UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-04642
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The Phoenix Edge Series Fund
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(Exact name of registrant as specified in charter)
CT Corporation System
155 Federal Street
Boston, MA 02110
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(Address of principal executive offices) (Zip code)
Kathleen A. McGah, Esq.
Vice President, Chief Legal Officer, John H. Beers, Esq.
Counsel and Secretary for Registrant Vice President and Counsel
Phoenix Life Insurance Company Phoenix Life Insurance Company
One American Row One American Row
Hartford, Ct 06103-2899 Hartford, CT 06103-2899
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(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 541-0171
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Date of fiscal year end: December 31
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Date of reporting period: December 31, 2009
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
(PHOENIX LOGO)
ANNUAL REPORT
THE PHOENIX EDGE
SERIES FUND
VARIABLE PRODUCTS FUND
DECEMBER 31, 2009
TABLE OF CONTENTS
A Message from the President ............................................. 1
Disclosure of Fund Expenses .............................................. 2
Key Investment Terms and Footnote Legend ................................. 4
SCHEDULE
FUND OF
FUND SUMMARY INVESTMENTS
- ---- ------- -----------
Phoenix Capital Growth Series ("Capital Growth Series") ........................... 8 44
Phoenix Dynamic Asset Allocation Series: Aggressive Growth
("Dynamic Asset Allocation Series: Aggressive Growth") ......................... 10 45
Phoenix Dynamic Asset Allocation Series: Growth
("Dynamic Asset Allocation Series: Growth") .................................... 12 46
Phoenix Dynamic Asset Allocation Series: Moderate
("Dynamic Asset Allocation Series: Moderate") .................................. 14 47
Phoenix Dynamic Asset Allocation Series: Moderate Growth
("Dynamic Asset Allocation Series: Moderate Growth") ........................... 16 48
Phoenix Growth and Income Series ("Growth and Income Series") ..................... 18 49
Phoenix Mid-Cap Growth Series ("Mid-Cap Growth Series") ........................... 20 50
Phoenix Mid-Cap Value Series ("Mid-Cap Value Series")
(formerly "Phoenix-Sanford Bernstein Mid-Cap Value Series") .................... 22 52
Phoenix Money Market Series ("Money Market Series") ............................... 24 53
Phoenix Multi-Sector Fixed Income Series
("Multi-Sector Fixed Income Series") ........................................... 26 54
Phoenix Multi-Sector Short Term Bond Series
("Multi-Sector Short Term Bond Series") ........................................ 28 60
Phoenix Small-Cap Growth Series ("Small-Cap Growth Series") ....................... 30 66
Phoenix Small-Cap Value Series ("Small-Cap Value Series")
(formerly "Phoenix-Sanford Bernstein Small-Cap Value Series") .................. 32 67
Phoenix Strategic Allocation Series ("Strategic Allocation Series") ............... 34 68
Phoenix-Aberdeen International Series ("Aberdeen International Series") ........... 36 73
Phoenix-Duff & Phelps Real Estate Securities Series
("Duff & Phelps Real Estate Securities Series") ................................ 38 74
Phoenix-Van Kampen Comstock Series
("Van Kampen Comstock Series") ................................................. 40 75
Phoenix-Van Kampen Equity 500 Index Series
("Van Kampen Equity 500 Index Series") ......................................... 42 76
Statements of Assets and Liabilities ................................................. 80
Statements of Operations ............................................................. 84
Statements of Changes In Net Assets .................................................. 88
Financial Highlights ................................................................. 94
Notes to Financial Statements ........................................................ 100
Report of Independent Registered Public Accounting Firm .............................. 110
Tax Information Notice ............................................................... 111
Board of Trustees' Consideration of Investment Advisory and Subadvisory Agreements ... 112
Fund Management Tables ............................................................... 146
PROXY VOTING PROCEDURES AND VOTING RECORD (FORM N-PX)
The advisor and subadvisors vote proxies relating to portfolio securities
in accordance with procedures that have been approved by the Fund's Board
of Trustees. You may obtain a description of these procedures, along with
information regarding how the Series voted proxies during the most recent
12-month period ended June 30, 2009, free of charge, by calling toll-free
800-541-0171. This information is also available through the Securities and
Exchange Commission's website at http://www.sec.gov.
FORM N-Q INFORMATION
The Fund files a complete schedule of portfolio holdings for each Series
with the Securities and Exchange Commission (the "SEC") for the first and
third quarters of each fiscal year on Form N-Q. Form N-Q is available on
the SEC's website at http://www.sec.gov. Form N-Q may be reviewed and
copied at the SEC's Public Reference Room. Information on the operation of
the SEC's Public Reference Room can be obtained by calling toll-free
1-800-SEC-0330.
