As filed with the Securities and Exchange Commission on December 16, 1999
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. 29 [X]
AND/OR
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 32 [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 INSURANCE COMPANY
800/447-4312
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
---------------
COPY TO:
EDWIN L. KERR, ESQ.
C/O PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
ONE AMERICAN ROW
HARTFORD, CT 06102-5056
(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 December 20, 1999 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 December 20, 1999 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>
THE PHOENIX EDGE SERIES FUND
CROSS-REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS (PART A) AND
STATEMENT OF ADDITIONAL INFORMATION (PART B)
OF INFORMATION REQUIRED BY FORM N-1A
PURSUANT TO RULE 495(A)
PART A
<TABLE>
<CAPTION>
FORM N-1A ITEM PROSPECTUS CAPTION
-------------- ------------------
<S> <C>
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
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT US AT:
[envelope] PHOENIX VARIABLE PRODUCTS
MAIL OPERATIONS
PO Box 8027
Boston, MA 02266-8027
[telephone] Tel. 800/541-0171
PROSPECTUS DECEMBER 20, 1999
The Phoenix Edge Series Fund (the "Fund") is an open-end management
investment company which is intended to meet a wide range of investment
objectives with its 21 separate Series. Generally, each Series operates as if it
were a separate fund.
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 or a
Variable Universal Life Insurance Policy offered by Phoenix Home Life Mutual
Insurance Company ("Phoenix"), PHL Variable Insurance Company ("PHL Variable"),
or Phoenix Life and Annuity Company ("PLAC"), and directing the allocation of
your payment(s) to the Subaccount(s) corresponding to the Series in which you
wish to invest. The Subaccounts, 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.
This prospectus describes each of the Series and provides important
information you should know before investing in any Series of the Fund. You
should read this prospectus carefully and keep it for future reference.
MANAGED BY
PHOENIX INVESTMENT COUNSEL, INC.
[diamond] Phoenix-Aberdeen International Series
[diamond] Phoenix-Engemann Capital Growth Series
[diamond] Phoenix-Engemann Nifty Fifty Series
[diamond] Phoenix-Goodwin Money Market Series
[diamond] Phoenix-Goodwin Multi-Sector Fixed Income Series
[diamond] Phoenix-Hollister Value Equity Series
[diamond] Phoenix-Oakhurst Balanced Series
[diamond] Phoenix-Oakhurst Growth and Income Series
[diamond] Phoenix-Oakhurst Strategic Allocation Series
[diamond] Phoenix-Seneca Mid-Cap Growth Series
[diamond] Phoenix-Seneca Strategic Theme Series
MANAGED BY
PHOENIX-ABERDEEN INTERNATIONAL ADVISORS, LLC
[diamond] Phoenix-Aberdeen New Asia Series
MANAGED BY
DUFF & PHELPS INVESTMENT MANAGEMENT CO.
[diamond] Phoenix-Duff & Phelps Real Estate Securities Series
MANAGED BY
PHOENIX VARIABLE ADVISORS, INC.
[diamond] Phoenix Research Enhanced Index Series
[diamond] Phoenix-Bankers Trust Dow 30 Series
[diamond] Phoenix-Federated U.S. Government Bond Series
[diamond] Phoenix-Janus Equity Income Series
[diamond] Phoenix-Janus Flexible Income Series
[diamond] Phoenix-Janus Growth Series
[diamond] Phoenix-Morgan Stanley Focus Equity Series
[diamond] Phoenix-Schafer Mid-Cap Value Series
We are offering this product only where we may lawfully do so. You should
rely only on the information contained in this document or in one that we have
referred you to. We have not authorized anyone to provide you with information
that is different.
These securities have not been approved or disapproved by the Securities and
Exchange Commission, nor has the Commission determined if this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
Phoenix Edge Series Fund 1
<PAGE>
TABLE OF CONTENTS
Heading Page
- ---------------------------------------------------------------
PHOENIX RESEARCH ENHANCED INDEX SERIES.................... 3
Investment Risk and Return Summary ...................... 3
Series' Expenses ........................................ 3
Financial Highlights..................................... 4
PHOENIX-ABERDEEN INTERNATIONAL SERIES..................... 5
Investment Risk and Return Summary ...................... 5
Series' Expenses ........................................ 6
Financial Highlights..................................... 6
PHOENIX-ABERDEEN NEW ASIA SERIES ......................... 7
Investment Risk and Return Summary ...................... 7
Series' Expenses ........................................ 8
Financial Highlights..................................... 9
PHOENIX-BANKERS TRUST DOW 30 SERIES....................... 10
Investment Risk and Return Summary ...................... 10
Series' Expenses ........................................ 10
Financial Highlights..................................... 10
PHOENIX-DUFF & PHELPS REAL ESTATE
SECURITIES SERIES ....................................... 11
Investment Risk and Return Summary ...................... 11
Series' Expenses......................................... 12
Financial Highlights..................................... 12
PHOENIX-ENGEMANN CAPITAL GROWTH SERIES ................... 13
Investment Risk and Return Summary ...................... 13
Series' Expenses......................................... 14
Financial Highlights..................................... 15
PHOENIX-ENGEMANN NIFTY FIFTY SERIES....................... 16
Investment Risk and Return Summary ...................... 16
Series' Expenses ........................................ 16
Financial Highlights..................................... 17
PHOENIX-FEDERATED U.S. GOVERNMENT BOND SERIES............. 18
Investment Risk and Return Summary ...................... 18
Series' Expenses ........................................ 18
Financial Highlights..................................... 18
PHOENIX-GOODWIN MONEY MARKET SERIES ...................... 19
Investment Risk and Return Summary ...................... 19
Series' Expenses ........................................ 20
Financial Highlights..................................... 21
PHOENIX-GOODWIN MULTI-SECTOR FIXED
INCOME SERIES............................................ 22
Investment Risk and Return Summary ...................... 22
Series' Expenses ........................................ 23
Financial Highlights..................................... 24
PHOENIX-HOLLISTER VALUE EQUITY SERIES .................... 25
Investment Risk and Return Summary ...................... 25
Series' Expenses ........................................ 26
Financial Highlights..................................... 26
PHOENIX-JANUS EQUITY INCOME SERIES........................ 27
Investment Risk and Return Summary ...................... 27
Series' Expenses ........................................ 27
PHOENIX-JANUS FLEXIBLE INCOME SERIES...................... 28
Investment Risk and Return Summary ...................... 28
Series' Expenses ........................................ 28
PHOENIX-JANUS GROWTH SERIES............................... 29
Investment Risk and Return Summary ...................... 29
Series' Expenses ........................................ 29
PHOENIX-MORGAN STANLEY FOCUS EQUITY SERIES................ 30
Investment Risk and Return Summary ...................... 30
Series' Expenses ........................................ 30
PHOENIX-OAKHURST BALANCED SERIES.......................... 31
Investment Risk and Return Summary ...................... 31
Series' Expenses ........................................ 32
Financial Highlights..................................... 33
PHOENIX-OAKHURST GROWTH AND INCOME SERIES................. 34
Investment Risk and Return Summary ...................... 34
Series' Expenses ........................................ 35
Financial Highlights..................................... 35
PHOENIX-OAKHURST STRATEGIC ALLOCATION SERIES.............. 36
Investment Risk and Return Summary ...................... 36
Series' Expenses ........................................ 37
Financial Highlights..................................... 38
PHOENIX-SCHAFER MID-CAP VALUE SERIES ..................... 39
Investment Risk and Return Summary ...................... 39
Series' Expenses ........................................ 39
Financial Highlights..................................... 40
PHOENIX-SENECA MID-CAP GROWTH SERIES ..................... 41
Investment Risk and Return Summary ...................... 41
Series' Expenses ........................................ 42
Financial Highlights..................................... 43
PHOENIX-SENECA STRATEGIC THEME SERIES..................... 44
Investment Risk and Return Summary ...................... 44
Series' Expenses ........................................ 45
Financial Highlights..................................... 46
ADDITIONAL DISCUSSION OF EACH SERIES' INVESTMENT
STRATEGIES AND MANAGEMENT................................ 47
Phoenix Research Enhanced Index Series................... 47
Phoenix-Aberdeen International Series.................... 48
Phoenix-Aberdeen New Asia Series......................... 51
Phoenix-Bankers Trust Dow 30 Series...................... 53
Phoenix-Duff & Phelps Real Estate Securities Series...... 55
Phoenix-Engemann Capital Growth Series................... 58
Phoenix-Engemann Nifty Fifty Series...................... 60
Phoenix-Federated U.S. Government Bond Series............ 62
Phoenix-Goodwin Money Market Series...................... 64
Phoenix-Goodwin Multi-Sector Fixed Income Series......... 65
Phoenix-Hollister Value Equity Series.................... 68
Phoenix-Janus Equity Income Series....................... 71
Phoenix-Janus Flexible Income Series..................... 74
Phoenix-Janus Growth Series.............................. 77
Phoenix-Morgan Stanley Focus Equity Series............... 79
Phoenix-Oakhurst Balanced Series......................... 82
Phoenix-Oakhurst Growth and Income Series................ 85
Phoenix-Oakhurst Strategic Allocation Series............. 88
Phoenix-Schafer Mid-Cap Value Series..................... 89
Phoenix-Seneca Mid-Cap Growth Series..................... 92
Phoenix-Seneca Strategic Theme Series.................... 95
IMPACT OF THE YEAR 2000 ISSUE ON FUND OPERATIONS.......... 98
INVESTMENT RESTRICTIONS................................... 98
PORTFOLIO TURNOVER........................................ 98
THE FUND AND ITS MANAGEMENT............................... 99
SHARES OF BENEFICIAL INTEREST............................. 99
NET ASSET VALUE........................................... 100
TAXES..................................................... 100
APPENDIX.................................................. 101
2 Phoenix Edge Series Fund
<PAGE>
PHOENIX RESEARCH ENHANCED INDEX SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVE
The Phoenix Research Enhanced Index Series has an investment objective to
seek high total return by investing in a broadly diversified portfolio of equity
securities of large and medium capitalization companies within the market
sectors found in the S&P 500.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] Under normal conditions, the Series will invest at least 80% of its
total assets in common stocks and other equity securities.
[diamond] The Series will invest in securities believed by the advisor to be
undervalued and which offer growth potential.
[diamond] The Series will evaluate each of the economic sectors represented in
the S&P 500 -
For example:
[bullet] industrial
[bullet] financial
[bullet] public utilities
[bullet] transportation
and exclude securities in any sector the advisor believes to be extremely
overvalued.
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
The Series will be invested primarily in common stocks, and the value of the
Series investments are expected to fluctuate in the same way as the S&P 500 and
the stock market generally.
The asset values of the Series may be affected by general economic declines,
declines in industries and changes in interest rates.
Share values also may decline if the specific companies selected for Series
investment fail to perform as the advisor expects, regardless of general
economic trends, industry trends, interest rates and other economic factors.
PERFORMANCE TABLES
The following bar chart and table provide some indication of the risks of
investing in the Phoenix Research Enhanced Index Series. The bar chart shows
changes in the Series' performance from year to year over its life.(1) The table
shows how the Series' average annual returns for one year and the life of the
Series compare to those of a broad-based securities market index. The Series'
past performance is not necessarily an indication of how the Series will perform
in the future.
PHOENIX RESEARCH ENHANCED INDEX SERIES
[GRAPHIC OMITTED]
CALENDAR YEAR ANNUAL RETURN (%)
1998 31.68
(1) The Series' average annual returns in this chart do not reflect the
deduction of any separate account or contract charges. The returns would
have been less than those shown if such charges were deducted. During the
period shown in the chart, the highest return for a quarter was 22.09%
(quarter ending December 1998) and the lowest return for a quarter was
-9.67% (quarter ending September 1998).
- ----------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS ONE LIFE OF
(FOR THE PERIOD ENDING 12/31/98) YEAR THE SERIES(1)
- ----------------------------------------------------------------
Phoenix Research Enhanced
Index Series 31.68% 25.40%
- ----------------------------------------------------------------
S&P 500 Index(2) 28.76% 23.42%
- ----------------------------------------------------------------
(1) Since July 15, 1997.
(2) The S&P 500 Index is an unmanaged, but commonly used measure of stock market
total return performance. The index is not available for direct investment.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM SERIES' ASSETS)
Management Fees 0.45%
Distribution and Service (12b-1) Fees None
Other Expenses 0.37%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES(1) 0.82%
=====
(1) Phoenix Investment Counsel has agreed to reimburse the Series for the
amount, if any, by which the Series' operating expenses through December 31,
2000 other than the management fee for any fiscal year exceeds 0.10%.
Actual Total Annual Series Operating Expenses after expense reimbursement
were .55% for the year ending December 31, 1998.
Phoenix Research Enhanced Index Series 3
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
- --------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------
Phoenix Research
Enhanced Index $84 $262 $455 $1,014
Series
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Series' financial performance for the past 5 years (or, if shorter, the period
of the Series' operations). Certain information reflects financial results for a
single share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Series (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP. This report and the Series' financial
statements are included in both the Statement of Additional Information and
Annual Report, which are available upon request.
<TABLE>
<CAPTION>
SIX MONTHS FROM
ENDED INCEPTION
6/30/99 YEAR ENDED 7/15/97 TO
(UNAUDITED) 12/31/98 12/31/97
----------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period............................................ $ 13.08 $ 10.49 $ 10.00
Income from investment operations 0.06(2)
Net investment income (loss).................................................. 0.12(2) 0.05(2)
Net realized and unrealized gain (loss)....................................... 1.67 3.19 0.54
-------- -------- --------
Total from investment operations............................................ 1.73 3.31 0.59
-------- -------- --------
Less distributions (0.04)
Dividends from net investment income.......................................... (0.12) (0.05)
Dividends from net realized gains............................................. (0.04) (0.60) (0.05)
-------- -------- --------
Total distributions......................................................... (0.08) (0.72) (0.10)
-------- -------- --------
Change in net asset value....................................................... 1.65 2.59 0.49
-------- -------- --------
Net asset value, end of period.................................................. $ 14.73 $ 3.08 $ 10.49
======== ======== ========
Total Return.................................................................... 13.25%(3) 31.68% 5.83%(3)
Ratios/supplemental data:
Net assets, end of period (thousands)......................................... $111,043 $ 69,522 $ 30,851
Ratio to average net assets of:
Operating expenses............................................................ 0.55%(1) 0.55% 0.55%(1)
Net investment income......................................................... 1.00%(1) 1.08% 1.46%(1)
Portfolio turnover rate......................................................... 22%(3) 45% 9%(3)
</TABLE>
(1) Annualized.
(2) Includes reimbursement of operating expenses by investment advisor of $0.01,
$0.03 and $0.02 per share, respectively.
(3) Not annualized.
4 Phoenix Research Enhanced Index Series
<PAGE>
PHOENIX-ABERDEEN INTERNATIONAL SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVES
Phoenix-Aberdeen International Series has an investment objective of high
total return consistent with reasonable risk. There is no guarantee that the
Series will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] The advisor will invest primarily in corporate stock of established
non-U.S. companies believed to have potential for capital growth,
income or both. Under normal circumstances, the Series will invest at
least 80% of its total assets in non-U.S. issuers located in not less
than 3 countries.
[diamond] The Series may invest any amount for capital growth or for income. In
determining whether assets will be invested for capital growth or for
income, the advisor will analyze the international equity and fixed
income markets and assess the degree of risk and level of return that
can be expected from each market.
[diamond] The Series may invest in convertible securities, preferred stock,
bonds, notes and other debt instruments of companies and obligations
of domestic or foreign governments.
[diamond] The Series may invest up to 10% of its total assets in below
investment grade bonds, or so-called "junk bonds."
[diamond] The Series may engage in certain options transactions, and enter into
futures contracts and related options for hedging purposes, invest in
repurchase agreements and engage in "securities lending."
[diamond] The Series may invest in small companies as well as large companies.
[diamond] The Series may invest in companies in foreign countries with "emerging
markets."
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
The Series will seek to increase the value of your shares by investing in
securities the advisor expects to have potential for capital growth or income or
both. Most of the Series' investments will be in common stocks and other equity
investments. Conditions affecting the overall economy, specific industries or
companies in which the Series invests can be worse than expected. As a result,
the value of your shares may decrease. Increases in interest rates affecting the
global economy, particular industries or specific companies can cause fixed
income investments that the Series may own to decline in value. This, too, can
cause your share value to decrease.
Unlike many other funds, this Series may make significant investments in
companies in foreign countries and in foreign governments, including some
"emerging market" countries (those with markets that are not fully developed).
Political and economic uncertainty as well as relatively less public information
about investments may negatively impact the Series' portfolio. Some investments
may be made in currencies other than U.S. dollars that will fluctuate in value
as a result of changes in the currency exchange rate. Foreign markets and
currencies may not perform as well as U.S. markets. Emerging market countries
and companies doing business in emerging markets may not have the same range of
opportunities as countries and their companies in developed nations. They also
may have more obstacles to financial success.
This Series also may invest in small companies as well as larger companies.
Smaller companies, regardless of their location, may be affected to a greater
extent than larger companies by changes in general economic conditions and
conditions in particular industries. Smaller companies also may be relatively
new and not have the same operating history and "track record" as larger
companies. This could make future performance of smaller companies more
difficult to predict.
PERFORMANCE TABLES
The following bar chart and table provide some indication of the risks of
investing in the Phoenix-Aberdeen International Series. The bar chart shows
changes in the Series' performance from year to year over an 8-year period.(1)
The table shows how the Series' average annual returns for 1 and 5 years and for
the life of the Series compare to those of a broad-based securities market
index. The Series' past performance is not necessarily an indication of how the
Series will perform in the future.
PHOENIX-ABERDEEN INTERNATIONAL SERIES
[GRAPHIC OMITTED]
CALENDAR YEAR ANNUAL RETURN (%)
1991 19.78
1992 -12.89
1993 38.44
1994 0.03
1995 9.59
1996 18.65
1997 12.04
1998 27.92
(1) The Series' average annual returns in this chart do not reflect the
deduction of any separate account or contract charges. The returns would
have been less than those shown if such charges were deducted. During the
8-year period shown in the chart, the highest return for a quarter was
22.89% (quarter ending March 1998) and the lowest return for a quarter
was -18.81% (quarter ending September 1990).
Phoenix-Aberdeen International Series 5
<PAGE>
- ---------------------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
(FOR THE PERIOD ONE FIVE LIFE OF
ENDING 12/31/98) YEAR YEARS THE SERIES(1)
- ---------------------------------------------------------------
Phoenix-Aberdeen
International Series 27.92% 13.27% 11.01%
- ---------------------------------------------------------------
MSCI EAFE Index(2) 20.33% 9.50% 8.32%
- ---------------------------------------------------------------
(1) Since May 1, 1990.
(2) The Morgan Stanley Capital International EAFE Index is an unmanaged,
commonly used measure of foreign stock fund performance, which includes net
dividends reinvested. Total return figures are net of foreign withholding
taxes. The EAFE Index is an aggregate of 19 individual country indexes in
Europe, Australasia, New Zealand and the Far East.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM THE SERIES' ASSETS)
Management Fees 0.75%
Distribution and Service (12b-1) Fees None
Other Expenses 0.23%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES 0.98%
=====
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
- ---------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------
Phoenix-Aberdeen
International $100 $312 $542 $1,201
Series
- ---------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Series' financial performance for the past 5 years (or, if shorter, the period
of the Series' operations). Certain information reflects financial results for a
single share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Series (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP. This report and the Series' financial
statements are included in both the Statement of Additional Information and
Annual Report, which are available upon request.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED 6/30/99 -----------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 15.46 $ 14.53 $ 4.52 $ 12.70 $ 11.85 $ 12.21
Income from investment operations
Net investment income (loss).................. 0.12(1) 0.12(1) 0.12(1) 0.11(1) 0.12(1) 0.08(1)
Net realized and unrealized gain (loss)....... 0.80 3.94 1.61 2.25 1.02 (0.07)
-------- -------- -------- -------- -------- --------
Total from investment operations............ 0.92 4.06 1.73 2.36 1.14 0.01
-------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income.......... (0.21) -- (0.22) (0.19) (0.04) (0.03)
Dividends from net realized gains............. (0.67) (3.13) (1.50) (0.33) (0.25) (0.34)
Total distributions......................... (0.88) (3.13) (1.72) (0.54) (0.29) (0.37)
-------- -------- -------- -------- -------- --------
Change in net asset value....................... 0.04 0.93 0.01 1.82 0.85 (0.36)
-------- -------- -------- -------- -------- --------
Net asset value, end of period.................. $ 15.50 $ 15.46 $ 14.53 $ 14.52 $ 12.70 $ 11.85
======== ======== ======== ======== ======== ========
Total Return.................................... 5.93%(3) 27.92% 12.04% 18.65% 9.59% 0.03%
Ratios/supplemental data:
Net assets, end of period (thousands)......... $253,439 $241,915 $194,108 $172,668 $134,455 $134,627
Ratio to average net assets of:
Operating expenses............................ 1.00%(2) 0.98% 1.01% 1.04% 1.07% 1.10%
Net investment income......................... 1.44%(2) 0.72% 0.72% 0.80% 0.95% 0.64%
Portfolio turnover rate......................... 47%(3) 93% 184% 142% 249% 172%
</TABLE>
(1) Computed using average shares outstanding.
(2) Annualized.
(3) Not annualized.
6 Phoenix-Aberdeen International Series
<PAGE>
PHOENIX-ABERDEEN NEW ASIA SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVE
Phoenix-Aberdeen New Asia Series has an objective of long-term capital
appreciation from a diversified portfolio invested primarily in equity
securities of issuers located in at least 3 different countries located in Asia,
other than Japan. There is no guarantee that the Series will achieve its
objective.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] Under normal circumstances, the Series will invest at least 65% of its
total assets in common stocks, preferred stocks and convertible
securities of issuers organized and principally operating in Asia,
excluding Japan.
[diamond] The advisor will seek out equity securities of companies that it
believes have the potential to appreciate.
[diamond] The Series will invest in countries having more established markets in
region of Asian countries. The Asian countries ordinarily will consist
of 3 or more of the following -
[bullet] China [bullet] Hong Kong
[bullet] India [bullet] Indonesia
[bullet] South Korea [bullet] Malaysia
[bullet] Pakistan [bullet] Philippines
[bullet] Singapore [bullet] Sri Lanka
[bullet] Taiwan [bullet] Thailand
In determining distribution of investments among markets the advisor will
consider relative -
[diamond] prospects for growth
[diamond] levels of inflation
[diamond] price levels
[diamond] government policies affecting business
[diamond] currency stability
The Series may invest in developing and emerging market countries.
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
The Series will seek to increase the value of your shares by investing in
securities the advisor expects to increase in value. Most of the Series'
investments will be in common stocks and other equity securities. Conditions
affecting the global or local economy, specific industries or companies in which
the Series invests can be worse than expected. As a result, the value of your
shares may decrease. If your financial circumstances are likely to require you
to sell your shares at any particular time, rather than holding them
indefinitely, you run the risk that your sale of shares will occur when share
values have declined.
The Series may invest in companies with medium capitalizations. It also may
invest in small companies as well as large companies. Investments in companies
with small and medium capitalizations make the Series more volatile than funds
which invest in companies with larger capitalizations. The smaller companies may
be affected to a greater extent than larger companies by changes in general
economic conditions and conditions in particular industries. Smaller companies
also may be relatively new and not have the same operating history and "track
record" as larger companies. This could make future performance of smaller
companies more difficult to predict.
The Series may invest in below-investment grade securities (so called "junk
bonds"). Below-investment grade securities present a greater risk that the
issuer will not be able to make interest or principal payments on time. If this
happens, the Series would lose income and could expect a decline in the market
value of the securities.
The Series will invest in companies in foreign countries. Political and
economic uncertainty as well as less public information about investments may
negatively impact the Series' portfolio. Some investments may be made in
currencies other than U.S. dollars that will fluctuate in value as a result of
changes in the currency exchange rate. Foreign markets and currencies may not
perform as well as U.S. markets.
The Series may invest in illiquid securities that cannot be sold quickly.
Illiquid securities may have a lower value than comparable securities that have
active markets for resale, and they can lose their value more quickly under
unfavorable conditions.
PERFORMANCE TABLES
The following bar chart and table provide some indication of the risks of
investing in the Phoenix-Aberdeen New Asia Series. The bar chart shows changes
in the Series' performance from year to year over the life of the Series.1 The
table shows how the Series' average annual returns for one year and for the life
of the Series compare to those of a broad-based securities market index. The
Series' past performance is not necessarily an indication of how the Series will
perform in the future.
Phoenix-Aberdeen New Asia Series 7
<PAGE>
PHOENIX-ABERDEEN NEW ASIA SERIES
[GRAPHIC OMITTED]
CALENDAR YEAR ANNUAL RETURN (%)
1997 -32.39
1998 -4.44
(1) The Series' average annual returns in this chart do not reflect the
deduction of any separate account or contract charges. The returns would
have been less than those shown if such charges were deducted. During the
period shown in the chart, the highest return for a quarter was 24.18%
(quarter ending December 1998) and the lowest return for a quarter was
-23.85% (quarter ending December 1997).
- --------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIOD ENDING LIFE OF
12/31/98) ONE YEAR THE SERIES(1)
- --------------------------------------------------------------
Phoenix-Aberdeen New Asia
Series (4.44)% (17.33)%
- --------------------------------------------------------------
MSCI AC Asia Pacific Ex
Japan Index(2) (5.21)% (16.44)%
- --------------------------------------------------------------
(1) Since September 17, 1996.
(2) Morgan Stanley Capital International All Country Asia Pacific (excluding
Japan) Index is a market-value weighted average of the performance of
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.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM SERIES' ASSETS)
Management Fees 1.00%
Distribution and Service (12b-1) Fees None
Other Expenses 1.50%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES(1) 2.50%
=====
(1) The Series' investment advisor has agreed to reimburse through December 31,
2000 the Phoenix-Aberdeen New Asia Series' operating expenses other than
Management Fees and Distribution and Service Fees to the extent that such
expenses exceed 0.25% of the average net assets of the Series. Actual Total
Annual Fund Operating Expenses after expense reimbursement were 1.25% for
the year ending December 31, 1998.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
- ----------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------
Phoenix-Aberdeen
New Asia Series $253 $779 $1,331 $2,836
- ----------------------------------------------------------------
Note: Your actual expenses would be lower than those shown in the tables
above since the expense levels used to calculate the figures shown do not
include the reimbursement of expenses over certain levels by the Series'
investment advisor.
8 Phoenix-Aberdeen New Asia Series
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Series' financial performance for the past 5 years (or, if shorter, the period
of the Series' operations). Certain information reflects financial results for a
single share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Series (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP. This report and the Series' financial
statements are included in both the Statement of Additional Information and
Annual Report, which are available upon request.
<TABLE>
<CAPTION>
SIX MONTHS FROM
ENDED INCEPTION
6/30/99 YEAR ENDED DECEMBER 31, 9/17/96 TO
(UNAUDITED) 1998 1997 12/31/96
----------- ---- ---- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period....................................... $ 6.13 $ 6.44 $ 9.96 $ 10.00
Income from investment operations
Net investment income (loss)............................................. 0.07(1) 0.13(1,4) 0.15(1) 0.05(1)
Net realized and unrealized gain (loss).................................. 1.95 (0.41) (3.36) (0.04)
-------- ------- -------- --------
Total from investment operations....................................... 2.02 (0.28) (3.21) 0.01
-------- ------- -------- --------
Less distributions: (0.07)
Dividends from net investment income..................................... (0.03) (0.15) (0.05)
Dividends from net realized gains........................................ -- -- (0.01) --
In excess of net investment income....................................... -- -- (0.10) --
Tax return of capital.................................................... -- -- (0.05) --
--- --- ------ ---
Total distributions.................................................... (0.07) (0.03) (0.31) (0.05)
-------- ------- -------- --------
Change in net asset value.................................................. 1.95 (0.31) (3.52) (0.04)
-------- ------- -------- --------
Net asset value, end of period............................................. $ 8.08 $ 6.13 $ 6.44 $ 9.96
======== ======= ======== ========
Total Return............................................................... 33.09%(3) (4.44)% (32.39)% 0.16%(3)
Ratios/supplemental data: $ 14,404
Net assets, end of period (thousands).................................... $ 9,510 $ 10,017 $ 11,585
Ratio to average net assets of:
Operating expenses....................................................... 1.25%(2) 1.25% 1.25% 1.25%(2)
Net investment income.................................................... 2.01%(2) 2.09% 1.63% 2.40%(2)
Portfolio turnover rate.................................................... 14%(3) 46% 27% 2%(3)
</TABLE>
(1) Includes reimbursement of operating expenses by investment advisor of $0.05,
$0.08, $0.07 and $0.03 per share, respectively.
(2) Annualized.
(3) Not annualized.
(4) Computed using average shares outstanding.
Phoenix-Aberdeen New Asia Series 9
<PAGE>
PHOENIX-BANKERS TRUST DOW 30 SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVES
The Phoenix-Bankers Trust Dow 30 Series seeks to track the total return of
the Dow Jones Industrial Average(SM) (the "DJIA(SM)") before fund expenses.
There is no guarantee that the Series will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] The Series will invest primarily in the equity securities of the 30
companies comprising the DJIA(SM) in the same proportions that they
are represented in the DJIA(SM).
[diamond] The Series employs a "passively" managed investment approach. The
Series matches rather than underweights or overweights its investment
in each component security of the DJIA(SM).
[diamond] The Series may invest in Equity Equivalents such as stock index
futures contracts and publicly-traded index securities. Such
investments replicate investments in the DJIA(SM), but their use may
lower transaction costs and permit improved management of cash flow.
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
Unlike other Series that do not attempt to track an index, the Series may
not use certain techniques to reduce the risk of loss. For example, the Series
will not keep any significant portion of its assets in cash. As a result, the
Series may go down in value more than an actively managed Series in the event of
a general market decline.
The Series' "non-diversified" status allows it to invest more than 5% of its
assets in the stock of a single company. To the extent the Series invests a
greater percentage of its assets in a single company, the Series has greater
exposure to the performance and risks of the stock of that company.
PERFORMANCE TABLES
The Phoenix-Bankers Trust Dow 30 Series is new and has not had an annual
return for one full calendar year.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM SERIES' ASSETS)
Management Fees 0.35%
Distribution and Service (12b-1) Fees None
Other Expenses(1,2) 1.40%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES(2) 1.75%
(1) The Phoenix-Bankers Trust Dow 30 Series investment advisor has agreed to
reimburse through December 31, 2000 the Phoenix-Bankers Trust Dow 30 Series'
expenses other than Management Fees to the extent such expenses exceed 0.15%
of its total average net assets.
(2) As a new Series, Other Expenses and Total Annual Series' Operating Expenses
are estimates of the expenses that will be incurred in the Series' first
fiscal year without reimbursements.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would be:
- ------------------------------------------------------------
1 YEAR 3 YEARS
- ------------------------------------------------------------
Phoenix-Bankers Trust
Dow 30 Series $178 $551
- ------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Series has not yet commenced operations.
- ----------
"Dow Jones," "Dow Jones Industrial Average(SM)" are service marks of Dow
Jones & Company, Inc. and have been licensed for use for certain purposes by the
Fund. The Phoenix-Bankers Trust Dow 30 Series, while based on the Dow Jones
Industrial Average(SM), is not sponsored, endorsed, sold or promoted by Dow
Jones, and Dow Jones makes no representation regarding the advisability of
investing in such products(s).
10 Phoenix-Bankers Trust Dow 30 Series
<PAGE>
PHOENIX-DUFF & PHELPS REAL ESTATE
SECURITIES SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVE
The Phoenix-Duff & Phelps Real Estate Securities Series has an investment
objective of capital appreciation and income with approximately equal emphasis.
There is no guarantee that the Series will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] The Series intends to invest at least 75% of its total assets in
marketable securities of publicly-traded real estate investment trusts
("REITs") and companies that are principally engaged in the real
estate industry.
[diamond] The Series may invest in common stock, rights or warrants to purchase
common stock, preferred stock and convertible debt.
[diamond] The Series may invest up to 85% of its total assets in -
[bullet] marketable debt securities of companies principally engaged
in the real estate industry
[bullet] mortgage-backed securities
[bullet] short-term investments
[diamond] For defensive purposes the Series may invest up to 100% of its total
assets in short-term investments. When this happens, the Series may
not achieve its investment objective.
[diamond] The Series may invest in equity or debt securities of foreign
companies or governments.
[diamond] The Series may invest in repurchase agreements and engage in
"securities lending."
PRINCIPAL RISKS
[diamond] If you invest in this Series you risk that you may lose your
investment.
[diamond] The Series is "non-diversified"; there is no limit on the percentage
of Series assets that may be invested in the securities of any one
issuer.
[diamond] Value of Series assets will fluctuate in response to changes in
economic conditions within the real estate industry, including, among
other things, possible declines in real estate values, general and
local economic conditions, availability of mortgage funds and natural
disasters.
[diamond] Equity REITs may be affected by changes in the value of underlying
property owned by the REIT. Mortgage REITs may be affected by the
quality of any credit extended. All REITs are dependent on the quality
of management skills.
[diamond] REITs and companies principally engaged in the real estate industry
are subject the effects of to fluctuations in interest rates.
[diamond] Investing in REITs involve risks similar to those associated with
investing in small capitalization companies.
PERFORMANCE TABLES
The following bar chart and table provide some indication of the risks of
investing in the Phoenix-Duff & Phelps Real Estate Securities Series. The bar
chart shows changes in the Series' performance from year to year since its
inception.1 The table shows how the Series' average annual returns for one year
and for the life of the Series compare to those of a broad-based securities
market index. The Series' past performance is not necessarily an indication of
how the fund will perform in the future.
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES
[GRAPHIC OMITTED]
CALENDAR YEAR ANNUAL RETURN (%)
1996 33.09
1997 22.05
1998 -21.19
(1) The Series' average annual returns in this chart do not reflect the
deduction of any separate account or contract charges. The returns would
have been less than those shown if such charges were deducted. During the
period shown in the chart, the highest return for a quarter was 17.66%
(quarter ending December 1996) and the lowest return for a quarter was
-13.12% (quarter ending September 1998).
- ---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIOD ENDING ONE LIFE OF
12/31/98)(1) YEAR THE SERIES(2)
- ---------------------------------------------------------------
Phoenix-Duff & Phelps Real
Estate Securities Series (21.19)% 11.84%
- ---------------------------------------------------------------
NAREIT Equity Index(3) (17.50)% 12.68%
- ---------------------------------------------------------------
(1) The Series' average annual returns in the table above do not reflect
the deduction of any separate account or contract charges.
(2) Since May 1, 1995.
(3) The National Association of Real Estate Investment Trusts (NAREIT) Index is
an unmanaged, commonly used indicator of REIT performance.
Phoenix-Duff & Phelps Real Estate Securities Series 11
<PAGE>
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM SERIES' ASSETS)
Management Fees 0.75%
Distribution and Service (12b-1) Fees None
Other Expenses 0.26%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES(1) 1.01%
=====
(1) Duff & Phelps Investment Management Co. and/or Phoenix Investment Counsel
have agreed to reimburse through December 31, 2000 the Series' operating
expenses for the amount, if any, such operating expenses (other than the
management fees) for any fiscal year exceed 0.25% of the average net assets
of the Series. Actual Total Annual Series Operating Expenses after expense
reimbursement were 1.00% for the year ending December 31, 1998.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
- ---------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------
Phoenix-Duff &
Phelps Real Estate $103 $322 $558 $1,236
Securities Series
- ---------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Series' financial performance for the past 5 years (or, if shorter, the period
of the Series' operations). Certain information reflects financial results for a
single share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Series (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP. This report and the Series' financial
statements are included in both the Statement of Additional Information and
Annual Report, which are available upon request.
<TABLE>
<CAPTION>
SIX MONTHS FROM
ENDED INCEPTION
6/30/99 YEAR ENDED DECEMBER 31, 5/1/95 TO
(UNAUDITED) 1998 1997 1996 12/31/95
----------- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period....................... $ 12.28 $ 16.38 $ 14.32 $ 11.33 $ 10.00
Income from investment operations
Net investment income (loss)............................. 0.35(3) 0.78(3) 0.50(3) 0.50(3) 0.33(3)
Net realized and unrealized gain (loss) ................. 0.76 (4.20) 2.62 3.14 1.42
-------- -------- -------- -------- ---------
Total from investment operations....................... 1.11 (3.42) 3.12 3.64 1.75
-------- -------- -------- -------- ---------
Less distributions:
Dividends from net investment income..................... (0.22) (0.65) (0.48) (0.50) (0.33)
Dividends from net realized gains........................ -- (0.02) (0.58) (0.15) (0.06)
Tax return of capital.................................... -- (0.01) -- -- (0.03)
-------- -------- -------- -------- ---------
Total distributions.................................... (0.22) (0.68) (1.06) (0.65) (0.42)
-------- -------- -------- -------- ---------
Change in net asset value.................................. 0.89 (4.10) 2.06 2.99 1.33
-------- -------- -------- -------- ---------
Net asset value, end of period............................. $ 13.17 $ 12.28 $ 16.38 $ 14.32 $ 11.33
======== ======== ======== ======== =========
Total Return............................................... 9.20%(2) (21.19)% 22.05% 33.09% 17.79%(2)
Ratios/supplemental data:
Net assets, end of period (thousands).................... $ 31,389 $ 36,408 $ 54,659 $ 22,710 $ 8,473
Ratio to average net assets of:
Operating expenses....................................... 1.00%(1) 1.00% 1.00% 1.00% 1.00%(1)
Net investment income.................................... 5.39%(1) 5.07% 3.59% 4.36% 4.80%(1)
Portfolio turnover rate.................................... 14%(2) 18% 41% 21% 10%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment advisor of $0.02,
$0.002, $0.01, $0.05 and $0.07 per share, respectively.
12 Phoenix-Duff & Phelps Real Estate Securities Series
<PAGE>
PHOENIX-ENGEMANN CAPITAL GROWTH SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVES
The Phoenix-Engemann Capital Growth Series has an investment objective of
intermediate and long-term capital appreciation, with income as a secondary
consideration. There is no guarantee that the Series will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] Under normal circumstances, the Series will invest at least 65% of its
total assets in common stocks.
[diamond] The advisor first determines which industries it believes have the
greatest growth potential and then identifies the amount and
proportion of assets to be invested in each. Quantitative and
fundamental analysis is then used to determine which securities to buy
and sell. Approximately 950 large cap stocks go through a quantitative
screening process where they are ranked on a number of factors,
including earnings acceleration, earning revisions, relative strength
and valuation. From these, the top 10% are analyzed for potential
Series investment. Companies that the advisor believes are capable of
producing long-term, sustainable above-average earnings growth
relative to their cost are then selected for Series investment.
Securities that have dropped 15% or more in value relative to the S&P
500 Index, that are in the bottom 20% of their quantitative ranking or
that have reached the advisor's target sell price are analyzed for
potential sale out of the Series' portfolio.
[diamond] The Series may invest any amount of its assets in any class or type of
security believed by the advisor to offer the potential for capital
appreciation over the intermediate and long term, including preferred
stocks, investment grade bonds, convertible preferred stocks and
convertible debentures. Distribution of investment income, such as
dividends and interest, is incidental in the selection of investments.
[diamond] Diversification among market sectors will be a factor in selecting
securities for the Series. However, the advisor will put greater
emphasis on selecting securities it believes have good potential for
appreciation rather than upon wide diversification.
[diamond] The Series may invest 25% of its total assets in foreign securities,
including emerging market securities.
[diamond] The Series may invest in small companies as well as large companies.
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
The Series will seek to increase the value of your shares by investing in
securities the advisor expects to increase in value. Most of the Series'
investments will be in common stocks. Conditions affecting the overall economy,
specific industries or companies in which the Series invests can be worse than
expected. As a result, the value of your shares may decrease.
The value of bonds and other fixed income securities in which the Series may
invest is inversely related to interest rate changes. If interest rates rise,
generally the value of these securities will fall. This may also cause the value
of your shares to decrease.
The Series may invest in small companies as well as large companies. Smaller
companies may be affected to a greater extent than larger companies by changes
in general economic conditions and conditions in particular industries. Smaller
companies also may be relatively new and not have the same operating history and
"track record" as larger companies. This could make future performance of
smaller companies more difficult to predict.
The Series may invest in companies in foreign countries, including some
"emerging market" countries (countries with markets that are not fully
developed). Political and economic uncertainty as well as less public
information about investments may negatively impact the Series' portfolio. No
investments may be made in currencies other than U.S. dollars. Foreign markets
may not perform as well as U.S. markets. Emerging market countries and companies
doing business in emerging markets may not have the same range of opportunities
as countries and their companies in developed nations. They also may have more
obstacles to financial success.
PERFORMANCE TABLES
The following bar chart and table provide some indication of the risks of
investing in the Phoenix-Engemann Capital Growth Series. The bar chart shows
changes in the Series' total return performance from year to year over a 10-year
period (see footnote 1 on following page). The table shows how the Series'
average annual returns for 1, 5 and 10 years and for the life of the Series
compare to those of a broad-based securities market index. The Series' past
performance is not necessarily an indication of how the Series will perform in
the future.
Phoenix-Engemann Capital Growth Series 13
<PAGE>
PHOENIX-ENGEMANN CAPITAL GROWTH SERIES
[GRAPHIC OMITTED]
CALENDAR YEAR ANNUAL RETURN (%)
1989 36.06
1990 3.98
1991 43.83
1992 10.29
1993 19.69
1994 1.48
1995 30.85
1996 12.58
1997 21.07
1998 30.01
(1) The Series' average annual returns in this chart do not reflect the
deduction of any separate account or contract charges. The returns would
have been less than those shown if sales charges were deducted. During the
10-year period shown in the chart, the highest return for a quarter was
23.36% (quarter ending March 1991) and the lowest return for a quarter was
-11.36% (quarter ending September 1990).
- ---------------------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS LIFE OF
(FOR THE PERIOD ONE FIVE TEN THE
ENDING 12/31/98) YEAR YEARS YEARS SERIES(1)
- ---------------------------------------------------------------
Phoenix-Engemann
Capital Growth Series 30.01% 18.67% 20.25% 19.27%
- ---------------------------------------------------------------
S&P 500 Stock Index(2) 28.76% 24.15% 19.22% 18.12%
- ---------------------------------------------------------------
(1) Since January 1, 1983.
(2) The S&P 500 Index is an unmanaged, commonly used measure of total return
stock market performance. The index is not available for direct investment.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM SERIES' ASSETS)
Management Fees 0.62%
Distribution and Service (12b-1) Fees None
Other Expenses(1) 0.07%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES 0.69%
=====
(1) The Phoenix-Engemann Capital Growth Series investment advisor has agreed to
reimburse through December 31, 2000 through the Phoenix-Engemann Capital
Growth Series' expenses other than Management Fees to the extent such
expenses exceed 0.15% of its total average net assets.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would be:
- ---------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------
Phoenix-Engemann
Capital Growth Series $70 $221 $384 $859
- ---------------------------------------------------------------
14 Phoenix-Engemann Capital Growth Series
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Series' financial performance for the past 5 years (or, if shorter, the period
of the Series' operations). Certain information reflects financial results for a
single share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Series (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP. This report and the Series' financial
statements are included in both the Statement of Additional Information and
Annual Report, which are available upon request.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED 6/30/99 -----------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 23.93 $ 19.16 $ 18.89 $ 18.13 $ 15.69 $ 16.59
Income from investment operations
Net investment income (loss).............. 0.03 0.03 0.13 0.19 0.20 0.23(1,3)
Net realized and unrealized gain (loss)... 1.67 5.65 3.70 2.10 4.60 0.02
-------- -------- -------- -------- -------- --------
Total from investment operations........ 1.70 5.68 3.83 2.29 4.80 0.25
-------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income...... (0.03) (0.03) (0.13) (0.18) (0.17) (0.23)
Dividends from net realized gains......... (0.33) (0.88) (3.43) (1.35) (2.19) (0.92)
-------- -------- -------- -------- -------- --------
Total distributions...................... (0.36) (0.91) (3.56) (1.53) (2.36) (1.15)
-------- -------- -------- -------- -------- --------
Change in net asset value................... 1.34 4.77 0.27 0.76 2.44 (0.90)
-------- -------- -------- -------- -------- --------
Net asset value, end of period.............. $ 25.27 $ 23.93 $ 19.16 $ 18.89 $ 18.13 $ 15.69
======== ======== ======== ======== ======== ========
Total Return................................ 7.21%(5) 30.01% 21.07% 12.58% 30.85% 1.48%
Ratios/supplemental data:
Net assets, end of period (thousands)..... $1,970,209 $1,876,296 $1,505,568 $1,235,395 $985,389 $616,221
Ratio to average net assets of:
Operating expenses........................ 0.68%(4) 0.69% 0.74% 0.72% 0.75%(2) 0.80%
Net investment income..................... 0.22%(4) 0.15% 0.64% 1.03% 1.12% 1.38%
Portfolio turnover rate..................... 71%(5) 102% 284% 167% 173% 185%
</TABLE>
(1) Includes reimbursement of operating expenses by investment advisor 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) Annualized.
(5) Not annualized.
Phoenix-Engemann Capital Growth Series 15
<PAGE>
PHOENIX-ENGEMANN NIFTY FIFTY SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVE
The Phoenix-Engemann Nifty Fifty Series has an investment objective of
long-term capital appreciation. There is no guarantee that the Series will
achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] The Series invests in approximately 50 different securities which, in
the opinion of the advisor, offer the best potential for long-term
growth of capital.
[diamond] At least 75% of the Series' total assets will be invested in common
stocks of high quality growth companies.
[diamond] Up to 25% of the Series' total assets may be invested in common stocks
of small corporations with rapidly growing earnings per share or
common stocks believed to be undervalued.
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
The Series will seek to increase the value of your shares by investing in
securities the advisor expects to increase in value. The Series' investments
will be in common stocks. Conditions affecting the overall economy, specific
industries or companies in which the Series invests can be worse than expected.
As a result, the value of your shares may decrease.
The Series will invest significantly in securities issued by small
companies. Smaller companies, regardless of their location, may be affected to a
greater extent than larger companies by changes in general economic conditions
and conditions in particular industries. Smaller companies also may be
relatively new and not have the same operating history and "track record" as
larger companies. This could make future performance of smaller companies more
difficult to predict.
Since the Series contains securities of a limited number of companies, it
may be more sensitive to changes in the market value of a single issuer or
industry in its portfolio. Consequently, the net asset value per share of the
Phoenix-Engemann Nifty Fifty Series may fluctuate substantially. The Series may
not be appropriate for short-term investors.
PERFORMANCE TABLES
The Phoenix-Engemann Nifty Fifty Series has been in existence only since
March 2, 1998 and thus has not had an annual return for one full calendar year.
The table below shows how the Series' average annual return since inception
compares to that of a broad-based securities market index for that period. You
should expect that the Series' performance will fluctuate from year to year,
sometimes significantly. The Series' past performance is not necessarily an
indication of how the Series will perform in the future.
- --------------------------------------------------------------
TOTAL RETURN LIFE OF THE
(FOR THE PERIOD ENDING 12/31/98)(1) SERIES(2)
- --------------------------------------------------------------
Phoenix-Engemann Nifty Fifty Series 26.26%
- --------------------------------------------------------------
S&P 500 Index(3) 18.95%
- --------------------------------------------------------------
(1) The Series' total return in this table does not reflect the deduction of any
separate account or contract charges. The return would have been less than
those shown if such charges were deducted.
(2) Since March 2, 1998.
(3) The S&P 500 Index is an unmanaged, but commonly used measure of stock market
total return performance. The Index is not available for direct investment.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM SERIES' ASSETS)
Management Fees 0.90%
Distribution and Service (12b-1) Fees None
Other Expenses 1.68%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES(1) 2.58%
=====
(1) Phoenix Investment Counsel has agreed to reimburse through December 31, 2000
the Series for the amount, if any, by which the Series' operating expenses
other than the management fee for any fiscal year exceeds 0.15%. Actual
Total Annual Series Operating Expenses after expense reimbursement were
1.05% for the year ending December 31, 1998.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
- ----------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------
Phoenix-Engemann
Nifty Fifty Series $261 $802 $1,370 $2,915
- ----------------------------------------------------------------
16 Phoenix-Engemann Nifty Fifty Series
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Series' financial performance for the past 5 years (or, if shorter, the period
of the Series' operations). Certain information reflects financial results for a
single share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Series (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP. This report and the Series' financial
statements are included in both the Statement of Additional Information and
Annual Report, which are available upon request.
<TABLE>
<CAPTION>
SIX MONTHS FROM
ENDED INCEPTION
6/30/99 3/2/98 TO
(UNAUDITED) 12/31/98
----------- --------
<S> <C> <C>
Net asset value, beginning of period............................................................. $ 12.62 $ 10.00
Income from investment operations
Net investment income (loss)................................................................... (0.01)(3) 0.01(3, 4)
Net realized and unrealized gain (loss)........................................................ 1.59 2.62
-------- --------
Total from investment operations............................................................. 1.58 2.63
-------- --------
Less distributions:
Dividends from net investment income........................................................... -- (0.01)
In excess of net investment income............................................................. -- --
-------- --------
Total distributions.......................................................................... 0.00 (0.01)
-------- --------
Change in net asset value........................................................................ 1.58 2.62
-------- --------
Net asset value, end of period................................................................... $ 14.20 $ 12.62
======== ========
Total Return..................................................................................... 12.50%(2) 26.26%(2)
Ratios/supplemental data:
Net assets, end of period (thousands).......................................................... $ 34,267 $ 13,153
Ratio to average net assets of:
Operating expenses.............................................................................. 1.05%(1) 1.05%(1)
Net investment income........................................................................... (0.19)% 0.07%(1)
Portfolio turnover rate........................................................................... 38%(2) 90%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment advisor of $0.03
and $0.13 per share, respectively.
(4) Computed using average shares outstanding.
Phoenix-Engemann Nifty Fifty Series 17
<PAGE>
PHOENIX-FEDERATED U.S. GOVERNMENT
BOND SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVES
The investment objective of the Phoenix-Federated U.S. Government Bond
Series is to pursue total return by investing primarily in debt obligations of
the U.S. Government, its agencies and instrumentalities.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] Under normal circumstances, the Series will invest at least 65% of its
total assets in U.S. government bonds.
[diamond] The Series will maintain a dollar-weighted average portfolio duration
that is within 20 percent of the weighted average portfolio duration
of the Merrill Lynch 10+ Year Treasury Index.
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
The prices of fixed income securities (debt obligations) fluctuate inversely
to the direction of interest rates. An increase in interest rates may result in
a decrease in the value of Series shares.
This Series is new and has no performance history.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM SERIES' ASSETS)
Management Fees 0.60%
Distribution and Service (12b-1) Fees None
Other Expenses(1,2) 1.70%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES(2) 2.30%
=====
(1) The Phoenix-Federated U.S. Government Bond Series investment advisor has
agreed to reimburse through December 31, 2000 the Phoenix-Federated U.S.
Government Bond Series' expenses other than Management Fees to the extent
such expenses exceed 0.15% of its total average net assets.
(2) As a new Series, Other Expenses and Total Annual Series' Operating Expenses
are estimates of the expenses that will be incurred in the Series first
fiscal year without reimbursement.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would be:
- -----------------------------------------------------------
1 YEAR 3 YEARS
- -----------------------------------------------------------
Phoenix-Federated U.S. Government
Bond Series $233 $718
- -----------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Series has not yet commenced operations.
18 Phoenix-Federated U.S. Government Bond Series
<PAGE>
PHOENIX-GOODWIN MONEY MARKET SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVES
The Phoenix-Goodwin Money Market Series has an investment objective of
seeking as high a level of current income as is consistent with the preservation
of capital and maintenance of liquidity. There is no guarantee that the Series
will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] The Series seeks to maintain a stable $1.00 per share price.
[diamond] The Series will invest in a diversified portfolio of high quality
money market instruments with maturities of 397 days or less. The
average maturity of the Series' portfolio securities, based on their
dollar value, will not exceed 90 days.
[diamond] The Series will invest exclusively in the following instruments:
[bullet] Obligations issued or guaranteed by the U.S. government, its
agencies, authorities and instrumentalities
[bullet] Obligations issued by banks and savings and loan
associations, including dollar-denominated obligations of
foreign branches of U.S. banks and U.S. branches of foreign
banks
[bullet] Dollar-denominated obligations guaranteed by banks or savings
and loan associations
[bullet] Federally insured obligations of other banks or savings and
loan associations
[bullet] Commercial paper
[bullet] Short-term corporate obligations
[bullet] Repurchase agreements
[diamond] At least 95% of the Series' total assets will be invested in
securities in the highest short-term rating category. Generally,
investments will be limited to securities in the 2 highest short-term
rating categories.
[diamond] The Series may invest more than 25% of its assets in the domestic
banking industry.
[diamond] The Series may forego purchasing securities with the highest available
yield due to considerations of liquidity and safety of principal.
[diamond] The advisor will buy, sell and trade securities in anticipation of, or
in response to, changing economic and money market conditions and
trends. This, and the short-term nature of money market instruments,
may result in a high portfolio turnover rate.
PRINCIPAL RISKS
An investment in the Series is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Series seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Series.
The Series' focus is to optimize current income. The advisor intends to
select investments that provide higher returns relative to overall money market
investment returns while preserving capital and maintaining liquidity. If the
advisor misjudges the return potential or the ability of the issuer to make
scheduled income and principal payments, the Series' returns may be lower than
prevailing returns and the Series' income available for distribution may be
less. Neither the Series nor the advisor can assure you that a particular level
of income will be consistently achieved.
The advisor intends to select investments that optimize the Series' yield
while preserving capital and maintaining liquidity. Because market conditions
and interest rates determine portfolio security yields, neither the Series nor
the advisor can assure you that the Series' yield will remain constant or that a
particular level of income will be achieved.
A security's short-term investment rating may decline, increasing the
chances the issuer may not be able to make principal and interest payments on
time. This may reduce the Series' stream of income and decrease the Series'
yield.
Obligations issued or guaranteed by the U.S. government, its agencies,
authorities and instrumentalities, or guaranteed or insured by banks only
guarantee or insure principal and interest will be timely paid to holders of the
securities. The entities do not guarantee that the value of the Series' shares
will increase.
The Series may invest in repurchase agreements. If the seller of the
repurchase agreement does not repurchase the underlying securities, the Series
may incur a loss.
PERFORMANCE TABLES
The following bar chart and table provide some indication of the risks of
investing in the Phoenix-Goodwin Money Market Series. The bar chart shows
changes in the Series' performance from year to year over a 10-year period.(1)
The table shows how the Series' average annual returns for 1, 5 and 10 years and
for the life of the Series compare to those of a broad-based money market
performance index. The Series' past performance is not necessarily an indication
of how the Series will perform in the future.
Phoenix-Goodwin Money Market Series 19
<PAGE>
PHOENIX-GOODWIN MONEY MARKET SERIES
[GRAPHIC OMITTED]
CALENDAR YEAR ANNUAL RETURN (%)
1989 9.20
1990 8.22
1991 5.98
1992 3.58
1993 2.87
1994 3.83
1995 5.72
1996 5.09
1997 5.18
1998 5.09
(1) The Series' average annual returns in this chart do not reflect the
deduction of any separate account or contract charges. The returns would
have been less than those shown if such charges were deducted. During the
10-year period shown in the chart, the highest return for a quarter was
2.37% (quarter ending June 1989) and the lowest return for a quarter was
.69% (quarter ending September 1993).
The Series' 7-day yield on December 31, 1998 was 4.05%.
- ----------------------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
(FOR THE PERIOD ONE FIVE TEN LIFE OF
ENDING 12/31/98) YEAR YEARS YEARS THE SERIES(1)
- ----------------------------------------------------------------
Phoenix-Goodwin
Money Market 5.09% 4.98% 5.46% 6.34%
Series
- ----------------------------------------------------------------
Lipper Money
Market Fund(2) 5.10% 4.90% 5.32% 6.27%
- ----------------------------------------------------------------
(1) Since October 31, 1982.
(2) The Lipper Money Market Fund is comprised of the weighted average of the top
30 Money Market funds.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM SERIES' ASSETS)
Management Fees 0.40%
Distribution and Service (12b-1) Fees None
Other Expenses 0.15%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES(2) 0.55%
=====
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
- --------------------------------------------------------------
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
- --------------------------------------------------------------
Phoenix-Goodwin Money
Market Series $56 $176 $307 $689
- --------------------------------------------------------------
20 Phoenix-Goodwin Money Market Series
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Series' financial performance for the past 5 years (or, if shorter, the period
of the Series' operations). Certain information reflects financial results for a
single share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Series (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP. This report and the Series' financial
statements are included in both the Statement of Additional Information and
Annual Report, which are available upon request.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED 6/30/99 -----------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Income from investment operations
Net investment income (loss)................ 0.22(1) 0.50 0.50 0.50 0.56 0.38(1)
---- ---- ---- ---- ---- ----
Total from investment operations........... 0.22 0.50 0.50 0.50 0.56 0.38
---- ---- ---- ---- ---- ----
Less distributions:
Dividends from net investment income........ (0.22) (0.50) (0.50) (0.50) (0.56) (0.38)
------ ------ ------ ------ ------ ------
Total distributions........................ (0.22) (0.50) (0.50) (0.50) (0.56) (0.38)
------ ------ ------ ------ ------ ------
Net asset value, end of period................ $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
======== ======== ======== ======== ======== ========
Total Return.................................. 2.26%(4) 5.09% 4.99% 4.98% 5.55% 3.77%
Ratios/supplemental data:
Net assets, end of period (thousands)....... $204,625 $196,811 $126,607 $131,361 $102,943 $ 94,586
Ratio to average net assets of:
Operating expenses.......................... 0.55%(3) 0.55% 0.55% 0.55% 0.53%(2) 0.55%
Net investment income....................... 4.50%(3) 4.99% 5.07% 4.89% 5.57% 3.85%
</TABLE>
(1) Includes reimbursement of operating expenses by investment advisor of $0.001
and $0.003 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.
(3) Annualized.
(4) Not annualized.
Phoenix-Goodwin Money Market Series 21
<PAGE>
PHOENIX-GOODWIN MULTI-SECTOR
FIXED INCOME SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVES
The Phoenix-Goodwin Multi-Sector Fixed Income Series has an investment
objective of seeking long-term total return by investing in a diversified
portfolio mixture of high yield (high risk) and high quality fixed income
securities. There is no guarantee that the Series will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] Under normal circumstances, the Series will invest at least 65% of its
total assets in various sectors of the fixed income securities market.
[diamond] Fixed income securities include: high yield (high risk) fixed income
securities (sometimes referred to as "junk bonds"), high quality fixed
income securities, preferred stock, 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.
[diamond] The advisor seeks to match the average duration and maturity of the
Series portfolio to those of the Lehman Brothers Aggregated Bond
Index.
[diamond] The Series may invest up to 35% of its total assets in high yield
(high risk) corporate fixed income securities.
[diamond] The Series may invest up to 50% of its total assets in foreign debt
obligations.
[diamond] The Series may invest in common stock and other equity securities.
PRINCIPAL RISKS
If you invest in this Series you risk that you may lose your investment.
The Series seeks to select investments providing an opportunity to enhance
the portfolio's overall total return and yield. Although the Series usually will
be invested in all sectors of the fixed income securities market, it may invest
any amount of its assets in any one sector (except for high yield (high risk)
and foreign debt obligations) and may choose not to invest in a sector in order
to achieve its investment objective. Conditions affecting the overall economy,
specific industries or companies in which the Series invests and interest rate
changes can be worse than expected. As a result, the value of your shares may
decline. If the advisor misjudges the return potential of fixed income
securities, or the ability of issuers to make scheduled principal and interest
payments, the Series' return may be lower than prevailing returns.
The Series may invest in high yield (high risk) fixed income securities (so
called "junk bonds"). Junk bonds present a greater risk that the issuer will not
be able to make interest or principal payments on time. If this happens, the
Series would lose income and could expect a decline in the market value of the
securities.
The Series may invest fixed income securities of foreign governments and
companies in foreign countries, including some "emerging market" countries
(countries with markets that are not fully developed). Political and economic
uncertainty as well as less public information about investments may negatively
impact the Series' portfolio. Some investments may be made in currencies other
than U.S. dollars that will fluctuate in value as a result of changes in the
currency exchange rate. Foreign markets and currencies may not perform as well
as U.S. markets. Emerging market countries and companies doing business in
emerging markets may not have the same range of opportunities as countries and
their companies in developed nations. They also may have more obstacles to
financial success.
This Series may invest in mortgage-backed and other asset-backed securities.
A portion of the cash flow from these securities may be from early payoff of
some of the underlying loans. In the event of very high prepayments, the Series
may be required to invest the proceeds at a lower interest rate, causing the
Series to earn less than if the prepayments had not occurred.
PERFORMANCE TABLES
The following bar chart and table provide some indication of the risks of
investing in the Phoenix-Goodwin Multi-Sector Fixed Income Series. The bar chart
shows the changes in the Series' performance from year to year over a 10-year
period.(1) The table shows how the Series' average annual returns for 1, 5 and
10 years and the life of the Series compare to those of a broad-based market
index. The Series' past performance is not necessarily an indication of how the
Series will perform in the future.
PHOENIX-GOODWIN MULTI-SECTOR SERIES
[GRAPHIC OMITTED]
CALENDAR YEAR ANNUAL RETURN (%)
1989 8.30
1990 5.14
1991 19.41
1992 10.03
1993 15.90
1994 -5.47
1995 23.54
1996 12.42
1997 10.93
1998 -4.02
(1) The Series' annual returns in this chart do not reflect the deduction of any
separate account or contract charges. The returns would have been less than
those shown if such charges were deducted. During the 10-year period shown
in the chart , the highest return for a quarter was 8.89% (quarter ending
June 1995) and the lowest return for a quarter was -8.25% (quarter ending
September 1998).
