.
2. ACCEPTANCE OF EMPLOYMENT; STANDARD OF PERFORMANCE. The Subadviser accepts
its employment as a discretionary series adviser of the Series and agrees
to use its best professional judgment to make investment decisions for the
Series in accordance with the provisions of this Agreement and as set
forth in Schedule D attached hereto and made a part hereof.
3. SERVICES OF SUBADVISER. In providing management services to the Series,
the Subadviser shall be subject to the investment objectives, policies and
restrictions of the Fund as they apply to the Series and as set forth in
the Fund's then current Prospectus and Statement of Additional Information
(as the same may be modified from time to time and provided to the
Subadviser by Adviser), and to the investment restrictions set forth in
the Act and the Rules thereunder, to the supervision and control of the
Trustees of the Fund (the "Trustees"), and to instructions from the
Adviser. The Subadviser shall not, without the Fund's prior approval,
effect any transactions which would cause the Series to be out of
compliance with any of such restrictions or policies.
4. TRANSACTION PROCEDURES. All series transactions for the Series will be
consummated by payment to, or delivery by, State Street Bank & Trust
Company (the "Custodian"), or such depositories or agents as may be
designated by the Custodian in writing, of all cash and/or securities due
to or from the Series. The Subadviser shall not have possession or custody
of such cash and/or securities or any responsibility or liability with
respect to such custody. The Subadviser shall advise the Custodian and
confirm in writing to the Fund all investment orders for the Series placed
by it with brokers and
<PAGE>
ABKB/LaSalle Securities
Page 2
dealers at the time and in the manner set forth in Schedule A hereto (as
amended from time to time). The Fund shall issue to the Custodian such
instructions as may be appropriate in connection with the settlement of
any transaction initiated by the Subadviser. The Fund shall be responsible
for all custodial arrangements and the payment of all custodial charges
and fees, and, upon giving proper instructions to the Custodian, the
Subadviser shall have no responsibility or liability with respect to
custodial arrangements or the act, omissions or other conduct of the
Custodian.
5. ALLOCATION OF BROKERAGE. The Subadviser shall have authority and
discretion to select brokers and dealers to execute series transactions
initiated by the Subadviser, and to select the markets on or in which the
transactions will be executed.
A. In placing orders for the sale and purchase of series securities
for the Fund, the Subadviser's primary responsibility shall be to seek the
best execution of orders at the most favorable prices. However, this
responsibility shall not obligate the Subadviser to solicit competitive
bids for each transaction or to seek the lowest available commission cost
to the Fund, so long as the Subadviser reasonably believes that the broker
or dealer selected by it can be expected to obtain a "best execution"
market price on the particular transaction and determines in good faith
that the commission cost is reasonable in relation to the value of the
brokerage and research services (as defined in Section 28(e)(3) of the
Securities Exchange Act of 1934) provided by such broker or dealer to the
Subadviser, viewed in terms of either that particular transaction or of
the Subadviser's overall responsibilities with respect to its clients,
including the Fund, as to which the Subadviser exercises investment
discretion, notwithstanding that the Fund may not be the direct or
exclusive beneficiary of any such services or that another broker may be
willing to charge the Fund a lower commission on the particular
transaction.
B. Subject to the requirements of paragraph A above, the Adviser
shall have the right to require that transactions giving rise to brokerage
commissions, in an amount to be agreed upon by the Adviser and the
Subadviser, shall be executed by brokers and dealers that provide
brokerage or research services to the Fund or that will be of value to the
Fund in the management of its assets, which services and relationship may,
but need not, be of direct benefit to the Series. In addition, subject to
paragraph A above and the applicable Rules of Fair Practice of the
National Association of Securities Dealers, Inc., the Fund shall have the
right to request that series transactions be executed by brokers and
dealers by or through whom sales of shares of the Fund are made.
C. The Subadviser shall not execute any series transactions for the
Series with a broker or dealer which is an "affiliated person" (as defined
in the Act) of the Fund, the Subadviser or the Adviser without the prior
written approval of the Fund. The Fund will provide the Subadviser with a
list of brokers and dealers which are "affiliated persons" of the Fund or
Adviser.
6. PROXIES. The Fund, or the Adviser as its authorized agent, will vote all
proxies solicited by or with respect to the issuers of securities in which
assets of the Series may be invested. At the request of the Fund, the
Subadviser shall provide the Fund with its recommendations as to the
voting of particular proxies.
7. FEES FOR SERVICES. The compensation of the Subadviser for its services
under this Agreement shall be calculated and paid by the Adviser in
accordance with the attached Schedule C. Pursuant to the
<PAGE>
ABKB/LaSalle Securities
Page 3
Investment Advisory Agreement between the Fund and the Adviser, the
Adviser is responsible for the payment of fees to the Subadviser.
8. LIMITATION OF LIABILITY. The Subadviser shall not be liable for any action
taken, omitted or suffered to be taken by it in its best professional
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with specific directions or instructions from the Fund,
provided, however, that such acts or omissions shall not have constituted
a breach of the investment objectives, policies and restrictions
applicable to the Series and that such acts or omissions shall not have
resulted from the Subadviser's willful misfeasance, bad faith or gross
negligence, a violation of the standard of care established by and
applicable to the Subadviser in its actions under this Agreement or a
breach of its duty or of its obligations hereunder (provided, however,
that the foregoing shall not be construed to protect the Subadviser from
liability under the Act).
9. CONFIDENTIALITY. Subject to the duty of the Subadviser and the Fund to
comply with applicable law, including any demand of any regulatory or
taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Series and the actions of
the Subadviser and the Fund in respect thereof.
10. ASSIGNMENT. This Agreement shall terminate automatically in the event of
its assignment, as that term is defined in Section 2(a)(4) of the Act. The
Subadviser shall notify the Fund in writing sufficiently in advance of any
proposed change of control, as defined in Section 2(a)(9) of the Act, as
will enable the Fund to consider whether an assignment as defined in
Section 2(a)(4) of the Act will occur, and to take the steps necessary to
enter into a new contract with the Subadviser.
11. REPRESENTATIONS, Warranties and Agreements of the Subadviser. The
Subadviser represents, warrants and agrees that:
A. It is registered as an "Investment Adviser" under the Investment
Advisers Act of 1940 ("Advisers Act").
B. It will maintain, keep current and preserve on behalf of
the Fund, in the manner required or permitted by the Act and
the Rules thereunder, the records identified in Schedule B (as
Schedule B may be amended from time to time). The Subadviser
agrees that such records are the property of the Fund, and
will be surrendered to the Fund promptly upon request.
C. It has or shall adopt a written code of ethics complying
with the requirements of Rule 17j-l under the Act and will
provide the Fund with a copy of the code of ethics and
evidence of its adoption. Subadviser acknowledges receipt of
the written code of ethics adopted by and on behalf of the
Phoenix Funds (the "Phoenix Code of Ethics"). Within 10 days
of the end of each calendar quarter while this Agreement is in
effect, a duly authorized compliance officer of the Subadviser
shall certify to the Fund that the Subadviser has complied
with the requirements of Rule 17j-l during the previous
calendar quarter and that there has been no violation of its
code of ethics, or the Phoenix Code of Ethics, or if such a
violation has occurred, that appropriate action was taken in
response to such violation. The Subadviser
<PAGE>
ABKB/LaSalle Securities
Page 4
shall permit the Fund to examine the reports required to be made by
the Subadviser under Rule 17j-l(c)(1) and this subparagraph.
D. Upon request, the Subadviser will promptly supply the Fund
with any information concerning the Subadviser and its
stockholders, employees and affiliates which the Fund may
reasonably require in connection with reports to the Fund's
Board of Trustees or the preparation of its registration
statement, proxy material, reports and other documents
required to be filed under the Act, the Securities Act of
1933, or under applicable securities laws.
E. Reference is hereby made to the Declaration of Trust dated
February 18, 1986, as amended, establishing the Fund, a copy
of which has been filed with the Secretary of the Commonwealth
of Massachusetts and elsewhere as required by law, and to any
and all amendments thereto so filed with the Secretary of the
Commonwealth of Massachusetts and elsewhere as required by
law, and to any and all amendments thereto so filed or
hereafter filed. The name The Phoenix Edge Series Fund refers
to the Trustees under said Declaration of Trust, as Trustees
and not personally, and no Trustee, shareholder, officer,
agent or employee of the Fund shall be held to any personal
liability hereunder or in connection with the affairs of the
Fund; only the trust estate under said Declaration of Trust is
liable under this Agreement. Without limiting the generality
of the foregoing, neither the Subadviser nor any of its
officers, directors, partners, shareholders or employees
shall, under any circumstances, have recourse or cause or
willingly permit recourse to be had directly or indirectly to
any personal, statutory, or other liability of any
shareholder, Trustee, officer, agent or employee of the Fund
or of any successor of the Fund, whether such liability now
exists or is hereafter incurred for claims against the trust
estate, but shall look for payment solely to said trust
estate, or to the assets of a successor of the Fund.
12. AMENDMENT. This Agreement may be amended at any time, but only by written
agreement among the Subadviser, the Adviser and the Fund, which amendment,
other than amendments to Schedules A, B, and D, is subject to the approval
of the Trustees and the Shareholders of the Fund as and to the extent
required by the Act.
13. EFFECTIVE DATE; TERM. This Agreement shall become effective on the date
set forth on the first page of this Agreement, and shall continue in
effect until the first meeting of the shareholders of the Series, and, if
its renewal is approved at that meeting in the manner required by the Act,
shall continue in effect thereafter only so long as its continuance has
been specifically approved at least annually by the Trustees in accordance
with Section 15(a) of the Investment Company Act, and by the majority vote
of the disinterested Trustees in accordance with the requirements of
Section 15(c) thereof.
14. TERMINATION. This Agreement may be terminated by any party, without
penalty, immediately upon written notice to the other parties in the event
of a breach of any provision thereof by a party so notified, or otherwise
upon thirty (30) days' written notice to the other parties, but any such
termination shall not affect the status, obligations or liabilities of any
party hereto to the other parties.
15. APPLICABLE LAW. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter
enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of the
Commonwealth of Massachusetts.
<PAGE>
ABKB/LaSalle Securities
Page 5
18. SEVERABILITY. If any term or condition of this Agreement shall be invalid
or unenforceable to any extent or in any application, then the remainder
of this Agreement shall not be affected thereby, and each and every term
and condition of this Agreement shall be valid and enforced to the fullest
extent permitted by law.
THE PHOENIX EDGE SERIES FUND
By: _____________________________________
Title:
<PAGE>
ABKB/LaSalle Securities
Page 6
THE PHOENIX REALTY SECURITIES, INC.
By: _____________________________________
Title:
ACCEPTED:
ABKB/LASALLE SECURITIES LIMITED PARTNERSHIP
By: _________________________________
Title: ______________________________
SCHEDULES: A. Operational Procedures
B. Record Keeping Requirements
C. Fee Schedule
D. Subadviser Functions
<PAGE>
SCHEDULE A
----------
OPERATIONAL PROCEDURES
In order to minimize operational problems, it will be necessary for a flow of
information to be supplied to State Street Bank & Trust Company (the
"Custodian"), the custodian for the Fund.
The Subadviser must furnish the Custodian with daily information as to executed
trades, or, if no trades are executed, with a report to that effect, no later
than 5 p.m. (Eastern Standard time) on the day of the trade (confirmation
received from broker). The necessary information can be sent via facsimile
machine to the Custodian. Information provided to the Custodian shall include
the following:
1. Purchase or sale;
2. Security name;
3. CUSIP number (if applicable);
4. Number of shares and sales price per share;
5. Executing broker;
6. Settlement agent;
7. Trade date;
8. Settlement date;
9. Aggregate commission or if a net trade;
10. Interest purchased or sold from interest bearing security;
11. Other fees;
12. Net proceeds of the transaction;
13. Exchange where trade was executed; and
14. Identified tax lot (if applicable).
When opening accounts with brokers for, and in the name of, the Fund, the
account must be a cash account. No margin accounts are to be maintained in the
name of the Fund. Delivery instructions are as specified by the Custodian. The
Custodian will supply the Subadviser daily with a cash availability report. This
will normally be done by telex so that the Subadviser will know the amount
available for investment purposes.
<PAGE>
SCHEDULE B
----------
RECORDS TO BE MAINTAINED BY THE SUBADVISER
1. (Rule 31a-1(b)(5)) A record of each brokerage order, and all other
series purchases and sales, given by the Subadviser on behalf of the
Fund for, or in connection with, the purchase or sale of securities,
whether executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modifications or
cancellations thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the Fund.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within
ten (10) days after the end of the quarter, showing specifically the
basis or bases upon which the allocation of orders for the purchase and
sale of series securities to named brokers or dealers was effected, and
the division of brokerage commissions or other compensation on such
purchase and sale orders. Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Fund by brokers or dealers.
(ii) The supplying of services or benefits by brokers or dealers to:
(a) The Fund,
(b) The Adviser (Phoenix Realty Securities, Inc.)
(c) The Subadviser, and
(d) Any person other than the foregoing.
(iii) Any other consideration other than the technical qualifications
of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of brokerage
commissions or other compensation.
D. The name of the person responsible for making the determination of such
allocation and such division of brokerage commissions or other
compensation.
3. (Rule 31a-(b)(10)) A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the
purchase or sale of series securities. Where an authorization is made
by a committee or group, a record shall be kept of the names of its
members who participate in the authorization. There shall be retained
as part of this record: any memorandum, recommendation or instruction
supporting or authorizing the purchase or sale of series securities and
such other information as is appropriate to support the authorization.*
<PAGE>
4. (Rule 31a-1(f)) Such accounts, books and other documents as are
required to be maintained by registered investment advisers by rule
adopted under Section 204 of the Investment Advisers Act of 1940, to
the extent such records are necessary or appropriate to record the
Subadviser's transactions for the Fund.
- --------------------------------------
*Such information might include: current financial information, annual and
quarterly reports, press releases, reports by analysts and from brokerage firms
(including their recommendation; i.e., buy, sell, hold) or any internal reports
or subadviser review.
<PAGE>
SCHEDULE C
----------
SUBADVISORY FEE
For services provided to The Phoenix Real Estate Securities Series (the
"Series"), the Adviser will pay to the Subadviser, on or before the 10th day of
each month, a fee, payable in arrears, at the annual rate of 0.45% of the
average daily net asset values of the Series up to $1 billion; 0.35% of such
values from $l billion to $2 billion; and 0.30% of such values in excess of $2
billion. The fees shall be prorated for any month during which this agreement is
in effect for only a portion of the month. In computing the fee to be paid to
the Subadviser, the net asset value of the Series shall be valued as set forth
in the then current registration statement of the Fund.
<PAGE>
SCHEDULE D
----------
SUBADVISER FUNCTIONS
With respect to managing the investment and reinvestment of the
Series's assets, the Subadviser shall provide, at its own expense:
(a) Investment research, advice and analysis, including, without
limitation, initial and ongoing i) assessment of national,
regional and specific real estate markets and real estate
related equities, and ii) detailed analysis of real estate
investment trust assets considered for purchase and held by
the Series with respect to INTER ALIA local market conditions,
fair market value, overall property condition, insurance
coverages and deductibles, tenant composition and vacancies,
compliance matters relating to zoning, handicap accessibility,
environmental, and other applicable codes, and such other
matters as the Adviser shall from time to time request;
(b) An investment program for the Series consistent with its
investment objectives based upon the development, review and
adjustment of buy/sell strategies approved from time to time
by the Board of Trustees and Adviser;
(c) Implementation of the investment program for the Series based
upon the foregoing criteria;
(d) Quarterly reports, in form and substance acceptable to the
Adviser, with respect to: i) compliance with the Phoenix Code of
Ethics and the Subadviser's code of ethics; ii) compliance with
procedures adopted from time to time by the Trustees of the Fund
relative to securities eligible for resale under Rule 144A under
the Securities Act of 1933, as amended; iii) diversification of
Series assets in accordance with the then prevailing prospectus
and statement of additional information pertaining to the Series
and governing laws; iv) compliance with governing restrictions
relating to the fair valuation of securities for which market
quotations are not readily available or considered "illiquid" for
the purposes of complying with the Series's limitation on
acquisition of illiquid securities; v) any and all other reports
reasonably requested in accordance with or described in this
Agreement; and, vi) the implementation of the Series's investment
program, including, without limitation, analysis of Series
performance;
(e) Attendance by appropriate representatives of the Subadviser at
meetings requested by the Adviser or Trustees at such time(s) and
location(s) as requested by the Adviser or Trustees, including
furnishing of adequate conference space at the offices of the
Subadviser (or such other acceptable meeting location in
Baltimore, Maryland) if requested; and
(f) Participation, overall assistance and support in marketing the
Series, including, without limitation, meetings with pension fund
representatives, broker/dealers who have a sales agreement with
Phoenix Equity Planning Corporation, and other parties requested
by the Adviser.
EXHIBIT 8
Global Custody Agreement
<PAGE>
CHASE
GLOBAL
CUSTODY
AGREEMENT
<PAGE>
This AGREEMENT is effective May 1, 1990, and is between THE CHASE MANHATTAN
BANK, N.A. ( the "Bank") and The Big Edge Series Fund (the "Customer").
1. CUSTOMER ACCOUNTS.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) a custody account in the name of the Customer ("Custody Account")
for any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property whether certificated or
uncertificated as may be received by the Bank or its Subcustodian (as defined in
Section 3) for the account of the Customer ("Securities"); and
(b) a deposit account in the name of the Customer ("Deposit Account")
for any and all cash in any currency received by the Bank or its Subcustodian
for the account of the Customer, which cash shall not be subject to withdrawal
by draft or check.
The Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts. The Bank may deliver securities of the same
class in place of those deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional Accounts
under the terms of this Agreement.
2. MAINTENANCE OF SECURITIES AND CASH AT BANK AND SUBCUSTODIAN LOCATIONS.
Unless Instructions specifically require another location acceptable to the
Bank:
(a) Securities will be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and
(b) cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or
non-interest bearing accounts as may be available for the particular currency.
To the extent Instructions are issued and the Bank can comply with such
Instructions, the Bank is authorized to maintain cash balances on deposit for
the Customer with itself or one of its affiliates at such reasonable rates of
interest as may from time to time be paid on such accounts, or in non-interest
bearing accounts as the Customer may direct, if acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians or their securities
depositories, such arrangement must be authorized by a written agreement, signed
by the Bank and the Customer.
3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
The Bank may act under this Agreement through the subcustodians listed in
Schedule A of this Agreement with which the Bank has entered into subcustodial
agreements ("Subcustodians"). The Customer authorizes the Bank to hold Assets in
the Accounts in accounts which the Bank has established with one or more of its
branches or Subcustodians. The Bank and Subcustodians are authorized to hold any
of the Securities in their account with any securities depository in which they
participate.
The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule A. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other regulatory
authority that supervises or regulates such Subcustodian.
4. USE OF SUBCUSTODIAN.
(a) The Bank will identify Assets on its books as belonging to the
Customer.
(b) A Subcustodian will hold Assets together with assets belonging to
other customers of the Bank in accounts identified on such Subcustodian's books
as special custody accounts for the exclusive benefit of customers of the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject
only to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only to
the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding
its customer's assets shall provide that such assets will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets will be freely transferable without the payment of
money or value other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or arrangement made by
the Customer with any particular Subcustodian.
<PAGE>
5. DEPOSIT ACCOUNT TRANSACTIONS.
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required by
the Bank.
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, the Bank, in its discretion,
may advance the Customer such excess amount which shall be deemed a loan payable
on demand, bearing interest at the rate customarily charged by the Bank on
similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or at
any time prior to actual collection and reconciliation to the Deposit Account,
with interest, dividends, redemptions or any other amount due, the Customer will
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited . If the Customer does not promptly return
any amount upon such notification, the Bank shall be entitled, upon oral or
written notification to the Customer to reverse such credit by debiting the
Deposit Account for the amount previously credited. The Bank or its Subcustodian
shall have no duty or obligation to institute legal proceedings, file a claim or
a proof of claim in any insolvency proceeding or take any other action with
respect to the collection of such amount, but may act for the Customer upon
Instructions after consultation with the Customer.
6. CUSTODY ACCOUNT TRANSACTIONS.
(a) Securities will be transferred, exchanged or delivered by the Bank
or its Subcustodian upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for Securities received
for, and delivery of Securities out of, the Custody Account may be made in
accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of Securities to a
purchaser, dealer or their agents against a receipt with the expectation of
receiving later payment and free delivery. Delivery of Securities out of the
Custody Account may also be made in any manner specifically required by
Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions will be
credited or debited to the Accounts on the date cash or Securities are actually
received by the Bank and reconciled to the Accounts.
(i) The Bank may reverse credits or debits made to the
Accounts in its discretion if the related transaction fails to
settle within a reasonable period, determined by the Bank in its
discretion, after the contractual settlement date for the related
transaction.
(ii) If any Securities delivered pursuant to this Section 6
are returned by the recipient thereof, the Bank may reverse the
credits and debits of the particular transaction at any time.