Not FDIC Insured No Bank Guarantee May Lose Value
A MESSAGE FROM THE PRESIDENT
Dear Phoenix Edge Series Fund Shareholder:
(PHOTO OF PHILIP K. POLKINGHORN)
This report provides performance and portfolio details about the underlying
investments of your Phoenix variable annuity or life insurance policy for the
fiscal year ended December 31, 2009. I hope you will take time to review this
important information.
Phoenix variable products offer quality investment options from professional
money managers across the industry, including many well-known names. In addition
to the Phoenix Edge Series Fund options discussed in this report, we also offer
a selection of other investment options for your consideration.
You may wish to visit our Web site, phoenixwm.com, to learn more about the
variable investments available to you, including occasional new offerings. Also,
if you haven't already done so, this is a good time of year to meet with your
financial professional to review your portfolio and make sure that your asset
allocation strategy remains consistent with your financial goals, especially if
your financial situation has changed in any way.
We appreciate your business and thank you for choosing Phoenix to be part of
your financial plan. It is our great privilege to serve you.
Sincerely yours,
/s/ Philip K. Polkinghorn
Philip K. Polkinghorn
President, The Phoenix Edge Series Fund
FEBRUARY 2010
VARIABLE INSURANCE PRODUCTS ARE SOLD BY PROSPECTUS. YOU SHOULD CAREFULLY
CONSIDER INVESTMENT OBJECTIVES, CHARGES, EXPENSES AND RISKS BEFORE YOU INVEST.
THE CONTRACT PROSPECTUS AND UNDERLYING FUND PROSPECTUSES CONTAIN THIS AND OTHER
IMPORTANT INFORMATION ABOUT THE VARIABLE INSURANCE PRODUCT. YOU MAY OBTAIN
PROSPECTUSES FROM YOUR REGISTERED REPRESENTATIVE OR BY CONTACTING US AT
1-800-417-4769 OR phoenixwm.com. PLEASE READ THE PROSPECTUSES CAREFULLY BEFORE
YOU INVEST.
1
THE PHOENIX EDGE SERIES FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
FOR THE SIX-MONTH PERIOD OF JULY 1, 2009 TO DECEMBER 31, 2009
We believe it is important for you to understand the impact of costs on
your investment. All mutual funds have operating expenses. As a shareholder of
The Phoenix Edge Series Fund, you incur ongoing costs including investment
advisory fees and other expenses. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in one of the Series and
to compare these costs with the ongoing costs of investing in other mutual
funds. These examples are based on an investment of $1,000 invested at the
beginning of the period and held for the entire six-month period. The following
Expense Table illustrates your Series' costs in two ways.
ACTUAL EXPENSES
This section of the accompanying table provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The expense estimate does not include the fees or expenses associated with the
separate insurance accounts, and if such charges were included, your costs would
have been higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
This section of the accompanying table provides information about
hypothetical account values and hypothetical expenses based on the Series'
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not your Series' actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in your Series and other funds. To do so,
compare these 5% hypothetical examples with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the accompanying table are meant to
highlight your ongoing costs only and do not reflect additional fees and
expenses associated with the annuity or life insurance policy through which you
invest. Therefore, this section of the accompanying table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if the annuity or life insurance policy
costs were included, your costs would have been higher. The calculations assume
no shares were bought or sold during the period. Your actual costs may have been
higher or lower, depending on the amount of your investment and the timing of
any purchases or redemptions.