22 Phoenix-Goodwin Multi-Sector Fixed Income Series
<PAGE>
- ---------------------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS LIFE OF
(FOR THE PERIOD ONE FIVE TEN THE
ENDING 12/31/98) YEAR YEARS YEARS SERIES(1)
- ---------------------------------------------------------------
Phoenix-Goodwin
Multi-Sector Fixed (4.02)% 6.93% 9.26% 9.99%
Income Series
- ---------------------------------------------------------------
Lehman Brothers
Aggregate Bond 8.69% 7.27% 9.26% 9.98%
Index(2)
- ---------------------------------------------------------------
(1) Since January 1, 1983.
(2) The Lehman Brothers Aggregate Bond Index is an unmanaged, commonly used
measure of bond performance. The index is not available for direct
investment.
SERIES' EXPENSES
This table illustrates all fees and expenses that you pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES
THAT ARE DEDUCTED FROM THE SERIES' ASSETS)
Management Fees 0.50%
Distribution and Service (12b-1) Fees None
Other Operating Expenses(1) 0.14%
--------
TOTAL ANNUAL SERIES' OPERATING EXPENSES 0.64%
=====
(1) Phoenix Investment Counsel, Inc. has agreed to reimburse through December
31, 2000 the Series for the amount, if any, for the Series' operating
expenses (other than the management fee) for any fiscal year exceeds 0.15%
of the average net assets of the Series.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
- -----------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------
Phoenix-Goodwin
Multi-Sector Fixed $65 $205 $357 $798
Income Series
- -----------------------------------------------------------
Phoenix-Goodwin Multi-Sector Fixed Income Series 23
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Series' financial performance for the past 5 years (or, if shorter, the period
of the Series' operations). Certain information reflects financial results for a
single share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Series (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP. This report and the Series' financial
statements are included in both the Statement of Additional Information and
Annual Report, which are available upon request.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED 6/30/99 -----------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 9.18 $ 10.38 $ 10.34 $ 10.22 $ 8.98 $ 10.27
Income from investment operations
Net investment income (loss).................. 0.37(1) 0.77 0.75(1) 0.79(1) 0.83(1,2) 0.72(1,2)
Net realized and unrealized gain (loss)....... (0.17) (1.17) 0.34 0.43 1.22 (1.28)
------ ------ ---- ---- ---- ------
Total from investment operations............ 0.20 (0.40) 1.09 1.22 2.05 (0.56)
---- ------ ---- ---- ---- ------
Less distributions
Dividends from net investment income.......... (0.36) (0.74) (0.77) (0.78) (0.81) (0.73)
Dividends from net realized gains............. -- (0.06) (0.28) (0.32) -- --
-- ------ ------ ------ ----- -----
Total distributions.......................... (0.36) (0.80) (1.05) (1.10) (0.81) (0.73)
------ ------ ------ ------ ------ ------
Change in net asset value....................... (0.16) (1.20) 0.04 0.12 1.24 (1.29)
------ ------ ----- ----- ----- ------
Net asset value, end of period.................. $ 9.02 $ 9.18 $ 10.38 $ 10.34 $ 10.22 $ 8.98
======== ======== ======== ======== ======== ========
Total Return.................................... 2.19%(5) (4.02)% 10.93% 12.42% 23.54% (5.47)%
Ratios/supplemental data:
Net assets, end of period (thousands)......... $179,881 $187,363 $191,627 $145,044 $109,046 $ 74,686
Ratio to average net assets of:
Operating expenses............................ 0.65%(4) 0.64% 0.65% 0.65% 0.65%(3) 0.66%
Net investment income......................... 8.10%(4) 7.61% 7.25% 7.80% 8.55% 7.62%
Portfolio turnover rate......................... 63%(5) 160% 151% 191% 147% 181%
</TABLE>
(1) Includes reimbursement of operating expenses by investment advisor of
$0.001, $0.001, $0.002, $0.007 and $0.006 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.
(4) Annualized.
(5) Not annualized.
24 Phoenix-Goodwin Multi-Sector Fixed Income Series
<PAGE>
PHOENIX-HOLLISTER VALUE EQUITY SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVES
The Phoenix-Hollister Value Equity Series' primary investment objective is
to seek long-term capital appreciation. The Series has a secondary investment
objective to seek current income. There is no guarantee that the Series will
achieve either objective.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] The Series will invest primarily in common stocks. Under normal
circumstances the Series will invest at least 65% of its total assets
in common stocks.
[diamond] The Series' advisor uses a quantitative value strategy that chooses
stocks that meet certain criteria relating to price, dividend yield
and the going concern value and debt levels of the issuers. For the
few hundred of the approximately 2,500 companies that survive this
screening, the advisor projects growth in earnings and dividends,
earnings momentum and relative undervaluation based on a dividend
discount model. The advisor develops target prices and value ranges,
and purchases the top-rated stocks. With certain exceptions the
advisor sells when -
[bullet] a stock's target price is reached,
[bullet] the issuer or its industry suffer negative changes, or
[bullet] there is a change in the investment criteria that prompted
the initial purchase.
[diamond] The Series may invest in convertible securities. Convertible
securities investments will be limited to those in one of the 4
highest rating categories of convertible securities. These are
commonly called "investment grade."
[diamond] The Series may obtain fixed interest loans from a bank in amounts up
to one-third the value of its net assets and invest the loan proceeds
in other assets.
[diamond] The Series may engage in "securities lending" to increase its
investment returns.
[diamond] The Series may invest up to 30% of its assets in securities of foreign
(non-U.S.) issuers.
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
The Series will seek to increase the value of your shares by investing in
securities the advisor expects to increase in value and to provide current
income. Most of the Series' investments will be in common stocks. Conditions
affecting the overall economy, specific industries or companies in which the
Series invests can be worse than expected. As a result, the value of your shares
may decrease. Dividend, interest and other distributions also can decrease or be
eliminated entirely.
The Series also may invest in small companies as well as large companies.
Smaller companies, regardless of their location, may be affected to a greater
extent than larger companies by changes in general economic conditions and
conditions in particular industries. Smaller companies also may be relatively
new and not have the same operating history and "track record" as larger
companies. This could make future performance of smaller companies more
difficult to predict.
The Series may borrow money to purchase additional securities. If the
additional securities increase in value, the net asset value would increase
sooner than it would have without borrowing. If these securities decrease in
value or do not increase enough to cover interest and other borrowing costs the
Series will suffer greater losses than it would if no borrowing took place.
The Series may invest in financial futures contracts and options. The
advisor will make these investments primarily to try to minimize the risk of
other investments it makes for the Series. These investments may not protect the
Series from losses, they may decrease overall return, and they could, in unusual
circumstances, expose the fund to losses that could be unlimited.
The Series may lend portfolio securities to financial institutions to
increase investment return. If the borrower is unwilling or unable to return the
borrowed securities when due, the Series can suffer losses.
This Series may invest in companies in foreign countries. Political and
economic uncertainty as well as relatively less public information about
investments may negatively impact the Series' portfolio. Some investments may be
made in currencies other than U.S. dollars that will fluctuate in value as a
result of changes in the currency exchange rate. Foreign markets and currencies
may not perform as well as U.S. markets.
PERFORMANCE TABLES
The Phoenix-Hollister Value Equity Series has been in existence only since
March 2, 1998 and thus has not had an annual return for one full calendar year.
The table shows how the Series' average annual return since inception compares
to that of a broad-based securities market index for that period. You should
expect that the Series' performance will fluctuate from year to year, sometimes
significantly. The Series' past performance is not necessarily an indication of
how the Series will perform in the future.
Phoenix-Hollister Value Equity Series 25
<PAGE>
- --------------------------------------------------------------
TOTAL RETURN
(FOR THE PERIOD ENDING 12/31/98)(1) LIFE OF THE SERIES(2)
- --------------------------------------------------------------
Phoenix-Hollister
Value Equity Series 10.79%
- --------------------------------------------------------------
S&P 500 Index(3) 18.95%
- --------------------------------------------------------------
(1) The Series' total return in this table does not reflect the deduction of any
separate account or contract charges. The return would have been less than
those shown if such charges were deducted.
(2) Since March 2, 1998.
(3) The S&P 500 Index is an unmanaged, but commonly used measure of stock market
total return performance. The Index is not available for direct investment.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES
THAT ARE DEDUCTED FROM SERIES' ASSETS)
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 1.76%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES(1) 2.46%
=====
(1) The Series' investment advisor has agreed to reimburse through December 31,
2000 the Phoenix-Hollister Value Equity Series' expenses other than
Management Fees and Distribution and Service Fees to the extent that such
expenses exceed 0.15%. Actual Total Annual Series' Operating Expenses after
expense reimbursement were 0.85% for the year ending December 31, 1998.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
- ---------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------
Phoenix-Hollister
Value Equity Series $249 $767 $1,311 $2,796
- ---------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Series' financial performance for the past 5 years (or, if shorter, the period
of the Series' operations). Certain information reflects financial results for a
single share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Series (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP. This report and the Series' financial
statements are included in both the Statement of Additional Information and
Annual Report, which are available upon request.
<TABLE>
<CAPTION>
SIX MONTHS FROM
ENDED INCEPTION
6/30/99 3/2/98 TO
(UNAUDITED) 12/31/98
----------- --------
<S> <C> <C>
Net asset value, beginning of period............................................ $ 11.03 $ 10.00
Income from investment operations
Net investment income (loss).................................................. 0.03(3) 0.05(3)
Net realized and unrealized gain (loss)....................................... 0.59 1.03
---- ----
Total from investment operations............................................ 0.62 1.08
---- ----
Less distributions
Dividends from net investment income.......................................... (0.01) (0.05)
In excess of net investment income............................................ -- --
------ ------
Total distributions......................................................... (0.01) (0.05)
------ ------
Change in net asset value....................................................... 0.61 1.03
----- -----
Net asset value, end of period.................................................. $ 11.64 $ 11.03
======== ========
Total Return.................................................................... 5.65%(2) 10.79%(2)
Ratios/supplemental data:
Net assets, end of period (thousands)......................................... $ 9,340 $ 9,533
Ratio to average net assets of:
Operating expenses............................................................ 0.85%(1) 0.85%(1)
Net investment income......................................................... 0.55%(1) 0.85%(1)
Portfolio turnover rate......................................................... 81%(2) 77%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment advisor of $0.07
and $0.13 per share, respectively.
26 Phoenix-Hollister Value Equity Series
<PAGE>
PHOENIX-JANUS EQUITY INCOME SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVES
The Phoenix-Janus Equity Income Series seeks current income and long-term
growth of capital. There is no guarantee that the Series will achieve its
objective.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] Normally, the Series will invest at least 65% of its invested assets
in income producing equity securities.
[diamond] The Series emphasizes investments in stock of companies with growth
potential.
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
Much of the Series' investments will be in common stocks. Common stocks tend
to be more volatile than other investment choices. Conditions affecting the
overall economy, specific industries or companies in which the Series invests
can be worse than expected. As a result, the value of your shares may decline.
The value of bonds and other fixed income securities in which the Series may
invest is inversely related to interest rate changes. If interest rates rise,
generally the value of these securities will fall. Another fundamental risk
associated with fixed-income securities is credit risk, which is the risk that
an issuer of a bond will be unable to make principal and interest payments when
due.
This Series is new and has no performance history.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM THE SERIES' ASSETS)
Management Fees 0.85%
Distribution and Service (12b-1) Fees None
Other Expenses(1,2) 1.40%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES(2) 2.25%
=====
(1) The Phoenix-Janus Equity Income Series investment advisor has agreed to
reimburse through December 31, 2000 the Phoenix-Janus Equity Income Series'
expenses other than Management Fees to the extent such expenses exceed 0.15%
of its total average net assets.
(2) As a new Series, Other Expenses and Total Annual Series' Operating Expenses
are estimates of the expenses that will be incurred in the Series' first
fiscal year without reimbursement.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would be:
- ------------------------------------------------------------
1 YEAR 3 YEARS
- ------------------------------------------------------------
Phoenix-Janus Equity
Income Series $228 $703
- ------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Series has not yet commenced operations.
Phoenix-Janus Equity Income Series 27
<PAGE>
PHOENIX-JANUS FLEXIBLE INCOME SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVES
The Phoenix-Janus Flexible Income Series seeks to obtain maximum total
return, consistent with preservation of capital. There is no guarantee that the
Series will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] The Series invests primarily in a wide variety of income producing
securities such as corporate bonds and notes, government securities
and preferred stock.
[diamond] The Series will invest at least 80% of its assets in income producing
securities. The Series may own an unlimited amount of
high-yield/high-risk fixed income securities, and these securities may
be a significant portion of the total portfolio.
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
The value of bonds and other fixed income securities in which the Series may
invest is inversely related to interest rate change. If interest rates rise,
generally the value of these securities will decrease. Another fundamental risk
associated with fixed income securities is credit risk, which is the risk that
an issuer will be unable to make principal and interest payments when due.
The Series may invest in high risk/high yield fixed income securities (so
called "junk bonds"). Junk bonds present a greater risk that the issuer will not
be able to make interest or principal payments on time. If this happens the
Series would lose income and could expect a decline in the market value of the
securities.
The Series may invest any amount in companies in foreign countries.
Political and economic uncertainty as well as less public information about
investments may negatively impact the Series' portfolio. Some investments may be
made in currencies other than U.S. dollars that will fluctuate in value as a
result of changes in the currency exchange rate. Foreign markets and currencies
may not perform as well as U.S. markets.
This Series is new and has no performance history.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES
THAT ARE DEDUCTED FROM THE SERIES' ASSETS)
Management Fees 0.80%
Distribution and Service (12b-1) Fees None
Other Expenses(1,2) 1.65%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES(2) 2.45%
=====
(1) The Phoenix-Janus Flexible Income Series investment advisor has agreed to
reimburse through December 31, 2000 the Phoenix-Janus Flexible Income
Series' expenses other than Management Fees to the extent such expenses
exceed 0.15% of its total average net assets.
(2) As a new Series, Other Expenses and Total Annual Series' Operating Expenses
are estimates of the expenses that will be incurred in the Series' first
fiscal year without reimbursement.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would be:
- ------------------------------------------------------------
1 YEAR 3 YEARS
- ------------------------------------------------------------
Phoenix-Janus Flexible
Income Series $248 $764
- ------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Series has not yet commenced operations.
28 Phoenix-Janus Flexible Income Series
<PAGE>
PHOENIX-JANUS GROWTH SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVES
The Phoenix-Janus Growth Series seeks long-term growth of capital in a
manner consistent with the preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES
The Series invests primarily in common stocks selected for their growth
potential.
Although the Series can invest in companies of any size, it generally
invests in larger, more established companies.
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
The Series will seek to increase the value of your shares by investing in
securities the advisor expects to increase in value. Most of the Series
investments will be in common stocks. Common stocks tend to be more volatile
than other investment choices. Conditions affecting the overall economy,
specific industries or companies in which the Series invests can be worse than
expected. As a result the value of your shares may decrease.
The Series may invest any amount in companies in foreign countries.
Political and economic uncertainty as well as less public information about
investments may negatively impact the Series' portfolio. Some investments may be
made in currencies other than U.S. dollars that will fluctuate in value as a
result of changes in the currency exchange rate. Foreign markets and currencies
may not perform as well as U.S. markets.
This Series is new and has no performance history.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM THE SERIES' ASSETS)
Management Fees 0.85%
Distribution and Service (12b-1) Fees None
Other Expenses(1,2) 1.05%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES(2) 1.90%
=====
(1) The Phoenix-Janus Growth Series investment advisor has agreed to reimburse
through December 31, 2000 the Phoenix-Janus Growth Series' expenses other
than Management Fees to the extent such expenses exceed 0.15% of its total
average net assets.
(2) As a new Series, Other Expenses and Total Annual Series' Operating Expenses
are estimates of the expenses that will be incurred in the Series' first
fiscal year without reimbursement.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would be:
- ------------------------------------------------------------
1 YEAR 3 YEARS
- ------------------------------------------------------------
Phoenix-Janus Growth Series $193 $597
- ------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Series has not yet commenced operations.
Phoenix-Janus Growth Series 29
<PAGE>
PHOENIX-MORGAN STANLEY FOCUS EQUITY SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVES
The Phoenix-Morgan Stanley Focus Equity Series seeks capital appreciation by
investing primarily in equity securities.
PRINCIPAL INVESTMENT STRATEGIES
The Series will invest in U.S. equity securities, and to a limited extent,
foreign companies that exhibit strong or accelerating earnings growth.
The Series will primarily invest in companies with market capitalization of
$1 billion or more, but may invest in smaller companies.
The Series generally concentrates its holdings in a relatively small number
of companies and may invest up to 25% of its assets in a single issuer.
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
The Series will invest primarily in common stocks. Conditions affecting the
overall economy, specific industries or companies in which the Series invests
can be worse than expected. As a result the value of your shares may decrease.
The risk of investing in the Series may be intensified because the Series is
non-diversified, which means that it may invest in securities of a limited
number of issuers. As a result, the performance of a particular investment or a
small group of investments may affect the Series' performance more than if the
Series were more diversified.
PERFORMANCE
This Series is new and has no performance history.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM THE SERIES' ASSETS)
Management Fees 0.85%
Distribution and Service (12b-1) Fees None
Other Expenses(1,2) 1.30%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES(2) 2.15%
=====
(1) The Phoenix-Morgan Stanley Focus Equity Series investment advisor has agreed
to reimburse through December 31, 2000 the Phoenix-Morgan Stanley Focus
Equity Series' expenses other than Management Fees to the extent such
expenses exceed 0.15% of its total average net assets.
(2) As a new Series, Other Expenses and Total Annual Series' Operating Expenses
are estimates of the expenses that will be incurred in the Series' first
fiscal year without reimbursement.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would be:
- ------------------------------------------------------------
1 YEAR 3 YEARS
- ------------------------------------------------------------
Phoenix-Morgan Stanley Focus Equity
Series $218 $673
- ------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Series has not yet commenced operations.
30 Phoenix-Morgan Stanley Focus Equity Series
<PAGE>
PHOENIX-OAKHURST BALANCED SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVES
The Phoenix-Oakhurst Balanced Series has investment objectives of reasonable
income, long-term capital growth and conservation of capital. There is no
guarantee that the Series will achieve its objectives.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] The advisor will use 4 criteria to select investments for the Series:
risk, income, capital enhancement and protection of capital value. The
advisor will select securities believed to have potential for the
production of current income, with emphasis on securities that also
have the potential for capital enhancement. Fixed income securities
are selected using a multi-sector approach. The advisor may adjust the
mix of investments based upon financial market and economic
conditions.
[diamond] Under normal circumstances, the Series will invest at least 65% of its
total assets in common stocks of companies of any size and fixed
income securities.
[diamond] The Series may invest up to 35% of its net assets in high yield, high
risk fixed income securities (commonly referred to as "junk bonds").
[diamond] At least 25% of the Series' assets will be invested in fixed income
securities that are rated within the 4 highest rating categories.
[diamond] The Series may invest 25% of its total assets in foreign securities,
including emerging market securities and foreign government
securities.
[diamond] The Series may also invest in mortgage-backed and asset-backed
securities.
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
The Series will seek to increase the value of your shares by investing in
securities the advisor expects to increase in value or provide reasonable
income. Most of the Series' investments will be in common stocks and fixed
income securities. Conditions affecting the overall economy, specific industries
or companies in which the Series invests and interest rate changes can be worse
than expected. As a result, the value of your shares may decrease. If the
advisor misjudges the return potential of fixed income securities, or the
ability of issuers to make scheduled principal and interest payments, the
Series' returns may be lower than prevailing returns, and the Series' income
available for distribution may be less than other Series. Neither the Series nor
the advisor can assure you that a particular level of income will be
consistently achieved.
This Series may invest in high risk, high yield fixed income securities (so
called "junk bonds"). Junk bonds present a greater risk that the issuer will not
be able to make interest or principal payments on time. If this happens, the
Series would lose income and could expect a decline in the market value of the
securities.
The Series may invest in foreign government securities and companies in
foreign countries, including some "emerging market" countries (countries with
markets that are not fully developed). Political and economic uncertainty as
well as less public information about investments may negatively impact the
Series' portfolio. Some investments may be made in currencies other than U.S.
dollars that will fluctuate in value as a result of changes in the currency
exchange rate. Foreign markets and currencies may not perform as well as U.S.
markets. Emerging market countries and companies doing business in emerging
markets may not have the same range of opportunities as countries and their
companies in developed nations. They also may have more obstacles to financial
success.
This Series may invest in unrated securities. Unrated securities may not
have as broad a market as rated, investment grade securities making them more
difficult to sell. This could cause the security to lose value.
The Series may invest in small companies as well as large companies. Smaller
companies may be affected to a greater extent than larger companies by changes
in general economic conditions and conditions in particular industries. Smaller
companies also may be relatively new and not have the same operating history and
"track record" as larger companies. This could make future performance of
smaller companies more difficult to predict.
This Series may invest in mortgage-backed and other asset-backed securities.
A portion of the cash flow from these securities may be from early payoff of
some of the underlying loans. In the event of very high prepayments, the Series
may be required to invest the proceeds at a lower interest rate, causing the
Series to earn less than if the prepayments had not occurred.
PERFORMANCE TABLES
The following bar chart and table provide some indication of the risks of
investing in the Phoenix-Oakhurst Balanced Series. The bar chart shows changes
in the Series' annual performance from year to year over a 6-year period.(1) The
table shows how the Series' average annual returns for 1 and 5 years and for the
life of the Series compare to those of a broad-based securities market index.
The Series' past performance is not necessarily an indication of how the Series
will perform in the future.
Phoenix-Oakhurst Balanced Series 31
<PAGE>
PHOENIX-OAKHURST BALANCED SERIES
[GRAPHIC OMITTED]
CALENDAR YEAR ANNUAL RETURN (%)
1993 8.57
1994 -2.80
1995 23.28
1996 10.56
1997 17.93
1998 19.01
(1) The Series' average annual returns in this chart do not reflect the
deduction of any separate account or contract charges. The returns would
have been less than those shown if such charges were deducted. During the
6-year period shown in the chart, the highest return for a quarter was
13.56% (quarter ending December 1998) and the lowest return for a quarter
was -5.21% (quarter ending September 1998).
- ---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIOD ENDING ONE FIVE LIFE OF
12/31/98) YEAR YEARS THE SERIES(1)
- ---------------------------------------------------------------
Phoenix- Oakhurst
Balanced Series 19.01% 13.21% 12.66%
- ---------------------------------------------------------------
Balanced Benchmark(2) 19.67% 16.29% 14.65%
- ---------------------------------------------------------------
(1) Since May 1, 1992.
(2) The Balanced Benchmark is a composite index made up of 55% of the S&P 500
Index return, 35% of the Lehman Brothers Aggregate Bond Index return and 10%
of the 90-day U.S. Treasury bills return and is produced by Frank Russell
Company. The Index is not available for direct investment.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM THE SERIES' ASSETS)
Management Fees 0.55%
Distribution and Service (12b-1) Fees None
Other Expenses 0.13%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES 0.68%
=====
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
- ---------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------
Phoenix-Oakhurst
Balanced Series $69 $218 $379 $847
- ---------------------------------------------------------------
32 Phoenix-Oakhurst Balanced Series
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Series' financial performance for the past 5 years (or, if shorter, the period
of the Series' operations). Certain information reflects financial results for a
single share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Series (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP. This report and the Series' financial
statements are included in both the Statement of Additional Information and
Annual Report, which are available upon request.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED 6/30/99 -----------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $ 13.74 $ 12.26 $ 12.06 $ 12.30 $ 10.53 $ 11.31
Income from investment operations
Net investment income (loss)............. 0.16 0.33 0.38 0.36 0.40(2) 0.38(1,2)
Net realized and unrealized gain (loss).. 0.41 1.94 1.73 0.89 2.02 (0.70)
---- ---- ---- ---- ---- ------
Total from investment operations....... 0.57 2.27 2.11 1.25 2.42 (0.32)
---- ---- ---- ---- ---- ------
Less distributions:
Dividends from net investment income..... (0.16) (0.32) (0.40) (0.35) (0.40) (0.36)
Dividends from net realized gains........ (0.10) (0.47) (1.51) (1.14) (0.25) (0.10)
------ ------ ------ ------ ------ ------
Total distributions.................... (0.26) (0.79) (1.91) (1.49) (0.65) (0.46)
------ ------ ------ ------ ------ ------
Change in net asset value.................. 0.31 1.48 0.20 (0.24) 1.77 (0.78)
---- ---- ---- ------ ---- ------
Net asset value, end of period............. $ 14.05 $ 13.74 $ 12.26 $ 12.06 $ 12.30 $ 10.53
======== ======== ======== ======== ======== ========
Total Return .............................. 4.20%(5) 19.01% 17.93% 10.56% 23.28% (2.80%)
Ratios/supplemental data:
Net assets, end of period (thousands).... $291,573 $280,056 $231,180 $204,285 $193,302 $161,105
Ratio to average net assets of:
Operating expenses....................... 0.71%(4) 0.68% 0.71% 0.68% 0.65%(3) 0.69%
Net investment income.................... 2.37%(4) 2.58% 2.92% 2.93% 3.44% 3.44%
Portfolio turnover rate.................... 36%(5) 110% 181% 229% 223% 171%
</TABLE>
(1) Includes reimbursement of operating expenses by investment advisor of $0.001
per share.
(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.
(4) Annualized.
(5) Not annualized.
Phoenix-Oakhurst Balanced Series 33
<PAGE>
PHOENIX-OAKHURST GROWTH AND INCOME SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVES
The Phoenix-Oakhurst Growth and Income Series has an investment objective of
seeking dividend growth, current income and capital appreciation. There is no
guarantee that the Series will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] The Series will invest in equity securities, primarily common stocks.
Under normal circumstances the Series will invest at least 65% of its
total assets in equity securities.
[diamond] Equity securities include common stock, preferred stock, securities
that can be converted into common stock or preferred stock
("convertible securities") and warrants to purchase common stock or
preferred stock.
[diamond] The Series' advisor uses a quantitative value strategy to pursue the
Series' investment objective. The strategy concentrates on the 1,500
largest companies traded in the United States. This strategy seeks
securities of companies that are undervalued relative to the market in
general and that have improving fundamentals.
[diamond] The Series will invest only in the 4 highest rating categories of
convertible securities. These are commonly called "investment grade."
[diamond] The Series may engage in "securities lending" to increase its
investment returns.
[diamond] The Series may invest up to 20% of its assets in securities of foreign
(non-U.S.) issuers. Under normal circumstances, however, the Series
will not invest more than 10% of its assets in foreign securities.
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
The Series seeks to outperform the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500") in total return and dividend yield. The S&P 500 total
return can be negative. When this happens, the Series may outperform the S&P 500
but still have a negative return. In that case the value of your shares would
likely decline rather than increase. The advisor also may fail in its objective
to outperform the S&P 500. Most of the Series' investments will be in common
stocks and other equity investments. Conditions affecting the overall economy,
specific industries or companies in which the Series invests can be worse than
expected. As a result, the value of your shares may decrease. Increases in
interest rates affecting the global economy, particular industries or specific
companies can cause fixed income investments that the Series may own to decline
in value. This, too, can cause your share value to decrease.
The advisor intends to invest nearly all of the Series' assets in common
stocks and other securities, rather than holding significant amounts of cash and
short term investments. This can increase the Series' net asset value more
quickly if those investments increase in value. It can cause the Series' net
asset value to decrease more quickly if those investments decrease in value.
This Series also may invest in small companies as well as larger companies.
Smaller companies, regardless of their location, may be affected to a greater
extent than larger companies by changes in general economic conditions and
conditions in particular industries. Smaller companies also may be relatively
new and not have the same operating history and "track record" as larger
companies. This could make future performance of smaller companies more
difficult to predict.
This Series may lend portfolio securities to financial institutions to
increase investment return. If the borrower is unwilling or unable to return the
borrowed securities when due, the Series can suffer losses.
This Series may invest in companies in foreign countries. Political and
economic uncertainty as well as relatively less public information about
investments may negatively impact the Series' portfolio. Some investments may be
made in currencies other than U.S. dollars that will fluctuate in value as a
result of changes in the currency exchange rate. Foreign markets and currencies
may not perform as well as U.S. markets.
PERFORMANCE TABLES
The Phoenix-Oakhurst Growth and Income Series has been in existence only
since March 2, 1998, and thus has not had an annual return for one full calendar
year. The table below shows how the Series' average annual return since
inception compares to that of a broad-based securities market index for that
period. You should expect that the Series' performance will fluctuate from year
to year, sometimes significantly.
- --------------------------------------------------------------
TOTAL RETURN LIFE OF
(FOR THE PERIOD ENDING 12/31/98)(1) THE SERIES(2)
- --------------------------------------------------------------
Phoenix-Oakhurst Growth and Income Series 20.45%
- --------------------------------------------------------------
S&P 500 Index(3) 18.95%
- --------------------------------------------------------------
(1) The Series' total return in this table does not reflect the deduction of any
separate account or contract charges. The return would have been less than
those shown if such charges were deducted.
(2) Since March 2, 1998.
(3) The S&P 500 Index is an unmanaged, but commonly used measure of stock market
total return performance. The Index is not available for direct investment.
34 Phoenix-Oakhurst Growth and Income Series
<PAGE>
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM SERIES' ASSETS)
Management Fees 0.70%
Distribution and Service (12b-1) Fees None
Other Expenses 0.76%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES(1) 1.46%
=====
(1) The Series' investment advisor has agreed to reimburse through December 31,
2000 the Phoenix-Oakhurst Growth and Income Series' expenses other than
Management Fees and Distribution and Service Fees to the extent that such
expenses exceed 0.15% of the average net assets of the Series. After such
reimbursement the Series' actual total annual operating expenses were .85%
for the year ending December 31, 1998.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
- ---------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------
Phoenix-Oakhurst
Growth and $149 $462 $797 $1,746
Income Series
- ---------------------------------------------------------------
Note: Your actual expenses would be lower than those shown in the tables
above since the expense levels used to calculate the figures shown do not
include the reimbursement of expenses over certain levels by the Series'
investment advisor. Refer to the section "Management of the Series" for
information about expense reimbursement.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Series' financial performance for the past 5 years (or, if shorter, the period
of the Series' operations). Certain information reflects financial results for a
single share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Series (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP. This report and the Series' financial
statements are included in both the Statement of Additional Information and
Annual Report, which are available upon request.
<TABLE>
<CAPTION>
SIX MONTHS FROM
ENDED INCEPTION
6/30/99 3/2/98 TO
(UNAUDITED) 12/31/98
----------- --------
<S> <C> <C>
Net asset value, beginning of period............................................ $ 11.99 $ 10.00
Income from investment operations
Net investment income (loss).................................................. 0.04(3) 0.05(3)
Net realized and unrealized gain (loss)....................................... 1.22 1.99
---- ----
Total from investment operations............................................ 1.26 2.04
---- ----
Less distributions:
Dividends from net investment income.......................................... (0.01) (0.05)
In excess of net investment income............................................ -- --
---- ----
Total distributions......................................................... (0.01) (0.05)
------ ------
Change in net asset value....................................................... 1.25 1.99
---- ----
Net asset value, end of period.................................................. $ 13.24 $ 11.99
======== ========
Total Return.................................................................... 10.45%(2) 20.45%(2)
Ratios/supplemental data:
Net assets, end of period (thousands)......................................... $ 75,724 $ 41,860
Ratio to average net assets of:
Operating expenses............................................................ 0.85%(1) 0.85%(1)
Net investment income......................................................... 0.85%(1) 1.02%(1)
Portfolio turnover rate......................................................... 33%(2) 81%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment advisor of $0.01
and $0.05 per share, respectively.
Phoenix-Oakhurst Growth and Income Series 35
<PAGE>
PHOENIX-OAKHURST STRATEGIC ALLOCATION SERIES
INVESTMENT RISK AND RETURN SUMMARY
- ----------------------------------
INVESTMENT OBJECTIVE
The Phoenix-Oakhurst Strategic Allocation Series has an investment objective
of high total return over an extended period of time consistent with prudent
investment risk. There is no guarantee that the Series will achieve its
investment objective.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] The advisor will determine the allocation of investments among the 3
market segments -
[bullet] stocks
[bullet] bonds
[bullet] money market
[diamond] The advisor will shift investment allocation among the 3 market
segments.
[diamond] The advisor will use active trading as a means of managing the
portfolio.
[diamond] Investment in the stock market segment will be made with the intent to
achieve superior total rate of return over an extended period of time
from both capital appreciation and current income.
[diamond] Investment in the bond segment will be made with the intent to achieve
as high a total rate of return as an annual basis as is considered
consistent with preservation of capital.
[diamond] Investment in the money market segment will be made with the intent to
achieve high current income, preservation of capital and liquidity.
[diamond] The Series may invest up to 5% of its total assets in "junk bonds."
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
The Series will seek to increase the value of your shares by investing in
securities the advisor expects to increase in value and/or to provide current
income. Most of the Series' investments will be in common stocks or debt
instruments. Conditions affecting the overall economy, specific industries or
companies in which the Series invests can be worse than expected. As a result,
the value of your shares may decrease. Dividend, interest and other
distributions also can decrease or be eliminated entirely.
The Series also may invest in small companies as well as larger companies.
Smaller companies, regardless of their location, may be affected to a greater
extent than larger companies by changes in general economic conditions and
conditions in particular industries. Smaller companies also may be relatively
new and not have the same operating history and "track record" as larger
companies. This could make future performance of smaller companies more
difficult to predict.
The Series may invest in companies in foreign countries. Political and
economic uncertainty as well as relatively less public information about
investments may negatively impact the Series' portfolio. Foreign markets and
currencies may not perform as well as U.S. markets.
Implementation of the strategy requires that the advisor accurately
anticipate the market segment(s) to emphasize or avoid.
The Share may invest in financial futures contracts and options. The advisor
will make these investments primarily to try to minimize the risk of other
investments it makes for the Series. These investments may not protect the
Series from losses, they may decrease overall return, and they could, in unusual
circumstances, expose the Series to losses that could be unlimited.
PERFORMANCE TABLES
The following bar chart and table provide some indication of the risks of
investing in the Phoenix-Oakhurst Strategic Allocation Series. The bar chart
shows changes in the Series' performance from year to year over a 10-year
period.(1) The table shows how the Series' average annual return for 1, 5 and 10
years and the life of the Series compare to those of a broad-based securities
market index. The Series' past performance is not necessarily an indication of
how the Series will perform in the future.
PHOENIX-OAKHURST STRATEGIC ALLOCATION SERIES
[GRAPHIC OMITTED]
CALENDAR YEAR ANNUAL RETURN (%)
1989 19.88
1990 5.62
1991 29.44
1992 10.67
1993 11.02
1994 -1.45
1995 18.22
1996 9.05
1997 20.73
1998 20.79
(1) The Series' average total returns in this chart do not reflect the deduction
of any separate account or contract charges. The returns would have been
less than those shown if such charges were deducted. During the 10-year
period shown in the chart, the highest return for a quarter was 16.00%
(quarter ending December 1998) and the lowest return for a quarter was
-5.52% (quarter ending September 1998).
36 Phoenix-Oakhurst Strategic Allocation Series
<PAGE>
- --------------------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS LIFE OF
(FOR THE PERIOD ONE FIVE TEN THE
ENDING 12/31/98) YEAR YEARS YEARS SERIES(1)
- --------------------------------------------------------------
Phoenix-Oakhurst
Strategic Allocation 20.79% 13.13% 14.06% 13.68%
Series
- --------------------------------------------------------------
Balanced Benchmark(2) 19.67% 16.29% 14.46% 14.60%
- --------------------------------------------------------------
Lipper Analytical
Services Flexible 16.55% 13.69% 13.02% N/A
Portfolio Index(3)
- --------------------------------------------------------------
S&P 500 Index(4) 28.76% 24.15% 19.22% 18.35%
- --------------------------------------------------------------
(1) Since September 17, 1984.
(2) 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.
(3) The Lipper Analytical Services Portfolio Index is an average of the largest
mutual funds within the flexible portfolio category.
(4) The S&P 500 Stock Index is an unmanaged, but commonly used measure of stock
total return performance. The index is not available for direct investment.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM SERIES' ASSETS)
Management Fees 0.58%
Distribution and Service (12b-1) Fees None
Other Expenses 0.10%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES 0.68%
=====
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
- -------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------
Phoenix-Oakhurst
Strategic $69 $218 $379 $847
Allocation Series
- -------------------------------------------------------------
Phoenix-Oakhurst Strategic Allocation Series 37
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Series' financial performance for the past 5 years (or, if shorter, the period
of the Series' operations). Certain information reflects financial results for a
single share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Series (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP. This report and the Series' financial
statements are included in both the Statement of Additional Information and
Annual Report, which are available upon request.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED 6/30/99 -----------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 15.65 $ 14.12 $ 13.65 $ 13.63 $ 12.68 $ 13.71
Income from investment operations
Net investment income (loss)................ 0.16 0.29 0.32 0.32 0.45 0.36(1,3)
Net realized and unrealized gain (loss)..... 0.48 2.57 2.46 0.91 1.84 (0.56)
---- ---- ---- ---- ---- ------
Total from investment operations.......... 0.64 2.86 2.78 1.23 2.29 (0.20)
---- ---- ---- ---- ---- ------
Less distributions:
Dividends from net investment income........ (0.14) (0.28) (0.33) (0.31) (0.45) (0.37)
Dividends from net realized gains........... (0.15) (1.05) (1.98) (0.90) (0.89) (0.46)
------ ------ ------ ------ ------ ------
Total distributions........................ (0.29) (1.33) (2.31) (1.21) (1.34) (0.83)
------ ------ ------ ------ ------ ------
Change in net asset value..................... 0.35 1.53 0.47 0.02 0.95 (1.03)
---- ---- ---- ---- ---- ------
Net asset value, end of period................ $ 16.00 $ 15.65 $ 14.12 $ 13.65 $ 13.63 $ 12.68
======== ======== ======== ======== ======== ========
Total Return.................................. 4.16%(5) 20.79% 20.73% 9.05% 18.22% (1.45%)
Ratios/supplemental data:
Net assets, end of period (thousands)....... $481,874 $480,897 $429,002 $374,244 $353,838 $289,083
Ratio to average net assets of:
Operating expenses.......................... 0.70%(4) 0.68% 0.71% 0.70% 0.67%(2) 0.74%
Net investment income....................... 2.05%(4) 1.97% 2.09% 2.26% 3.28% 2.71%
Portfolio turnover rate....................... 51%(5) 139% 368% 287% 170% 220%
</TABLE>
(1) Includes reimbursement of operating expenses by investment advisor 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) Annualized.
(5) Not annualized.
38 Phoenix-Oakhurst Strategic Allocation Series
<PAGE>
PHOENIX-SCHAFER MID-CAP VALUE SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVE
Investment objective of the Phoenix-Schafer Mid-Cap Value Series is
long-term capital appreciation. Current income is a secondary objective of the
Series. There is no guarantee that the Series will achieve its objectives.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] The Series will invest in securities which the Advisor believes offer
the possibility of increase in value.
[diamond] Investments will primarily be in common stocks of established
companies having -
[bullet] a strong financial position
[bullet] a below average price/earnings ratio
[bullet] an above average prospective earnings and dividend growth
rate
[bullet] total market capitalization between $1.0 billion and $7.5
billion
[diamond] The Series may invest in convertible securities.
[diamond] The Series may invest up to 20% of its total assets in securities of
foreign issuers.
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
The Series will seek to increase the value of your shares by investing in
securities the advisor expects to increase in value and to provide current
income. Most of the Series' investments will be in common stocks. Conditions
affecting the overall economy, specific industries or companies in which the
Series invests can be worse than expected. As a result, the value of your shares
may decrease.
The Series may invest in companies in foreign countries. Political and
economic uncertainty as well as relatively less public information about
investments may negatively impact the Series' portfolio. Some investments may be
made in currencies other than U.S. dollars that will fluctuate in value as a
result of changes in the currency exchange rate. Foreign markets and currencies
may not perform as well as U.S. markets.
PERFORMANCE TABLES
The Phoenix-Schafer Mid-Cap Value Series has been in existence only since
March 2, 1998, and thus has not had an annual return for one full calendar year.
The table below shows how the Series' total return since inception compares to
that of a broad-based securities market index for that period. You should expect
that the Series' performance will fluctuate from year to year, sometimes
significantly.
- -------------------------------------------------------------
TOTAL RETURN LIFE OF
(FOR THE PERIOD ENDING 12/31/98)(1) THE SERIES(2)
- -------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series (11.37)%
- -------------------------------------------------------------
S&P 500 Index(3) 18.95%
- -------------------------------------------------------------
(1) The Series' total return in this table does not reflect the deduction of any
separate account or contract charges. The return would have been lower than
that shown if such charges were deducted.
(2) Since March 2, 1998.
(3) The S&P 500 Index is an unmanaged, but commonly used measure of stock market
total return performance. The Index is not available for direct investment.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM SERIES' ASSETS)
Management Fees 1.05%
Distribution and Service (12b-1) Fees None
Other Expenses 1.72%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES(1) 2.77%
=====
(1) The Series' investment advisor has agreed to reimburse through December 31,
2000 the Phoenix-Schafer Mid-Cap Value Series' expenses other than
management fees to the extent that such expenses exceed 0.15%. Actual total
Annual Series Operating Expenses after expense reimbursement were 1.20% for
the year ending December 31, 1998.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
- --------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------
Phoenix-Schafer
Mid-Cap Value Series $280 $859 $1,464 $3,099
- --------------------------------------------------------------
Phoenix-Schafer Mid-Cap Value Series 39
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Series' financial performance for the past 5 years (or, if shorter, the period
of the Series' operations). Certain information reflects financial results for a
single share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Series (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP. This report and the Series' financial
statements are included in both the Statement of Additional Information and
Annual Report, which are available upon request.
<TABLE>
<CAPTION>
SIX MONTHS FROM
ENDED INCEPTION
6/30/99 3/2/98 TO
(UNAUDITED) 12/31/98
----------- --------
<S> <C> <C>
Net asset value, beginning of period............................................ $ 8.84 $ 10.00
Income from investment operations
Net investment income (loss).................................................. 0.04(3,4) 0.03(3,4)
Net realized and unrealized gain (loss)....................................... (0.22) (1.16)
------ ------
Total from investment operations............................................ (0.18) (1.13)
------ ------
Less distributions
Dividends from net investment income.......................................... (0.01) (0.03)
In excess of net investment income............................................ -- --
------ ------
Total distributions......................................................... (0.01) (0.03)
------ ------
Change in net asset value....................................................... (0.19) (1.16)
------ ------
Net asset value, end of period.................................................. $ 8.65 $ 8.84
======= =======
Total Return.................................................................... (2.01)%(2) (11.37)%(2)
Ratios/supplemental data:
Net assets, end of period (thousands)......................................... $ 9,579 $ 7,896
Ratio to average net assets of:
Operating expenses............................................................ 1.20%(1) 1.20%(1)
Net investment income......................................................... 1.02%(1) 0.52%(1)
Portfolio turnover rate......................................................... 17%(2) 21%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment advisor of $0.05
and $0.11 per share, respectively.
(4) Computed using average shares outstanding.
40 Phoenix-Schafer Mid-Cap Value Series
<PAGE>
PHOENIX-SENECA MID-CAP GROWTH SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVES
The Phoenix-Seneca Mid-Cap Growth Series has an investment objective of
capital appreciation. Distribution of investment income, such as dividends and
interest, is incidental in the selection of investments. There is no guarantee
that the Series will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] The Series will invest in equity securities, primarily common stocks
of growth companies. Under normal circumstances the Series will invest
at least 65% of its total assets in companies with market
capitalizations between $500 million and $5 billion. The Series may at
times have significant investments in companies with higher or lower
market capitalizations.
[diamond] The advisor is responsible for managing the Series' investment program
and the general operation of the Series. The subadvisor manages the
investments of the Series by selecting securities of companies that
meet certain fundamental standards and that the subadvisor believes
will demonstrate greater long-term earnings growth than the average
company included in the S&P Midcap 400 Index.
[diamond] The subadvisor may buy securities in anticipation of short-term price
gains.
[diamond] The Series may invest in preferred stocks, warrants and debt
instruments, including bonds convertible into common stocks.
[diamond] The Series may invest up to 35% of its net assets in below investment
grade bonds (so called "junk bonds").
[diamond] The Series may lend up to one-third of its net assets at market value
to increase its investment returns.
[diamond] The Series may invest up to 20% of its assets in securities of foreign
(non-U.S.) issuers.
[diamond] The Series may invest up to 20% of its net assets in options and
futures contracts. The Series intends to invest in these securities
primarily for "hedging" purposes but may invest up to 5% of its net
assets in these securities as an investment unrelated to hedging
purposes.
[diamond] The Series may invest up to 15% of its assets in securities that are
not liquid, such as private placements and repurchase agreements that
have maturities of more than 7 days.
[diamond] Temporary Defensive Strategy. If the subadvisor believes that market
conditions are not favorable to the Series' principal strategies, the
Series may invest without limit in cash and cash equivalents. When
this happens, the Series may not achieve its investment objective.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques.
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
The Series will seek to increase the value of your shares by investing in
securities the subadvisor expects to increase in value. Most of the Series'
investments will be in common stocks. Conditions affecting the overall economy,
specific industries or companies in which the Series invests can be worse than
expected. As a result, the value of your shares may decrease. Decreases in share
value from day to day will be "paper" losses unless you actually sell your
shares. If your financial circumstances are likely to require you to sell your
shares at any particular time, rather than holding them indefinitely, you run
the risk that your sale of shares will occur when share values have declined.
The Series may buy securities in anticipation of short-term price gains.
Gains depend on the ability of the subadvisor to predict correctly the increase
to securities prices. Securities prices may not increase as anticipated. This
may increase the Series' overall trading volume especially if prices do not rise
as expected. Frequent and active trading may increase transaction costs for the
Series.
The Series' investment focus is on companies with medium capitalizations. It
also may invest in small companies as well as large companies. Investments in
companies with small and medium capitalizations make the Series more volatile
than Series which invest in companies with larger capitalizations. The smaller
companies may be affected to a greater extent than larger companies by changes
in general economic conditions and conditions in particular industries. Smaller
companies also may be relatively new and not have the same operating history and
"track record" as larger companies. This could make future performance of
smaller companies more difficult to predict.
The Series may invest in below investment grade securities (so called "junk
bonds"). Below investment grade securities present a greater risk that the
issuer will not be able to make interest or principal payments on time. If this
happens, the Series would lose income and could expect a decline in the market
value of the securities.
The Series may lend portfolio securities to financial institutions to
increase investment return. If the borrower is unwilling or unable to return the
borrowed securities when due, the Series can suffer losses.
The Series may invest in companies in foreign countries. Political and
economic uncertainty as well as less public information about investments may
negatively impact the Series' portfolio. Some investments may be made in
currencies other than U.S. dollars that will fluctuate in value as a result of
changes in the currency exchange rate. Foreign
Phoenix-Seneca Mid-Cap Growth Series 41
<PAGE>
markets and currencies may not perform as well as U.S. markets.
The Series may buy and write options and enter into futures contracts and
swap agreements primarily to minimize the risk of other investments it makes for
the Series. These investments may not protect the Series from losses, they may
decrease overall return, and they could, in unusual circumstances, expose the
Series to losses that could be unlimited.
The Series may invest in illiquid securities that cannot be sold quickly.
Illiquid securities may have a lower value than comparable securities that have
active markets for resale, and they can lose their value more quickly under
unfavorable conditions.
PERFORMANCE TABLES
The Phoenix-Seneca Mid-Cap Growth Series has been in existence only since
March 2, 1998, and thus has not had an annual return for one full calendar year.
The following table shows how the Series' total return for the life of the
Series compares to that of a broad-based securities market index for that
period. You should expect that the Series performance will fluctuate from year
to year, sometimes significantly.
- ---------------------------------------------------------------
TOTAL RETURN
(FOR THE PERIOD ENDING 12/31/98)(1) LIFE OF THE SERIES(2)
- ---------------------------------------------------------------
Phoenix-Seneca Mid-Cap Growth 21.75%
Series
- ---------------------------------------------------------------
S&P Midcap 400 Index(3) 12.21%
- ---------------------------------------------------------------
(1) The Series' total return in this table does not reflect the deduction of any
separate account or contract charge. The return would have been less than
that shown if such charges were deducted.
(2) Since March 2, 1998.
(3) The S&P Midcap 400 Index is an unmanaged, but commonly used measure of total
return performance of mid-capitalization companies. The Index is not
available for direct investment.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM SERIES' ASSETS)
Management Fees 0.80%
Distribution and Service (12b-1) Fees None
Other Expenses 2.01%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES(1,2) 2.81%
=====
(1) The Series' investment advisor has agreed to reimburse through December 31,
2000 the Phoenix-Seneca Mid-Cap Growth Series' operating expenses other than
Management Fees and Distribution and Service Fees to the extent that such
expenses exceed 0.25%. Actual Total Annual Series' Operating Expenses after
expense reimbursement were 1.05% for the year ending December 31, 1998.
(2) The shares have been offered only since March 2, 1998. The percentages
indicated are estimates before expense reimbursement; actual expenses may be
more or less than the amounts shown.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
- --------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------
Phoenix-Seneca Mid-Cap
Growth Series $284 $871 $1,484 $3,138
- --------------------------------------------------------------
42 Phoenix-Seneca Mid-Cap Growth Series
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Series' financial performance for the past 5 years (or, if shorter, the period
of the Series' operations). Certain information reflects financial results for a
single share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Series (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP. This report and the Series' financial
statements are included in both the Statement of Additional Information and
Annual Report, which are available upon request.
<TABLE>
<CAPTION>
SIX MONTHS FROM
ENDED INCEPTION
6/30/99 3/2/98 TO
(UNAUDITED) 12/31/98
----------- --------
<S> <C> <C>
Net asset value, beginning of period............................................ $ 12.16 $ 10.00
Income from investment operations
Net investment income (loss).................................................. (0.02)(3,4) 0.01(3,4)
Net realized and unrealized gain (loss)....................................... 0.59 2.16
---- ----
Total from investment operations............................................ 0.57 2.17
---- ----
Less distributions
Dividends from net investment income.......................................... -- (0.01)
--- ------
In excess of net investment income............................................ -- --
--- ---
Total distributions......................................................... -- (0.01)
--- ------
Change in net asset value....................................................... 0.57 2.16
---- ----
Net asset value, end of period.................................................. $ 12.73 $ 12.16
======== ========
Total Return.................................................................... 4.62%(2) 21.75%(2)
Ratios/supplemental data:
Net assets, end of period (thousands)......................................... $ 10,830 $ 7,897
Ratio to average net assets of:
Operating expenses............................................................ 1.05%(1) 1.05%(1)
Net investment income......................................................... (0.32)%(1) 0.15%(1)
Portfolio turnover rate......................................................... 110%(2) 127%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment advisor of $0.07
and $0.15 per share, respectively. 4 Computed using average shares
outstanding.
Phoenix-Seneca Mid-Cap Growth Series 43
<PAGE>
PHOENIX-SENECA STRATEGIC THEME SERIES
- --------------------------------------------------------------------------------
INVESTMENT RISK AND RETURN SUMMARY
INVESTMENT OBJECTIVE
The Phoenix-Seneca Strategic Theme Series has an investment objective of
long-term capital appreciation through investing in securities of companies
benefiting from long-term trends present in the United States and abroad. There
is no guarantee that the Series will achieve its investment objective.
PRINCIPAL INVESTMENT STRATEGIES
[diamond] The Series will invest primarily in common stocks of companies
believed by the advisor to have substantial potential for capital
growth by being well positioned to benefit from -
[bullet] cultural
[bullet] demographic
[bullet] regulatory
[bullet] social
[bullet] technological
changes worldwide.
[diamond] The advisor will seek to identify those companies which, in addition
to being well positioned to benefit from identified themes, also -
[bullet] have good financial resources
[bullet] provide satisfactory return on capital
[bullet] has enhanced industry position
[bullet] has demonstrated superior management skills
[diamond] Advisor will establish strategic themes (major changes affecting
markets for a prolonged periods of time) and tactical themes (focused,
short-term).
[diamond] The Series may invest in preferred stocks, investment grade bonds,
convertible preferred stocks and convertible debentures.
[diamond] The Series may invest up to 35% of its total assets in securities of
foreign issuers.
PRINCIPAL RISKS
If you invest in this Series, you risk that you may lose your investment.
The Series will seek to increase the value of your shares by investing in
securities the advisor expects to increase in value. Most of the Series'
investments will be in common stocks and other equity securities. Conditions
affecting the overall economy, specific industries or companies in which the
Series invests can be worse than expected. As a result, the value of your shares
may decrease.
The Series may invest in securities issued by small companies. Smaller
companies, regardless of their location, may be affected to a greater extent
than larger companies by changes in general economic conditions and conditions
in particular industries. Smaller companies also may be relatively new and not
have the same operating history and "track record" as larger companies. This
could make future performance of smaller companies more difficult to predict.
The Series may invest in companies in foreign countries. Political and
economic uncertainty as well as relatively less public information about
investments may negatively impact the Series' portfolio. Some investments may be
made in currencies other than U.S. dollars that will fluctuate in value as a
result of changes in the currency exchange rate. Foreign markets and currencies
may not perform as well as U.S. markets.
Investing in a single economic theme can make the Series more vulnerable to
adverse economic, political or regulatory developments than a diversified
portfolio.
The advisor may not accurately anticipate emerging market trends, or may not
exploit such investment opportunities, or may not divest such investments at the
proper time.
PERFORMANCE TABLES
The following bar chart and table provide some indication of the risks of
investing in the Phoenix-Seneca Strategic Theme Series. The bar chart shows
changes in the Series' performance from year to year over its life.1 The table
shows how the Series' average annual returns for one year and for the life of
the Series compare to those of a broad-based securities market index. The
Series' past performance is not necessarily an indication of how the Series will
perform in the future.
PHOENIX-SENECA STRATEGIC THEME SERIES
[GRAPHIC OMITTED]
CALENDAR YEAR ANNUAL RETURN (%)
1997 17.16
1998 44.69
(1) The Series' average annual returns in this chart do not reflect the
deduction of any separate account or contract charges. The returns would
have been less than those shown if such charges were deducted. During the
period shown in the chart, the highest return for a quarter was 37.46%
(quarter ending December 1998) and the lowest return for a quarter was
-7.15% (quarter ending September 1998).
44 Phoenix-Seneca Strategic Theme Series
<PAGE>
- ---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDING LIFE OF
12/31/98) ONE YEAR THE SERIES(1)
- ---------------------------------------------------------------
Phoenix-Seneca Strategic Theme
Series 44.69% 23.89%
- ---------------------------------------------------------------
S&P MidCap 400 Index(2) 19.11% 24.20%
- ---------------------------------------------------------------
S&P 500 Stock Index(3) 28.76% 28.59%
- ---------------------------------------------------------------
(1) Since January 29, 1996.
(2) The S&P MidCap 400 is an unmanaged index composed of companies with market
capitalizations between $300 million and $5 billion.
(3) The S&P 500 Index is an unmanaged, commonly used measure of stock total
return performance. The Index is not available for direct investment.
SERIES' EXPENSES
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the Series.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Sales Charge imposed on purchases None
Sales Charge imposed on reinvested dividends None
Deferred Sales Charge None
Redemption Fee None
Exchange Fee None
ANNUAL SERIES' OPERATING EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM SERIES' ASSETS)
Management Fees 0.75%
Distribution and Service (12b-1) Fees None
Other Expenses 0.24%
-----
TOTAL ANNUAL SERIES' OPERATING EXPENSES 0.99%
=====
EXAMPLE
This example is intended to help you compare the cost of investing in the
Series with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Series' operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
- ---------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------
Phoenix-Seneca Strategic
Theme Series $101 $315 $547 $1,213
- ---------------------------------------------------------------
Phoenix-Seneca Strategic Theme Series
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Series' financial performance for the past 5 years (or, if shorter, the period
of the Series' operations). Certain information reflects financial results for a
single share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Series (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP. This report and the Series' financial
statements are included in both the Statement of Additional Information and
Annual Report, which are available upon request.
<TABLE>
<CAPTION>
SIX MONTHS FROM
ENDED YEAR ENDED DECEMBER 31, INCEPTION
6/30/99 ----------------------- 1/29/96 TO
(UNAUDITED) 1998 1997 12/31/96
----------- ---- ---- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 15.40 $ 11.32 $ 10.98 $ 10.00
Income from investment operations
Net investment income (loss).......................... (0.01) 0.01 0.05(3) 0.04(3)
Net realized and unrealized gain (loss)............... 2.87 5.03 1.82 0.99
---- ---- ---- ----
Total from investment operations.................... 2.86 5.04 1.87 1.03
---- ---- ---- ----
Less distributions
Dividends from net investment income.................. -- (0.01) (0.05) (0.04)
Dividends from net realized gains..................... (0.72) (0.95) (1.16) --
In excess of net realized gains....................... -- -- (0.31) --
Tax return of capital................................. -- -- (0.01) (0.01)
--- --- ------ ------
Total distributions................................. (0.72) (0.96) (1.53) (0.05)
------ ------ ------ ------
Change in net asset value............................... 2.14 4.08 0.34 0.98
---- ---- ---- ----
Net asset value, end of period.......................... $ 17.54 $ 15.40 $ 11.32 $ 10.98
======== ======== ======== ========
Total Return............................................ 18.58%(2) 44.69% 17.16% 10.33%(2)
Ratios/supplemental data:
Net assets, end of period (thousands)................. $117,726 $ 75,098 $ 47,620 $ 25,972
Ratio to average net assets of:
Operating expenses.................................... 0.96%(1) 0.99% 1.00% 1.00%(1)
Net investment income................................. (0.17)% (0.01)% 0.42% 0.64%(1)
Portfolio turnover rate................................. 109%(2) 364% 642% 391%(2)
</TABLE>
(1) Annualized.
(2) Not annualized.
(3) Includes reimbursement of operating expenses by investment advisor of $0.02
and $0.02 per share, respectively.
46 Phoenix-Seneca Strategic Theme Series
<PAGE>
ADDITIONAL DISCUSSION OF EACH SERIES' INVESTMENT STRATEGIES AND MANAGEMENT
- --------------------------------------------------------------------------------
PHOENIX RESEARCH ENHANCED INDEX SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
Phoenix Research Enhanced Index Series has an investment objective to seek
high total return by investing in a broadly diversified portfolio of equity
securities.
PRINCIPAL INVESTMENT STRATEGIES
The Series invests in a diversified portfolio of securities of large and
medium capitalized companies within the market sectors reflected in the S&P 500.
Under normal market conditions, the Series will invest at least 80% of its
total assets in common stocks and other equity securities.
The Series will invest in securities that the advisor believes to be
undervalued and which offer growth potential and an overall volatility of return
similar to that of the S&P 500.
The S&P 500 is a market weighted compilation of 500 common stocks selected
on a statistical basis by Standard & Poor's Corporation. The S&P 500 is
typically composed of issues in the following sectors:
[diamond] industrial
[diamond] financial
[diamond] public utilities
[diamond] transportation
The Advisor and/or Subadvisor will seek to reduce the Series' volatility
relative to the S&P 500 by attempting to generally match the Series' equities
holdings to various risk characteristics of the S&P 500 such as market
capitalization, weightings and diversification. The Subadvisor then uses
fundamental analysis and systematic stock valuation to exclude stocks within
economic sectors which appear to be extremely overvalued.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques.
RISKS RELATED TO INVESTMENT STRATEGIES
The Series' primary focus is high total return. The advisor intends to
invest Series' assets so that your shares increase in value. However, the value
of the Series' investments that support your share value can decrease as well as
increase. If between the time you purchase shares and the time you sell shares
the value of the Series' investments decreases, you will lose money. The value
of the Series' investments can decrease for a number of reasons. For example,
changing economic conditions may cause a decline in the value of many or even
most equity and fixed income investments. Particular industries can face poor
markets for their products or services so that companies engaged in those
businesses do not do as well as companies in other industries. Interest rate
changes may improve prospects for certain types of businesses and they may
worsen prospects for others. To the extent that the Series' investments are
affected by general economic declines, declines in industries, and interest rate
changes that negatively affect the companies in which the Series invests,
Series' share values may decline.
Share values also can decline if the specific companies selected for Series
investment fail to perform as the advisor expects, regardless of general
economic trends, industry trends, interest rates and other economic factors.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
MANAGEMENT OF THE SERIES
THE ADVISORS
Phoenix Variable Advisors, Inc. ("PVA") is the investment advisor to the
Series and is located at One American Row, Hartford, CT 06102-5056. PVA also
acts as the investment advisor for 7 other series. PVA is a new investment
advisor created to actively monitor and manage subadvisor performance.
J.P. Morgan Investment Management, Inc. ("J.P. Morgan"), a wholly-owned
subsidiary of J.P. Morgan & Co. Incorporated (JPM & Co.), serves as subadvisor
to the Phoenix Research Enhanced Index Series. J.P. Morgan's principal place of
business is located at 522 Fifth Avenue, New York, New York 10036. J.P. Morgan
presently serves as an investment manager for corporate, public and union
employee benefit funds, foundations, endowments, insurance companies, government
agencies and the accounts of other institutional investors. J.P. Morgan was
founded in 1984. JPM & Co., through J.P. Morgan and its other investment
management subsidiaries, had approximately $316 billion in assets under
management as of December 31, 1998.
Phoenix Edge Series Fund 47
<PAGE>
Subject to the direction of the Fund's Board of Trustees, PVA is responsible
for managing the Series' investment program and J.P. Morgan, as subadvisor, is
responsible for the day-to-day management of the holdings of the Series. Both
PVA and J.P. Morgan manage the Series' assets to conform with the investment
policies as described in this prospectus. The Series pays PVA a monthly
investment management fee that is accrued daily against the value of that
Series' net assets at the rate of 0.45% annually.
During the Series' last fiscal year, it paid total management fees of
$218,150. The ratio of management fees to average net assets for the fiscal year
ended December 31, 1998 was 0.45%.