7. ACTIONS OF THE BANK.
The Bank shall follow Instructions received regarding Assets held in
the Accounts. However, until it receives Instructions to the contrary, the Bank
will perform the following functions.
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that the Bank or Subcustodian
is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any transfers
of Assets to or from the Accounts. Such statements, advices or notifications
shall indicate the identity of the entity having custody of the Assets. Unless
the Customer sends the Bank a written exception or objection to any Bank
statement within sixty days of receipt, the Customer shall be deemed to have
approved such statement. In such event, or where the Customer has otherwise
approved any such statement, the Bank shall, to the extent permitted by law, be
released, relieved and discharged with respect to all matters set forth in such
statement or reasonably implied therefrom as though it had been settled by the
decree of a court of competent jurisdiction in an action where the Customer and
all persons having or claiming an interest in the Customer or the Customer's
Accounts were parties.
<PAGE>
All collections of funds or other property paid or distributed in respect
of Securities in the Custody Account shall be made at the risk of the Customer.
The Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank or by its Subcustodians of any payment, redemption
or other transaction regarding Securities in the Custody Account in respect of
which the Bank has agreed to take any action under this Agreement.
8. CORPORATE ACTIONS; PROXIES.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities (other
than a proxy), such as subscription rights, bonus issues, stock repurchase plans
and rights offerings, or legal notices or other material intended to be
transmitted to securities holders ("Corporate Actions") the Bank will give the
Customer notice of such Corporate Actions to the extent that the Bank's central
corporate actions department has actual knowledge of a Corporate Action in time
to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received which
bears an expiration date, the Bank will endeavor to obtain Instructions from the
Customer or its Authorized Person, as defined in Section 10, but if Instructions
are not received in time for the Bank to take timely action, or actual notice of
such Corporate Action was received too late to seek Instructions, the Bank is
authorized to sell such rights entitlement or fractional interest and to credit
the deposit Account with the proceeds or take any other action it deems, in good
faith, to be appropriate in which case it shall be held harmless for any such
action.
The Bank will deliver proxies to the Customer or its designated agent
pursuant to special arrangements which may have been agreed to in writing. Such
proxies shall be executed in the appropriate nominee name relating to Securities
in the Custody Account registered in the name of such nominee but without
indicating the manner in which such proxies are to be voted; and where bearer
Securities are involved, proxies will be delivered in accordance with
Instructions.
9. NOMINEES.
Securities which are ordinarily held in registered form may be registered
in a nominee name of the Bank, Subcustodian or securities depository, as the
case may be. The Bank may, without notice to the Customer, cause any such
Securities to cease to be registered in the name of any such nominee and to be
registered in the name of the Customer. In the event that any Securities
registered in a nominee name are called for partial redemption by the issuer,
the Bank may allot the called portion to the respective beneficial holders of
such class of security in any manner the Bank deems to be fair and equitable.
The Customer agrees to hold the Bank, Subcustodians, and their respective
nominees harmless from any liability arising directly or indirectly from their
status as a mere record holder of Securities in the Custody Account.
10. AUTHORIZED PERSONS.
As used in this Agreement, the term "Authorized Person" means employees or
agents including investment managers as have been designated by written notice
from the Customer or its designated agent to act on behalf of the Customer under
this Agreement. Such persons shall continue to be Authorized Persons until such
time as the Bank receives Instructions from the Customer or its designated agent
that any such employee or agent is no longer an Authorized Person.
11. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information system
acceptable to the Bank which the Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until cancelled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Customer will hold the
Bank harmless for the failure of an Authorized Person to send such confirmation
in writing, the failure of such confirmation to conform to the telephone
instructions received or the Bank's failure to produce such confirmation at any
subsequent time. Either Party may electronically record any Instructions given
by telephone, and any other telephone discussions with respect to the Custody
Account. The Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which the Bank shall make
available to the Customer or its Authorized Persons.
<PAGE>
12. STANDARD OF CARE; LIABILITIES.
(a) The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement or expressly contained in Instructions
which are consistent with the provisions of this Agreement.
(i) The Bank will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Assets. The
Bank shall be liable to the Customer for any loss which shall occur
as the result of the failure of a Subcustodian to exercise reasonable
care with respect to the safekeeping of such Assets to the same extent
that the Bank would be liable to the Customer if the Bank were holding
such Assets in New York. In the event of any loss to the Customer by
reason of the failure of the Bank or its Subcustodian to utilize
reasonable care, the Bank shall be liable to the Customer only to the
extent of the Customer's direct damages, to be determined based on the
market value of the property which is the subject of the loss at the
date of discovery of such loss and without reference to any special
conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission, default
or for the solvency of any broker or agent which it or a Subcustodian
appoints unless such appointment was made negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without liability to the
Customer for any action taken or omitted by the Bank whether pursuant
to Instructions or otherwise within the scope of this Agreement if
such act or omission was in good faith, without negligence. In
performing its obligations under this Agreement, the Bank may rely on
the genuineness of any document which it believes in good faith to
have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless from
any liability or loss resulting from the imposition or assessment of
any taxes or other governmental charges, and any related expenses with
respect to income from or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act upon the advice
of counsel (who may be counsel for the Customer) on all matters, and
shall be without liability for any action reasonably taken or omitted
pursuant to such advice.
(vi) The Bank need not maintain any insurance for the benefit of the
Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable
for any loss which results from: 1) the general risk of investing, or
2) investing or holding Assets in a particular country including, but
not limited to, losses resulting from nationalization, expropriation
or other governmental actions; regulation of the banking or securities
industry; currency restrictions, devaluations or fluctuations; and
market conditions which prevent the orderly execution of securities
transactions or affect the value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or
work stoppages. acts of war or terrorism, insurrection, revolution,
nuclear fusion, fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to the Customer or
an Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or
the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other
than as provided in Section 5(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker, agent or other party
to which Securities are delivered or payments are made pursuant to
this Agreement; or
(v) review or reconcile trade confirmations received from brokers.
The Customer or its Authorized Persons issuing Instructions shall
bear any responsibility to review such confirmations against
Instructions issued to and statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have a
material interest in a transaction, or circumstances are such that the Bank may
have a potential conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to other customers, act
as financial advisor to the issuer of Securities, act as a lender to the issuer
of Securities, act in the same transaction as agent for more than one customer,
have a material interest in the issue of Securities, or earn profits from any of
the activities listed herein.
<PAGE>
13. FEES AND EXPENSES.
The Customer agrees to pay the Bank for its services under this Agreement
such amount as may be agreed upon in writing, together with the Bank's
reasonable out-of-pocket or incidental expenses, including, but not limited to
legal fees. The Bank shall have a lien on and is authorized to charge any
Accounts of the Customer for any amount owing to the Bank under any provision of
this Agreement.
14. MISCELLANEOUS.
(a) Foreign Exchange Transactions. To facilitate the administration of the
Customer's trading and investment activity, the Bank is authorized to enter into
spot or forward foreign exchange contracts with the Customer or an Authorized
Person for the Customer and may also provide foreign exchange through its
subsidiaries, affiliates or Subcustodians. Instructions, including standing
instructions, may be issued with respect to such contracts but the Bank may
establish rules or limitations concerning any foreign exchange facility made
available. In all cases where the Bank, its subsidiaries, affiliates or
Subcustodians enter into a foreign exchange contract related to Accounts, the
terms and conditions of the then current foreign exchange contract of the Bank,
its subsidiary, affiliate or Subcustodian and, to the extent not inconsistent,
this Agreement, shall apply to such transaction.
(b) Certification of Residency, etc. The Customer certifies that it is
a resident of the United States and agrees to notify the Bank of any changes in
residency. The Bank may rely upon this certification or the certification of
such other facts as may be required to administer the Banks obligations under
this Agreement. The Customer will indemnify the Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.
(c) Access to records. The Bank shall allow the Customer's independent
public accountants reasonable access to the records of the Bank relating to the
Assets as is required in connection with their examination of books and records
pertaining to the Customer's affairs. Subject to restrictions under applicable
law, the Bank shall also obtain an undertaking to permit the Customers
independent public accountants reasonable access to the record's of any
Subcustodian which has physical possession of any Assets as may be required in
connection with the examination of the Customer's books and records.
(d) Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and
the Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that the
Assets deposited in the Accounts are (check one):
______ employee benefit plan or other assets subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
__X___ mutual fund assets subject to Securities and Exchange Commission
("SEC") rules and regulations:
______ neither of the above.
This Agreement consists exclusively of this document together with Schedule
A, Exhibits I-____ and the following rider(s) [check applicable rider(s)]:
______ ERISA
__X___ MUTUAL FUND
______ SPECIAL TERMS AND CONDITIONS
There are no other provisions of this Agreement and this Agreement
supersedes any other agreements, whether written or oral, between the parties.
Any amendment to this Agreement must be in writing, executed by both parties.
(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or unenforceable in any respect on the basis
of any particular circumstances or in any jurisdiction, the validity, legality
and enforceability of any such provision and the remaining provisions, under
other circumstances or in other jurisdictions will not in any way be affected or
impaired.
<PAGE>
(g) Waiver. Except as otherwise provided in this Agreement, no failure or
delay on the part of either party in exercising any power or right under this
Agreement operates as a waiver, nor does any single or partial exercise of any
power or right preclude any other or further exercise thereof, or the exercise
of any other power or right. No waiver by a party of any provision of this
Agreement, or waiver of any breach or default, is effective unless in writing
and signed by the party against whom the waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses or
such other addresses as may subsequently be given to the other party in writing:
Bank: The Chase Manhattan Bank. N.A.
1211 Avenue of the Americas
New York, NY 10036
Attention: Global Custody Division
Customer: The Big Edge Series Fund
--------------------------------------------------
c/o Phoenix Equity Planning Corporation
--------------------------------------------------
100 Bright Meadow Boulevard
--------------------------------------------------
Enfield, CT 06082-1989
--------------------------------------------------
Attention: John Elder, Treasurer
(I) Termination. This Agreement may be terminated by the Customer or the
Bank by giving sixty days written notice to the other, provided that such notice
to the Bank shall specify the names of the persons to whom the Bank shall
deliver the Assets in the Accounts. If notice of termination is given by the
Bank, the Customer shall, within sixty days following receipt of the notice,
deliver to the Bank Instructions specifying the names of the persons to whom the
Bank shall deliver the Assets. In either case the Bank will deliver the Assets
to the persons so specified, after deducting any amounts which the Bank
determines in good faith to be owed to it under Section 13. If within sixty days
following receipt of a notice of termination by the Bank, the Bank does not
receive Instructions from the Customer specifying the names of the persons to
whom the Bank shall deliver the Assets, the Bank, at its election, may deliver
the Assets to a bank or trust company doing business in the State of New York to
be held and disposed of pursuant to the provisions of this Agreement, or to
Authorized Persons, or may continue to hold the Assets until Instructions are
provided to the Bank.
CUSTOMER
By /s/ Philip R. McLoughlin
-----------------------------------
President
-----------------------------------
Title
THE CHASE MANHATTAN BANK, N.A.
By /s/ P. Scott Abbott
-----------------------------------
Vice President
-----------------------------------
Title
<PAGE>
STATE OF )
: ss.
COUNTY OF )
On this __30th__ day of __April________, 1990,__ before me personally came
__Philip R. McLoughlin__ to me known, who, being by me duly sworn, did depose
and say that he/she resides in __West Simsbury, CT 06092__ at __11 Country Club
Drive__; that he/she is __President__ of __The Big Edge Series Fund__
("Customer"), the Customer which executed the foregoing Agreement; that he/she
knows the seal of the Customer; that the seal affixed to the Agreement is such
seal; that it was affixed by order of the Customer, and that he/she signed
his/her name thereto by like order.
________________________________________
Sworn to before me this __30th
day of __April__, 1990__
/s/ Winifred H. Luzzi
- ------------------------------
Notary
WINIFRED H. LUZZI
NOTARY PUBLIC
MY COMMISSION EXPIRES MARCH 31, 1992
STATE OF )
: ss.
COUNTY OF )
On this __________ day of _______________, 19__, before me personally came
____________________ to me known, who being by me duly sworn, did depose and
say that he/she resides in ____________________________ at ____________________;
that he/she is a Vice President of THE CHASE MANHATTAN BANK, N.A. ("Bank"), the
Bank which executed the foregoing Agreement; that he/she knows the seal of the
Bank; that the seal affixed to the Agreement is such corporate seal; that it
was so affixed by order of the Board of Directors of the Bank, and that he/she
signed his/her name thereto by like order.
___________________________________
Sworn to before me this _____
day of __________, 19__
_____________________________
Notary
<PAGE>
ERISA Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
__________________________________________
________________, effective_______________
Customer represents that the Assets being placed in the Bank's custody are
subject to ERISA. It is understood that in connection therewith the Bank is a
service provider and not a fiduciary of the plan and trust to which the assets
are related. The Bank shall not be considered a party to the underlying plan and
trust and the Customer hereby assumes all responsibility to assure that
Instructions issued under this Agreement are in compliance with such plan and
trust and ERISA.
This Agreement will be interpreted so as to be in compliance with the
Department of Labor Regulations Section 2550.404b-1 concerning the maintenance
of indicia of ownership of plan assets outside of the jurisdiction of the
district courts of the United States.
The following modifications are made to the Agreement:
SECTION 3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
Add the following language to the end of Section 3:
As used in this Agreement, the term Subcustodian and the term securities
depositories include a branch of the Bank, a branch of a qualified U.S. bank, an
eligible foreign custodian, or an eligible foreign securities depository, where
such terms shall mean:
(a) "qualified U.S. bank" shall mean a U.S. bank as described in paragraph
(a)(2)(ii)(A)(1) of the Department of Labor Regulations Section 2550.404b-1;
(b) "eligible foreign custodian" shall mean a banking institution
incorporated or organized under the laws of a country other than the United
States which is supervised or regulated by that country's government or an
agency thereof or other regulatory authority in the foreign jurisdiction having
authority over banks; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
country other than the United States, which is supervised or regulated by that
country's government or an agency thereof or other regulatory authority in the
foreign jurisdiction having authority over such depositories or clearing
agencies and which is described in paragraph (c)(2) of the Department of Labor
Regulations Section 2550.404b-1.
SECTION 4. USE OF SUBCUSTODIAN.
Subsection (d) of this section is modified by deleting the last sentence.
SECTION 5. DEPOSIT ACCOUNT TRANSACTIONS.
Subsection (b) is amended to read as follows:
(b) In the event that any payment made under this Section 5 exceeds the
funds available in the Deposit Account, such discretionary advance shall be
deemed a service provided by the Bank under this Agreement for which it is
entitled to recover its reasonable costs and expenses as may be determined by
the Bank in good faith.
SECTION 10. AUTHORIZED PERSONS.
Add the following paragraph at the end of Section 10:
Customer represents that: a) Instructions will only be issued by or for a
fiduciary pursuant to Department of Labor Regulations Section 404b-1 (a)(2)(i)
and b) if Instructions are to be issued by an investment manager, such entity
will meet the requirements of Section 3(38) of ERISA and will have been
designated by the Customer to manage assets held in the Accounts ("Investment
Manager"). An Investment Manager may designate certain of its employees to act
as Authorized Persons under this Agreement.
SECTION 14(A). FOREIGN EXCHANGE TRANSACTIONS.
Add the following paragraph at the end of Subsection 14(a):
Instructions to execute foreign exchange transactions with the Bank, its
subsidiaries, affiliates or Subcustodians will include (1) the time period in
which the transaction must be completed: (2) the location i.e., Chase New York,
Chase London, etc. or the Subcustodian with whom the contract is to be executed
and (3) such additional information and guidelines as may be deemed necessary;
and, if the Instruction is a standing Instruction, a provision allowing such
Instruction to be overridden by specific contrary Instructions.
<PAGE>
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
The Big Edge Series Fund
------------------------
______________, effective __May 1, 1990__
Customer represents that the Assets being placed in the Bank's custody are
subject to the Investment Company Act of 1940 (the "Act"), as the same may be
amended from time to time.
Except to the extent that the Bank has specifically agreed to comply with a
condition of a rule, regulation or interpretation promulgated by or under the
authority of the SEC or the Exemptive Order applicable to accounts of this
nature issued to the Bank (Investment Company Act of 1940, Release No. 12053,
November 20, 1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall be solely responsible to assure that the maintenance
of Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority of the
Securities Exchange Commission.
The following modifications are made to the Agreement:
SECTION 3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used in this
Agreement shall mean a branch of a qualified U.S. bank, an eligible foreign
custodian or an eligible foreign securities depository, which are further
defined as follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined in
Rule 17f-5 under the Act:
(b) "eligible foreign custodian" shall mean (i) a banking institution or
trust company incorporated or organized under the laws of a country other than
the United States that is regulated as such by that country's government or an
agency thereof and that has shareholders' equity in excess of $200 million in
U.S. currency (or a foreign currency equivalent thereof), (ii) a majority owned
direct or indirect subsidiary of a qualified U.S. bank or bank holding company
that is incorporated or organized under the laws of a country other than the
United States and that has shareholders' equity in excess of $100 million in
U.S. currency (or a foreign currency equivalent thereof), (iii) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States or a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that is incorporated
or organized under the laws of a country other than the United States which has
such other qualifications as shall be specified in Instructions and approved by
the Bank or (iv) any other entity that shall have been so qualified by exemptive
order, rule or other appropriate action of the SEC; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
country other than the United States, which operates (i) the central system for
handling securities or equivalent book-entries in that country or (ii) a
transnational system for the central handling of securities or equivalent
book-entries.
The Customer represents that its Board of Directors has approved each of
the Subcustodians listed in Schedule A to this Agreement and the terms of the
subcustody agreements between the Bank and each Subcustodian, which are attached
as Exhibits I through _____ of Schedule A, and further represents that its Board
has determined that the use of each Subcustodian and the terms of each
subcustody agreement are consistent with the best interests of the Customer's
fund(s) and its (their) shareholders. The Bank will supply the Customer with any
amendment to Schedule A for approval. The Customer has supplied or will supply
the Bank with certified copies of its Board of Directors resolution(s) with
respect to the foregoing prior to placing Assets with any Subcustodian so
approved.
SECTION 11. INSTRUCTIONS.
Add the following language to the end of Section 11:
Account transactions made pursuant to Sections 5 and 6 of this Agreement
may be made only for the purposes listed below. Instructions must specify the
purpose for which any transaction is to be made and the Customer shall be solely
responsible to assure that Instructions are in accord with any limitations or
restrictions applicable to the Customer by law or as may be set forth in its
prospectus.
<PAGE>
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise become
payable.
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment.
(d) Upon conversion of Securities pursuant to their terms into other
securities.
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities.
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring a pledge
of Securities, but only against receipt of amounts borrowed.
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer.
(i) For the purpose of redeeming shares of the capital stock of the
Customer and the delivery to, or the crediting to the account of the Bank, its
Subcustodian or the Customer's transfer agent, such shares to be purchased or
redeemed.
(j) For the purpose of redeeming in kind shares of the Customer against
delivery of the shares to be redeemed to the Bank, its Subcustodian or the
Customer's transfer agent.
(k) For delivery in accordance with the provisions of any agreement among
the Customer, the Bank and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of the National
Association of Securities Dealers, Inc., relating to compliance with the rules
of The Options Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the Customer.
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Bank of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Bank will receive the Securities previously deposited from
brokers. The Bank will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due other
than to make proper request for such return.
(m) For spot or forward foreign exchange transactions to facilitate
security trading, receipt of income from Securities or related transactions.
(n) For other proper purposes as may be specified in Instructions issued
by an officer of the Customer which shall include a statement of the purpose for
which the delivery or payment is to be made, the amount of the payment or
specific Securities to be delivered, the name of the person or persons to whom
delivery or payment is to be made, and a certification that the purpose is a
proper purpose under the instruments governing the Customer.
(o) Upon the termination of this Agreement as set forth in Section 14(i).
SECTION 12. STANDARD OF CARE; LIABILITIES.
Add the following subsection (d) to Section 12:
(d) The Bank hereby warrants to the Customer that in its opinion, after
due inquiry, the established procedures to be followed by each of its branches,
each branch of a qualified U.S. bank, each eligible foreign custodian and each
eligible foreign securities depository holding the Customer's Securities
pursuant to this Agreement afford protection for such Securities at least equal
to that afforded by the Bank's established procedures with respect to similar
securities held by the Bank and its securities depositories in New York.
SECTION 14. ACCESS TO RECORDS.
Add the following language to the end of Section 14(c):
Upon reasonable request from the Customer, the Bank shall furnish the
Customer such reports (or portions thereof) of the Bank's system of internal
accounting controls applicable to the Bank's duties under this Agreement. The
Bank shall endeavor to obtain and furnish the Customer with such similar reports
as it may reasonably request with respect to each Subcustodian and securities
depository holding the Customer's assets.