EXPENSE TABLE
Beginning Ending Annualized Expenses Paid
Account Value Account Value Expense During
July 1, 2009 December 31, 2009 Ratio Period*
------------- ----------------- ---------- -------------
CAPITAL GROWTH SERIES
ACTUAL $1,000.00 $1,215.80 0.95% $5.31
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,020.36 0.95 4.85
DYNAMIC ASSET ALLOCATION SERIES: AGGRESSIVE GROWTH
ACTUAL $1,000.00 $1,211.40 0.55% $3.07
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,022.40 0.55 2.81
DYNAMIC ASSET ALLOCATION SERIES: GROWTH
ACTUAL $1,000.00 $1,184.80 0.55% $3.03
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,022.40 0.55 2.81
DYNAMIC ASSET ALLOCATION SERIES: MODERATE
ACTUAL $1,000.00 $1,103.60 0.55% $2.92
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,022.40 0.55 2.81
DYNAMIC ASSET ALLOCATION SERIES: MODERATE GROWTH
ACTUAL $1,000.00 $1,148.80 0.55% $2.98
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,022.40 0.55 2.81
GROWTH AND INCOME SERIES+++
ACTUAL $1,000.00 $1,214.40 0.89% $4.97
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,020.66 0.89 4.54
MID-CAP GROWTH SERIES
ACTUAL $1,000.00 $1,214.90 1.10% $6.14
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,019.59 1.10 5.62
MID-CAP VALUE SERIES
ACTUAL $1,000.00 $1,242.00 1.30% $7.35
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,018.57 1.30 6.64
MONEY MARKET SERIES
ACTUAL $1,000.00 $1,000.20 0.20% $1.01
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,024.18 0.20 1.02
MULTI-SECTOR FIXED INCOME SERIES
ACTUAL $1,000.00 $1,160.60 0.75% $4.08
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,021.38 0.75 3.83
MULTI-SECTOR SHORT TERM BOND SERIES
ACTUAL $1,000.00 $1,126.90 0.70% $3.75
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,021.63 0.70 3.57
2
THE PHOENIX EDGE SERIES FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED) (CONTINUED)
FOR THE SIX-MONTH PERIOD OF JULY 1, 2009 TO DECEMBER 31, 2009
EXPENSE TABLE
Beginning Ending Annualized Expenses Paid
Account Value Account Value Expense During
July 1, 2009 December 31, 2009 Ratio Period*
------------- ----------------- ---------- -------------
SMALL-CAP GROWTH SERIES
ACTUAL $1,000.00 $1,190.50 1.05% $5.80
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,019.85 1.05 5.36
SMALL-CAP VALUE SERIES
ACTUAL $1,000.00 $1,217.90 1.30% $7.27
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,018.57 1.30 6.64
STRATEGIC ALLOCATION SERIES
ACTUAL $1,000.00 $1,172.00 0.85% $4.65
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,020.87 0.85 4.34
ABERDEEN INTERNATIONAL SERIES
ACTUAL $1,000.00 $1,276.50 1.03% $5.91
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,019.95 1.03 5.26
DUFF & PHELPS REAL ESTATE SECURITIES SERIES
ACTUAL $1,000.00 $1,466.80 1.10% $6.84
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,019.59 1.10 5.62
VAN KAMPEN COMSTOCK SERIES
ACTUAL $1,000.00 $1,252.30 0.95% $5.39
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,020.36 0.95 4.85
VAN KAMPEN EQUITY 500 INDEX SERIES
ACTUAL $1,000.00 $1,223.30 0.50% $2.80
HYPOTHETICAL (5% RETURN BEFORE EXPENSES)
1,000.00 1,022.65 0.50 2.55
* Expenses are equal to the relevant series' annualized expense ratio which
includes waived fees and reimbursed expenses, if applicable, multiplied by
the average account value over the period, multiplied by the number of days
(184) expenses were accrued in the most recent fiscal half-year, then
divided by 365 days to reflect the one-half year period. Exceptions noted
below.
The series may invest in other funds, and the annualized expense ratios
noted above do not reflect fees and expenses associated with the underlying
funds. If such fees and expenses had been included, the expenses would have
been higher.
You can find more information about the series' expenses in the Financial
Statements section that follows. For additional information on operating
expenses and other shareholder costs, including contractual charges
associated with the separate account, refer to the series prospectus and
the contract prospectus.
+++ If the extraordinary expenses were excluded for the Growth and Income
Series, actual expenses paid and hypothetical expenses would be as follows:
EXPENSES
PAID
--------
Actual $4.74
Hypothetical 4.34
3
KEY INVESTMENT TERMS AND FOOTNOTE LEGEND
KEY INVESTMENT TERMS
ADR (AMERICAN DEPOSITARY RECEIPT)
Represents shares of foreign companies traded in U.S. dollars on U.S. exchanges
that are held by a U.S. bank or trust. Foreign companies use ADRs in order to
make it easier for Americans to buy their shares. An ADR is likely to be traded
over the counter.
BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX
The Barclays Capital U.S. Aggregate Bond Index measures the U.S. investment
grade fixed rate bond market. The index is calculated on a total return basis.
CITIGROUP 90-DAY TREASURY BILLS INDEX
The Citigroup 90-Day Treasury Bill Index measures monthly return equivalents of
yield averages that are not marked to market. The 90-Day Treasury Bill Index is
an average of the last three three-month Treasury Bill issues.
COMPOSITE INDEX FOR DYNAMIC ASSET ALLOCATION SERIES: AGGRESSIVE GROWTH
A composite index made up of 100% of the S&P 500 Index, which measures stock
market total return performance. For the period February 3, 2006 through March
2, 2008, the composite index consisted of 75% S&P 500 Index, 8% Barclays Capital
U.S. Aggregate Bond Index and 17% MSCI EAFE Index.