PORTFOLIO MANAGEMENT
Timothy Devlin and James Wiess are coportfolio managers of the Phoenix
Research Enhanced Index Series and, are primarily responsible for the day-to-day
management of the Series' investments.
Mr. Devlin has served as a vice president of J.P. Morgan since July 1996 and
is a member of the Structured Equity Group where he has the dual
responsibilities of client servicing and portfolio management. From 1987 to
1996, he served as first vice president of Mitchell Hutchins where he managed
quantitatively-driven equity portfolios for institutional and retail investors.
Mr. Wiess is a vice president of J.P. Morgan and is a portfolio manager in
the Structured Equity Group where he has the responsibility of portfolio
rebalancing and research and development of structured equities. Prior to
joining J.P. Morgan in 1992, Mr. Wiess was a stock index arbitrager for 7 years
at Oppenheimer & Co.
PHOENIX-ABERDEEN INTERNATIONAL SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The Series' investment objective is high total return consistent with
reasonable risk. There is no guarantee that the Series will achieve its
investment objective.
PRINCIPAL INVESTMENT STRATEGIES
The Series invests in a diversified portfolio of securities of non-U.S.
issuers, including companies, governments, governmental agencies and
international organizations. The Series may invest in any region of the world.
Under normal circumstances, the Series will invest at least 80% of its total
assets in the securities of issuers located in at least 3 different countries.
The Series will invest primarily in common stocks. The Series also may
invest in other equity securities, including preferred stocks, securities
convertible into common stocks, warrants and rights to purchase common stock,
and in bonds, notes and other debt securities. Although the Series intends to
invest primarily in established companies, the Series may invest in securities
of issuers of any size, in countries with developed markets and countries with
emerging markets.
The Series also may invest in nonconvertible fixed income securities of
non-U.S. issuers when the advisor feels that such securities are appropriate for
the achievement of the Series' investment objective. Market values of fixed
income securities typically move in the opposite direction from changes in
interest rates. Therefore, investing in fixed income securities can provide an
opportunity for capital appreciation when interest rates are expected to
decline.
The nonconvertible fixed income securities referred to above may consist of:
[diamond] Corporate notes, bonds, debentures and other securities (such as
Euro-currency instruments) of non-U.S. issuers that are rated within
the 3 highest rating categories of rating services or, if unrated, are
deemed by the advisor to be of comparable credit quality.
[diamond] Securities issued by foreign governments and supranational agencies
(such as the World Bank).
The Series may invest up to 10% of its net assets in fixed income securities
rated below investment grade (commonly referred to as "junk bonds").
Temporary defensive strategy: if the advisor believes that market conditions
are not favorable to the Series' principal strategies, the Series may invest
without limit in U.S. government securities and in money market instruments.
When this happens, the Series may not achieve its investment objective.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques.
RISKS RELATED TO INVESTMENT STRATEGIES
GENERAL
The Series' focus is total return. The advisor intends to invest assets so
that your shares increase in value. However, the value of the Series'
investments that support your share value can decrease as well as increase. If
between the time you purchase shares and the time you sell shares the value of
the Series' investments decreases you will lose money. The value of the Series'
investments can decrease for a number of reasons. For example, changing economic
conditions may cause a decline in the value of many or even most equity and
fixed income investments. Particular industries can face poor markets for their
products or services so that companies engaged in those businesses do not do as
well as companies in other industries. Interest rate changes may improve
prospects for certain types of businesses and they may
48 Phoenix Edge Series Fund
<PAGE>
worsen prospects for others. To the extent that the Series' investments are
affected by general economic declines, declines in industries, and interest rate
changes that negatively affect the companies in which the Series invests, Series
share values may decline. Share values also can decline if the specific
companies selected for Series investment fail to perform as the advisor or
subadvisor expects, regardless of general economic trends, industry trends,
interest rates and other economic factors.
In addition to these general risks of investing in the Series, there are
several specific risks of investing in the Series that you should note.
FOREIGN INVESTING
The Series will invest in non-U.S. companies. Investing in the securities of
non-U.S. companies involves special risks and considerations not typically
associated with investing in U.S. companies. These include:
[diamond] differences in accounting, auditing and financial reporting standards;
[diamond] generally higher commission rates on foreign portfolio transactions;
[diamond] differences and inefficiencies in transaction settlement systems;
[diamond] the possibility of expropriation or confiscatory taxation;
[diamond] adverse changes in investment or exchange control regulations;
[diamond] political instability; and
[diamond] potential restrictions on the flow of international capital.
Political and economic uncertainty as well as relatively less public
information about investments may negatively impact the Series' portfolio.
Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility. Additionally,
dividends and interest payable on foreign securities may be subject to foreign
taxes withheld prior to receipt by the Series.
Many of the foreign securities held by the Series will not be registered
with, nor will the issuers of those securities be subject to the reporting
requirements of, the U.S. Securities and Exchange Commission. Accordingly, there
may be less publicly-available information about the securities and about the
foreign company or government issuing them than is available about a domestic
company or government entity. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payment positions.
FOREIGN CURRENCY
Significant portions of the Series' assets may be invested in securities
denominated in foreign currencies. Changes in foreign exchange rates will affect
the value of those securities denominated or quoted in currencies other than the
U.S. dollar. The forces of supply and demand in the foreign exchange markets
determine exchange rates and these forces are in turn affected by a range of
economic, political, financial, governmental and other factors. Exchange rate
fluctuations can affect the Series' net asset value (share price) 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 terms.
Effective January 1, 1999, 11 European countries began converting from their
sovereign currency to the European Union common currency called the "Euro." This
conversion may expose the Series to certain risks, including the reliability and
timely reporting of pricing information of the Series' portfolio holdings. In
addition, one or more of the following may adversely affect specific securities
in the Series' portfolio:
[diamond] known trends or uncertainties related to the Euro conversion that an
issuer reasonably expects will have a material impact on revenues,
expenses or income from its operations;
[diamond] competitive implications of increased price transparency of European
Union markets (including labor markets) resulting from adoption of a
common currency and issuers' plans for pricing their own products and
services in the Euro;
[diamond] issuers' ability to make required information technology updates on a
timely basis, and costs associated with the conversion (including
costs of dual currency operations through January 1, 2002);
[diamond] currency exchange rate risk and derivatives exposure (including the
disappearance or price sources, such as certain interest rate
indices); and
[diamond] potential tax consequences.
EMERGING MARKET INVESTING
The Series may invest in companies located in emerging market countries and
regions. Investment in less-developed countries whose markets are still emerging
generally presents risks in greater degree than those presented by investment in
foreign issuers based in countries with developed securities markets and more
advanced regulatory systems. Prior governmental approval of foreign investments
may be required under certain circumstances in some developing countries, and
the extent of foreign investment in domestic companies may be subject to
limitation in other developing countries. The charters of
Phoenix Edge Series Fund 49
<PAGE>
individual companies in developing countries may impose limitations on foreign
ownership to prevent, among other concerns, violation of foreign investment
limitations.
The economies 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 also have been (and may
continue to be) adversely affected by economic conditions in these countries.
SMALL MARKET CAPITALIZATION INVESTING
The Series may invest in large and small companies throughout the world.
Companies with small capitalization are often companies with a limited operating
history or companies in industries which have recently emerged due to cultural,
economic, regulatory or technological developments. Such developments can have a
significant positive or negative effect on small capitalization companies and
their stock performance. Given the limited operating history and rapidly
changing fundamental prospects, investment returns from smaller capitalization
companies can be highly volatile. Smaller companies may find their ability to
raise capital impaired by their size or lack of operating history. Product lines
are often less diversified and subject to competitive threats. Smaller
capitalization stocks are subject to varying patterns of trading volume and may,
at times, be difficult to sell.
MUTUAL FUND INVESTING
The Series may invest in other mutual funds to take advantage of investment
opportunities in certain countries where the Series otherwise would not be able
to invest or where the size of a Series investment in any particular country
would be too small. The Series may invest up to 10% of its assets in the shares
of other mutual funds. However, the Series will not invest more than 5% of its
assets in any one mutual fund. When the Series purchases shares of another
mutual fund, the assets invested in the other mutual fund incur a layering of
expenses, including operating costs, advisory fees, and administrative fees that
you indirectly bear.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES' INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
Issuers of securities in countries outside of the U.S., particularly in
emerging markets, may be more susceptible to Year 2000 problems and may not be
required to make the same level of disclosure regarding Year 2000 readiness as
is required in the U.S. Similarly, the Series could experience difficulties in
effecting transactions if any of its foreign subcustodians, foreign
broker-dealers or foreign exchanges are not ready for Year 2000.
MANAGEMENT OF THE SERIES
THE ADVISOR
Phoenix Investment Counsel, Inc. ("PIC") is the investment advisor to the
Series and is located at 56 Prospect Street, Hartford, CT 06115. PIC also acts
as the investment advisor for 14 other mutual funds, as subadvisor to 3
additional mutual funds and as advisor to institutional clients. As of December
31, 1998, PIC had $23.9 billion in assets under management. PIC has acted as an
investment advisor for over 60 years.
Aberdeen Fund Managers, Inc. ("Aberdeen") is the investment subadvisor to
the Series and is located at One Financial Plaza, Suite 2210, NationsBank Tower,
Fort Lauderdale, Florida 33394. Aberdeen acts as subadvisor to 2 other funds. As
of December 31, 1998, Aberdeen had $1.3 billion under management.
Subject to the direction of the Fund's Board of Trustees, PIC is responsible
for managing the Series' investment program and the day-to-day management of the
Series' portfolio and managing the Series' assets to conform with the investment
policies as described in this prospectus. The Series pays PIC a monthly
investment management fee that is accrued daily against the value of the Series'
net assets at the following rates.
- ---------------------------------------------------------------
FIRST NEXT OVER
$250,000,000 $250,000,000 $500,000,000
- ---------------------------------------------------------------
Management 0.75% 0.70% 0.65%
Fee
- ---------------------------------------------------------------
During the Series' last fiscal year, it paid total management fees of
$1,704,109. The ratio of management fees to average net assets for the fiscal
year ended December 31, 1998 was 0.75%. The total advisory fee of 0.75% of the
aggregate net assets of the Series is greater than that for most mutual funds;
however, the Trustees have determined that it is comparable to fees charged by
other mutual funds whose investment objectives are similar to those of the
Series.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques.
50 Phoenix Edge Series Fund
<PAGE>
PORTFOLIO MANAGEMENT
The investment and trading decisions for the Phoenix-Aberdeen International
Series are made by a team of the advisor's equity investment professionals. The
advisor has retained Aberdeen Fund Managers, Inc. for advice and assistance in
making investment and trading decisions. Aberdeen Fund Managers, Inc. does not
have discretionary authority to manage the Phoenix-Aberdeen International
Series.
PHOENIX-ABERDEEN NEW ASIA SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The Series has an investment objective of long-term capital appreciation.
Distribution of investment income, such as dividends and interest, is incidental
in the selection of investments. There is no guarantee that the Series will
achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
The Series invests in a diversified portfolio of primarily equity securities
of companies located in Asia (other than Japan). Under normal circumstances, the
Series intends to invest at least 65% of its total assets invested in the equity
securities of such companies.
The advisor selects securities of companies that meet certain fundamental
standards and that the advisor believes have the market potential for above
average market appreciation.
The Series will, under normal circumstances, invest at least 65% of its
total assets in a diversified portfolio of equity securities of issuers
organized and principally doing business in Asia, other than Japan, and whose
principal securities, such as common stock, are actively traded on recognized
stock exchanges of those countries.
A company is principally operating in Asia if
[diamond] at least 50% of revenues or profits are from Asian countries or
[diamond] at least 50% of their assets are located in Asian countries.
The Series ordinarily will be invested in 3 or more of the following
countries:
[bullet] China [bullet] Hong Kong
[bullet] India [bullet] Indonesia
[bullet] South Korea [bullet] Malaysia
[bullet] Pakistan [bullet] Philippines
[bullet] Singapore [bullet] Sri Lanka
[bullet] Taiwan [bullet] Thailand
If the advisor considers it appropriate, the Series also may invest in South
Pacific nations such as Australia and New Zealand.
In determining the appropriate distribution of investments among various
countries and geographic regions, the advisor ordinarily will consider the
following factors:
[diamond] prospects for relative economic growth among Asian countries;
[diamond] expected levels of inflation;
[diamond] relative price levels of the various capital markets;
[diamond] governmental policies influencing business conditions;
[diamond] the outlook for currency relationships; and
[diamond] the range of individual investment opportunities available to the
international investor.
The Series also 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
issuer at predetermined time(s), price(s) or price formula. A convertible
security entitles the owner to receive interest paid or accrued on a debt
security or dividends paid on preferred stock until the security matures or is
converted to common stock. Convertible securities have several unique
investments characteristics, such as:
[diamond] higher yields than common stocks but lower yields than comparable
nonconvertible securities;
[diamond] typically less fluctuation in value than the "underlying" common
stock, that is, the common stock that the investor receives if he
converts;
[diamond] the potential for capital appreciation if the market price of the
underlying common stock increases.
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. 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:
Phoenix Edge Series Fund 51
<PAGE>
[diamond] government obligations;
[diamond] certificates of deposit;
[diamond] bankers' acceptances;
[diamond] time deposits;
[diamond] commercial paper;
[diamond] short-term corporate debt securities; and
[diamond] 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.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques.
RISKS RELATED TO INVESTMENT STRATEGIES
FOREIGN INVESTING
The Series invests in non-U.S. companies. Investing in the securities of
non-U.S. companies involves special risks and considerations not typically
associated with investing in U.S. companies. These include:
[diamond] differences in accounting, auditing and financial reporting standards;
[diamond] generally higher commission rates on foreign portfolio transactions;
[diamond] differences and inefficiencies in transaction settlement systems;
[diamond] the possibility of expropriation or confiscatory taxation;
[diamond] adverse changes in investment or exchange control regulations;
[diamond] political instability; and
[diamond] potential restrictions on the flow of international capital.
Political and economic uncertainty as well as less public information about
investments may negatively impact the Series' portfolio.
Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility.
Additionally, dividends and interest payable on foreign securities may be
subject to foreign taxes withheld prior to receipt by the fund.
Many of the foreign securities held by the Series will not be registered
with, nor will the issuers of those securities be subject to the reporting
requirements of, the SEC. Accordingly, there may be less publicly available
information about the securities and about the foreign company or government
issuing them than is available about a domestic company or government entity.
Moreover, individual foreign economies may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross national product, rate
of inflation, capital reinvestment, resource self-sufficiency and balance of
payment positions.
FOREIGN CURRENCY
Portions of the Series' assets will be invested in securities denominated in
foreign currencies. Changes in foreign exchange rates will affect the value of
those securities denominated or quoted in currencies other than the U.S. dollar.
The forces of supply and demand in the foreign exchange markets determine
exchange rates and these forces are in turn affected by a range of economic,
political, financial, governmental and other factors. Exchange rate fluctuations
can affect the Series' net asset value (share price) 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 long and short terms.
In addition, when certain foreign countries experience economic
difficulties, there is an increased risk that the foreign government may impose
restrictions on the free exchange of its currency.
Effective January 1, 1999, 11 European countries began converting from their
sovereign currency to the European Union common currency called the "Euro." This
conversion may expose the Series to certain risks, including the reliability and
timely reporting of pricing information of the Series' portfolio holdings. In
addition, one or more of the following may adversely affect specific securities
in the Series' portfolio:
[diamond] known trends or uncertainties related to the Euro conversion that an
issuer reasonably expects will have a material impact on revenues,
expenses or income from its operations;
[diamond] competitive implications of increased price transparency of European
Union markets (including labor markets) resulting from adoption of a
common currency and issuers' plans for pricing their own products and
services in the Euro;
[diamond] issuers' ability to make required information technology updates on a
timely basis, and costs associated with the conversion (including
costs of dual currency operations through January 1, 2002);
[diamond] currency exchange rate risk and derivatives exposure (including the
disappearance of price sources, such as certain interest rate
indices); and
[diamond] potential tax consequences.
52 Phoenix Edge Series Fund
<PAGE>
EMERGING OR DEVELOPING MARKETS
The Series will make investments in developing or emerging countries which
involve exposure to economic systems that are generally less diverse and mature
than in the United States, and to political systems that are less stable. In the
past, markets of developing countries have been more volatile than the markets
of developed countries.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
Issuers of securities in countries outside of the U.S., particularly in
emerging markets, may be more susceptible to Year 2000 problems and may not be
required to make the same level of disclosure regarding Year 2000 readiness as
is required in the U.S. Similarly, the Series could experience difficulties in
effecting transactions if any of its foreign subcustodians, foreign
broker-dealers or foreign exchanges are not ready for Year 2000.
MANAGEMENT OF THE SERIES
THE ADVISOR
Phoenix-Aberdeen International Advisors, LLC ("PAIA") is the investment
advisor to the Series and is located at 56 Prospect Street, Hartford, CT 06115.
PAIA also acts as the investment advisor to Phoenix-Aberdeen Series Fund. As of
December 31, 1998, PAIA had $43.9 million in assets under management.
Subject to the direction of the Fund's Board of Trustees, PAIA is
responsible for managing the Series' investment program and the day-to-day
management of the Series' portfolio. PAIA manages the Series' assets to conform
with the investment policies as described in this prospectus. The Series pays
PAIA a monthly investment management fee that is accrued daily against the value
of the Series' net assets at the rate of 1.00% annually.
During the Series' last fiscal year, the Series paid total management fees
of $93,715. The ratio of management fees to average net assets for the fiscal
year ended December 31, 1998 was 1.00%.
PORTFOLIO MANAGEMENT
Aberdeen Fund Managers, Inc. ("Aberdeen") is the investment subadvisor to
the Series and is located at One Financial Plaza, Suite 2210, NationsBank Tower,
Fort Lauderdale, Florida 33394. Aberdeen acts as subadvisor to 2 other funds. As
of December 31, 1998, Aberdeen had $1.3 billion under management.
PHOENIX-BANKERS TRUST DOW 30 SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
Phoenix-Bankers Trust Dow 30 Series seeks to track the total return of the
Dow Jones Industrial Average(SM) (the "DJIA(SM)") before fund expenses. There is
no guarantee that the Series will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
The Series is an "index fund" and invests primarily in the equity securities
of the 30 companies comprising the DJIA(SM) (known as the "Dow 30(SM)") in the
same proportions that they are represented in the DJIA(SM). The Series employs a
"passively" managed investment approach.
The DJIA(SM) currently consists of 30 of the most widely held and actively
traded stocks listed on the New York Stock Exchange. The stocks in the DJIA(SM)
represent companies that typically are dominant firms in their respective
industries. Normally, the Series will invest substantially all of its total
assets in the stocks of the DJIA(SM) and "Equity Equivalents" (described below)
that offer participation in the performance of the stocks in the DJIA(SM). The
portion of the Series' total assets invested in the stocks in the DJIA(SM) will
vary from time to time.
Equity Equivalents include stock index futures contracts and publicly-traded
index securities (such as DIAMONDS(SM)). Stock index futures contracts are
agreements whereby 2 parties agree to take or make delivery of an amount of cash
based on the value of an index (such as the DJIA(SM)) on specified future date.
Investment in index futures contracts allows an investor to participate in the
performance of the index without the costs of buying the stocks comprising the
index. DIAMONDS represent proportionate undivided interests in a portfolio of
securities consisting of all of the component common stocks of the DJIA(SM) and
are listed on the American Stock Exchange. Equity Equivalents may be used for
several purposes: to simulate full investment in the underlying index while
retaining a cash balance for fund management purposes, to facilitate trading, to
reduce transaction costs or to seek higher investment returns where an Equity
Equivalent is priced more attractively than securities in the DJIA(SM).
The Series will attempt to achieve a correlation between the total return
performance of its portfolio and that of the total return of the DJIA(SM) of at
least .98 before expenses. A correlation of 1.00 would indicate perfect
correlation, which would be achieved when the Series' net asset value, including
the value of its dividend and capital gain
Phoenix Edge Series Fund 53
<PAGE>
distributions, increases or decreases in exact proportion to changes in the
total return of the DJIA(SM). The investment manager monitors the correlation of
the performance of the Series in relation to the DJIA(SM) under the supervision
of PVA and the Board of Trustees. In the unlikely event that a high correlation
is not achieved, PVA and the Board of Trustees will take appropriate steps based
on the reasons for the lower than expected correlation.
RISKS RELATED TO INVESTMENT STRATEGIES
You could lose money on your investment in the Series, or the Series could
underperform other investments, if the value of the DJIA(SM) goes down. Unlike
other funds that do not attempt to track an index, the Series may not use
certain techniques to reduce the risk of loss. For example, the Series will not
keep any significant portion of its assets in cash. As a result, the Series may
go down in value more than an actively managed fund in the event of a general
market decline. In addition, because the Series has expenses whereas the
DJIA(SM) does not, the Series' performance will tend to underperform the
performance of the DJIA(SM).
The Series' "non-diversified" status allows it to invest more than 5% of its
assets in the stock of a single company. To the extent the Series invests a
greater percentage of its assets in a single company, it has greater exposure to
the performance and risks of the stock of that company.
An investment in the Series is not a deposit of any bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
MANAGEMENT OF THE SERIES
THE ADVISOR
Phoenix Variable Advisors, Inc. ("PVA") is the investment advisor to the
Series and is located at One American Row, Hartford, CT 06102-5056. PVA also
acts as the investment advisor for 7 other series. PVA is a new investment
advisor created to actively monitor and manage subadvisor performance.
Bankers Trust Company ("Bankers Trust") serves as subadvisor to the
Phoenix-Bankers Trust Dow 30 Series. Bankers Trust, a New York banking
corporation with principal offices at 130 Liberty Street, One Bankers Trust
Plaza, New York, New York 10006, is a wholly-owned subsidiary of Deutsche Bank
AG ("Deutsche Bank"), and has more than 50 years of experience managing
retirement assets for the nation's largest corporations and institutions.
Deutsche Bank is split into 5 business divisions, including Deutsche Asset
Management, which encompasses the investment management capabilities of Bankers
Trust. At June 30, 1999, Deutsche Asset Management had $680 billion in assets
under management globally; and in the U.S., Deutsche Asset Management is
responsible for $300 billion in client assets.
PVA, subject to the supervision and direction of the Board of Trustees, is
responsible for assuring that the Series is managed in accordance with the
Series' investment objective and stated investment policies. Bankers Trust, as
subadvisor, is responsible for the day-to-day management of the holdings of the
Series, makes investment decisions for the Series, places orders to purchase and
sell securities and other financial instruments on behalf of the Series and
employs professional investment managers and securities analysts who provide
research services to the Series. Bankers Trust may utilize the expertise of any
of its worldwide subsidiaries and affiliates to assist it in its role as
Advisor.
The Series pays PVA a monthly investment management fee that is accrued
daily against the value of that Series' net assets at the rate of 0.35%.
This Series is not sponsored, endorsed, sold or promoted by Dow Jones. Dow
Jones makes no representation or warranty, express or implied, to actual or
potential investors in the Series or to any member of the public regarding the
advisability of investing in securities generally or in this Series
particularly. Dow Jones' only relationship to the Fund is the licensing of
certain trademarks, trade names and service marks of Dow Jones and of the Dow
Jones Industrial Average(SM), which is determined, composed and calculated by
Dow Jones without regard to the Fund or the Series. Dow Jones has no obligation
to take the needs of Fund or the investors in the Series into consideration in
determining, composing or calculating the Dow Jones Industrial Average(SM). Dow
Jones is not responsible for and has not participated in the determination of
the timing of, prices at, or quantities of the Series to be issued or in the
determination or calculation of the equation by which shares of the Series may
be redeemed. Dow Jones has no obligation or liability in connection with the
administration, marketing or trading of the Series.
DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE DOW
JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED THEREIN AND DOW
54 Phoenix Edge Series Fund
<PAGE>
JONES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS
THEREIN. DOW JONES MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE
OBTAINED BY THE FUND, INVESTORS IN THE SERIES, OR ANY OTHER PERSON OR ENTITY
FROM THE USE OF THE DOW JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED
THEREIN. DOW JONES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE WITH RESPECT TO THE DOW JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES HAVE
ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR
CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF.
THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN
DOW JONES AND THE FUND.
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The Phoenix-Duff & Phelps Real Estate Securities Series has an investment
objective of capital appreciation and income with approximately equal emphasis
on each. There is no guarantee that the Series will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
The Series will 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 Series' total assets in these securities.
REITs are pooled investment vehicles which invest primarily in income
producing real estate or real estate related loans. Generally, REITs can be
classified as equity REITs, mortgage REITs or hybrid REITs.
[diamond] Equity REITs invest the majority of their assets directly in real
property and derive income primarily from the collection of rents.
Equity REITs also can realize capital gains by selling properties that
have appreciated in value.
[diamond] Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments.
[diamond] 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, the advisor 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 stocks.
The Series also may invest up to 25% of its total assets in
[diamond] marketable debt securities of companies principally engaged in the
real estate industry;
[diamond] mortgage-backed securities such as mortgage pass-through certificates,
real estate mortgage investment conduit ("REMIC") certificates and
collateralized mortgage obligations ("CMOS");
[diamond] short-term investments.
The Series invests in debt securities only if, at the date of investment,
they are rated within the 4 highest grades as determined by Moody's or by S&P
or, if not rated are judged by the advisor to be of equivalent quality.
Securities rated at the lowest of the 4 grades 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 ability
to make principal and interest payments in the case of such obligations than is
the case of higher grade securities. The Series is not required to dispose of
debt securities whose credit quality falls below investment grade. Unrated debt
securities may be less liquid then comparable rated debt securities and may
involve somewhat greater risk then rated debt securities.
For temporary defensive purposes (as when market conditions in real estate
securities are so extraordinarily adverse that the advisor believes there are
extraordinary risks associated with investment in those securities), the Series
may invest up to 100% of its total assets in short-term investments such as
Phoenix Edge Series Fund 55
<PAGE>
[diamond] money market instruments consisting of securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities;
[diamond] repurchase agreements; certificates of deposit and bankers'
acceptances issued by banks or savings and loan associations having
net assets of at least $500 million;
[diamond] high-grade commercial paper rated at time of purchase in the top 2
categories by a national rating agency or determined to be of
comparable quality by the advisor; and
[diamond] other long- and short-term instruments which are rated A or higher by
S&P or Moody's at the time of purchase.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques.
RISKS RELATED TO INVESTMENT STRATEGIES
GENERAL
The Series' focus is capital appreciation and income. The value of your
shares is based on the market value of the Series' investments. However, the
value of the Series' investments that support your share value can decrease as
well as increase. If between the time you purchase shares and the time you sell
shares the value of the Series' investments decreases, you will lose money. The
value of the Series' investments can decrease for a number of reasons. For
example, changing economic conditions may cause a decline in the value of many
or most investments. Particular industries can face poor market conditions for
their products or services so that companies engaged in those businesses do not
perform as well as companies in other industries. Interest rate changes may
improve prospects for certain types of businesses and they may worsen prospects
for others. Share values also can decline if the specific companies selected for
fund investment fail to perform as the advisor expects, regardless of general
economic trends, industry trends, interest rates and other economic factors.
In the case of fixed income securities, the value of the security will be
directly affected by trends in interest rates and the overall condition of
credit markets. For example, in times of rising interest rates, the value of
these types of securities tends to decrease. When interest rates fall, the value
of these securities tends to rise. Income distribution also will affect the
Series' return. If the advisor misjudges the ability of the issuer of a
portfolio security to make scheduled interest or other income payments to the
Series, the Series' income available for distribution to shareholders may
decrease.
In addition to these general risks of investing in the Series, there are
several specific risks of investing in the Series that your should note.
The Series is "non-diversified" under the federal securities laws. As a
non-diversified portfolio, there is no restriction on the percentage of assets
that may be invested at any time in the securities of any one issuer. To the
extent that the Series is in fact not well diversified, it may be more
vulnerable to adverse economic, political or regulatory developments affecting a
single issuer than would be the case if it were more broadly diversified.
Although the Series does not invest directly in real estate, it does invest
primarily in real estate securities and, as a result, the value of shares of the
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:
[diamond] possible declines in the value of real estate;
[diamond] risks related to general and local economic conditions;
[diamond] possible lack of availability of mortgage funds;
[diamond] overbuilding;
[diamond] extended vacancies of properties;
[diamond] increases in competition, property taxes and operating expenses;
[diamond] changes in zoning laws;
[diamond] costs of clean-up of and liability for environmental problems;
[diamond] casualty or condemnation losses;
[diamond] uninsured damages from flood, earthquakes or other natural disasters;
[diamond] limitations on and variations in rents;
[diamond] dependency on property management skill;
[diamond] the appeal of properties to tenants; and
[diamond] 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:
[diamond] dependent upon management skills,
[diamond] are not diversified, and
[diamond] 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 the advisor to ascertain the value of the REIT's
underlying assets, management capabilities and growth prospects. REITs
56 Phoenix Edge Series Fund
<PAGE>
whose underlying assets include long-term health care projects, such as nursing,
retirement and assisted living homes may be affected by federal regulations
concerning the health care industry.
REITs (especially mortgage REITs) are subject to interest rate risks. When
interest rated 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. On the
other hand, since interest rates on adjustable rate mortgage loans are reset
periodically, yields on a REIT's investment in such loans will gradually align
themselves to current market interest rates. The value of such investments
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.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
It is difficult to predict cash flows from mortgage-backed securities.
Payments of principal and interest on the underlying mortgages may be allocated
among classes in a variety of ways, and the inability to determine specific
amounts and timing of prepayments of the underlying loans make it difficult to
accurately predict cash flow. The variability of prepayments will tend to limit
price gains when interest rates drop and exaggerate price declines when interest
rates rise.
In the event of high prepayments, the Series may be required to invest these
proceeds at a lower interest rate, causing the Series to earn less than if the
prepayments had not occurred. Generally, prepayments will increase during a
period of falling interest rates.
GOVERNMENT SECURITIES
Obligations issued or guaranteed by federal, state, and municipal
governments, agencies, authorities and instrumentalities only guarantee
principal and interest will be timely paid to holders of the securities. The
entities do not guarantee that the value of Series shares will increase.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
MANAGEMENT OF THE SERIES
THE ADVISOR
Duff & Phelps Investment Management Co. ("DPIM") is the investment advisor
of the Series. DPIM is a subsidiary of Phoenix Investment Partners, Inc. ("PXP")
and is located at 55 East Monroe Street, Suite 3600, Chicago, Illinois 60603.
PXP is a NYSE traded company that provides investment management and related
services to institutional investors, corporations and individuals through
operating subsidiaries. DPIM also serves as investment advisor to the Core
Equity Fund of Phoenix Equity Series Fund, the Enhanced Reserves, Core Equity
and Real Estate Equity Securities Portfolios of Phoenix Duff & Phelps
Institutional Mutual Funds, the Real Estate Securities Portfolio of Phoenix
Multi-Portfolio Fund and 3 closed-end funds: Duff & Phelps Utilities Income
Inc., Duff & Phelps Utilities Tax-Free Income Inc. and Duff & Phelps Utility and
Corporate Bond Trust Inc. As of December 31, 1998, DPIM had approximately $15.2
billion in assets under management.
Subject to the direction of the Fund's Board of Trustees, DPIM is
responsible for managing the Series' investment program and the day-to-day
management of the Series' portfolio. DPIM manages the Series' assets to conform
with the investment policies as described in this prospectus. The Series pays
DPIM a monthly investment management fee that is accrued daily against the value
of the Series' net assets at following rates.
-------------------------------------------------------------
1ST BILLION $1+ BILLION
THROUGH $2 BILLION $2+ BILLION
-------------------------------------------------------------
Management Fee 0.75% 0.70% 0.65%
-------------------------------------------------------------
During the Fund's last fiscal year, the Series paid total management fees of
$350,294. The ratio of management fees to average net assets for the fiscal year
ended December 31, 1998 was 0.75%.
PORTFOLIO MANAGEMENT
Michael Schatt is responsible for managing the assets of the Phoenix-Duff &
Phelps Real Estate Securities Series. Mr. Schatt is employed as managing
director of PXP and is a vice president of the Series, Phoenix Duff & Phelps
Institutional Mutual Funds, Phoenix Multi-Portfolio Fund, Phoenix Duff & Phelps
Utilities Income Inc. and DPIM. His current responsibilities include serving as
coportfolio manager of the Real Estate Securities Portfolio of Phoenix
Multi-Portfolio Fund, the Real Estate Equity Securities Portfolio of Phoenix
Duff & Phelps Institutional Mutual
Phoenix Edge Series Fund 57
<PAGE>
Funds, and managing the real estate investment securities of Duff & Phelps
Utilities Income Inc. Previously he served as director of the Real Estate
Advisory Practice for Coopers & Lybrand, LLC, and has over 16 years experience
in the real estate industry.
PHOENIX-ENGEMANN CAPITAL GROWTH SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The Phoenix-Engemann Capital Growth Series has an investment objective of
intermediate and long-term capital appreciation, with income as a secondary
consideration. There is no guarantee that the Series will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
The Series invests primarily in a portfolio of common stocks. Under normal
circumstances the Series intends to invest at least 65% of its total assets in
common stocks.
To select securities for Series investment, the advisor first determines
which industries, such as health care, technology, and energy, it believes have
the greatest growth potential given the advisor's future economic outlook. The
advisor will then identify the amount and proportion of assets to be invested in
each such industry. The advisor will then use quantitative and fundamental
analysis to determine which securities to buy and sell within each industry
given its asset allocation. Approximately 950 large cap stocks go through a
quantitative screening process where they are ranked on a number of factors,
including earnings acceleration, earning revisions, relative strength and
valuation. From these, the top 10% are analyzed for potential Series investment.
The advisor's analysis includes such activities as developing earnings models,
visiting companies, analyzing industry information and seeking information from
other research firms. Companies that the advisor believes are capable of
producing long-term and above-average sustainable earnings growth relative to
their cost are then selected for Series investment.
Understanding the importance of a strong sell discipline, the advisor's
investment process also incorporates 3 separate sell indicators. Specifically,
if any holding:
[diamond] drops 15% or more in value relative to the S&P 500 Index;
[diamond] falls into the bottom 20% of their quantitative ranking; or
[diamond] reaches the advisor's target sell price,
it is reviewed by the advisor for potential sale.
The advisor selects common stocks of companies that it believes have the
potential to appreciate over both the intermediate and long terms. However,
since common stocks do not always afford the greatest promise for capital
appreciation, the Series may invest any amount of its assets in any class or
type of security believed by the advisor to offer the potential for capital
appreciation over both the intermediate and long terms, including preferred
stocks and investment grade bonds. When interest rates fall, generally the value
of bonds rises. Distribution of income, such as dividends and interest, is
incidental in the selection of investments for the Series. The advisor will
monitor portfolio securities to determine whether they are contributing to the
investment objective. Diversification among market sectors will also be a factor
in selecting securities for the Series. However, the advisor will put greater
emphasis on selecting securities which have good potential for appreciation
rather than upon wide diversification.
The Series also may invest up to 20% of its assets 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 issuer at predetermined time(s), price(s) or price
formula. Convertible securities have several unique investment characteristics,
such as:
[diamond] higher yields than common stocks but lower yields than comparable
nonconvertible securities;
[diamond] typically less fluctuation in value than the "underlying" common
stock, that is, the common stock that the investor receives if he
converts;
[diamond] the potential for capital appreciation if the market price of the
underlying common stock increases.
The Series may invest up to 25% of its net assets in securities of foreign
(non-U.S.) issuers. The Series may invest in a broad range of foreign
securities, including equity, debt and convertible securities and foreign
government securities. Issuers may be in established market countries and
emerging market countries.
Temporary Defensive Strategy. If the advisor believes that market conditions
are not favorable to the Series' principal strategies, the Series may invest in
fixed income securities with or without warrants or conversion features and it
may hold on to its cash or invest without limit in cash equivalents. When this
happens, the Series may not achieve its investment objective.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques of the Series.
58 Phoenix Edge Series Fund
<PAGE>
RISKS RELATED TO INVESTMENT STRATEGIES
GENERAL
The Series' focus is intermediate to long-term capital appreciation. The
advisor intends to invest the Series' assets so that your shares increase in
value. However, the value of the Series' investments that support your share
value can decrease as well as increase. If between the time you purchase shares
and the time you redeem shares the value of the Series' investments decreases,
you will lose money. The value of the Series' investments can decrease for a
number of reasons. For example, changing economic conditions may cause a decline
in value of many or most investments. Particular industries can face poor market
conditions for their products or services so that companies engaged in those
businesses do not perform as well as companies in other industries. Interest
rate changes may improve prospects for certain types of businesses and they may
worsen prospects for others. To the extent that the Series' investments are
affected by general economic declines, declines in industries, and interest rate
changes that negatively affect the companies in which the Series invests, Series
share values may decline. Share values also can decline if the specific
companies selected for investment fail to perform as the advisor expects,
regardless of general economic trends, industry trends, interest rates and other
economic factors.
In addition to these general risks of investing in the Series, there are
several specific risks of investing in the Series that you should note.
SMALL MARKET CAPITALIZATION INVESTING
The Series may invest in some smaller companies. Companies with small
capitalization are often companies in industries that have recently emerged due
to cultural, economic, regulatory or technological developments. Such
developments can have a significant positive or negative effect on small
capitalization companies and their stock performance. Given the limited
operating history and rapidly changing fundamental prospects, investment returns
from smaller capitalization companies can be highly volatile. Smaller companies
may find their ability to raise capital impaired by their size or lack of
operating history. Product lines are often less diversified and subject to
competitive threats. Smaller capitalization stocks are subject to varying
patterns of trading volume and may, at times, be difficult to sell.
FOREIGN INVESTING
The Series may invest in non-U.S. companies. Investing in the securities of
non-U.S. companies involves special risks and considerations not typically
associated with investing in U.S. companies. These include:
[diamond] differences in accounting, auditing and financial reporting standards;
[diamond] generally higher commission rates on foreign portfolio transactions;
[diamond] differences and inefficiencies in transaction settlement systems;
[diamond] the possibility of expropriation or confiscatory taxation;
[diamond] adverse changes in investment or exchange control regulations;
[diamond] political instability; and
[diamond] potential restrictions on the flow of international capital.
Political and economic uncertainty as well as less public information about
investments may negatively impact the Series' portfolio.
Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility. Additionally,
dividends and interest payable on foreign securities may be subject to foreign
taxes withheld prior to receipt by the Series.
Many of the foreign securities held by the Series will not be registered
with, nor will the issuers of those securities be subject to the reporting
requirements of, the U.S. Securities and Exchange Commission. Accordingly, there
may be less publicly available information about the securities and about the
foreign company or government issuing them than is available about a domestic
company or government entity. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payment positions.
EMERGING MARKET INVESTING
The Series may invest in companies located in emerging market countries and
regions. Investments in less-developed countries whose markets are still
emerging generally present risks in greater degree than those presented by
investment in foreign issuers based in countries with developed securities
markets and more advanced regulatory systems. Prior governmental approval of
foreign investments may be required under certain circumstances in some
developing countries, and the extent of foreign investment in domestic companies
may be subject to limitation in other developing countries. The charters of
individual companies in developing countries may impose limitations on foreign
ownership to prevent, among other concerns, violation of foreign investment
limitations.
The economies 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
Phoenix Edge Series Fund 59
<PAGE>
adjustments in relative currency values and other protectionist measures imposed
or negotiated by the countries with which they trade. These economies also have
been (and may continue to be) adversely affected by economic conditions in the
countries with which they trade.
IMPACT OF THE YEAR 2000 ISSUE ON THE SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the Year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
MANAGEMENT OF THE SERIES
THE ADVISOR
Phoenix Investment Counsel, Inc. ("PIC") is the investment advisor to the
Series and is located at 56 Prospect Street, Hartford, CT 06115. PIC also acts
as the investment advisor for 14 other mutual funds, as subadvisor to 3 mutual
funds and as advisor to institutional clients. As of December 31, 1998, PIC had
$23.9 billion in assets under management. PIC has acted as an investment advisor
for over 60 years.
Subject to the direction of the Fund's Board of Trustees, PIC is responsible
for managing the Series' investment program and the day-to-day management of the
Series' portfolio. PIC manages the fund's assets to conform with the investment
policies as described in this prospectus. The Series pays PIC a monthly
investment management fee that is accrued daily against the value of the Fund's
net assets at the following rates.
- ---------------------------------------------------------------
FIRST NEXT OVER
$250,000,000 $250,000,000 $500,000,000
- ---------------------------------------------------------------
Management 0.70% 0.65% 0.60%
Fee
- ---------------------------------------------------------------
During the Series' last fiscal year, the Series paid total management fees
of $10,143,250. The ratio of management fees to average net assets for the
fiscal year ended December 31, 1998 was 0.62%.
PORTFOLIO MANAGEMENT
Investment and trading decisions for the Series are made by a team of equity
investment professionals.
PHOENIX-ENGEMANN NIFTY FIFTY SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
Phoenix-Engemann Nifty Fifty Series has an investment objective to seek
long-term capital gain. There is no guarantee that the Series will achieve its
investment objective.
PRINCIPAL INVESTMENT STRATEGIES
The Series will invest in approximately 50 different securities which the
advisor believes represent the best potential to achieve long-term growth of
capital. Dividend and interest income to be received from portfolio securities
is largely incidental.
Under normal market conditions, the Series will invest at least 75% of its
total assets in common stocks of high quality growth companies; most companies
will have at least $50 million in annual net income.
Companies whose common stock is purchased by the Series will be listed on
the NYSE or would satisfy the applicable listing requirements of the NYSE with
respect to demonstrated earning power, years in operation, number of
publicly-held shares and net tangible assets.
Under normal conditions, up to 25% of the Series' total assets will be
invested in common stocks of corporations with rapidly growing earnings per
share or in common stocks of corporations that are believed to be undervalued in
the advisor's opinion. While some of these companies may be well-known and
established many will be unseasoned.
The Series may invest in preferred stock, warrants and convertible debt
obligations if the advisor believes these investments will help meet the Series'
objectives.
Please refer to the Statement of Additional Information for more detailed
information about these and other investments.
RISKS RELATED TO INVESTMENT STRATEGIES
GENERAL
The Series' primary focus is long-term capital appreciation. The advisor
intends to invest Series assets so that your shares increase in value. However,
the value of the Series' investments that support your share value can decrease
as well as increase. If between the time you purchase shares and the time you
sell shares the value of the Series' investments decreases, you will lose money.
The value of the Series' investments can decrease for a number of reasons. For
example, changing economic conditions may cause a decline in the value of many
or even most equity and fixed income investments. Particular industries can face
poor markets for their products or services so that
60 Phoenix Edge Series Fund
<PAGE>
companies engaged in those businesses do not do as well as companies in other
industries. Interest rate changes may improve prospects for certain types of
businesses and they may worsen prospects for others. To the extent that the
Series' investments are affected by general economic declines, declines in
industries, and interest rate changes that negatively affect the companies in
which the Series invests, Series' share values may decline. Share values also
can decline if the specific companies selected for Series investment fail to
perform as the advisor expects, regardless of general economic trends, industry
trends, interest rates and other economic factors.
In addition to these general risks of investing in the Series, there are
several specific risks of investing in the Series that you should note.
SMALL MARKET CAPITALIZATION INVESTING
The Series may invest in some smaller companies. Companies with small
capitalization are often companies with a limited operating history or companies
in industries that have recently emerged due to cultural, economic, regulatory
or technological developments. Such developments can have significant positive
or negative effect on small capitalization companies and their stock
performance. Given the limited operating history and rapidly changing
fundamental prospects, investment returns from smaller capitalization companies
can be highly volatile. Smaller companies may find their ability to raise
capital impaired by their size or lack of operating history. Product lines are
often less diversified and subject to competitive threats. Smaller
capitalization stocks are subject to varying patterns of trading volume and may,
at times, be difficult to sell.
REDUCED DIVERSIFICATION
This Series will invest in a much smaller number of companies than the
average equity growth fund. Consequently, this Series may be more sensitive to
changes in the market value of a single issuer or of an industry held in its
portfolio. The net asset value of the Series may fluctuate substantially. This
Series may not be appropriate for short-term investors.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
MANAGEMENT OF THE SERIES
THE ADVISOR
Phoenix Investment Counsel, Inc. ("PIC") is the investment advisor to the
Series and is located at 56 Prospect Street, Hartford, CT 06115. PIC also acts
as the investment advisor for 14 other mutual funds, as subadvisor to 3
additional mutual funds and as advisor to institutional clients. As of December
31, 1998, PIC had $23.9 billion in assets under management. PIC has acted as an
investment advisor for over 60 years.
Roger Engemann & Associates ("Engemann") serves as subadvisor to the
Phoenix-Engemann Nifty Fifty Series. Engemann is a wholly owned subsidiary of
Pasadena Capital Corporation which, in turn, is a wholly-owned subsidiary of
PXP. Engemann has been engaged in the investment management business since 1969
and provides investment counseling services to retirement plans, colleges,
corporations, trusts and individuals. Engemann also serves as investment advisor
to the Phoenix-Engemann Funds. As of December 31, 1998, Engemann had
approximately $7.8 billion in assets under management.
Subject to the direction of the Fund's Board of Trustees, PIC is responsible
for managing the Series' investment program and the day-to-day management of the
domestic portion of the Series' portfolio. Engemann, as subadvisor, is
responsible for the day-to-day management of the holdings of the Series. Both
PIC and Engemann manage the Series' assets to conform with the investment
policies as described in this prospectus. The Series pays PIC a monthly
investment management fee that is accrued daily against the value of that
Series' net assets at the following rates.
- --------------------------------------------------------------
FIRST NEXT OVER
$250,000,000 $250,000,000 $500,000,000
- --------------------------------------------------------------
Management 0.90% 0.85% 0.80%
Fee
- --------------------------------------------------------------
During the Series' last fiscal year, the Series paid total management fees
of $48,195. The ratio of management fees to average net assets for the fiscal
year ended December 31, 1998 was 0.90%. The total advisory fee of 0.90% of the
aggregate net assets of the Series is greater than that for most funds; however,
the Trustees have determined that it is comparable to fees charged by other
mutual funds whose investment objectives are similar to those of the Series.
PORTFOLIO MANAGEMENT
Roger Engemann, James E. Mair and John S. Tilson are primarily responsible
for the day-to-day management of the Series. Messrs. Engemann, Mair and Tilson
also manage the investment portfolio of Phoenix Aggressive Growth Fund of
Phoenix Series Fund. Each is a managing director, equities of PIC. Mr. Engemann
has been president of Engemann since its inception. Messrs. Mair and Tilson are
Phoenix Edge Series Fund 61
<PAGE>
both executive vice presidents of Engemann, and both have been with Engemann
since 1983.
PHOENIX-FEDERATED U.S. GOVERNMENT BOND SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The Series' investment objective is to pursue total return by investing
primarily in debt obligations of the U.S. government, its agencies and
instrumentalities. There is no guarantee that the Series will achieve its
investment objective.
PRINCIPAL INVESTMENT STRATEGIES
The Series invests primarily in debt obligations (i.e., bills, notes, and
bonds) of the U.S. government, its agencies and instrumentalities, with at least
65% of the value of its total assets being invested under normal circumstances
in U.S. government bonds. As a matter of operating policy, the Series invests
100% of its assets in a portfolio of direct obligations of the U.S. government,
its agencies and instrumentalities. The Series' advisor actively manages its
portfolio, seeking to limit the interest rate risk taken by the Series while
selecting investments that should offer enhanced returns based upon the
advisor's interest rate outlook. A description of the various types of
securities in which the Series invests, and their risks, immediately follows
this strategy section.
The advisor manages the Series' interest rate risk by limiting the
dollar-weighted average duration of its portfolio securities. "Duration"
measures the sensitivity of a security's price to changes in interest rates. The
greater a portfolio's average duration, the greater the change in the
portfolio's value in response to a change in market interest rates. As a matter
of investment policy, under normal market conditions, the advisor limits the
average duration of the portfolio to within 20% of the duration of the Merrill
Lynch 10+ Year Treasury Index (the "Index"). This Index includes all U.S.
Treasury notes and bonds with maturities of greater than 10 years.
The advisor uses 3 principal methods to enhance the portfolio's returns as
compared to the Index. First, the advisor tries to extend the portfolio's
average duration when it expects interest rates to fall and shorten the duration
when it expects interest rates to rise. This method seeks to enhance the returns
from favorable interest rate changes and reduce the effect of unfavorable
changes.
Second, in constructing a portfolio with a targeted average duration, the
advisor tries to combine individual portfolio securities with different
durations to take advantage of relative changes in interest rates. Relative
changes in interest rates may occur whenever longer-term interest rates move
more, less or in a different direction than shorter-term interest rates.
Third, the advisor tries to obtain securities issued by agencies and
instrumentalities of the U.S. that it expects to provide better returns than
U.S. Treasury securities of comparable duration. Through ongoing relative value
analysis, the advisor generally compares current yield differences of securities
to their historical and expected yield differences.
The advisor's interest rate outlook is the most important factor in
selecting the methods used to manage the Series' portfolio. The advisor
formulates its interest rate outlook by analyzing a variety of factors such as:
[diamond] current and expected U.S. economic growth;
[diamond] current and expected interest rates and inflation;
[diamond] the Federal Reserve Board's monetary policy; and
[diamond] changes in the supply of or demand for U.S. government securities.
In selecting individual securities, the advisor analyzes how the security
should perform in response to expected interest rate changes as compared to
other securities of comparable risk.
The Series also invests in repurchase agreements for U.S. government
securities. Repurchase agreements are collateralized by the same types of
securities in which the Series invests. The Series uses repurchase agreements to
invest cash balances and shorten duration.
TEMPORARY DEFENSIVE INVESTMENTS
The Series may temporarily depart from its principal investment strategies
by investing its assets in cash and shorter-term, higher-quality debt securities
and similar obligations. It may do this to minimize potential losses and
maintain liquidity to meet contractholder redemptions during adverse market
conditions. This may cause the Series to give up greater investment returns to
maintain the safety of principal, that is, the original amount invested by
contractholders.
WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE SERIES INVESTS?
The Series invests in the following types of U.S. government securities:
U.S. TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.
U.S. GOVERNMENT AGENCY SECURITIES
Agency securities are issued or guaranteed by a federal agency or other
government-sponsored entity acting under federal authority.
62 Phoenix Edge Series Fund
<PAGE>
INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES
The advisor will determine whether a security is investment grade based upon
the credit ratings given by one or more nationally recognized rating services.
For example, Standard & Poor's, a rating service, assigns ratings to investment
grade securities (AAA, AA, A, and BBB) based on their assessment of the
likelihood of the issuer's inability to pay interest or principal (default) when
due on each security. Lower credit ratings correspond to higher credit risk. If
a security has not received a rating, the Series must rely entirely upon the
advisor's credit assessment that the security is comparable to investment grade.
RISKS RELATED TO INVESTMENT STRATEGIES
INTEREST RATE RISKS
The Series' focus is total return from investing in fixed income obligations
of the U.S. government and its agencies.
The value of fixed income securities will be directly affected by trends in
interest rates and the overall condition of credit markets. For example, in
times of rising interest rates, the value of these type of securities tends to
decrease. When interest rates fall, the value of these securities tends to rise.
Interest rate changes have a greater effect on the price of fixed income
securities with longer durations.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
MANAGEMENT OF THE SERIES
THE ADVISOR
Phoenix Variable Advisors, Inc. ("PVA") is the investment advisor to the
Series and is located at One American Row, Hartford, CT 06102-5056. PVA also
acts as the investment advisor for 7 other Series. PVA is a new investment
advisor established to actively monitor and manage subadvisor performance.
Federated Investment Management Company ("Federated") serves as subadvisor
to the Phoenix-Federated U.S. Government Bond Series. Federated, a Delaware
business trust with principal offices at 1001 Liberty Avenue, Pittsburgh,
Pennsylvania 15222, is a wholly-owned subsidiary of Federated Investors, Inc.
PVA, subject to the supervision and direction of the Board of Trustees, is
responsible for assuring that the Series is managed in accordance with the
Series' investment objective and stated investment policies. Federated, as
subadvisor, is responsible for the day-to-day management of the holdings of the
Series, makes investment decisions for the Series, places orders to purchase and
sell securities and other financial instruments on behalf of the Series and
employs professional investment managers and securities analysts who provide
research services to the Series.
The Series pays PVA a monthly investment management fee that is accrued
daily against the value of that Series net assets at the rate of 0.60%.
PORTFOLIO MANAGEMENT
Susan M. Nason has been the portfolio manager of the publicly-sold Federated
U.S. Government Bond Fund since 1994. Ms. Nason joined Federated in 1987 and has
been a senior portfolio manager and senior vice president of Federated since
1997. She served as a portfolio manager and vice president of the Federated from
1993 to 1997. Ms. Nason is a chartered financial analyst and received her
M.S.I.A. concentrating in Finance from Carnegie Mellon University.
Donald T. Ellenberger has been the portfolio manager of the publicly-sold
Federated U.S. Government Bond Fund since 1997. Mr. Ellenberger joined Federated
in 1996 as a portfolio manager and a vice president of Federated. From 1986 to
1996, he served as a trader/portfolio manager for Mellon Bank, N.A. Mr.
Ellenberger received his M.B.A. in Finance from Stanford University.
Phoenix Edge Series Fund 63
<PAGE>
PHOENIX-GOODWIN MONEY MARKET SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The Phoenix-Goodwin Money Market Series has an investment objective of
seeking as high a level of current income as is consistent with the preservation
of capital and maintenance of liquidity. There is no guarantee that the Series
will achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
The advisor will seek a high level of return relative to the market by
selecting securities for the Series' portfolio in anticipation of, or in
response to, changing economic conditions and money market conditions and
trends. The advisor may not purchase securities with the highest available yield
if the advisor believes that such an investment is inconsistent with the Series
objectives of preservation of capital and maintenance of liquidity.
The Series will invest in a diversified portfolio of high quality money
market instruments with maturities of 397 days or less. The average maturity of
the Series' portfolio securities, based on their dollar value, will not exceed
90 days.
The following money market instruments are the only investments the Series
will have in its portfolio at any time:
[diamond] Obligations issued or guaranteed by the U.S. government, its agencies,
authorities and instrumentalities, including U.S. Treasury obligations
and securities issued by:
[bullet] the Government National Mortgage Association (GNMA),
[bullet] the Federal Home Loan Mortgage Corporation (FHLMC),
[bullet] the Federal National Mortgage Association (FNMA),
[bullet] Student Loan Marketing Association (SLMA),
[bullet] other federal agencies;
[diamond] Obligations issued by banks and savings and loan associations,
including dollar-denominated obligations of foreign branches of U.S.
banks and U.S. branches of foreign banks, including certificates of
deposits and bankers acceptances;
[diamond] Dollar-denominated obligations guaranteed by banks or savings and loan
associations;
[diamond] Federally insured obligations of other banks or savings and loan
associations;
[diamond] Commercial paper;
[diamond] Short-term corporate obligations; and
[diamond] Repurchase agreements:
[bullet] A repurchase agreement is a transaction where the Series buys
a security from a seller and the seller agrees to buy that
same security back at an agreed upon date and price.
[bullet] The advisor will enter into repurchase agreements only with
those sellers that it deems creditworthy.
Investments in the Series generally will be limited to securities in the 2
highest short-term rating categories with at least 95% of the Series' total
assets invested in securities in the highest rating category. Securities in the
highest rating category carry the smallest degree of investment risk.
The Series may invest more than 25% of its assets in the domestic banking
industry.
The short-term nature of money market instruments and the Series' strategies
may result in a higher turnover rate as compared to other types of funds.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques.
RISKS RELATED TO INVESTMENT STRATEGIES
GENERAL
The Series' focus is to optimize current income. The advisor intends to
select investments that provide higher returns relative to overall money market
investment returns while preserving capital and maintaining liquidity. If the
advisor misjudges the return potential of the Series' investments, the Series'
returns may be lower than prevailing returns, and the Series' income available
for distribution to shareholders may be less. Similarly, if the advisor
misjudges the ability of the issuer of a portfolio security to make scheduled
interest or other income payments to the Series, the Series' income available
for distribution to shareholders may decrease. Neither the Series nor the
advisor can assure you that a particular level of income will be consistently
achieved.
The advisor intends to select investments that optimize the Series' yield
while preserving capital and maintaining liquidity. Because market conditions
and interest rates determine portfolio security yields, neither the Series nor
the advisor can assure you that the Series' yield will remain constant or that a
particular level of income will be achieved.
64 Phoenix Edge Series Fund
<PAGE>
In addition to these general risks of investing in the Series, there are
several specific risks of investing in the Series that you should note.
INVESTMENTS NOT GUARANTEED
Unlike cash held in a bank, investments in the Series are not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
NET ASSET VALUE LESS THAN $1.00
If the net asset value drops below $1.00 per share, you could lose money.
CREDIT RATING DECREASE
A security's short-term investment rating may decline, increasing the
chances the issuer may not be able to make principal and interest payments on
time. This may reduce the Series' stream of income and decrease the Series'
yield.
REPURCHASE AGREEMENTS
If a seller of a repurchase agreement defaults and does not repurchase the
underlying securities, the Series may incur a loss if the value of the
underlying securities declines. Disposition costs may be incurred in connection
with liquidating the underlying securities. If the seller enters into
bankruptcy, the Series may never receive the purchase price or it may be delayed
or limited.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
MANAGEMENT OF THE SERIES
THE ADVISOR
Phoenix Investment Counsel, Inc. ("PIC" or "Advisor") is the investment
advisor to the Series and is located at 56 Prospect Street, Hartford, CT 06115.
PIC also acts as the investment advisor for 14 other mutual funds, as subadvisor
to 3 mutual funds and as advisor to institutional clients. As of December 31,
1998, PIC had $23.9 billion in assets under management. PIC has acted as an
investment advisor for over 60 years.
Subject to the direction of the Fund's Board of Trustees, PIC is responsible
for managing the Series' investment program and the day-to-day management of the
Series' portfolio. PIC manages the Series' assets to conform with the investment
policies as described in this prospectus. The Series pays Phoenix a monthly
investment management fee that is accrued daily against the value of the Series'
net assets at the following rates.
- -------------------------------------------------------------
FIRST NEXT OVER
$250,000,000 $250,000,000 $500,000,000
- -------------------------------------------------------------
Management Fee 0.40% 0.35% 0.30%
- -------------------------------------------------------------
During the Series' last fiscal year, the Series paid total management fees
of $564,665. The ratio of management fees to average net assets for the fiscal
year ended December 31, 1998 was 0.40%.
PORTFOLIO MANAGEMENT
Julie Sapia is the portfolio manager of the Series and is primarily
responsible for the day-to-day management of its investments. Ms. Sapia has
served as director, Money Market Trading of PIC since 1997. From 1991 until
1997, she served in various money market investment management positions of
increasing responsibility with PIC and Phoenix Home Life Mutual Insurance
Company. She also is vice president of The Phoenix Series Fund, Phoenix Duff &
Phelps Institutional Mutual Funds and Phoenix-Aberdeen Series Fund and serves as
portfolio manager for certain series of each of those funds.
PHOENIX-GOODWIN MULTI-SECTOR FIXED INCOME SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The Phoenix-Goodwin Multi-Sector Fixed Income Series has an investment
objective of seeking long-term total return by investing in a diversified
portfolio mixture of high yield (high risk) and high quality fixed income
securities.
PRINCIPAL INVESTMENT STRATEGIES
The Series invests primarily in a portfolio of fixed income securities.
Under normal circumstances the Series intends to invest at least 65% of its
total assets in various sectors of the fixed income securities market.
The advisor will invest in any of several sectors of the fixed income
securities market: high yield (high risk) fixed income securities (sometimes
referred to as "junk bonds"), high quality fixed income securities, preferred
stock, convertible securities, U.S. and 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 generally will be invested in each
market sector, but the Series may invest any amount of its assets (except for
the junk bond and foreign debt limits shown below) in any one sector and may
Phoenix Edge Series Fund 65
<PAGE>
choose not to invest in certain sectors, in order to achieve its investment
objective.
Special limits on investing are:
[diamond] no more than 35% of total assets may be invested in high yield (high
risk) securities; and
[diamond] no more that 50% of total asset may be invested in foreign debt
obligations.
The Series also 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
issuer at predetermined time(s), price(s) or price formula. Convertible
securities have several unique investment characteristics, such as:
[diamond] higher yields than common stocks but lower yields than comparable
nonconvertible securities;
[diamond] typically less fluctuation in value than the "underlying" common
stock, that is, the common stock that the investor receives if he
converts; and
[diamond] the potential for capital appreciation if the market price of the
underlying common stock increases.
The Series may invest up to 50% of its net assets in debt obligations of
foreign (non-U.S.) issuers. Issuers may be in established and emerging market
countries.
Temporary Defensive Strategy. If the advisor believes that market conditions
are not favorable to the Series' principal strategies, the Series may invest in
fixed income securities with or without warrants or conversion features and it
may hold on to its cash or invest without limit in cash equivalents. When this
happens, the Series may not achieve its investment objective.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques of the fund.
RISKS RELATED TO INVESTMENT STRATEGIES
GENERAL
The Series' focus is long-term total return. The advisor intends to invest
Series' assets so that your shares increase in value. However, the value of the
Series' investments that support your share value can decrease as well as
increase. If between the time you purchase shares and the time you sell shares,
the value of the Series' investments decreases, you will lose money. The value
of the Series' investments can decrease for a number of reasons. For example,
changing economic conditions may cause a decline in value of many or most
investments. Particular industries can face poor market conditions for their
products or services so that companies engaged in those businesses do not
perform as well as companies in other industries. Interest rate changes may
improve prospects for certain types of businesses and they may worsen prospects
for others. To the extent that the Series' investments are affected by general
economic declines, industry declines and interest rate changes that negatively
affect the companies in which the Series invests, Series share values may
decline. Share values also can decline if the specific companies selected for
investment fail to perform as the advisor expects, regardless of general
economic trends, industry trends, interest rates and other economic factors.
In addition to these general risks of investing in the Series, there are
several specific risks of investing in the Series that you should note.
SMALL MARKET CAPITALIZATION INVESTING
The Series may invest in the debt obligations of some smaller companies.