<PAGE>
CHASE
GLOBAL CUSTODY AGREEMENT
with /s/ Philip R. McLoughlin
---------------------------------------------
(Customer)
dated __April 30, 1990________
SPECIAL TERMS AND CONDITIONS
----------------------------
page _____ of _____
<PAGE>
THE REPORTS AND SERVICES THAT ARE INCLUDED IN THE GLOBAL CUSTODY SERVICE ARE AS
FOLLOWS:
INTERNATIONAL CUSTODY
- ---------------------
* SAFEKEEPING
* PROCESSING OF SECURITY TRANSACTIONS
* AUTO-CREDIT (INCOME COLLECTION)
* EFFECTING CORPORATE ACTION
* TAX RECLAIM
CASH MANAGEMENT
- ---------------
* DAILY COMMUNICATIONS WITH INVESTMENT ADVISER/SUBADVISER
* CURRENCY CONVERSION
TRANSFERS TO SUCCESSOR CUSTODIANS
- ---------------------------------
* BUY/SELL TRANSACTION CHARGES APPLY
THIS FEE AGREEMENT WILL BE IN EFFECT FOR A ONE YEAR PERIOD FROM MAY 1, 1990
THROUGH APRIL 30, 1991.
THE CHASE MANHATTAN BANK N.A. THE BIG EDGE SERIES FUND
BY: BY:
/s/ P. Scott Abbott /s/ Philip R. McLoughlin
- ----------------------------- -----------------------------------
P. SCOTT ABBOTT, VP PHILIP R. MCLOUGHLIN, PRESIDENT
DATE: DATE:
5-2-90 April 30, 1990
- ----------------------------- -----------------------------------
<PAGE>
CHASE GLOBAL SECURITIES SERVICES
FEE AGREEMENT
BETWEEN
CHASE MANHATTAN BANK, N.A.
AND
THE BIG EDGE SERIES FUND
Portfolio Basis Point Fee 15 bp
per Transaction Charge (buy/sell) $60
A minimum annual fee of $24,000 ($2000 per month) will apply to The Big Edge
Series Fund for assets of its International Series.
EXHIBIT 8.1
Amendment to Custodial Agreement
<PAGE>
AMENDMENT TO
GLOBAL CUSTODY AGREEMENT
BETWEEN THE CHASE MANHATTAN BANK, N.A.
AND THE BIG EDGE SERIES FUND
This Amendment is made as of the 1st day of May, 1992 to the Global
Custody Agreement between THE CHASE MANHATTAN BANK, N.A. (THE "BANK") and THE
BIG EDGE SERIES FUND (THE "CUSTOMER") dated May 1, 1990 (hereinafter called the
"Agreement").
The Agreement is amended by changing the name of the Customer
referenced in the introductory paragraph to "The Phoenix Edge Series Fund".
The Agreement is further amended by adding the following as the last
paragraph in Section 1 ("Customer Accounts"):
The Accounts established and separately accounted for under
terms of this Agreement are the International Series, Money Market
Series, Growth Series, Bond Series, Total Return Series and Balanced
Series.
The Agreement is further amended by substituting the following Section
13 ("Fees and Expenses"):
With respect to the International Series, the Customer agrees
to pay the Bank for its services under this Agreement such amount as
may be agreed upon in writing, together with the Bank's reasonable
out-of-pocket or incidental expenses, including, but not limited to
legal fees. With respect to the Money Market, Growth, Bond, Total
Return and Balanced Series, Phoenix Mutual Life Insurance Company shall
pay the Bank for its services under this Agreement such amount as may
agreed upon by the Customer and the Bank in writing, together with the
Bank's reasonable out-of-pocket expenses.
For its services for the International Series, the Bank shall
have a lien on and is authorized to charge the Account for the
International Series for any amount owing to the Bank under any
provision of this Agreement.
The Agreement is further amended by substituting the following
addresses for the Bank in Section 14(h) ("Notices"):
<PAGE>
-2-
Bank (for International Series):
The Chase Manhattan Bank, N.A.
1211 Avenue of the Americas
New York, NY 10036
Attention: Global Custody Division
Bank (for Series other than International Series):
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
Floor 3B
New York, NY 10081
The Agreement is further amended by adding the following paragraph (j)
to Section 14 ("Miscellaneous"):
(j) It is expressly agreed that the obligations of the
Customer hereunder shall not be binding upon any persons individually,
but shall bind only the trust property of the Fund, as provided in the
Declaration of Trust filed with the Secretary of the Commonwealth of
Massachusetts. The execution and delivery by an officer of the Fund,
acting at the direction of the Trustees, shall not be deemed to have
been made by any of the aforementioned individually or to be binding
upon or impose any liability on any of them personally, but shall bind
only the trust property of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
the Agreement to be executed as of the date first above written.
THE BIG EDGE SERIES FUND
By ______________________________________
_________________________________________
Title
THE CHASE MANHATTAN BANK, N.A.
By ______________________________________
_________________________________________
Title
EXHIBIT 8.2
AGREEMENT BETWEEN
BROWN BROTHERS HARRIMAN & CO.
AND
THE PHOENIX EDGE SERIES FUND
<PAGE>
AGREEMENT BETWEEN
BROWN BROTHERS HARRIMAN & CO.
AND
THE PHOENIX EDGE SERIES FUND
<PAGE>
TABLE OF CONTENTS
1. Employment of Custodian 1
2. Powers and Duties of the Custodian
with respect to Property of the Fund
held by the Custodian 1
2.1 Safekeeping 2
2.2 Manner of Holding Securities 2
2.3 Registration 2
2.4 Purchases 2
2.5 Exchanges 4
2.6 Sales of Securities 4
2.7 Depositary Receipts 5
2.8 Exercise of Rights; Tender Offers 5
2.9 Stock Dividends, Rights, Etc. 6
2.10 Options 6
2.11 Borrowings 7
2.12 Demand Deposit Bank Accounts 7
2.13 Interest Bearing Call or Time Deposits 8
2.14 Futures Contracts 9
2.15 Foreian Exchange Transactions 10
2.16 Stock Loans 11
2.17 Collections 12
2.18 Dividends, Distributions and Redemptions 12
2.19 Proxies, Notices, Etc. 13
2.20 Nondiscretionary Details 13
2.21 Bills 14
2.22 Deposit of Fund Assets in Securities Systems 14
2.23 Other Transfers 16
2.24 Investment Limitations 16
2.25 Custodian Advances 17
2.26 Restricted Securities 18
2.27 Proper Instructions 19
2.28 Segregated Account 20
3. Powers and Duties of the Custodian with
Respect to the Appointment of Subcustodians 21
4. Assistance by the Custodian as to Certain Matters 25
5. Powers and Duties of the Custodian with
Respect to its Role as Recordkeeping Agent 25
5.1 Records 25
5.2 Accounts 25
5.3 Access to Records 25
<PAGE>
-2-
6. Standard of Care and Related Matters 26
6.1 Liability of the Custodian with
Respect to Proper Instructions;
Evidence of Authority; Etc. 26
6.2 Liability of the Custodian with
Respect to Use of Securities Systems
and Foreign Depositories 27
6.3 Standard of Care; Liability;
Indemnification 27
6.4 Reimbursement of Disbursements, Etc. 29
6.5 Security for Obligations to Custodian 29
6.6 Appointment of Agents 30
6.7 Powers of Attorney 30
7. Compensation of the Custodian 30
8. Termination; Successor Custodian 30
9. Amendment 31
10. Governing Law 32
11. Notices 32
12. Binding Effect 32
13. Counterparts 32
14. Miscellaneous 33
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made this __8th__ day of __August__, 1994, between
THE PHOENIX EDGE SERIES FUND (for the International Series) (the "Fund")
and Brown Brothers Harriman & Co. (the "Custodian");
WITNESSETH: That in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN: The Fund hereby employs and appoints
the Custodian as a custodian for the term and subject to the provisions of this
Agreement. The Custodian shall not be under any duty or obligation to require
the Fund to deliver to it any securities or funds owned by the Fund and shall
have no responsibility or liability for or on account of securities or funds not
so delivered. The Fund will deposit with the Custodian copies of the Declaration
of Trust or Certificate of Incorporation and By-Laws (or comparable documents)
of the Fund and all amendments thereto, and copies of such votes and other
proceedings of the Fund as may be necessary for or convenient to the Custodian
in the performance of its duties.
2. POWERS AND DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE
FUND HELD BY THE CUSTODIAN: Except for securities and funds held by any
Subcustodians appointed pursuant to the provisions of Section 3 hereof or held
by any Foreign Depositories (as said term is defined in Section 3) utilized by a
- 1 -
<PAGE>
Subcustodian, the Custodian shall have and perform the following powers and
duties:
2.1 SAFEKEEPING - To keep safely the securities and other assets of
the Fund that have been delivered to the Custodian and, on behalf of the Fund,
from time to time to receive delivery of securities for safekeeping.
2.2 MANNER OF HOLDING SECURITIES - To hold securities of the Fund (1)
by physical possession of the share certificates or other instruments
representing such securities in registered or bearer form, or (2) in book-entry
form by a Securities System (as said term is defined in Section 2.22) or a
Foreign Depository.
2.3 REGISTRATION - To hold registered securities of the Fund, with or
without any indication of fiduciary capacity, provided that securities are held
in an account of the Custodian containing only assets of the Fund or only assets
held as fiduciary or custodian for customers.
2.4 PURCHASES - Upon receipt of Proper Instructions, as defined in
Section 2.27, insofar as funds are available for the purpose, to pay for and
receive securities purchased for the account of the Fund, payment being made
only upon receipt of the securities (1) by the Custodian, or (2) by a clearing
corporation of a national securities exchange of which the Custodian is a
member, or (3) by a Securities System or a Foreign Depository. However, (i) in
the case of repurchase agreements entered into by the Fund, the Custodian (as
well as an Agent) may release funds to a Securities System, a Foreign Depository
or a Subcustodian prior to the receipt of advice from the Securities System,
Foreign Depository or Subcustodian that the securities underlying such
repurchase agreement have been
- 2 -
<PAGE>
transferred by book entry into the Account (as defined in Section 2.22) of the
Custodian (or such Agent) maintained with such Securities System or to the
Foreign Depository or Subcustodian, so long as such payment instructions to the
Securities System, Foreign Depository or Subcustodian include a requirement that
delivery is only against payment for securities, (ii) in the case of foreign
exchange contracts, options, time deposits, call account deposits, currency
deposits, and other deposits, contracts or options pursuant to Sections 2.10,
2.12, 2.13, 2.14 and 2.15, the Custodian may make payment therefor without
receiving an instrument evidencing said deposit, contract or option so long as
such payment instructions detail specific securities to be acquired, and (iii)
in the case of securities as to which payment for the security and receipt of
the instrument evidencing the security are under generally accepted trade
practice or the terms of the instrument representing the security expected to
take place in different locations or through separate parties, such as
commercial paper which is indexed to foreign currency exchange rates,
derivatives and similar securities, the Custodian may make payment for such
securities prior to receipt thereof in accordance with such generally accepted
trade practice or the terms of the instrument representing such security.
Except as specifically permitted in this Agreement or as authorized or
permitted in Proper Instructions, in any and every case where payment for
purchase of domestic securities for the Fund is made by the Custodian in advance
of receipt of the securities, the Custodian shall be liable to the Fund for such
securities to the same extent as if the securities had been received by the
Custodian.
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2.5 EXCHANGES - Upon receipt of proper instructions, to exchange
securities held by it for the account of the Fund for other securities in
connection with any reorganization, recapitalization, split-up of shares, change
of par value, conversion or other event relating to the securities or the issuer
of such securities and to deposit any such securities in accordance with the
terms of any reorganization or protective plan. Without proper instructions, the
Custodian may surrender securities in temporary form for definitive securities,
may surrender securities for transfer into an account as permitted in Section
2.3, and may surrender securities for a different number of certificates or
instruments representing the same number of shares or same principal amount of
indebtedness, provided the securities to be issued are to be delivered to the
Custodian.
2.6 SALES OF SECURITIES - Upon receipt of proper instructions, to
make delivery of securities which have been sold for the account of the Fund,
but only against payment therefor (1) in cash, by a certified check, bank
cashier's check, bank credit, or bank wire transfer, or (2) by credit to the
account of the Custodian with a clearing corporation of a national securities
exchange of which the Custodian is a member, or (3) by credit to the account
of the Custodian or an Agent of the Custodian with a Securities System or a
Foreign Depository; provided, however, that (i) in the case of delivery of
physical certificates or instruments representing securities, the Custodian may
make delivery to the broker buying the securities, against receipt therefor, for
examination in accordance with "street delivery" custom, provided that the
payment therefor is to be made to the Custodian (which payment may be made by a
broker's check) or that such securities are to be returned to the Custodian, and
(ii) in the case of securities referred to in clause (iii) of the last sentence
of Section 2.4, the Custodian may
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make settlement, including with respect to the form of payment, in accordance
with generally accepted trade practice relating to such securities or the terms
of the instrument representing said security.
2.7 DEPOSITARY RECEIPTS - Upon receipt of proper instructions, to
instruct a Subcustodian or an Agent to surrender securities to the depositary
used by an issuer of American Depositary Receipts or International Depositary
Receipts (hereinafter collectively referred to as "ADRs") for such securities
against a written receipt therefor adequately describing such securities and
written evidence satisfactory to the Subcustodian or Agent that the depositary
has acknowledged receipt of instructions to issue with respect to such
securities ADRs in the name of the Custodian, or a nominee of the Custodian, for
delivery to the Custodian in Boston, Massachusetts, or at such other place as
the Custodian may from time to time designate.
Upon receipt of proper instructions, to surrender ADRs to the issuer
thereof against a written receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the Custodian that the issuer
of the ADRs has acknowledged receipt of instructions to cause its depositary to
deliver the securities underlying such ADRs to a Subcustodian or an Agent.
2.8 EXERCISE OF RIGHTS; TENDER OFFERS - Upon timely receipt of proper
instructions, to deliver to the issuer or trustee thereof, or to the agent of
either, warrants, puts, calls, rights or similar securities for the purpose of
being exercised or sold, provided that the new securities and cash, if any,
acquired by such action are to be delivered to the Custodian, and, upon receipt
of proper instructions, to deposit securities upon invitations for tenders of
securities, provided that the
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consideration is to be paid or delivered or the tendered securities are to be
returned to the Custodian.
2.9 STOCK DIVIDENDS, RIGHTS, ETC. - To receive and collect all stock
dividends, rights and other items of like nature; and to deal with the same
pursuant to proper instructions relative thereto.
2.10 OPTIONS - Upon receipt of proper instructions or upon receipt of
instructions given pursuant to any agreement relating to an option or as
otherwise provided in any such agreement to (i) receive and retain, to the
extent provided to the Custodian, confirmations or other documents evidencing
the purchase, sale or writing of an option of any type on or in respect of a
security, securities index or similar form of property by the Fund; (ii) deposit
and maintain in a segregated account, either physically or by book-entry in a
Securities System or Foreign depository or with a broker, dealer or other
entity, securities, cash or other assets in connection with options transactions
entered into by the Fund; (iii) transfer securities, cash or other assets to a
Securities System, Foreign Depository, broker, dealer or other entity, as margin
(including variation margin) or other security for the Fund's obligations in
respect of any option; and (iv) pay, release and/or transfer such securities,
cash or other assets in accordance with a notice or other communication
evidencing the expiration, termination or exercise of or default under any such
option furnished by The Options Clearing Corporation, by the securities or
options exchange on which such option is traded or by such broker, dealer or
other entity as may be responsible for handling such options transaction or have
authority to give such notice or communication. The Custodian shall not be
responsible for the sufficiency of assets held in any segregated account
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established in compliance with applicable margin maintenance requirements or the
performance of the other terms of any agreement relating to an option.
Notwithstanding the foregoing, options on futures contracts and options to
purchase and sell foreign currencies shall be governed by Sections 2.14 and
2.15.
2.11 BORROWINGS - Upon receipt of proper instructions, to deliver
securities of the Fund to lenders or their agents as collateral for borrowings
effected by the Fund, provided that such borrowed money is payable to or upon
the Custodian's order as Custodian for the Fund.
2.12 DEMAND DEPOSIT BANK ACCOUNTS - To open and operate an account or
accounts in the name of the Fund, subject only to draft or order by the
Custodian, and to hold in such account or accounts as a deposit accepted on the
Custodian's books cash, including foreign currency, received for the account of
the Fund other than cash held as deposits with Banking Institutions in
accordance with the following paragraph. The responsibilities of the Custodian
for cash, including foreign currency, of the Fund accepted on the Custodian's
books as a deposit shall be that of a U. S. bank for a similar deposit.
If and when authorized by proper instructions, the Custodian may open
and operate an additional account(s) in such other banks or trust companies as
may be designated by the Fund in such instructions (any such bank or trust
company so designated by the Fund being referred to hereafter as a "Banking
Institution"), and may deposit cash, including foreign currency, of the Fund in
such account or accounts, provided that such account(s) (hereinafter
collectively referred to as "demand deposit bank accounts") shall be in the name
of the Custodian or a nominee of the Custodian for the account of the Fund or
for the account of the
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Custodian's customers generally and shall be subject only to the Custodian's
draft or order; provided that any such demand deposit bank account shall contain
only assets held by the Custodian as a fiduciary or custodian for the Fund
and/or other customers and that the records of the Custodian shall indicate at
all times the Fund and/or other customers for which such funds are held in such
account and the respective interests therein. Such demand deposit accounts may
be opened with Banking Institutions in the United States and in other countries
and may be denominated in either U. S. Dollars or other currencies as the Fund
may determine. The records for each such account will be maintained by the
Custodian but the deposits in any such account shall not constitute a deposit
liability of the Custodian. All such deposits, including with Subcustodians,
shall be deemed to be portfolio securities of the Fund and accordingly the
responsibility of the Custodian therefor shall be the same as and no greater
than the Custodian's responsibility in respect of other portfolio securities of
the Fund. The authorization by the Fund to appoint a Subcustodian as such shall
also constitute a proper instruction to open a demand deposit bank account
subject to the provisions of this paragraph with such Subcustodian.
2.13 INTEREST BEARING CALL OR TIME DEPOSITS - To place interest
bearing fixed term and call deposits with such banks and in such amounts as the
Fund may authorize pursuant to proper instructions. Such deposits may be placed
with the Custodian or with Subcustodians or other Banking Institutions as the
Fund may determine, in the name of the Custodian or a nominee of the Custodian
for the account of the Fund or the account of the Custodian's customers
generally and subject only to the Custodian's draft or order; provided that any
such deposit shall be held in an account containing only assets held by the
Custodian as a fiduciary
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<PAGE>
or custodian for the Fund and/or other customers and that the records of the
Custodian shall indicate at all times the Fund and/or other customers for which
such funds are held in such account and the respective interests therein.
Deposits may be denominated in U. S. Dollars or other currencies and need not be
evidenced by the issuance or delivery of a certificate to the Custodian,
provided that the Custodian shall include in its records with respect to the
assets of the Fund appropriate notation as to the amount and currency of each
such deposit, the accepting Banking Institution and other appropriate details,
and shall retain such forms of advice or receipt evidencing the deposit, if any,
as may be forwarded to the Custodian by the Banking Institution. Funds, other
than those accepted on the Custodian's books as a deposit, but including those
placed with Subcustodians, shall be deemed portfolio securities of the Fund and
the responsibilities of the Custodian therefor shall be the same as those for
demand deposit bank accounts placed with other banks, as described in the second
paragraph of Section 2.12 of this Agreement. The responsibility of the Custodian
for funds accepted on the Custodian's books as a deposit shall be that of a U.S.
bank for a similar deposit.
2.14 FUTURES CONTRACTS. Upon receipt of proper instructions or upon
receipt of instructions given pursuant to any agreement relating to a futures
contract or an option thereon or as otherwise provided in any such agreement, to
(i) receive and retain, to the extent provided to the Custodian, confirmations
or other documents evidencing the purchase or sale of a futures contract or an
option on a futures contract by the Fund; (ii) deposit and maintain in a
segregated account, either physically or by book-entry in a Securities System or
Foreign Depository, for the benefit of any futures commission merchant, or pay
to such futures commission merchant, securities, cash or other assets designated
by the
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Fund as initial, maintenance or variation "margin" deposits intended to secure
the Fund's performance of its obligations under any futures contract purchased
or sold or any option on a futures contract written, purchased or sold by the
Fund, in accordance with the provisions of any agreement relating thereto or the
rules of the Commodity Futures Trading Commission and/or any contract market or
any similar organization on which such contract or option is traded; and (iii)
pay, release and/or transfer securities, cash or other assets into or out of
such margin accounts only in accordance with any such agreement or rules. The
Custodian shall not be responsible for the sufficiency of assets held in any
segregated account established in compliance with applicable margin maintenance
requirements or the performance of the other terms of any agreement relating to
a futures contract or an option thereon.