COMPOSITE INDEX FOR DYNAMIC ASSET ALLOCATION SERIES: GROWTH
A composite index made up of 85% of the S&P 500(R) Index, which measures stock
market total return performance and 15% of the Barclays Capital U.S. Aggregate
Bond Index, which measures bond market total return performance. For the period
February 3, 2006 through March 2, 2008, the composite index consisted of 60% S&P
500 Index, 27% Barclays Capital U.S. Aggregate Bond Index and 13% MSCI EAFE
Index.
COMPOSITE INDEX FOR DYNAMIC ASSET ALLOCATION SERIES: MODERATE
A composite index made up of 50% of the S&P 500(R) Index, which measures stock
market total return performance and 50% of the Barclays Capital U.S. Aggregate
Bond Index, which measures bond market total return performance. For the period
February 3, 2006 through March 2, 2008, the composite index consisted of 30% S&P
500 Index, 65% Barclays Capital U.S. Aggregate Bond Index and 5% MSCI EAFE
Index.
COMPOSITE INDEX FOR DYNAMIC ASSET ALLOCATION SERIES: MODERATE GROWTH
A composite index made up of 70% of the S&P 500(R) Index, which measures stock
market total return performance and 30% of the Barclays Capital U.S. Aggregate
Bond Index, which measures bond market total return performance. For the period
February 3, 2006 through March 2, 2008, the composite index consisted of 50% S&P
500 Index, 40% Barclays Capital U.S. Aggregate Bond Index and 10% MSCI EAFE
Index.
COMPOSITE INDEX FOR STRATEGIC ALLOCATION SERIES
A composite index made up of 60% of the S&P 500(R) Index, which measures stock
market total return performance, and 40% of the Barclays Capital U.S. Aggregate
Bond Index, which measures bond market total return performance.
DOW JONES-AIG COMMODITY INDEX
The Dow Jones-AIG Commodity Index is a broadly diversified index that tracks
commodity futures.
ETF (EXCHANGE-TRADED FUND)
A Fund that tracks an index, but can be traded like a stock.
FASB--FINANCIAL ACCOUNTING STANDARDS BOARD
FEDERAL RESERVE (THE "FED")
The central bank of the United States, responsible for controlling the money
supply, interest rates and credit with the goal of keeping the U.S. economy and
currency stable. Governed by a seven-member board, the system includes 12
regional Federal Reserve Banks, 25 branches and all national and state banks
that are part of the system.
FTSE NAREIT EQUITY REITS INDEX
The FTSE NAREIT Equity REITs Index is a free-float market
capitalization-weighted index measuring equity tax-qualified real estate
investment trusts, which meet minimum size and liquidity criteria, that are
listed on the New York Stock Exchange, the American Stock Exchange and the
NASDAQ National Market System. The index is calculated on a total return basis
with dividends reinvested.
MBS--MORTGAGE-BACKED SECURITY
MERRILL LYNCH 1-2.99 YEAR MEDIUM QUALITY CORPORATE BONDS INDEX
The Merrill Lynch 1-2.99 Year Medium Quality Corporate Bonds Index measures
performance of U.S. investment grade corporate bond issues rated "BBB" and "A"
by Standard & Poor's/Moody's with maturities between one and three years. The
index is calculated on a total return basis.
4
KEY INVESTMENT TERMS AND FOOTNOTE LEGEND (CONTINUED)
MSCI EAFE(R) INDEX
The MSCI EAFE(R) Index is a free float-adjusted market capitalization index that
measures developed foreign market equity performance, excluding the U.S. and
Canada. The index is calculated on a total return basis with gross dividends
reinvested.
MSCI EMERGING MARKETS INDEX
The MSCI Emerging Markets Index is a free float-adjusted market capitalization
index designed to measure equity market performance in the global emerging
markets. The index is calculated on a total return basis with gross dividends
reinvested.
MSCI WORLD EXCLUDING U.S. TOTAL RETURN INDEX
The MSCI World excluding U.S. Total Return Index is a free float-adjusted market
capitalization weighted index that is designed to measure the equity market
performance of developed markets.
MSCI WORLD INDEX
The MSCI World Index is a free float-adjusted market capitalization index that
measures developed global market equity performance. The index is calculated on
a total return basis with gross dividends reinvested.
PIK (PAYMENT-IN-KIND)
A bond which pays interest in the form of additional bonds, or preferred stock
which pays dividends in the form of additional preferred stock.