Companies with small capitalization are often companies in industries that have
recently emerged due to cultural, economic, regulatory or technological
developments. Such developments can have a significant positive or negative
effect on small capitalization companies and their ability to repay debt. Given
the limited operating history and rapidly changing fundamental prospects,
profits of smaller capitalization companies can be highly volatile. Smaller
companies may find their ability to raise capital impaired by their size or lack
of operating history. Product lines are often less diversified and subject to
competitive threats.
FOREIGN INVESTING
The Series may invest in debt obligations of non-U.S. companies and
governments. Investing in the securities of non-U.S. companies involves special
risks and considerations not typically associated with investing in U.S.
companies. These include:
[diamond] differences in accounting, auditing and financial reporting standards;
[diamond] generally higher commission rates on foreign portfolio transactions;
[diamond] differences and inefficiencies in transaction settlement systems;
[diamond] the possibility of expropriation or confiscatory taxation;
[diamond] adverse changes in investment or exchange control regulations;
[diamond] political instability; and
[diamond] potential restrictions on the flow of international capital.
Political and economic uncertainty as well as less public information about
investments may negatively impact the Series' portfolio.
66 Phoenix Edge Series Fund
<PAGE>
Foreign debt securities often trade with less frequency and volume than
domestic securities and therefore may exhibit greater price volatility.
Additionally, interest payable on foreign securities may be subject to foreign
taxes withheld prior to receipt by the Series.
Many of the foreign securities held by the Series will not be registered
with, nor will the issuers of those securities be subject to the reporting
requirements of, the U.S. Securities and Exchange Commission. Accordingly, there
may be less publicly available information about the securities and about the
foreign company or government issuing them than is available about a domestic
company or government entity. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payment positions.
FOREIGN CURRENCY
Portions of the Series' assets may be invested in securities denominated in
foreign currencies. Changes in foreign exchange rates will affect the value of
those securities denominated or quoted in currencies other than the U.S. dollar.
The forces of supply and demand in the foreign exchange markets determine
exchange rates and these forces are in turn affected by a range of economic,
political, financial, governmental and other factors. Exchange rate fluctuations
can affect the Series' net asset value (share price) 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 long and short terms.
Effective January 1, 1999, 11 European countries began converting from their
sovereign currency to the European Union common currency called the "Euro." This
conversion may expose the Series to certain risks, including the reliability and
timely reporting of pricing information of the Series' portfolio holdings. In
addition, one or more of the following may adversely affect specific securities
in the Series' portfolio:
[diamond] known trends or uncertainties related to the Euro conversion that an
issuer reasonably expects will have a material impact on revenues,
expenses or income from its operations;
[diamond] competitive implications of increased price transparency of European
Union markets (including labor markets) resulting from adoption of a
common currency and issuers' plans for pricing their own products and
services in the Euro;
[diamond] issuers' ability to make required information technology updates on a
timely basis, and costs associated with the conversion (including
costs of dual currency operations through January 1, 2002);
[diamond] currency exchange rate risk and derivatives exposure (including the
disappearance of price sources, such as certain interest rate
indices); and
[diamond] potential tax consequences.
EMERGING MARKET INVESTING
The Series may invest in debt obligations of companies located in emerging
market countries and regions. Investments in less-developed countries whose
markets are still emerging generally present risks in greater degree than those
presented by investment in foreign issuers based in countries with developed
securities markets and more advanced regulatory systems. Prior governmental
approval of foreign investments may be required under certain circumstances in
some developing countries, and the extent of foreign investment in domestic
companies may be subject to limitation in other developing countries.
The economies of developing countries generally are heavily dependent upon
international trade. Accordingly, economies 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 also have been (and may
continue to be) adversely affected by economic conditions in the countries with
which they trade.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
MANAGEMENT OF THE SERIES
THE ADVISOR
Phoenix Investment Counsel, Inc. ("PIC") is the investment advisor to the
Series and is located at 56 Prospect Street, Hartford, CT 06115. PIC also acts
as the investment advisor for 14 other mutual funds, as subadvisor to 3 mutual
funds and as advisor to institutional clients. As of December 31, 1998, PIC had
$23.9 billion in assets under management. PIC has acted as an investment advisor
for over 60 years.
Phoenix Edge Series Fund 67
<PAGE>
Subject to the direction of the Fund's Board of Trustees, PIC is responsible
for managing the Series' investment program and the day-to-day management of the
Series' portfolio. PIC manages the Series' assets to conform with the investment
policies as described in this prospectus. The Series pays PIC a monthly
investment management fee that is accrued daily against the value of the fund's
net assets at the following rates.
- --------------------------------------------------------------
FIRST NEXT OVER
$250,000,000 $250,000,000 $500,000,000
- --------------------------------------------------------------
Management 0.50% 0.45% 0.40%
Fee
- --------------------------------------------------------------
During the Series' last fiscal year, the Series paid total management fees
of $993,926. The ratio of management fees to average net assets for the fiscal
year ended December 31, 1998 was 0.50%.
PORTFOLIO MANAGEMENT
Investment and trading decisions for the Series are made by a team of fixed
income investment professionals.
PHOENIX-HOLLISTER VALUE EQUITY SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The Series has a primary investment objectives to seek long-term capital
appreciation. The Series has a secondary investment objective to seek current
income. There is no guarantee that the Series will achieve either objective.
PRINCIPAL INVESTMENT STRATEGIES
The Series invests in a diversified portfolio of securities of primarily
domestic (U.S.) companies. Generally the Series will invest in securities traded
on the New York Stock Exchange, the American Stock Exchange and in
over-the-counter markets. The Series is designed to invest in common stocks that
meet the advisor's quantitative standards that indicate above average financial
soundness and intrinsic value relative to price. Under normal circumstances the
Series will invest at least 65% of its total assets in common stocks.
The advisor applies a security selection process that chooses stocks that
meet certain investment criteria relating to price, dividend yield, going
concern value and debt levels. The advisor considers approximately 2,500
companies, but only a few hundred meet one or more of the advisor's criteria for
selection. For those that do, the advisor projects growth in earnings and
dividends, earnings momentum and undervaluation based on a dividend discount
model. From this analysis the advisor develops target prices and value ranges
and selects the top-rated securities for purchase. While the advisor's strategy
tends to concentrate its investment selections in larger issuers, the Series may
invest in securities of issuers of any size. Generally the advisor sells a
Series security when its target price is reached, when the company or its
industry suffers negative changes, or when there is a significant change in the
investment criteria that prompted the advisor to purchase the security. The
advisor may choose to continue to hold a security that it believes suitable for
the Series' objectives even if it no longer meets these criteria.
The Series also 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
issuer at predetermined time(s), price(s) or price formula. A convertible
security entitles the owner to receive interest paid or accrued on a debt
security or dividends paid on preferred stock until the security matures or is
converted to common stock. Convertible securities have several unique investment
characteristics, such as:
[diamond] higher yields than common stocks but lower yields than comparable
nonconvertible securities;
[diamond] typically less fluctuation in value than the "underlying" common
stock, that is, the common stock that the investor receives if he
converts;
[diamond] the potential for capital appreciation if the market price of the
underlying common stock increases.
The Series will invest only in the 4 highest rating categories of
convertible securities, commonly called "investment grade" securities. If the
Series purchases an investment grade security that loses its investment grade
rating, the Series is not required to sell the security. Ratings are established
by nationally recognized statistical rating agencies. Please see the Statement
of Additional Information for a detailed list of rating categories.
The Series may increase ownership of securities by borrowing from banks at
fixed interest rates and investing the proceeds in stocks or other investments
that are consistent with these investment techniques. Purchasing additional
securities with borrowed funds can increase the net asset value of the Series
more quickly. Total borrowing cannot exceed 33% of the Series' net assets, which
means that after any borrowing the value of the Series' assets (including the
amount borrowed) must be at least 3 times the total amount borrowed for
investment purposes. If the value of the Series' assets decreases so that the
ratio becomes less than 3 to 1, the Series must reduce its outstanding loan
within 3 business days to bring the ratio back to 3 to 1.
The Series may lend portfolio securities to broker-dealers and other
financial institutions to increase its investment returns. The total amount of
such lending can be as much as one-third of the Series' total assets. When the
Series lends securities in this fashion, the borrower
68 Phoenix Edge Series Fund
<PAGE>
returns the securities at a prearranged time and pays some form of premium or
other fee for the transaction. The Series receives all dividends and other
distributions made with respect to the loaned securities. All securities loans
are secured by other marketable securities.
The Series may invest up to 30% of its total assets in securities of foreign
(non-U.S.) issuers.
Temporary Defensive Strategy. If the advisor believes that market conditions
are not favorable to the Series' principal strategies, the Series may invest
without limit in U.S. government securities and in money market instruments.
When this happens, the Series may not achieve its investment objective.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques.
RISKS RELATED TO INVESTMENT STRATEGIES
GENERAL
The Series' primary focus is long-term capital appreciation. Its secondary
objective is current income. The advisor intends to invest Series' assets so
that your shares increase in value and so that your shares earn current income
through dividends, interest or other current distributions. However, the value
of the Series' investments that support your share value can decrease as well as
increase. If between the time you purchase shares and the time you sell shares
the value of the Series' investments decreases you will lose money. The value of
the Series' investments can decrease for a number of reasons. For example,
changing economic conditions may cause a decline in the value of many or even
most equity and fixed income investments. Particular industries can face poor
markets for their products or services so that companies engaged in those
businesses do not do as well as companies in other industries. Interest rate
changes may improve prospects for certain types of businesses and they may
worsen prospects for others. To the extent that the Series' investments are
affected by general economic declines, declines in industries, and interest rate
changes that negatively affect the companies in which the Series invests,
Series' share values may decline. Share values also can decline if the specific
companies selected for Series' investment fail to perform as the advisor
expects, regardless of general economic trends, industry trends, interest rates
and other economic factors. When companies owned by the Series encounter
negative conditions they may be unable to continue to pay dividends or interest
at expected levels.
In addition to these general risks of investing in the Series, there are
several specific risks of investing in the Series that you should note.
SMALL MARKET CAPITALIZATION INVESTING
The Series may invest in some smaller companies. Companies with small
capitalization are often companies with a limited operating history or companies
in industries that have recently emerged due to cultural, economic, regulatory
or technological developments. Such developments can have a significant positive
or negative effect on small capitalization companies and their stock
performance. Given the limited operating history and rapidly changing
fundamental prospects, investment returns from smaller capitalization companies
can be highly volatile. Smaller companies may find their ability to raise
capital impaired by their size or lack of operating history. Product lines are
often less diversified and subject to competitive threats. Smaller
capitalization stocks are subject to varying patterns of trading volume and may,
at times, be difficult to sell.
LEVERAGE
If the Series borrows money to make additional investments it must pay
interest on the borrowed funds. The interest paid will decrease the Series' net
investment income. The advisor may borrow funds to make additional investments
expecting that those investments will increase in value sufficient to cover
borrowing costs and produce additional gain for the Series. If those investments
decrease in value or do not increase in value sufficient to cover borrowing
costs the Series will suffer greater losses than would take place if no
borrowing took place. In addition, because the Series must maintain a 3-to-1
ratio of net assets to debt, in a declining market it may have to sell
securities under poor market conditions to maintain the required ratio.
SECURITIES LENDING
When the Series lends portfolio securities it runs the risk that the
borrower will be unable or unwilling to return the securities and the agreed fee
or premium. The value of the collateral taken as security for the securities
loaned may decline in value or may be difficult to convert to cash in the event
that the Series must rely on the collateral to recover the value of its
securities. In these circumstances the Series will suffer losses.
FOREIGN INVESTING
The Series may invest in non-U.S. companies. Investing in the securities of
non-U.S. companies involves special risks and considerations not typically
associated with investing in U.S. companies. These include:
[diamond] differences in accounting, auditing and financial reporting standards;
[diamond] generally higher commission rates on foreign portfolio transactions;
[diamond] differences and inefficiencies in transaction settlement systems;
Phoenix Edge Series Fund 69
<PAGE>
[diamond] the possibility of expropriation or confiscatory taxation;
[diamond] adverse changes in investment or exchange control regulations;
[diamond] political instability; and
[diamond] potential restrictions on the flow of international capital.
Political and economic uncertainty as well as less public information about
investments may negatively impact the Series' portfolio.
Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility. Additionally,
dividends and interest payable on foreign securities may be subject to foreign
taxes withheld prior to receipt by the Series.
Many of the foreign securities held by the Series will not be registered
with, nor will the issuers of those securities be subject to the reporting
requirements of, the U.S. Securities and Exchange Commission. Accordingly, there
may be less publicly available information about the securities and about the
foreign company or government issuing them than is available about a domestic
company or government entity. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payment positions.
FOREIGN CURRENCY
Portions of the Series' assets may be invested in securities denominated in
foreign currencies. Changes in foreign exchange rates will affect the value of
those securities denominated or quoted in currencies other than the U.S. dollar.
The forces of supply and demand in the foreign exchange markets determine
exchange rates and these forces are in turn affected by a range of economic,
political, financial, governmental and other factors. Exchange rate fluctuations
can affect the Series' net asset value (share price) 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 terms.
Effective January 1, 1999, 11 European countries began converting from their
sovereign currency to the European Union common currency called the "Euro." This
conversion may expose the Series to certain risks, including the reliability and
timely reporting of pricing information of the Series' portfolio holdings. In
addition, one or more of the following may adversely affect specific securities
in the Series' portfolio:
[diamond] known trends or uncertainties related to the Euro conversion that an
issuer reasonably expects will have a material impact on revenues,
expenses or income from its operations;
[diamond] competitive implications of increased price transparency of European
Union markets (including labor markets) resulting from adoption of a
common currency and issuers' plans for pricing their own products and
services in the Euro;
[diamond] issuers' ability to make required information technology updates on a
timely basis, and costs associated with the conversion (including
costs of dual currency operations through January 1, 2002);
[diamond] currency exchange rate risk and derivatives exposure (including the
disappearance of price sources, such as certain interest rate
indices); and
[diamond] potential tax consequences.
The advisor does not expect to invest in any securities that may be
adversely effected by the conversion to the Euro.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
MANAGEMENT OF THE SERIES
THE ADVISOR
Phoenix Investment Counsel, Inc. ("PIC") is the investment advisor to the
Series and is located at 56 Prospect Street, Hartford, CT 06115. PIC also acts
as the investment advisor for 14 mutual funds, as subadvisor to 3 mutual funds
and as advisor to institutional clients. As of December 31, 1998, PIC had $23.9
billion in assets under management. PIC has acted as an investment advisor for
over 60 years.
Subject to the direction of the Fund's Board of Trustees, PIC is responsible
for managing the Series' investment program and the day-to-day management of the
portfolio. PIC manages the Series' assets to conform with the investment
policies as described in this prospectus. The Series pays PIC a monthly
investment management fee that is accrued daily against the value of the Series'
net assets at the following rates.
70 Phoenix Edge Series Fund
<PAGE>
- ----------------------------------------------------------------
FIRST NEXT OVER
$250,000,000 $250,000,000 $500,000,000
- ----------------------------------------------------------------
Phoenix-Hollister
Value Equity 0.70% 0.65% 0.60%
Series
- ----------------------------------------------------------------
PIC has voluntarily agreed to assume total Series' operating expenses
excluding interest, taxes, brokerage fees, commissions and extraordinary
expenses, until December 31, 1999, to the extent that such expenses exceed 0.15%
of the Series' average annual net asset values.
During the Series' last fiscal year, the Series paid total management fees
of $30,941. The ratio of management fees to average net assets for the fiscal
year ended December 31, 1998 was 0.70%. The advisory fee is greater than that
for most Series; however, the Trustees have determined that it is comparable to
fees charged by other Series whose investment objectives are similar to those of
the Series.
PORTFOLIO MANAGEMENT
Christian C. Bertelsen serves as portfolio manager of the Phoenix-Hollister
Value Equity Series, and is primarily responsible for the day-to-day management
of the Series' investments. Mr. Bertelsen joined Phoenix Investment Counsel,
Inc. in July 1997. Previously, from 1996 to July 1997, Mr. Bertelsen was
employed by Dreman Value Advisors where he served as chief investment officer
and portfolio manager of the Kemper-Dreman Contrarian and Small Cap Value Funds.
From 1993 to 1996, Mr. Bertelsen was a Senior Vice President of Eagle Asset
Management where he managed private and institutional assets, as well as the
Heritage Value Equity Fund.
PHOENIX-JANUS EQUITY INCOME SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The investment objective of this Series is to seek current income and
long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
The Series seeks current income and long-term growth of capital. It pursues
its objective by normally emphasizing investments in common stock, and growth
potential is a significant investment consideration. The Series tries to provide
a lower level of volatility than the S&P 500 Index. Normally, it invests at
least 65% of its invested assets in income-producing equity securities including
common and preferred stocks, warrants and securities that are convertible to
common or preferred stocks.
The lower volatility sought by this Series is expected to result primarily
from investments in dividend-paying common stocks and other equity securities
characterized by relatively greater price stability. The greater price stability
sought by the Series may be characteristic of companies that generate above
average free cash flows. A company may use free cash flows for a number of
purposes including commencing or increasing dividend payments, repurchasing its
own stock or retiring outstanding debt. The portfolio manager also considers
growth potential in selecting this Series' securities and may hold securities
selected solely for their growth potential.
The Series may invest substantially all of its assets in common stocks if
the portfolio manager believes that common stocks will appreciate in value. The
portfolio manager generally takes a "bottom up" approach to selecting companies.
In other words, he seeks to identify individual companies with earnings growth
potential that may not be recognized by the market at large. He makes this
assessment by looking at companies one at a time, regardless of size, country of
organization, place of principal business activity, or other similar selection
criteria.
The growth component of the Series' investments is expected to consist
primarily of common stocks, but may also include warrants, preferred stocks or
convertible securities selected primarily for their growth potential.
Because income is a part of the investment objective of the Series, the
portfolio manager may consider dividend-paying characteristics to a greater
degree in selecting common stocks for the Series. The Series may also invest in
domestic and foreign equity securities with varying degrees of emphasis on
income. The Series may also invest to a lesser degree in other types of
securities. These securities may include:
[diamond] debt securities
[diamond] indexed/structured securities
[diamond] high-yield/high-risk bonds (less than 35% of the Series' assets)
[diamond] options, futures, forwards and other types of derivatives for hedging
purposes or for non-hedging purposes such as seeking to enhance return
[diamond] securities purchased on a when-issued, delayed delivery or forward
commitment basis
ILLIQUID INVESTMENTS
The Series may invest up to 15% of its net assets in illiquid investments.
An illiquid investment is a security or other position that cannot be disposed
of quickly in the normal course of business. For example, some securities are
not registered under U.S. securities laws and cannot be sold to the U.S. public
because of SEC regulations (these are known as "restricted securities"). Under
procedures adopted by the Series' Trustees, certain restricted securities may be
deemed liquid and will not be counted toward this 15% limit.
Phoenix Edge Series Fund 71
<PAGE>
FOREIGN INVESTING
The Series may invest without limit in foreign equity and debt securities.
The Series may invest directly in foreign securities denominated in a foreign
currency and not publicly traded in the United States. Other ways of investing
in foreign securities include depositary receipts or shares, and passive foreign
investment companies.
RISKS RELATED TO INVESTMENT STRATEGIES
GENERAL
Because the Series may invest substantially all of its assets in common
stocks, the main risk is the risk that the value of the stocks it holds might
decrease in response to the activities of an individual company or in response
to general market and/or economic conditions. If this occurs, the Series' share
price may also decrease. The Series' performance may also be affected by risks
specific to certain types of investments, such as foreign securities, derivative
investments, non-investment grade debt securities or companies with relatively
small market capitalizations.
The Series may invest in smaller or newer companies which have some special
risks. Smaller or newer companies may suffer more significant losses as well as
realize more substantial growth than larger or more established issuers because
they may lack depth of management, be unable to generate funds necessary for
growth or potential development, or be developing or marketing new products or
services for which markets are not yet established and may never become
established. In addition, such companies may be insignificant factors in their
industries and may become subject to intense competition from larger or more
established companies. Securities of smaller or newer companies may have more
limited trading markets than the markets for securities of larger or more
established issuers, and may be subject to wide price fluctuations. Investments
in such companies tend to be more volatile and somewhat more speculative.
FOREIGN SECURITIES
The Series may invest without limit in foreign securities either indirectly
(e.g., depositary receipts) or directly in foreign markets. Investments in
foreign securities, including those of foreign governments, may involve greater
risks than investing in domestic securities because the Series' performance may
depend on issues other than the performance of a particular company. These
issues include:
[diamond] CURRENCY RISK. As long as the Series holds a foreign security, its
value will be affected by the value of the local currency relative to
the U.S. dollar. When a Series sells a foreign denominated security,
its value may be worth less in U.S. dollars even if the security
increases in value in its home country. U.S. dollar denominated
securities of foreign issuers may also be affected by currency risk.
[diamond] POLITICAL AND ECONOMIC RISK. Foreign investments may be subject to
heightened political and economic risks, particularly in emerging
markets which may have relatively unstable governments, immature
economic structures, national policies restricting investments by
foreigners, different legal systems, and economies based on only a few
industries. In some countries, there is the risk that the government
may take over the assets or operations of a company or that the
government may impose taxes or limits on the removal of the Series'
assets from that country.
[diamond] REGULATORY RISK. There may be less government supervision of foreign
markets. As a result, foreign issuers may not be subject to the
uniform accounting, auditing and financial reporting standards and
practices applicable to domestic issuers and there may be less
publicly available information about foreign issuers.
[diamond] MARKET RISK. Foreign securities markets, particularly those of
emerging market countries, may be less liquid and more volatile than
domestic markets. Certain markets may require payment for securities
before delivery and delays may be encountered in settling securities
transactions. In some foreign markets, there may not be protection
against failure by other parties to complete transactions.
[diamond] TRANSACTION COSTS. Costs of buying, selling and holding foreign
securities, including brokerage, tax and custody costs, may be higher
than those involved in domestic transactions.
ILLIQUID SECURITIES
Securities owned by the Series that are not liquid may be difficult to sell
because there may be no active markets for resale and fewer potential buyers.
This can make illiquid investments more likely than other types of investments
to lose value. In extreme cases it may be impossible to resell them and they can
become almost worthless to the Series.
HIGH RISK-HIGH YIELD SECURITIES
The Series may invest in securities that are high risk, high yield
noninvestment-grade securities. Although these securities provide greater income
and opportunity for capital appreciation than investments in higher grade
securities, they also typically entail greater price volatility and principal
and interest risk. There is a greater risk that an issuer will not be able to
make principal and interest payments on time. Analysis of the creditworthiness
of issuers of below investment grade securities may be more complex than for
higher grade securities, making it more difficult for the advisor to accurately
predict risk.
CASH POSITION
When a portfolio manager believes that market conditions are unfavorable for
profitable investing, or when he is otherwise unable to locate attractive
investment opportunities, the Series' cash or similar investments may
72 Phoenix Edge Series Fund
<PAGE>
increase. In other words, the Series does not always stay fully invested in
stocks and bonds. Cash or similar investments generally are a residual--they
represent the assets that remain after a portfolio manager has committed
available assets to desirable investment opportunities. However, a portfolio
manager may also temporarily increase the Series' cash position to protect its
assets or maintain liquidity.
When the Series' investments in cash or similar investments increase, it may
not participate in market advances or declines to the same extent that it would
if the Series remained more fully invested in stocks or bonds.
FUTURES CONTRACTS, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
The Series may invest in financial futures contracts and options and other
derivative instruments. The advisor intends to invest in such securities
primarily to hedge or reduce the risk of holding other investments. If the
prices for futures contracts and prices in the cash market do not correlate as
expected or if the advisor's expectations about interest rate, exchange rate or
general market movements are incorrect, the Series' returns may not be as high
as they would be if the advisor did not invest in these securities. There is
also a risk that the market for reselling financial futures contracts and
options may be limited or nonexistent. The Series could incur unlimited losses
if it cannot liquidate certain futures contracts. The subadvisor's decisions
about the nature and timing of futures contract and options and derivative
transactions may result in losses when other investors' decisions about the same
contracts, options or derivatives result in gains.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES' INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
Issuers of securities in countries outside of the U.S., particularly in
emerging markets, may be more susceptible to Year 2000 problems and may not be
required to make the same level of disclosure regarding Year 2000 readiness as
is required in the U.S. Similarly, the Series could experience difficulties in
effecting transactions if any of its foreign subcustodians, foreign
broker-dealers or foreign exchanges are not ready for Year 2000.
MANAGEMENT OF THE SERIES
THE ADVISOR
Phoenix Variable Advisors, Inc. ("PVA") is the investment advisor to the
fund and is located at One American Row, Hartford, CT 06102-5056. PVA also acts
as the investment advisor for 7 other Series. PVA is a new investment advisor
established to actively monitor and manage subadvisor performance.
Janus Capital Corporation ("Janus") is the investment subadvisor to the
Series and is located at 100 Fillmore Street, Denver, Colorado 80206. Janus acts
as a subadvisor to approximately 40 series of mutual funds and acts as an
investment advisor to institutions and individuals. As of December 31, 1998,
Janus had $108 billion under management.
Subject to the direction of the Fund's Board of Trustees, PVA is responsible
for assuring that the Series is managed in accordance with the Series'
investment objective and stated investment policies. Janus is responsible for
the day-to-day management of the Series' portfolio and managing the Series'
assets to conform with the investment policies as described in this prospectus.
The Series pays PVA a monthly investment management fee that is accrued daily
against the value of the Series' net assets at the rate of 0.85%.
Janus, as investment subadvisor, is responsible for the day-to-day
management of the Series' investment program. Janus manages the Series' assets
to conform with the investment policies as described in the prospectus.
ILLUSTRATIVE PERFORMANCE OF PORTFOLIO MANAGER
The performance information presented below is a composite of the
performance of mutual funds managed by Janus, the investment subadvisor. Each of
the funds included in the composite has investment objectives, policies and
strategies substantially similar to those of the Series. The composite
performance should not be considered an indication of future performance of the
Series or its investment subadvisor.
- ---------------------------------------------------------------
ANNUALIZED RETURNS FOR PERIOD ENDING SEPTEMBER 30, 1999
- ---------------------------------------------------------------
JANUS EQUITY INCOME S&P 500 INDEX
COMPOSITE*
- ---------------------------------------------------------------
1 YEAR 41.78 27.73
- ---------------------------------------------------------------
3 YEARS 27.58 25.17
- ---------------------------------------------------------------
SINCE INCEPTION 30.64 30.64
- ---------------------------------------------------------------
* Inception as of July 1, 1996
The Equity Income Composite includes the Janus Equity Income Fund and Janus
Aspen Series Equity Income Portfolio for which Janus Capital Corporation serves
as investment advisor. Composite performance is presented net of all fees and
reflects reinvestment of dividends and capital gains. The expense ratio for the
Funds as of September 30, 1999 was 0.83% and 1.25%, respectively.
Phoenix Edge Series Fund 73
<PAGE>
The Funds enter the composite upon the first full quarter under management. As
of September 30, 1999, the Equity Income Composite included 2 accounts and
assets of $721.2 million, which represented 0.44% of total assets under
management. The percentage of total assets managed is defined as composite
assets as a percentage of the total assets managed including registered
investment company accounts under management. Performance figures are based upon
historical information and do not guarantee future results. In addition, the
manager responsible for the historical performance record of these Funds will
assume new responsibilities at Janus beginning January 1, 2000. Karen Reidy will
assume the role of portfolio manager for all Equity Income Products at this
time. No changes will be made with regard to the investment philosophy or
process of the Funds. The S&P 500 is an unmanaged index of common stock prices
and includes reinvestment of dividends and capital gains. They have been taken
from published sources and have not been audited. Composition of each
separately-managed account portfolio may differ significantly from securities in
the corresponding benchmark indices.
PORTFOLIO MANAGEMENT
Karen L. Reidy is the portfolio manager of the Series. She will be the
executive vice president and portfolio manager of Janus Balanced Fund and Janus
Equity Income Fund, replacing Blaine P. Rollins effective January 1, 2000. She
is also an assistant portfolio manager of Janus Fund. Prior to joining Janus
Capital in 1995, she worked for Price Waterhouse as a manager in both the
Mergers and Acquisitions and Audit business units. In this capacity, Ms. Reidy
performed due diligence work for corporate clients and oversaw audit
engagements. She received an undergraduate degree in Accounting from the
University of Colorado in 1989 and passed the CPA exam in 1992. She is a
Chartered Financial Analyst.
PHOENIX-JANUS FLEXIBLE INCOME SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The Phoenix-Janus Flexible Income Series seeks to obtain maximum total
return, consistent with preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES
In addition to considering economic factors such as the effect of interest
rates on the Series' investments, the portfolio manager applies a "bottom up"
approach in choosing investments. In other words, he looks mostly for
income-producing securities that meet his investment criteria one at a time. If
the portfolio manager is unable to find such investments, much of the Series'
assets may be in cash or similar investments.
The Series pursues its investment objective by primarily investing in a wide
variety of income-producing securities such as corporate bonds and notes,
government securities and preferred stock. As a fundamental policy, the Series
will invest at least 80% of its assets in income-producing securities. The
Series may own an unlimited amount of high-yield/high-risk securities, and these
may be a big part of the portfolio. This Series generates total return from a
combination of current income and capital appreciation, but income is usually
the dominant portion.
The Series invests primarily in fixed-income securities which may include
corporate bonds and notes, government securities, preferred stock,
high-yield/high-risk fixed-income securities and municipal obligations. The
Series may also invest to a lesser degree in other types of securities. These
securities may include:
[diamond] common stocks
[diamond] mortgage- and asset-backed securities
[diamond] zero coupon, pay-in-kind and step coupon securities
[diamond] options, futures, forwards and other types of derivatives for hedging
purposes or for non-hedging purposes such as seeking to enhance return
[diamond] securities purchased on a when-issued, delayed delivery or forward
commitment basis
The Series may invest in foreign equity and debt securities. The Series may
invest directly in foreign securities denominated in a foreign currency and not
publicly traded in the United States. Other ways of investing in foreign
securities include depositary receipts or shares, and passive foreign investment
companies.
RISKS RELATED TO INVESTMENT STRATEGIES
GENERAL
Because the Series invests substantially all of its assets in fixed-income
securities, it is subject to risks such as credit or default risks, and
decreased value due to interest rate increases. The Series' performance may also
be affected by risks to certain types of investments, such as foreign securities
and derivative instruments.
FOREIGN SECURITIES
The Series may invest without limit in foreign securities either indirectly
(e.g., depositary receipts) or directly in foreign markets. Investments in
foreign securities, including those of foreign governments, may involve greater
risks than investing in domestic securities because the Series' performance may
depend on issues other than the performance of a particular company. These
issues include:
[diamond] CURRENCY RISK. As long as the Series holds a foreign security, its
value will be affected by the value of the local currency relative to
the U.S. dollar. When a Series sells a foreign denominated security,
its value may be
74 Phoenix Edge Series Fund
<PAGE>
worth less in U.S. dollars even if the security increases in value in
its home country. U.S. dollar denominated securities of foreign
issuers may also be affected by currency risk.
[diamond] POLITICAL AND ECONOMIC RISK. Foreign investments may be subject to
heightened political and economic risks, particularly in emerging
markets which may have relatively unstable governments, immature
economic structures, national policies restricting investments by
foreigners, different legal systems, and economies based on only a few
industries. In some countries, there is the risk that the government
may take over the assets or operations of a company or that the
government may impose taxes or limits on the removal of the Series'
assets from that country.
[diamond] REGULATORY RISK. There may be less government supervision of foreign
markets. As a result, foreign issuers may not be subject to the
uniform accounting, auditing and financial reporting standards and
practices applicable to domestic issuers and there may be less
publicly available information about foreign issuers.
[diamond] MARKET RISK. Foreign securities markets, particularly those of
emerging market countries, may be less liquid and more volatile than
domestic markets. Certain markets may require payment for securities
before delivery and delays may be encountered in settling securities
transactions. In some foreign markets, there may not be protection
against failure by other parties to complete transactions.
[diamond] TRANSACTION COSTS. Costs of buying, selling and holding foreign
securities, including brokerage, tax and custody costs, may be higher
than those involved in domestic transactions.
HIGH-YIELD/HIGH-RISK SECURITIES
High-yield/high-risk securities (or "junk" bonds) are securities rated below
investment grade by the primary rating agencies such as Standard & Poor's and
Moody's. The value of lower quality securities generally is more dependent on
credit risk, or the ability of the issuer to meet interest and principal
payments, than investment grade debt securities. Issuers of high-yield
securities may not be as strong financially as those issuing bonds with higher
credit ratings and are more vulnerable to real or perceived economic changes,
political changes or adverse developments specific to the issuer.
The junk bond market can experience sudden and sharp price swings. Because
the Series may invest a significant portion of its assets in
high-yield/high-risk securities, investors should be willing to tolerate a
corresponding increase in the risk of significant and sudden changes in NAV.
ILLIQUID INVESTMENTS
The Series may invest up to 15% of its net assets in illiquid investments.
An illiquid investment is a security or other position that cannot be disposed
of quickly in the normal course of business. For example, some securities are
not registered under U.S. securities laws and cannot be sold to the U.S. public
because of SEC regulations (these are known as "restricted securities"). Under
procedures adopted by the Trustees, certain restricted securities may be deemed
liquid, and will not be counted toward this 15% limit.
CASH POSITION
When a portfolio manager believes that market conditions are unfavorable for
profitable investing, or when he is otherwise unable to locate attractive
investment opportunities, the Series' cash or similar investments may increase.
In other words, the Series does not always stay fully invested in stocks and
bonds. Cash or similar investments generally are a residual--they represent the
assets that remain after a portfolio manager has committed available assets to
desirable investment opportunities. However, a portfolio manager may also
temporarily increase the Series' cash position to protect its assets or maintain
liquidity.
When the Series' investments in cash or similar investments increase, it may
not participate in market advances or declines to the same extent that it would
if the Series remained more fully invested in stocks or bonds.
FUTURES CONTRACTS, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
The Series may invest in financial futures contracts and options and other
derivative instruments. The advisor intends to invest in such securities
primarily to hedge or reduce the risk of holding other investments. If the
prices for futures contracts and prices in the cash market do not correlate as
expected or if the advisor's expectations about interest rate, exchange rate or
general market movements are incorrect, the Series' returns may not be as high
as they would be if the advisor did not invest in these securities. There is
also a risk that the market for reselling financial futures contracts and
options may be limited or nonexistent. The Series could incur unlimited losses
if it cannot liquidate certain futures contracts. The subadvisor's decisions
about the nature and timing of futures contract and options and derivative
transactions may result in losses when other investors' decisions about the same
contracts, options or derivatives result in gains.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are
Phoenix Edge Series Fund 75
<PAGE>
held by the Series does not "fix" its Year 2000 issue, it is possible that its
operations and financial results would be hurt. Also, the cost of modifying
computer programs to become Year 2000 compliant may hurt the financial
performance and market price of companies whose securities are held by the
Series.
MANAGEMENT OF THE FUNDS
THE ADVISOR
Phoenix Investment Advisors, Inc. ("PVA") is the investment advisor to the
Series and is located at One American Row, Hartford, Connecticut 06102-5056. PVA
also acts as the investment advisor for 7 other Series. PVA is a new investment
advisor established to actively monitor and manage subadvisor performance.
Janus Capital Corporation ("Janus") is the investment subadvisor to the
Series and is located at 100 Fillmore Street, Denver, Colorado 80206. Janus acts
as a subadvisor to approximately 40 series of mutual funds and acts as
investment advisor to institutions and individuals. As of December 31, 1998,
Janus had $108 billion in assets under management. Janus has been an investment
advisor since 1989.
Subject to the direction of the Fund's Board of Trustees, PVA is responsible
for assuring that the Series is managed in accordance with the Series'
investment objective and stated investment policies. Janus, as subadvisor, is
responsible for managing the Series' investment program and for day-to-day
management of the Series' portfolios.
Janus manages the Series' assets to conform with the investment policies as
described in the prospectus. The Series pays PVA a monthly investment management
fee that is accrued daily against the value of that Series' net assets at the
rate of 0.80% annually.
Janus, as investment subadvisor, is responsible for the day-to-day
management of the Series' investment program. Janus manages the Series' assets
to conform with the investment policies as described in the prospectus.
ILLUSTRATIVE PERFORMANCE OF PORTFOLIO MANAGER
The performance information presented below is a composite of the
performance of mutual funds managed by Janus, the investment subadvisor. Each of
the funds included in the composite has investment objectives, policies and
strategies substantially similar to those of the Series. The composite
performance should not be considered an indication of future performance of the
Series or its investment subadvisor.
- ---------------------------------------------------------------
ANNUALIZED RETURNS FOR THE PERIOD ENDED SEPTEMBER 30, 1999
- ---------------------------------------------------------------
JANUS FLEXIBLE INCOME LEHMAN BROS. GOVERNMENT/
COMPOSITE* CORPORATE INDEX
- ---------------------------------------------------------------
1 YEAR -0.43 -1.62
- ---------------------------------------------------------------
3 YEARS 7.55 6.75
- ---------------------------------------------------------------
5 YEARS 8.95 7.77
- ---------------------------------------------------------------
10 YEARS 8.72 8.08
- ---------------------------------------------------------------
* Inception as of July 7, 1987
The Flexible Income Composite includes the Janus Flexible Income Fund and
Janus Aspen Series Flexible Income Portfolio for which Janus Capital Corporation
serves as investment advisor. Composite performance is presented net of all fees
and reflects reinvestment of dividends and capital gains. The expense ratio for
the Funds as of September 30, 1999 was 0.80% and 0.73%, respectively. The Funds
enter the composite upon the first full quarter under management. As of
September 30, 1999, the Flexible Income Composite included 2 accounts and assets
of $1,471.0 million, which represented 0.89% of total assets under management.
The percentage of total assets managed is defined as composite assets as a
percentage of the total assets managed including registered investment company
accounts under management. Performance figures are based upon historical
information and do not guarantee future results. The Lehman Bros.
Government/Corporate Index is an unmanaged index and includes reinvestment of
dividends and capital gains. They have been taken from published sources and
have not been audited. Composition of each separately-managed account portfolio
may differ significantly from securities in the corresponding benchmark indices.
The advisory fee is greater than that for most Series; however, the Trustees
have determined that it is comparable to fees charged by other funds whose
investment objectives are similar to those of the Series.
PORTFOLIO MANAGEMENT
Ronald V. Speaker is the portfolio manager of the Series. He is an executive
vice president and manages other Janus funds. He holds a Bachelor of Arts in
Finance from the University of Colorado and received the Chartered Financial
Analyst designation.
In January 1997, Mr. Speaker settled an SEC administrative action involving
2 personal trades made by him in January of 1993. Without admitting or denying
the allegations, Mr. Speaker agreed to civil money penalty, disgorgement, and
interest payments totaling $37,199 and to a 90-day suspension which ended on
April 25, 1997.
76 Phoenix Edge Series Fund
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PHOENIX-JANUS GROWTH SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
This Series seeks long-term growth of capital in a manner consistent with
the preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES
The Series pursues its objective by investing primarily in common stocks
selected for their growth potential. Although the Series can invest in companies
of any size, it generally invests in larger, more established companies.
The Series may invest substantially all of its assets in common stocks if
the portfolio manager believes that common stocks will appreciate in value. The
portfolio manager generally takes a "bottom up" approach to selecting companies.
In other words, he seeks to identify individual companies with earnings growth
potential that may not be recognized by the market at large. He makes this
assessment by looking at companies one at a time, regardless of size, country of
organization, place of principal business activity, or other similar selection
criteria. Realization of income is not a significant consideration when choosing
investments for the Series. Income realized on the Series' investments will be
incidental to its objectives.
The portfolio manager seeks companies that meet his selection criteria,
regardless of where a company is located. Foreign securities are generally
selected on a stock-by-stock basis without regard to any defined allocation
among countries or geographic regions. However, certain factors such as expected
levels of inflation, government policies influencing business conditions, the
outlook for currency relationships, and prospects for economic growth among
countries, regions or geographic areas may warrant greater consideration in
selecting foreign securities. There are no limitations on the countries in which
the Series may invest and the Series may at times have significant foreign
exposure.
The Series invests primarily in domestic and foreign equity securities,
which may include preferred stocks, common stocks, warrants and securities
convertible into common or preferred stocks. The Series may also invest to a
lesser degree in other types of securities, including:
[diamond] debt securities
[diamond] indexed/structured securities
[diamond] high-yield/high-risk bonds (less than 35% of the Series' assets)
[diamond] options, futures, forwards and other types of derivatives for hedging
purposes or for non-hedging purposes such as seeking to enhance return
[diamond] securities purchased on a when-issued, delayed delivery or forward
commitment basis
RISKS RELATED TO INVESTMENT STRATEGIES
GENERAL
Because the Series may invest substantially all of its assets in common
stocks, the main risk is the risk that the value of the stocks it holds might
decrease in response to the activities of an individual company or in response
to general market and/or economic conditions. If this occurs, the Series' share
price may also decrease. The Series' performance may also be affected by risks
specific to certain types of investments, such as foreign securities, derivative
investments, non-investment grade debt securities or companies with relatively
small market capitalizations.
The Series may invest in smaller or newer companies which have some special
risks. Smaller or newer companies may suffer more significant losses as well as
realize more substantial growth than larger or more established issuers because
they may lack depth of management, be unable to generate funds necessary for
growth or potential development, or be developing or marketing new products or
services for which markets are not yet established and may never become
established. In addition, such companies may be insignificant factors in their
industries and may become subject to intense competition from larger or more
established companies. Securities of smaller or newer companies may have more
limited trading markets than the markets for securities of larger or more
established issuers, and may be subject to wide price fluctuations. Investments
in such companies tend to be more volatile and somewhat more speculative.
FOREIGN SECURITIES
The Series may invest without limit in foreign securities either indirectly
(e.g., depositary receipts) or directly in foreign markets. Investments in
foreign securities, including those of foreign governments, may involve greater
risks than investing in domestic securities because the Series' performance may
depend on issues other than the performance of a particular company. These
issues include:
[diamond] CURRENCY RISK. As long as the Series holds a foreign security, its
value will be affected by the value of the local currency relative to
the U.S. dollar. When the Series sells a foreign denominated security,
its value may be worth less in U.S. dollars even if the security
increases in value in its home country. U.S. dollar denominated
securities of foreign issuers may also be affected by currency risk.
[diamond] POLITICAL AND ECONOMIC RISK. Foreign investments may be subject to
heightened political and economic risks, particularly in emerging
markets which may have relatively unstable governments, immature
economic structures, national policies restricting investments by
foreigners, different legal systems, and economies based
Phoenix Edge Series Fund 77
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on only a few industries. In some countries, there is the risk that
the government may take over the assets or operations of a company or
that the government may impose taxes or limits on the removal of the
Series' assets from that country.
[diamond] REGULATORY RISK. There may be less government supervision of foreign
markets. As a result, foreign issuers may not be subject to the
uniform accounting, auditing and financial reporting standards and
practices applicable to domestic issuers and there may be less
publicly available information about foreign issuers.
[diamond] MARKET RISK. Foreign securities markets, particularly those of
emerging market countries, may be less liquid and more volatile than
domestic markets. Certain markets may require payment for securities
before delivery and delays may be encountered in settling securities
transactions. In some foreign markets, there may not be protection
against failure by other parties to complete transactions.
[diamond] TRANSACTION COSTS. Costs of buying, selling and holding foreign
securities, including brokerage, tax and custody costs, may be higher
than those involved in domestic transactions.
HIGH-YIELD/HIGH-RISK SECURITIES
High-yield/high-risk securities (or "junk" bonds) are securities rated below
investment grade by the primary rating agencies such as Standard & Poor's and
Moody's. The value of lower quality securities generally is more dependent on
credit risk, or the ability of the issuer to meet interest and principal
payments, than investment grade debt securities. Issuers of high-yield
securities may not be as strong financially as those issuing bonds with higher
credit ratings and are more vulnerable to real or perceived economic changes,
political changes or adverse developments specific to the issuer.
The junk bond market can experience sudden and sharp price swings.
ILLIQUID INVESTMENTS
The Series may invest up to 15% of its net assets in illiquid investments.
An illiquid investment is a security or other position that cannot be disposed
of quickly in the normal course of business. For example, some securities are
not registered under U.S. securities laws and cannot be sold to the U.S. public
because of SEC regulations (these are known as "restricted securities"). Under
procedures adopted by the Trustees, certain restricted securities may be deemed
liquid, and will not be counted toward this 15% limit.
CASH POSITION
When a portfolio manager believes that market conditions are unfavorable for
profitable investing, or when he is otherwise unable to locate attractive
investment opportunities, the Series' cash or similar investments may increase.
In other words, the Series does not always stay fully invested in stocks and
bonds. Cash or similar investments generally are a residual--they represent the
assets that remain after a portfolio manager has committed available assets to
desirable investment opportunities. However, a portfolio manager may also
temporarily increase the Series' cash position to protect its assets or maintain
liquidity.
When the Series' investments in cash or similar investments increase, it may
not participate in market advances or declines to the same extent that it would
if the Series remained more fully invested in stocks or bonds.
FUTURES CONTRACTS, OPTIONS AND SWAP AGREEMENTS
The Series may invest in financial futures contracts and options and enter
into swap agreements. The advisor intends to invest in such securities primarily
to hedge or reduce the risk of holding other investments. If the prices for
futures contracts and prices in the cash market do not correlate as expected or
if the advisor's expectations about interest rate, exchange rate or general
market movements are incorrect, the Series' returns may not be as high as they
would be if the advisor did not invest in these securities. There is also a risk
that the market for reselling financial futures contracts and options may be
limited or nonexistent. The Series could incur unlimited losses if it cannot
liquidate certain futures contracts. The subadvisor's decisions about the nature
and timing of futures contract and options and swap transactions may result in
losses when other investors' decisions about the same contracts, options or
swaps result in gains.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
MANAGEMENT OF THE FUNDS
THE ADVISOR
Phoenix Investment Advisors, Inc. ("PVA") is the investment advisor to the
Series and is located at One American Row, Hartford, Connecticut 06102-5056. PVA
also acts as the investment advisor for 7 other Series. PVA is a new investment
advisor established to actively monitor and manage subadvisor performance.
78 Phoenix Edge Series Fund
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Janus Capital Corporation ("Janus") is the investment subadvisor to the
Series and is located at 100 Fillmore Street, Denver, Colorado 80206. Janus acts
as a subadvisor to approximately 40 series of mutual funds and acts as
investment advisor to institutions and individuals. As of December 31, 1998,
Janus had $108 billion in assets under management. Janus has been an investment
advisor since 1989.
Subject to the direction of the Fund's Board of Trustees, PVA is responsible
for assuring that the Series is managed in accordance with the Series'
investment objective and stated investment policies. Janus, as subadvisor, is
responsible for managing the Series' investment program and for day-to-day
management of the Series' portfolios.
Janus manages the Series' assets to conform with the investment policies as
described in the prospectus. The Series pays PVA a monthly investment management
fee that is accrued daily against the value of that Series' net assets at the
rate of 0.85% annually.
The advisory fee is greater than that for most Series; however, the Trustees
have determined that it is comparable to fees charged by other funds whose
investment objectives are similar to those of the Series.
Janus, as investment subadvisor, is responsible for the day-to-day
management of the Series' investment program. Janus manages the Series' assets
to conform with the investment policies as described in the prospectus.
ILLUSTRATIVE PERFORMANCE OF PORTFOLIO MANAGER
The performance information presented below is a composite of the
performance of mutual funds managed by Janus, the investment subadvisor. Each of
the funds included in the composite has investment objectives, policies and
strategies substantially similar to those of the Series. The composite
performance should not be considered an indication of future performance of the
Series or its investment subadvisor.
- ---------------------------------------------------------------
ANNUALIZED RETURNS FOR THE PERIOD ENDED SEPTEMBER 30, 1999
- ---------------------------------------------------------------
JANUS LARGECAP
GROWTH RUSSELL 1000
COMPOSITE* S&P 500 INDEX GROWTH INDEX
- ---------------------------------------------------------------
1 YEAR 41.52 27.73 34.85
- ---------------------------------------------------------------
3 YEARS 27.39 25.17 26.87
- ---------------------------------------------------------------
5 YEARS 28.06 25.11 26.79
- ---------------------------------------------------------------
10 YEARS 18.33 16.84 17.96
- ---------------------------------------------------------------
* Inception as of July 7, 1987
The LargeCap Growth Composite includes all accounts with assets above $5
million for which Janus has discretionary authority, including registered
investment companies (mutual funds). Composite performance is presented net of
all fees and reflects reinvestment of dividends and capital gains. For all new
separately-managed LargeCap Growth equity accounts over $25 million, a
management fee of 0.75% per annum applies on the first $50 million, 0.65% the
next $100 million, and 0.60% on the balance. Accounts enter the Composite upon
the first full quarter under management in which assets exceed the stated
minimum. Prior to 1995, all discretionary accounts were included in the
appropriate Composite, regardless of asset size, and there has been no
restatement of pre-1995 performance. As of September 30, 1999, the LargeCap
Growth Composite included 49 accounts and assets of $3,272.5 million, which
represented 1.98% of total assets under management. The percentage of total
assets managed is defined as composite assets as a percentage of the total
assets managed including registered investment company accounts under
management. Performance figures are based upon historical information and do not
guarantee future results. The S&P 500 and the Russell 1000 Growth are unmanaged
indices of common stock prices and include reinvestment of dividends and capital
gains. They have been taken from published sources and have not been audited.
Composition of each separately-managed account portfolio may differ
significantly from securities in the corresponding benchmark indices.
PORTFOLIO MANAGEMENT
E. Marc Pinto, CFA, is portfolio manager of the Series. He is also the
portfolio manager of several portfolios in the LargeCap Growth discipline. He
has also served as an assistant portfolio manager of Janus Twenty Fund and Janus
Growth and Income Fund. Prior to joining Janus in 1994, Mr. Pinto worked in an
investment firm analyzing companies in the telecommunications and financial
services sectors. He also worked for Goldman Sachs as an associate in the
investment banking division, for Fred Alger Management as a research associate,
and for Bank of Boston as a credit analyst. Mr. Pinto has a bachelor's degree in
history from Yale University and an M.B.A. from Harvard University, where he
graduated with distinction. Mr. Pinto has 14 years of professional investment
experience.
PHOENIX-MORGAN STANLEY FOCUS EQUITY SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVES
The Series seeks capital appreciation by investing primarily in equity
securities.
PRINCIPAL INVESTMENT STRATEGIES
The Series seeks to maximize capital appreciation by investing in equity
securities of U.S., and to a limited extent, foreign companies that exhibit
strong or accelerating earnings growth. The universe of eligible companies
mainly includes those with market capitalizations of $1 billion or more but may
also include smaller companies. The Series normally invests at least
Phoenix Edge Series Fund 79
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65% of its assets in a non-diversified portfolio of equity securities. These
securities may include common and preferred stocks, depositary receipts,
convertibles, rights, warrants, and equity related options and futures. The
investment subadvisor emphasizes individual security selection. The Series
generally concentrates its holdings in a relatively small number of companies
and may invest up to 25% of its assets in a single issuer.
The investment subadvisor follows a flexible investment program in looking
for companies with above average capital appreciation potential. Fundamental
equity research drives the process. The investment subadvisor focuses on
companies with consistent or rising earnings growth records and compelling
business strategies. The investment subadvisor continually and rigorously
studies company developments, including business strategy, management focus and
financial results, to identify companies with earnings growth and business
momentum. In addition, the investment subadvisor closely monitors analysts'
expectations to identify issuers that have the potential for positive earnings
surprises versus consensus expectations. Valuation is of secondary importance
and is viewed in the context of prospects for sustainable earnings growth and
the potential for positive earnings surprises in relation to consensus
expectations. The Series considers selling securities of issuers that no longer
meet the investment subadvisor's criteria. The investment subadvisor's focus on
individual security selection may lead to an emphasis on particular industry
sectors.
RISKS RELATED TO INVESTMENT STRATEGIES
GENERAL
Investing in this Series entails the risks and uncertainties of investing in
a non-diversified portfolio of equity securities. In general, prices of equity
securities are more volatile than those of fixed income securities. The prices
of equity securities will rise and fall in response to a number of different
factors. In particular, equity securities will respond to events that affect
entire financial markets or industries (changes in inflation or consumer demand,
for example) and to events that affect particular issuers (news about the
success or failure of a new product, for example). In addition, at times the
Series' market sector, mid- to large-capitalization growth-oriented equity
securities, may underperform relative to other sectors.
FOREIGN INVESTING
The Series may invest in non-U.S. companies. Investing in the securities of
non-U.S. companies involves special risks and considerations not typically
associated with investing in U.S. companies. These include:
[diamond] differences in accounting, auditing and financial reporting standards;
[diamond] generally higher commission rates on foreign portfolio transactions;
[diamond] differences and inefficiencies in transaction settlement systems;
[diamond] the possibility of expropriation or confiscatory taxation;
[diamond] adverse changes in investment or exchange control regulations;
[diamond] political and economic uncertainty;
[diamond] less publicly-available information;
[diamond] greater security price volatility;
[diamond] possible taxation of dividends and interest payable on securities; and
[diamond] potential restrictions on the flow of international capital.
FOREIGN CURRENCY
Portions of the Series' assets may be invested in securities denominated in
foreign currencies. Changes in foreign exchange rates will affect the value of
those securities denominated or quoted in currencies other than the U.S. dollar.
Exchange rate fluctuations can affect the Series' net asset value (share price)
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 long and short terms.
DERIVATIVES
The Series may use various instruments that derive their values from those
of specific securities, indices, currencies or other points of reference for
both hedging and non-hedging purposes. Derivatives include, but are not limited
to, futures, options, forward contracts, swaps, and structured notes. These
derivatives, including those used to manage risk, are themselves subject to
risks of the different markets in which they trade and, therefore, may not serve
their intended purpose.
The primary risks of derivatives are:
[diamond] changes in the market value of securities held by the Series, and of
derivatives relating to those securities, may not be proportionate;
[diamond] there may not be a liquid market for the Series to sell a derivative,
which could result in difficulty closing a position; and
[diamond] certain derivatives can magnify the extent of losses incurred due to
changes in the market value of the securities to which they relate.
In addition, some derivatives are subject to counterparty risk. To minimize
this risk, the Series may enter into derivatives transactions only with
counterparties that meet
80 Phoenix Edge Series Fund
<PAGE>
certain requirements for credit quality and collateral. Also, the Series may
invest in certain derivatives that require the Series to segregate some or all
of its cash or liquid securities to cover its obligations under those
instruments. At certain levels, this can cause the Series to lose flexibility in
managing its investments properly, responding to shareholder redemption
requests, or meeting other obligations. If the Series is in that position it
could be forced to sell other securities that it wanted to retain.
The Series will limit its use of derivatives for non-hedging purposes to
33-1/3% of its total assets measured by the aggregate notional amount of
outstanding derivatives. While the use of derivatives may be advantageous to the
Series, if the investment subadvisor is not successful employing them, the
Series' performance may be worse than if it did not make such investments.
TEMPORARY DEFENSIVE INVESTMENTS
When the investment subadvisor believes that changes in economic, financial
or political conditions warrant, the Series may invest without limit in certain
short- and medium-term fixed income securities for temporary defensive purposes.
If the investment subadvisor incorrectly predicts the effects of these changes,
such defensive investments may adversely affect the Series' performance and the
Series may not achieve its investment objective.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
MANAGEMENT OF THE FUNDS
THE ADVISOR
Phoenix Variable Advisors, Inc. ("PVA") is the investment advisor to the
Series and is located at One American Row, Hartford, Connecticut 06102-5056. PVA
also acts as the investment advisor for 7 other Series. PVA is a new investment
advisor established to actively monitor and manage subadvisor performances.
Subject to the direction of the Fund's Board of Trustees, PVA is responsible
for assuring that the Series is managed in accordance with the Series'
investment objective and stated investment policies.
The Series pays PVA a monthly investment management fee that is accrued
daily against the value of that Series' net assets at the rate of 0.85%
annually. The advisory fee is greater than that for most Series; however, the
Trustees have determined that it is comparable to fees charged by other funds
whose investment objectives are similar to those of the Series.
Morgan Stanley Asset Management ("MSAM") is the investment subadvisor to the
Series and has its principal offices at 1221 Avenue of the Americas, New York,
New York 10020. On December 1, 1998, Morgan Stanley Asset Management Inc.
changed its name to Morgan Stanley Dean Witter Investment Management Inc., but
continues to do business in certain instances using the name Morgan Stanley
Asset Management. MSAM conducts a worldwide portfolio management business and
provides a broad range of portfolio management services to customers in the
United States and abroad. Morgan Stanley Dean Witter & Co. ("MSDW") is the
direct parent of MSAM and Morgan Stanley & Co. Incorporated ("Morgan Stanley").
MSDW is a global financial services firm that maintains leading market positions
in each of its 3 primary businesses: securities, asset management and credit
services. At September 30, 1999, MSAM, together with its affiliated
institutional asset management companies, managed assets of approximately $173.5
billion, including assets under fiduciary advice.
MSAM, as investment subadvisor, is responsible for the day-to-day management
of the Series' investment program. MSAM manages the Series' assets to conform
with the investment policies as described in the prospectus.
ILLUSTRATIVE PERFORMANCE OF PORTFOLIO MANAGER
The performance information presented below is a composite of the
performance of certain mutual funds and private accounts managed by MSAM, the
investment subadvisor to the Phoenix-Morgan Stanley Focus Equity Series. Each of
the accounts included in the composite has investment objectives, policies and
strategies substantially similar to those of the Series.
Unlike management of the private accounts included in the composite, the
Series will be subject to certain regulatory restrictions (e.g., diversification
and income distribution) and cash flows that did not apply to the private
accounts. If such factors had been applicable to these accounts, the composite
performance may have been lower. The composite performance should not be
considered an indication of future performance of the Series or its investment
subadvisor.
Phoenix Edge Series Fund 81
<PAGE>
- --------------------------------------------------------------
QUARTERLY RETURNS
- --------------------------------------------------------------
COMPOSITE S&P 500 INDEX
- --------------------------------------------------------------
4TH QTR 1998 26.16% 21.29%
- --------------------------------------------------------------
1ST QTR 1999 13.39% 4.98%
- --------------------------------------------------------------
2ND QTR 1999 9.80% 7.05%
- --------------------------------------------------------------
3RD QTR 1999 (0.61)% (6.24)%
- --------------------------------------------------------------
- --------------------------------------------------------------
ANNUALIZED RETURNS(1)
- --------------------------------------------------------------
COMPOSITE S&P 500 INDEX
- --------------------------------------------------------------
1 YEAR 56.13% 27.79%
- --------------------------------------------------------------
3 YEARS 28.53% 25.08%
- --------------------------------------------------------------
SINCE INCEPTION2 34.08% 25.26%
- --------------------------------------------------------------
(1) Year ending September 30, 1999
(2) April 30, 1995
These performance numbers do not include fees that would be charged by the
Series; therefore, comparable performance results for the Series would be lower.
PORTFOLIO MANAGEMENT
Philip W. Friedman is a managing director of MSAM and Morgan Stanley & Co.
Incorporated ("Morgan Stanley") and is head of the Institutional Equity Group.
In addition to portfolio management, his equity research responsibilities
include capital goods, consumer durables, multi-industry and transportation.
Prior to joining MSAM in 1997, he was the North American director of equity
research at Morgan Stanley. From 1990 to 1995, he was a member of Morgan
Stanley's equity research team. Mr. Friedman graduated from Rutgers University
with a B.A. (Phi Beta Kappa and Summa Cum Laude) in Economics. He also holds a
Masters of Management from the J.L. Kellogg School of Management at Northwestern
University.
William S. Auslander is a principal of MSAM and Morgan Stanley and a
portfolio manager in the Institutional Equity Group. He joined MSAM in 1995 as
an equity analyst in the Institutional Equity Group. Prior to joining MSAM, he
worked at Icahn & Co. for 9 years as an equity analyst. Mr. Auslander graduated
from the University of Wisconsin at Madison with a B.A. in Economics and
received an M.B.A. from Columbia University.
Messrs. Friedman and Auslander have shared primary responsibility for
managing the Series' assets since its inception.
PHOENIX-OAKHURST BALANCED SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The Phoenix-Oakhurst Balanced Series has investment objectives of reasonable
income, long-term capital growth and conservation of capital. There is no
guarantee that the Series will achieve its objectives.
PRINCIPAL INVESTMENT STRATEGIES
The Series invests in a portfolio of common stocks and fixed income
securities. Under normal circumstances the Series intends to invest at least 65%
of its total assets in these securities. At least 25% of assets will be invested
in fixed income securities that are rated within the 4 highest rating
categories. The Series may invest in foreign and domestic companies of all
sizes. Fixed income securities in which the Series may invest include, U.S. and
foreign government securities, corporate bonds, municipals, and mortgage- and
asset-backed securities. Credit ratings for fixed income securities are
established by nationally recognized statistical rating organizations. Refer to
the Statement of Additional Information for a detailed list of rating
categories.
The advisor will use 4 criteria to select investments for the Series: risk,
income, capital enhancement, and protection of capital value. The advisor will
select securities believed to have potential for the production of current
income, with emphasis on securities that also have the potential for capital
enhancement. Fixed income securities are selected using a multi-sector approach.
Holdings are shifted into sectors believed by the advisor to be undervalued and
out of sectors determined by the advisor to be overvalued. The amount of Series
assets which may be invested in common stocks and fixed income securities is not
fixed. The advisor may adjust the mix of investments based upon financial market
and economic conditions.
Up to 35% of the Series' assets may be invested in "junk bonds." The actual
percentage of junk bonds held in the portfolio will be determined by the
advisor. In the advisor's opinion, if market conditions warrant, the Series may
increase its holdings of junk bonds subject to the 35% limit. The price of junk
bonds will generally decline when interest rates rise, and increase when
interest rates fall.