2.15 FOREIGN EXCHANGE TRANSACTIONS - Pursuant to proper instructions,
to settle foreign exchange contracts or options to purchase and sell foreign
currencies for spot and future delivery on behalf and for the account of the
Fund with such currency brokers or Banking Institutions, including
Subcustodians, as the Fund may direct pursuant to proper instructions. The
Custodian shall be responsible for the transmission of cash and instructions to
and from the currency broker or Banking Institution with which the contract or
option is made, the safekeeping of all certificates and other documents and
agreements evidencing or relating to such foreign exchange transactions as the
Custodian may receive and the maintenance of proper records as set forth in
Section 5.1. In connection with such transactions, as to which Proper
Instructions have been sent, the Custodian is authorized to make free outgoing
payments of cash in the form of U. S. Dollars or foreign currency without
receiving confirmation of a foreign exchange contract or option
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or confirmation that the countervalue currency completing the foreign exchange
contract has been delivered or received or that the option has been delivered or
received. The Fund accepts full responsibility for its use of third-party
foreign exchange dealers and for execution of said foreign exchange contracts
and options and understands that the Fund shall be responsible for any and all
costs and interest charges which may be incurred by the Fund or the Custodian as
a result of the failure or delay of third parties to deliver foreign exchange.
Alternatively, such transactions may be undertaken by the Custodian as
principal, if instructed by the Fund.
Foreign exchange contracts and options, other than those executed with
the Custodian as principal, but including those executed with Subcustodians,
shall be deemed to be portfolio securities of the Fund and the responsibility of
the Custodian therefor shall be the same as and no greater than the Custodian's
responsibility in respect of other portfolio securities of the Fund. The
responsibility of the Custodian with respect to foreign exchange contracts and
options executed with the Custodian as principal shall be that of a U. S. bank
with respect to a similar contract or option.
2.16 STOCK LOANS - Upon receipt of proper instructions, to deliver
securities of the Fund, in connection with loans of securities by the Fund, to
the borrower thereof prior to receipt of the collateral, if any, for such
borrowing, provided that for stock loans secured by cash collateral the
Custodian's instructions to any Securities System holding such securities
require that the Securities System may deliver the securities to the borrower
thereof only upon receipt of the collateral for such borrowing.
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2.17 COLLECTIONS - (i) To collect and receive all income, payments of
principal and other payments with respect to the securities held hereunder, and
in connection therewith to deliver the certificates or other instruments
representing the securities to the issuer thereof or its agent when securities
are called, redeemed, retired or otherwise become payable; provided, that the
payment is to be made in such form and manner and at such time, which may be
after delivery by the Custodian of the instrument representing the security, as
is in accordance with the terms of the instrument representing the security, or
such proper instructions as the Custodian may receive, or governmental
regulations, the rules of Securities Systems, Foreign Depositories or other U.S.
or foreign securities depositories and clearing agencies or, with respect to
securities referred to in clause (iii) of the last sentence of Section 2.4, in
accordance with generally accepted trade practice; (ii) to execute ownership and
other certificates and affidavits for all federal and state tax purposes in
connection with receipt of income, principal or other payments with respect to
securities of the Fund or in connection with transfer of securities; and (iii)
pursuant to proper instructions to take such other actions with respect to
collection or receipt of funds or transfer of securities which involve an
investment decision.
2.18 DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS - Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from the Fund's
shareholder servicing agent or agent with comparable duties (the "Shareholder
Servicing Agent") (given by such person or persons and in such manner on behalf
of the Shareholder Servicing Agent as the Fund shall have authorized), the
Custodian shall release funds or securities to the Shareholder Servicing Agent
or otherwise apply funds or securities, insofar as available, for the payment of
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<PAGE>
dividends or other distributions to Fund shareholders. Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from the Shareholder
Servicing Agent (given by such person or persons and in such manner on behalf of
the Shareholder Servicing Agent as the Fund shall have authorized), the
Custodian shall release funds or securities, insofar as available, to the
Shareholder Servicing Agent or as such Agent shall otherwise instruct for
payment to Fund shareholders who have delivered to such Agent a request for
repurchase or redemption of their shares of the Fund.
2.19 PROXIES, NOTICES, ETC. - Promptly to deliver or mail to the Fund
all forms of proxies and all notices of meetings and any other notices or
announcements affecting or relating to securities owned by the Fund that are
received by the Custodian, and upon receipt of proper instructions, to execute
and deliver or cause its nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian nor its nominee shall
vote upon any of such securities or execute any proxy to vote thereon or give
any consent or take any other action with respect thereto (except as otherwise
herein provided) unless ordered to do so by proper instructions.
2.20 NONDISCRETIONARY DETAILS - Without the necessity of express
authorization from the Fund, (1) to attend to all nondiscretionary details in
connection with the sale, exchange, substitution, purchase, transfer or other
dealings with securities, funds or other property of the Fund held by the
Custodian except as otherwise directed from time to time by the Directors or
Trustees of the Fund, and (2) to make payments to itself or others for minor
expenses of handling
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securities or other similar items relating to the Custodian's duties under this
Agreement, provided that all such payments shall be accounted for to the Fund.
2.21 BILLS - Upon receipt of proper instructions, to pay or cause to
be paid, insofar as funds are available for the purpose, bills, statements and
other obligations of the Fund (including but not limited to interest charges,
taxes, management fees, compensation to Fund officers and employees, and other
operating expenses of the Fund).
2.22 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS - The Custodian may
deposit and/or maintain securities owned by the Fund in (i) The Depository Trust
Company, (ii) the Participants Trust Company, (iii) any book-entry system as
provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, Subpart B of 31
CFR Part 350, or the book-entry regulations of federal agencies substantially in
the form of Subpart O, or (iv) any other domestic clearing agency registered
with the Securities and Exchange Commission under Section 17A of the Securities
Exchange Act of 1934 which acts as a securities depository and whose use the
Fund has previously approved in writing (each of the foregoing being referred to
in this Agreement as a "Securities System"). Utilization of a Securities System
shall be in accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may deposit and/or maintain Fund securities, either
directly or through one or more Agents appointed by the Custodian (provided that
any such agent shall be qualified to act as a custodian of the Fund pursuant to
the Investment Company Act of 1940 and the rules and regulations thereunder), in
a
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Securities System provided that such securities are represented in an account
("Account") of the Custodian or such Agent in the Securities System which shall
not include any assets of the Custodian or Agent other than assets held as a
fiduciary, custodian, or otherwise for customers;
2) The records of the Custodian with respect to securities of the Fund
which are maintained in a Securities System shall identify by book-entry those
securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the account of
the Fund upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Account, and (ii) the making of an entry
on the records of the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall transfer securities sold for the
account of the Fund upon (i) receipt of advice from the Securities System that
payment for such securities has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect such transfer and
payment for the account of the Fund. Copies of all advices from the Securities
System of transfers of securities for the account of the Fund shall identify the
Fund, be maintained for the Fund by the Custodian or an Agent as referred to
above, and be provided to the Fund at its request. The Custodian shall furnish
the Fund confirmation of each transfer to or from the account of the Fund in the
form of a written advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the Securities System
for the account of the Fund on the next business day;
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4) The Custodian shall provide the Fund with any report obtained by the
Custodian or any Agent as referred to above on the Securities System's
accounting system, internal accounting control and procedures for safeguarding
securities deposited in the Securities System; and the Custodian and such Agents
shall send to the Fund such reports on their own systems of internal accounting
control as the Fund may reasonably request from time to time.
5) At the written request of the Fund, the Custodian will terminate the
use of any such Securities System on behalf of the Fund as promptly as
practicable.
2.23 OTHER TRANSFERS - To deliver securities, funds and other property
of the Fund to a Subcustodian or another custodian as necessary to effect
transactions authorized by proper instructions and upon receipt of proper
instructions, to deliver securities, funds and other property of the Fund to a
Subcustodian or another custodian of the Fund; and, upon receipt of proper
instructions, to make such other disposition of securities, funds or other
property of the Fund in a manner other than or for purposes other than as
enumerated elsewhere in this Agreement, provided that the instructions relating
to such disposition shall state the amount of securities to be delivered and the
name of the person or persons to whom delivery is to be made.
2.24 INVESTMENT LIMITATIONS - In performing its duties generally, and
more particularly in connection with the purchase, sale and exchange of
securities made by or for the Fund, the Custodian may assume unless and until
notified in writing to the contrary that proper instructions received by it are
not in conflict with or in any way contrary to any provisions of the Fund's
Declaration of Trust or Certificate of Incorporation or By-Laws (or comparable
documents) or votes or
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proceedings of the shareholders or Trustees or Directors of the Fund. The
Custodian shall in no event be liable to the Fund and shall be indemnified by
the Fund for any violation which occurs in the course of carrying out
instructions given by the Fund of any investment limitations to which the Fund
is subject or other limitations with respect to the Fund's powers to make
expenditures, encumber securities, borrow or take similar actions affecting the
Fund.
2.25 CUSTODIAN ADVANCES. - In the event that the Custodian is directed
by proper instructions to make any payment or transfer of funds on behalf of the
Fund for which there would be, at the close of business on the date of such
payment or transfer, insufficient funds held by the Custodian on behalf of the
Fund, the Custodian may, in its discretion without further proper instructions,
provide an advance ("Advance") to the Fund in an amount sufficient to allow the
completion of the transaction by reason of which such payment or transfer of
funds is to be made. In addition, in the event the Custodian is directed by
proper instructions to make any payment or transfer of funds on behalf of the
Fund as to which it is subsequently determined that the Fund has overdrawn its
cash account with the Custodian as of the close of business on the date of such
payment or transfer, said overdraft shall constitute an Advance. Any Advance
shall be payable on demand by Custodian, unless otherwise agreed by the Fund and
the Custodian, and shall accrue interest from the date of the Advance to the
date of payment by the Fund at a rate agreed upon from time to time by the
Custodian and the Fund. It is understood that any transaction in respect of
which the Custodian shall have made an Advance, including but not limited to a
foreign exchange contract or transaction in respect of which the Custodian is
not acting as a principal, is for the account of and at the risk of the Fund,
and not, by reason of such Advance,
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deemed to be a transaction undertaken by the Custodian for its own account and
risk. The Custodian and the Fund acknowledge that the purpose of Advances is to
finance temporarily the purchase or sale of securities for prompt delivery in
accordance with the settlement terms of such transactions or to meet emergency
expenses not reasonably foreseeable by the Fund.
2.26 RESTRICTED SECURITIES. - In the case of a "restricted security",
the fund shall have the responsibility to provide to or obtain for the
Custodian, the issuer of the security or other appropriate third party any
necessary documentation, including without limitation, legal opinions or
consents, and to take any necessary actions required in connection with the
registration of restricted securities in the manner provided in Section 2.3 upon
acquisition thereof by the Fund or required in connection with any sale or other
disposition thereof by the Fund. Upon acquisition and until so registered, the
Custodian shall have no duty to service such restricted securities, including
without limitation, the receipt and collection of cash and stock dividends,
rights and other items of like nature, nor shall the Custodian have
responsibility for the inability of the Fund to exercise in a timely manner any
right in respect of any restricted security or to take any action in a timely
manner in respect of any other type of corporate action relating to a restricted
security. Similarly, the Custodian shall not have responsibility for the
inability of the Fund to sell or otherwise transfer in a timely manner any
restricted security in the absence of any such documentation or action to be
provided, obtained or taken by the Fund. At such time as the Custodian shall
receive any restricted security, regardless of when it shall be registered as
aforesaid, the Fund shall also deliver to the Custodian a term sheet summarizing
those rights, restrictions or other matters of which the Custodian should have
knowledge, such
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as exercise periods, expiration dates and payment dates, in order to assist the
Custodian in servicing such securities. As used herein, the term "restricted
security" shall mean a security which is subject to restrictions on transfer,
whether by reason of contractual restrictions or federal, state or foreign
securities or similar laws, or a security which has special rights or
contractual features which do not apply to publicly-traded shares of, or
comparable interests representing, such security.
2.27 PROPER INSTRUCTIONS - Proper instructions shall mean a tested
telex from the Fund or a written request, direction, instruction or
certification signed or initialled on behalf of the Fund by one or more person
or persons as the Board of Trustees or Directors of the Fund shall have from
time to time authorized, provided, however, that no such instructions directing
the delivery of securities or the payment of funds to an authorized signatory of
the Fund shall be signed by such person. Those persons authorized to give proper
instructions may be identified by the Board of Trustees or Directors by name,
title or position and will include at least one officer empowered by the Board
to name other individuals who are authorized to give proper instructions on
behalf of the Fund. Telephonic or other oral instructions or instructions given
by facsimile transmission may be given by any one of the above persons and will
be considered proper instructions if the Custodian reasonably believes them to
have been given by a person authorized to give such instructions with respect to
the transaction involved. Oral instructions will be confirmed by tested telex or
in writing in the manner set forth above but the lack of such confirmation shall
in no way affect any action taken by the Custodian in reliance upon such oral
instructions. The Fund authorizes the Custodian to tape record any and all
telephonic or other oral instructions given to
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the Custodian by or on behalf of the Fund (including any of its officers,
Directors, Trustees, employees or agents or any investment manager or adviser or
person or entity with similar responsibilities which is authorized to give
proper instructions on behalf of the Fund to the Custodian). Proper instructions
may relate to specific transactions or to types or classes of transactions, and
may be in the form of standing instructions.
Proper instructions may include communications effected directly
between electro-mechanical or electronic devices or systems, in addition to
tested telex, provided that the Fund and the Custodian agree to the use of such
device or system.
2.28 SEGREGATED ACCOUNT - The Custodian shall upon receipt of proper
instructions establish and maintain on its books a segregated account or
accounts for and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities of the Fund, including securities maintained
by the Custodian pursuant to Section 2.22 hereof, (i) in accordance with the
provisions of any agreement among the Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc. (or any futures commission
merchant registered under the Commodity Exchange Act) relating to compliance
with the rules of the Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by the
Fund, (ii) for purposes of segregating cash or securities in connection with
options purchased, sold or
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written by the Fund or commodity futures contracts or options thereon purchased
or sold by the Fund, (iii) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by registered investment
companies, and (iv) as mutually agreed from time to time between the Fund and
the Custodian.
3. POWERS AND DUTIES OF THE CUSTODIAN WITH RESPECT TO THE
APPOINTMENT OF SUBCUSTODIANS: The Fund hereby authorizes and instructs the
Custodian to hold securities, funds and other property of the Fund which are
maintained outside the United States at subcustodians appointed pursuant to the
provisions of this Section 3 (a "Subcustodian"). The Fund shall approve in
writing (1) the appointment of each Subcustodian and the subcustodian agreement
to be entered into between such Subcustodian and the Custodian, and (2) if the
Subcustodian is organized under the laws of a country other than the United
States, the country or countries in which the Subcustodian is authorized to hold
securities, cash and other property of the Fund. The Fund hereby further
authorizes and instructs the Custodian and any Subcustodian to utilize such
securities depositories located outside the United States which are approved in
writing by the Fund to hold securities, cash and other property of the Fund (a
"Foreign Depository"). Upon such approval by the Fund, the Custodian is
authorized on behalf of the Fund to notify each Subcustodian of its appointment
as such.
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Those Subcustodians, and the countries where and the Foreign
Depositories through which they or the Custodian may hold securities, cash and
other property of the Fund which the Fund has approved to date are set forth on
Appendix A hereto. Such Appendix shall be amended from time to time as
Subcustodians, and/or countries and/or Foreign Depositories are changed, added
or deleted. The Fund shall be responsible for informing the Custodian
sufficiently in advance of a proposed investment which is to be held in a
country not listed on Appendix A, in order that there shall be sufficient time
for the Fund to give the approval required by the preceding paragraph and for
the Custodian to put the appropriate arrangements in place with such
Subcustodian, including negotiation of a subcustodian agreement and submission
of such subcustodian agreement to the Fund for approval.
If the Fund shall have invested in a security to be held in a country
before the foregoing procedures have been completed, such security shall be held
by such agent as the Custodian may appoint. In any event, the Custodian shall be
liable to the Fund for the actions of such agent if and only to the extent the
Custodian shall have recovered from such agent for any damages caused the Fund
by such agent. At the request of the Fund, Custodian agrees to remove any
securities held on behalf of the Fund by such agent, if practical, to an
approved Subcustodian. Under such circumstances the Custodian will collect
income and respond to corporate actions on a best efforts basis.
With respect to securities and funds held by a Subcustodian, either
directly or indirectly (including by a Foreign Depository or foreign clearing
agency) or by a Foreign Depository or foreign clearing agency utilized by the
Custodian,
- 22 -
<PAGE>
notwithstanding any provision of this Agreement to the contrary, payment for
securities purchased and delivery of securities sold may be made prior to
receipt of the securities or payment, respectively, and securities or payment
may be received in a form, in accordance with governmental regulations, rules of
Foreign Depositories and foreign clearing agencies, or generally accepted trade
practice in the applicable local market.
With respect to the securities and funds held by a Subcustodian, either
directly or indirectly (including by a Foreign Depository or a foreign clearing
agency), including demand and interest bearing deposits, currencies or other
deposits and foreign exchange contracts as referred to in Sections 2.12, 2.13,
2.14 and 2.15, the Custodian shall be liable to the Fund if and only to the
extent that such Subcustodian is liable to the Custodian and the Custodian
recovers under the applicable subcustodian agreement. The Custodian shall
nevertheless be liable to the Fund for its own negligence in transmitting to any
such Subcustodian any instructions received by it from the Fund and for its own
negligence in connection with the delivery of any securities or funds held by it
to any such Subcustodian.
In the event that any Subcustodian appointed pursuant to the provisions
of this Section 3 fails to perform any of its obligations under the terms and
conditions of the applicable subcustodian agreement, the Custodian shall use its
best efforts to cause such Subcustodian to perform such obligations. In the
event that the Custodian is unable to cause such Subcustodian to perform fully
its obligations thereunder, the Custodian shall forthwith upon the Fund's
request terminate such Subcustodian in accordance with the termination
provisions under the applicable subcustodian agreement and, if necessary or
desirable, appoint another
- 23 -
<PAGE>
subcustodian in accordance with the provisions of this Section 3. At the
election of the Fund, it shall have the right to enforce, to the extent
permitted by the subcustodian agreement and applicable law, the Custodian's
rights against any such Subcustodian for loss or damage caused the Fund by such
Subcustodian.
The Custodian will not amend any subcustodian agreement or agree to
change or permit any changes thereunder except upon the prior written approval
of the Fund.
The Custodian may, at any time in its discretion upon notification to
the Fund, terminate any Subcustodian of the Fund in accordance with the
termination provisions under the applicable Subcustodian Agreement, and at the
written request of the Fund, the Custodian will terminate any Subcustodian in
accordance with the termination provisions under the applicable Subcustodian
Agreement.
If necessary or desirable, the Custodian may appoint another
subcustodian to replace a Subcustodian terminated pursuant to the foregoing
provisions of this Section 3, such appointment to be made upon approval of the
successor subcustodian by the Fund's Board of Directors or Trustees in
accordance with the provisions of this Section 3.
In the event the Custodian receives a claim from a Subcustodian under
the indemnification provisions of any subcustodian agreement, the Custodian
shall promptly give written notice to the Fund of such claim. No more than
thirty days after written notice to the Fund of the Custodian's intention to
make such payment, the Fund will reimburse the Custodian the amount of such
payment except in respect of any negligence or misconduct of the Custodian.
- 24 -
<PAGE>
4. ASSISTANCE BY THE CUSTODIAN AS TO CERTAIN MATTERS: The Custodian
may assist generally in the preparation of reports to Fund shareholders and
others, audits of accounts, and other ministerial matters of like nature.
5. POWERS AND DUTIES OF THE CUSTODIAN WITH RESPECT TO ITS ROLE AS
RECORDKEEPING AGENT: The Custodian shall have and perform the following duties
with respect to recordkeeping:
5.1 RECORDS - To create, maintain and retain such records relating
to its activities and obligations under this Agreement as are required under the
Investment Company Act of 1940 and the rules and regulations thereunder
(including Section 31 thereof and Rules 31a-1 and 31a-2 thereunder) and under
applicable Federal and State tax laws. All such records will be the property of
the Fund and in the event of termination of this Agreement shall be delivered to
the successor custodian.
5.2 ACCOUNTS - To keep books of account and render statements,
including interim monthly and complete quarterly financial statements, or copies
thereof, from time to time as reasonably requested by proper instructions.
5.3 ACCESS TO RECORDS - The books and records maintained by the
Custodian pursuant to Sections 5.1 and 5.2 shall at all times during the
Custodian's regular business hours be open to inspection and audit by officers
of, attorneys for and auditors employed by the Fund and by employees and agents
of the Securities and Exchange Commission, provided that all such individuals
shall observe all security requirements of the Custodian applicable to its own
employees
- 25 -
<PAGE>
having access to similar records within the Custodian and such regulations as
may be reasonably imposed by the Custodian.
6. STANDARD OF CARE AND RELATED MATTERS:
6.1 LIABILITY OF THE CUSTODIAN WITH RESPECT TO PROPER INSTRUCTIONS;
EVIDENCE OF AUTHORITY, ETC. The Custodian shall not be liable for any action
taken or omitted in reliance upon proper instructions believed by it to be
genuine or upon any other written notice, request, direction, instruction,
certificate or other instrument believed by it to be genuine and signed by the
proper party or parties.