PPIP (PUBLIC-PRIVATE INVESTMENT PROGRAM)
A plan designed to value and remove troubled assets from the balance sheet of
troubled financial institutions in the U.S. Public-Private Investment Program
consists mainly of two parts: a Legacy Loans Program and a Legacy Securities
Program. The Legacy Loans Program uses FDIC-guaranteed debt along with private
equity to purchase troubled loans from banks. On the other hand, the Legacy
Securities Program is designed to use funds from the Federal Reserve, Treasury
and private investors to reignite the market for legacy securities. Legacy
securities include certain mortgage-backed securities, asset-backed securities
and other securitized assets that the government deems to be eligible for the
program.
REIT (REAL ESTATE INVESTMENT TRUST)
A publicly traded company that owns, develops and operates income-producing real
estate such as apartments, office buildings, hotels, shopping centers and other
commercial properties.
RUSSELL 1000(R) GROWTH INDEX
The Russell 1000(R) Growth Index is a market capitalization-weighted index of
growth-oriented stocks of the 1,000 largest companies in the Russell Universe,
which comprises the 3,000 largest U.S. companies. The index is calculated on a
total return basis with dividends reinvested.
RUSSELL 1000(R) VALUE INDEX
The Russell 1000(R) Value Index is a market capitalization-weighted index of
value-oriented stocks of the 1,000 largest companies in the Russell Universe,
which comprises the 3,000 largest U.S. companies. The index is calculated on a
total return basis with dividends reinvested.
RUSSELL 2000(R) GROWTH INDEX
The Russell 2000(R) Growth Index is a market capitalization-weighted index of
growth-oriented stocks of the smallest 2,000 companies in the Russell Universe,
which comprises the 3,000 largest U.S. companies. The index is calculated on a
total return basis with dividends reinvested.
RUSSELL 2000(R) VALUE INDEX
The Russell 2000(R) Value Index is a market capitalization-weighted index of
value-oriented stocks of the smallest 2,000 companies in the Russell Universe,
which comprises the 3,000 largest U.S. companies. The index is calculated on a
total return basis with dividends reinvested.
RUSSELL 2500(TM) VALUE INDEX
The Russell 2500(TM) Value Index is a market capitalization-weighted index of
value-oriented stocks of the smallest 2,500 companies in the Russell Universe,
which comprises the 3,000 largest U.S. companies. The index is calculated on a
total return basis with dividends reinvested.
RUSSELL MIDCAP(R) GROWTH INDEX
The Russell MidCap(R) Growth Index is a market capitalization-weighted index of
medium-capitalization, growth-oriented stocks of U.S. companies. The index is
calculated on a total return basis with dividends reinvested.
S&P 500(R) INDEX
The S&P 500(R) Index is a free-float market capitalization-weighted index of 500
of the largest U.S. companies. The index is calculated on a total return basis
with dividends reinvested.
5
KEY INVESTMENT TERMS AND FOOTNOTE LEGEND (CONTINUED)
S&P GOLDMAN SACHS COMMODITY INDEX
The S&P GSCI(TM) is a composite index of commodity sector returns representing
an unleveraged, long-only investment in commodity futures that is broadly
diversified across the spectrum of commodities.
SPONSORED ADR (AMERICAN DEPOSITARY RECEIPT)
An ADR which is issued with the cooperation of the company whose stock will
underlie the ADR. Sponsored ADRs generally carry the same rights normally given
to stockholders, such as voting rights. ADRs must be sponsored to be able to
trade on a major U.S. exchange such as the NYSE.
SPDR (S&P DEPOSITARY RECEIPT)
A short form of Standard & Poor's depositary receipt, an exchange-traded fund
(ETF) that tracks the Standard & Poor's 500(R) Index (S&P 500). Spiders are
listed on the American Stock Exchange (AMEX).
TALF (TERM ASSET-BACKED SECURITIES LOAN FACILITY)
The TALF is intended to assist the credit markets in accommodating the credit
needs of consumers and small businesses by facilitating the issuance of
asset-backed securities (ABS) and improving the market conditions for ABS more
generally.
FOOTNOTE LEGEND
1) Federal Income Tax Information: For tax information at December 31, 2009,
see the Federal Income Tax Information Note 12 in the Notes to Financial
Statements.
2) Non-income producing.
3) Variable or step coupon security; interest rate shown reflects the rate in
effect at December 31, 2009.
4) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. See table below.
Market Value
Series (reported in thousands) % of Net Assets
- ------ ----------------------- ---------------
Multi-Sector Fixed Income Series $41,582 20.2%
Multi-Sector Short Term Bond Series 6,021 18.1
Strategic Allocation Series 11,983 7.0
5) Regulation S security. Security is offered and sold outside of the United
States; therefore, it is exempt from registration with the SEC under rules
903 and 904 of the Securities Act of 1933.