The Series may invest up to 25% of its net assets in securities of foreign
(non-U.S.) issuers. The Series may invest in a broad range of foreign
securities, including equity, debt and convertible securities and foreign
government securities. Issuers may be in established market countries and
emerging market countries.
The Series also 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
issuer at predetermined time(s), price(s) or price formula. Convertible
securities have several unique investment characteristics, such as:
[diamond] higher yields than common stocks but lower yields than comparable
nonconvertible securities;
82 Phoenix Edge Series Fund
<PAGE>
[diamond] typically less fluctuation in value than the "underlying" common
stock, that is, the common stock that the investor receives if he
converts;
[diamond] the potential for capital appreciation if the market price of the
underlying common stock increases.
Temporary Defensive Strategy. If the advisor believes that market conditions
are not favorable to the Series' principal strategies, the Series may hold on to
its cash or invest without limit in cash equivalents, such as U.S. government
securities and high grade commercial paper. When this happens, the Series may
not achieve its investment objective.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques of the Series.
RISKS RELATED TO INVESTMENT STRATEGIES
GENERAL
The Series' focus is reasonable income, long-term capital growth, and
conservation of capital. The value of your shares is based on the market value
of the Series' investments. However, the value of the Series' investments that
support your share value can decrease as well as increase. If between the time
you purchase shares and the time you sell shares the value of the Series'
investments decreases, you will lose money. The value of the Series' investments
can decrease for a number of reasons. For example, changing economic conditions
may cause a decline in the value of many or most investments. Particular
industries can face poor market conditions for their products or services so
that companies engaged in those businesses do not perform as well as companies
in other industries. Interest rate changes may improve prospects for certain
types of businesses and they may worsen prospects for others. Share values also
can decline if the specific companies selected for fund investment fail to
perform as the advisor expects, regardless of general economic trends, industry
trends, interest rates and other economic factors.
In the case of fixed income securities, the value of the security will be
directly affected by trends in interest rates and the overall condition of
credit markets. For example, in times of rising interest rates, the value of
these types of securities tends to decrease. When interest rates fall, the value
of these securities tends to rise. Income distribution also will affect the
Series' return. If the advisor misjudges the ability of the issuer of a
portfolio security to make scheduled interest or other income payments to the
Series, the Series' income available for distribution to shareholders may
decrease.
In addition to these general risks of investing in the Series, there are
several specific risks of investing in the Series that you should note.
HIGH RISK-HIGH YIELD SECURITIES
The Series may invest in securities that are high risk, high yield
noninvestment-grade securities. Although these securities provide greater income
and opportunity for capital appreciation than investments in higher grade
securities, they also typically entail greater price volatility and principal
and interest risk. There is a greater risk that an issuer will not be able to
make principal and interest payments on time. Analysis of the creditworthiness
of issuers of below investment grade securities may be more complex than for
higher grade securities, making it more difficult for the advisor to accurately
predict risk.
FOREIGN INVESTING
The Series may invest in non-U.S. companies. Investing in the securities of
non-U.S. companies involves special risks and considerations not typically
associated with investing in U.S. companies. These include:
[diamond] differences in accounting, auditing and financial reporting standards;
[diamond] generally higher commission rates on foreign portfolio transactions;
[diamond] differences and inefficiencies in transaction settlement systems;
[diamond] the possibility of expropriation or confiscatory taxation;
[diamond] adverse changes in investment or exchange control regulations;
[diamond] political instability; and
[diamond] potential restrictions on the flow of international capital.
Political and economic uncertainty as well as less public information about
investments may negatively impact the Series' portfolio.
Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility. Additionally,
dividends and interest payable on foreign securities may be subject to foreign
taxes withheld prior to receipt by the Series.
Many of the foreign securities held by the Series will not be registered
with, nor will the issuers of those securities be subject to the reporting
requirements of, the U.S. Securities and Exchange Commission. Accordingly, there
may be less publicly available information about the securities and about the
foreign company or government issuing them than is available about a domestic
company or government entity. Moreover, individual foreign economies may differ
favorably or unfavorably from the
Phoenix Edge Series Fund 83
<PAGE>
U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payment positions.
FOREIGN CURRENCY
Portions of the Series' assets may be invested in securities denominated in
foreign currencies. Changes in foreign exchange rates will affect the value of
those securities denominated or quoted in currencies other than the U.S. dollar.
The forces of supply and demand in the foreign exchange markets determine
exchange rates and these forces are in turn affected by a range of economic,
political, financial, governmental and other factors. Exchange rate fluctuations
can affect the Series' net asset value (share price) 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 long and short terms.
Effective January 1, 1999, 11 European countries began converting from their
sovereign currency to the European Union common currency called the "Euro." This
conversion may expose the Series to certain risks, including the reliability and
timely reporting of pricing information of the Series' portfolio holdings. In
addition, one or more of the following may adversely affect specific securities
in the Series' portfolio:
[diamond] known trends or uncertainties related to the Euro conversion that an
issuer reasonably expects will have a material impact on revenues,
expenses or income from its operations;
[diamond] competitive implications of increased price transparency of European
Union markets (including labor markets) resulting from adoption of a
common currency and issuers' plans for pricing their own products and
services in the Euro;
[diamond] issuers' ability to make required information technology updates on a
timely basis, and costs associated with the conversion (including
costs of dual currency operations through January 1, 2002);
[diamond] currency exchange rate risk and derivatives exposure (including the
disappearance of price sources, such as certain interest rate
indices); and
[diamond] potential tax consequences.
SMALL MARKET CAPITALIZATION INVESTING
The Series may invest in some smaller companies. Companies with small
capitalization are often companies in industries that have recently emerged due
to cultural, economic, regulatory or technological developments. Such
developments can have a significant positive or negative effect on small
capitalization companies and their stock performance. Given the limited
operating history and rapidly changing fundamental prospects, investment returns
from smaller capitalization companies can be highly volatile. Smaller companies
may find their ability to raise capital impaired by their size or lack of
operating history. Product lines are often less diversified and subject to
competitive threats. Smaller capitalization stocks are subject to varying
patterns of trading volume and may, at times, be difficult to sell.
UNRATED SECURITIES
The Series may invest in unrated securities. Unrated securities may not be
lower in quality than rated securities, but due to their perceived risk, they
may not have as broad a market as rated securities. Analysis of unrated
securities is more complex than for rated securities, making it more difficult
for the advisor to accurately predict risk.
IMPACT OF THE YEAR 2000 ISSUE ON THE SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the Year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
MANAGEMENT OF THE SERIES
THE ADVISOR
Phoenix Investment Counsel, Inc. ("PIC") is the investment advisor to the
Series and is located at 56 Prospect Street, Hartford, CT 06115. PIC also acts
as the investment advisor for 14 other mutual funds, as subadvisor to 3 mutual
funds and as advisor to institutional clients. As of December 31, 1998, PIC had
$23.9 billion in assets under management. PIC has acted as an investment advisor
for over 60 years.
Subject to the direction of the Fund's Board of Trustees, PIC is responsible
for managing the Series' investment program and the day-to-day management of the
Series' portfolio. PIC manages the Series' assets to conform with the investment
policies as described in this prospectus. The Series pays PIC a monthly
investment management fee that is accrued daily against the value of the Series'
net assets at the following rates.
84 Phoenix Edge Series Fund
<PAGE>
- --------------------------------------------------------------
FIRST NEXT OVER
$250,000,000 $250,000,000 $500,000,000
- --------------------------------------------------------------
Management 0.55% 0.50% 0.45%
Fee
- --------------------------------------------------------------
During the Series' last fiscal year, the Series paid total management fees
of $1,378,437. The ratio of management fees to average net assets for the fiscal
year ended December 31, 1998 was 0.55%.
PORTFOLIO MANAGEMENT
Investment and trading decisions for the Series are made by a team of equity
professionals and a team of fixed income professionals.
PHOENIX-OAKHURST GROWTH AND INCOME SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The Series has an investment objective of seeking dividend growth, current
income and capital appreciation. There is no guarantee that the Series will
achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
The Series invests in a diversified portfolio of securities of primarily
domestic (U.S.) companies. The Series is designed to invest in equity
securities. Under normal circumstances,
[diamond] the Series intends to invest solely in equity securities and will
invest at least 65% of its total assets in equity securities;
[diamond] the Series will invest primarily in common stocks; and
[diamond] the Series intends to be "fully invested" and will attempt to limit
its holdings of cash and short-term investments to not more than 2% of
its assets.
The advisor uses a quantitative value strategy to pursue its investment
objective. Quantitative value involves selecting securities primarily from the
equity securities of the 1,500 largest companies traded in the United States,
based on market capitalization. The advisor seeks a desired balance of risk and
return potential, including a targeted yield exceeding the yield of the S&P 500.
This strategy seeks securities of companies that are undervalued relative to the
market in general and that have improving fundamentals. While the advisor's
strategy tends to concentrate its investment selections in larger issuers, the
Series may invest in securities of issuers of any size.
The Series also may invest in other equity securities, including preferred
stocks, preferred stocks convertible into common stocks, fixed income securities
convertible into common stocks, warrants and rights to purchase common stock.
Convertible securities have several unique investment characteristics, such as:
[diamond] higher yields than common stocks but lower yields than comparable
nonconvertible securities;
[diamond] typically less fluctuation in value than the "underlying" common
stock, that is, the common stock that the investor receives if he
converts;
[diamond] the potential for capital appreciation if the market price of the
underlying common stock increases.
The Series will invest only in the 4 highest rating categories of
convertible securities, commonly called "investment grade" securities. If the
Series purchases an investment grade security that loses its investment grade
rating the Series is not required to sell the security. Ratings are established
by nationally recognized statistical rating agencies. Please see the Statement
of Additional Information for a detailed list of rating categories.
The Series may lend portfolio securities to broker-dealers and other
financial institutions to increase its investment returns. The total amount of
such lending can be as much as one-third of the Series' total assets. When the
Series lends securities in this fashion, the borrower returns the securities at
a pre-arranged time and pays some form of premium or other fee for the
transaction. The Series receives all dividends and other distributions made with
respect to the loaned securities. All securities loans are secured by other
marketable securities.
The Series may invest up to 20% of its total assets in securities of foreign
(non-U.S.) issuers. However, under normal circumstances the Series will not
invest more than 10% of its total assets in securities of foreign issuers.
Temporary Defensive Strategy. If the advisor or subadvisor believes that
market conditions are not favorable to the Series' principal strategies, the
Series may invest without limit in U.S. government securities and in money
market instruments. When this happens, the Series may not achieve its investment
objective.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques.
RISKS RELATED TO INVESTMENT STRATEGIES
GENERAL
The Series' focus is dividend growth, current income and capital
appreciation. The advisor intends to invest Series assets so that the Series'
total return and dividend yield exceed average total return and dividend yield
for companies included in the S&P 500. In this sense the Series seeks to
outperform the S&P 500. The S&P 500 can have negative
Phoenix Edge Series Fund 85
<PAGE>
returns, however. When that happens, the Series may outperform the S&P 500 but
still have negative returns. The value of the Series' investments, as well as
the value of stocks included in the S&P 500, can decrease for a number of
reasons. For example, changing economic conditions may cause a decline in value
of many or even most equity and fixed income investments. Particular industries
can face poor markets for their products or services so that companies engaged
in those businesses do not do as well as companies in other industries. Interest
rate changes may improve prospects for certain types of businesses and they may
worsen prospects for others. To the extent that the Series' investments are
affected by general economic declines, declines in industries, and interest rate
changes that negatively affect the companies in which the Series invests,
Series' share values may decline. Share values also can decline, or can fail to
perform as well as stocks included in the S&P 500 if the specific companies the
advisor selects for the Series fail to perform as the advisor expects,
regardless of general economic trends, industry trends, interest rates and other
economic factors.
The advisor intends to keep cash and short-term investments below 2% of the
Series' assets under normal circumstances. By keeping the Series' assets "fully
invested" the advisor intends to maximize the Series' opportunity to increase
its net asset value. However, being "fully invested" in common stocks and other
securities the Series' net asset value will decrease if the value of those
investments decreases.
In addition to these general risks of investing in the Series, there are
several specific risks of investing in the Series that you should note.
SMALL MARKET CAPITALIZATION INVESTING
The Series may invest in some smaller companies. Companies with small
capitalization are often companies with limited operating history or companies
in industries that have recently emerged due to cultural, economic, regulatory
or technological developments. Such developments can have a significant positive
or negative effect on small capitalization companies and their stock
performance. Given the limited operating history and rapidly changing
fundamental prospects, investment returns from smaller capitalization companies
can be highly volatile. Smaller companies may find their ability to raise
capital impaired by their size or lack of operating history. Product lines are
often less diversified and subject to competitive threats. Smaller
capitalization stocks are subject to varying patterns of trading volume and may,
at times, be difficult to sell.
SECURITIES LENDING
When the Series lends portfolio securities it runs the risk that the
borrower will be unable or unwilling to return the securities and the agreed fee
or premium. The value of the collateral taken as security for the securities
loaned may decline in value or may be difficult to convert to cash in the event
that the Series must rely on the collateral to recover the value of its
securities. In these circumstances the Series will suffer losses.
FOREIGN INVESTING
The Series may invest in non-U.S. companies. Investing in the securities of
non-U.S. companies involves special risks and considerations not typically
associated with investing in U.S. companies. These include:
[diamond] differences in accounting, auditing and financial reporting standards;
[diamond] generally higher commission rates on foreign portfolio transactions;
[diamond] differences and inefficiencies in transaction settlement systems;
[diamond] the possibility of expropriation or confiscatory taxation;
[diamond] adverse changes in investment or exchange control regulations;
[diamond] political instability; and
[diamond] potential restrictions on the flow of international capital.
Political and economic uncertainty as well as less public information about
investments may negatively impact the Series' portfolio.
Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility. Additionally,
dividends and interest payable on foreign securities may be subject to foreign
taxes withheld prior to receipt by the Series.
Many of the foreign securities held by the Series will not be registered
with, nor will the issuers of those securities be subject to the reporting
requirements of, the SEC. Accordingly, there may be less publicly available
information about the securities and about the foreign company or government
issuing them than is available about a domestic company or government entity.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payment positions.
FOREIGN CURRENCY
Portions of the Series' assets may be invested in securities denominated in
foreign currencies. Changes in foreign exchange rates will affect the value of
those securities denominated or quoted in currencies other than the U.S. dollar.
The forces of supply and demand in the foreign exchange markets determine
exchange rates and these forces are in turn affected by a range of economic,
political, financial, governmental and other factors.
86 Phoenix Edge Series Fund
<PAGE>
Exchange rate fluctuations can affect the Series' net asset value (share price)
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 terms.
Effective January 1, 1999, eleven European countries began converting from
their sovereign currency to the European Union common currency called the
"Euro." This conversion may expose the Series to certain risks, including the
reliability and timely reporting of pricing information of the Series' portfolio
holdings. In addition, one of more of the following may adversely affect
specific securities in the Series' portfolio:
[diamond] known trends or uncertainties related to the Euro conversion that an
issuer reasonably expects will have a material impact on revenues,
expenses or income from its operations;
[diamond] competitive implications of increased price transparency of European
Union markets (including labor markets) resulting from adoption of a
common currency and issuers' plans for pricing their own products and
services in the Euro;
[diamond] issuers' ability to make required information technology updates on a
timely basis, and costs associated with the conversion (including cost
of dual currency operations through January 1, 2002);
[diamond] currency exchange rate risk and derivatives exposure (including the
disappearance of price sources, such as certain interest rate
indices); and
[diamond] potential tax consequences.
The advisor does not expect to invest in any securities that may be
adversely effected by the conversion to the Euro.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
MANAGEMENT OF THE SERIES
THE ADVISOR
Phoenix Investment Counsel, Inc. ("PIC") is the investment advisor to the
Series and is located at 56 Prospect Street, Hartford, CT 06115. PIC also acts
as the investment advisor for 14 other mutual funds, as subadvisor to 3 mutual
funds and as advisor to institutional clients. As of December 31, 1998, PIC had
$23.9 billion in assets under management. PIC has acted as an investment advisor
for over 60 years.
Subject to the direction of the Fund's Board of Trustees, PIC is responsible
for managing the Series' investment program and the day-to-day management of the
Series' portfolio. PIC manages the Series' assets to conform with the investment
policies as described in this prospectus. The fund pays PIC a monthly investment
management fee that is accrued daily against the value of the Series' net assets
at the following rates.
- --------------------------------------------------------------
FIRST NEXT OVER
$250,000,000 $250,000,000 $500,000,000
- --------------------------------------------------------------
Management 0.70% 0.65% 0.60%
Fee
- --------------------------------------------------------------
The advisor has voluntarily agreed until December 31, 1999, to reimburse the
Series for the amount, if any, by which the Series' operating expenses other
than the management fee for any fiscal years exceed 0.15% of the average net
assets of the Series.
During the Series' last fiscal year, the fund paid total management fees of
$109,232. The ratio of management fees to average net assets for the fiscal year
ended December 31, 1998 was 0.70%.
PORTFOLIO MANAGEMENT
Steven L. Colton serves as portfolio manager and is primarily responsible
for the day-to-day operation of the fund. Mr. Colton joined Phoenix Investment
Counsel, Inc. in June 1997. Previously, Mr. Colton was portfolio manager for the
American Century Income & Growth Fund ("ACIGF") from its inception on December
17, 1990 through May 30, 1997.
Dong Zhang serves as a member of the team that manages Phoenix Growth and
Income Fund. Mr. Zhang also was a member of the portfolio management team for
ACIGF from June 1996 through June 4, 1997.
Phoenix Edge Series Fund 87
<PAGE>
PHOENIX-OAKHURST STRATEGIC ALLOCATION SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The Phoenix-Oakhurst Strategic Allocation Series has an investment objective
of as high a total rate of return as is considered consistent with prudent
investment risk. There is no guarantee that the Series will achieve its
investment objective.
PRINCIPAL INVESTMENT STRATEGIES
The Series will invests in the common stock, bond and money market segments
in the proportion determined by the advisor.
The advisor may invest 0-100% in any one market segment.
The advisor will adjust the mix of investments among the 3 market segments
to capitalize on perceived variations in potential returns as economic and
financial conditions change.
Investments in one of the 3 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 a 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 3 market segments in which
the Allocation Series will invest are listed in the Statement of Additional
Information.
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) will be of significance. The
Series intends to use trading as a means of managing the portfolio 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.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques.
RISKS RELATED TO INVESTMENT STRATEGIES
GENERAL
The Series' focus is high income, long term capital growth, and conservation
of capital. The value of your shares is based on the market value of the Series'
investments. However, the value of the Series' investments that support your
share value can decrease as well as increase. If between the time you purchase
shares and the time you sell shares the value of the Series' investments
decreases, you will lose money. The value of the Series' investments can
decrease for a number of reasons. For example, changing economic conditions may
cause a decline in the value of many or most investments. Particular industries
can face poor markets conditions for their products or services so that
companies engaged in those businesses do not perform as well as companies in
other industries. Interest rate changes may improve prospects for certain types
of businesses and they may worsen prospects for others. Share values also can
decline if the specific companies selected for Series investments fail to
perform as the advisor expects, regardless of general economic trends, industry
trends, interest rates and other economic factors.
In the case of fixed income securities, the value of the security will be
directly affected by trends in interest rates and the overall condition of
credit markets. For example, in times of rising interest rates, the value of
these types of securities tends to decrease. When interest rates fall, the value
of these securities tends to rise. Income distribution also will affect the
Series' return. If the advisor misjudges the ability of the issuer of a
portfolio security to make scheduled interest or other income payments to the
Series, the Series' income available for distribution to shareholders may
decrease.
In addition to these general risks of investing in the Series, there are
several specific risks of investing in the Series that you should note.
Implementation of this strategy requires the ability of the advisor to
accurately anticipate which market segment to emphasize or avoid. If the advisor
is wrong, significant losses can be experienced.
The advisor will engage in trading when it believes that the trade, net of
transaction costs, will improve interest income of capital appreciation
potential, or will lessen capital loss potential. Whether these goals will be
achieved through trading depends on the advisor's ability to evaluate particular
securities and anticipate relevant market factors, including interest rate
trends and variations. Such trading places a premium on the advisor's ability to
obtain relevant information, evaluate it properly and take advantage of its
evaluations by completing transactions on a favorable basis. If the advisor's
evaluations and expectations prove to be incorrect, the Series' income or
capital appreciation may be
88 Phoenix Edge Series Fund
<PAGE>
reduced and its capital losses may be increased. Portfolio trading involves
transaction costs.
HIGH RISK-HIGH YIELD SECURITIES
The Series may invest in securities that are high risks, high yield
noninvestment grade securities. Although these securities provide greater income
and opportunity for capital appreciation than investments in higher grade
securities, they also typically entail greater price volatility and principal
and interest risk. There is a greater risk that an issuer will not be able to
make principal and interest payments on time. Analysis of the creditworthiness
of issuers of below investments grade securities may be more complex then for
higher grade securities, making it more difficult for the advisor to accurately
predict risk.
FOREIGN INVESTING
The Series may invest in non-U.S., companies. Investing in the securities of
non-U.S. companies involves special risks and considerations not typically
associated with investing in U.S. companies. These include:
[diamond] differences in accounting, auditing and financial reporting standards;
[diamond] generally higher commission rates on foreign portfolio transactions;
[diamond] differences and inefficiencies in transaction settlement systems;
[diamond] the possibility of expropriation or confiscatory taxation;
[diamond] adverse changes in investment or exchange control regulations;
[diamond] political instability;
[diamond] potential restrictions on the flow of international capital; and
[diamond] potential tax consequences.
SMALL MARKET CAPITALIZATION INVESTING
The Series may invest in some smaller companies. Companies with small
capitalization are often companies in industries that have recently emerged due
to cultural, economic, regulatory or technological developments. Such
developments can have a significant positive or negative effect on small
capitalization companies and their stock performance. Given the limited
operation history and rapidly changing fundamental prospects, investment returns
from smaller capitalization companies can be highly volatile. Smaller companies
may find their ability to raise capital impaired by their size or lack of
operating history. Product lines are often less diversified and subject to
competitive threats. Smaller capitalization stocks are subject to varying
patterns of trading volume and may, at times, be difficult to sell.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
MANAGEMENT OF THE SERIES
THE ADVISOR
Phoenix Investment Counsel, Inc. ("PIC") is the investment advisor to the
Series and is located at 56 Prospect Street, Hartford, CT 06115. PIC also acts
as the investment advisor for 14 other mutual funds, as subadvisor to 3
additional mutual funds and as advisor to institutional clients. As of December
31, 1998, PIC had $23.9 billion in assets under management. PIC has acted as an
investment advisor for over 60 years.
Subject to the direction of the Fund's Board of Trustees, PIC is responsible
for managing the Series' investment program and the day-to-day management of the
Series' portfolio. PIC manages the Series' assets to conform with the investment
policies as described in this prospectus. The Series pays PIC a monthly
investment management fee that is accrued daily against the value of the Series'
net assets at the following rates.
- -------------------------------------------------------------
FIRST NEXT OVER
$250,000,000 $250,000,000 $500,000,000
- -------------------------------------------------------------
Management 0.60% 0.55% 0.50%
Fee
- -------------------------------------------------------------
During the Series' last fiscal year, the Series paid total management fees
of $2,567,526. The ratio of management fees to average net assets for the fiscal
year ended December 31, 1998 was 0.58%.
PORTFOLIO MANAGEMENT
Investment decisions for the Allocation Series are made by a team of equity
investment professionals and a team of fixed income investment professionals.
PHOENIX-SCHAFER MID-CAP VALUE SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
Phoenix-Schafer Mid-Cap Value Series has an investment objective of
long-term capital appreciation. Current income is a secondary investment
objective.
Phoenix Edge Series Fund 89
<PAGE>
PRINCIPAL INVESTMENT STRATEGIES
The Series will invest in securities the advisor believes offer the
possibility of increase in value. The advisor will choose from securities which
satisfy 3 basic criteria:
[diamond] established companies having a strong financial position;
[diamond] price/earnings ratio below major market indices, such as the S&P 500;
and
[diamond] prospective earnings and dividend growth rates above average rates for
major market indices.
Once a security is purchased the Series will generally hold it until it no
longer meets the financial or valuation criteria.
The Series also 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
issuer at predetermined time(s), price(s) or price formula. A convertible
security entitles the owner to receive interest paid or accrued on a debt
security or dividends paid on preferred stock until the security matures or is
converted to common stock. Convertible securities have several unique
investments characteristics, such as:
[diamond] higher yields than common stocks but lower than comparable
nonconvertible securities;
[diamond] typically less fluctuation in value than the "underlying" common
stock, that is, the common stock that the investor receives if he
converts;
[diamond] the potential for capital appreciation if the market price of the
underlying common stock increases.
The Series may invest up to 20% of its net assets in securities of foreign
(non-U.S.) issuers. The Series may invest in a broad range of foreign
securities, including equity, debt and convertible securities and foreign
government securities.
Issuers may be in established market countries and emerging market countries.
If the advisor is unable to identify attractive equity investments
consistent with the Series' principal strategies, the Series may hold on to cash
or invest without limit in cash equivalents, such as U.S. government securities
and high grade commercial paper. When this happens, the fund may not achieve its
investment objective.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques of the fund.
RISKS RELATED TO INVESTMENT STRATEGIES
GENERAL
The Series' focus is long-term capital appreciation. The advisor intends to
invest Series assets so that your shares increase in value. However, the value
of the Series' investments that support your share value can decrease as well as
increase. If between the time you purchase shares and the time you sell shares
the value of the Series' investments decreases you will lose money. The value of
the Series' investments can decrease for a number of reasons. For example,
changing economic conditions may cause a decline in value of many or even most
equity and fixed income investments. Particular industries can face poor markets
for their products or services so that companies engaged in those businesses do
not do as well as companies in other industries. Interest rate changes may
improve prospects for certain types of businesses and they many worsen prospects
for others. To the extent that the Series' investments are affected by general
economic declines, declines in industries, and interest rate changes that
negatively affect the companies in which the Series invests, Series share values
may decline. Share values also can decline if the specific companies selected
for Series investment fail to perform as the advisor expects, regardless of
general economic trends, industry trends, interest rates and other economic
factors.
In addition to these general risks of investing in the Series, there are
several specific risks of investing in the Series that you should note.
SMALL MARKET CAPITALIZATION INVESTING
The Series may invest in some smaller companies. Companies with small
capitalization are often companies in industries that have recently emerged due
to cultural, economic, regulatory or technological developments. Such
developments can have a significant positive or negative effect on small
capitalization companies and their stock performance. Given the limited
operating history and rapidly changing fundamental prospects, investment returns
from smaller capitalization companies can be highly volatile. Smaller companies
may find their ability to raise capital impaired by their size or lack of
operating history. Product lines are often less diversified and subject to
competitive threats. Smaller capitalization stocks are subject to varying
patterns of trading volume and may, at times, be difficult to sell.
FOREIGN INVESTING
The Series may invest in non-U.S. companies. Investing in the securities of
non-U.S. companies involves special risks and considerations not typically
associated with investing in U.S. companies. These include:
90 Phoenix Edge Series Fund
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[diamond] differences in accounting, auditing and financial reporting standards;
[diamond] generally higher commission rates on foreign portfolio transactions;
[diamond] differences and inefficiencies in transaction settlement systems;
[diamond] the possibility of expropriation or confiscatory taxation;
[diamond] adverse changes in investment or exchange control regulations;
[diamond] political instability; and
[diamond] potential restrictions on the flow of international capital.
Political and economic uncertainty as well as less public information about
investments may negatively impact the fund's portfolio.
Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility. Additionally,
dividends and interest payable on foreign securities may be subject to foreign
taxes withheld prior to receipt by the Series.
Many of the foreign securities held by the Series will not be registered
with, nor will the issuers of those securities be subject to the reporting
requirements of, the U.S. Securities and Exchange Commission. Accordingly, there
may be less publicly available information about the securities and about the
foreign company or government issuing them than is available about a domestic
company or government entity. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payment positions.
FOREIGN CURRENCY
Portions of the Series' assets may be invested in securities denominated in
foreign currencies. Changes in foreign exchange rates will affect the value of
those securities denominated or quoted in currencies other than the U.S. dollar.
The forces of supply and demand in the foreign exchange markets determine
exchange rates and these forces are in turn affected by a range of economic,
political, financial, governmental and other factors. Exchange rate fluctuations
can affect the Series' net asset value (share price) 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 long and short terms.
Effective January 1, 1999, 11 European countries began converting from their
sovereign currency to the European Union common currency called the "Euro." This
conversion may expose the Series to certain risks, including the reliability and
timely reporting of pricing information of the Series' portfolio holdings. In
addition, one or more of the following may adversely affect specific securities
in the Series' portfolio:
[diamond] known trends or uncertainties related to the Euro conversion that an
issuer reasonably expects will have a material impact on revenues,
expenses or income from its operations;
[diamond] competitive implications of increased price transparency of European
Union markets (including labor markets) resulting from adoption of a
common currency and issuers' plans for pricing their own products and
services in the Euro;
[diamond] issuers' ability to make required information technology updates on a
timely basis, and costs associated with the conversion (including
costs of dual currency operations through January 1, 2002);
[diamond] currency exchange rate risk and derivatives exposure (including the
disappearance of price sources, such as certain interest rate
indices); and
[diamond] potential tax consequences.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
MANAGEMENT OF THE SERIES
THE ADVISOR
Phoenix Variable Advisors, Inc. ("PVA") is the investment advisor to the
Series and is located at One American Row, Hartford, CT 06102-5056. PVA also
acts as the investment advisor for 7 other Series. PVA is a new investment
advisor established to actively monitor and manage subadvisor performance.
THE SUBADVISOR
Schafer Capital Management, Inc. ("Schafer") serves as subadvisor to the
Series. Schafer's principal place of business is located at 101 Carnegie Center,
Suite 107, Princeton, New Jersey. Schafer has been engaged in the investment
management business since 1981, specializing in
Phoenix Edge Series Fund 91
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long-term investing in the equity markets. As of December 31, 1998, Schafer had
approximately $1.7 billion in assets under management.
Subject to the direction of the Fund's Board of Trustees, PVA is responsible
for overseeing the Series' investment program. Schafer is responsible for the
day-to-day management of the Series' portfolio, and for managing the Series'
assets to conform with the investment policies as described in this prospectus.
The Series pays PVA a monthly investment management fee that is accrued daily
against the value of that Series' net assets at the rate of 1.05% annually.
The total advisory fees of 1.05% of the aggregate net assets of the Series
is greater than that paid by most funds; however, the Board of Trustees of the
Series has determined that it is similar to fees charged by other mutual funds
whose investment objectives are similar to those of the Series.
During the Series' last fiscal year, the Series paid total management fees
of $46,644. The ratio of management fees to average net assets for the fiscal
year ended December 31, 1998 was 1.05%.
PORTFOLIO MANAGEMENT
David K. Schafer is the portfolio manager for the Phoenix-Schafer Mid-Cap
Value Series and is primarily responsible for the day-to-day management of the
Series' portfolio. Mr. Schafer has been in the investment management business
for more than 25 years. Mr. Schafer is the president of Schafer Capital
Management, Inc. and is also portfolio manager for the Strong Schafer Value
Fund. Mr. Schafer was a securities analyst, first for Arnold Bernhard & Co.,
Inc., publisher of The Value Line Investment Survey, from June 1966 to June
1968; for J & W Seligman & Co. from June 1968 to December 1970; and for Fariston
Management Corp., from January 1971 to November 1972. He joined the treasury
department of INCO Ltd. to supervise that company's pension assets, and in 1974
he began managing a portion of those assets himself. In 1981, Mr. Schafer left
INCO Ltd. to found Schafer Capital Management.
PHOENIX-SENECA MID-CAP GROWTH SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The Series has an investment objectives of capital appreciation.
Distribution of investment income, such as dividends and interest, is incidental
in the selection of investments. There is no guarantee that the Series will
achieve its objective.
PRINCIPAL INVESTMENT STRATEGIES
The Series invests in a diversified portfolio of securities of primarily
domestic (U.S.) companies. Under normal circumstances the Series intends to
invest at least 65% of its total assets in companies with market capitalizations
between $500 million and $5 billion.
The Series contracts with an advisor, Phoenix Investment Counsel, Inc. to
manage the Series' investment program and be responsible for the general
operation of the Series, and a subadvisor, Seneca Capital Management LLC to
manage the investments of the Series. The subadvisor selects securities of
companies that meet certain fundamental standards and that the subadvisor
believes have the market potential for above average market appreciation. In
evaluating companies' potential for market appreciation, the subadvisor seeks
companies that it believes will demonstrate greater long-term earnings growth
than the average company included in the S&P Midcap 400 Index. The strategy is
based on the subadvisor's view that growth in a companies' earnings will
correlate with growth in the price of its stock.
The subadvisor seeks to identify companies that have the most attractive
earnings prospects and favorable valuations, regardless of the size of the
company. Generally, however, a portion of the Series' portfolio will be invested
in large, well-known companies that have established histories of profitability
and/or dividend payment.
Although the Series stresses long-term earnings growth potential, the
subadvisor may buy securities in anticipation of short-term price gains.
Debt instruments, including investment grade and below investment grade
bonds ("junk bonds") and bonds convertible into common stocks, also may be a
part of the Series portfolio. Below investment grade securities present a
greater risk that the issuer will not be able to make interest or principal
payments on time. If this happens, the Series would lose income and could expect
a decline in the market value of the securities.
The Series may invest up to 20% of its total assets in securities of foreign
(non-U.S.) issuers. Foreign investment will be primarily through American
Depository Receipts (ADRs).
The Series may lend portfolio securities to broker-dealers and other
financial institutions to increase its investment returns. The total amount of
such lending can be as much as one-third of the Series' total assets. When the
Series lends securities in this fashion, the borrower returns the securities at
a prearranged time and pays some form of premium or other fee for the
transaction. The Series receives all dividends and other distributions made with
respect to the loaned securities. All securities loans are secured by other
marketable securities.
92 Phoenix Edge Series Fund
<PAGE>
The Series intends to invest in financial futures contracts, options and
swap agreements only for hedging purposes. However, the Series can invest in
these transactions even if they are not purchased for hedging purposes, that is,
they are purchased as an investment in their own right.
The Series may invest up to 15% of its net assets in securities that are not
liquid. The Series considers investments that the advisor is not likely to be
able to sell within 7 business days as not liquid. These securities can include
repurchase agreements, with maturities more than 7 days and private placements.
Repurchase agreements are contracts under which the Series will buy securities
that are not sold to investors through a public offering but instead are sold in
direct, private transactions.
Note: If the subadvisor determines that market conditions are not favorable
to the types of investments the advisor ordinarily intends to hold, the Series
may invest without limitation in any combination of high quality money market
securities and repurchase agreements. In such instances, the Series may not
achieve its stated investment objective.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques of the Series.
RISKS RELATED TO INVESTMENT STRATEGIES
GENERAL
The Series' focus is long-term earnings growth. The subadvisor intends to
invest Series' assets so that your shares increase in value. However, the value
of the Series' investments that support your share value can decrease as well as
increase. If between the time you purchase shares and the time you sell shares
the value of the Series' investments decreases, you will lose money. The value
of the Series' investments can decrease for a number of reasons. For example,
changing economic conditions may cause a decline in value of many or most
investments. Particular industries can face poor market conditions for their
products or services so that companies engaged in those businesses do not
perform as well as companies in other industries. Interest rate changes may
improve prospects for certain types of businesses and they many worsen prospects
for others. To the extent that the Series' investments are affected by general
economic declines, declines in industries, and interest rate changes that
negatively affect the companies in which the Series invests, Series' share
values may decline. Share values also can decline if the specific companies
selected for Series' investment fail to perform as the advisor expects,
regardless of general economic trends, industry trends, interest rates and other
economic factors, Finally, decreases in share values from day to day will be
"paper" losses unless you actually sell your shares. If your financial
circumstances are likely to require you to sell your shares at any particular
time, rather than holding them indefinitely, you run the risk that your sale of
shares will occur when share values have declined. If between the time you
purchase shares and the time you sell shares the value of the Series'
investments decreases you will lose money.
In addition to these general risks of investing in the Series, there are
several specific risks of investing in the Series that you should note.
ANTICIPATING SHORT-TERM PRICE GAINS
The advisor may buy securities that it anticipates will rise in price over a
short period of time. If the securities do not perform as expected, gains will
not be as high as anticipated. Moreover, the advisor buys these securities with
the expectation that they will be sold after a short period of time. Each time a
security is bought or sold, the Series incurs certain costs associated with the
transaction. The more transactions, the higher the overall cost to the Series.
SMALL MARKET CAPITALIZATION INVESTING
The Series may invest in some smaller companies. Companies with small
capitalization are often companies in industries that have recently emerged due
to cultural, economic, regulatory or technological developments. Such
developments can have a significant positive or negative effect on small
capitalization companies and their stock performance. Given the limited
operating history and rapidly changing fundamental prospects, investment returns
from smaller capitalization companies can be highly volatile. Smaller companies
may find their ability to raise capital impaired by their size or lack of
operating history. Product lines are often less diversified and subject to
competitive threats. Smaller capitalization stocks are subject to varying
patterns of trading volume and may, at times, be difficult to sell.
BELOW INVESTMENT GRADE SECURITIES
The Series may invest in securities that are below investment grade.
Although these securities provide greater income and opportunity for capital
appreciation than investments in higher grade securities, they also typically
entail greater price volatility and principal and interest risk. There is a
greater risk that an issuer will not be able to make principal and interest
payments on time. Analysis of the creditworthiness of issuers of below
investment grade securities may be more complex than for higher grade
securities, making it more difficult for the subadvisor to accurately predict
risk.
SECURITIES LENDING
When the Series lends portfolio securities it runs the risk that the
borrower will be unable or unwilling to return the securities and the agreed fee
or premium. The value of the collateral taken as security for the securities
loaned may
Phoenix Edge Series Fund 93
<PAGE>
decline in value or may be difficult to convert to cash in the event that the
Series must rely on the collateral to recover the value of its securities. In
these circumstances the Series will suffer losses.
FOREIGN INVESTING
The Series may invest in non-U.S. companies. Investing in the securities of
non-U.S. companies involves special risks and considerations not typically
associated with investing in U.S. companies. These include:
[diamond] differences in accounting, auditing and financial reporting standards;
[diamond] generally higher commission rates on foreign portfolio transactions;
[diamond] differences and inefficiencies in transaction settlement systems;
[diamond] the possibility of expropriation or confiscatory taxation;
[diamond] adverse changes in investment or exchange control regulations;
[diamond] political instability; and
[diamond] potential restrictions on the flow of international capital.
Political and economic uncertainty as well as less public information about
investments may negatively impact the Series' portfolio.
Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility. Additionally,
dividends and interest payable on foreign securities may be subject to foreign
taxes withheld prior to receipt by the Series. Many of the foreign securities
held by the Series will not be registered with, nor will the issuers of those
securities be subject to the reporting requirements of, the U.S. Securities and
Exchange Commission. Accordingly, there may be less publicly available
information about the securities and about the foreign company or government
issuing them than is available about a domestic company or government entity.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payment positions.
FOREIGN CURRENCY
Portions of the Series' assets may be invested in securities denominated in
foreign currencies. Changes in foreign exchange rates will affect the value of
those securities denominated or quoted in currencies other than the U.S. dollar.
The forces of supply and demand in the foreign exchange markets determine
exchange rates and these forces are in turn affected by a range of economic,
political, financial, governmental and other factors. Exchange rate fluctuations
can affect the Series' net asset value (share price) 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 long and short terms.
Effective January 1, 1999, eleven European countries began converting from
their sovereign currency to the European Union common currency called the
"Euro." This conversion may expose the Series to certain risks, including the
reliability and timely reporting of pricing information of the Series' portfolio
holdings. In addition, one or more of the following may adversely affect
specific securities in the Series' portfolio:
[diamond] known trends or uncertainties related to the Euro conversion that an
issuer reasonably expects will have a material impact on revenues,
expenses or income from its operations;
[diamond] competitive implications of increased price transparency of European
Union markets (including labor markets) resulting from adoption of a
common currency and issuers' plans for pricing their own products and
services in the Euro;
[diamond] issuers' ability to make required information technology updates on a
timely basis, and costs associated with the conversion (including
costs of dual currency operations through January 1, 2002);
[diamond] currency exchange rate risk and derivatives exposure (including the
disappearance of price sources, such as certain interest rate
indices); and
[diamond] potential tax consequences.
FUTURES CONTRACTS, OPTIONS AND SWAP AGREEMENTS
The Series may invest in financial futures contracts and options and enter
into swap agreements. The advisor intends to invest in such securities primarily
to hedge or reduce the risk of holding other investments. If the prices for
futures contracts and prices in the cash market do not correlate as expected or
if the advisor's expectations about interest rate, exchange rate or general
market movements are incorrect, the Series' returns may not be as high as they
would be if the advisor did not invest in these securities. There is also a risk
that the market for reselling financial futures contracts and options may be
limited or nonexistent. The Series could incur unlimited losses if it cannot
liquidate certain futures contracts. The subadvisor's decisions about the nature
and timing of futures contract and options and swap transactions may result in
losses when other investors' decisions about the same contracts, options or
swaps result in gains.
94 Phoenix Edge Series Fund
<PAGE>
ILLIQUID SECURITIES
Securities owned by the Series that are not liquid may be difficult to sell
because there may be no active markets for resale and fewer potential buyers.
This can make illiquid investments more likely than other types of investments
to lose value. In extreme cases it may be impossible to resell them and they can
become almost worthless to the Series.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
MANAGEMENT OF THE FUNDS
THE ADVISOR
Phoenix Investment Counsel, Inc.("PIC") is the investment advisor to the
Series and is located at 56 Prospect Street, Hartford, CT 06115. PIC also acts
as the investment advisor for 14 other mutual funds, as subadvisor to 3
additional mutual funds and as advisor to institutional clients. As of December
31, 1998, PIC had $23.9 billion in assets under management. PIC has acted as an
investment advisor for over 60 years.
Seneca Capital Management LLC ("Seneca") is the investment subadvisor to the
Series and is located at 909 Montgomery Street, San Francisco, California 94133.
Seneca acts as a subadvisor to 2 mutual funds and acts as investment advisor to
institutions and individuals. As of December 31, 1998, Seneca had $5.9 billion
in assets under management. Seneca has been (with its predecessor, GMG/Seneca
Capital Management LP) an investment advisor since 1989.
Subject to the direction of the Fund's Board of Trustees, PIC is responsible
for managing the Series' investment program and the general operations of the
Series. Seneca, as subadvisor, is responsible for day-to-day management of the
Series' portfolios.
Seneca manages the Series', assets to conform with the investment policies
as described in the prospectus. The Series pays PIC a monthly investment
management fee that is accrued daily against the value of that Series' net
assets at the rate of 0.80% annually.
Phoenix pays Seneca an annual subadvisory fee of 0.40%.
During the Series' last fiscal year, the Series paid total management fees
of $31,013. The ratio of management fees to average net assets for the fiscal
year ended December 31, 1998 was 0.80%. The advisory fee is greater than that
for most Series; however, the Trustees have determined that it is comparable to
fees charged by other funds whose investment objectives are similar to those of
the Series.
PORTFOLIO MANAGEMENT
Investment and trading decisions for the Series are made by a team of
managers and analysts headed by 2 team leaders. The team leaders are primarily
responsible for the day-to-day decisions.
Gail P. Seneca is a team leader for the Series. Since January 1998, Ms.
Seneca also has served as co-manager of Phoenix Equity Opportunities Series of
Phoenix Strategic Equity Series Fund and since June 1998, she has served as
co-manager of Phoenix Mid-Cap Portfolio of Phoenix Multi-Portfolio Fund. Ms.
Seneca has been the chief executive and investment officer of Seneca or
GMG/Seneca since November 1989. From October 1987 until October 1989, she was
senior vice president of the Asset Management Division of Wells Fargo Bank, and
from October 1983 to September 1987, she was investment strategist and portfolio
manager for Chase Lincoln Bank, heading the fixed income division.
Richard D. Little is the other team leader for the Series. Since January
1998, Mr. Little has served as co-manager of Phoenix Equity Opportunities Series
of Phoenix Strategic Equity Series Fund, and since June 1998, he has served as
co-manager of Phoenix Mid-Cap Portfolio of Phoenix Multi-Portfolio Fund. Mr.
Little has been director of equities with Seneca or GMG/Seneca since December
1989. Before he joined GMG/Seneca, Mr. Little held positions as an analyst,
board member, and regional manager with Smith Barney, NatWest Securities, and
Montgomery Securities.
PHOENIX-SENECA STRATEGIC THEME SERIES
INVESTMENT STRATEGIES
INVESTMENT OBJECTIVE
The Phoenix-Seneca Strategic Theme Series has an investment objective to
seek long-term capital appreciation through investing in securities of companies
benefiting from long-term trends in the United States and abroad. There is no
guarantee that the Series will achieve its investment objective.
PRINCIPAL INVESTMENT STRATEGIES
The Series will invest primarily in common stocks of companies the advisor
believes are particularly well situated 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
Phoenix Edge Series Fund 95
<PAGE>
shortage' years of the late 1970's, owning companies benefiting from the lower
inflation trends during the early 1980's, investing in companies acquiring
cellular franchises in the late 1980's and technology companies during the
1990's.
The Series will not invest more than 25% of its total assets in any one
industry or group of related industries.
In determining when and whether to invest in particular industries, the
advisor 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 advisor may change investment themes once it has determined
that an investment theme has become saturated or fully exploited. The advisor
may pursue one or more investment themes at any time.
The advisor will seek to identify companies which, in addition to being
considered well positioned to benefit from investment themes identified, also
are believed to possess attributes such as good financial resources,
satisfactory return on capital, enhanced industry position and superior
management skills.
The Series also 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
issuer at predetermined time(s), price(s) or price formula. A convertible
security entitles the owner to receive interest paid or accrued on a debt
security or dividends paid on preferred stock until the security matures or is
converted to common stock. Convertible securities have several unique investment
characteristics, such as:
[diamond] higher yields than common stocks but lower yields than comparable
nonconvertible securities;
[diamond] typically less fluctuation in value than the "underlying" common
stock, that is, the common stock that the investor receives if he
converts;
[diamond] the potential for capital appreciation if the market price of the
underlying common stock increases.
The Series will invest only in the 4 highest rating categories of
convertible securities, commonly called "investment grade" securities. If the
Series purchases an investment grade security that loses its investment grade
rating the Series is not required to sell the security. Ratings are established
by nationally recognized statistical rating agencies. Please see the Statement
of Additional Information for a detailed list of rating categories.
The Series may invest up to 35% of its net assets in securities of foreign
(non-U.S.) issuers. The Series may invest in a broad range of foreign
securities, including equity, debt and convertible securities and foreign
government securities.
Issuers may be in established market countries and emerging market countries.
Please refer to the Statement of Additional Information for more detailed
information about these and other investment techniques.
RISKS RELATED TO INVESTMENT STRATEGIES
GENERAL
The Series' primary focus is long-term capital appreciation. The advisor
intends to invest Series assets so that your shares increase in value. However,
the value of the Series' investments that support your share value can decrease
as well as increase. If between the time you purchase shares and the time you
sell shares the value of the Series' investments decreases you will lose money.
The value of the Series' investments can decrease for a number of reasons. For
example, changing economic conditions may cause a decline in the value of many
or even most equity and fixed income investments. Particular industries can face
poor markets for their products or services so that companies engaged in those
businesses do not do as well as companies in other industries. Interest rate
changes may improve prospects for certain types of businesses and they may
worsen prospects for others. To the extent that the Series' investments are
affected by general economic declines, declines in industries, and interest rate
changes that negatively affect the companies in which the Series invests, Series
share values may decline. Share values also can decline if the specific
companies selected for Series investment fail to perform as the advisor expects,
regardless of general economic trends, industry trends, interest rates and other
economic factors.
In addition to these general risks of investing in the Series, there are
several specific risks of investing in the Series that you should note.
To the extent the Series invests in a single investment theme, it may be
more vulnerable to adverse economic, political or regulatory developments than
would be the case if it invested in a broader spectrum of themes, or as compared
to a broadly diversified portfolio.
The successful implementation of the thematic investment strategy used by
the advisor is dependent on the advisor's ability to
[diamond] anticipate emerging market trends;
[diamond] exploit such investment opportunities; and
[diamond] divest such securities at the right time.
96 Phoenix Edge Series Fund
<PAGE>
SMALL MARKET CAPITALIZATION INVESTING
The Series may invest in some smaller companies. Companies with small
capitalization are often companies with a limited operating history or companies
in industries that have recently emerged due to cultural, economic, regulatory
or technological developments. Such developments can have a significant positive
or negative effect on small capitalization companies and their stock
performance. Given the limited operating history and rapidly changing
fundamental prospects, investment returns from smaller capitalization companies
can be highly volatile. Smaller companies may find their ability to raise
capital impaired by their size or lack of operating history. Product lines are
often less diversified and subject to competitive threats. Smaller
capitalization stocks are subject to varying patterns of trading volume and may,
at times, be difficult to sell.
FOREIGN INVESTING
The Series may invest in non-U.S. companies. Investing in the securities of
non-U.S. companies involves special risks and considerations not typically
associated with investing in U.S. companies. These include:
[diamond] differences in accounting, auditing and financial reporting standards;
[diamond] generally higher commission rates on foreign portfolio transactions;
[diamond] differences and inefficiencies in transaction settlement systems;
[diamond] the possibility of expropriation or confiscatory taxation;
[diamond] adverse changes in investment or exchange control regulations;
[diamond] political instability; and
[diamond] potential restrictions on the flow of international capital.
Political and economic uncertainty as well as relatively less public
information about investments may negatively impact the Series' portfolio.
Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility. Additionally,
dividends and interest payable on foreign securities may be subject to foreign
taxes withheld prior to receipt by the Series.
Many of the foreign securities held by the Series will not be registered
with, nor will the issuers of those securities be subject to the reporting
requirements of, the U.S. Securities and Exchange Commission. Accordingly, there
may be less publicly available information about the securities and about the
foreign company or government issuing them than is available about a domestic
company or government entity. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payment positions.
FOREIGN CURRENCY
Portions of the Series' assets may be invested in securities denominated in
foreign currencies. Changes in foreign exchange rates will affect the value of
those securities denominated or quoted in currencies other than the U.S. dollar.
The forces of supply and demand in the foreign exchange markets determine
exchange rates and these forces are in turn affected by a range of economic,
political, financial, governmental and other factors. Exchange rate fluctuations
can affect the Series' net asset value (share price) 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 terms.
Effective January 1, 1999, 11 European countries began converting from their
sovereign currency to the European Union common currency called the "Euro." This
conversion may expose the Series to certain risks, including the reliability and
timely reporting of pricing information of the Series' portfolio holdings. In
addition, one or more of the following may adversely affect specific securities
in the Series' portfolio:
[diamond] known trends or uncertainties related to the Euro conversion that an
issuer reasonably expects will have a material impact on revenues,
expenses or income from its operations;
[diamond] competitive implications of increased price transparency of European
Union markets (including labor markets) resulting from adoption of a
common currency and issuers' plans for pricing their own products and
services in the Euro;
[diamond] issuers' ability to make required information technology updates on a
timely basis, and costs associated with the conversion (including
costs of dual currency operations through January 1, 2002);
[diamond] currency exchange rate risk and derivatives exposure (including the
disappearance of price sources, such as certain interest rate
indices); and
[diamond] potential tax consequences.
The Series may buy and write options and enter into futures contracts and
swap agreements primarily to minimize the risk of other investments it makes for
the Series. These investments may not protect the Series from losses, they may
decrease overall return, and they could, in unusual circumstances, expose the
Series to losses that could be unlimited.
Phoenix Edge Series Fund 97
<PAGE>
If the advisor believes that market conditions are not favorable to the
Series' principal strategies the Series may invest without limit in U.S.
government securities and in money market instruments. When this happens, the
Series may not achieve its investment objective.
IMPACT OF THE YEAR 2000 ISSUE ON SERIES INVESTMENTS
The Year 2000 issue is the result of computer programs being written using 2
rather than 4 digits to define the applicable year. There is the possibility
that some or all of a company's computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. If a company whose securities are held by the Series does not "fix" its
Year 2000 issue, it is possible that its operations and financial results would
be hurt. Also, the cost of modifying computer programs to become Year 2000
compliant may hurt the financial performance and market price of companies whose
securities are held by the Series.
MANAGEMENT OF THE SERIES
THE ADVISOR
Phoenix Investment Counsel, Inc. ("PIC") is the investment advisor to the
Series and is located at 56 Prospect Street, Hartford, CT 06115. PIC also acts
as the investment advisor for 14 other mutual funds, as subadvisor to 3
additional mutual funds and as advisor to institutional clients. As of December
31, 1998, PIC had $23.9 billion in assets under management. PIC has acted as an
investment advisor for over 60 years.
Subject to the direction of the fund's Board of Trustees, PIC is responsible
for managing the Series' investment program and the day-to-day management of the
domestic portion of the Series' portfolio. PIC manages the Series' assets to
conform with the investment policies as described in this prospectus. The Series
pays PIC a monthly investment management fee that is accrued daily against the
value of the Series' net assets at the following rates.
- --------------------------------------------------------------
FIRST NEXT OVER
$250,000,000 $250,000,000 $500,000,000
- --------------------------------------------------------------
Management Fee 0.75% 0.70% 0.65%
- --------------------------------------------------------------
During the Series' last fiscal year, the Series paid total management fees
of $426,848. The ratio of management fees to average net assets for the fiscal
year ended December 31, 1998 was 0.75%.
PORTFOLIO MANAGEMENT
Investment decisions for the Phoenix-Seneca Strategic Theme Series are made
by a team of equity investment professionals.
IMPACT OF THE YEAR 2000 ISSUE ON FUND OPERATIONS
- --------------------------------------------------------------------------------
The Trustees have directed management to ensure that the systems used by
service providers (Phoenix and its affiliates) in support of the funds'
operations be assessed and brought into Year 2000 compliance. Based upon its
assessments, Phoenix determined that it would be required to modify or replace
portions of its software so that its computer systems would properly utilize
dates beyond December 31, 1999. Phoenix management believes that the majority of
these systems are already Year 2000 compliant. Phoenix believes that with
modifications to existing software and conversions to new software, the Year
2000 issue will be mitigated.
Phoenix is utilizing both internal and external resources to reprogram, or
replace, and test the software for Year 2000 modifications. As of June 30, 1999,
Phoenix mission-critical systems have been upgraded and tested for Year 2000
compliance. The total cost to become Year 2000 compliant is not an expense of
the fund and is not expected to have a material impact on the operating results
of Phoenix.
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 (other than
Phoenix-Federated U.S. Government Bond Series), the market value of the
securities loaned may not exceed 25% of the market value of the total assets of
such Series (33-1/3% of the total assets of the Phoenix-Morgan Stanley Focus
Equity Series).
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. Certain restrictions for each Series, as
identified in the Statement of Additional Information, 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
98 Phoenix Edge Series Fund
<PAGE>
ordinary income. The rate of portfolio turnover is not a limiting factor when
the Advisor deems changes appropriate. It is anticipated that the turnover rate
for the Phoenix Research Enhanced Index, Phoenix-Engemann Nifty Fifty,
Phoenix-Seneca Mid-Cap Growth, Phoenix-Oakhurst Growth and Income,
Phoenix-Hollister Value Equity and Phoenix-Schafer Mid-Cap Value Series
generally will not exceed 100%. Although securities for the Phoenix-Seneca
Strategic Theme Series are not purchased for the short-term, the Advisor'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 Advisor'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 (other than the Phoenix-Goodwin Money Market, Phoenix-Engemann Nifty
Fifty, Phoenix-Seneca Mid-Cap Growth, Phoenix-Oakhurst Growth and Income,
Phoenix-Hollister Value Equity, Phoenix-Bankers Trust Dow 30, Phoenix-Federated
U.S. Government Bond, Phoenix-Janus Equity Income, Phoenix-Janus Flexible
Income, Phoenix-Janus Growth, Phoenix-Morgan Stanley Focus Equity, and
Phoenix-Schafer Mid-Cap Value 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 management
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 advisors. The Fund was organized as a Massachusetts business trust on
February 18, 1986. The Fund issues shares of beneficial interest in 21 Series.
The Statement of Additional Information contains a list of the members of
the Board of Trustees and the officers of the Fund.
SHARES OF BENEFICIAL INTEREST
- --------------------------------------------------------------------------------
The Fund currently has 21 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 are fully and completely insulated
from risk.
Phoenix Edge Series Fund 99
<PAGE>
NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value per share of each Series is determined as of the close
of regular trading of the NYSE on days when the NYSE 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.
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 intends to 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 Phoenix-Aberdeen
International and Phoenix-Aberdeen New Asia Series may incur liability for
foreign income and withholding taxes on investment income. The Phoenix-Aberdeen
International and Phoenix-Aberdeen New 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 Phoenix-Aberdeen International and Phoenix-Aberdeen New 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 Phoenix-Duff & Phelps Real Estate Securities Series may be a
nondiversified 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 Phoenix-Duff &
Phelps Real Estate Securities 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 Phoenix-Duff & Phelps Real Estate Securities Series has
rental income or income from the disposition of real property acquired as a
result of a default on securities the Phoenix-Duff & Phelps Real Estate
Securities Series may own, the receipt of such income may adversely affect its
ability to retain its tax status as a regulated investment company.
100 Phoenix Edge Series Fund
<PAGE>
APPENDIX
- --------------------------------------------------------------------------------
A-1 AND P-1 COMMERCIAL PAPER RATINGS
The Phoenix-Goodwin Money Market Series will invest only in commercial paper
which at the date of investment is rated A-1 by S&P or P-1 by Moody's 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 S&P 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 2 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.
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 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.
S&P'S CORPORATE BOND RATINGS
AAA--This is the highest rating assigned by S&P 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.
Phoenix Edge Series Fund 101
<PAGE>
BB-B-CCC-CC--Bonds rated BB, B, CCC are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with terms of the obligation. BB indicates the lowest
degree of speculation and CCC the highest degree of speculation. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
Ability to pay interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be identified
which could assist the obligor in satisfying its debt service requirement.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are in imminent default in payment of interest or principal.
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.
102 Phoenix Edge Series Fund
<PAGE>
PART B
<PAGE>
THE PHOENIX EDGE SERIES FUND
HOME OFFICE: PHOENIX VARIABLE PRODUCTS
101 Munson Street MAIL OPERATIONS ("VPMO"):
Greenfield, Massachusetts P.O. Box 8027
Boston, MA 02266-8027
STATEMENT OF ADDITIONAL INFORMATION
December 20, 1999
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 December 20, 1999, which may
be obtained by calling Variable Products Operations ("VPO") at 800/541-0171, or
by writing to VPMO.
-----------------
TABLE OF CONTENTS
PAGE
----
The Phoenix Edge Series Fund ........................................ 2
Investment Policies ................................................. 2
Investment Restrictions.............................................. 17
Portfolio Turnover................................................... 19
Management of the Fund .............................................. 19
The Investment Advisors ............................................. 25
Custodian ........................................................... 29
Foreign Custodian ................................................... 30
Independent Accountants ............................................. 30
Brokerage Allocation ................................................ 30
Determination of Net Asset Value .................................... 31
Investing In the Fund ............................................... 31
Redemption of Shares ................................................ 32
Taxes ............................................................... 32
Disclaimer........................................................... 32
Financial Statements ................................................ 33
1
<PAGE>
THE PHOENIX EDGE SERIES FUND
- --------------------------------------------------------------------------------
The Phoenix Edge Series Fund (the "Fund") is an open-end, diversified
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. Shares in each Series of the Fund are available
only to certain insurance company separate accounts.
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 PHL Variable Universal Life Account is a separate account of PHL
Variable formed on September 10, 1998.
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, P.O. Box 5056, Hartford, Connecticut 06102-5056.
The Accounts own the majority of the shares of the Fund.
INVESTMENT POLICIES
The investment objectives and policies of the Series are described in each
Series' "Investment Risk and Return Summary" and "Investment Strategies"
sections. The following supplements the information contained in those sections.
MONEY MARKET INSTRUMENTS
Certain money market instruments used extensively by the Phoenix-Goodwin
Money Market, Phoenix-Federated U.S. Government Bond and Phoenix-Oakhurst
Strategic Allocation Series are described below. They also may be used by the
Phoenix-Aberdeen International, Phoenix-Duff & Phelps Real Estate Securities,
Phoenix-Seneca Strategic Theme, Phoenix Research Enhanced Index and
Phoenix-Aberdeen New 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. The Phoenix-Morgan Stanley Focus Equity Series may invest up
to 100% of its assets in cash and certain short- and medium-term fixed income
securities for temporary 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 accounts 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 7 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 1 to 7 years, and Treasury bonds generally have maturity of
greater than 5 years.
Agencies of the United States Government which issue or guarantee
obligations include, among others, Export-Import Bank of the United States,
Farmers Home Administration, Federal Housing Administration, Government National
Mortgage Association, Maritime Administration, Small Business Administration and
The Tennessee Valley Authority. Obligations of instrumentalities of the United
States Government include securities issued or guaranteed by, among others, the
Federal National Mortgage Association, Federal Home Loan Banks, Federal Home
Loan Mortgage Corporation, Federal Intermediate Credit Banks, Banks for
Cooperatives and the U.S. Postal Service. Securities issued or guaranteed by the
Export-Import Bank of the United States, Farmers 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
2
<PAGE>
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
negotiable certificates are 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 6 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 9 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 Phoenix-Goodwin Money Market Series' investments will mature in
397 days or less and will have a weighted average age of not more than 90 days.
By limiting the maturity of its investments, the Series seeks to lessen the
changes in the value of its assets caused by market factors. This Series,
consistent with its investment objective, will attempt to maximize yield through
portfolio trading. This may involve selling portfolio instruments and purchasing
different instruments to take advantage of disparities of yields in different
segments of the high grade money market or among particular instruments within
the same segment of the market. It is expected that the Series' portfolio
transactions 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 Phoenix-Goodwin 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 Phoenix-Goodwin 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."