The Secretary or Assistant Secretary of the Fund shall certify to the
Custodian the names, signatures and scope of authority of all persons authorized
to give proper instructions or any other such notice, request, direction,
instruction, certificate or instrument on behalf of the Fund, the names and
signatures of the officers of the Fund, the name and address of the Shareholder
Servicing Agent, and any resolutions, votes, instructions or directions of the
Fund's Board of Directors or Trustees or shareholders. Such certificate may be
accepted and relied upon by the Custodian as conclusive evidence of the facts
set forth therein and may be considered in full force and effect until receipt
of a similar certificate to the contrary.
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement.
- 26 -
<PAGE>
The Custodian shall be entitled to receive and act upon advice of (i)
counsel regularly retained by the Custodian in respect of Custodian matters, or
(ii) at the expense of the Fund, and upon the Fund's approval, (x) counsel for
the Fund, or (y) such other counsel as the Fund and the Custodian may agree
upon, with respect to all matters, and the Custodian shall be without liability
for any action reasonably taken or omitted pursuant to such advice.
6.2 LIABILITY OF THE CUSTODIAN WITH RESPECT TO USE OF SECURITIES
SYSTEMS AND FOREIGN DEPOSITORIES - With respect to the portfolio securities,
cash and other property of the Fund held by a Securities System or by a Foreign
Depository utilized by the Custodian or any Subcustodian, the Custodian shall be
liable to the Fund only for any loss or damage to the Fund resulting from use of
the Securities System or Foreign Depository if caused by any negligence,
misfeasance or misconduct of the Custodian or any of its Agents (as said term is
defined in Section 6.6) or of any of its or its Agents' employees or from any
failure of the Custodian or any such Agent to enforce effectively such rights as
it may have against the Securities System or Foreign Depository. At the election
of the Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claim against the Securities System, Foreign
Depository or any other person which the Custodian may have as a consequence of
any such loss or damage to the Fund if and to the extent that the Fund has not
been made whole for any such loss or damage.
6.3 STANDARD OF CARE; LIABILITY; INDEMNIFICATION - The Custodian
shall be held only to the exercise of reasonable care and diligence in carrying
out the provisions of this Agreement, provided that the Custodian shall not
thereby be
- 27 -
<PAGE>
required to take any action which is in contravention of any applicable law,
rule or regulation or any order or judgment of any court of competent
jurisdiction.
The Fund agrees to indemnify and hold harmless the Custodian and its
nominees from all claims and liabilities (including counsel fees) incurred or
assessed against it or its nominees in connection with the performance of this
Agreement, except such as may arise from its or its nominee's breach of the
relevant standard of conduct set forth in this Agreement. Without limiting the
foregoing indemnification obligation of the Fund, the Fund agrees to indemnify
the Custodian and any nominee in whose name portfolio securities or other
property of the Fund is registered against any liability the Custodian or such
nominee may incur by reason of taxes assessed to the Custodian or such nominee
or other costs, liability or expense incurred by the Custodian or such nominee
resulting directly or indirectly from the fact that portfolio securities or
other property of the Fund is registered in the name of the Custodian or such
nominee.
In no event shall the Custodian incur liability under this Agreement if
the Custodian or any Subcustodian, Securities System, Foreign Depository,
Banking Institution or any agent or entity utilized by any of them is prevented,
forbidden or delayed from performing, or omits to perform, any act or thing
which this Agreement provides shall be performed or omitted to be performed, by
reason of (i) any Sovereign Risk or (ii) any provision of any present or future
law or resolution or order of the United States of America or any state thereof,
or of any foreign country or political subdivision thereof, or of any securities
depository or clearing agency which operates a central system for handling of
securities or equivalent book-entries in a country or which operates a
transnational system for
- 28 -
<PAGE>
the central handling of securities or equivalent book-entries, or (iii) any
provision of any order or judgment of any court of competent jurisdiction. A
"Sovereign Risk" shall mean nationalization, expropriation, devaluation,
revaluation, confiscation, seizure, cancellation, destruction or similar action
by any governmental authority, de facto or de jure; or enactment, promulgation,
imposition or enforcement by any such governmental authority of currency
restrictions, exchange controls, taxes, levies or other charges affecting the
Fund's property; or acts of war, terrorism, insurrection or revolution; or any
other act or event beyond the Custodian's control.
6.4 REIMBURSEMENT OF DISBURSEMENTS, ETC. - The Custodian shall be
entitled to receive reimbursement from the Fund on demand, in the manner
provided in Section 7, for its cash disbursements, expenses and charges
(including the fees and expenses of any Subcustodian or any Agent) in connection
with this Agreement, but excluding salaries and usual overhead expenses.
6.5 SECURITY FOR OBLIGATIONS TO CUSTODIAN - If the Custodian or any
nominee thereof shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of this
Agreement (collectively a "Liability"), except such as may arise from its or
such nominee's breach of the relevant standard of conduct set forth in this
Agreement, or if the Custodian shall make any Advance to the Fund, then in such
event any property at any time held for the account of the Fund by the Custodian
or a Subcustodian shall be security for such Liability or for such Advance and
the interest thereon, and if the Fund shall fail to pay such Advance or interest
when due or shall fail to reimburse or indemnify the Custodian promptly in
respect of a
- 29 -
<PAGE>
Liability, the Custodian shall be entitled to utilize available cash and to
dispose of the Fund's property, including securities, to the extent necessary to
obtain repayment, reimbursement or indemnification.
6.6 APPOINTMENT OF AGENTS - The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other bank or trust
company as its agent (an "Agent") to carry out such of the provisions of this
Agreement as the Custodian may from time to time direct, provided, however, that
the appointment of such Agent (other than an Agent appointed pursuant to the
third paragraph of Section 3) shall not relieve the Custodian of any of its
responsibilities under this Agreement.
6.7 POWERS OF ATTORNEY - Upon request, the Fund shall deliver to the
Custodian such proxies, powers of attorney or other instruments as may be
reasonable and necessary or desirable in connection with the performance by the
Custodian or any Subcustodian of their respective obligations under this
Agreement or any applicable subcustodian agreement.
7. COMPENSATION OF THE CUSTODIAN: The Fund shall pay the Custodian a
custody fee based on such fee schedule as may from time to time be agreed upon
in writing by the Custodian and the Fund. Such fee, together with all amounts
for which the Custodian is to be reimbursed in accordance with Section 6.4,
shall be billed to the Fund and be paid in cash to the Custodian.
8. TERMINATION; SUCCESSOR CUSTODIAN: This Agreement shall continue
in full force and effect until terminated by either party by an instrument in
writing delivered or mailed, postage prepaid, to the other party, such
termination to take
- 30 -
<PAGE>
effect not sooner than seventy five (75) days after the date of such delivery or
mailing. In the event of termination the Custodian shall be entitled to receive
prior to delivery of the securities, funds and other property held by it all
accrued fees and unreimbursed expenses the payment of which is contemplated by
Sections 6.4 and 7, and all Advances and Liabilities, upon receipt by the Fund
of a statement setting forth such fees, expenses, Advances and Liabilities.
In the event of the appointment of a successor custodian, it is agreed
that the funds and securities owned by the Fund and held by the Custodian or any
Subcustodian shall be delivered to the successor custodian, and the Custodian
agrees to cooperate with the Fund in execution of documents and performance of
other actions necessary or desirable in order to substitute the successor
custodian for the Custodian under this Agreement.
9. AMENDMENT: This Agreement constitutes the entire understanding
and agreement of the parties hereto with respect to the subject matter hereof.
No provision of this Agreement may be amended or terminated except by a
statement in writing signed by the party against which enforcement of the
amendment or termination is sought.
In connection with the operation of this Agreement, the Custodian and
the Fund may agree in writing from time to time on such provisions
interpretative of or in addition to the provisions of this Agreement as may in
their joint opinion be consistent with the general tenor of this Agreement. No
interpretative or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Agreement.
- 31 -
<PAGE>
The section headings in this Agreement are for the convenience of the
parties and in no way alter, amend, limit or restrict the contractual
obligations of the parties set forth in this Agreement.
10. GOVERNING LAW: This Agreement is executed and delivered in The
Commonwealth of Massachusetts and shall be governed by and construed
according to the laws of said Commonwealth.
11. NOTICES: Notices and other writings delivered or mailed postage
prepaid to the Fund addressed to the Fund at __________________________________
_______________________________________________________________________________
________________________________________________ or to such other address as the
Fund may have designated to the Custodian in writing, or to the Custodian at 40
Water Street, Boston, Massachusetts 02109, Attention: Manager, Securities
Department, or to such other address as the Custodian may have designated to the
Fund in writing, shall be deemed to have been properly delivered or given
hereunder to the respective addressee.
12. BINDING EFFECT: This Agreement shall be binding on and shall
inure to the benefit of the Fund and the Custodian and their respective
successors and assigns, provided that neither party hereto may assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of the other party.
13. COUNTERPARTS: This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
each of the parties.
- 32 -
<PAGE>
14. MISCELLANEOUS: It is expressly agreed that the obligations of the
Fund hereunder, shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Trust personally, but bind only
the Trust property as provided in the Declaration of Trust on file with the
Secretary of the Commonwealth of Massachusetts.
- 33 -
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
THE PHOENIX EDGE BROWN BROTHERS HARRIMAN & CO.
SERIES FUND
By /s/ Philip R. McLoughlin per pro /s/ R. A. Hill
------------------------ ----------------------------
- 34 -
EXHIBIT 8.3
CUSTODIAN CONTRACT
Between
PHOENIX EDGE SERIES FUND
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
CUSTODIAN CONTRACT
Between
PHOENIX EDGE SERIES FUND
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Employment of Custodian and Property to be Held By It...................1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States..................2
2.1 Holding Securities.............................................2
2.2 Delivery of Securities.........................................3
2.3 Registration of Securities.....................................6
2.4 Bank Accounts..................................................7
2.5 Availability of Federal Funds..................................8
2.6 Collection of Income...........................................8
2.7 Payment of Fund Monies.........................................8
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased..............................11
2.9 Appointment of Agents........................................11
2.10 Deposit of Fund Assets in Securities System...................11
2.10A Fund Assets Held in the Custodian's Direct
Paper System..................................................13
2.11 Segregated Account............................................15
2.12 Ownership Certificates for Tax Purposes.......................16
2.13 Proxies.......................................................16
2.14 Communications Relating to Portfolio Securities...............16
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States.............................17
3.1 Appointment of Foreign Sub-Custodians.........................17
3.2 Assets to be Held.............................................17
3.3 Foreign Securities Depositories...............................17
3.4 Agreements with Foreign Banking Institutions..................18
3.5 Access of Independent Accountants of the Fund.................18
3.6 Reports by Custodian..........................................19
3.7 Transactions in Foreign Custody Account.......................19
3.8 Liability of Foreign Sub-Custodians...........................20
3.9 Liability of Custodian........................................20
3.10 Reimbursement for Advances....................................21
3.11 Monitoring Responsibilities...................................21
3.12 Branches of U.S. Banks........................................22
3.13 Tax Law.......................................................22
4. Payments for Sales or Repurchase or Redemptions
of Shares of the Fund..................................................23
5. Proper Instructions....................................................23
6. Actions Permitted Without Express Authority............................24
7. Evidence of Authority..................................................24
<PAGE>
8. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income..........................25
9. Records................................................................25
10. Opinion of Fund's Independent Accountants..............................26
11. Reports to Fund by Independent Public Accountants......................26
12. Compensation of Custodian..............................................27
13. Responsibility of Custodian............................................27
14. Effective Period, Termination and Amendment............................28
15. Successor Custodian....................................................30
16. Interpretive and Additional Provisions.................................31
17. Additional Funds.......................................................31
18. Massachusetts Law to Apply.............................................31
19. Prior Contracts........................................................32
20. Shareholder Communications Election....................................32
<PAGE>
CUSTODIAN CONTRACT
------------------
This Contract between Phoenix Edge Series Fund, a business trust
organized and existing under the laws of Massachusetts, having its principal
place of business at 100 Bright Meadow Boulevard, Enfield, Connecticut
06083-2200 hereinafter called the "Fund", and State Street Bank and Trust
Company, a Massachusetts trust company, having its principal place of business
at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in one series, the
Big Edge Real Estate Securities Portfolio (such series together with all other
series subsequently established by the Fund and made subject to this Contract in
accordance with paragraph 17, being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Declaration of
Trust. The Fund on behalf or the Portfolio(s) agrees to deliver to the Custodian
all securities and cash of the Portfolios, and all payments of income, payments
of principal or capital distributions received by it with respect to all
securities owned by the Portfolio(s) from time to time, and the cash
consideration received by it for
<PAGE>
such new or treasury shares of beneficial interest of the Fund representing
interests in the Portfolios, ("Shares") as may be issued or sold from time to
time. The Custodian shall not be responsible for any property of a Portfolio
held or received by the Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY
THE CUSTODIAN IN THE UNITED STATES
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository
or in a book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities System" and
(b) commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the Custodian
pursuant to Section 2.10A.
2
<PAGE>
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only
upon receipt of Proper Instructions from the Fund on behalf of the
applicable Portfolio, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered into
by the Portfolio;
3) In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name
of any agent appointed pursuant to Section 2.9 or into the
name or nominee name of any sub-custodian appointed pursuant
to Article l; or for exchange for a different number of
bonds, certificates or other evidence representing
3
<PAGE>
the same aggregate face amount or number of units; provided
that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery" custom; provided that in any such case, the
Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise
from the Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities; provided
that, in any such case, the new securities and cash, if any,
are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Portfolio, but only against receipt of adequate
collateral as agreed upon from time to time by the Custodian
and the Fund on behalf of the Portfolio, which may be in the
form of cash or obligations issued by the United States
government, its agencies or instrumentalities,
4
<PAGE>
except that in connection with any loans for which
collateral is to be credited to the Custodian's account in
the book-entry system authorized by the U.S. Department of
the Treasury, the Custodian will not be held liable or
responsible for the delivery of securities owned by the
Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings
by the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a
member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission
and/or any Contract Market, or any similar organization or
organizations, regarding
5
<PAGE>
account deposits in connection with transactions by the
Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in connection
with distributions in kind, as may be described from time to
time in the currently effective prospectus and statement of
additional information of the Fund, related to the Portfolio
("Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon
receipt of in addition to Proper Instructions from the Fund
on behalf of the applicable Portfolio, a certified copy of a
resolution of the Board of Trustees or of the Executive
Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, specifying the
securities of the Portfolio to be delivered, setting forth
the purpose for which such delivery is to be made, declaring
such purpose to be a proper corporate purpose, and naming
the person or persons to whom delivery of such securities
shall be made.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has authorized
in writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as
the Portfolio, or in the name or nominee name of any agent appointed
pursuant to
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Section 2.9 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted by the
Custodian on behalf of the Portfolio under the terms of this Contract
shall be in "street name" or other good delivery form. If, however, the
Fund directs the Custodian to maintain securities in "street name", the
Custodian shall utilize its best efforts only to timely collect income
due the Fund on such securities and to notify the Fund on a best
efforts basis only of relevant corporate actions including, without
limitation, pendency of calls, maturities, tender or exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio
of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Portfolio, other than cash maintained by
the Portfolio in a bank account established and used in accordance with
Rule 17f-3 under the Investment Company Act of 1940. Funds held by the
Custodian for a Portfolio may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such other
banks or trust companies as it may in its discretion deem necessary or
desirable; provided, however, that every such bank or trust company
shall be qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the funds to
be deposited with each such bank or trust company shall on behalf of
each applicable Portfolio be approved by vote of a majority of the
Board of Trustees of the Fund. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
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2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund
on behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf
of a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of
such Portfolio which are deposited into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which
each Portfolio shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all income
and other payments with respect to bearer domestic securities if, on
the date of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such income, as
collected, to such Portfolio's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation as
and when they become due and shall collect interest when due on
securities held hereunder. Income due each Portfolio on securities
loaned pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income to
which the Portfolio is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions where
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deemed appropriate by the parties, the Custodian shall pay out monies
of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Portfolio but only (a) against the delivery of such
securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian
(or any bank, banking firm or trust company doing business
in the United States or abroad which is qualified under the
Investment Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian as its
agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian
referred to in Sectlon 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set
forth in Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.10A; (d) in the case of
repurchase agreements entered into between the Fund on
behalf of the Portfolio and the Custodian, or another bank,
or a broker-dealer which is a member of NASD, (i) against
delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by the Portfolio
of securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase
such securities from the Portfolio or (e) for
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transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the
Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section
2.2 hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following
payments for the account of the Portfolio: interest, taxes,
management, accounting, transfer agent and legal fees, and
operating expenses of the Fund whether or not such expenses
are to be in whole or part capitalized or treated as
deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect
of securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund on behalf of
the Portfolio, a certified copy of a resolution of the Board
of Trustees or of the Executive Committee of the Fund signed
by an officer of the Fund and certified by its Secretary or
an Assistant Secretary, specifying the amount of such
payment, setting forth the purpose for which such payment is
to be made, declaring such purpose to be a proper
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purpose, and naming the person or persons to whom such
payment is to be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by
the Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall
not relieve the Custodian of its responsibilities or liabilities
hereunder.
2.10 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section
17A of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "Securities System" in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
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1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in
the Securities System which shall not include any assets of
the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of
the Portfolio which are maintained in a Securities System
shall identify by book-entry those securities belonging to
the Portfolio;
3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and
transfer for the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the Securities
System that payment for such securities has been transferred
to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and
payment for the account of the Portfolio. Copies of all
advices from the Securities System of transfers of
securities for the account of the Portfolio shall identify
the Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund on behalf of
the Portfolio confirmation of each transfer to or from the
account of the Portfolio in the form of a written advice or
notice and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction
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sheets reflecting each day's transactions in the Securities
System for the account of the Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with
any report obtained by the Custodian on the Securities
System's accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System;
5) The Custodian shall have received from the Fund on behalf of
the Portfolio the initial or annual certificate, as the case
may be, required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding,
the Custodian shall be liable to the Fund for the benefit of
the Portfolio for any loss or damage to the Portfolio
resulting from use of the Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian or
any of its agents or of any of its or their employees or
from failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian
with respect to any claim against the Securities System or
any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent
that the Portfolio has not been made whole for any such loss
or damage.
2.10A FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM
The Custodian may deposit and/or maintain securities owned by a
Portfolio in the Direct Paper System of the Custodian subject to the
following provisions:
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l) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper
Instructions from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented
in an account ("Account") of the Custodian in the Direct
Paper System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian
or otherwise for customers;
3) The records of the Custodian with respect to securities of
the Portfolio which are maintained in the Direct Paper
System shall identify by book-entry those securities
belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and
transfer of securities to the account of the Portfolio. The
Custodian shall transfer securities sold for the account of
the Portfolio upon the making of an entry on the records of
the Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the
account of the Portfolio, in the form of a written advice or
notice, of Direct Paper on the next business day following
such transfer and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each
day's transaction in the Securities System for the account
of the Portfolio;
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6) The Custodian shall provide the Fund on behalf of the Portfolio
with any report on its system of internal accounting control as
the Fund may reasonably request from time to time.
2.11 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased
or sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the
Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for
other proper corporate purposes, but only, in the case of clause (iv),
upon receipt of, in addition to Proper Instructions from the Fund on
behalf of the applicable Portfolio, a certified copy of a resolution of
the Board of Trustees or of the Executive Committee signed
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by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper corporate
purposes.
2.12 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.13 PROXIES. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be voted,
and shall promptly deliver to the Portfolio such proxies, all proxy
soliciting materials and all notices relating to such securities.
2.14 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without
limitation, pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund on behalf of the Portfolio
and the maturity of futures contracts purchased or sold by the
Portfolio) received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer, exchange offer
or any other similar transaction, the Portfolio shall notify the
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Custodian at least three business days prior to the date on which the
Custodian is to take such action.
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD
OUTSIDE OF THE UNITED STATES
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS
The Fund hereby authorizes and instructs the Custodian to employ as
sub-custodians for the Portfolio's securities and other assets
maintained outside the United States the foreign banking institutions
and foreign securities depositories designated on Schedule A hereto
("foreign sub-custodians"). Upon receipt of "Proper Instructions", as
defined in Section 5 of this Contract, together with a certified
resolution of the Fund's Board of Trustees, the Custodian and the Fund
may agree to amend Schedule A hereto from time to time to designate
additional foreign banking institutions and foreign securities
depositories to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to cease the
employment of any one or more such sub-custodians for maintaining
custody of the Portfolio's assets.
3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c) (1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Portfolio's foreign securities
transactions. The Custodian shall identify on its books as belonging to
the Fund, the foreign securities of the Fund held by each foreign
sub-custodian.