6) Illiquid security.
7) Principal amount is adjusted daily pursuant to the change in the Consumer
Price Index.
8) Security valued at fair value as determined in good faith by or under the
direction of the Trustees. This security is disclosed as a level 3 security
in the level table located after the Schedule of Investments.
9) Security in default.
10) The rate shown is the discount rate.
11) Affiliated Series.
12) All or a portion of the security is segregated as collateral.
13) Amount is less than $500.
14) The maturity date shown is the reset date.
6
THIS PAGE INTENTIONALLY BLANK.
CAPITAL GROWTH SERIES
PORTFOLIO MANAGER COMMENTARY
- - PHOENIX CAPITAL GROWTH SERIES (THE "SERIES") is diversified and has an
investment objective to seek long-term growth of capital.
- - For the fiscal year ended December 31, 2009, the Series returned 29.93%.
For the same period, the S&P 500(R) Index, a broad-based equity index,
returned 26.46% and the Russell 1000(R) Growth Index, the Series'
style-specific benchmark, returned 37.21%.
ALL PERFORMANCE FIGURES ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND
EXCLUDE THE EFFECT OF FEES AND EXPENSES ASSOCIATED WITH THE VARIABLE LIFE
INSURANCE OR ANNUITY PRODUCT THROUGH WHICH YOU INVEST. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE SHOWN ABOVE.
HOW DID THE MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE SERIES'
FISCAL YEAR?
- - The Series generated a positive return for the fourth quarter and 12-month
period ended December 31, 2009, but underperformed its benchmark, the
Russell 1000(R) Growth Index, for both periods.
- - For the year, the Russell 1000(R) Growth Index gained over 37%, its
strongest performance since 2003. Technology stocks were the leading
gainers among sectors, surging over 60% as a group, followed by a 44% rise
in Materials and a 43% surge in Consumer Discretionary. Apple, Microsoft,
Google and IBM were among the best performing large cap names for the year.
- - For the 12 months ended December 31, 2009, the Portfolio under performed
its benchmark, the Russell 1000(R) Growth Index. Underperformance was
driven by a number of different factors, which showed up in stock
selection. Two of the categories that detracted the most from performance
were Consumer Staples and Healthcare. Both of these were driven by negative
stock selection. The Portfolio was also hurt by stock selection in
Financials. The biggest relative contributors during the year were Energy
and Materials. These were driven by strong stock selection.
- - We began the year in a very defensive posture, one that had paid dividends
in 2008. On March 6th, the market began its historic rally. As the market
began to improve, the rotation was clearly into higher risk securities. As
a result, lower market cap, weaker balance sheet, higher beta, more
economically sensitive, more cyclical companies out performed dramatically
until into the fourth quarter. We adjusted the portfolio dramatically to
reflect the improving fundamentals that were evident in Energy, Materials,
Industrials and Technology, though we generally did this by purchasing
higher quality companies that we felt had operating leverage as opposed to
financial leverage. Our thought was that a double-dip, or stalling of
growth would endanger the survival of some of the lower quality companies,
and since the strength of the recovery was by no means assured, we felt the
most prudent course of action was to attempt to capture upside, while
limiting potential for losses.
- - We continue to believe the outlook for global economies is brightening.
Government support and stimulus should continue to have a positive result
in the short term and as worldwide economies stabilize, we believe global
growth will reaccelerate. As for earnings, aggressive cost cutting measures
have boosted profit margins across the board and margins should continue to
be wide in 2010. As a result, we believe earnings will continue to come in
ahead of expectations and the year-over-year comparisons for the first half
of the year should look impressive. We continue to hold our belief that, on
a long-term basis, large-cap growth securities remain attractive on both a
forward growth and valuation basis. We believe the average company will
start to experience a reacceleration in growth over the course of the year
and that the market should pay a premium for companies with growth rates
surpassing the average. As disruptive as the past 18 months have been, our
mission continues to be the search for companies undergoing acceleration in
key growth metrics, driven by an identifiable catalyst and with strong
management and clean balance sheets, which has been our strategy for the
past 16 years.
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. ANY
SUCH OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET
CONDITIONS AND SHOULD NOT BE RELIED ON AS INVESTMENT ADVICE.
BECAUSE THE SERIES IS HEAVILY WEIGHTED IN THE TECHNOLOGY SECTOR, IT WILL BE
IMPACTED BY THAT SECTOR'S PERFORMANCE MORE THAN A SERIES WITH BROADER
SECTOR DIVERSIFICATION.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and as a
percentage of total investments as of December 31, 2009.