PHOENIX-OAKHURST STRATEGIC ALLOCATION SERIES: MARKET
SEGMENT INVESTMENTS AND TRADING
Market Segment Investments. The Phoenix-Oakhurst Strategic Allocation Series
seeks to achieve its investment objective by investing in the 3 market segments
of stocks, bonds and money market instruments described below.
[diamond] STOCK--common stocks and other equity-type securities such as
preferred stocks, securities convertible into common stock and
warrants;
[diamond] BONDS--bonds and other debt securities with maturities generally
exceeding one year, including:
[bullet] publicly-offered straight debt securities having a rating
within the 4 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;
[bullet] obligations issued, sponsored, assumed or guaranteed as to
principal and interest by the U.S. Government or its agencies
or instrumentalities;
[bullet] 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 Phoenix-Oakhurst Strategic Allocation Series'
total assets;
[bullet] 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 3 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
[bullet] 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
Phoenix-Oakhurst Strategic Allocation Series' total assets.
3
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[diamond] MONEY MARKET--money market instruments and other debt securities with
maturities generally not exceeding one year, including:
[bullet] those money market instruments described in this Statement of
Additional Information; and
[bullet] 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
asset coverage of at least 300% at all times 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 Phoenix-Oakhurst Strategic 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 advisor 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 advisor's ability to
evaluate particular securities and anticipate relevant market factors, including
interest rate trends and variations. Such trading places a premium on the
advisor's ability to obtain relevant information, evaluate it properly and take
advantage of its evaluations by completing transactions on a favorable basis. If
the advisor'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 advisor believes that the result of the trading, net
of transaction costs, will benefit the Series. Purchases and sales of securities
will be made, whenever necessary in the advisor'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 Phoenix-Oakhurst Strategic Allocation
Series may enter into financial futures and options contracts.
PHOENIX RESEARCH ENHANCED INDEX SERIES
The investment strategy of the Phoenix Research Enhanced Index Series is to
earn a total return modestly in excess of the total return performance of the
S&P 500 (including the reinvestment of dividends) while maintaining a volatility
of return similar to the S&P 500. The Series is appropriate for investors who
seek a modestly enhanced total return relative to that of large- and
medium-sized U.S. companies typically represented in the S&P 500. The portfolio
intends to invest in securities of approximately 350 issuers, which securities
are rated by the Series' subadvisor to have above-average expected returns.
The Series seeks to achieve its investment objective through fundamental
analysis, systematic stock valuation and disciplined portfolio construction.
[diamond] Fundamental research: The subadvisors of the Series--approximately 25
domestic equity analysts, each an industry specialist with an average
of approximately 12 years experience, follow over 900 predominantly
large- and medium-sized U.S. companies--approximately 550 of which
form the universe for the Series' investments. A substantial majority
of these companies are issuers of securities which are included in the
S&P 500. The analysts' research goal is to forecast normalized,
longer-term earnings and dividends for the companies that they cover.
[diamond] Systematic valuation: The analysts' forecasts are converted into
comparable expected returns by a dividend discount model, which
calculates those expected returns by solving for the rate of return
that equates the company's current stock price to the present value of
its estimated long-term earnings power. Within each sector, companies
are ranked by their expected return and grouped into quintiles; those
with the highest expected returns (Quintile 1) are deemed the most
undervalued relative to their long-term earnings power, while those
with the lowest expected returns (Quintile 5) are deemed the most
overvalued.
[diamond] Disciplined portfolio construction: A diversified portfolio is
constructed using disciplined buy and sell rules. Sector weightings
will generally approximate those of the S&P 500. The Series will
normally be principally comprised, based on the dividend discount
model, of stocks in the first 4 quintiles. Finally, the Series holds a
large number of stocks to enhance its diversification.
Under normal market circumstances, the Series' advisor will invest at least
80% of its net assets in equity securities consisting of common stocks and other
securities with equity characteristics such as trust interests, limited
partnership interests, preferred stocks, warrants, rights and securities
convertible into common stock. The Series' primary equity investments will be
the common stock of large- and medium-sized U.S. companies with market
capitalizations above $1 billion. Such securities will be listed on a national
securities exchange or traded in the over-the-counter market. The Series may
invest in similar securities of foreign corporations, provided that the
securities of such corporations are included in the S&P 500.
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The Series intends to manage its portfolio actively in pursuit of its
investment objective. Since the Series has a long-term investment perspective,
it does not intend to respond to short-term market fluctuations or to acquire
securities for the purpose of short-term market fluctuations or to acquire
securities for the purpose of short-term trading; however, it may take advantage
of short-term trading opportunities that are consistent with its objective.
FINANCIAL FUTURES AND RELATED OPTIONS
The Phoenix-Oakhurst Strategic Allocation, Phoenix-Hollister Value Equity,
Phoenix-Oakhurst Growth and Income, Phoenix-Seneca Mid-Cap Growth,
Phoenix-Federated U.S. Government Bond, Phoenix-Janus Equity Income,
Phoenix-Janus Flexible Income, Phoenix-Janus Growth, Phoenix-Morgan Stanley
Focus Equity and Phoenix-Oakhurst Balanced 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, a 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 a 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. A 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,
a Series might take a "long" position by entering into contracts for the future
purchase of securities. This could be done when the Series anticipates 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.
A 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 a Series is subject, where applicable, to the advisor's or
subadvisor's ability to correctly predict movements in the direction of interest
rates and other factors affecting the market for debt securities. Thus, while a
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.
A 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. The Phoenix-Morgan Stanley Focus Equity Series will limit
its use of all derivative products, including futures contracts, for non-hedging
purposes to 33-1/3% of its total assets measured by the aggregate notional
amount of outstanding derivative products. A futures contract for the receipt of
a debt obligation will be offset by any asset, including equity securities and
noninvestment 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.
Phoenix-Aberdeen International, Phoenix Research Enhanced Index,
Phoenix-Hollister Value Equity, Phoenix-Seneca Mid-Cap Growth, Phoenix-Oakhurst
Growth and Income, Phoenix-Federated U.S. Government Bond, Phoenix-Janus Growth,
Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income, Phoenix-Morgan
Stanley Focus Equity and Phoenix-Aberdeen New Asia Series. Each of these 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
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or sell 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. The
Phoenix-Morgan Stanley Focus Equity series may also enter into financial futures
contracts for non-hedging purposes to further the Series' investment objective
and enhance returns. The Series, however, will not use financial, futures
contracts or other derivative products in a manner that creates leverage, except
to the extent expressly permitted by the Series' investment policies.
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 2
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.
Each Series may purchase and sell financial futures contracts which are
traded on a recognized exchange or board of trade and may purchase or sell put
and call options on financial futures contracts.
Each Series other than the Phoenix-Morgan Stanley Focus Equity Series, will
engage in transactions in financial futures contracts and related options
primarily for hedging purposes. The Phoenix-Morgan Stanley Focus Equity Series
will limit its use of derivative products, including financial futures contracts
and related options, for non-hedging purposes to 33-1/3% of its total assets
measured by the aggregate notional amount of outstanding derivative products. In
addition, each Series will not purchase or sell any financial futures contract
or related option for purposes other than bona fide hedging. 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
(contracts and options relating to the Series' non-bona fide hedging
activities). At the time of the purchase of a futures contract or a call option
on a futures contract, any asset --either 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 (the "Code") 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 advisor or
subadvisor 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 the futures transaction 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.
The Phoenix-Seneca Strategic Theme and Phoenix-Bankers Trust Dow 30 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 2 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, to a considerable extent, a decline in the market value
of securities in a Series' portfolio may be protected against 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 buy in the
future by purchasing futures contracts.
The Phoenix-Seneca Strategic Theme and Phoenix-Bankers Trust Dow 30 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, 3-month U.S. Treasury bills and GNMA
certificates. Securities index futures contracts are currently traded with
respect to the S&P 500. A clearing corporation associated with the New York
Stock Exchange ("NYSE") or board of trade on which
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a financial futures contract trades assumes responsibility for the completion of
transactions and 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. In the case of a call, this amount will be equal to the amount by which
the market price of the futures contract at the time of exercise exceeds, or, in
the case of a put, is less than 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.
A 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
PHOENIX-GOODWIN MONEY MARKET, PHOENIX-ENGEMANN CAPITAL GROWTH,
PHOENIX-OAKHURST BALANCED, PHOENIX-ABERDEEN INTERNATIONAL, PHOENIX-GOODWIN
MULTI-SECTOR FIXED INCOME, PHOENIX-OAKHURST STRATEGIC ALLOCATION, PHOENIX-SENECA
STRATEGIC THEME, PHOENIX RESEARCH ENHANCED INDEX, PHOENIX-SENECA MID-CAP GROWTH,
PHOENIX-OAKHURST GROWTH AND INCOME, PHOENIX-HOLLISTER VALUE EQUITY,
PHOENIX-MORGAN STANLEY FOCUS EQUITY, PHOENIX-JANUS GROWTH, PHOENIX-JANUS EQUITY
INCOME, PHOENIX-JANUS FLEXIBLE INCOME, PHOENIX-FEDERATED U.S. GOVERNMENT BOND
AND PHOENIX-ABERDEEN NEW ASIA SERIES:
Writing Covered Call Options. These Series may write (sell) covered call
options on securities owned by them, including securities into which convertible
securities are convertible, provided that such call options are listed on a
national securities exchange.
A call option gives the holder the right to buy a security at a specified
price (the exercise price) for a stated period of time. Prior to the expiration
of the option, the seller of the option has an obligation to sell the underlying
security to the holder of the option at the original price specified regardless
of the market price of the security at the time the option is exercised. The
seller of the call option receives a cash payment (premium) at the time of sale,
which premium is retained by the seller whether or not the option is exercised.
The premium represents consideration to the seller for undertaking the
obligations under the option contract and thereby foregoing the opportunity to
profit from an increase in the market price of the underlying security above the
exercise price (except insofar as the premium represents such a profit).
A call option may be purchased to terminate a call option previously
written. The premium paid in connection with the purchase of a call option may
be more than, equal to or less than the premium received upon writing the call
option which is being terminated.
When a Series writes a covered call option, an amount equal to the premium
received by it is included in assets of the Series offset by an equivalent
liability. The amount of the liability is subsequently marked to reflect the
current market value of the written option. Market value is the last sale price
of the options on the NYSE 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 ends 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 concludes.
Premium income earned with respect to a qualified covered call option which
lapses or experiences gain or loss from such an option which is closed out
(other than by
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exercise) generally will be short-term capital gain or loss. Further, gain or
loss with respect to the exercise of such an option 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 less than the applicable security
price (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 an outstanding written option.
Buying Call and Put Options. The Phoenix-Oakhurst Strategic Allocation,
Phoenix-Oakhurst Balanced, Phoenix Research Enhanced Index, Phoenix-Hollister
Value Equity, Phoenix-Oakhurst Growth and Income, Phoenix-Seneca Mid-Cap Growth,
Phoenix-Morgan Stanley Focus Equity, Phoenix-Janus Growth, Phoenix-Janus Equity
Income, Phoenix-Janus Flexible Income, Phoenix-Federated U.S. Government Bond
and Phoenix-Seneca Strategic Theme Series may buy national exchange-traded call
and put options on equity and debt securities and on various stock market
indices. The Phoenix-Goodwin Money Market, Phoenix-Engemann Capital Growth and
Phoenix-Goodwin Multi-Sector Fixed Income Series may only purchase a call option
to terminate a previously-written call option. (See "Writing Covered 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 and 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 and 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 or premium at the time of
sale which is retained by the seller whether or not the option is exercised.
This 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.
Immediately after entering into an opening option position, the total value
of all open option positions based on exercise price will not exceed 10% of the
Phoenix-Oakhurst Strategic Allocation or Phoenix-Oakhurst 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 the cost of the put or call
option.
PHOENIX-ABERDEEN INTERNATIONAL, PHOENIX-SENECA STRATEGIC THEME, PHOENIX
RESEARCH ENHANCED INDEX, PHOENIX-SENECA MID-CAP GROWTH, PHOENIX-HOLLISTER VALUE
EQUITY, PHOENIX-OAKHURST GROWTH AND INCOME, PHOENIX-MORGAN STANLEY FOCUS EQUITY,
PHOENIX-JANUS GROWTH, PHOENIX-JANUS EQUITY INCOME, PHOENIX-JANUS FLEXIBLE
INCOME, PHOENIX-FEDERATED U.S. GOVERNMENT BOND AND PHOENIX-ABERDEEN NEW ASIA
SERIES:
To promote their objectives, these Series may write covered call and put
options and purchase call and put options on securities and securities indices.
In addition, the Series may 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.
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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, securities indices and 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 may be written 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,
other than the Phoenix-Morgan Stanley Focus Equity 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 Phoenix-Morgan Stanley Focus Equity Series
will limit its use of derivative products, including options, for non-hedging
purposes to 33-1/3% of its total assets measured by the aggregate notional
amount of outstanding derivative products.
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
Phoenix-Aberdeen International, Phoenix-Seneca Strategic Theme, Phoenix Research
Enhanced Index, Phoenix-Oakhurst Growth and Income, Phoenix-Morgan Stanley Focus
Equity, Phoenix-Janus Growth, Phoenix-Janus Equity Income, Phoenix-Janus
Flexible Income and Phoenix-Aberdeen New 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, securities indices and foreign currencies (the
Phoenix-Morgan Stanley Focus Equity Series will be subject to the 33-1/3%
derivatives limitation for non-hedging purposes discussed in the preceding
section). 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 may invest in call and put options whenever, in the
opinion of the advisor or subadvisor, 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 Phoenix-Aberdeen International,
Phoenix-Seneca Strategic Theme, Phoenix Research Enhanced Index,
Phoenix-Oakhurst Growth and Income and Phoenix-Aberdeen New Asia Series intend
to invest up to 5% of their respective 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 NYSE or the American Stock Exchange.
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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 nonperformance by the
dealer. However, the premium is paid in advance by the dealer. OTC options are
available for a greater variety of securities and foreign currencies, and in a
wider range of expiration dates and exercise prices than exchange-traded
options. Since there is no exchange, pricing is normally done by reference to
information from a market maker. This information is carefully monitored or
caused to be monitored by the advisor or subadvisor 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, a 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 a 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 ("SEC") to be that purchased OTC options and the assets used
as "cover" for written OTC options are illiquid securities. Although the dealers
with which a Series 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 Series.
A Series 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 advisor believe that the approved dealers present minimal
credit risks to the Fund and, therefore, should be able to enter into closing
transactions if necessary. A Series currently will not engage in OTC options
transactions if the amount invested by the Series in OTC options, plus a
"liquidity charge" related to OTC options written by the Series in illiquid
securities plus any other portfolio securities considered to be illiquid, would
exceed 10% of the Series' total assets (15% of the net assets of the
Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income, Phoenix-Janus Growth
and Phoenix-Morgan Stanley Focus Equity Series). The "liquidity charge" referred
to above is computed as described below.
The Series anticipates entering into agreements with dealers to which the
Series sells OTC options. Under these agreements a Series 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 a Series to repurchase a specific OTC
option written by the Series, the "liquidity charge" will be the current market
value of the assets serving as "cover" for such OTC option.
FOREIGN SECURITIES
The Phoenix-Aberdeen International and Phoenix-Aberdeen New Asia Series will
purchase foreign securities as discussed above. In addition, the other Series
may invest up to 25% (up to 35% for the Phoenix-Seneca Strategic Theme Series,
20% for the Phoenix-Seneca Mid-Cap Growth and Phoenix-Schafer Mid-Cap Value
Series and typically less than 5% for the Phoenix-Engemann Nifty Fifty Series)
of total net asset value in foreign securities. The Phoenix-Goodwin Multi-Sector
Fixed Income Series may invest up to 50% of total net asset value in foreign
debt securities. Each Series, other than the Phoenix-Aberdeen International,
Phoenix-Seneca Strategic Theme, Phoenix-Goodwin Multi-Sector Fixed Income,
Phoenix-Morgan Stanley Focus Equity and Phoenix-Aberdeen New Asia Series, will
purchase foreign debt securities only if issued in U.S. dollar denominations.
The Phoenix Research Enhanced Index Series may invest in securities of foreign
corporations, provided that such securities are included in the S&P 500 or
traded on a U.S. exchange. The Phoenix-Morgan Stanley Focus Equity,
Phoenix-Janus Growth, Phoenix-Janus Equity Income and Phoenix-Janus Flexible
Income Series may invest 100% of total net asset value in foreign securities,
although such would be a very unlikely event.
The foreign debt securities in which the Series may invest are issued by
foreign issuers in developed countries considered creditworthy by the advisor or
subadvisor, as applicable, and in so-called emerging market countries. The
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Series will invest in government obligations supported by the authority to levy
taxes sufficient to ensure the payment of all principal and interest due on such
obligations. Because foreign government obligations, like U.S. government
obligations, are generally guaranteed for principal and interest by the
government issuing the security, the principal risk of investing in foreign
government obligations is that the foreign government will not or will be unable
to meet its obligations. The Series also may purchase securities of
nongovernmental issuers considered creditworthy by the advisor or subadvisor, as
applicable.
While the Phoenix-Aberdeen International, Phoenix-Janus Equity Income,
Phoenix-Janus Flexible Income, Phoenix-Janus Growth, Phoenix-Seneca Strategic
Theme, Phoenix-Goodwin Multi-Sector Fixed Income and Phoenix-Aberdeen New Asia
Series may purchase foreign debt securities denominated in foreign currencies
("non-U.S. dollar securities"), the amount invested in such non-U.S. dollar
securities may vary depending on the relative yield of such securities, the
relative strength of the economies and the financial markets of such countries,
the relative interest rates available in such countries and the relationship of
such countries' currencies to the U.S. dollar. Investments in non-U.S. dollar
securities and currency will be evaluated on the basis of fundamental economic
criteria (e.g., relative inflation levels and trends, growth rate forecasts,
balance of payments status, and economic policies) as well as technical and
political data.
FOREIGN CURRENCY TRANSACTIONS
For each Series investing in foreign securities, the value of the assets of
such 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 or exposed to a foreign currency, it may want to establish the
United States dollar cost or proceeds. 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
Phoenix-Aberdeen International, Phoenix-Morgan Stanley Focus Equity,
Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income, Phoenix-Janus Growth
and Phoenix-Aberdeen New Asia Series also may hedge their foreign currency
exchange rate risk by engaging in currency financial futures and options
transactions.
When the advisor or subadvisor 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 or exposed to such foreign currency. The forecasting
of short-term currency market movement is extremely difficult and whether such a
short-term hedging strategy will be successful is highly uncertain.
It is impossible to forecast with precision the market value of portfolio
securities at the expiration of a contract. Accordingly, it may be necessary for
a Series to purchase additional currency on the spot market (and bear the
expense of such purchase) if the market value of the security is less than the
amount of foreign currency the Series is obligated to deliver when a decision is
made to sell the security and make delivery of the foreign currency in
settlement of a forward contract. Conversely, it may be necessary to sell on the
spot market some of the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency the Series
is obligated to deliver.
If the Series retains the portfolio security and engages in an offsetting
transaction, it will incur a gain or a loss 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.
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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 Phoenix-Goodwin Multi-Sector Fixed Income, Phoenix-Janus Growth,
Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income, Phoenix-Morgan
Stanley Focus Equity, Phoenix-Federated U.S. Government Bond and Phoenix-Seneca
Mid-Cap Growth 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, under normal conditions, the Phoenix-Duff &
Phelps Real Estate Securities Series intends 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:
[diamond] 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.
[diamond] Mortgage REITs, which invest the majority of their assets in real
estate mortgages and derive their income primarily from interest
payments.
[diamond] 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 Phoenix-Duff & Phelps Real Estate Securities
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 Phoenix-Duff & Phelps Real Estate Securities Series total
assets may be invested in debt securities (which include for purposes of this
investment policy convertible debt securities which Duff & Phelps Investment
Management ("DPIM") believes have attractive equity characteristics). The
Phoenix-Duff & Phelps Real Estate Securities Series may invest in debt
securities rated BBB or better by S&P or Baa or better by Moody's or, if not
rated, are judged to be of comparable quality as determined by DPIM. In choosing
debt securities for purchase by the Series, DPIM will employ the same analytical
and valuation techniques utilized in managing the equity portion of the
Phoenix-Duff & Phelps Real Estate Securities Series holdings and will invest in
debt securities only of companies that satisfy DPIM's investment criteria.
The value of a 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.
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 specific 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 then the
underlying stock since they have fixed income characteristics and (3) the
potential for capital appreciation if the market price of the underlying common
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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 Phoenix-Goodwin Money Market, Phoenix-Duff & Phelps Real Estate
Securities, Phoenix-Aberdeen International, Phoenix-Seneca Strategic Theme,
Phoenix Research Enhanced Index, Phoenix-Engemann Nifty Fifty, Phoenix-Seneca
Mid-Cap Growth, Phoenix-Schafer Mid-Cap Value, Phoenix-Oakhurst Growth and
Income, Phoenix-Hollister Value Equity, Phoenix-Federated U.S. Government Bond,
Phoenix-Janus Growth, Phoenix-Janus Equity Income, Phoenix-Janus Flexible
Income, Phoenix-Morgan Stanley Focus Equity and Phoenix-Aberdeen New Asia Series
may invest in repurchase agreements. However, no more than 10% of a Series' net
assets (15% with respect to Phoenix-Janus Growth, Phoenix-Janus Equity Income,
Phoenix-Janus Flexible Income, Phoenix-Morgan Stanley Focus Equity and
Phoenix-Federated U.S. Government Bond Series) will be invested in repurchase
agreements having maturities of more than 7 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 advisor or subadvisor, as
applicable, acting at the Board's direction, to be creditworthy. In addition,
the repurchase agreements are 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.
JUNK BONDS
The Phoenix-Janus Flexible Income, Phoenix-Goodwin Multi-Sector Fixed
Income, Phoenix-Janus Equity Income, Phoenix-Janus Growth, Phoenix-Aberdeen
International, Phoenix-Morgan Stanley Focus Equity and Phoenix-Oakhurst
Strategic Allocation Series may invest up to 100%, 50%, 35%, 35%, 10%, 5% and
5%, respectively, of total net assets in noninvestment 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. A more detailed description of the
risks associated with High Yield-High Risk Securities appears under
"Phoenix-Goodwin Multi-Sector Fixed Income Series - Risk Factors" in the
Prospectus.
REAL ESTATE SECURITIES
The Phoenix-Duff & Phelps Real Estate Securities 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, overbuilding, 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-liquidation and the possibility of failing to qualify for tax-free status
of income under the Code and failing to maintain exemption from the Investment
Company Act of 1940. In the event of a default by a borrower or lessee, the REIT
may experience delays in enforcing its rights as a mortgagee or lessor and may
incur substantial costs associated with protecting its investments. In addition,
investment in REITs could cause the Series to possibly fail to qualify as a
regulated investment company.
EMERGING MARKET SECURITIES
The Phoenix-Aberdeen New 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
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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
advisor to be an emerging market as defined above. The Series also may invest in
securities of: (i) companies where the principal securities trading market 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 ownership or 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 of 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 advisor believes that the applicable
rate is unfavorable at the time the currencies are received or the advisor
anticipates, for any other reason, that the NYSE 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 into which it has
entered. 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 advisor, it is in the best interest
of the Series to do so. In such instances as well, the Series may convert the
foreign 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. In 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.
LEVERAGE
The Phoenix-Seneca Strategic Theme, Phoenix-Hollister Value Equity,
Phoenix-Seneca Mid-Cap Growth, Phoenix-Morgan Stanley Focus Equity and Phoenix
Research Enhanced Index Series may, from time to time, increase their ownership
of securities holdings above the amounts otherwise possible by borrowing from
banks at fixed amounts of interests and investing the borrowed funds. The Series
will borrow only from banks, and only if
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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 3 times the amount of funds borrowed for investment
purposes. The Series, other than the Phoenix-Morgan Stanley Focus Equity Series,
may borrow up to 25% of the net assets of such Series, not including the
proceeds of any such borrowings. The Phoenix-Morgan Stanley Focus Equity Series
may borrow up to 33-1/3% of its total assets (including the amount borrowed)
less liabilities. 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 3 times the amount of the borrowings for
investment purposes, the Series, within 3 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.
An investment gains made with the additional monies borrowed in excess of
interest paid will cause the net assets 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.
Phoenix-Schafer Mid-Cap Value, Phoenix-Oakhurst Growth and Income and
Phoenix-Engemann Nifty Fifty Series may not borrow except for emergency or other
extraordinary purposes, only from a bank, and only in an amount not to exceed 5%
of the Series' total assets (33-1/3% in the case of Phoenix-Oakhurst Growth and
Income Series). These Series must also maintain a 300% asset coverage ratio.
Phoenix-Schafer Mid-Cap Value Series may collateralize any such borrowings with
up to 10% of its total assets; Phoenix-Oakhurst Growth and Income Series may
collateralize any such borrowing with up to 33-1/3% of its total assets.
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, ads amended (the "1933 Act"). Public sales of such
securities by a Series may involve significant delays and expense. Private sales
often require negotiation with one or more purchasers and may produce less
favorable prices than the sale of similar unrestricted securities. Public sales
generally involve the time and expense of the preparation and processing of a
registration statement under the 1933 Act (and the possible decline in value of
the securities during such period) and may involve the payment of underwriting
commissions. In some instances, the 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' illiquid securities 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 Phoenix-Goodwin Multi-Sector Fixed Income, Phoenix-Duff & Phelps Real
Estate Securities, Phoenix-Janus Flexible Income and Phoenix-Seneca Mid-Cap
Growth 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, semiannually. CMOs may be collateralized by whole
mortgage loans but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by Government National Mortgage Association
(GNMA), for 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
15
<PAGE>
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 results 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 repayments 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 then 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 (other than
Phoenix-Engemann Nifty Fifty 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 Phoenix-Aberdeen New 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.
WHEN-ISSUED SECURITIES
The Phoenix Research Enhanced Index, Phoenix-Federated U.S. Government Bond,
Phoenix-Janus Growth, Phoenix-Janus Equity Income, Phoenix-Janus Flexible
Income, Phoenix-Morgan Stanley Focus Equity and Phoenix-Seneca Mid-Cap Growth
Series may purchase securities on a when-issued basis. New issues of certain
securities are offered on a when-issued basis, that is, delivery and payment for
the securities normally takes place 15 to 45 days or more after the date of the
commitment to purchase. The payment obligation and the interest rate, if any,
that will be received on the securities are each fixed at the time the buyer
enters into the commitment. The Series will generally make a commitment to
purchase such securities with the intention of actually acquiring the
securities. However, the Series may sell these securities before the settlement
date if it is deemed advisable as a matter of investment strategy. When the
Series purchases securities on a when-issued basis, cash or liquid securities
equal in value to commitments for the when-issued securities will be deposited
in a segregated account with the Series' custodian
16
<PAGE>
bank. Such segregated securities either will mature or, if necessary, be sold on
or before the settlement date.
Securities purchased on a when-issued basis are subject to changes in market
value. Therefore, to the extent the Series remains substantially fully invested
at the same time that they have purchased securities on a when-issued basis,
there will be greater fluctuations in the net asset values than if the Series
merely set aside cash to pay for when-issued securities. In addition, there will
be a greater potential for the realization of capital gains. When the time comes
to pay for when-issued securities, the Series will meet its obligations from
then available cash flow, the sales of securities or, although it would not
normally expect to do so, from the sale of the when-issued securities themselves
(which may have a value greater or less than the payment obligation). Lastly,
investing in when-issued securities includes the risk that the securities may
never be issued, in which event the Series may incur expenses associated with
unwinding such transactions.
STRUCTURED NOTES
The Phoenix-Morgan Stanley Focus Equity Series may use Structured Notes.
These are derivative securities for which the amount of principal repayment
and/or interest payments is based upon the movement of one or more "factors."
They include, but are not limited to, currency exchange rates. interest rates
(such as the prime lending rate and LIBOR) and stock indices, such as the S&P
500. In some cases, the impact of the movements of these factors may increase or
decrease through the use of multipliers or deflators.
Structured Notes may be designed to have particular quality and maturity
characteristics and may vary from money market quality to below investment
grade. Depending on the factor used and the use of multipliers or deflators,
however, changes in interest rates and movement of the factor may cause
significant price fluctuations or may cause particular Structured Notes to
become illiquid. The Series will use Structured Notes to tailor its investments
to the specific risks and returns the subadvisor wishes to accept while avoiding
or reducing certain other risks.
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;
provided, however, that restrictions (6) through (9) and (13) below, although
applicable to the Phoenix-Morgan Stanley Focus Equity Series, will not be
treated as fundamental restrictions of that Series and may be changed without
shareholder approval. 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 Phoenix-Duff & Phelps Real Estate Securities and the
Phoenix-Federated U.S. Government Bond 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 Phoenix-Oakhurst Strategic Allocation,
Phoenix-Oakhurst Balanced, Phoenix-Hollister Value Equity,
Phoenix-Oakhurst Growth and Income, Phoenix-Morgan Stanley Focus
Equity, Phoenix-Federated U.S. Government Bond and Phoenix-Seneca
Mid-Cap Growth 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
Phoenix-Aberdeen International, Phoenix-Morgan Stanley Focus Equity and
Phoenix-Aberdeen New 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
17
<PAGE>
securities which it has acquired. The Phoenix-Aberdeen International
and Phoenix-Aberdeen New 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, and except that the Phoenix-Morgan Stanley
Focus Equity Series may borrow from banks in an amount not to exceed
33-1/3% of its total assets (including the amount borrowed) in
accordance with its investment objective and policies. 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 Phoenix-Oakhurst
Strategic Allocation, Phoenix-Aberdeen International, Phoenix-Morgan
Stanley Focus Equity, Phoenix-Federated U.S. Government Bond and
Phoenix-Aberdeen New Asia Series may borrow money to the extent of
financial futures transactions and reverse repurchase agreements,
provided that such borrowings are limited to 33-1/3% of the value of
the total assets of the Series.
(6) Invest in 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 options futures and swap 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 SEC or of a plan of reorganization, purchase or
otherwise acquire any security issued by an investment company if the
Series would immediately thereafter own (a) more than 3% of the
outstanding voting stock of the investment company, (b) securities of
the investment company having an aggregate value in excess of 5% of the
Series' total assets, (c) securities of investment companies having an
aggregate value in excess of 10% of the Series' total assets or (d)
together with investment companies having the same investment advisor
as the Fund (and companies controlled by such investment companies),
more than 10% of the outstanding voting stock of any registered
closed-end investment company, except that the Phoenix-Federated U.S.
Government Bond Series may invest without limit in the securities of
money market investment companies, including affiliated investment
companies.
(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
Phoenix-Aberdeen International and Phoenix-Aberdeen New Asia Series,
other than foreign government securities) or, with respect to the
Phoenix-Oakhurst Strategic Allocation and Phoenix-Oakhurst Balanced
Series, call or put options contracts and financial futures contracts
of any one issuer (including repurchase agreements with any one bank);
nor (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 Phoenix-Duff & Phelps Real Estate Securities
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 Phoenix-Aberdeen
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. The
above restrictions will apply only to securities comprising 75% of the
value of the total assets with respect to the Phoenix-Bankers Trust Dow
30, Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income,
Phoenix-Janus Growth and Phoenix-Morgan Stanley Focus Equity Series.
(11) Concentrate the portfolio investments in any one industry (the
foregoing restriction being inapplicable to the Phoenix-Duff & Phelps
Real Estate Securities 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 Series' total
assets. However, the Phoenix-Goodwin Money Market Series and
Phoenix-Oakhurst Strategic Allocation Series may invest more than 25%
of their assets in the banking industry. The Phoenix-Duff & Phelps Real
Estate Securities Series may invest not less than 75% of its assets in
the real estate industry. Government securities, municipal bonds and
bank instruments shall not be considered an industry.
(12) Issue senior securities.
(13) Enter into repurchase agreements which would cause more than 10% (15%
with respect to the
18
<PAGE>
Phoenix-Federated U.S. Government Bond, Phoenix-Janus Equity Income,
Phoenix-Janus Flexible Income, Phoenix-Janus Growth and Phoenix-Morgan
Stanley Focus Equity Series) of any Series' net assets (taken at market
value) to be subject to repurchase agreements maturing in more than 7
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. The portfolio turnover rates for each
Series (other than the Phoenix-Goodwin Money Market, Phoenix-Bankers Trust Dow
30, Phoenix-Janus Equity Income, Phoenix-Janus Flexible Income, Phoenix-Janus
Growth, Phoenix-Federated U.S. Government Bond and Phoenix-Morgan Stanley Focus
Equity Series) are set forth under "Financial Highlights" in the Prospectus.
MANAGEMENT OF THE FUND
On November 22, 1999 pursuant to a proxy sent to all shareholders of record
of The Phoenix Edge Series Fund, the Fund shareholders elected an entirely new
Board of Trustees.
These 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 56 Prospect Street,
Hartford, Connecticut 06115. 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>
Eunice S. Groark (61) Trustee Director, Member Audit Committee and Executive Committee, Chair, Trust
35 Saddleridge Drive Committee, Peoples Bank, CT (since 1995). Visiting Professor in
Bloomfield, CT 06002 Government, Wesleyan University (since 1997). Columnist,
Journal-Inquirer (since 1995). Fellow, Institute of Politics, Kennedy
School, Harvard University (1996). Adjunct Professor, Hartford College
for Women, University of Hartford (1996). Lieutenant Governor of the
State of Connecticut (1991-1995).
John A. Fabian (65) Trustee Retired; previously Chief Investment Officer, Home Life Insurance
497 Hensler Lane Company (1982-1992); Executive Vice President, Investment Department,
Oradell, NJ 07649 Phoenix Home Life Mutual Insurance Company (1992-1994).
Timothy P. Shriver (40) Trustee Chair, Collaborative for the Advancement of Social and Emotional
Special Olympics Inc. Learning. Co-Chair, Advisory Panel on Youth Service for General Colin
1325 G Street NW, Suite 500 Powell's "America's Promise"--The President's Summit on Youth. Director
Washington, DC 20005 Chair, The Shriver Center National Advisory Board, The University of
Maryland Baltimore County (since 1996). Director, The John F. Kennedy
Library Foundation (since 1993). Director, Amistad America, Inc. (since
1998). Director, Education Compact for Learning & Citizenship (since
1998). President and CEO, Special Olympics International (since 1996).
Co-Producer, Amistad film (1997). President, 1995 Special Olympic World
Games (1992-1995).
19
<PAGE>
John R. Mallin (49) Trustee Director, Hartford Ballet. Past President/Director, Connecticut Down
Cummings & Lockwood Syndrome Congress. Past President/Chairman, Corporate Advisory Committee
185 Asylum Street of the Connecticut Rivers Council, Boy Scouts of America, Past Chairman,
Hartford, CT 06103 Scouting Unlimited Committee, Past Officer, Long Rivers Council.
Director/Treasurer, Connecticut Chapter of the Harvard Law School
Association. Director, Business for Downtown Hartford. Partner, Cummings
& Lockwood (since 1996). Partner, Corcoran, Mallin & Asresco, P.C.
(1987-1996).
Frank M. Ellmer (59) Trustee Retired; previously Audit Partner and Past Regional Director of Health
427 Woodhaven Road Care, Ernst & Young, LLP (partner since 1978).
Glastonbury, CT 06033
Simon Y. Tan (47) Trustee and Senior Vice President, Individual Market Development, Phoenix Home Life
President Mutual Insurance Company (since 1994).
Michael E. Haylon (41) Executive Director and Executive Vice President--Investments, Phoenix Duff & Phelps
Vice President Corporation (1995-present). Executive Vice President, Phoenix Funds
(1993-present) and Phoenix-Aberdeen Series Fund (1996-present).
Executive Vice President (1997-present), Vice President (1996-1997),
Phoenix Duff & Phelps Institutional Mutual Funds. Director (1994-present),
President (1995-present, Executive Vice President (1994-1995), Vice
President (1991-1994), Phoenix Investment Counsel, Inc. Director
(1994-present), President (1996-present), Executive Vice President
(1994-1996), Vice President (1993-1994), National Securities & Research
Corporation. Director, Phoenix Equity Planning Corporation (1995-present).
Senior Vice President, Securities Investment, Phoenix Home Life Mutual
Insurance Company (1993-1995).
Michael Gilotti (52) Executive Executive Vice President, PHL Variable Insurance Company (6/99 -
Vice President present), Vice President and Head of Bank and Broker/Dealer Operations,
Aetna (1994 - 1998), Principal and Founding Partner, Eden Financial Group
(1982 - 1998).
</TABLE>
- ---------------
* Trustees identified with an asterisk are considered to be "interested
persons" of the Fund within the meaning of the definition set forth in
Section 2(a)(19) of the Investment Company Act of 1940.
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
Roger Engemann (57) Senior Vice President President, Roger Engemann & Associates (1992-present). President and
600 North Rosemead Boulevard a Director, Pasadena Capital Corporation. Senior Vice President, The
Pasadena, CA 91107 Phoenix Edge Series Fund and Phoenix Series Fund (1998-present).
Managing Director, Equities, Phoenix Investment Counsel, Inc.
(1998-present).
David K. Schafer (60) Senior Vice President and Director, Schafer Capital Management, Inc.
101 Carnegie Center, Suite 107 President (1983-present). Senior Vice President and Portfolio Manager, The
Princeton, NJ 08540 Phoenix Edge Series Fund (1998-present). President and Chairman,
Strong Schafer Value Fund (1985-present). Chairman, Schafer Cullen
Capital Management, Inc. (1983-present). President, Chubb Equity
Managers, Inc. (1992-1996).
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
Gail P. Seneca (43) Senior Vice President President, Chief Executive and Chief Investment Officer, Seneca
909 Montgomery Street Capital Management, LLC (1996-present). Chief Executive and
San Francisco, CA 94133 Investment Officer, and a managing general partner, GMG/Seneca
Capital Management, LLC (1989-present). President and a Trustee,
Seneca Funds (1996-present). Senior Vice President, The Phoenix Edge
Series Fund (1998-present).
James D. Wehr (41) Senior 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. Senior Vice President, Phoenix
Multi-Portfolio Fund, Phoenix Series Fund, The Phoenix Edge Series
Fund, Phoenix California Tax Exempt Bonds, Inc., Phoenix Duff &
Phelps Institutional Mutual Funds, Phoenix-Goodwin Multi-Sector
Fixed Income Fund, Inc., Phoenix Multi-Sector Short Term Bond Fund,
Phoenix Income and Growth Fund and Phoenix Strategic Allocation Fund
(1997-present). Senior Vice President and Chief Investment Officer,
Duff & Phelps Utilities Tax-Free Income Inc. (1997-present). Vice
President, Phoenix Multi-Portfolio Fund (1988-1997), Phoenix Series
Fund (1990-1997), The Phoenix Edge Series Fund (1991-1997), Phoenix
California Tax Exempt Bonds, Inc. (1993-1997) and Phoenix Duff &
Phelps Institutional Mutual Funds (1996-1997). Managing Director,
Public Fixed Income, Phoenix Home Life Insurance Company
(1991-1995).
Hugh Young (40) Senior Senior Vice President, Phoenix-Aberdeen Series Fund and The Phoenix
Aberdeen Asset Managers LTD Vice President Edge Series Fund (1996-present). Director, Phoenix-Aberdeen
88A Circular Road International Advisors, LLC. Far East Investment Director, Aberdeen
Singapore 049439 Asset Management Asia Limited (1988-present). Managing Director,
Aberdeen Asset Management Asia 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.
David L. Albrycht (37) Vice President Managing Director, Fixed Income (1996-present) and Vice President
(1995-1996), Phoenix Investment Counsel, Inc. Managing Director,
Fixed Income (1996-present) and Investment Officer (1994-1996),
National Securities & Securities Research Corporation. Vice
President, Phoenix Multi-Portfolio Fund (1993-present), Phoenix
Multi-Sector Short Term Bond Fund (1993-present), Phoenix
Multi-Sector Fixed Income Fund, Inc. (1994-present). The Phoenix
Edge Series Fund (1997-present) and Phoenix Series Fund
(1997-present). Portfolio Manager, Phoenix Home Life Mutual
Insurance Company (1995-1996).
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
Christian C. Bertelsen (56) Vice President Managing Director, Value Equities, Phoenix Investment Counsel, Inc.
(1997-present). Vice President, The Phoenix Edge Series Fund
(1998-present), Phoenix Investment Trust 97 (1997-present). Senior
Vice President and Chief Investment Officer, Zurich Kemper
(1996-1997). Vice President and Portfolio Manager, Zurich Kemper
Small Cap Fund and Zurich Kemper Contrarian Fund (1996-1997). Senior
Vice President, Eagle Asset Management (1993-1996). Vice President
and Portfolio Manager, Heritage Value Fund and Golden Select
Variable Annuity Value Trust (1995-1996).
Steven L. Colton (40) Vice President Managing Director, Value Equities, Phoenix Investment Counsel, Inc.
(1997-present). Managing Director, Value Equities, National
Securities & Research Corporation (1998-present). Vice President,
The Phoenix Edge Series Fund (1997-present), Phoenix Series Fund
(1997-present), Phoenix Equity Series Fund (1997-present), and
Phoenix Income and Growth Fund (1998-present). Vice President/Senior
Portfolio Manager, American Century Investment Management
(1987-1997). Portfolio Manager, American Century/Benham Income and
Growth Fund (1990-1997), American Century/Benham Equity Growth Fund
(1991-1996) and American Century/Benham Utilities Income Fund
(1993-1997).
Timothy Devlin (35) Vice President Vice President and Portfolio Manager, J.P. Morgan Investment Company
J.P. Morgan Investment Management Inc. and Morgan Guaranty Trust Company of NY (1996-present). Vice
522 Fifth Avenue President, The Phoenix Edge Series Fund (1997-present). First Vice
New York, NY 10036 President and Portfolio Manager, Mitchell Hutchins Asset Management,
Inc. (1987-1996).
Ronald K. Jacks (31) Vice President Portfolio Manager, Seneca Capital Management, LLC (1996-present).
909 Montgomery Street Portfolio Manager, GMG/Seneca Capital Management, LLC
San Francisco, CA 94133 (1990-present). Senior Vice President, The Phoenix Edge Series Fund
and Phoenix Strategic Equity Series Fund (1998-present). Managing
Director, Equities, National Securities & Research Corporation
(1998-present). Trustee, Seneca Funds (1996-1997).
Christopher J. Kelleher (46) 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. Portfolio Manager, Public Bonds,
Phoenix Home Life Mutual Insurance Company (1991-1995). Portfolio
Manager, U.S. Government Securities (1989-1997), Vice President
(1989-present), Phoenix Series Fund. Vice President, The Phoenix
Edge Series Fund (1998-present), Phoenix Income and Growth Fund
(1998-present). Portfolio manager, U.S. Government Securities
Portfolio (1996-present). Vice President, Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present).
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
Richard D. Little (50) Vice President Managing Director, Equities, Phoenix Investment Counsel, Inc.
(1998-present). Vice President, The Phoenix Edge Series Fund
(1998-present), Phoenix Strategic Equity Series Fund (1998-present).
and Phoenix Multi-Portfolio Fund (1998-present). Director of
Equities, Seneca Capital management LLC (1996-present). General
Partner and Director of Equities, Seneca Capital Management LP
(1989-present).
James E. Mair (57) Vice President Managing Director, Phoenix Investment Counsel, Inc. (1998-present).
Roger Engemann & Associates, Inc. Vice President, Co-Portfolio Manager, Nifty Fifty, The Phoenix Edge
600 Rosemead Boulevard Series Fund (1998-present). Vice President, Co-Portfolio Manager,
Pasadena, CA 91107-2138 Aggressive Growth, Phoenix Series Fund (1998-present). Vice
President, Co-Portfolio Manager, Small Cap Phoenix Strategic Equity
Series Fund (1998-present). Executive Vice President (1994-present)
Senior Vice President (1983-1994), Roger Engemann & Associates, Inc.
Executive Vice President (1994-present), Security Analyst
(1983-1994), Roger Engemann Management Co., Inc. Executive Vice
President (1994-present), Senior Vice President (1990-1994),
Director (1990-present), Pasadena Capital Corporation. Director,
Pasadena National Trust company (1989-present).
Chester Sokolosky (39) Vice President Second Vice President and Controller, Individual Insurance, Phoenix
Home Life Mutual Insurance Company (1994 - present).
Julie L. Sapia (42) Vice President Director, Money Market Trading (1998-present), Head Money Market
Trader (1997-1998), Money Market Trader (1995-1997), Phoenix
Investment Counsel, Inc. Vice President, The Phoenix Edge Series
Fund, Phoenix Series Fund, Phoenix Duff & Phelps Institutional
Mutual Funds and Phoenix-Aberdeen Series Fund (1997-present). Money
Market Trader, Phoenix Home Life Mutual Insurance Company
(1991-1995).
Michael Schatt (52) Vice President Managing Director, Phoenix Duff & Phelps Corporation (1994-present).
55 East Monroe Street Senior Vice President, Duff & Phelps Investment Management Co.
Suite 3600 (1997-present). Vice President, Phoenix Realty Securities, Inc.
Chicago, IL 60603 (1997-present). Vice President, Phoenix Duff & Phelps Institutional
Mutual Funds, Phoenix Multi-Portfolio Fund and The Phoenix Edge
Series Fund (1997-present). Director, Real Estate Advisory Practice,
Coopers & Lybrand, LLC (1990-1994).
John S. Tilson (54) Vice President Executive Vice President, Portfolio Manager and Securities Analyst,
600 North Rosemead Boulevard Roger Engemann & Associates (1983-present). An officer and a
Pasadena, CA 91107 Director of Pasadena Capital Corporation. Senior Vice President, The
Phoenix Edge Series Fund (1998-present).
Nancy G. Curtiss (46) 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).
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
<S> <C> <C>
Jeanie Gagnon (44) Secretary Second Vice President, Individual Market Development, Phoenix Home
One American Row Life Mutual Insurance Company (1997 - present), Assistant Vice
Hartford, CT 06115 President (1994 - 1997).
- ---------------
</TABLE>
No person listed in the foregoing table has any immediate family
relationship with any other person listed in the table.
At December 31, 1998, the former 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,
1998, the former Trustees received an aggregate of $210,013 from the Fund as
Trustees' fees. For service on the Boards of the Phoenix Funds, each former
Trustee who was not a full-time employee of the advisors or any of their
affiliates received a retainer at the annual rate of $40,000 and $2,500 per
joint meeting of the Boards. Each Trustee who served on the Audit Committee
received a retainer at the annual rate of $2,000 and $2,000 per joint Audit
Committee meeting attended. The members of the Audit Committee were Messrs.
Conway, Roth, Segerson and Weicker. Each Trustee who served on the Executive
Committee and who was not an interested person of the Fund received a retainer
at the annual rate of $1,000 and $1,000 per joint Executive Committee meeting
attended. The members of the Executive Committee were Messrs. Conway,
Dalzell-Payne, McLoughlin, Morris, Oates and Roth. The function of the Executive
Committee was to serve as a contract review, compliance review and performance
review delegate of the full Board of Trustees. The foregoing fees did not
include the reimbursement of expenses incurred in connection with meeting
attendance.
For the Fund's fiscal year ended December 31, 1998, the former Trustees
received the following compensation:
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
RETIREMENT FROM FUND AND
AGGREGATE BENEFITS ESTIMATED ANNUAL FUND COMPLEX
COMPENSATION ACCRUED AS PART OF BENEFITS UPON (13 FUNDS)
NAME FROM FUND FUND EXPENSES RETIREMENT PAID TO TRUSTEES
---- --------- ------------- ---------- ----------------
<S> <C> <C> <C> <C>
Robert Chesek $18,143 $60,000
E. Virgil Conway $24,122 $79,500
Harry Dalzell-Payne $21,652 $71,250
Francis E. Jeffries $18,192 None for None for $60,000
Leroy Keith, Jr. $19,015 any Trustee any Trustee $62,500
Philip R. McLoughlin $0 $0
Everett L. Morris $20,828 $69,500
James M. Oates $20,828 $68,750
Philip R. Reynolds $140 $500
Herbert Roth, Jr. $24,946 $81,250
Richard E. Segerson $21,486 $70,750
Lowell P. Weicker, Jr. $21,486 $70,000
</TABLE>
* This compensation (and the earnings thereon) is deferred pursuant to the
Directors' Deferred Compensation Plan. At December 31, 1998, the total amount
of deferred compensation (including interest and other accumulation earned on
the original amounts deferred) accrued for Messrs. Jeffries, Morris and Roth
was $60,161.00, $126,891.00 and $137,672.00, respectively. At present, by
agreement among the Fund, the Distributor and the electing director, director
fees that are deferred are paid by the Fund to the Distributor. The liability
for the deferred compensation obligation appears only as a liability of the
Distributor.
The current Trustees are paid an annual retainer of $12,000 plus a fee of
$2,000 for each meeting attended. In addition, members of the Audit and
Nominating Committees are paid a fee of $2,000 for each meeting attended. Also
Trustees are reimbursed for 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 advisor who are
"interested persons" are compensated by the advisor and receive no compensation
from the Fund.
24
<PAGE>
CONTROL PERSONS
The shares of each of the Series are owned by one or more of the separate
accounts of the Phoenix family of insurance companies offering variable
insurance products or by the general account of Phoenix Home Life Mutual
Insurance Company ("Phoenix"). The table below shows the percentage ownership of
each Series held by each separate or general account.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
PHOENIX HOME LIFE
PHOENIX HOME PHOENIX HOME
PHOENIX LIFE PHL VARIABLE LIFE
HOME VARIABLE ACCUMULATION VARIABLE SEPARATE SEPARATE SEPARATE
LIFE UNIVERSAL ACCOUNT ACCUMULATION ACCOUNT B ACCOUNT C ACCOUNT D
GENERAL LIFE ACCOUNT ACCOUNT
SERIES ACCOUNT
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Phoenix Research Enhanced Index 24.6 32.0 43.4
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Aberdeen International 26.0 11.8 62.2
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Aberdeen New Asia 20.1 16.8 26.8 36.3
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Bankers Trust Dow 30
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Duff & Phelps Real Estate 8.7 12.6 33.1 45.6
Securities
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Engemann Capital Growth 20.7 14.3 64.5 0.2 0.2 0.1
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Engemann Nifty Fifty 11.2 16.7 40.4 31.7
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Federated U.S. Government
Bond Series
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Goodwin Money Market 18.5 30.2 51.3
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Goodwin Multi-Sector 11.1 32.7 56.2
Fixed Income
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Hollister Value Equity 20.1 43.5 36.4
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Janus Equity Income
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Janus Flexible Income
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Janus Growth
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Morgan Stanley Focus Equity
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Oakhurst Balanced 10.6 16.8 72.6
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Oakhurst Growth & Income 4.2 10.8 41.7 43.3
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Oakhurst Strategic Allocation 13.4 13.6 73.0
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Schaefer Mid-Cap Value 19.6 17.0 32.0 31.4
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Seneca Mid-Cap Growth 25.9 16.1 30.0 28.0
- ------------------------------------ ------------- -------------- ------------ -------------- ---------------------------------
Phoenix-Seneca Strategic Theme 12.3 36.8 50.9
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PHL Variable Insurance Company is an indirect, wholly-owned subsidiary of
Phoenix which is, in turn, the controlling entity of each Series.
No shares of any Series is held by any officer or director of the Fund or
any advisor or subadvisor.
THE INVESTMENT ADVISORS
- --------------------------------------------------------------------------------
The Fund has entered into Investment Advisory Agreements ("Agreements") with
Phoenix Investment Counsel, Inc. ("PIC"), DPIM, Phoenix Variable Advisors, Inc.
("PVA") and Phoenix-Aberdeen International Advisors, LLC ("PAIA") all of whose
offices are located in Hartford, Connecticut.
Phoenix is in the business of writing ordinary and group life and health
insurance and annuities. Phoenix Equity Planning Corporation ("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 its affiliates. PEPCO is registered as a broker-dealer in 50 states.
The executive offices of Phoenix, PVA and PAIA are located at One American Row,
Hartford, Connecticut 06102-5056 and the principal offices of PEPCO are located
at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200.
INVESTMENT ADVISORS
The Fund's investment advisor to all Series except the Phoenix-Duff & Phelps
Real Estate Securities and Phoenix-Aberdeen New Asia Series is PIC, which is
located at 56 Prospect Street, Hartford, Connecticut 06115 and Phoenix
25
<PAGE>
Variable Advisors ("PVA"), which is located at One American Row, Hartford, CT
06102-5056. All of the outstanding stock of PIC is owned by PEPCO, a
subsidiary of Phoenix Investment Partners, Ltd. ("PXP"). Phoenix owns a
controlling interest in PXP. 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 06102-5056; the executive offices of PXP 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.
In addition to the Fund, PIC serves as investment advisor to The Phoenix
Edge Series Fund, Phoenix-Oakhurst Strategic Allocation Fund, Inc. Phoenix
Strategic Equity Series Fund (all series other than Equity Opportunities
Series), Phoenix Duff & Phelps Institutional Mutual Funds (all portfolios other
than the Phoenix-Duff & Phelps Real Estate Securities Equity Securities
Portfolio, Core Equity Portfolio and the Enhanced Reserves Portfolio), Phoenix
Growth and Income Fund of Phoenix Equity Series Fund, Phoenix Investment Trust
97 and Phoenix Multi-Portfolio Fund (all portfolios other than the Real Estate
Securities Portfolio) and as subadvisor to Sun America Series Trust. PIC also
serves as subadvisor to the Phoenix-Aberdeen New Asia Series. PIC was originally
organized in 1932 as John P. Chase, Inc. As of December 31, 1998, PIC has
approximately $20.5 billion in assets under management.
Bankers Trust Company ("Bankers Trust") serves as subadvisor to the
Phoenix-Bankers Trust Dow 30 Series. Bankers Trust, a New York banking
corporation with principal offices at 150 Liberty Street, (One Bankers Trust
Plaza), New York, New York 10006, is a wholly owned subsidiary of Deutsche Bank
AG ("Deutsche Bank"), and has more than 50 years of experience managing
retirement assets for the nation's largest corporations and institutions.
Deutsche Bank is split into 5 business divisions, including Deutsche Asset
Management which encompasses the investment management capabilities of Bankers
Trust. At June 30, 1999, Deutsche Asset Management has $680 billion in assets
under management globally and in the U.S. Deutsche Asset Management is
responsible for $300 billion in client assets.
J.P. Morgan Investment Management, Inc. ("J.P. Morgan"), a wholly-owned
subsidiary of J.P. Morgan & Co. Incorporated ("JPM & Co."), serves as subadvisor
to the Phoenix Research Enhanced Index Series. J.P. Morgan's principal place of
business is located at 522 Fifth Avenue, New York, New York 10036. J.P. Morgan
presently serves as an investment manager for corporate, public and union
employee benefit funds, foundations, endowments, insurance companies, government
agencies and the accounts of other institutional investors. J.P. Morgan was
founded in 1984. JPM & Co., through J.P. Morgan and its other investment
management subsidiaries, had approximately $316 billion in assets under
management as of December 31, 1998.
Janus Capital Corporation ("Janus") is the investment subadvisor to the
Series and is located at 100 Fillmore Street, Denver, Colorado 80206. Janus
began serving as an investment advisor to an investment company in 1970 and
currently serves as investment advisor to all of the Janus retail funds, acts as
subadvisor for a number of private label mutual funds and provides separate
account advisory services for institutional accounts. As of December 31, 1998,
Janus had $108 billion under management.
Roger Engemann & Associates ("Engemann") serves as subadvisor to the
Phoenix-Engemann Nifty Fifty Series. Engemann is a wholly owned subsidiary of
Pasadena Capital Corporation, which in turn is a wholly owned subsidiary of
PD&P. Engemann has been engaged in the investment management business since
1969, and provides investment counseling services to retirement plans, colleges,
corporations, trusts and individuals. Engemann also serves as investment advisor
to the Phoenix-Engemann Funds. As of December 31, 1998, Engemann had
approximately $7.8 billion in assets under management.
Morgan Stanley Asset Management ("MSAM"), is the investment subadvisor to
the Series and has its principal offices at 1221 Avenue of the Americas, New
York, New York 10020. On December 1, 1998, Morgan Stanley Asset Management Inc.
changed its name to Morgan Stanley Dean Witter Investment Management Inc., but
continues to do business in certain instances using the name Morgan Stanley
Asset Management. MSAM conducts a worldwide portfolio management business and
provides a broad range of portfolio management services to customers in the
United States and abroad. Morgan Stanley Dean Witter & Co. ("MSDW") is the
direct parent of MSAM. MSDW is a global financial services firm that maintains
leading market positions in each of its 3 primary businesses -securities, asset
management and credit services. At September 30, 1999, MSAM, together with its
affiliated institutional asset management companies, managed assets of
approximately $173.5 billion, including assets under fiduciary advice.
Seneca Capital Management, LLC serves as subadvisor to the Phoenix-Seneca
Mid-Cap Growth Series. PD&P owns a majority interest in Seneca; the balance is
owned by certain of its employees, including Gail Seneca, one of the portfolio
management team leaders, and the former limited partners of GMG/Seneca Capital
Management, LLC. Seneca (including its predecessor, GMG/Seneca Capital
Management LP) has been an investment advisor since 1989, managing equity and
fixed-income securities portfolios primarily for institutions and individuals.
As of December 31, 1998, Seneca had approximately $5.9 billion in assets under
management.
26
<PAGE>
Schafer Capital Management, Inc. ("Schafer"), serves as subadvisor to the
Phoenix-Schafer Mid-Cap Value Series. Schafer's principal place of business is
located at 101 Carnegie Center, Suite 107, Princeton, New Jersey. Schafer has
been engaged in the investment management business since 1981, specializing in
long-term investing in the equity markets. As of December 31, 1998, Schafer had
approximately $1.7 billion in assets under management.
The offices of Duff & Phelps Investment Management Co. ("DPIM") are located
at 55 East Monroe Street, Suite 3600, Chicago, Illinois 60603. DPIM also serves
as investment advisor to the Core Equity Fund of Phoenix Equity Series Fund, the
Enhanced Reserves, Core Equity and Real Estate Equity Securities Portfolio of
Phoenix Duff & Phelps Institutional Mutual Funds, the Real Estate Securities
Portfolio of Phoenix Multi-Portfolio Fund and three closed-end funds: Duff &
Phelps Utilities Income Inc., Duff & Phelps Utilities Tax-Free Income Inc. and
Duff & Phelps Utility and Corporate Bond Trust Inc. The investment advisor at
inception of the Phoenix-Duff & Phelps Real Estate Securities Series was Phoenix
Realty Securities, Inc. ("PRS" or "Advisor") PRS is a wholly-owned indirect
subsidiary of Phoenix Home Life. On March 2, 1998, DPIM purchased the management
rights for the Series from PRS and PRS's contract was assigned to DPIM. As of
December 31, 1998, DPIM had approximately $15.2 billion in assets under
management.
PAIA, a Delaware limited liability company formed in 1996 and jointly owned
and managed by PM Holdings, Inc., a 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 One Financial
Plaza, Suite 2210, NationsBank Tower, Fort Lauderdale, Florida 33394. PAIA also
serves as investment advisor to Phoenix-Aberdeen Series Fund. While many of the
officers and directors of the PAIA have extensive experience as investment
professionals, due to its recent formation, PAIA has no prior operating history.
Aberdeen Fund Managers, Inc. also serves as subadvisor for the Phoenix-Aberdeen
New Asia Series and Phoenix-Aberdeen Series Fund.
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 December 31, 1998, Aberdeen Asset Management, and its advisory
subsidiaries, had approximately $23.9 billion in assets under management.
Simon Tan, President and Trustee of the Fund, is a director and officer of
PVA. Michael Haylon, an officer of the Trust, is a director and officer of PIC
and also an officer of DPIM. David L. Albrycht, Christian Bertelsen, Steven L.
Colton, J. Roger Engemann, James E. Mair, Julie Sapia, John S. Tilson, James D.
Wehr, David K. Schafer and Gail P. Seneca, officers of the Trust, are officers
of PIC. Michael Schatt, an officer of the Trust, is also an officer of DPIM.
Hugh Young, an officer of the Trust, is also an officer and director of PAIA.
The Agreements provide that each Advisor 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 Advisors shall be paid by
the Fund or by Phoenix, PHL Variable and PLAC. The Advisors or Phoenix, PHL
Variable and PLAC have agreed to reimburse the Fund for certain operating
expenses for all Series. Each Series (except the Phoenix-Aberdeen International,
Phoenix-Duff & Phelps Real Estate Securities, Phoenix-Goodwin Strategic Theme,
Phoenix-Aberdeen New Asia, Phoenix Research Enhanced Index and Phoenix-Seneca
Mid-Cap Growth 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
Phoenix-Aberdeen International, Phoenix-Duff & Phelps Real Estate Securities,
Phoenix-Goodwin Strategic Theme, Phoenix-Aberdeen New Asia, Phoenix Research
Enhanced Index and Phoenix-Seneca Mid-Cap Growth Series pay total operating
expenses other than the management fee up to .40%, .25%, .25%, .25%, .10%, and
.25%, respectively, of its total average net assets. Expenses above these limits
are paid by the Advisors, Phoenix, PHL Variable or PLAC.
The Agreements also provide that the Advisors will reimburse the Fund for
the amount, if any, by which the total operating expenses (including the
Advisor's compensation, but excluding interest, taxes, brokerage fees and
commissions and extraordinary expenses) for any fiscal year exceed the level of
expenses which the Fund is permitted to bear under the most restrictive expense
limitation.
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 Advisors,
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,
27
<PAGE>
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
SEC and the expense of preparing and mailing prospectuses and reports to
shareholders.
The Investment Advisory Agreements provide that the Advisors shall not be
liable to the Fund or to any shareholder of the Fund for any error of judgment
or mistake of law or for any loss suffered by the Fund or by any shareholder of
the Fund in connection with the matters to which the Investment Advisory
Agreements relate, except a loss resulting from willful misfeasance, bad faith,
gross negligence or reckless disregard on the part of the Advisors 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 advisors shall be
compensated as follows:
PHOENIX INVESTMENT COUNSEL, INC.