3.3 FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be agreed upon
in writing by the Custodian and the Fund, assets of the Portfolios
shall be maintained in foreign securities depositories only through
arrangements implemented by the foreign
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banking institutions serving as sub-custodians pursuant to the terms
hereof. Where possible, such arrangements shall include entry into
agreements containing the provisions set forth in Section 3.4 hereof.
3.4 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall be substantially in the form set
forth in Exhibit 1 hereto and shall provide that: (a) the assets of
each Portfolio will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of the foreign banking
institution or its creditors or agent, except a claim of payment for
their safe custody or administration; (b) beneficial ownership for the
assets of each Portfolio will be freely transferable without the
payment of money or value other than for custody or administration; (c)
adequate records will be maintained identifying the assets as belonging
to each applicable Portfolio; (d) officers of or auditors employed by,
or other representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants for
the Fund, will be given access to the books and records of the foreign
banking institution relating to its actions under its agreement with
the Custodian; and (e) assets of the Portfolios held by the foreign
sub-custodian will be subject only to the instructions of the Custodian
or its agents.
3.5 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
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3.6 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Portfolio(s) held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Portfolio(s) securities and other
assets and advices or notifications of any transfers of securities to
or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of each applicable Portfolio
indicating, as to securities acquired for a Portfolio, the identity of
the entity having physical possession of such securities.
3.7 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT
(a) Except as otherwise provided in paragraph (b) of this Section 3.7,
the provision of Sections 2.2 and 2.7 of this Contract shall apply,
mutatis mutandis to the foreign securities of the Fund held outside the
United States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the
account of each applicable Portfolio may be effected in accordance with
the customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may
be maintained in the name of such entity's nominee to the same extent
as set forth in Section 2.3 of this Contract, and the Fund agrees to
hold any such nominee harmless from any liability as a holder of record
of such securities.
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3.8 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless,
the Custodian and the Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not been made
whole for any such loss, damage, cost, expense, liability or claim.
3.9 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by paragraph 3.12 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this paragraph 3.9, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident
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or other losses under circumstances where the Custodian and State
Street London Ltd. have exercised reasonable care.
3.10 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay
the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolios assets to the extent
necessary to obtain reimbursement.
3.11 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is notified by such foreign
subcustodian that there appears to be a substantial likelihood that its
shareholders'equity will decline below $200 million (U.S. dollars or
the equivalent thereof) or that its shareholders' equity has declined
below $200 million (in each case computed in accordance with generally
accepted U.S. accounting principles).
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3.12 BRANCHES OF U.S. BANKS
(a) Except as otherwise set forth in this Contract, the provisions
hereof shall not apply where the custody of the Portfolios assets are
maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment Company Act of
1940 meeting the qualification set forth in Section 26(a) of said Act.
The appointment of any such branch as a sub-custodian shall be governed
by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom
shall be maintained in an interest bearing account established for the
Fund with the Custodian's London branch, which account shall be subject
to the direction of the Custodian, State Street London Ltd. or both.
3.13 TAX LAW
The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or
any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations
imposed on the Fund or the Custodian as custodian of the Fund by the
tax law of jurisdictions other than those mentioned in the above
sentence, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist the
Fund with respect to any claim for exemption or refund under the tax
law of jurisdictions for which the Fund has provided such information.
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4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board of
Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
5. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Contract means a writing
signed or initialled by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions
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with respect to the transaction involved. The Fund shall cause all oral
instructions to be confirmed in writing. Upon receipt of a certificate of the
Secretary or an Assistant Secretary as to the authorization by the Board of
Trustees of the Fund accompanied by a detailed description of procedures
approved by the Board of Trustees, Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Board of Trustees and the Custodian are satisfied that
such procedures afford adequate safeguards for the Portfolios' assets. For
purposes of this Section, Proper Instructions shall include instructions
received by the Custodian pursuant to any three-party agreement which requires a
segregated asset account in accordance with Section 2.11.
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this Contract,
provided that all such payments shall be accounted for to the Fund on behalf of
the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Portfolio except as otherwise directed
by the Board of Trustees of the Fund.
7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept
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a certified copy of a vote of the Board of Trustees of the Fund as conclusive
evidence (a) of the authority of any person to act in accordance with such vote
or (b) of any determination or of any action by the Board of Trustees pursuant
to the Declaration of Trust as described in such vote, and such vote may be
considered as in full force and effect until receipt by the Custodian of written
notice to the contrary.
8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees of the Fund to keep
the books of account of each Portfolio and/or compute the net asset value per
share of the outstanding shares of each Portfolio or, if directed in writing to
do so by the Fund on behalf of the Portfolio, shall itself keep such books of
account and/or compute such net asset value per share. If so directed, the
Custodian shall also calculate daily the net income of the Portfolio as
described in the Fund's currently effective prospectus related to such Portfolio
and shall advise the Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in writing by an officer of the Fund to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset value per
share and the daily income of each Portfolio shall be made at the time or times
described from time to time in the Fund's currently effective prospectus related
to such Portfolio.
9. RECORDS
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the Investment
Company Act of 1940, with particular attention to Section 31 thereof and Rules
3la-1 and 3la-2 thereunder. All such records shall be the property of the Fund
and shall at all times during the regular business hours of the
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Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the preparation of the Fund's
Form N-lA, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
11. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or maintained
in a Securities System, relating to the services provided by the Custodian under
this Contract; such reports, shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Fund to provide reasonable
assurance that any material inadequacies would be disclosed by such examination,
and, if there are no such inadequacies, the reports shall so state.
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12. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
13. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States (except as specifically provided in Article 3.9)
and, regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S. bank
as contemplated by paragraph 3.12 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from, or caused
by, the direction of or authorization by the Fund to maintain custody or any
securities or cash of the Fund in a
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foreign country including, but not limited to, losses resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement for
the benefit of a Portfolio including the purchase or sale of foreign exchange or
of contracts for foreign exchange or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at any time held
for the account of the applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such Portfolio's assets to
the extent necessary to obtain reimbursement.
14. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
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however that the Custodian shall not with respect to a Portfolio act under
Section 2.10 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Trustees of the Fund has
approved the initial use of a particular Securities System by such Portfolio and
the receipt of an annual certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has reviewed the use by such Portfolio of such
Securities System, as required in each case by Rule 17f-4 under the Investment
Company Act of 1940, as amended and that the Custodian shall not with respect to
a Portfolio act under Section 2.10A hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary that the Board of
Trustees has approved the initial use of the Direct Paper System by such
Portfolio and the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has reviewed the use by such
Portfolio of the Direct Paper System; provided further, however, that the Fund
shall not amend or terminate this Contract in contravention of any applicable
federal or state regulations, or any provision of the Declaration of Trust, and
further provided, that the Fund on behalf of one or more of the Portfolios may
at any time by action of its Board of Trustees (i) substitute another bank or
trust company for the Custodian by giving notice as described above to the
Custodian, or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the Comptroller of
the currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the custodian for its
costs, expenses and disbursements.
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15. SUCCESSOR CUSTODIAN
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Trustees of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Trustees of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to transfer
to an account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust company
shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the
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certified copy of the vote referred to or of the Board of Trustees to appoint a
successor custodian, the Custodian shall be entitled to fair compensation for
its services during such period as the Custodian retains possession of such
securities, funds and other properties and the provisions of this Contract
relating to the duties and obligations of the Custodian shall remain in full
force and effect.
16. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and
the Fund on behalf of each of the Portfolios, may from time to time agree on
such provisions interpretive of or in addition to the provisions of this
Contract as may in their joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Declaration of Trust of the
Fund. No interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
17. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to Big Edge Real Estate Securities Portfolio with respect to which it
desires to have the Custodian render services as custodian under the terms
hereof, it shall so notify the Custodian in writing, and if the Custodian agrees
in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
18. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
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19. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
20. SHAREHOLDER COMMUNICATIONS ELECTION
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
accounts established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and address for any purpose
other than corporate communications. Please indicate below whether the Fund
consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's
name, address, and share positions.
NO [ ] The Custodian is not authorized to release the
Fund's name, address, and share positions.
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IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the ________ day of__________________ ,
199_____.
ATTEST PHOENIX EDGE SERIES FUND
____________________________________ By__________________________________
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ By /s/ Donald E. Lynn
- ------------------------------------ ----------------------------------
Executive Vice President
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Schedule A
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Trustees of Phoenix Edge Series
Fund for use as sub-custodians for the Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
_________________________________
Fund's Authorized Officer
Date:____________________________
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EXHIBIT I
SUBCUSTODIAN AGREEMENT
----------------------
AGREEMENT made this day of , 19 , between State Street
Bank and Trust Company, A Massachusetts Trust Company (hereinafter referred to
as the "Custodian"), having its principal place of business at 225 Franklin
Street, Boston, MA, and (hereinafter referred to as the
"Subcustodian"), a organized under the laws of
and having an office at .
WHEREAS, Custodian has been appointed to act as Trustee, Custodian or
Subcustodian of securities and monies on behalf of certain of its customers
including, without limitation, collective investment undertakings, investment
companies subject to the U.S. Investment Company Act of 1940, as amended, and
employee benefit plans subject to the U.S. Employee Retirement Income Security
Act of 1974, as amended;
WHEREAS, Custodian wishes to establish Account (the "Account") with the
Subcustodian to hold and maintain certain property for which Custodian is
responsible as custodian; and
WHEREAS, Subcustodian agrees to establish the Account and to hold and
maintain all Property in the Account in accordance with the terms and conditions
herein set forth.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the custodian and the Subcustodian agree as follows:
I. THE ACCOUNT
A. ESTABLISHMENT OF THE ACCOUNT. Custodian hereby requests that
Subcustodian establish for each client of the Custodian an Account which shall
be composed of:
1. A Custody Account for any and all Securities (as
hereinafter defined) from time to time received by Subcustodian therefor, and
2. A Deposit Account for any and all Cash (as hereinafter
defined) from time to time received by Subcustodian therefor.
B. USE OF THE ACCOUNT. The Account shall be used exclusively to hold,
acquire, transfer or otherwise care for, on behalf of Custodian as custodian and
the customers of Custodian and not for Custodian's own interest, Securities and
such Cash or cash equivalents as are transferred to Subcustodian or as are
received in payment of any transfer of, or as payment on, or interest on, or
dividend from, any such Securities (herein collectively called "Cash").
C. TRANSFER OF PROPERTY IN THE ACCOUNT. Beneficial ownership of the
Securities and Cash in the Account shall be freely transferable without payment
of money or value other than for safe custody and administration.
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D. OWNERSHIP AND SEGREGATION OF PROPERTY IN THE ACCOUNT. The ownership
of the property in the Account, whether Securities, Cash or both, and whether
any such property is held by Subcustodian in an Eligible Depository, shall be
clearly recorded on Subcustodian's books as belonging to Custodian on behalf of
Custodian's customers, and not for Custodian's own interest and, to the extent
that Securities are physically held in the Account, such Securities shall also
be physically segregated from the general assets of Subcustodian, the assets of
Custodian in its individual capacity and the assets of Subcustodian's other
customers. In addition, Subcustodian shall maintain such other records as may be
necessary to identify the property hereunder as belonging to each Account.
E. REGISTRATION OF SECURITIES IN THE ACCOUNT. Securities which are
eligible for deposit in a depository as provided for in Paragraph III may be
maintained with the depository in an account for Subcustodian's customers.
Securities which are not held in a depository and that are ordinarily held in
registered form will be registered in the name of Subcustodian or in the name of
Subcustodian's nominee, unless alternate Instructions are furnished by
Custodian.
II. SERVICES TO BE PROVIDED BY THE SUBCUSTODIAN
The services Subcustodian will provide to Custodian and the manner in
which such services will be performed will be as set forth below in this
Agreement.
A. SERVICES PERFORMED PURSUANT TO INSTRUCTIONS. All transactions
involving the Securities and Cash in the Account shall be executed solely in
accordance with Custodian's Instructions as that term is defined in Paragraph
IV hereof, except those described in paragraph B below.
B. SERVICES TO BE PERFORMED WITHOUT INSTRUCTIONS. Subcustodian will,
unless it receives Instructions from Custodian to the contrary:
1. COLLECT CASH. Promptly collect and receive all dividends,
income, principal, proceeds from transfer and other payments with respect to
property held in the Account, and present for payment all Securities held in the
Account which are called, redeemed or retired or otherwise become payable and
all coupons and other income items which call for payment upon presentation, and
credit Cash receipts therefrom to the Deposit Account.
2. EXCHANGE SECURITIES. Promptly exchange Securities where the
exchange is purely ministerial including, without limitation, the exchange of
temporary Securities for those in definitive form and the exchange of warrants,
or other documents of entitlement to Securities, for the Securities themselves.
3. SALE OF RIGHTS AND FRACTIONAL INTERESTS. Whenever
notification of a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend or stock split is received for the Account and such
rights entitlement or fractional interest bears an expiration date, Subcustodian
will promptly endeavor to obtain Custodian's Instructions, but should these not
be received in time for Subcustodian to take timely action, Subcustodian is
authorized to sell such rights entitlement or fractional interest and to credit
the Account.
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<PAGE>
4. EXECUTE CERTIFICATES. Execute in Custodian's name for the
Account, whenever Subcustodian deems it appropriate, such ownership and other
certificates as may be required to obtain the payment of income from the
Securities held in the account.
5. PAY TAXES AND RECEIVE FUNDS. To pay or cause to be paid
from the Account any and all taxes and levies in the nature of taxes imposed on
the property in the Account by any governmental authority, and to take all steps
necessary to obtain all tax exemptions, privileges or other benefits, including
reclaiming and recovering any foreign withholding tax, relating to the Account
and to execute any declaration, affidavits, or certificates of ownership which
may be necessary in connection therewith.
6. PREVENT LOSSES. Take such steps as may be reasonably necessary
to secure or otherwise prevent the loss of, entitlements attached to or
otherwise relating to property held in the Account.
C. ADDITIONAL SERVICES.
1. TRANSMISSION OF NOTICES OF CORPORATE ACTION. By such means
as will permit Custodian to take timely action with respect thereto,
Subcustodian will promptly notify Custodian upon receiving notices or reports,
or otherwise becoming aware, of corporate action affecting Securities held in
the Account (including, but not limited to, calls for redemption, mergers,
consolidations, reorganizations, recapitalizations, tender offers, rights
offerings, exchanges subscriptions and other offerings) and dividend, interest
and other income payments relating to such Securities.
2. COMMUNICATIONS REGARDING THE EXERCISE OF ENTITLEMENTS. Upon
request by Custodian, Subcustodian will promptly deliver, or cause any Eligible
Depository authorized and acting hereunder to deliver, to Custodian all notices,
proxies, proxy soliciting materials and other communications that call for
voting or the exercise of rights or other specific action (including material
relative to legal proceedings intended to be transmitted to security holders)
relating to Securities held in the Account to the extent received by
Subcustodian or said Eligible Depository, such proxies or any voting instruments
to be executed by the registered holder of the Securities, but without
indicating the manner in which such Securities are to be voted.
3. MONITOR FINANCIAL SERVICE. In furtherance of its
obligations under this Agreement, Subcustodian will monitor a leading financial
service with respect to announcements and other information respecting property
held in the Account, including announcements and other information with respect
to corporate actions and dividend, interest and other income payments.
III. USE OF SECURITIES DEPOSITORY
Subcustodian may, with the prior written approval of Custodian, maintain all or
any part of the Securities in the Account with a securities depository or
clearing agency which is incorporated or organized under the laws of a country
other than the United States of America and is supervised or regulated by a
government agency or regulatory authority in the foreign jurisdiction having
authority over such depositories or agencies, and which operates (a) the central
system for handling of designated securities or equivalent book entries in
, or (b) a transnational system for the central handling of
securities or equivalent book entries (herein called "Eligible Depository"),
provided however, that,
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<PAGE>
while so maintained, such Securities shall be subject only to the directions of
Subcustodian, and that Subcustodian duties, obligations and responsibilities
with regard to such Securities shall be the same as if such Securities were held
by Subcustodian on its premises.
IV. CLAIMS AGAINST PROPERTY IN THE ACCOUNT
The property in the account shall not be subject to any right, charge,
security interest, lien or claim of any kind (collectively "Charges") in favor
of Subcustodian or any Eligible Depository or any creditor of Subcustodian or of
any Eligible Depository except a claim for payment for such property's safe
custody or administration in accordance with the terms of this Agreement.
Subcustodian will immediately notify Custodian of any attempt by any party to
assert any Charge against the property held in the Account and shall take all
lawful actions to protect such property from such Charges until Custodian has
had a reasonable time to respond to such notice.
V. SUBCUSTODIAN'S WARRANTY
Subcustodian represents and warrants that:
(A) It is a branch of a "qualified U.S. bank" or an "eligible foreign
custodian" as those terms are defined in Rule 17f-5 of the Investment Company
Act of 1940, a copy of which is attached hereto as Attachment A (the "Rule"),
and Subcustodian shall immediately notify Custodian, in writing or by other
authorized means, in the event that there appears to be a substantial likelihood
that Subcustodian will cease to qualify under the Rule as currently in effect or
as hereafter amended, or
(B) It is the subject of an exemptive order issued by the United States
Securities and Exchange Commission which order permits Custodian to employ
Subcustodian notwithstanding the fact that Subcustodian fails to qualify under
the terms of the Rule, and Subcustodian shall immediately notify Custodian, in
writing or by other authorized means, if for any reason it is no longer covered
by such exemptive order.
Upon receipt of any such notification required under (A) or (B) of this section,
Custodian may terminate this Agreement immediately without prior notice to
Subcustodian.
VI. DEFINITIONS
A. Instructions. The term "Instructions" means:
1. instructions in writing signed by authorized individuals
designated as such by Custodian;
2. telex or tested telex instructions of Custodian;
3. other forms of instructions in computer readable form as shall
customarily be used for the transmission of like information, and
4. such other forms of communication as from time to time may
be agreed upon by Custodian and Subcustodian, which Subcustodian believes in
good faith to have been given by Custodian or which are transmitted with proper
testing or authentication pursuant to terms and conditions which Custodian may
specify.
4
<PAGE>
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded. Subcustodian shall act in
accordance with Instructions and shall not be liable for any act or omission in
respect of any Instruction except in the case of willful default, negligence,
fraud, bad faith, willful misconduct, or reckless disregard of duties on the
part of Subcustodian. Subcustodian in executing all Instructions will take
relevant action in accordance with accepted industry practice and local
settlement practice.
B. ACCOUNT. The term "Account" means collectively the Custody Account,
and the Deposit Account.
C. SECURITIES. The term "Securities" includes, without limitation,
stocks, shares, bonds, debentures, debt securities (convertible or
non-convertible), notes, or other obligations or securities and any
certificates, receipts, futures contracts, foreign exchange contracts, options,
warrants, scrip or other instruments representing rights to receive, purchase or
subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets.
VII. MISCELLANEOUS PROVISIONS
A. STATEMENTS REGARDING THE ACCOUNT. Subcustodian will supply
Custodian with such statements regarding the Account as Custodian may request,
including the identity and location of any Eligible Depository authorized and
acting hereunder. In addition, Subcustodian will supply Custodian an advice or
notification of any transfers of Securities to or from the Account indicating,
as to Securities acquired for the Account, if applicable, the Eligible
Depository having physical possession of such Securities.
B. EXAMINATION OF BOOKS AND RECORDS. Subcustodian agrees that its
books and records relating to the Account and Subcustodian's actions under this
Agreement shall be open to the physical, on-premises inspection and audit at
reasonable times by officers of, auditors employed by or other representatives
of Custodian including (to the extent permitted under the law of )
the independent public accountants for any customer of Custodian whose property
is being held hereunder and such books and records shall be retained for such
period as shall be agreed upon by Custodian and Subcustodian.
As Custodian may reasonably request from time to time, Subcustodian will furnish
its auditor's reports on its system of internal controls, and Subcustodian will
use its best efforts to obtain and furnish similar reports of any Eligible
Depository authorized and acting hereunder.
C. STANDARD OF CARE. In holding, maintaining, servicing and disposing
of Property under this Agreement, and in fulfilling any other obligations
hereunder, Subcustodian shall exercise the same standard of care that it
exercises over its own assets, provided that Subcustodian shall exercise at
least the degree of care and maintain adequate insurance as expected of a
prudent professional Subcustodian for hire and shall assume the burden of
proving that it has exercised such care in its maintenance of Property held by
Subcustodian in its Account. The maintenance of the Property in an Eligible
Depository shall not affect Subcustodian's standard of care, and Subcustodian
will remain as fully responsible for any loss or damage to such securities as if
it had itself retained physical possession of them. Subcustodian shall also
indemnify and hold harmless Custodian and each of Custodian's customers from and
against any loss, damage, cost, expense, liability or
5
<PAGE>
claim (including reasonable attorney's fees) arising out of or in connection
with the improper or negligent performance or the nonperformance of the duties
of Subcustodian.
Subcustodian shall be responsible for complying with all provisions of the law
of , or any other law, applicable to Subcustodian in connection with
its duties hereunder, including (but not limited to) the payment of all transfer
taxes or other taxes and compliance with any currency restrictions and
securities laws in connection with its duties as Subcustodian.