Information Technology 38%
Industrials 13
Health Care 12
Consumer Discretionary 11
Energy 9
Consumer Staples 8
Materials 4
Other (includes short-term investments) 5
---
Total 100%
===
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
8
CAPITAL GROWTH SERIES (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
1 year 5 years 10 years
------ ------- --------
CAPITAL GROWTH SERIES 29.93% -1.82% -6.89%
S&P 500(R) INDEX 26.46 0.42 -0.96
RUSSELL 1000(R) GROWTH INDEX 37.21 1.63 -3.99
SERIES EXPENSE RATIO(2): 0.95%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIO OF THE SERIES IS SET FORTH ACCORDING TO THE PROSPECTUS
FOR THE SERIES EFFECTIVE 5/1/09, AND MAY DIFFER FROM THE EXPENSE RATIOS
DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE
FINANCIAL HIGHLIGHTS FOR MORE CURRENT INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 12/31/99. Returns
shown include the reinvestment of all distributions at net asset value, and the
change in share price for the stated period.
Capital Growth Russell 1000(R)
Series S&P 500(R) Index Growth Index
-------------- ---------------- ---------------
12/31/99 $10,000 $10,000 $10,000
12/29/00 8,223 9,081 7,758
12/31/01 5,380 8,003 6,173
12/31/02 4,045 6,234 4,452
12/31/03 5,117 8,024 5,776
12/31/04 5,371 8,896 6,140
12/30/05 5,570 9,334 6,463
12/29/06 5,750 10,807 7,050
12/31/07 6,368 11,401 7,883
12/31/08 3,771 7,183 4,853
12/31/09 4,900 9,084 6,658
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
9
DYNAMIC ASSET ALLOCATION SERIES: AGGRESSIVE GROWTH
PORTFOLIO MANAGER COMMENTARY
- - PHOENIX DYNAMIC ASSET ALLOCATION SERIES: AGGRESSIVE GROWTH (THE "SERIES")
is diversified and has an investment objective to seek long-term capital
growth.
- - For the fiscal year ended December 31, 2009, the Series returned 27.50%.
For the same period, the S&P 500(R) Index, a broad-based equity index,
returned 26.46%, and the Composite Index for the Series returned 26.46%.
ALL PERFORMANCE FIGURES ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND
EXCLUDE THE EFFECT OF FEES AND EXPENSES ASSOCIATED WITH THE VARIABLE LIFE
INSURANCE OR ANNUITY PRODUCT THROUGH WHICH YOU INVEST. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE SHOWN ABOVE.
HOW DID THE MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE SERIES'
FISCAL YEAR?
MARKET COMMENTARY
- - Gradually improving macroeconomic news continued to emerge during the
second half of 2009. Both industrialized and emerging markets have seen
improvements (or at least more limited deterioration) on GDP growth,
industrial production, and new factory orders. Unemployment remains high,
but for most countries it appears to be approaching a path towards
improvement. Inflation remains subdued.
- - Credit markets have reflected both a moderate return to confidence and a
renewed investor interest for corporate bonds thanks to expansionary
monetary policies from the major central banks.
U.S. STOCK MARKET
- - The positive return for most equity indexes in 2009 has not made up for
past losses. The annualized total return to the Morningstar U.S. Market
Index from January 2007 through December 2009 is -5 percent.
- - The financial services sector was the laggard during the fourth quarter as
it was the only sector to post a negative return. Surprisingly, REITs,
which are often leveraged and therefore correlated to the performance of
the financial sector, outpaced the U.S. stock market as a whole.
- - The gap between trailing P/E including negative earnings and P/E excluding
negative earnings has started shrinking for most large-cap indexes. P/E
ratios for U.S. small cap stocks are still negative or extremely large when
including negative earnings.
- - The ratio including negatives for the S&P 500 Index approached 80 at the
end of 2009 according to S&P, while it exceeded 120 at the end of the third
quarter. The current 80 is still a large number compared to historical
ranges, but it is more reasonable than before.
- - Given the relatively stable current prices, the increase in the P/E
excluding negatives is explained by a growing number of companies posting
small but positive earnings.
U.S. BOND MARKET
- - Recent data from S&P has shown a decrease in corporate bond defaults in the
U.S. This is a promising sign of improvement in the credit markets and may
lead banks towards higher corporate lending. At the same time however, the
press reported record defaults in the commercial real estate sector which
is going to damage bank balance sheets. Such defaults mostly affect
mid-sized and smaller banks for which commercial real estate was one of the
few niches where they could compete against the larger financial
conglomerates.
- - Government yields for short-term Treasury bills have remained stable and
well below historical averages. Longer-term yields increased in proportion
to bond maturity: during the fourth quarter 2-year Treasury yields
increased by about 20 basis points, while 5-year yields increased by 37
basis points and 10-year yields by 53 basis points.