--------------------------------
RATE FOR RATE FOR RATE FOR
FIRST NEXT EXCESS OVER
SERIES $250,000,000 $250,000,000 $500,000,000
- ------ ------------ ------------ ------------
Phoenix-Goodwin
Money Market......... .40% .35% .30%
Phoenix-Goodwin
Multi-Sector Fixed
Income............... .50% .45% .40%
Phoenix-Oakhurst
Balanced............. .55% .50% .45%
Phoenix-Oakhurst
Strategic Allocation. .60% .55% .50%
Phoenix-Engemann
Capital Growth....... .70% .65% .60%
Phoenix-Aberdeen
International........ .75% .70% .65%
Phoenix-Seneca
Strategic Theme ..... .75% .70% .65%
Phoenix-Engemann
Nifty Fifty.......... .90% .85% .80%
Phoenix-Oakhurst
Growth and Income ... .70% .65% .60%
Phoenix-Hollister
Value Equity......... .70% .65% .60%
PHOENIX INVESTMENT COUNSEL, INC.
--------------------------------
SERIES
- ------
Phoenix-Seneca Mid-Cap
Growth.............. .80%
PHOENIX-ABERDEEN INTERNATIONAL ADVISORS, LLC
--------------------------------------------
SERIES
- ------
Phoenix-Aberdeen
New Asia............. 1.00%
PHOENIX VARIABLE ADVISORS, INC.
--------------------------------
SERIES
- ------
Phoenix Research
Enhanced Index...... .45%
Phoenix-Federated U.S.
Government Bond
Series.............. 0.60%
Phoenix- Janus Equity
Income Series....... 0.85%
Phoenix-Janus Flexible
Income Series....... 0.80%
Phoenix-Janus Growth
Series.............. 0.85%
Phoenix-Morgan Stanley
Focus Equity Series. 0.85%
Phoenix-Schafer
Mid-Cap Value ...... 1.05%
DUFF & PHELPS INVESTMENT MANAGEMENT CO.
---------------------------------------
RATE FOR
RATE FOR FIRST RATE FOR NEXT EXCESS OVER
SERIES $1,000,000,000 $1,000,000,000 $2,000,000,000
- ------ -------------- -------------- --------------
Phoenix-Duff & Phelps
Real Estate Securities .75% .70% .65%
The amounts payable to the advisors 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 advisors, on sixty (60) days written notice.
Pursuant to a subadvisory agreement with the Fund, PIC delegates certain
investment decisions and research functions with respect to the Phoenix Research
Enhanced Index Series to J.P. Morgan, with respect to the Phoenix-Engemann
Capital Growth and Phoenix-Engemann Nifty Fifty Series to Engemann, with respect
to Phoenix-Seneca Mid-Cap Growth and Phoenix-Seneca Strategic Theme Series to
Seneca, and with respect to Phoenix-Schafer Mid-Cap Value Series to Schafer for
which they are paid a
28
<PAGE>
fee by PIC. In accordance with the subadvisory agreement between the Fund and
J.P. Morgan, J.P. Morgan is paid a monthly fee at the annual rate of .25% of the
average aggregate daily net asset values of the Phoenix Research Enhanced Index
Series up to $100 million and .20% of such value in excess of $100 million.
Pursuant to the subadvisory agreement between the Fund and Engemann, Engemann is
paid a monthly fee at the annual rate of .45% of the average aggregate daily net
asset values of the Phoenix-Engemann Nifty Fifty Series up to $250,000,000, .45%
of such values between $250,000,000 and $500,000,000, and .40% of such values in
excess of $500,000,000. Pursuant to the subadvisory agreement between the Fund
and Seneca, Seneca is paid a monthly fee at the annual rate of .40% of the
average aggregate daily net asset values of the Phoenix-Seneca Mid-Cap Growth
Series. In accordance with the subadvisory agreement between the Fund and
Schafer, Schafer is paid a monthly fee at the annual rate of .85% of the average
aggregate daily net asset values of the Phoenix-Schafer Mid-Cap Value Series up
to $175 million and .80% of such value in excess of $175 million.
Pursuant to a subadvisory agreement with each relevant investment
subadvisor, PVA delegates certain investment decisions and research functions
with respect to the Phoenix-Bankers Trust Dow 30 Series to Bankers Trust, with
respect to Phoenix-Federated U.S. Government Bond Series to Federated
Investment, with respect to the Phoenix-Janus Equity Income, Phoenix-Janus
Flexible Income and Phoenix-Janus Growth Series to Janus Capital, and with
respect to Phoenix-Morgan Stanley Focus Equity Series to MSAM for which each is
paid a fee by PVA. Pursuant to the subadvisory agreement between the Fund and
Bankers Trust, Bankers Trust is paid a monthly fee at the annual rate of 0.10%
of the average aggregate daily net assets of the Phoenix-Bankers Trust Dow 30
Series, subject to a $100,000 annual minimum. In accordance with the subadvisory
agreement between the Fund and Federated Investment, Federated is paid a monthly
fee at the annual rate of 0.30% of the average aggregate daily assets of the
Phoenix-Federated U.S. Government Bond Series up to $25 million, 0.25% on the
next $25 million and 0.20% on the next $50 million. The fee is negotiable on
amounts over $50 billion. Pursuant to the subadvisory agreement between the Fund
and Janus Capital, Janus Capital is paid a monthly fee at the annual rate of
0.55% of the average aggregate daily assets of each of (calculated separately,
not in the aggregate) the Phoenix-Janus Equity Income Series, the Phoenix-Janus
Flexible Income Series and the Phoenix-Janus Growth Series up to $100 million,
0.50% of such values between $100 million and $500 million, and 0.45% of such
values in excess of $500 million. In accordance with the subadvisory agreement
between PVA and MSAM, MSAM is paid a monthly fee at the annual rate of 0.55% of
the average aggregate daily assets of the Phoenix-Morgan Stanley Focus Equity
Series up to $150 million, 0.45% of such value between $150 million and $300
million, and 0.40% of such value in excess of $300 million.
The subadvisory agreements relating to the Phoenix Research Enhanced Index,
Phoenix-Engemann Nifty Fifty, Phoenix-Seneca Mid-Cap Growth, Phoenix-Seneca
Strategic Theme, Phoenix-Schafer Mid-Cap Value, Phoenix-Bankers Trust Dow 30,
Phoenix-Federated U.S. Government Bond, Phoenix-Janus Equity Income,
Phoenix-Janus Flexible Income, Phoenix-Janus Growth and Phoenix-Morgan Stanley
Focus Equity Series provide, among other things, that J.P. Morgan, Engemann,
Seneca, Schafer, Bankers Trust, Federated Investment, Janus Capital and MSAM
shall effectuate the purchase and sales of securities for the applicable Series
and provide related advisory services.
For providing research and other domestic advisory services to the
Phoenix-Aberdeen New Asia Series, PAIA pays to PIC a monthly subadvisory fee at
an annual rate equivalent to .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 .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 i.e.
investments in particular geographic areas, Aberdeen Fund Managers, Inc. shall
engage the services of its affiliates, Aberdeen Fund Managers Ltd. and Aberdeen
Asset Management Asia Limited for which such entities shall be paid a fee by
Aberdeen Fund Managers, Inc.
CUSTODIAN
- --------------------------------------------------------------------------------
The securities and cash of the Phoenix-Goodwin Multi-Sector Fixed Income and
Phoenix-Goodwin Money Market are held by The Chase Manhattan Bank, N.A. under
the terms of a custodian agreement. The address for The Chase Manhattan Bank,
N.A., is 1 Chase Manhattan Plaza, Floor 13B, New York, NY 10081. The securities
and cash of the Phoenix-Aberdeen International and Phoenix-Aberdeen New Asia
Series are held by Brown Brothers Harriman & Co. under the terms of a custodian
agreement. The address for Brown Brothers Harriman & Co. is 40 Water Street,
Boston, Massachusetts 02109, Attention: Manager, Securities Department. The
securities and cash of the Phoenix-Duff & Phelps Real Estate Securities,
Phoenix-Oakhurst Balanced, Phoenix-Oakhurst Growth and Income, Phoenix-Oakhurst
Strategic Allocation, Phoenix-Hollister Value Equity, Phoenix-Engemann Capital
Growth, Phoenix-Engemann Nifty Fifty, Phoenix-Seneca Mid-Cap Growth,
Phoenix-Seneca Strategic Theme, Phoenix-Schafer Mid-Cap Value, Phoenix-Janus
Equity Income, Phoenix-Janus Flexible Income, Phoenix-Janus Growth,
Phoenix-Morgan Stanley Focus Equity and Phoenix Research Enhanced Index Series
are held by State Street Bank and Trust Company, located at 1 Heritage Drive,
P2N, North Quincy, Massachusetts 02171. The Fund permits the Custodian to
deposit some or all of its
29
<PAGE>
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 PricewaterhouseCoopers 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 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. PFPC,
Inc. has been retained by PEPCO to perform certain administrative and pricing
services for the Fund for which PEPCO pays PFPC a fee. While PEPCO has delegated
certain responsibilities to PFPC, PEPCO retains full responsibility for the
performance of all duties of financial agent.
BROKERAGE ALLOCATION
- --------------------------------------------------------------------------------
In effecting portfolio transactions for the Fund, the advisors and
subadvisors, 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 advisors or subadvisors may cause a Series 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 advisors or subadvisors 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 Series or to the advisors or subadvisors are considered to be in addition
to and not in lieu of services required to be performed by the advisors or
subadvisors under their advisory contracts and research services may benefit
both the Series and other clients of the advisors or subadvisors. Conversely,
research services provided by brokers to other clients of the advisors or
subadvisors may benefit the Series.
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 Series (involving both price paid or received and any commissions
and other costs paid), the efficiency with which the transaction is effected,
the ability to effect the transaction at all where a large block is involved,
the availability of the broker to stand ready to execute possibly difficult
transactions in the future and the financial strength and stability of the
broker. Such considerations are judgmental and are weighed by the advisors or
subadvisors in determining the overall reasonableness of brokerage commissions
paid by the Fund.
For the fiscal years ended December 31, 1996, 1997, and 1998 brokerage
commissions paid by the Series on portfolio transactions totaled $6,749,696,
$10,220,704 and $4,487,103, respectively. None of such commissions was paid to a
broker who was an affiliated person of the Series or an affiliated person of
such a person or, to the knowledge of the Series, to a broker an affiliated
person of which was an affiliated person of the Fund or the advisor or
subadvisor. Total brokerage commissions paid during the fiscal year ended
December 31, 1998 included brokerage commissions of $3,822,400 on portfolio
transactions aggregating $3,913,541,000 executed by brokers who
30
<PAGE>
provided research and other statistical and factual information.
It may frequently happen that the same security is held in the portfolio of
more than one Series. Simultaneous transactions are inevitable when several
Series are managed by the same investment adviser, particularly when the same
security is suited for the investment objectives of more than one Series. When 2
or more Series advised by the advisors are simultaneously engaged in the
purchase or sale of the same security, the transactions are allocated among the
Series in a manner equitable to each Series. 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 Series is concerned. In other cases, however, it is
believed that the ability of the Series to participate in volume transactions
will produce better executions for the Series. It is the opinion of the Board of
Trustees of the Fund that the desirability of utilizing the advisors and
subadvisors as investment advisors of securities owned by the Series 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 advisor or subadvisor, as applicable, shall aggregate
transactions unless it believes in its sole discretion that such aggregation is
inconsistent with its duty to seek best execution (which shall include the duty
to seek best price) for the Series. No advisory account of the advisor or
subadvisor, as applicable, is to be favored over any other account and each
account that participates in an aggregated order is expected to participate at
the average share price for all transactions of the advisor or subadvisor, as
applicable, in that security on a given business day, with all transaction costs
shared pro rata based on the Series' participation in the transaction. If the
aggregated order is filled in its entirety, it shall be allocated among the
advisor's or subadvisor's, as applicable, 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 advisor or subadvisor, as applicable, whose orders
are allocated receive fair and equitable treatment.
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 NYSE on days when the NYSE is open for trading. The
NYSE will be closed on the following observed national holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' 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 SEC.
A security that is listed or traded on more than one exchange is valued at
the quotation on the NYSE 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, contractowners and policyowners do have
voting rights with respect to those shares, as described in the prospectus under
"Shares of Beneficial Interest." You may invest in the 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.
31
<PAGE>
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 be suspended or the payment date postponed for
more than seven days only for any period during which trading on the NYSE is
closed for other than customary weekend and holiday closings, or when trading on
the NYSE is restricted, as determined by the SEC, 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.
DISCLAIMER
- --------------------------------------------------------------------------------
"Dow Jones," "Dow Jones Industrial Average(SM)" and "DJIA(SM)" are service
marks of Dow Jones & Company, Inc. and have been licensed for use for certain
purposes by the Fund. The Phoenix-Bankers Trust Dow 30 Series, while based on
the Dow Jones Industrial Average(SM), is not sponsored, endorsed, sold or
promoted by Dow Jones, and Dow Jones makes no representation regarding the
advisability of investing in such product(s).
This Series is not sponsored, endorsed, sold or promoted by Dow Jones. Dow
Jones makes no representation or warranty, express or implied, to actual or
potential investors in the Series or to any member of the public regarding the
advisability of investing in securities generally or in this Series
particularly. Dow Jones' only relationship to the Fund is the licensing of
certain trademarks, trade names and service marks of Dow Jones and of the Dow
Jones Industrial Average(SM), which is determined, composed and calculated by
Dow Jones without regard to the Fund or the Series. Dow Jones has no obligation
to take the needs of Fund or the investors in the Series into consideration in
determining, composing or calculating the Dow Jones Industrial Average(SM). Dow
Jones is not responsible for and has not participated in the determination of
the timing of, prices at, or quantities of the Series to be issued or in the
determination or calculation of the equation by which shares of the Series may
be redeemed. Dow Jones has no obligation or liability in connection with the
administration, marketing or trading of the Series.
DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE DOW
JONES INDUSTRIAL AVERAGESM OR ANY DATA INCLUDED THEREIN AND DOW JONES SHALL HAVE
NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONES
MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND,
INVESTORS IN THE SERIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DOW
JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED THEREIN. DOW JONES MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
DOW JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES HAVE ANY LIABILITY FOR ANY
LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES,
EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF. THERE ARE NO THIRD PARTY
BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN DOW JONES AND THE FUND.
32
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements and the notes thereto relating to the Fund and the
report of PricewaterhouseCoopers LLP with respect thereto for the fiscal year
ended December 31, 1998 are contained in the Fund's annual report. The annual
report is available by calling Variable Products Operations at 800/541-0171 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 semiannual report to shareholders containing the
Fund's financial statements to every contractowner or policyowner having an
interest in the accounts. The annual report for the fiscal period ended December
31, 1998, and semiannual report for the period ended June 30, 1999 are included
in this SAI.
33
<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 are included in
the Semiannual and Annual Reports to Shareholders for the
periods ended June 30, 1999 and December 31, 1998, filed
via Edgar with Post-Effective Amendment No. 28 on October 6,
1999.
(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 with
Post-Effective Amendment No. 20 on April 29, 1997.
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 with Post-Effective
Amendment No. 20 on April 29, 1997.
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 with Post-Effective Amendment
No. 20 on April 29, 1997.
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
with Post-Effective Amendment No. 20 on April 29, 1997.
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.
1.8 Amendment to Declaration of Trust, establishing the Research
Enhanced Index Series, filed via Edgar with Post-Effective
Amendment No. 22 on July 15, 1997.
1.9 Amendment to Declaration of Trust, establishing five new
Series filed via Edgar with Post-Effective Amendment No. 25
on April 29, 1998.
1.10 Amendment to Declaration of Trust, establishing six new
Series, to be filed by amendment.
1.11 Amendment to Declaration of Trust, changing names of four
Series, to be filed by amendment.
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 with Post-Effective Amendment No.
20 on April 29, 1997.
5.1 Investment Advisory Agreement between Registrant and Phoenix
Realty Securities, Inc. covering the Phoenix Real Estate
Securities Series, dated February 28, 1995 and assigned
March 2, 1998 to Duff & Phelps Investment Management Co.,
filed with Post-Effective Amendment No. 13, on April 28,
1995 and filed via Edgar with Post-Effective Amendment No.
20 on April 29, 1997.
5.2 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.
C-1
<PAGE>
5.3 Form of Subadvisory Agreement between The Phoenix Edge
Series Fund and Aberdeen Fund Managers, Inc. covering
Aberdeen New Asia Series filed via Edgar with Post-Effective
Amendment No. 19 on September 3, 1996.
5.4 Form of Subadvisory Agreement between The Phoenix Edge
Series Fund and Phoenix Investment Counsel, Inc. covering
Aberdeen New Asia Series filed via Edgar with Post-Effective
Amendment No. 19 on September 3, 1996.
5.5 Form of Investment Advisory Agreement between Registrant and
Phoenix Investment Counsel, Inc., covering the Research
Enhanced Index Series, filed via Edgar with Post-Effective
Amendment No. 22 on July 15, 1997.
5.6 Form of Subadvisory Agreement among Registrant, Phoenix
Investment Counsel, Inc. and J. P. Morgan Investment
Management, Inc., covering the Research Enhanced Index
Series, filed via Edgar with Post-Effective Amendment No. 22
on July 15, 1997.
5.7 Form of Subadvisory Agreement among the Registrant, Phoenix
Realty Securities, Inc. and Duff & Phelps Investment
Management Co., covering the Phoenix Real Estate Securities
Series, filed via Edgar with Post-Effective Amendment No. 23
on December 12, 1997.
5.8 Form of Investment Advisory Agreement between Registrant and
Phoenix Investment Counsel, Inc., covering the Engemann
Nifty Fifty, Seneca Mid-Cap Growth, Phoenix Income and
Growth, Phoenix Value Equity and Schafer Mid-Cap Value
Series, filed via Edgar with Post-Effective Amendment No. 24
on February 24, 1998.
5.9 Form of Investment Subadvisory Agreement among the
Registrant, Phoenix Investment Counsel, Inc. and Roger
Engemann & Associates, Seneca Capital Management, LLC and
Schafer Capital Management, Inc., filed via Edgar with
Post-Effective Amendment No. 24 on February 24, 1998.
5.10 Form of Investment Advisory Agreement between Registrant and
Phoenix Variable Advisors, Inc., covering the
Phoenix-Bankers Trust Dow 30 Series, the Phoenix-Federated
U.S. Government Bond Series, the Phoenix-Janus Equity
Income, Phoenix-Janus Flexible Income, Phoenix-Janus
Growth Series, the Phoenix-Morgan Stanley Focus Equity
Series, the Phoenix Research Enhanced Index Series, and the
Phoenix-Schafer Mid-Cap Value Series, filed via Edgar
herewith.
5.11 Form of Investment Subadvisory Agreement among Registrant,
Phoenix Variable Advisors, Inc., covering the
Phoenix-Bankers Trust Dow 30 Series, filed via Edgar
herewith.
5.12 Form of Investment Subadvisory Agreement among Registrant,
Phoenix Variable Advisors, Inc. and Federated Investment
Management Company, covering the Phoenix-Federated U.S.
Government Bond Series, filed via Edgar herewith.
5.13 Form of Investment Subadvisory Agreement among Registrant,
Phoenix Variable Advisors, Inc. and Janus Capital
Corporation, covering the Phoenix-Janus Equity Income,
Phoenix-Janus Flexible Income Phoenix Janus Growth Series,
filed via Edgar herewith.
5.14 Form of Investment Subadvisory Agreement among Registrant,
Phoenix Variable Advisors, Inc., and Morgan Stanley
Investment Management, Inc., covering the Phoenix-Morgan
Stanley Focus Equity Series, filed via Edgar herewith.
5.15 Form of Investment Subadvisory Agreement among Registrant,
Phoenix Variable Advisors, Inc. and J.P. Morgan Investment
Management, Inc., covering the Phoenix Research Enhanced
Index Series, filed via Edgar herewith.
5.16 Form of Investment Subadvisory Agreement among Registrant,
Phoenix Variable Advisors, Inc. and Schafer Capital
Management, Inc., covering the Schafer Mid-Cap Value Series,
filed via Edgar herewith.
6. Not Applicable.
7. Not Applicable.
C-2
<PAGE>
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 with Post-Effective Amendment No. 20 on
April 29, 1997.
8.1 Form of Amendment to Custodian Agreement covering
International, Money Market, Growth, Multi-Sector Fixed
Income, Strategic Income and Balanced Series, filed with
Post-Effective Amendment No. 7 on March 2, 1992 and filed
via Edgar with Post-Effective Amendment No. 20 on April 29,
1997.
8.2 Custodian Agreement between Registrant and Brown Brothers
Harriman & Co. covering the International and Asia Series,
filed with Post-Effective Amendment No. 12 on February 16,
1995 and filed via Edgar with Post-Effective Amendment No.
20 on April 29, 1997.
8.3 Form of Custodian Agreement between Registrant and State
Street Bank and Trust Company dated May 1, 1997 covering the
Real Estate Securities and Enhanced Index Series, filed via
Edgar with Post-Effective Amendment No. 23 on December 12,
1997.
9.1 Form of Transfer Agency Agreement, filed with original
Registration Statement on Form N-1A on April 18, 1986 and
filed via Edgar with Post-Effective Amendment No. 20 on
April 29, 1997.
9.2 Financial Agent Agreement between Registrant and Phoenix
Equity Planning Corporation dated December 11, 1996 filed
via Edgar with Post-Effective Amendment No. 20 on April 29,
1997.
9.3 First Amendment to Financial Agent Agreement effective
February 27, 1998 filed via Edgar with Post-Effective
Amendment No. 25 on April 29, 1998.
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 with Post-Effective Amendment No. 20 on April 29,
1997.
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 with
Post-Effective Amendment No. 20 on April 29, 1997.
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.
10.4 Opinion and Consent of Counsel covering shares of the
Research Enhanced Index Series filed via Edgar with
Post-Effective Amendment No. 22 on July 15, 1997.
10.5 Opinion and Consent of Counsel covering shares of the
Engemann Nifty Fifty, Seneca Mid-Cap Growth, Phoenix Growth
& Income, Phoenix Value Equity and Schafer Mid-Cap Value
Series filed via Edgar with Post-Effective Amendment No. 24
on February 24, 1998.
10.6 Opinion and Consent of Counsel covering shares of the
Phoenix-Bankers Trust Dow 30, Phoenix-Federated U.S.
Government Bond, Phoenix-Janus Equity Income, Phoenix-Janus
Flexible Income, Phoenix-Janus Growth and Phoenix-Morgan
Stanley Focus Equity Series filed via Edgar herewith.
11. Written Consent of PricewaterhouseCoopers LLP, filed via
Edgar herewith.
12. Not Applicable.
13. Not Applicable.
14. Not Applicable.
15. Not Applicable.
16. Not Applicable.
17. Powers of Attorney, filed via Edgar herewith.
C-3
<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-4
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
NUMBER OF RECORD HOLDERS
TITLE OF CLASS AS OF APRIL 27, 1999
--------------- --------------------
<S> <C>
Phoenix-Goodwin Multi-Sector Fixed Income Series 5
Phoenix-Goodwin Money Market Series* 5
Phoenix-Engemann Capital Growth Series 8
Phoenix-Oakhurst Strategic Allocation Series 5
Phoenix-Oakhurst Balanced Series 5
Phoenix-Aberdeen International Series 5
Phoenix-Duff & Phelps Real Estate Securities Series 5
Phoenix-Seneca Strategic Theme Series 5
Phoenix-Aberdeen New Asia Series 6
Phoenix Research Enhanced Index Series 5
Phoenix-Engemann Nifty Fifty Series 5
Phoenix-Seneca Mid-Cap Growth Series 6
Phoenix-Hollister Value Equity Series 5
Phoenix-Oakhurst Growth and Income Series 5
Phoenix-Schafer Mid-Cap Value Series 6
</TABLE>
- ---------------
*Phoenix Mutual Life Insurance Company purchased 1 share of the Phoenix-Goodwin
Money Market Series at a price of $10 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.; 801-52167 for Phoenix-Aberdeen
International Advisors, LLC; 801-14813 for Duff & Phelps Investment Management
Co.; 801-56484 for Phoenix Variable Advisors, Inc.) filed under the Investment
Advisers Act of 1940, incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITERS
Not Applicable.
C-5
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Phoenix Home Life Mutual Insurance Company
One American Row, P.O. Box 5056
Hartford, Connecticut 06115-5056
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-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant 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 17th day of December, 1999.
THE PHOENIX EDGE SERIES FUND
Attest: /s/ Edwin L. Kerr By: /s/ Simon Y. Tan
--------------------- ---------------------
Edwin L. Kerr Simon Y. Tan
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 17th day of December, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
Trustee
- ----------------------------------------------
Frank M. Ellmer
Trustee
- ----------------------------------------------
John Fabian
Treasurer
- ---------------------------------------------- (Principal Financial and Accounting Officer)
Nancy G. Curtis
Trustee
- ----------------------------------------------
Eunice Groak
Trustee
- ----------------------------------------------
John R. Mallin
Trustee
- ----------------------------------------------
Timothy P. Shriver
Trustee and President
- ---------------------------------------------- (Principal Executive Officer)
Simon Y. Tan
</TABLE>
By: /s/ Simon Y. Tan
-------------------------
*Simon Y. Tan, pursuant to powers of attorney filed via Edgar herewith.
EXHIBIT 5.10
INVESTMENT ADVISORY AGREEMENT
<PAGE>
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT made effective as of the __ day of December, 1999 by and
between The Phoenix Edge Series Fund, a Massachusetts business trust having a
place of business located at 101 Munson Street, Greenfield, Massachusetts (the
"Trust") and Phoenix Variable Advisors, Inc., a Delaware corporation having a
place of business located at One American Row, Hartford, Connecticut (the
"Advisor").
WITNESSETH THAT:
1. The Trust hereby appoints the Adviser to act as investment adviser
to the Trust on behalf of the series of the Trust established and designated by
the Trustees on or before the date hereof, as listed on attached Schedule A, 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"), by agreement in writing the Trust and
the Advisor may agree to amend Schedule A to include such Additional Series,
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
Existing Series 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; and
(e) Regular reports to the Trustees on the implementation of
each Series' investment program.
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) 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 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; and
(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 the 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 by fee, payable
monthly, as outlined in Schedule A. The amounts payable to the Adviser with
respect to the respective Series shall be based upon the average of the values
of the net assets of such Series as of the close of business each day, computed
in accordance with the Trust's Declaration of Trust.
<PAGE>
(a) Compensation shall accrue immediately upon the effective
date of this Agreement.
(b) If there is termination of this Agreement during a
month, the 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.
(c) 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 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 farther 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 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 as directors, officers, stockholders or
otherwise;
(b) Directors, officers, employees, agents and stockholders
of the Adviser 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.
<PAGE>
12. This Agreement shall become effective with respect to the Existing
Series 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 two years 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 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 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 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 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 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".
15. The terms "majority of the outstanding voting securities",
"interested persons" and "assignment", when used herein, shall have the
respective meanings in the Investment Company Act of 1940, as amended.
<PAGE>
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 State of
Connecticut.
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: ________________________
Simon Y. Tan
President
PHOENIX VARIABLE ADVISORS, INC.
By: _________________________
Edwin L. Kerr
Vice President/Assistant Secretary
<PAGE>
SCHEDULE A
Series Investment Advisory Fee
------ -----------------------
Phoenix-Schafer Mid-Cap Value Series 1.05%
Phoenix Research Enhanced Index Series 0.45%
Phoenix-Bankers Trust Dow 30 Series 0.35%
Phoenix-Federated U.S. Government Bond Series 0.60%
Phoenix-Janus Equity Income Series 0.85%
Phoenix-Janus Flexible Income Series 0.80%
Phoenix-Janus Growth Series 0.85%
Phoenix-Morgan Stanley Focus Equity Series 0.85%
EXHIBIT 5.11
SUBADVISORY AGREEMENT
<PAGE>
SUBADVISORY AGREEMENT
[PHOENIX EDGE SERIES FUND]
BANKERS TRUST COMPANY December 15, 1999
One Bankers Trust Plaza
New York, NY 10006
WHEREAS, 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;
WHEREAS, the shares of the Fund are offered or may be offered in
several series, including the Phoenix-Bankers Fund Dow 30 Series (hereafter
referred to as the "Series");
WHEREAS, the Fund has entered into an Advisory Agreement with Phoenix
Variable Advisors (the "Advisor"), dated December 15, 1999 (the "Advisory
Agreement"), pursuant to which the Advisor evaluates and recommends series
advisors for the Series and is responsible for the day-to-day management of the
Series;
WHEREAS, the Advisor desires to retain Bankers Trust Company, a banking
corporation organized under the laws of the State of New York (the "Subadvisor")
to furnish portfolio management services for the Series, and the Subadvisor is
willing to furnish such services; and
WHEREAS, the Trustees of the Fund (the"Trustees"), including a majority
of the Trustees who are not "interested persons," as such term in defined in the
Act, of any party to this Agreement, has consented to such Agreement;
NOW, THEREFORE, the Advisor and the Subadvisor agree as follows:
1. Employment as a Subadvisor. The Advisor, being duly authorized by the
terms of the Advisory Agreement, hereby employs the Subadvisor to
invest and reinvest the assets of the Series on the terms and
conditions set forth herein. The services of the Subadvisor hereunder
are not to be deemed exclusive; the Subadvisor may render services to
others and engage in other activities which do not conflict in any
material manner in the Subadvisor's performance hereunder.
2. Acceptance of Employment; Standard of Performance. The Subadvisor
accepts its employment as a subadvisor to the Advisor and agrees to use
its best professional judgment to make investment decisions for the
Series in accordance with the provisions of this Agreement.
3. Services of Subadvisor.
(a) The Subadvisor shall provide the services set forth herein
and in Schedule A attached hereto and made a part hereof.
In providing management services to the Series, the
Subadvisor 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 to the Fund's
Agreement and Declaration of
<PAGE>
Fund, to the investment and other restrictions set forth
in the Act, the Securities Act of 1933 and the Internal
Revenue Code and the rules and regulations thereunder, and
to the supervision and control of the Funds of the Fund
(the "Funds"). The Subadvisor shall not, without the
Advisor's prior approval, effect any transactions which
would cause the Series at the time of the transaction to
be out of compliance with any of such restrictions or
policies. The Subadvisor will keep the Fund and the
Advisor informed of developments materially affecting the
Fund, and will, on its own initiative, furnish the Fund
and the Advisor from time to time with whatever
information the Sub-Advisor believes is appropriate for
this purpose.
(b) Subject at all times to the limitations set forth in
subparagraph 3(a) above, the Subadvisor shall have full
authority at all times with respect to the management of
the Series, including, but not limited to, authority to
give written or oral instructions to various
broker/dealers, banks or other agents; to bind and
obligate the Fund to and for the carrying out of
contracts, arrangements, or transactions which shall be
entered into by the Subadvisor on the Fund's behalf with
or through such broker/dealers, banks or other agents; to
direct the purchase and sale of any securities; and
generally to do and take all action necessary in
connection with the Series, or considered desirable by the
Subadvisor with respect thereto. The Subadvisor may
maintain uninvested cash balances in the Series as it
shall deem reasonable without incurring any liability for
the payment of interest thereon.
4. Expenses. It is understood that the Fund will pay all of its expenses
other than those expressly stated to be payable by the Subadvisor
hereunder or by the Advisor pursuant to the Advisory Agreement.
Expenses paid by the Fund include, but are not limited to ALL EXPENSES
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, REGISTERING
AND MAINTAINING THE REGISTRATION OF THE FUND AND ITS SHARES WITH THE
SEC, PREPARING AND MAILING PROSPECTUSES AND REPORTS TO SHAREHOLDERS,
BOOKKEEPING, AUDITING AND LEGAL EXPENSES.
The Subadvisor shall furnish at its own expense, or pay the expenses of
the Advisor, for the following:
(a) Office facilities, including office space, furniture and
equipment utilized by its employees, in the fulfillment of
Subadvisor's responsibilities hereunder;
(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 investment work), and to fulfill the other functions
of the Subadvisor hereunder; and
(c) Personnel to serve without salaries for the Fund as agents
of the Fund. The Subadvisor need not provide personnel to
perform, or pay the expenses of the Advisor for, services
customarily performed for an open-end management
2
<PAGE>
investment company by its national distributor, custodian,
financial agent, transfer agent, auditors and legal
counsel.
5. Transaction Procedures. All transactions for the Series will be
consummated by payment to, or delivery by, the Custodian(s) from time
to time designated by the Fund (the "Custodian"), or such depositories
or agents as may be designated by the Custodian pursuant to its
agreement with the Fund (the "Custodian Agreement"), of all cash and/or
securities due to or from the Series. The Subadvisor shall not have
possession or custody of such cash and/or securities or any
responsibility or liability with respect to such custody. The
Subadvisor shall advise the Custodian and confirm in writing to the
Fund all investment orders for the Series placed by it with brokers and
dealers at the time and in the manner set forth in the Custodian
Agreement and in Schedule B 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 Subadvisor. 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
Subadvisor shall have no responsibility or liability with respect to
custodial arrangements or the acts, omissions or other conduct of the
Custodian.
6. Allocation of Brokerage. The Subadvisor shall have authority and
discretion to select brokers and dealers to execute Series transactions
initiated by the Subadvisor, 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 Subadvisor's primary responsibility shall be to seek the
best execution of orders at the most favorable prices. However, this
responsibility shall not obligate the Subadvisor to solicit competitive
bids for each transaction or to seek the lowest available commission
cost to the Fund, so long as the Subadvisor reasonably believes that
the broker or dealer selected by it can be expected to obtain "best
execution" 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 Subadvisor, viewed in terms of either that particular transaction
or of the Subadvisor's overall responsibilities with respect to its
clients, including the Fund, as to which the Subadvisor 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 Advisor shall
have the right to require that transactions giving rise to brokerage
commissions, in an amount to be agreed upon by the Advisor and the
Subadvisor, 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 or exclusive benefit to
the Series. In addition, subject to paragraph A above, the applicable
Conduct Rules of the National Association of Securities Dealers, Inc.
and other applicable law, the Fund shall have the right to request that
transactions be executed by brokers and dealers by or through whom
sales of shares of the Fund are made.
3
<PAGE>
C. On occasions when the Subadvisor deems the purchase or sale of a
security to be in the best interests of the Fund as well as other
customers, the Subadvisor may, to the extent permitted by applicable
law and regulations, but shall not be obligated to, aggregate the
securities to be sold or purchased in order to obtain the best
execution or lower brokerage commissions, if any. In such event,
allocation of the securities so sold or purchased, as well as the
expenses incurred in the transaction, will be made by the Subadvisor in
the manner it considers to be the most equitable and consistent with
its fiduciary obligations to the Fund and, if applicable, to such other
customers.
D. Affiliates of the Subadvisor may be dealers in equity and debt
securities, and from time to time may be underwriters or dealers of
securities that may be bought for, held in, or sold from the Series.
With respect to each such instance, the Subadvisor represents that all
transactions which are effected for the Series will be made solely in
furtherance of their respective investment goals, and the fact that the
Subadvisor's affiliate is acting as an underwriter or dealer will not
be a factor in the investment decision. The Subadvisor agrees that it
will not purchase securities underwritten by itself or affiliates of
the Fund, except as permitted by the Act and the Fund's procedures.
7. Fees for Services. The compensation of the Subadvisor for its services
under this Agreement shall be calculated and paid by the Advisor in
accordance with the attached Schedule C. In computing the fee, the net
asset value of the Series will be calculated as described in the
Prospectus and Statement of Additional Information. Pursuant to the
Advisory Agreement , the Advisor is solely responsible for the payment
of fees to the Subadvisor.
8. Limitation of Liability. The Subadvisor 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 Subadvisor's
willful misfeasance, bad faith or gross negligence, a violation of the
standard of care established by and applicable to the Subadvisor 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 Subadvisor from liability under the Act,
other federal or state securities laws or common law).
The Advisor shall hold harmless and indemnify the Subadvisor for any
loss, liability, cost, damage or expense (including reasonable
attorneys fees and costs) arising from any claim or demand by any past
or present shareholder of the Series or the Fund that is not based upon
the obligations of the Subadvisor with respect to the Series under this
Agreement.
9. Confidentiality. Subject to the duty of the Subadvisor 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 Subadvisor and the Fund in respect thereof.
4
<PAGE>
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 Subadvisor shall notify the Advisor 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 Advisor to consider whether an
assignment as defined in Section 2(a)(4) of the Act will occur and to
take the steps it deems necessary.
11. Representations, Warranties and Agreements of the Subadvisor. The
Subadvisor represents, warrants and agrees that:
A. It is registered as an "investment advisor" under the Investment
Advisors Act of 1940 ("Advisors Act"); or is a "bank" as defined in the
Advisors Act.
B. It will maintain the records and information required by Rule 31a-1
under the Act respecting its activities with respect to the Series, and
such other records with respect thereto relating to the services the
Subadvisor provides under this Agreement as may be required in future
by applicable SEC rules, and shall retain such information for such
times and in such manner as required by applicable rules, including
Rule 31a-2 under the 1940 Act.
C. It has a written code of ethics complying with the requirements of
Rule 17j-1 under the Act and will provide the Advisor with a copy of
the code of ethics and evidence of its adoption. Subadvisor
acknowledges receipt of the written code of ethics adopted by and on
behalf of the Fund (the "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 Subadvisor shall certify to the
Fund and to the Advisor that the Subadvisor has complied with the
requirements of Rule 17j-1 during the previous calendar quarter and
that there has been no violation of its code of ethics, or the Code of
Ethics, or if such a violation has occurred, that appropriate action
was taken in response to such violation. The Subadvisor shall permit
the Fund and Advisor to examine the reports required to be made by the
Subadvisor under Rule 17j-1(c)(1) and this subparagraph.
D. It will use all necessary efforts to manage the Series so that the
Fund will qualify as a regulated investment company under Subchapter M
of the Internal Revenue Code.
E. It will furnish the Advisor a copy of its Form ADV as filed with the
Securities and Exchange Commission, if such form is required to be
filed by the Subadvisor.
F. The Subadvisor will be responsible for the preparation and filing of
Schedule 13G and Form 13F with respect to the assets of the Series.
G. Reference is hereby made to the Declaration of Trust dated February
18, 1986, 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 or
hereafter so filed with the Secretary of the Commonwealth of
Massachusetts and elsewhere as required by law. The name Phoenix Edge
Series Fund refers to the Trustees under said Declaration of Fund, as
Trustees and not personally, and no Trustee, shareholder, officer,
agent or employee of the Fund shall be held to any personal liability
in connection with the affairs of the Fund; only the Fund estate under
said Declaration of Trust is liable. Without limiting the generality of
the foregoing, neither the Subadvisor nor any of its
5
<PAGE>
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.
12. Representations, Warranties and Agreements of the Advisor. The Advisor
represents, warrants and agrees that:
A. It has the power and has taken all necessary action, and has
obtained all necessary licenses, authorizations and approvals, to
execute this Agreement, which constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms.
B. It is registered as an "investment advisor" under the Investment
Advisors Act of 1940 ("Advisors Act").
C. It will deliver to the Subadvisor true and complete copies of the
Prospectus, Statement of Additional Information, Advisory Agreement ,
Fund's Code of Ethics and such other documents or instruments governing
the investments and investment policies and practices of the Series,
and during the term of this Agreement will promptly deliver to the
Subadvisor true and complete copies of all documents and instruments
supplementing, amending, or otherwise becoming such Fund Documents
before or at the time they become effective.
D. It will deliver to the Subadviser any limitations imposed upon the
Fund as a result of relevant diversification requirements under the
provisions of Section 817(h) of the Internal Revenue Code of 1986, as
amended.
E. It will furnish or otherwise make available to the Subadvisor such
other information relating to the business affairs of the Fund as the
Subadvisor at any time, or from time to time, reasonably requests in
order to discharge its obligations hereunder.
13. Reports. The Subadvisor shall provide the Advisor such periodic and
special reports as the Advisor may reasonably request. The Subadvisor
agrees that such records are the property of the Fund, and shall be
made reasonably available for inspections, and by the Fund or to the
Advisor as agent of the Fund, and promptly upon request surrendered to
either. The Subadvisor is authorized to supply the Fund's independent
accountants, PricewaterhouseCoopers LLP, or any successor accountant
for the Fund, any information that they may request in connection with
the Fund.
14. Proxies. Subadviser will cooperate (in establishing proxy handling
procedures acceptable to Advisor) with such authorized representative
of the Fund granted authority to vote proxies solicited by or with
respect to the issuers of securities in which Fund assets are invested.
15. Recordkeeping. The Subadviser will assist the recordkeeping agent for
the Fund in determining or confirming the value of any securities or
other assets in the Series for which the recordkeeping agent seeks
assistance from or identifies for review by the Advisor. The parties
agree that,
6
<PAGE>
consistent with applicable law, the Advisor will not bear
responsibility for the determination of value of any such securities or
other assets.
16. Use of Subadvisor's Name. Neither the Fund nor the Advisor shall use
the name of the Subadvisor, or any affiliate of the Subadvisor, in any
prospectus, advertisement, sales literature or other communication to
the public except in accordance with such policies and procedures as
shall be mutually agreed to in writing be the Subadvisor and the Fund
or Advisor.
17. Amendment. This Agreement may be amended at any time, but only by
written agreement between the Subadvisor and the Advisor, which
amendment, other than amendments to Schedules 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.
18. Effective Date; Term. This Agreement shall become effective on the date
set forth on the first page of this Agreement. Unless terminated as
hereinafter provided, this Agreement shall remain in full force and
effect until December 31, 2000, and 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 Act, and by the
majority vote of the disinterested Trustees in accordance with the
requirements of Section 15(c) thereof.
19. Notices. All notices or other communications required of permitted to
be given hereunder shall be in writing and shall be delivered or sent
by pre-paid first class letter post to the following addresses or to
such other address as the relevant addressee shall hereafter notify for
such purpose to the others by notice in writing and shall be deemed to
have been given at the time of delivery.
If to the Advisor: PHOENIX VARIABLE ADVISORS
One American Row
Hartford, Connecticut
Attention: _________________
If to the Subadviser: BANKERS TRUST COMPANY
One Bankers Trust Plaza
New York, New York 10006
Attention: _Lawrence S. Lafer
Director________________
20. Termination. This Agreement may be terminated by either party, without
penalty, immediately upon written notice to the other party in the
event of a breach of any provision thereof by the party so notified, or
otherwise, upon sixty (60) days' written notice to the other party, but
any such termination shall not affect the status, obligations or
liabilities of either party hereto to the other party.
21. 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.
7
<PAGE>
22. 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.
PHOENIX VARIABLE ADVISORS
By: _______________________
Title:
ACCEPTED:
BANKERS TRUST COMPANY
By: ______________________
Title:
SCHEDULES: A. Subadvisor Functions
B. Operational Procedures
C. Fee Schedule
8
<PAGE>
SCHEDULE A
----------
SUBADVISOR FUNCTIONS
With respect to managing the investment and reinvestment of the Series
assets, the Subadvisor shall provide, at its own expense:
(a) 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 Advisor;
(b) Implementation of the investment program for the Series based
upon the foregoing criteria;
(c) Quarterly reports, in form and substance acceptable to the
Advisor, with respect to: i) compliance with the Code of
Ethics and the Subadvisor'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 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 investment program,
including, without limitation, analysis of Series performance;
(d) Attendance by appropriate representatives of the Subadvisor at
meetings requested by the Advisor or Trustees at such time(s)
and location(s) as reasonably requested by the Advisor or
Trustees; and
(e) 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 Advisor.
9
<PAGE>
SCHEDULE B
----------
OPERATIONAL PROCEDURES
In order to minimize operational problems, it will be necessary for a flow of
information to be supplied to [NAME OF CUSTODIAN] (the "Custodian"), the
custodian for the Fund.
The Subadvisor 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 SWIFT 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. Except with respect to Subadvisor's future
transactions, 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 Subadvisor daily with a cash availability report. This will normally
be done by facsimile so that the Subadvisor will know the amount available for
investment purposes.
10
<PAGE>
SCHEDULE C
----------
SUBADVISORY FEE
For services provided to the Fund pursuant to paragraph 3 hereof, the
Advisor will pay to the Subadvisor, on or before the 10th day of each month, a
fee, payable in arrears, at the annual rate of:
0.10% of the average aggregate daily net asset value of the Series;
subject to a minimum fee of $100,000.
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
Subadvisor, the net asset value of the Fund and each Series shall be valued as
set forth in the then current registration statement of the Fund.
11
EXHIBIT 5.12
SUBADVISORY AGREEMENT
<PAGE>
SUBADVISORY AGREEMENT
---------------------
This Subadvisory Agreement (this "Agreement") is entered into as of the
15th day of December, 1999 by and between Phoenix Variable Advisors, a Delaware
corporation (the "Adviser") and Federated Investment Management Company, a
Delaware business trust ("FIMCO").
RECITALS:
---------
A. The Adviser has entered into an advisory agreement dated December 15,
1999 (the "Advisory Agreement") with The Phoenix Edge Series Fund, a
Massachusetts business trust (the "Trust"), pursuant to which the
Adviser provides portfolio management services to the series of the
Trust set forth on Schedule 1 to this Agreement (each a "Fund" and
collectively the "Funds");
B. The Advisory Agreement provides that the Adviser may delegate any or
all of its portfolio management responsibilities under the Advisory
Agreement to one or more subadvisers; and
C. The Adviser and the Board of Trustees (the "Board") of the Trust desire
to retain FIMCO to render portfolio management services in the manner
and on the terms set forth in this Agreement.
AGREEMENT:
----------
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Adviser and FIMCO agree as follows:
SECTION 1. APPOINTMENT OF SUBADVISER.
The Adviser hereby appoints FIMCO as subadviser for each Fund and
authorizes FIMCO, in its discretion and without prior consultation with the
Adviser, to invest and manage each Fund's portfolio of Securities in accordance
with such Fund's stated investment objective to the fullest extent permitted by:
(a) the Fund's investment policies, limitations, procedures and
guidelines set forth in the documents listed on Schedules 2 and 3 to
this Agreement;
(b) any additional objectives, policies or guidelines established by
the Adviser or by the Board that have been furnished in writing to
FIMCO;
(c) the provisions of the Investment Company Act of 1940 (the "1940
Act") and the rules and regulations thereunder applicable to the Fund,
including rule 2a-7 promulgated thereunder ("Rule 2a-7"); and
<PAGE>
(d) the provisions of Subchapter M of the Internal Revenue Code ("IRC")
applicable to "regulated investment companies."
For purposes of this Agreement, "Securities" include any investment permitted
under the foregoing policies, limitations, procedures, guidelines, laws or
regulations. Subject to the supervision of the Adviser and the Board, the
Adviser authorizes FIMCO to determine the structure and composition of the
Fund's portfolio, including the purchase, retention and disposition of, and
exercise of all rights pertaining to, the Securities comprising the portfolio.
FIMCO accepts its appointment as a subadviser to the Adviser and agrees to
provide an investment program for the Fund 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. In
managing the Fund FIMCO agrees to use its best professional judgment to make
investment decisions for the Fund in accordance with the provisions of this
Agreement.
FIMCO agrees to attendance by appropriate representatives of the Adviser at
meetings reasonably requested by the Adviser or Trustees at such time(s) and
location(s) as reasonably requested by the Adviser or Trustees. FIMCO also
agrees to reasonable participation, reasonable 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 as reasonably requested by the Adviser.
To the extent applicable, FIMCO will cooperate (in establishing proxy handling
procedures acceptable to Investment Manager) with such authorized representative
of the Trust granted authority to vote proxies solicited by or with respect to
the issuers of securities in which Fund assets are invested.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
SECTION 2.1. REPRESENTATIONS AND WARRANTIES OF FIMCO
FIMCO represents and warrants to Adviser as follows:
(a) FIMCO is a business trust duly organized, validly existing, and in
good standing under the laws of the State of Delaware.
(b) This Agreement constitutes the legal, valid, and binding obligation
of FIMCO, enforceable against FIMCO in accordance with its terms. FIMCO
has the absolute and unrestricted right, power, and authority to
execute and deliver this and to perform its obligations under this
Agreement.
(c) Neither the execution and delivery of this Agreement by FIMCO nor
the performance of any of its obligations hereunder will give any
person the right to prevent, delay, or otherwise interfere with the
performance of such obligations pursuant to:
(i) any provision of FIMCO's Declaration of Trust or By-Laws;
<PAGE>
(ii) any resolution adopted by the board of trustees or the
shareholders of FIMCO;
(iii) any law, regulation or administrative or court order to
which FIMCO may be subject; or
(iv) any contract to which FIMCO is a party or by which FIMCO may
be bound.
FIMCO is not and will not be required to obtain any consent from any
person in connection with the execution and delivery of this Agreement
or the performance of any obligations hereunder.
(d) FIMCO is registered with the Securities and Exchange Commission
("SEC") as an investment adviser under the Investment Advisers Act of
1940 (the "Advisers Act") and is registered or licensed as an
investment adviser under the laws of all jurisdictions in which its
activities require it to be so registered or licensed, except where the
failure to be so licensed would not have a material adverse effect on
its business.
(e) FIMCO has furnished to the Adviser true and complete copies of all
the documents listed on Schedule 3 to this Agreement.
SECTION 2.2. REPRESENTATIONS AND WARRANTIES OF THE ADVISER
The Adviser represents and warrants to FIMCO as follows:
(a) The Adviser is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware.
(b) This Agreement constitutes the legal, valid, and binding obligation
of the Adviser, enforceable against the Adviser in accordance with its
terms. the Adviser has the absolute and unrestricted right, power, and
authority to execute and deliver this and to perform its obligations
under this Agreement.
(c) Neither the execution and delivery of this Agreement by the Adviser
nor the performance of any of its obligations hereunder will give any
person the right to prevent, delay, or otherwise interfere with the
performance of such obligations pursuant to:
(i) any provision of the Adviser's Declaration of Trust or
By-Laws;
(ii) any resolution adopted by the board of trustees or the
shareholders of the Adviser;
(iii) any law, regulation or administrative or court order to which
the Adviser may be subject; or
(iv) any contract to which the Adviser is a party or by which the
Adviser may be bound.
<PAGE>
Except for the approval of the Board and of each Fund's shareholders as
required by Section 15 of the 1940 Act, the Adviser is not and will not
be required to obtain any consent from any person in connection with
the execution and delivery of this Agreement or the performance of any
obligations hereunder.
(d) The Adviser is registered with the SEC as an investment adviser
under the Advisers Act and is registered or licensed as an investment
adviser under the laws of all jurisdictions in which its activities
require it to be so registered or licensed, except where the failure to
be so licensed would not have a material adverse effect on its
business.
(e) The Adviser has furnished to FIMCO true and complete copies of all
the documents listed on Schedule 2 to this Agreement.
(f) Adviser will deliver to FIMCO any limitations imposed upon the Fund
as a result of relevant diversification requirements under the
provisions of Section 817(h) of the Internal Revenue Code of 1986, as
amended.
SECTION 3. CONDITIONS TO AGREEMENT.
FIMCO's and the Adviser's obligations under this Agreement are subject
to the satisfaction of the following conditions precedent:
(a) Receipt by FIMCO of a certificate of an officer of Trust stating
that (i) this Agreement and the Advisory Agreement have been approved
by the vote of a majority of the trustees who are not interested
persons of FIMCO or the Adviser, cast in person at a meeting of the
Board call for the purpose of voting on such approval, and (ii) this
Agreement and the Advisory Agreement have been approved by the vote of
a majority of the outstanding voting securities of the Trust;
(b) Receipt by FIMCO of certified copies of instructions from the Trust
to its custodian designating the persons specified by FIMCO as
"Authorized Persons" under the Fund's custody agreement;
(c) The Trust's execution and delivery of a limited power of attorney
in favor of FIMCO, in a form mutually agreeable to FIMCO, the Adviser
and the Board;
(d) Receipt by FIMCO of Board resolutions, certified by an officer of
the Trust, adopting all procedures and guidelines listed on Schedule 3
to this Agreement and identified as required by Rule 2a-7 or any other
exemptive rule or order that is or will become applicable to any Fund;
(e) Receipt by FIMCO of complete copies, certified by an officer of the
Trust, of all other policies procedures, guidelines, and codes listed
on Schedule 2 to this Agreement; and
<PAGE>
(f) Any other documents, certificates or other instruments that FIMCO
or the Adviser may reasonable request from the Trust.
SECTION 4. COMPENSATION.
For the services provided under this Agreement, the Adviser will pay to
FIMCO a fee at the annual rate set forth opposite each Fund's name on Schedule 1
multiplied times such Fund's average daily net assets. Such fee will accrue
daily and will be paid monthly to FIMCO on or before the last business day of
the next succeeding calendar month. If this Agreement is effective for only a
portion of a month, the fee will be prorated for the portion of such month
during which this Agreement is in effect.
SECTION 5. INFORMATION AND REPORTS.
(a) The Adviser will promptly notify FIMCO of any material change in
any of the documents listed on Schedule 2 to this Agreement and will
provide FIMCO with copies of any such modified document. The Adviser
will also provide FIMCO with a list, to the best of the Adviser's
knowledge, of all affiliated persons of Adviser (and any affiliated
person of such an affiliated person) and will promptly update the list
whenever the Adviser becomes aware of any additional affiliated
persons.
(b) FIMCO will maintain books and records relating to its management of
the Fund under its customary procedures and in compliance with
applicable regulations under the 1940 Act and the Advisers Act. FIMCO
will permit the Adviser to inspect such books and records at all
reasonable times during normal business hours, upon reasonable notice.
Prior to each Board meeting, FIMCO will provide the Adviser and the
Board with reports regarding its management of the Fund during the
interim period, in such form as may be mutually agreed upon by FIMCO
and the Adviser. FIMCO will also provide the Adviser with any
information regarding its management of the Fund required for any
shareholder report, amended registration statement or prospectus
supplement filed by the Fund with the SEC. FIMCO will keep the Trust
and the Adviser informed of developments materially affecting the Fund,
and will, on its own initiative, furnish the Fund and the Advisor from
time to time with whatever information FIMCO believes is appropriate
for this purpose.
(c) FIMCO shall also furnish Adviser with Quarterly reports, in form
and substance acceptable to the Advisor, with respect to:
(i) compliance with FIMCO's code of ethics, and the Adviser's code
of ethics, subject to approval by FIMCO of Adviser's code of
ethics;
(ii) compliance with procedures, as are agreed to by FIMCO,
relative to securities eligible for resale under Rule 144A
under the Securities Act of 1933, as amended;
<PAGE>
(iii) diversification of Fund assets in accordance with the then
prevailing prospectus and statement of additional information
pertaining to the Fund and governing laws;
(iv) compliance with any Fund limitations regarding the 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 Fund investment program, including,
without limitation, a review and discussion of Fund
performance.
(d) FIMCO will be responsible for the preparation and filing of
Schedule 13G and Form 13F with respect to assets of the Fund managed by
FIMCO.
(e) FIMCO will assist the recordkeeping agent for the Trust in finding
appropriate parties to determine or confirm the value of any
securities or other assets in the Fund for which the recordkeeping
agent seeks assistance from the Adviser. The parties agree that,
consistent with applicable law, FIMCO will not bear responsibility for
the determination of value of any such securities or other assets.
(f) FIMCO agrees that such records are the property of the Trust, and
shall be made reasonably available for inspections by the Fund or the
Adviser as agent of the Trust, and will surrender such records within a
reasonable time after request by either.
(g) Each party agrees that information obtained from the other during
the course of this agreement will only be used in furtherance of
performance of its obligations under this agreement.
SECTION 6. NONEXCLUSIVE AGREEMENT; ALLOCATION OF TRANSACTIONS.
(a) The investment management services provided by FIMCO hereunder are
not to be deemed to be exclusive, and FIMCO shall be free to render
similar services to other advisers, investment companies, and other
types of clients.
(b) To the extent consistent with applicable law, FIMCO may aggregate
purchase or sell orders for the Fund with contemporaneous purchase or
sell orders of other clients of FIMCO or its affiliated persons. In
such event, allocation of the Securities so purchased or sold, as well
as the expenses incurred in the transaction, will be made by FIMCO in
the manner FIMCO considers to be the most equitable and consistent with
its and its affiliates' fiduciary obligations to the Fund and to such
other clients. The Adviser hereby acknowledges that such aggregation of
orders may not result in a more favorable price or lower brokerage
commissions in all instances.
(c) FIMCO will place purchase and sell orders for the Fund with or
through such banks, brokers, dealers, futures commission merchants or
other firms dealing in Securities ("Brokers") as it determines, which
may include Brokers that are affiliated persons of
<PAGE>
FIMCO, provided such orders are exempt from the provisions of Section
17(a), (d) and (e) of the 1940 Act. FIMCO will use its best efforts to
obtain execution of transactions for the Fund at prices which are
advantageous to the Fund and at commission rates that are reasonable in
relation to the services received. FIMCO may, however, select Brokers
on the basis that they provide brokerage, research or other services or
products to the Fund and/or other clients of FIMCO and its affiliated
persons. In selecting Brokers, FIMCO may also consider the reliability,
integrity and financial condition of the Broker, and the size of and
difficulty in executing the order.
SECTION 7. FUND EXPENSES.
Each Fund shall pay or cause to be paid all of its own expenses and its
allocable share of Trust expenses incurred in managing its portfolio of
Securities, including all commissions, mark-ups, transfer fees, registration
fees, ticket charges, transfer taxes, custodian fees and similar expenses. Each
Fund will also pay its allocable share of such extraordinary expenses as may
arise including expenses incurred in connection with litigation, proceedings,
and claims and the legal obligations of the Trust to indemnify its officer and
Trustees and agents with respect thereto. Each Fund will promptly reimburse
FIMCO for any such expense to the extent advanced by FIMCO. In no event will
FIMCO have any obligation to pay any of the Funds' expenses, including without
limitation, the expenses of organizing the Trust and continuing its existence;
fees and expenses of Trustees and officers of the Trust; fees for administrative
personnel and services; expenses incurred in the distribution of its shares
("Shares"), including expenses of administrative support services; fees and
expenses of preparing and printing its Registration Statements under the
Securities Act of 1933 and the 1940 Act; expenses of registering and qualifying
the Trust, the Funds, and Shares of the Funds under federal and state laws and
regulations; expenses of preparing, printing, and distributing prospectuses (and
any amendments thereto) to shareholders; interest expense, taxes, fees, and
commissions of every kind; expenses of issue (including cost of Share
certificates), purchase, repurchase, and redemption of Shares; charges and
expenses of custodians, transfer agents, dividend disbursing agents, shareholder
servicing agents, and registrars; printing and mailing costs, auditing,
accounting, and legal expenses; reports to shareholders and governmental
officers and commissions; expenses of meetings of Trustees and shareholders and
proxy solicitations therefor; insurance expenses; association membership dues
and such nonrecurring items as may arise, including all losses and liabilities
incurred in administering the Trust and the Funds.
SECTION 8. LIMITATION OF LIABILITY.
(a) In the absence of willful misfeasance, bad faith or gross
negligence on the part of FIMCO, or of reckless disregard by FIMCO of
its obligations and duties hereunder, FIMCO shall not be subject to any
liability to the Adviser, the Fund, the Trust, any shareholder of the
Fund, or to any person, firm or organization. Without limiting the
foregoing, FIMCO shall not have any liability whatsoever for any
investment losses incurred by a Fund, or arising from transactions by a
Fund, prior to the date on which FIMCO assumes responsibility for the
management of the Fund's portfolio.
<PAGE>
(b) The Adviser, the Trust, and the Fund are hereby expressly put on
notice of the limitation of liability as set forth in the Declaration
of Trust of FIMCO and agree that the obligations assumed by FIMCO
pursuant to this Agreement will be limited in any case to FIMCO and its
assets and the Adviser, the Trust, and the Fund shall not seek
satisfaction of any such obligation from the shareholders of FIMCO, the
trustees of FIMCO, officers, employees or agents of FIMCO, or any of
them.
SECTION 9. PRICING.
The Adviser and the Fund hereby acknowledge that FIMCO is not
responsible for pricing portfolio Securities, and that the Adviser, the Trust,
the Fund, and FIMCO will rely on the pricing agent chosen by the Board of the
Trust for prices of Securities, for any purposes.
SECTION 10. TERM.
This Agreement shall begin as of the date of its execution and shall
continue in effect for a period of two years from the date hereof and thereafter
for successive periods of one year, subject to the provisions for termination
and all of the other terms and conditions hereof if such continuance is
specifically approved at least annually in conformity with the requirements of
the 1940 Act; provided, however, that this Agreement may be terminated by the
Fund at any time, without the payment of any penalty, by the Board or by vote of
a majority of the outstanding voting securities (as defined in the 1940 Act) of
the Fund, or by the Adviser or FIMCO at any time, without the payment of any
penalty, on not more than 60 days' nor less than 30 days' written notice to the
other party. This Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act) or upon the termination of the Adviser's
management agreement with the Trust.
SECTION 11. LIMITED POWER OF ATTORNEY.
Subject to any other written instructions of the Adviser or the Trust,
FIMCO is hereby appointed the Trust's agent and attorney-in-fact for the limited
purposes of executing account documentation, agreements, contracts and other
documents as FIMCO shall be requested by brokers, dealers, counter parties and
other persons in connection with its management of the Fund's assets. The
Adviser hereby ratifies and confirms as good and effectual, at law or in equity,
all that FIMCO and its officers and employees, may do in its capacity as
attorney-in-fact. However, nothing herein shall be construed as imposing a duty
on FIMCO to act or assume responsibility for any matters in its capacity as
attorney-in-fact for the Fund. Any person, partnership, corporation or other
legal entity dealing with FIMCO in its capacity as attorney-in-fact hereunder
for the Trust is hereby expressly put on notice that FIMCO is acting solely in
the capacity as an agent of the Trust and that any such person, partnership,
corporation or other legal entity must look solely to the Fund for enforcement
of any claim against Fund, as FIMCO assumes no personal liability whatsoever for
obligations of the Fund entered into by FIMCO in its capacity as
attorney-in-fact for the Trust.