D. LOSS OF CASH OR SECURITIES. Subcustodian agrees that, in the even
of any loss of Securities or Cash in the Account, Subcustodian will use its best
efforts to ascertain the circumstances relating to such loss and will promptly
report the same to Custodian and shall use every legal means available to it to
effect the quickest possible recovery.
E. COMPENSATION OF SUBCUSTODIAN. Custodian agrees to pay to
Subcustodian from time to time such compensation for its services and such
out-of-pocket or incidental expenses of Subcustodian pursuant to this Agreement
as may be mutually agreed upon in writing from time to time.
F. OPERATING REQUIREMENTS. The Subcustodian agrees to follow such
Operating Requirements as the Custodian may establish from time to time. A copy
of the current Operating Requirements is attached as Attachment B to this
Agreement.
G. TERMINATION. This Agreement may be terminated by Subcustodian or
Custodian on 60 days' written notice to the other party, sent by registered
mail, provided that any such notice, whether given by Subcustodian or Custodian,
shall be followed within 60 days by Instructions specifying the names of the
persons to whom Subcustodian shall deliver the Securities in the Account and to
whom the Cash in the account shall be paid. If within 60 days following the
giving of such notice of termination, Subcustodian does not receive such
Instructions, Subcustodian shall continue to hold such Securities and Cash
subject to this Agreement until such Instructions are given. The obligations of
the parties under this Agreement shall survive the termination of this
Agreement.
G. NOTICES. Unless otherwise specified in this Agreement, all notices
and communications with respect to matters contemplated by this Agreement shall
be in writing, and delivered by mail, postage prepaid, telex, SWIFT, or other
mutually agreed telecommunication methods to the following addresses (or to such
other address as either party hereto may from time to time designate by notice
duly given in accordance with this paragraph):
To Subcustodian:
To Custodian: State Street Bank and Trust Company
Securities Operations/
Network Administration
P.O. Box 1631
Boston, MA 02105
H. CONFIDENTIALITY. Subcustodian and Custodian shall each use its
best efforts to maintain the confidentiality of the property in the Account,
and the beneficial owners thereof, subject, however, to the provisions of any
laws, requiring disclosure. In addition,
6
<PAGE>
Subcustodian shall safeguard any test keys, identification codes or other
security devices which Custodian shall make available to it. The Subcustodian
further agrees it will not disclose the existence of this Agreement or any
current business relationship unless compelled by applicable law or regulation
or unless it has secured the Custodian's written consent.
I. ASSIGNMENT. This Agreement shall not be assignable by either party
but shall bind any successor in interest of Custodian and Subcustodian
respectively.
J. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of . To the extent inconsistent
with this Agreement or Custodian's Operating Requirements as attached hereto,
Subcustodian's rules and conditions regarding accounts generally or custody
accounts specifically shall not apply.
CUSTODIAN: STATE STREET BANK AND TRUST COMPANY
By:______________________________
Date:____________________________
AGREED TO BY SUBCUSTODIAN
By:______________________________
Date:____________________________
7
EXHIBIT 8.4
Amendment to Custodian Contract
<PAGE>
AMENDMENT TO CUSTODIAN CONTRACT
Agreement made by and between State Street Bank and Trust Company (the
"Custodian") and The Phoenix Edge Series Fund (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated April 28, 1995 (the "Custodian Contract") governing the terms and
conditions under which the Custodian maintains custody of the securities and
other assets of the Fund; and
WHEREAS, the Custodian and the Fund desire to amend the terms and
conditions under which the Custodian maintains the Fund's securities and other
non-cash property in the custody of certain foreign sub-custodians in conformity
with the requirements of Rule 17f-5 under the Investment Company Act of 1940, as
amended;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Fund hereby amend the Custodian Contract by the
addition of the following terms and provisions;
1. Notwithstanding any provisions to the contrary set forth in the
Custodian Contract, the Custodian may hold securities and other non-cash
property for all of its customers, including the Fund, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other non-cash property
of the Fund which are maintained in such account shall identify by book-entry
those securities and other non-cash property belonging to the Fund and (ii) the
Custodian shall require that securities and other non-cash property so held by
the foreign sub-custodian be held separately from any assets of the foreign
sub-custodian or of others.
2. Except as specifically superseded or modified herein, the terms and
provisions of the Custodian Contract shall continue to apply with full force and
effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed as a sealed instrument in its name and behalf by its duly authorized
representative this 17th day of October, 1996.
THE PHOENIX EDGE SERIES FUND
By: /s/ Michael E. Haylon
-----------------------------------------
Title: Executive Vice President
---------------------------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/ Donald E. Lynn
-----------------------------------------
Title: Executive Vice President
---------------------------------------
EXHIBIT 9.1
TRANSFER AGENCY AGREEMENT
between
THE BIG EDGE SERIES FUND
and
PHOENIX EQUITY PLANNING CORPORATION
<PAGE>
TRANSFER AGENCY AGREEMENT
between
THE BIG EDGE SERIES FUND
and
PHOENIX EQUITY PLANNING CORPORATION
<PAGE>
Table of Contents
-----------------
Page
----
1. DOCUMENTS ...............................................................1
2. AUTHORIZED SHARES .......................................................1
3. PEPCO TO REGISTER SHARES ................................................1
4. PEPCO TO RECORD TRANSFERS ...............................................1
5. RECEIPT OF FUNDS ........................................................2
A. Non-Money Market Funds ...........................................2
B. Money Market Funds ...............................................2
6. PURCHASE ORDERS .........................................................2
7. NOTICE OF DISTRIBUTION ..................................................2
8. DISTRIBUTIONS ...........................................................2
9. REDEMPTIONS .............................................................3
A. Non-Money Market Funds ...........................................3
B. Money Market Funds ...............................................3
10. TAX RETURNS .............................................................4
11. BOOKS AND RECORDS .......................................................4
12. INFORMATION TO THE TRUST ................................................5
13. CORRESPONDENCE ..........................................................5
14. MAILINGS .......................................................6
15. FEES AND CHARGES ........................................................6
16. COMPLIANCE WITH GOVERNMENTAL RULES AND
REGULATIONS ..........................................................6
17. REFERENCES TO PEPCO .....................................................6
18. FORCE MAJEURE ...........................................................6
<PAGE>
19. STANDARD OF CARE ........................................................6
20. INDEMNIFICATION .........................................................6
21. FURTHER ACTIONS .........................................................7
22. ADDITIONAL SERIES .......................................................7
23. AMENDMENT AND TERMINATION ...............................................7
24. NOTICES .......................................................7
25. MISCELLANEOUS ...........................................................8
<PAGE>
TRANSFER AGENCY AGREEMENT
-------------------------
AGREEMENT made as of this 29th day of August, 1988 by and between The
Big Edge Series Fund, a Massachusetts business trust having its principal place
of business at Greenfield, Massachusetts (hereinafter called the "Trust") and
Phoenix Equity Planning Corporation, a Connecticut corporation and an indirect
subsidiary of Phoenix Mutual Life Insurance Company, with its principal place of
business at Hartford, Connecticut (hereinafter called "PEPCO").
WHEREAS, the Trust is authorized to issue shares of beneficial interest
("Shares") in separate series, with each such series representing interests in a
separate portfolio of securities and other assets; and
WHEREAS, the Trust intends to offer Shares in six series: Money Market
Series, Bond Series, Stock Series, Total-Vest Series, Zero Bond I Series and
Zero Bond II Series (such series, together with all other series subsequently
established by the Trust and made subject to this Agreement in accordance with
paragraph 22, being herein referred to as the "Series");
WITNESSETH THAT:
PEPCO is hereby appointed Transfer Agent for the Shares of, and the
Dividend Disbursing Agent for, the Trust under the following terms and
conditions:
DOCUMENTS
- ---------
1. In connection with the appointment of PEPCO as Transfer Agent, the
Trust shall file with PEPCO such certificates, documents or opinions which PEPCO
may, in its discretion, deem necessary or appropriate in the proper performance
of its duties.
AUTHORIZED SHARES
- -----------------
2. The Trust certifies to PEPCO that as of the close of business
on the date of this Agreement, it has authorized an unlimited amount of Shares.
PEPCO TO REGISTER SHARES
- ------------------------
3. PEPCO shall record issuance of Shares of beneficial interest of the
Trust. Except as specifically agreed in writing between PEPCO and the Trust,
PEPCO shall have no obligation, when crediting Shares, to take cognizance of any
other laws relating to the issue and sale of such Shares.
PEPCO TO RECORD TRANSFERS
- -------------------------
4. PEPCO upon receipt of request for transfer in proper form is
authorized to transfer on the records of the Trust maintained by it from time to
time Shares of the appropriate Series, and to credit a like amount of Shares to
the transferee.
<PAGE>
RECEIPT OF FUNDS
- ----------------
5. A. NON-MONEY MARKET FUNDS Upon receipt at the office designated by
PEPCO of an order to purchase Shares and, in the case of a new account
accompanied by a new account application or sufficient information to establish
an account, PEPCO shall stamp the transmittal accompanying such order with the
date of receipt, and shall compute the number of Shares to be purchased
according to the price of Shares in effect for such purchases as set forth in
the Trust's then current prospectus. PEPCO shall credit the Share account of the
shareholder with the number of Shares so purchased and shall promptly mail the
shareholder a notice of such credit. All such actions are subject to any
instructions which the Trust may give to PEPCO with respect to acceptance of
orders for Shares so received by it. PEPCO shall determine the amount due the
appropriate Series and shall notify Phoenix Mutual of such amount. Phoenix
Mutual shall deposit on the second business day following receipt of such order
by PEPCO the net amount due the appropriate Series in the bank account of the
Series maintained by the Trust's custodian bank the "Custodian") and notify the
Custodian and PEPCO of the total amount deposited.
B. MONEY MARKET FUNDS Upon receipt at the office designated by
PEPCO of an order to purchase Shares and, in the case of a new account
accompanied by a new account application or sufficient information to establish
an account, PEPCO shall stamp the transmittal accompanying such order with the
date of receipt. PEPCO shall determine the amount due the appropriate Series and
shall notify Phoenix Mutual of such amount. Phoenix Mutual shall, as of the
second business day following receipt of such order by PEPCO, credit federal
funds to the appropriate Series of the Trust in the face amount of the check or
other instrument and shall deposit the amount due the Trust to the custodial
account of the appropriate Series of the Trust. PEPCO shall credit the
shareholder's account with number of Shares purchased according to the price of
the Shares of that Series in effect for such purchases as set forth in the
Trust's then current prospectus.
PURCHASE ORDERS
- ---------------
6. Upon receipt of an order from the Trust for the purchase of Shares
of a Series and, in the case of a new account, a completed account application,
PEPCO shall credit the Share account of the shareholder with the number of
Shares as purchased and shall promptly mail to the shareholder a notice of such
credit.
NOTICE OF DISTRIBUTION
- ----------------------
7. The Trust shall promptly inform PEPCO of the declaration of any
dividend or distribution on account of Shares of any Series.
DISTRIBUTIONS
- -------------
8. PEPCO shall act as Dividend Disbursing Agent for the Trust, and, as
such, in accordance with the provisions of the Trust's Declaration of Trust, the
then current prospectus and instructions received from time to time from the
Trust, shall prepare and mail or credit income and capital gain payments to
shareholders. As the Dividend Disbursing Agent it shall, before the payment date
of any such dividend or distribution with respect to any Series, notify the
Custodian
2
<PAGE>
of the estimated amount required to pay any portion of said dividend or
distribution which is payable in cash, and the Trust agrees that on or before
the payment date of such distribution, it shall instruct the Custodian to make
available to the Dividend Disbursing agent from the account of that Series
sufficient funds for the cash amount to be paid out. If a shareholder is
entitled to receive additional Shares by virtue of any such distribution or
dividend, appropriate credits will be made to his account.
REDEMPTIONS
- -----------
9. A. NON-MONEY MARKET FUNDS PEPCO shall receive and shall stamp
with the date of receipt, all requests for redemptions or repurchase of Shares
and shall process said redemption and repurchase requests as follows:
1. If such redemption or repurchase requests comply with the
standards for redemption or repurchase as approved by the
Trust, PEPCO shall notify the Trust of the total number of
Shares presented and covered by such requests received by
PEPCO on said date;
2. On or prior to the seventh calendar day succeeding any such
request for redemption or repurchase, PEPCO shall from cash
available in the bank account maintained by the Custodian,
pay the applicable redemption or repurchase price, as the
case may be, to the investor as set forth in the
Declaration of Trust and then current prospectus of the
Trust;
3. If any such request for redemption or repurchase does not
comply with the standards for redemption approved by the
Trust, PEPCO shall promptly notify the shareholder of such
fact, together with the reason therefor, and shall effect
such redemption or repurchase at the price applicable to
the date and time of receipt of documents or a request
complying with said standards or, in the case of a
repurchase, at such other time as the Trust shall so
direct.
4. PEPCO shall mail to the shareholder a confirmation showing
trade date, number of full and fractional Shares of each
Series redeemed (in case of a fractional Share, rounded to
three decimal places), the price per Share and total
redemption proceeds.
B. MONEY MARKET FUNDS PEPCO shall process each order for the
redemption of Shares accepted by PEPCO on behalf of the Trust from or on behalf
of a shareholder and shall mail to the shareholder a confirmation showing trade
date, number of full and fractional Shares of each Series redeemed (in the case
of a fractional Share, rounded to three decimal places), the price per Share and
the total redemption proceeds. In the event of a complete redemption of Shares
of any Series, such confirmation shall show, in addition, the amount of
accumulated dividends included in such total redemption proceeds not previously
reported to the shareholder in a monthly statement and the
3
<PAGE>
total distributions for the year to date. PEPCO shall either (a) prepare, affix
the appropriate facsimile signature to, address and mail a check in the
appropriate amount to the appropriate person or, (b) in the event redemption
proceeds are to be wired through the Federal Reserve Wire system or by bank wire
cause such proceeds to be wired in federal funds to the bank or trust company
account designated by the shareholder for receiving such proceeds. The
requirements as to instruments of transfer and other documentation, the
applicable redemption price and the time of payment shall be as provided in the
then currently effective prospectus, subject to such supplemental requirements
consistent with such prospectus as may be established by mutual agreement
between the Trust and PEPCO. If PEPCO or the Trust determines that a request for
redemption does not comply with the requirements for redemption, PEPCO shall
promptly so notify the shareholder, together with the reason therefor, and shall
effect such redemption at the price in effect at the time of receipt of
documents or request complying with said standards.
C. PEPCO shall notify the Custodian and the Trust on each business
day of the amount of cash required to meet payments made with respect to each
Series pursuant to the provisions of this paragraph and the Trust shall instruct
the Custodian to make available from time to time sufficient funds therefor in
the liquidation account of the appropriate Series.
D. Procedures ant standards for effecting and accepting redemption
orders from shareholders by telephone shall be established by mutual agreement
between PEPCO and the Trust consistent with the then current prospectus.
E. The authority of PEPCO to perform its responsibilities under
this paragraph 9 A & B shall be suspended upon receipt of notification by it of
the suspension of the determination of the Trust's net asset value.
TAX RETURNS
- -----------
10. PEPCO shall prepare, file with the Internal Revenue Service and
with the appropriate State Agencies, and, if required, mail to shareholders such
returns for reporting dividends and distributions paid as are required to be so
filed and mailed, and shall withhold and pay on behalf of the Trust such sums as
are required to be withheld under applicable Federal and state tax laws, rules
and regulations.
BOOKS AND RECORDS
- -----------------
11. PEPCO shall maintain records showing for each shareholder's account
relative to each Series the following:
A. Names, addresses and tax identifying numbers;
B. Number of Shares held;
4
<PAGE>
C. Historical information regarding the account of each
shareholder, including dividends paid and date and price for
all transactions;
D. Any stop or restraining order placed against the account;
E. Any dividend reinvestment order, plan application, dividend
address and correspondence relating to the current maintenance
of the account;
F. Any information required in order for PEPCO to perform the
calculations contemplated or required by this Agreement.
Any such records required to be maintained by Rule 31a-1 of the
Investment Company Act of 1940 or pertinent to variable life insurance or
variable annuity contracts are the property of the Trust and shall be controlled
by the Trust and preserved for the periods prescribed in Rule 31a-2 of said
rules as specifically noted below. Such records may be inspected, audited and
photocopied by the Trust, Trustees, agents, auditors, counsel and officers of
the Trust identified by the Trust, and representatives, employees or agents of
any regulatory agency, at reasonable times. PEPCO shall furnish any state
insurance commissioner with such information or reports in connection with the
services provided under this Agreement as the Commissioner may request in order
to ascertain whether variable life insurance or variable annuity operations are
being conducted in accordance with applicable law or regulations. PEPCO will
promptly notify the Trust in the event a request to inspect such records is made
by any other person or organization and will act only in accordance with the
instructions of the Trust. PEPCO, may at its option at any time, and shall
forthwith upon the Trust's demand, turn over to the Trust and cease to retain in
PEPCO's files, records and documents created and maintained by PEPCO pursuant to
this Agreement, except that prior to responding to a demand by the Trust, PEPCO
will be allowed reasonable time to copy any records it determines are needed in
the performance of its services or for its protection. If not so turned over to
the Trust, such records and documents will be retained by PEPCO for six years
from the year of creation, during the first two of which such documents will be
in readily accessible form. At the end of the six year period, such records and
documents will either be turned over to the Trust, or destroyed in accordance
with the Trust's authorization.
INFORMATION TO THE TRUST
- ------------------------
12. PEPCO shall furnish to the Trust such other information, including
periodic reports, shareholder lists, and statistical and other information as
may be agreed upon from time to time.
CORRESPONDENCE
- --------------
13. PEPCO shall answer correspondence from shareholders relating to
their Share accounts and such other correspondence as may from time to time be
mutually agreed upon.
5
<PAGE>
MAILINGS
- --------
14. PEPCO shall address and mail such materials, including but not
limited to periodic reports and distributions, as may be supplied by the Trust.
FEES AND CHARGES
- ----------------
15. PEPCO shall receive such compensation from the Trust or Phoenix
Mutual Life Insurance Company for its services as the Trust's Transfer and
Dividend Disbursing Agent, and for its other duties pursuant hereto, as may be
agreed upon from time to time.
COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS
- --------------------------------------------------
16. The Trust assumes full responsibility for the preparation, contents
and distribution of each prospectus of the Trust for complying with all
applicable requirements of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and any laws, rules and regulations
of governmental authorities having jurisdiction.
REFERENCES TO PEPCO
- -------------------
17. The Trust shall not circulate any printed matter which contains any
reference to PEPCO without the prior written approval of PEPCO, excepting solely
such printed matter as merely identifies PEPCO as Transfer Agent and Dividend
Disbursing Agent for the Trust and Plan Agent for the shareholders of the Trust.
The Trust shall submit printed matter requiring approval to PEPCO in draft form,
allowing sufficient time for review by PEPCO and its counsel prior to any
deadline for printing.
FORCE MAJEURE
- -------------
18. PEPCO shall not be liable for loss of data, occurring by reason of
circumstances beyond its control, including but not limited to acts of civil or
military authority, national emergencies, fire, flood or catastrophe, acts of
God, insurrection, war, riots, or failure of transportation, communication or
power supply. PEPCO shall use its best efforts to minimize the likelihood of all
damage, loss of data, delays and errors resulting from uncontrollable events,
and if such damage, loss of data, delays or errors occur, PEPCO shall use its
best efforts to mitigate the effects of such occurrence.
STANDARD OF CARE
- ----------------
19. PEPCO shall at all times act in good faith and agrees to use its
best efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall not be
liable for loss or damage due to errors unless said error is caused by its
negligence, bad faith or willful misconduct or that of its employees.
INDEMNIFICATION
- ---------------
20. The Trust shall indemnify and hold PEPCO harmless from all loss,
cost, damage and expense, including reasonable expenses for counsel, incurred by
it resulting from any claim, demand, action or suit in connection with its
acceptance of this Agreement, any action or omission
6
<PAGE>
by it in the performance of its duties hereunder, or the functions of Transfer
and Dividend Disbursing Agent, or as a result of acting upon any instruction
believed by it to have been executed by a duly authorized officer of the Trust,
or upon any information, data, records or documents provided PEPCO or its agents
by computer tape, telex CRT data entry or other similar means authorized by the
Trust, provided that this indemnification shall not apply to actions or
omissions of PEPCO in cases of its own willful misconduct or negligence, and
further provided, that prior to confessing any claim against it which may be
subject of this indemnification, PEPCO shall give the Trust reasonable
opportunity to defend against said claim in its own name or in the name of
PEPCO. It is further understood that PEPCO will use all reasonable care to
identify and notify the Trust promptly concerning any situation which presents
or appears likely to present the probability of a claim for indemnification
against the Trust. The Trust shall have the option to defend PEPCO against any
claim which may be the subject of this indemnification and in the event that the
Trust so elects, it will so notify PEPCO and thereupon the Trust shall take over
complete defense of the claim and State Street shall sustain no further legal or
other expenses in such situation for which it shall seek indemnification under
this Agreement.
FURTHER ACTIONS
- ---------------
21. Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
ADDITIONAL SERIES
- -----------------
22. In the event that the Trust establishes one or more series of
Shares in addition to the Money Market Series, Bond Series, Stock Series,
Total-Vest Series, Zero Bond I Series and Zero Bond II Series, with respect to
which it desires to have PEPCO render services as Transfer Agent under the terms
hereof, it shall so notify PEPCO by telephone or in writing, and if PEPCO agrees
by telephone or in writing to provide such services, such series of Shares shall
become a Series hereunder.
AMENDMENT AND TERMINATION
- -------------------------
23. This Agreement shall run for a period of one year from the date
first above written and from year to year thereafter and may be modified or
amended from time to time by mutual written agreement between the parties
hereto. This Agreement may be terminated at any time after the expiration of one
year by sixty (60) days' written notice given by one party to the other. Upon
termination hereof, the Trust or Phoenix Mutual shall pay to PEPCO such
compensation as may be due as of the date of such termination, and shall
likewise reimburse PEPCO for its costs, expenses and disbursements reasonably
incurred or made by it in the normal performance of its duties under this
Agreement.
NOTICES
- -------
24. Notices and other writings delivered or mailed postage prepaid to
the Trust or to PEPCO or to such other address as the Trust or PEPCO may
hereafter specify, shall be deemed to have been properly delivered or given
hereunder to the respective address.
7
<PAGE>
MISCELLANEOUS
- -------------
25. It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but bind only the Trust property of
the Trust as provided in the Declaration of Trust. The execution and delivery of
this Agreement have been authorized by the Trustees and signed by a duly
authorized officer of the Trust acting as such, and neither such authorization
by such Trustees nor such execution by such officer shall be deemed to have been
made by any of them individually or be binding upon or impose any liability on
any of them personally, but shall bind only the Trust property of the Trust as
provided in the Declaration of Trust. The Declaration of Trust is on file with
the Secretary of The Commonwealth of Massachusetts.
THE BIG EDGE SERIES FUND
/s/ Robert Chesek
-----------------------------------
Robert Chesek, President
PHOENIX EQUITY PLANNING CORPORATION
/s/ Janice L. Scites
-----------------------------------
Janice L. Scites, President
Consented to by: PHOENIX MUTUAL LIFE INSURANCE COMPANY
By /s/ Martin J. Gavin
------------------------------------
Martin J. Gavin, Vice President
8
EXHIBIT 9.3
Financial Agent Agreement
<PAGE>
FINANCIAL AGENT AGREEMENT
THIS AGREEMENT made and concluded as of this 11th day of December ,
1996 by and between Phoenix Equity Planning Corporation, a Connecticut
corporation having a place of business located at 100 Bright Meadow Boulevard,
Enfield, Connecticut (the "Financial Agent") and The Phoenix Edge Series Fund, a
Massachusetts business trust having a place of business located at 101 Munson
Street, Greenfield, Massachusetts (the "Trust").
WITNESSETH THAT:
1. Financial Agent shall keep the books of the Trust and compute the
daily net asset value of shares of the Trust in accordance with instructions
received from time to time from the Board of Trustees of the Trust; which
instructions shall be certified to Financial Agent by the Trust's Secretary.
Financial Agent shall report such net asset value so determined to the Trust and
shall perform such other services as may be requested from time to time by the
Trust as are reasonably incidental to Financial Agent's duties hereunder.
2. Financial Agent shall be obligated to maintain, for the periods and
in the places required by Rule 31a-2 under the Investment Company Act of 1940,
as amended, those books and records maintained by Financial Agent. Such books
and records are the property of the Trust and shall be surrendered promptly to
the Trust upon its request. Furthermore, such books and records shall be open to
inspection and audit at reasonable times by officers and auditors of the Trust.
3. As compensation for its services hereunder during any fiscal year of
the Trust, Financial Agent shall receive, within eight days after the end of
each month, a fee as specified in Schedule A.
4. Financial Agent shall not be liable for anything done or omitted by
it in the exercise of due care in discharging its duties specifically described
hereunder and shall be answerable and accountable only for its own acts and
omissions and not for those of any agent employed by it nor for those of any
bank, trust company, broker, depository, correspondent or other person.
Financial Agent shall be protected in acting upon any instruction, notice,
request, consent, certificate, resolution, or other instrument or paper believed
by Financial Agent to be genuine, and to have been properly executed, and shall,
unless otherwise specifically provided herein, be entitled to receive as
conclusive proof of any fact or matter required to be ascertained by Financial
Agent hereunder a certificate signed by the Secretary of the Trust. Financial
Agent shall be entitled, with respect to questions of law relating to its duties
hereunder, to advice of counsel (which may be counsel for the Trust) and, with
respect to anything done or omitted by it in good faith hereunder in conformity
with the advice of or based upon an opinion of counsel, to be held harmless by
the Trust from all claims of loss or damage. Nothing herein shall protect
Financial Agent against any liability to the Trust or to its respective
shareholders to which Financial Agent would otherwise be subject by reason of
its willful misfeasance, bad faith, gross negligence or reckless disregard of
its duties hereunder. Except as provided in this paragraph, Financial Agent
shall not be entitled to any indemnification by the Trust.
<PAGE>
5. Subject to prior approval of the Board of Trustees of the Trust,
Financial Agent may appoint one or more sub-financial agents to perform any of
the functions and services which are to be provided under the terms of this
Agreement upon such terms and conditions as may be mutually agreed upon by the
Trust, Financial Agent and such sub-financial agent.
6. This Agreement shall continue in effect only so long as (a) such
continuance is specifically approved at least annually by the Board of Trustees
of the Trust or by a vote of a majority of the outstanding voting securities of
the Trust, and (b) the terms and any renewal of such Agreement have been
approved by the vote of a majority of the trustees of the Trust who are not
parties to this Agreement or interested persons, as that term is defined in the
Investment Company Act of 1940, as amended, of any such party, cast in person at
a meeting called for the purpose of voting on such approval. A "majority of the
outstanding voting securities of the Trust" shall have, for all purposes of this
Agreement, the meaning provided therefor in said Investment Company Act.
7. Either party may terminate the within Agreement by tendering written
notice to the other, whereupon Financial Agent will be relieved of the duties
described herein. This Agreement shall immediately terminate in the event of its
assignment, as that term is defined in said Investment Company Act.
8. This Agreement shall be construed and the rights and obligations of
the parties hereunder enforced in accordance with the laws of the Commonwealth
of Massachusetts.
9. This Agreement shall become effective on January 1, 1997.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
THE PHOENIX EDGE SERIES FUND
By: /s/ Philip R. McLoughlin
-------------------------------------
Philip R. McLoughlin
President
PHOENIX EQUITY PLANNING
CORPORATION
By: /s/ David R. Pepin
-------------------------------------
David R. Pepin
Executive Vice President
<PAGE>
SCHEDULE A
FEE SCHEDULE
FEE INFORMATION FOR SERVICES AS FINANCIAL AGENT
Annual Financial Agent Fees shall be based on the following formula:
6 basis points on average daily net assets
EXHIBIT 10
Letter to SEC from Patricia O. McLaughlin
<PAGE>
February 27, 1992
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington D.C. 20549
Re: The Big Edge Series Fund
Registration No. 33-5033
Dear Sirs:
As counsel of Phoenix Mutual Life Insurance Company (the "Company"), I
have participated in the development of and am familiar with The Big Edge Series
Fund, an open-end, diversified management investment company whose shares are
the subject of the above-captioned Registration Statement on Form N-1A.
Post-effective amendment No. 7 to this Registration Statement reflects the
Trustees' decisions to add a Balanced Series to the Fund, to rename the Fund
"The Phoenix Edge Series Fund", to rename the Stock Series the "Growth Series"
and to rename the Total-Vest Series the "Total Return Series".
In connection with this opinion, I have reviewed relevant materials
including the Registration Statement, the Declaration of Trust, proceedings of
the Board of Trustees and proceedings of the Board of Directors of the Company.
Based upon this review, I am of the opinion that the shares of all
Series of the Big Edge Series Fund have been validly and duly issued, fully paid
and non-assessable. Furthermore, I am of the opinion that the shares of the
Balanced Series, when issued, will have been validly and duly issued, fully paid
and non-assessable.
I further consent to the use of this opinion as an exhibit to the
above-captioned Registration Statement.
Very truly yours,
/s/ Patricia O. McLaughlin
Patricia O. McLaughlin
EXHIBIT 10.1
Letter to SEC from Richard J. Wirth
<PAGE>
April 25, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Ladies and Gentlemen:
This opinion is furnished in connection with the registration under the
Securities Act of 1933, as amended, of shares ("Shares") of the Phoenix Real
Estate Securities Series of The Phoenix Edge Series Fund (the "Phoenix Fund").
In rendering our opinion, we have examined such documents, records, and
matters of law as we deemed necessary for purposes of this opinion. We have
assumed the genuineness of all signatures of all parties, the authenticity of
all documents submitted as originals, the correctness of all copies and the
correctness of all written or oral statements made to us.
Based upon the subject to the foregoing, it is our opinion that the
Shares that will be issued by the Phoenix Fund when sold will be legally issued,
fully paid, and nonassessable.
Our opinion is rendered solely in connection with the Registration
Statement on Form N-1A under which the Shares will be registered and may not be
relied upon for any other purposes without our written consent. We hereby
consent to the use of this opinion as an exhibit to such Registration Statement.
Yours truly,
/s/ Richard J. Wirth
Richard J. Wirth
EXHIBIT 11
WRITTEN CONSENT OF PRICE WATERHOUSE LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 20 to the registration
statement on Form N-1A (the "Registration Statement) of our report dated
February 12, 1997, relating to the financial statements and financial highlights
of the Money Market Series, Growth Series, Multi-Sector Fixed Income Series,
Total Return (currently Strategic Allocation) Series, International Series,
Balanced Series, Real Estate Series, Strategic Theme Series and Aberdeen New
Asia Series of the Phoenix Edge Series Fund, which appears in such Statement of
Additional Information, and to the incorporation by reference of our report into
the Prospectus which constitutes part of this Registration Statement. We also
consent to the references to us under the headings "Independent Accountants" and
"Financial Statements" in such Statement of Additional Information and to the
references to us under the headings "Financial Highlights" and "Other
Information" in such Prospectus.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Boston, Massachusetts
April 15, 1997
<PAGE>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> PHOENIX EDGE MONEY MARKET SERIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 129308
<INVESTMENTS-AT-VALUE> 129308
<RECEIVABLES> 1622
<ASSETS-OTHER> 526
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 131456
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 95
<TOTAL-LIABILITIES> 95
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 131361
<SHARES-COMMON-STOCK> 13136
<SHARES-COMMON-PRIOR> 10291
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 131361
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5865
<OTHER-INCOME> 0
<EXPENSES-NET> (590)
<NET-INVESTMENT-INCOME> 5275
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 5275
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5304)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31501
<NUMBER-OF-SHARES-REDEEMED> (29187)
<SHARES-REINVESTED> 530
<NET-CHANGE-IN-ASSETS> 28418
<ACCUMULATED-NII-PRIOR> 29
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 431
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 590
<AVERAGE-NET-ASSETS> 107758
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.50)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> PHOENIX EDGE GROWTH SERIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1217830
<INVESTMENTS-AT-VALUE> 1298580
<RECEIVABLES> 63125
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1361705
<PAYABLE-FOR-SECURITIES> 118209
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8101
<TOTAL-LIABILITIES> 126310
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1077176
<SHARES-COMMON-STOCK> 65391
<SHARES-COMMON-PRIOR> 54341
<ACCUMULATED-NII-CURRENT> 739
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 76730
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 80750
<NET-ASSETS> 1235395
<DIVIDEND-INCOME> 11474
<INTEREST-INCOME> 8183
<OTHER-INCOME> 0
<EXPENSES-NET> (8113)
<NET-INVESTMENT-INCOME> 11544
<REALIZED-GAINS-CURRENT> 151631
<APPREC-INCREASE-CURRENT> (28812)
<NET-CHANGE-FROM-OPS> 134363
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10973)
<DISTRIBUTIONS-OF-GAINS> (82323)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16370
<NUMBER-OF-SHARES-REDEEMED> (10174)
<SHARES-REINVESTED> 4854
<NET-CHANGE-IN-ASSETS> 250006
<ACCUMULATED-NII-PRIOR> 195
<ACCUMULATED-GAINS-PRIOR> 7396
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7114
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8113
<AVERAGE-NET-ASSETS> 1123248
<PER-SHARE-NAV-BEGIN> 18.13
<PER-SHARE-NII> 0.19
<PER-SHARE-GAIN-APPREC> 2.10
<PER-SHARE-DIVIDEND> (0.18)
<PER-SHARE-DISTRIBUTIONS> (1.35)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 18.89
<EXPENSE-RATIO> 0.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> PHOENIX EDGE MULTI-SECTOR FIXED INCOME SERIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 139048
<INVESTMENTS-AT-VALUE> 143463
<RECEIVABLES> 6977
<ASSETS-OTHER> 23
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 150463
<PAYABLE-FOR-SECURITIES> 5298
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 121
<TOTAL-LIABILITIES> 5419
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 138951
<SHARES-COMMON-STOCK> 14026
<SHARES-COMMON-PRIOR> 10669
<ACCUMULATED-NII-CURRENT> 427
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1251
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4415
<NET-ASSETS> 145044
<DIVIDEND-INCOME> 623
<INTEREST-INCOME> 9626
<OTHER-INCOME> 0
<EXPENSES-NET> (788)
<NET-INVESTMENT-INCOME> 9461
<REALIZED-GAINS-CURRENT> 7367
<APPREC-INCREASE-CURRENT> (2310)
<NET-CHANGE-FROM-OPS> 14518
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9239)
<DISTRIBUTIONS-OF-GAINS> (4271)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6711
<NUMBER-OF-SHARES-REDEEMED> (4670)
<SHARES-REINVESTED> 1316
<NET-CHANGE-IN-ASSETS> 35999
<ACCUMULATED-NII-PRIOR> 135
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 1775
<GROSS-ADVISORY-FEES> 606
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 809
<AVERAGE-NET-ASSETS> 121289
<PER-SHARE-NAV-BEGIN> 10.22
<PER-SHARE-NII> 0.79
<PER-SHARE-GAIN-APPREC> 0.43
<PER-SHARE-DIVIDEND> (0.78)
<PER-SHARE-DISTRIBUTIONS> (0.32)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.34
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> PHOENIX EDGE TOTAL RETURN SERIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 356510
<INVESTMENTS-AT-VALUE> 373931
<RECEIVABLES> 1231
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 375162
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 918
<TOTAL-LIABILITIES> 918
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 351776
<SHARES-COMMON-STOCK> 27418
<SHARES-COMMON-PRIOR> 25952
<ACCUMULATED-NII-CURRENT> 415
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4632
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17421
<NET-ASSETS> 374244
<DIVIDEND-INCOME> 2772
<INTEREST-INCOME> 8132
<OTHER-INCOME> 0
<EXPENSES-NET> (2589)
<NET-INVESTMENT-INCOME> 8315
<REALIZED-GAINS-CURRENT> 25852
<APPREC-INCREASE-CURRENT> (2475)
<NET-CHANGE-FROM-OPS> 31692
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7997)
<DISTRIBUTIONS-OF-GAINS> (23234)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4387
<NUMBER-OF-SHARES-REDEEMED> (5175)
<SHARES-REINVESTED> 2254
<NET-CHANGE-IN-ASSETS> 20406
<ACCUMULATED-NII-PRIOR> 154
<ACCUMULATED-GAINS-PRIOR> 1956
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2147
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2589
<AVERAGE-NET-ASSETS> 367558
<PER-SHARE-NAV-BEGIN> 13.63
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> 0.91
<PER-SHARE-DIVIDEND> (0.31)
<PER-SHARE-DISTRIBUTIONS> (0.90)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.65
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 05
<NAME> PHOENIX EDGE INTERNATIONAL SERIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 145374
<INVESTMENTS-AT-VALUE> 169367
<RECEIVABLES> 266
<ASSETS-OTHER> 3283
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 172916
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 248
<TOTAL-LIABILITIES> 248
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 141596
<SHARES-COMMON-STOCK> 11895
<SHARES-COMMON-PRIOR> 10588
<ACCUMULATED-NII-CURRENT> 1391
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4615
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25066
<NET-ASSETS> 172668
<DIVIDEND-INCOME> 2164
<INTEREST-INCOME> 691
<OTHER-INCOME> 0
<EXPENSES-NET> (1616)
<NET-INVESTMENT-INCOME> 1239
<REALIZED-GAINS-CURRENT> 12049
<APPREC-INCREASE-CURRENT> 13071
<NET-CHANGE-FROM-OPS> 26359
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2429)
<DISTRIBUTIONS-OF-GAINS> (3811)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3517
<NUMBER-OF-SHARES-REDEEMED> (2645)
<SHARES-REINVESTED> 435
<NET-CHANGE-IN-ASSETS> 38213
<ACCUMULATED-NII-PRIOR> 918
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (1531)
<GROSS-ADVISORY-FEES> 1167
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1616
<AVERAGE-NET-ASSETS> 155605
<PER-SHARE-NAV-BEGIN> 12.70
<PER-SHARE-NII> 0.11
<PER-SHARE-GAIN-APPREC> 2.25
<PER-SHARE-DIVIDEND> (0.21)
<PER-SHARE-DISTRIBUTIONS> (0.33)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.52
<EXPENSE-RATIO> 1.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 06
<NAME> PHOENIX EDGE BALANCED SERIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 191588
<INVESTMENTS-AT-VALUE> 202972
<RECEIVABLES> 1406
<ASSETS-OTHER> 98
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 204476
<PAYABLE-FOR-SECURITIES> 11
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 180
<TOTAL-LIABILITIES> 191
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 186762
<SHARES-COMMON-STOCK> 16942
<SHARES-COMMON-PRIOR> 15716
<ACCUMULATED-NII-CURRENT> 351
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5789
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11383
<NET-ASSETS> 204285
<DIVIDEND-INCOME> 1162
<INTEREST-INCOME> 5996
<OTHER-INCOME> 0
<EXPENSES-NET> (1351)
<NET-INVESTMENT-INCOME> 5807
<REALIZED-GAINS-CURRENT> 16868
<APPREC-INCREASE-CURRENT> (2671)
<NET-CHANGE-FROM-OPS> 20004
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5537)
<DISTRIBUTIONS-OF-GAINS> (18065)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2806
<NUMBER-OF-SHARES-REDEEMED> (3529)
<SHARES-REINVESTED> 1949
<NET-CHANGE-IN-ASSETS> 10983
<ACCUMULATED-NII-PRIOR> 75
<ACCUMULATED-GAINS-PRIOR> 6986
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1090
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1351
<AVERAGE-NET-ASSETS> 198178
<PER-SHARE-NAV-BEGIN> 12.30
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> 0.89
<PER-SHARE-DIVIDEND> (0.35)
<PER-SHARE-DISTRIBUTIONS> (1.14)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.06
<EXPENSE-RATIO> 0.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 07
<NAME> PHOENIX EDGE REAL ESTATE SERIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 18492
<INVESTMENTS-AT-VALUE> 22907
<RECEIVABLES> 322
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23230
<PAYABLE-FOR-SECURITIES> 464
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 56
<TOTAL-LIABILITIES> 520
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18163
<SHARES-COMMON-STOCK> 1586
<SHARES-COMMON-PRIOR> 748
<ACCUMULATED-NII-CURRENT> 9
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 123
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4415
<NET-ASSETS> 22710
<DIVIDEND-INCOME> 645
<INTEREST-INCOME> 16
<OTHER-INCOME> 0
<EXPENSES-NET> (123)
<NET-INVESTMENT-INCOME> 538
<REALIZED-GAINS-CURRENT> 357
<APPREC-INCREASE-CURRENT> 3569
<NET-CHANGE-FROM-OPS> 4464
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (530)
<DISTRIBUTIONS-OF-GAINS> (234)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1121
<NUMBER-OF-SHARES-REDEEMED> (343)
<SHARES-REINVESTED> 60
<NET-CHANGE-IN-ASSETS> 14237
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 92
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 176
<AVERAGE-NET-ASSETS> 12339
<PER-SHARE-NAV-BEGIN> 11.33
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> 3.14
<PER-SHARE-DIVIDEND> (0.50)
<PER-SHARE-DISTRIBUTIONS> (0.15)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.32
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 08
<NAME> PHOENIX EDGE STRATEGIC THEME SERIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-29-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 23910
<INVESTMENTS-AT-VALUE> 25431
<RECEIVABLES> 63
<ASSETS-OTHER> 788
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 26282
<PAYABLE-FOR-SECURITIES> 264
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 46
<TOTAL-LIABILITIES> 310
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24889
<SHARES-COMMON-STOCK> 2365
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
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