<PAGE>
SECTION 12. GENERAL PROVISIONS
SECTION 12.1. NOTICES
All notices or other communications required of permitted to be given
hereunder shall be in writing and shall be delivered or sent by
pre-paid first class letter post to the following addresses or to such
other address as the relevant addressee shall hereafter notify for such
purpose to the others by notice in writing and shall be deemed to have
been given at the time of delivery.
If to the Adviser: PHOENIX VARIABLE ADVISORS
One American Row
Hartford, Connecticut
Attention: Doreen Bonner
If to FMICO: FEDERATED INVESTMENT MANAGEMENT CO.
1001 Liberty Avenue
Pittsburgh, PA 10006
Attention: Carol Kayworth
SECTION 12.2. FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such
further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
SECTION 12.3. WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
SECTION 12.4. ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect
<PAGE>
to its subject matter. This Agreement may not be amended except by a written
agreement executed by the party to be charged with the amendment.
SECTION 12.5. ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without
the prior consent of the other parties. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
SECTION 12.6. SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
SECTION 12.7. SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
SECTION 12.8. GOVERNING LAW
This Agreement will be governed by the laws of the State of
Pennsylvania without regard to conflicts of laws principles.
SECTION 12.9. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed
on their behalf by their duly authorized officers as of the date first above
written.
PHOENIX VARIABLE ADVISORS
<PAGE>
By: _______________________
Title:
ACCEPTED:
FEDERATED INVESTMENT MANAGEMENT COMPANY
By: ______________________
Title:
<PAGE>
SCHEDULE 1 - FUNDS AND SUBADVISORY FEES
---------------------------------------
Name of Series Subadvisory Fee
-------------- ---------------
Phoenix-Federated U.S. Government Bond Series 0.30% first $25 million
0.25% next $25 million
0.20% next $20 million
Negotiable above $100 million
<PAGE>
SCHEDULE 2 - FUND DOCUMENTATION
-------------------------------
1. Trust's [Articles of Incorporation] [Declaration of Trust] and Bylaws.
2. Currently effective registration statement for each class of each Fund's
shares and any pending amendments to such registration statement.
3. Any supplements to any prospectus or statement of additional information
for any class of any Fund's shares.
4. Custody Agreement between the Trust and ________________________, as
Custodian for the Portfolio's securities, including information as to:
[bullet] the Portfolio's nominee,
[bullet] the Federal tax identification numbers of the Portfolio and its
nominee,
[bullet] all routing, bank, participant and account numbers and other
information necessary to provide proper instructions for transfer
and delivery of Securities to the Portfolio's accounts at the
Custodian,
[bullet] the name, address, phone and fax number of the Custodian's
employees responsible for the Portfolio's accounts, and
[bullet] the Portfolio's pricing service and contact persons.
5. All policies, procedures, guidelines and codes adopted by the Board under
the 1940 Act or any regulation thereunder, including:
[bullet] Rule 2a-7 (if the Portfolio holds itself out as a "money market
fund"),
[bullet] Rule 10f-3 (relating to affiliated underwriting syndicates),
[bullet] Rule 17a-7 (relating to interfund transactions),
[bullet] Rule 17e-1 (relating to transactions with affiliated Brokers),
[bullet] Rule 17f-4 (relating to securities held in securities
depositories),
[bullet] Rule 17j-1 (relating to a code of ethics), and
[bullet] Rule 17f-5 (relating to foreign custody).
6. All SEC exemptive orders applicable to the Portfolio, and all procedures
and guidelines adopted by the Board under the terms of such orders.
7. All procedures and guidelines adopted by the Board or the Manager
regarding:
[bullet] Repurchase agreements,
[bullet] Evaluating the liquidity of securities, include restricted
securities, municipal leases and stripped U.S. government
securities,
[bullet] Segregation of liquid assets in connection with reverse repurchase
agreements, firm commitments, standby commitments, short sales,
options and futures agreements,
[bullet] Derivative contracts and securities, and
[bullet] Affiliated bank procedures.
<PAGE>
8. Any master agreements that the Trust has entered into on behalf of the
Portfolio, including:
[bullet] Master Repurchase Agreement,
[bullet] Master Futures and Options Agreements,
[bullet] Master Foreign Exchange Netting Agreements, and
[bullet] Master Swap Agreements.
9. Blue Sky undertakings.
10. CFTC Rule 4.5 letter.
11. Schedule of the current year's Board meetings, and the reports needed by
the Board.
12. Pricing and performance calculation entities and contact persons.
<PAGE>
SCHEDULE 3 - SUBADVISER DOCUMENTATION
-------------------------------------
1. Part II of FIMCO's Form ADV most recently filed with the SEC.
2. Guidelines and procedures required by Rule 2a-7, consisting of:
[bullet] Forms of resolutions authorizing use of the amortized cost method,
[bullet] Amortized Cost Procedures, and
[bullet] Federated Investment Adviser Guidelines
3. Procedures and checklists required by the following exemptive rules and
orders under under the 1940 Act:
[bullet] Rule 10f-3 (relating to affiliated underwriting syndicates),
[bullet] Rule 17a-7 (relating to interfund transactions),
[bullet] Rule 17e-1 (relating to transactions with affiliated Brokers),
[bullet] Rule 17f-4 (relating to securities held in securities
depositories),
[bullet] Rule 17j-1 (relating to a code of ethics),
[bullet] Release No. IC-22903 (granting an exemption for the use of "core
funds"),
[bullet] Release No. IC-22313 (granting an exemption for the purchase of
affiliated money market funds)
[bullet] Release Nos. IC-16602 and IC-19816 (granting an exemption for
certain transactions with affiliated banks), and
[bullet] Release No. IC-15243 (granting an exemption permitting the
purchase of insurance from an affiliate and the settlement of
claims therefrom).
4. Procedures and checklist required
5. All exemptive orders granted by the SEC that will become applicable to the
Portfolio, and the procedures and guidelines followed by FIMCO in
accordance therewith.
EXHIBIT 5.13
SUB-INVESTMENT ADVISORY AGREEMENT
<PAGE>
SUB-INVESTMENT ADVISORY AGREEMENT
This Sub-Investment Advisory Agreement (this "Agreement") is entered
into as of December 15, 1999, by and between Phoenix Variable Advisors, a
Delaware corporation ("Investment Manager") and Janus Capital Corporation, a
Colorado corporation ("JCC").
RECITALS
--------
a. Investment Manager has entered into an Investment Management
Agreement dated December 15,1999 (the "Investment Management Agreement") with
The Phoenix Edge Series Fund (the "Fund"), to act as investment manager to the
Phoenix-Janus Equity-Income Series, the Phoenix-Janus Flex Income Series and the
Phoenix-Janus Growth Series, which are series of the Fund (collectively the
"Portfolios").
b. The Investment Management Agreement provides that Investment Manager
may engage a sub-investment adviser to furnish investment information and advice
to assist Investment Manager in carrying out its responsibilities under the
Investment Management Agreement.
c. Investment Manager and the Trustees of the Fund desire to retain JCC
to render investment management services to Investment Manager in the manner and
on the terms set forth in this Agreement.
AGREEMENT
---------
In consideration of the mutual covenants and agreements set forth in
this Agreement, Investment Manager and JCC agree as follows:
1. Sub-Investment Adviser Services.
(a) JCC shall, subject to the control of the Trustees of the
Fund and to the supervision of Investment Manager, have exclusive authority to
manage the investment and reinvestment of the assets of the Portfolios,
including cash, provided that such management is in accordance with the Fund's
declaration of trust and in its registration statements under the Investment
Company Act of 1940 (the "1940 Act"), Investment Manager acknowledges that JCC
has authority to trade every day the market is open. JCC makes no representation
or warranty, express or implied, that any level of performance or investment
results will be achieved by the Portfolios or that the Portfolios will perform
comparably with any standard or index, including other clients of JCC, whether
public or private.
(b) Subject to the understanding that JCC shall not be
responsible for portfolio accounting and shall not be required to generate
information derived from portfolio accounting data or to disclose proprietary
information, JCC shall furnish Investment Manager with quarterly reports, in
form and substance acceptable to the Investment Manager, with respect to:
-1-
<PAGE>
(i) compliance with JCC'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 Portfolio assets in accordance
with the then prevailing prospectus and statement
of additional information pertaining to the
Portfolios and governing laws;
(iv) the implementation of the Portfolios' investment
program, including, without limitation, analysis of
Portfolio performance; and
(v) any other reports reasonably requested in
accordance with or described in this Agreement.
(c) Upon prior notice, JCC shall permit the financial
statements, books and records with respect to the Portfolios to be inspected and
audited by Investment Manager (and/or the independent accountants for Investment
Manager or the Fund) at all reasonable times during normal business hours. JCC
agrees that such records are the property of the Fund, and shall be made
reasonably available for inspections, and by the Fund or to the Investment
Manager as agent of the Fund, and promptly upon request surrendered to either.
(d) JCC has provided to Investment Manager a copy of JCC's
Form ADV as filed with the Securities and Exchange Commission. JCC shall provide
to Investment Manager a list of persons who JCC wishes to have authorized to
give written and/or oral instructions to Custodians of Fund assets for the
Portfolios.
(e) JCC shall be responsible for the preparation and filing of
Schedule 13G and Form 13F on behalf of the Portfolios. JCC shall not be
responsible for the preparation or filing of any reports required of the
Portfolios by any governmental or regulatory agency, except as expressly agreed
to in writing. JCC will cooperate (establishing proxy handling procedures
acceptable to Investment Manager) with such authorized representative of the
Fund granted authority to vote proxies solicited by or with respect to the
issuers of securities in which Fund assets are invested.
(f) JCC shall have no responsibility to monitor certain
limitations or restrictions, including without limitation, the 90%-source test,
for which JCC determines it has not been provided sufficient information in
accordance with Section 2 of this Agreement or otherwise. All such monitoring
shall be the responsibility of Investment Manager.
-2-
<PAGE>
(g) JCC accepts its appointment as a sub-investment adviser
and agrees to provide an investment program for the Portfolios consistent with
their investment objectives based upon the development, review and adjustment of
investment policies approved from time to time by the Board of Trustees and
Investment Manager in consultation with JCC. In managing the Portfolios JCC
agrees to use its best professional judgment to make investment decisions for
the Portfolios in accordance with the provisions of this Agreement.
(h) JCC agrees to attendance by appropriate representatives of
the Investment Manager at meetings requested by the Investment Manager or
Trustees at such time(s) and location(s) as reasonably requested by the
Investment Manager or Trustees. JCC also agrees to participation, overall
assistance and support in marketing the Portfolios, 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 Investment Manager.
(i) JCC will assist the recordkeeping agent for the Fund in
determining or confirming the value of any securities or other assets in the
Portfolios for which the recordkeeping agent seeks assistance from or identifies
for review by JCC. The parties agree that, consistent with applicable law, JCC
will not bear responsibility for the determination of value of any such
securities or other assets.
2. Obligations of Investment Manager and the Portfolio.
(a) Investment Manager has provided to JCC the information and
documents listed on the attached Exhibit A. Throughout the term of this
Agreement, Investment Manager shall continue to provide such information and
documents to JCC, including any amendments, updates or supplements to such
information or documents, before or at the time the amendments, updates or
supplements become effective. Investment Manager shall timely furnish JCC with
such additional information as may be reasonably necessary for or requested by
JCC to perform its responsibilities pursuant to this Agreement.
(b) Investment Manager shall be responsible for setting up and
maintaining brokerage accounts and other accounts JCC deems advisable to allow
for the purchase or sale of various forms of securities pursuant to this
Agreement.
(c) Investment Manager will deliver to JCC any limitations
imposed upon the Fund as a result of relevant diversification requirements under
the provisions of Section 817(h) of the Internal Revenue Code of 1986, as
amended.
3. Custodian. The Portfolio assets shall be maintained in the
custody of the custodian identified pursuant to Exhibit A. Any assets added to
the Portfolios shall be delivered directly to such custodian. JCC shall have no
liability for the acts or omissions of any custodian of the Portfolio's assets.
JCC shall have no responsibility for the segregation requirement of the 1940 Act
or other applicable law.
-3-
<PAGE>
4. Broker Dealers. Absent written instructions from Investment
Manager to the contrary, JCC shall place all orders for the purchase and sale of
investment instruments for the Portfolio with brokers or dealers selected by
JCC, which may include brokers or dealers affiliated with JCC. Purchase or sell
orders for a Portfolio may be aggregated with contemporaneous purchase or sell
orders of other clients of JCC. JCC shall use its best efforts to obtain
execution of Portfolio transaction at prices that are advantageous to the
Portfolios and at commission rates that are reasonable in relation to the
benefits received. However, JCC may select brokers or dealers on the basis that
they provide brokerage, research, or other services or products to a Portfolio
and/or other accounts serviced by JCC. JCC may place portfolio transactions with
a broker or dealer with whom it has negotiated a commission in excess of the
commission another broker or dealer would have charged for effecting that
transaction if JCC determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research provided by
such broker or dealer, viewed in terms of either that particular transaction or
the overall responsibilities that JCC and its affiliates have with respect to
the Portfolio and to accounts over which they exercise investment discretion,
and not all such services or products will necessarily be used by JCC in
managing the Portfolios. In addition, consistent with best execution, JCC may
execute Portfolio transactions through brokers and dealers that sell shares of
mutual funds advised by JCC or recommend to their customers that they purchase
shares of such funds. If JCC determines that any product or service furnished by
a broker has a mixed use, such that it also serves functions that do not assist
in the investment decision-making process, JCC may allocate the costs of such
service or product accordingly. The portion of the product or service that JCC
determines will assist it in the investment decision-making process may be paid
for in brokerage commission dollars. This allocation may create a conflict of
interest for JCC.
5. Fees. Investment Manager shall pay to JCC a monthly fee in
accordance with the attached Exhibit B. Investment Manager shall calculate the
fee for each month during which JCC provides investment management services
based upon the average daily net assets of the Portfolios (including cash or
cash equivalents) for each such month. The fee shall be payable to JCC by the
fifteenth day of each month. The fee for the first month during which JCC
provides investment management services shall be based upon the number of days
the account was open in that month. Similarly, if this Agreement is terminated,
the fee shall be based upon the number of days the account was open during the
month in which the Agreement is terminated.
6. Expenses. Investment Manager, the Fund and the Portfolios
shall assume and pay their respective organizational, operational, and business
expenses not specifically assumed or agreed to be paid by JCC pursuant to this
Agreement. JCC shall pay its own organizational, operational, and business
expenses but shall not be obligated to pay any expenses of Investment Manager,
the Fund, or the Portfolios, including without limitation: (a) interest and
taxes; (b) brokerage commissions and other costs in connection with the purchase
or sale of securities or other investment instruments for the Portfolios; and
(c) custodian fees and expenses. Any reimbursement of management fees required
by any expense limitation provision and any liability arising out of a violation
of Section 36(b) of the 1940 Act shall be the sole responsibility of Investment
Manager.
-4-
<PAGE>
7. Representations and Warranties.
(a) Investment Manager represents and warrants the following:
(i) Investment Manager has been duly incorporated and
is validly existing and in good standing as a
corporation under the laws of the state of
Deleware.
(ii) Investment Manager has all requisite corporate
power and authority under the laws of Delaware and
federal securities laws to execute, deliver and to
perform this Agreement.
(iii) All necessary corporate proceedings of Investment
Manager have been duly taken to authorize the
execution, delivery and performance of this
Agreement by Investment Manager.
(iv) Investment Manager is a registered investment
adviser under the Investment Advisers Act of 1940
and is in compliance with all other registrations
required.
(v) Investment Manager has complied, in all material
respects, with all registrations required by, and
will comply, in all material respects, with all
applicable rules and regulations of, the
Securities and Exchange Commission.
(vi) Investment Manager has authority under the
Investment Management Agreement to execute,
deliver and perform this Agreement.
(vii) Investment Manager has received a copy of Part II
of JCC's Form ADV.
(b) JCC represents and warrants the following:
(i) JCC has been duly incorporated and is validly
existing and in good standing as a corporation
under the laws of the state of Colorado.
-5-
<PAGE>
(ii) JCC has all requisite corporate power and
authority under the laws of Colorado and federal
securities laws to execute, deliver and to perform
this Agreement.
(iii) All necessary corporate proceedings of JCC have
been duly taken to authorize the execution,
delivery and performance of this Agreement by JCC.
(iv) JCC is a registered investment adviser under the
Investment Advisers Act of 1940 and is in
compliance with all other registrations required.
(v) JCC has complied, in all material respects, with
all registrations required by, and will comply, in
all material respects, with all applicable rules
and regulations, of the Securities and Exchange
Commission.
8. Confidentiality and Proprietary Rights. Investment Manager
will not, directly or indirectly, and will not permit its affiliates employees,
officers, directors, agents, contractors, or the Portfolios to, in any form or
by any means, use, disclose, or furnish, to any person or entity, records or
information concerning the business of JCC, except as necessary for the
performance of its duties under this Agreement or the Investment Management
Agreement, or as required by law upon prior written notice to JCC. JCC is the
sole owner of the name and mark "Janus." Investment Manager shall not, and shall
not permit the Portfolio to, without prior written consent of JCC, use the name
or mark "Janus" or make representations regarding JCC or its affiliates. Upon
termination of this Agreement for any reason, Investment Manager shall
immediately cease, and Investment Manager shall cause the Portfolios to
immediately cease, all use of the Janus name or any Janus mark.
9. Non-Exclusivity.
(a) JCC, its affiliates, or any of their directors, officers,
employees, or agents may buy, sell, or trade any securities or other investment
instruments for their own account or for the account of others for whom it or
they may be acting, provided that such activities will not adversely affect or
otherwise impair the performance by JCC of its responsibilities under this
Agreement. JCC and its affiliates may act as investment manager to or provide
other services with respect to various investment companies and other managed
accounts, which advice or services, including the nature of such services, may
differ from or be identical to advice given or action taken with respect to the
Portfolios. In the event of such activities, the transactions and associated
costs will be allocated among such clients (including the Portfolios) in a
manner that JCC believes to be equitable to the accounts involved and consistent
with such accounts' objectives, policies, and limitations.
-6-
<PAGE>
(b) JCC shall be subject to a written code of ethics adopted
by it pursuant to Rule 17j-1(b) of the 1940 Act, and shall not be subject to any
other code of ethics, including Investment Manager's code of ethics, unless
specifically adopted by JCC.
(c) JCC may provide advice to or take action with respect to
other clients, which advice or action, including the timing and nature of such
action, may differ from or be identical to advice given or action taken with
respect to the Portfolios. Except as necessary to perform this Agreement, JCC
shall be deemed to be an independent contractor and shall have no authority,
unless otherwise provided or authorized, to act for or represent the Portfolios
or Investment Manager in any way or otherwise be deemed an agent of the
Portfolios or Investment Manager. Investment Manager and JCC shall not be
considered as partners or participants in a joint venture.
10. Liability.
(a) Except as may otherwise be provided by the 1940 Act, or
other federal securities laws, neither JCC nor any of its affiliates, officers,
directors, officers, shareholders, employees, or agents shall be liable for any
loss, liability, cost, damage, or expense (including reasonable attorneys' fees
and costs) (collectively referred to in this Agreement as "Losses"), including
without limitation, Losses in connection with pricing information or other
information provided by JCC, except for Losses directly resulting from JCC's
gross negligence, bad faith, or willful misconduct. Investment Manager and the
Fund shall, jointly and severally, hold harmless and indemnify JCC, its
affiliates, directors, officers, shareholders, employees or agents for any Loss
not resulting from JCC's negligence or its breach of the terms of this
Agreement. The obligations contained in this Section 10 shall survive
termination of this Agreement.
(b) Reference is hereby made to the Declaration of Trust dated
February 18, 1986, 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 or hereafter so filed with
the Secretary of the Commonwealth of Massachusetts and elsewhere as required by
law. The name Phoenix Edge Series Fund refers to the Trustees under said
Declaration of Fund, as Trustees and not personally, and no Trustee,
shareholder, officer, agent or employee of the Fund shall be held to any
personal liability in connection with the affairs of the Fund; only the Fund
estate under said Declaration of Trust is liable. Without limiting the
generality of the foregoing, neither FIC 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.
-7-
<PAGE>
11. Duration.
(a) This Agreement shall remain in full force and effect for
two years from the date it is entered into, and is then renewable annually upon
approval by (i) the majority of those members of the Fund's Trustees who are not
interested persons of the Fund, the Investment Manager, or JCC, cast in person
at a meeting called for the purpose of voting on such approval, and (ii) the
Fund's Trustees or vote of a majority of outstanding voting securities of the
applicable Portfolio; provided, however, that if this Agreement or the
continuation of this Agreement is not approved, JCC may continue to render
services under this Agreement in the manner and to the extent permitted by the
1940 Act and applicable regulations.
(b) This Agreement may be terminated as to a Portfolio at any
time, without penalty, by JCC, by the Fund's Trustees or by a majority of the
outstanding voting securities of the applicable Portfolio, on sixty days'
written notice to the other party. This Agreement will immediately terminate in
the event of its assignment. Investment Manager shall provide advance written
notice of any anticipated assignment. (As used in this Agreement, the terms
"majority of the outstanding voting securities," "interested persons," and
"assignment" have the same meaning as such terms have in the 1940 Act.)
12. Amendment. This Agreement may be amended at any time, but only
by written agreement between the Investment Manager and JCC, which amendment, is
subject to the approval of the Trustees and the Shareholders of the Fund as and
to the extent required by the 1940 Act.
13. General.
(a) This Agreement constitutes the entire understanding of the
parties with respect to its subject matter, shall supersede all prior
understandings agreements, contracts or other documents, and shall continue in
full force and effect until terminated.
(b) If any provision of this Agreement is held to be invalid
or unenforceable to any extent, the remainder of this Agreement shall be
enforced to the greatest extent permitted by law.
(c) This Agreement shall be governed by applicable federal law
and the laws of the State of Colorado without regard to choice of laws
principals. Investment Manager and the Fund consent to the venue of the Denver
District Court of the County of Denver, State of Colorado, or the United States
District Court for the District of Colorado and agree that all lawsuits arising
from this Agreement shall be conducted only in such courts, unless such courts
refuse to accept jurisdiction.
(d) This Agreement may be executed in two or more counterparts
which together shall constitute one document.
-8-
<PAGE>
(e) All notices or other communications required or permitted
to be given hereunder shall be in writing and shall be delivered or sent by
pre-paid first class letter post to the following addresses or to such other
address as the relevant addressee shall hereafter notify for such purpose to the
others by notice in writing and shall be deemed to have been given at the time
of delivery.
If to the Investment Manager:
Phoenix Variable Advisors
One American Row
Hartford, Connecticut
Attention: Doreen Bonner
If to JCC:
Janus Capital Corporation
100 Fillmore Street
Denver, CO 80206
Attention: General Counsel
PHOENIX VARIABLE ADVISORS
By:_______________________________
Name:___________________________
Title:__________________________
JANUS CAPITAL CORPORATION
By:_______________________________
Name:_________________________
Title:________________________
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<PAGE>
EXHIBIT A
Information and documentation provided by Investment Manager:
[bullet] A copy of the Portfolios' registration statement.
[bullet] Copies of the Portfolios' prospectus and statement of additional
information.
[bullet] Copies of the Fund's organizational documents, Bylaws, and as
applicable to the Portfolio, minutes of meetings of the Trustees of the
Fund.
[bullet] Notice of the Portfolio's custodian designated to hold assets in the
Portfolios.
[bullet] A list of the countries approved by the Trustees in accordance with
Rule 17f-5 in which Portfolio assets may be maintained and a list of
those countries available immediately.
[bullet] Certified copies of financial statements or reports prepared for the
Fund, including the Portfolio, by certified or independent public
accountants.
[bullet] Copies of any financial statement or reports made by the Portfolio to
its shareholders or to any governmental body or securities exchange.
[bullet] Reports as to the composition of assets in the Fund, cash requirements
and cash available for investment in the Portfolios.
[bullet] Copies of Investment Manager's liquidity procedures, cross-trade
procedures, repurchase agreement procedures, 10f-3, 17a-7 and 17e-1
procedures and other procedures that may affect the duties of JCC.
[bullet] A Free-riding and Withholding Questionnaire completed by the Fund.
[bullet] An Internal Revenue Service Form W-9 completed by the Fund.
[bullet] A Qualified Institutional Investor Certification completed by the Fund.
[bullet] A list of persons authorized to act on behalf of the Portfolios.
[bullet] A list of "affiliates" of the Fund, as such term is used in the 1940
Act, including all broker-dealers affiliated with the Fund.
[bullet] Applicable Commodities Futures Trading Commission exemptions,
notifications and/or related documentation.
[bullet] A list of established futures accounts.
-10-
<PAGE>
EXHIBIT B
Fee Rate
(on all assets)
---------------
Series Fee
- ------ ---
Phoenix-Janus Equity-Income Series 0.85%
Phoenix-Janus Flex Income Series 0.80%
Phoenix-Janus Growth Series 0.85%
-11-
EXHIBIT 5.14
SUB-ADVISORY AGREEMENT
<PAGE>
SUB-ADVISORY AGREEMENT
PHOENIX-MORGAN STANLEY FOCUS EQUITY SERIES
This Sub-Advisory Agreement (the "Agreement") is entered into as of
December [INSERT], 1999 by and between Phoenix Variable Advisors, Inc., a
Delaware corporation (the "Manager"), and Morgan Stanley Dean Witter Investment
Management Inc., a Delaware corporation (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
[INSERT] (the "Advisory Agreement") with The Phoenix Edge Series Fund (the
"Fund"), pursuant to which the Manager provides portfolio management and
administrative services to the Phoenix-Morgan Stanley Focus Equity Series of the
Fund (the "Portfolio").
WHEREAS, the Advisory Agreement provides that the Manager may delegate
any or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager desires to retain the Sub-Adviser to render
portfolio management services in the manner and on the terms set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Manager and the Sub-Adviser agree as follows:
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of the
Manager and in cooperation with any administrator appointed by the Manager (the
"Administrator"), manage the investment and reinvestment of the assets of the
Portfolio. The Sub-Adviser shall manage the Portfolio in conformity with (1) the
investment objective, policies and restrictions of the Portfolio set forth in
the Fund's prospectus and statement of additional information relating to the
Portfolio, (2) any additional policies or guidelines established by the Manager
or by the Fund's directors that have been furnished in writing to the
Sub-Adviser and (3) the provisions of the Internal Revenue Code (the "Code")
applicable to "regulated investment companies" (as defined in Section 851 of the
Code), all as from time to time in effect (collectively, the "Policies"), and
with all applicable provisions of law, including without limitation all
applicable provisions of the Investment Company Act of 1940, as amended (the
"1940 Act") and the rules and regulations thereunder. Subject to the foregoing,
the Sub-Adviser is authorized, in its discretion and without prior consultation
with the Manager, to buy, sell, lend and otherwise trade in any stocks, bonds
and other securities and investment instruments on behalf of the Portfolio,
without regard to the length of time the securities have been held and the
resulting rate of portfolio turnover or any tax considerations; and the majority
or the whole of the Portfolio may be invested in such proportions of stocks,
bonds, other securities or investment instruments, or cash, as the Sub-Adviser
shall determine. In managing the Portfolio, the Sub-Adviser agrees to use its
best professional judgement to make investment decisions for the Portfolio in
accordance with the provisions of this Agreement. Notwithstanding the foregoing
provisions of this Section 1.a, however, the Sub-Adviser shall, upon written
instructions from the Manager, effect such portfolio transactions for the
Portfolio as the Manager shall determine are necessary in order for the
Portfolio to comply with the Policies.
<PAGE>
b. The Sub-Adviser shall furnish the Manager with quarterly
reports, in such form as may be mutually agreed upon, with respect to:
(i) compliance with the Sub-Adviser's Code of Ethics;
(ii) compliance with procedures adopted from time to
time by the Trustees of the Fund regarding securities eligible
for resale under Rule 144A under the Securities Act of 1933,
as amended;
(iii) diversification of Portfolio assets in
accordance with governing laws and the then prevailing
prospectus and statement of additional information pertaining
to the Portfolio;
(iv) compliance with the Portfolio's limitation
regarding the acquisition of illiquid securities; and
(v) the implementation of the Portfolio's investment
program as described herein, including, without limitation,
analysis of Portfolio performance.
The Sub-Adviser shall also furnish the Manager with any and all other reports
regarding the management of the Portfolio reasonably requested by the Manager in
accordance with or described in this Agreement. The Sub-Adviser will keep the
Fund and the Manager informed of developments materially affecting the
management of the Portfolio, and will furnish the Fund and the Manager from time
to time with such information as Sub-Adviser believes, in its discretion, is
appropriate for this purpose. The Sub-Adviser also agrees to attendance by
appropriate representatives of the Sub-Adviser at meetings reasonably requested
by the Manager or the Fund's Trustees at such times and locations as reasonably
requested by the Manager or the Trustees.
c. The Sub-Adviser will assist the record-keeping agent for
the Fund in determining or confirming the value of any securities or other
assets in the Portfolio for which the record-keeping agent reasonably requests
review by the Sub-Adviser. The parties agree that, consistent with applicable
law, the Sub-Adviser will not bear any responsibility or liability in connection
with the determination or confirmation of values of any such securities or other
assets in the Portfolio.
d. Upon reasonable notice, the Sub-Adviser shall permit the
books and records with respect to the Portfolio to be inspected and audited by
the Manager and the Fund (and/or the independent accountants for the Fund) at
all reasonable times during normal business hours. The Sub-Adviser agrees that
such records are the property of the Fund and shall be promptly surrendered to
the Fund or the Manager, as agent of the Fund, upon request; provided, however,
that the Sub-Adviser is authorized to maintain a copy of any such records.
e. The Sub-Adviser will cooperate (in establishing proxy
handling procedures acceptable to Manager) with such authorized
representative(s) of the Fund granted authority to vote proxies solicited by or
with respect to the issuers of securities in which Portfolio assets are
invested.
f. The Sub-Adviser will be responsible for the preparation and
filing of Schedule 13G and Form 13F with respect to the assets of the Portfolio.
g. The Sub-Adviser shall provide to the Manager a copy of its
Form ADV as filed with the Securities and Exchange Commission and as amended
from time to time and a list of the persons whom the Sub-Adviser wishes to have
authorized to give written and/ or oral instructions to custodians of assets of
the Portfolio.
2. Obligations of the Manager.
2
<PAGE>
a. The Manager shall provide (or cause the Fund's custodian to
provide) timely information to the Sub-Adviser regarding such matters as the
composition of assets of the Portfolio, cash requirements and cash available for
investment in the Portfolio, and all other information as may be reasonably
necessary for the Sub-Adviser to perform its responsibilities hereunder. In this
regard, the Manager will deliver to the Sub-Adviser any limitations imposed upon
the Portfolio as a result of relevant diversification requirements under the
provisions of Section 817(h) of the Internal Revenue Code of 1986, as amended,
as well as any subsequent amendments to such limitations.
b. The Manager has furnished the Sub-Adviser a copy of the
prospectus and statement of additional information of the Portfolio and agrees
during the continuance of this Agreement to furnish the Sub-Adviser copies of
any revisions or supplement thereto at, or, if practicable, before the time the
revisions or supplements become effective. No revisions shall be made nor
supplements issued regarding the Portfolio or the Sub-Adviser without the prior
review and approval of the Sub-Adviser. No written materials naming or relating
to the Sub-Adviser, its employees or its affiliated companies, other than
materials provided or approved by the Sub-Adviser, shall be use by the Manager,
the Fund or their affiliates in offering or marketing shares of the Fund. The
Manager agrees to furnish the Sub-Adviser with minutes of meetings of the
Directors of the Fund applicable to the Portfolio to the extent they may affect
the duties of the Sub-Adviser, and with copies of any financial statements or
reports made by the Portfolio to its shareholders, and any further materials or
information which the Sub-Adviser may reasonably request to enable it to perform
its functions under this Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a
copy of the Fund's agreement with the custodian designated to hold the assets of
the Portfolio (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Portfolio shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions of
the Custodian unless such act or omission is required by and taken in reliance
upon instruction given to the Custodian by a representative of the Sub-Adviser
properly authorized to give such instruction under the Custody Agreement. Any
assets added to the Portfolio shall be delivered directly to the Custodian.
4. Expenses. Except for expenses specifically assumed or agreed
to be paid by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be
liable for any expenses of the Manager or the Fund including, without
limitation, (a) interest and taxes, (b) brokerage commissions and other costs in
connection with the purchase or sale of securities or other investment
instruments with respect to the Portfolio, and (c) custodian fees and expenses.
The Sub-Adviser will pay its own expenses incurred in furnishing the services to
be provided by it pursuant to this Agreement.
5. Purchase and Sale of Assets. Absent instructions from the
Manager to the contrary, the Sub-Adviser shall place all order for the purchase
and sale of securities for the Portfolio with brokers or dealers selected by the
Sub-Adviser, which may include brokers or dealers affiliated with the
Sub-Adviser, provided such orders comply with Rule 17e-1 under the 1940 Act. To
the extent consistent with applicable law, purchase or sell orders for the
Portfolio may be aggregated with contemporaneous purchase or sell orders of
other clients of the Sub-Adviser. The Sub-Adviser shall use its best efforts to
obtain execution of transactions for the Portfolio at prices which are
advantageous to the Portfolio and at commission rates that are reasonable in
relation to the benefits received.
6. Compensation of the Sub-Adviser. As full compensation for all
services rendered, facilities furnished and expenses borne by the Sub-Adviser
hereunder, the Manager shall pay the Sub-
3
<PAGE>
Adviser compensation at the annual rate of 0.55% of the average aggregate daily
assets of the Portfolio up to $150 million, 0.45% of the Portfolio's assets
between $150 million and $300 million, and 0.40% of the Portfolio's assets in
excess of $300 million. Such compensation shall by payable monthly in arrears or
at such other intervals, not less frequently than quarterly, as the Manager is
paid by the Portfolio pursuant to the Advisory Agreement. The Manager may from
time to time waive the compensation it is entitled to receive from the Fund,
however, and such waiver will have no effect on the Manager's obligation to pay
the Sub-Adviser the compensation provided for herein.
7. Non-Exclusivity. The Manager and the Portfolio agree that the
services of the Sub-Adviser are not to be deemed exclusive and that the
Sub-Adviser and its affiliates are free to act as investment manager and provide
other services to various investment companies and other managed accounts,
except as the Sub-Adviser and the Manager or the Administrator may otherwise
agree from time to time in writing before or after the date hereof. This
Agreement shall not in any way limit or restrict the Sub-Adviser or any of its
directors, officers, employees or agents from buying, selling or trading any
securities or other investment instruments for its or their own account or for
the account of others for whom it or they may be acting, provided that such
activities do not adversely affect or otherwise impair the performance by the
Sub-Adviser of its duties and obligations under this Agreement. The Manager and
the Portfolio recognize and agree that the Sub-Adviser may provide advice to or
take action with respect to other clients, which advice or action, including the
timing and nature of such action, may differ from or be identical to advice
given or action taken with respect to the Portfolio. The Sub-Adviser shall for
all purposes hereof be deemed to be an independent contractor and shall, unless
otherwise provided or authorized, have no authority to act for or represent the
Fund or the Manager in any way or otherwise be deemed an agent of the Fund or
the Manager.
8. Liability. Except as may otherwise be provided by the 1940
Act or other federal securities laws, neither the Sub-Adviser nor any of its
affiliates or its or their officers, directors, employees or agents (the
"Indemnified Parties") shall be subject to any liability to the Manager, the
Fund, the Portfolio or any shareholder of the Portfolio or the Fund for any
error of judgment, any mistake of law or any loss arising out of any investment
or other act or omission in the course of, connected with, or arising out of any
service to be rendered under this Agreement, except by reason of willful
misfeasance, bad faith or gross negligence in the performance of the
Sub-Adviser's duties or by reason of reckless disregard by the Sub-Adviser of
its obligations and duties. The Manager shall hold harmless and indemnify the
Sub-Adviser for any loss, liability, cost, damage or expense (including
reasonable attorneys fees and costs) arising from any claim or demand by any
past or present shareholder of the Portfolio or the Fund that is not based upon
the obligations of the Sub-Adviser with respect to the Portfolio under this
Agreement. The Manager acknowledges and agrees that the Sub-Adviser makes no
representation or warranty, express or implied, that any level of performance or
investment results will be achieved by the Portfolio or that the Portfolio will
perform comparably with any standard or index, including other clients of the
Sub-Adviser, whether public or private.
9. Effective Date and Termination. This Agreement shall become
effective as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to year
thereafter so long as such continuance is specifically approved at least
annually (i) by the Board of Directors of the Fund or by vote of a majority of
the outstanding voting securities of the Portfolio, and (ii) by vote of a
majority of the directors of the Fund who are not interested persons of the
Fund, the Manager or the Sub-Adviser, cast in person at a meeting called for the
purpose of voting on such approval;
4
<PAGE>
b. this Agreement may at any time be terminated on sixty days'
written notice to the Sub-Adviser either by vote of the Board of Directors of
the Fund or by vote of a majority of the outstanding voting securities of the
Portfolio;
c. this Agreement shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Agreement; and
d. this Agreement may be terminated by the Sub-Adviser on
sixty days' written notice to the Manager and the Fund, or, if approved by the
Board of Directors of the Fund, by the Manager on sixty days' written notice to
the Sub-Adviser.
Termination of this Agreement pursuant to this Section 9 shall be
without the payment of any penalty.
10. Amendment. This Agreement may be amended at any time by mutual
consent of the parties, provided that, if required by law, such amendment shall
also have been approved by vote of a majority of the outstanding voting
securities of the Portfolio and by vote of a majority of the directors of the
Fund who are not interested persons of the Fund, the Manager or the Sub-Adviser,
cast in person at a meeting called for the purpose of voting on such approval.
11. Certain Definitions. For the purpose of this Agreement, the
terms "vote of a majority of the outstanding voting securities," "interested
person," " affiliated person" and "assignment" shall have their respective
meanings defined in the 1940 Act, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under the 1940 Act.
12. General.
a. The Sub-Adviser may perform its services through affiliate,
employee, officer or agent, and the Manager shall not be entitled to the advice,
recommendation or judgment of any specific person; provided, however, that the
persons identified in the prospectus of the Portfolio shall perform the
portfolio management duties described therein until the Sub-Adviser notifies the
Manager that one or more other affiliates, employees, officers or agents
identified in such notice shall assume such duties as of a specific date.
b. If any term or provision of this Agreement or the
application thereof to any person or circumstances is held to be invalid or
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to other persons or circumstances shall not be affected
thereby and shall be enforced to the fullest extent permitted by law.
c. Each party hereto agrees that information obtained from the
other during the course of this Agreement will only be used in furtherance of
performance of its obligations under this Agreement; provided, however, that
this clause shall not apply to information specifically authorized for another
use by the providing party or information that is otherwise available to the
public.
d. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York.
13. Notice. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered or
sent by pre-paid first class mail to the following addresses or
5
<PAGE>
to such other address as the relevant party shall hereafter notify for such
purpose to the other by notice in writing, and shall be deemed to have been
given at the time of delivery.
If to the Manager: PHOENIX VARIABLE ADVISORS, INC.
One American Row
Hartford, Connecticut 06115
Attention: Doreen Bonner
If to the Sub-Adviser: MORGAN STANLEY DEAN WITTER INVESTMENT
MANAGEMENT INC.
1221 Avenue of the Americas
New York, New York 10020
Attention: General Counsel
14. Use of Morgan Stanley Name. The Manager and the Fund agree
that if this Agreement is terminated and the Sub-Adviser or an affiliate thereof
shall no longer be the sub-adviser to the Portfolio, the Fund will change the
name of the Portfolio to delete any reference to "Morgan Stanley" or any portion
or combination thereof.
PHOENIX VARIABLE ADVISORS, INC.
By:______________________________
Name:
Title:
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
By:______________________________
Name: ___________________________
Title: __________________________
6
EXHIBIT 5.15
INVESTMENT SUB-ADVISORY AGREEMENT
<PAGE>
INVESTMENT SUB-ADVISORY AGREEMENT
The Phoenix Edge Series Fund
----------------------------
December 20, 1999
J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Dear Sir or Madam:
The Phoenix Edge Series Fund (the "Trust"), a diversified open-end
investment company of the series type registered under the Investment Company
Act of 1940, as amended (the "Act") and a business trust organized under the
laws of the Commonwealth of Massachusetts, and Phoenix Variable Advisors, Inc.,
a Delaware corporation (the "Adviser"), hereby agree with J.P. Morgan Investment
Management Inc., a Delaware corporation (the "Sub-Adviser") as follows:
1. Investment Description; Appointment. The Trust desires to employ the
capital of the Trust's Research Enhanced Index Series (the "Fund") by investing
and reinvesting in investments of the kind and in accordance with the
limitations specified in its Declaration of Trust, as amended to date (the
"Trust Declaration"), and in the prospectus (the "Prospectus") and the statement
of additional information (the "Statement") filed with the Securities and
Exchange Commission as part of the Trust's Registration Statement on Form N- 1A,
as amended from time to time, and in such manner and to such extent as from time
to time may be approved by the Trust's Board of Trustees (the "Board"). Copies
of the Prospectus, the Statement and the Trust Declaration, each as currently in
effect, have been delivered to the Sub-Adviser. The Trust agrees, on an ongoing
basis, to provide to the Sub-Adviser as promptly as practicable copies of all
amendments and supplements to the Prospectus and the Statement and amendments to
the Trust Declaration. The Trust desires to engage and hereby appoints the
Sub-Adviser to act as a discretionary investment sub-adviser to the Fund. The
Sub-Adviser accepts the appointment and agrees to furnish the services described
herein for the compensation set forth below.
2. Services as Investment Sub-Adviser Guidelines and Advice. Subject to
the supervision of the Trust's Board and of the Adviser, the Sub-Adviser will
(a) manage the Fund's assets in accordance with the Fund's investment
objective(s) and policies stated in the Prospectus, Statement, Trust Declaration
and Act, but subject to the Guidelines (as such term is defined below); (b) make
investment decisions for the Fund; (c) place purchase and sale orders for
portfolio transactions for the Fund; and (d) employ professional portfolio
managers and securities analysts to provide research services to the Fund. In
<PAGE>
providing these services, the Sub-Adviser will conduct a continual program of
investment, evaluation and, if appropriate, sale and reinvestment of the Fund's
assets.
The Adviser agrees on an on-going basis to provide or cause to be
provided to the Sub-Adviser guidelines, to be revised as provided below (the
"Guidelines"), setting forth limitations, by dollar amount or percentage of net
assets, on the types of securities in which the Fund is permitted to invest or
investment activities in which the Fund is permitted to engage. Among other
matters, the Guidelines shall set forth clearly the limitations imposed upon the
Fund as a result of relevant diversification requirements under state and
federal law pertaining to insurance products, including, without limitation, the
provisions of Section 817(h) of the Internal Revenue Code of 1986, as amended
(the "Code"). The Guidelines shall remain in effect until 12:00 p.m. (Eastern
Time) on the third business day following actual receipt by the Sub-Adviser of a
written notice, denominated clearly as such, setting forth revised Guidelines.
The Adviser agrees to cause to be delivered to a person designated in writing
for such purpose by the Sub-Adviser at least monthly, a written report dated the
date of its delivery (the "Report") with respect to the Fund's compliance for
its current fiscal year with the short-three test set forth in Section 851(b)
(3) of the Code (the "short-three test"). The Report shall include in chart form
the Fund's gross income (within the meaning of Code Section 851) from the
beginning of the current fiscal year to the date of the Report and its
cumulative income and gains described in Code Section 851(b) (3) for such
period. If the Report is not timely delivered, the Sub-Adviser shall be
permitted to rely on the most recent Report delivered to it. The Trust and the
Adviser agree that the Sub-Adviser may rely on the Guidelines and the Report
without independent verification of their accuracy.
3. Transaction Procedures. All transactions for the Fund will be
consummated by payment to, or delivery by, the Custodian(s) from time to time
designated by the Trust (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 Fund. The Sub-Adviser shall not have possession or custody of such
cash and/or securities or any responsibility or liability with respect to such
custody. The Sub-Adviser shall advise the Custodian and confirm in writing to
the Trust all investment orders for the Fund placed by it with brokers and
dealers. The Trust shall issue to the Custodian such instructions as may be
appropriate in connection with the settlement of any transaction initiated by
the Sub-Adviser. The Trust shall be responsible for all custodial arrangements
and the payment of all custodial charges and fees. The Sub-Adviser shall have no
responsibility or liability with respect to custodial arrangements or the acts,
omissions or other conduct of the Custodian.
4. Brokerage. In selecting brokers or dealers to execute transactions
on behalf of the Fund, the Sub-Adviser will seek the best overall terms
available. In assessing the best overall terms available for any transaction,
the Sub-Adviser will consider factors it deems relevant, including, without
limitation, the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer and the reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction, and in evaluating the best overall terms
available, the Sub-Adviser is authorized to consider the brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934, as amended) provided to the Fund and/or other accounts over which the
Sub-Adviser or its affiliates exercise investment discretion. Subject to
governing law, the Trust shall have the right to request that Fund transactions
be executed by brokers and dealers by or through whom sales of Phoenix
2
<PAGE>
investment/insurance products are made; provided the Sub-Adviser processes
transactions with such broker/dealer(s) in its ordinary course of business.
5. Information Provided to the Trust. The Sub-Adviser will keep the
Trust and the Adviser informed of developments materially affecting the Fund,
and will, on its own initiative, furnish the Trust and the Adviser from time to
time with whatever information the Sub-Adviser believes is appropriate for this
purpose.
6. Standard of Care The Sub-Adviser shall exercise its best judgment in
rendering the services described in paragraphs 2, 3 and 4 above. The Sub-Adviser
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement (each such
act or omission shall be referred to as "Disqualifying Conduct"). The
Sub-Adviser shall not be deemed to have engaged in Disqualifying Conduct if it
complies with the Guidelines and acts in reliance on the Report, and the
Sub-Adviser's failure to act in accordance therewith shall not constitute
evidence that it engaged in Disqualifying Conduct.
7. Proxies. The Trust, 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 Fund may be invested.
8. Compensation. In consideration of the services rendered pursuant to
this Agreement, the Adviser will pay the Sub-Adviser on or before the 10th day
of each month a fee for the previous month at the annual rates set forth in
Schedule A hereto of each of the Fund's average daily net assets. The fee for
the period from the effective date hereof, to the end of the month during which
such sale shall have been commenced shall be prorated according to the
proportion that such period bears to the full monthly period. Upon any
termination of this Agreement before the end of a month, the fee for such part
of that month shall be prorated according to the proportion that such period
bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Sub-Adviser, the value of the Fund's net assets shall be computed at the
times and in the manner specified in the Prospectus and/or the Statement.
9. Expenses. The Sub-Adviser will bear all of its expenses in connection
with the performance of its services under this Agreement. All other expenses to
be incurred in the operation of the Fund will be borne by the Trust, except to
the extent specifically assumed by the Sub-Adviser. The expenses to be borne by
the Trust include, without limitation, the following: organizational costs,
taxes, interest, brokerage fees and commissions, Trustee's fees, Securities and
Exchange Commission fees and state Blue Sky qualification fees, advisory fees,
charges of custodians, transfer and dividend disbursing agents' fees, certain
insurance premiums, industry association fees, outside auditing and legal
expenses, costs of independent pricing services, costs of maintaining existence,
costs attributable to investor services (including, without limitation,
telephone and personnel expenses), costs of preparing and printing prospectuses
and statements of additional information for regulatory purposes and for
distribution to existing stockholders, costs of stockholders' reports and
meetings, and any extraordinary expenses.
3
<PAGE>
10. Services to Other Companies or Accounts. The Trust understands that
the Sub-Adviser now acts, will continue to act and may act in the future as
investment adviser to fiduciary and other managed accounts and as investment
adviser to other investment companies, and the Trust has no objection to the
Sub-Adviser so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Sub-Adviser have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with a methodology believed to be equitable to each entity. The
Sub-Adviser agrees to allocate similarly opportunities to sell securities. The
Trust recognizes that, in some cases, this procedure may limit the size of the
position that may be acquired or sold for the Fund. In addition, the Trust
understands that the persons employed by the Sub-Adviser to assist in the
performance of the Sub-Adviser's duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit or
restrict the right of the Sub-Adviser or any affiliate of the Sub-Adviser to
engage in and devote time and attention to other business or to render services
of whatever kind or nature. To the extent permitted by law, the Sub-Adviser may
bunch or aggregate its orders for the Fund with orders of its other clients,
provided that the Fund and the other clients whose orders are aggregated with
orders of the Fund shall receive the same average price with respect to such
aggregate orders.
11. Books and Records. In compliance with the requirements of Rule
31a-3 under the Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Fund are the property of the Trust and further agrees to
surrender promptly to the Trust copies of any of such records upon the Fund's or
the Adviser's request. The Sub-Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the Act the records relating to its
activities hereunder required to be maintained by Rule 31a-1 under the Act and
to preserve the records relating to its activities hereunder required by Rule
204-2 under the Investment Advisers Act of 1940, as amended, for the period
specified in said Rule.
12. Representations, Warranties and Agreements of the Sub-Adviser. The
Sub-Adviser 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 hereunder. The Sub-Adviser agrees
that such records are the property of the Trust, and will be
surrendered to the Trust or to Adviser as agent of the Trust promptly
upon request of either.
C. It has or shall adopt a written personal trading rules covering its
employees complying with the requirements of Rule 17j-1 under the Act
and will provide the Trust and Adviser with a copy of the personal
trading rules. Sub-Adviser acknowledges receipt of the written code of
ethics adopted by and on behalf of the Trust (the "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 Sub-Adviser
shall certify to the Fund and to Adviser that the Sub-Adviser has
complied with the requirements of Rule 17j-1 during the previous
calendar quarter and that there has been no violation of its personal
trading rules, or if such a violation has occurred, that appropriate
action was taken in response to such violation. The Sub-Adviser shall
permit the Trust and Adviser to examine the reports requiring to be
made by the Sub-Adviser under Rule 17j-1(c)(1) and this subparagraph.
4
<PAGE>
D. Reference is hereby made to the Declaration of Trust dated February
18, 1986, establishing the Trust, 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 Trust shall be held to any personal liability in connection with
the affairs of the Trust. Without limiting the generality of the
foregoing, neither the Sub-Adviser 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, policyholder, certificateholder, trustee, officer, agent
or employee of the Trust or of any successor thereof, whether such
liability now exists or is hereafter incurred for claims against the
trust estate.
13. Term of Agreement. This Agreement shall become effective as of the
effective date hereof (as herein below defined) and shall continue until
December 31, 2000, and thereafter shall continue automatically for successive
annual periods ending on December 31st of each year thereafter, provided such
continuance is specifically approved at least annually by (i) the Trust's Board
or (ii) a vote of "majority" (as defined in the Act) of the Fund's outstanding
voting securities, provided that in either event the continuance also is
approved by a majority of the Trust's Board who are not "interested persons" (as
defined in the Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. This Agreement is
terminable, without penalty, on 30 days' written notice, by the Adviser, by the
Trust's Board, by vote of holders of a majority of the Fund's shares or by the
Sub-Adviser, and will terminate five business days after the Sub-Adviser
receives written notice of the termination of the advisory agreement between the
Trust and the Adviser. This Agreement also will terminate automatically in the
event of its assignment (as defined in the Act). For the purposes hereof, the
term "effective date hereof" shall refer to the date of effectiveness of the
registration statement for the Fund or the date of funding of shares of the
Fund, whichever is later.
14. Indemnification. The Adviser agrees to indemnify and hold harmless
the Sub-Adviser from and against any and all claims, losses, liabilities or
damages (including reasonable attorneys' fees and other related expenses),
howsoever arising, from or in connection with this Agreement or the performance
by the Sub-Adviser of its duties hereunder; provided, however, that nothing
contained herein shall require that the Sub-Adviser be indemnified for
Disqualifying Conduct.
15. Disclosure. Neither the Trust nor the Adviser shall, without the
prior written consent of the Sub-Adviser, make representations regarding or
reference to the Sub-Adviser or any affiliates in any disclosure document,
advertisement, sales literature or other promotional materials.
16. Miscellaneous. All notices provided for by this Agreement shall be
in writing and shall be deemed given when received, against appropriate receipt,
by Ms. Diane Minardi in the case of the Sub-Adviser, Ms. Jeanie Grasso Gagnon,
Phoenix Home Life Mutual Insurance Company, One American Row, Hartford, CT 06115
and the Fund's Secretary in the case of the Fund, or such other person as a
party shall designate by notice to the other parties. No provision of this
Agreement may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against
5
<PAGE>
which enforcement of the change, waiver, discharge or termination is sought.
This Agreement constitutes the entire agreement among the parties hereto and
supersedes any prior agreement among the parties relating to the subject matter
hereof. The paragraph headings of this Agreement are for convenience of
reference and do not constitute a part hereof. This Agreement shall be governed
in accordance with the internal laws of the Commonwealth of Massachusetts,
without giving effect to principles of conflict of laws.
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
THE PHOENIX EDGE SERIES FUND
By:_____________________________________
Name:___________________________________
Title:__________________________________
PHOENIX VARIABLE ADVISORS, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
Accepted:
J.P. Morgan Investment Management Inc.
By:_______________________________
Name: ____________________________
Title: ___________________________
6
<PAGE>
SCHEDULE A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEE
(AS A PERCENTAGE OF AVERAGE
SUB-ADVISER FUND(S) DAILY NET ASSETS OF THE FUND)
- ----------- ------- -----------------------------
<S> <C> <C>
J.P Morgan Investment Research Enhanced Index .25%- first $100 Million
Management Inc. .20%- excess of $100 Million
</TABLE>
EXHIBIT 5.16
SUBADVISORY AGREEMENT
<PAGE>
THE PHOENIX EDGE SERIES FUND
SUBADVISORY AGREEMENT
December 20, 1999
Schafer Capital Management, Inc.
101 Carnegie Center, Suite 107
Princeton, NJ 08540
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 or may be offered in several series,
including the Schafer Mid-Cap Value Series (collectively sometimes hereafter
referred to as the "Series").
Phoenix Variable Advisors, 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 Schafer Capital Management, Inc. (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 C 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
<PAGE>
"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 at the time of the transaction 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, the Custodian(s) from time
to time designated by the Fund (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
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 request, but not dictate, that transactions giving
rise to brokerage commissions, 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 Conduct
Rules of the National Association of Securities Dealers, Inc., the Fund
shall have the right to request, but not dictate, that
<PAGE>
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 that 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 that 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 B. Pursuant to the Investment
Advisory Agreement between the Fund and the Adviser, the Adviser is
solely 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:
<PAGE>
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 Rules 31a-1(b)(5), 31a-1(b)(9),
31a-a(b)(10) and 31a-1(f) (as such rules 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 or to Adviser as agent of the
Fund promptly upon request of either.
C. It has or shall adopt a written code of ethics complying with the
requirements of Rule 17j-1 under the Act and will provide the Fund and
Adviser 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 Fund (the "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 and to Adviser that the Subadviser has complied with the
requirements of Rule 17j-1 during the previous calendar quarter and
that there has been no violation of its code of ethics, or the Code of
Ethics, or if such a violation has occurred, that appropriate action
was taken in response to such violation. The Subadviser shall permit
the Fund and Adviser to examine the reports required to be made by the
Subadviser under Rule 17j-1(c)(1) and this subparagraph.
D. Reference is hereby made to the Declaration of Trust dated February
18, 1986, 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 in connection with the
affairs of the Fund; only the trust estate under said Declaration of
Trust is liable. 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.
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, and C, is subject to
the approval of the Trustees and the Shareholders of the Fund as and to
the extent required by the Act.
<PAGE>
13. Name of Fund. The parties agree that the Fund may use the name
"Schafer", and any logos or service marks which the Subadviser may
furnish, only so long as this Agreement remains in effect, and that any
such use shall be royalty free. Upon termination of this Agreement, the
Fund shall discontinue the use of such name and any such logos or
service marks at the request of the Subadviser. The Fund acknowledges
that (i) it has no proprietary or exclusive rights in the same name as
"Schafer", or any logo or service mark furnished by the Subadviser, and
(ii) the Subadviser reserves to itself the right to grant the
nonexclusive right to use such name and any such logo or service mark
to other persons (including other investment companies).
14. Indemnification. Except as provided in Section 8, the Adviser agrees to
indemnify and hold harmless the Sub-Adviser from and against any and
all claims, losses, liabilities or damages (including reasonable
attorneys' fees and other related expenses), howsoever arising, from or
in connection with this Agreement or the performance by the Sub-Adviser
of its duties hereunder.
15. 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 December 31st, and 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.
16. 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 (3 0) 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.
17. 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.
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.
<PAGE>
THE PHOENIX EDGE SERIES FUND
By:_____________________________________
Name:___________________________________
Title:__________________________________
PHOENIX VARIABLE ADVISORS, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
Accepted:
Schafer Capital Management, Inc.
By:_______________________________
Name: ____________________________
Title: ___________________________
<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 and 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
----------
SUBADVISORY FEE
(a) For services provided to the Fund, 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 0.85% of the average daily net asset values of the Series up to
$75 million and 0.80% of the average daily net asset values in excess of $75
million. 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 Fund and each Series shall be valued
as set forth in the then current registration statement of the Fund.
<PAGE>
SCHEDULE C
----------
SUBADVISER FUNCTIONS
With respect to managing the investment and reinvestment of the Series' assets,
the Subadviser shall provide, at its own expense:
(a) 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;
(b) Implementation of the investment program for the Series based upon the
foregoing criteria;
(c) Quarterly reports, in form and substance acceptable to the Adviser,
with respect to: i) compliance with the 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' 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' investment program,
including, without limitation, analysis of Series performance;
(d) Attendance by appropriate representatives of the Subadviser at meetings
requested by the Adviser or Trustees at such time(s) and location(s) as
reasonably requested by the Adviser or Trustees; and
(e) Participation, overall assistance and support in marketing the Series,
as reasonably requested by the Adviser or Trustees 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 10.6
OPINION AND CONSENT OF COUNSEL
<PAGE>
December 16, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
This undersigned serves as Counsel to Phoenix Home Life Mutual
Insurance Company ("Phoenix Home Life"). Shares of The Phoenix Edge Series Fund,
a Massachusetts business trust (the "Phoenix Fund") are issued to one or more
designated separate accounts of Phoenix Home Life. In my capacity as Counsel, I
have represented these entities in connection with the preparation and filing of
Post-Effective Amendment No. 29 to the Fund's Registration Statement on Form
N-1A under which shares of the Fund have been registered (the "Registration
Statement"). I am admitted to practice law in the State of Connecticut and am
familiar with Massachusetts law applicable to this entity.
This opinion is furnished in connection with the registration under the
Securities Act of 1933, as amended of shares of the Phoenix-Bankers Trust Dow
30, Phoenix-Federated U.S. Government Bond, Phoenix-Janus Equity Income,
Phoenix-Janus Flexible Income, Phoenix-Janus Growth and Phoenix-Morgan Stanley
Focus Equity Series ("Shares") of the Phoenix Fund.
In rendering my opinion, I have examined such documents, records, and matters of
law as I deemed necessary for purposes of this opinion. I have assumed the
genuineness of all signatures of all parties, the authenticity of all documents
submitted as originals, the correctness of all copies, and the correctness of
all facts set forth in the certificates delivered to me and the correctness of
all written and oral statements made to me.
Based upon and subject to the foregoing, it is my opinion that the Shares that
will be issued by the Phoenix Fund will, when sold, be legally issued, fully
paid, and nonassessable.
My opinion is rendered solely in connection with the Registration Statement and
may not be relied upon for any other purposes without my written consent. I
hereby consent to the use of this opinion as an exhibit to such Registration
Statement.
Very truly yours,
/s/ Edwin L. /Kerr
----------------------------------
Edwin L. Kerr, Counsel
The Phoenix Edge Series Fund
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No.29 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 17, 1999, relating to the financial
statements and financial highlights appearing in the December 31, 1999 Annual
Report to Shareholders of the Phoenix Edge Series Fund, which is also
incorporated by reference into the Registration Statement. We also consent to
the reference to us under the heading "Financial Highlights" in the Prospectus
and under the headings "Independent Accountants" and "Financial Statement" in
the Statement of Additional Information.
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 16, 1999
EXHIBIT 17
POWER OF ATTORNEY
<PAGE>
POWER OF ATTORNEY
The undersigned, being all of the Trustees of The Phoenix Edge Series
Fund, do hereby constitute and appoint each of Dona D. Young, Edwin L. Kerr, and
Simon Y. Tan as our true and lawful attorneys and agents, and with full power to
act without the others, are hereby authorized, empowered and directed to take
all action necessary, on behalf of the Fund, in order to comply with the
Securities Act of 1933, the Investment Company Act of 1940 and any other
applicable Federal laws, including the filing of registration statements, any
amendments to registration statements, any undertakings, any applications for
exemptions from the Investment Company Act of 1940 or other applicable Federal
laws, any filings with any state agency with respect to the Funds' Declaration
of Trust, and any or all amendments to the foregoing as such attorneys and
agents shall deem necessary or appropriate relating to said mutual fund. The
undersigned hereby ratify and confirm our signature as it may be signed by said
attorneys and agents.
We hereby declare that a photostatic, xerographic or other similar copy
of this original instrument shall be as effective as the original.
We hereby further revoke any and all powers of attorney previously
given by us with respect to the above-named mutual fund, provided that this
revocation shall not affect the exercise of such powers prior to the date
hereof.
WITNESS our hand and seal on the date set forth below.
Date: December __, 1999
/s/ Frank Elmer /s/ John Mallin
- ------------------------------- -------------------------------
Frank Elmer, Trustee John Mallin, Trustee
/s/ John Fabian /s/ Timothy Shriver
- ------------------------------- -------------------------------
John Fabian, Trustee Timothy Shriver, Trustee
/s/ Eunice Groark /s/ Simon Tan
- ------------------------------- -------------------------------
Eunice Groark, Trustee Simon Tan, Trustee