- - According to our calculation, 10-year and higher duration Treasury yields
are within their historical normal range. Therefore, despite a Federal
deficit estimated to exceed 10 percent of GDP in 2009, bond investors do
not seem concerned over the solvency of the United States.
- - Short-term yields have been kept low by monetary policy, thus leading to a
particularly steep yield curve. If intermediate yields revert to their
historical means, reflecting for example expectations of a return to less
accommodative monetary policy, we estimate that the price of the 5-year
Treasury bond could lose between 4 and 8 percent.
U.S. REITS
- - The FTSE NAREIT Equity REITs Index posted a 9.4 percent return during the
fourth quarter and 28 percent for the year. While large, this return is not
sufficient to cover the losses incurred by the index in 2008. The three
year annualized return for the index is -12.4 percent.
- - REIT yields, currently around 3.7 percent, are lower than those on U.S.
corporate bonds. The recent price rally may have been triggered by recent
announcements of mergers and acquisitions as the healthier, larger REITs
have started shopping for distressed REITs at bargain prices.
COMMODITIES
- - Spot prices for energy, precious metals, and other commodities increased in
the fourth quarter, with the energy-heavy S&P GSCI Index returning 8.4
percent for the quarter and 13.4 percent for the year. The more diversified
DJ UBS Index was up 9 percent during the quarter and 18.9 percent for the
year. Demand for raw materials and energy as well as agricultural
commodities spurred prices.
- - According to several observers, a further increase in demand may not have a
large effect on prices. Producers and intermediaries appear to have built
up inventories hoping to take advantage of higher prices. Therefore, such
inventories might be sufficient to satisfy an increased demand.
NON-U.S. EQUITY MARKETS
- - Non-U.S. markets grew less than the U.S. market. For the year the MSCI AC
World ex U.S. Index returned 32.39 percent in local currency and 42.14
percent in U.S. dollars. Industrialized countries were in line with this
finding, with the MSCI EAFE Index returning 32.46 percent in 2009.
- - The MSCI Emerging Markets Index was up 79.0 percent for 2009 and an
annualized 5.1 percent for the three-year period from 2007-2009.
Considering the dismal returns to industrialized stock markets in the same
period, one wonders whether this run (annualized +9.8 percent over the last
ten years) can and will continue.
NON-U.S. BOND MARKETS
- - Credit spreads, similar to those in the U.S., remain above their long-term
averages in most industrialized countries. Emerging market bonds have
recently outperformed, with the J.P. Morgan EMBI Global Index, representing
emerging market sovereign bonds denominated in hard currencies, up 1.5
percent for the fourth quarter. The J.P. Morgan GBI-EM Index, representing
sovereign bonds issued by emerging countries in local currencies, gained
2.3 percent for the fourth quarter. At this point emerging market bond
spreads are now within their historical range.
WHAT FACTORS AFFECTED THE SERIES' PERFORMANCE DURING ITS FISCAL YEAR?
- - Effective March 3, 2008, Ibbotson Associates became limited services
subadvisor to the Phoenix Dynamic Asset Allocation Series, and the
composite benchmark for the Series changed to 100% S&P 500(R).
- - The Series had a 100 percent equity allocation during the first half of
2009. During the second half of the year this allocation was changed to a
92 percent equity and 8 percent fixed income allocation. During the first
half of the year (100 percent equity) the Series significantly outperformed
this benchmark primarily due to the strong performance of the Emerging
Markets Equity, Large Cap Growth Equity, International Equity, and
International Small Cap Equity asset classes. The greatest detractors from
performance over this period were the Large Cap Value Equity, U.S. REIT,
and Small Cap Value Equity asset classes. Upon the portfolio change to a 92
percent equity and 8 percent fixed income mandate, and through the rest of
the year, the asset class performance continued to outperform the
benchmark, but not quite as much as during the first half of 2009. The
primary drivers of this out performance were the U.S. REIT, Small/Mid Cap
Value Equity, and Small/Mid Cap Growth Equity asset classes. The greatest
asset class detractors from Series performance over this time were
Commodities and International Equities. Overall for 2009, the asset
allocation for the Series outperformed the benchmark noted above.
- - Ibbotson creates a customized blended benchmark for each underlying
investment option in the portfolio and measures each manager's return for
the period against this benchmark. For the first half of the year the
underlying manager performance slightly detracted from relative fund
performance. The Vanguard Large Cap ETF, SPDR S&P International Small Cap,
and the iShares MSCI EAFE Index were the greatest detractors from relative
performance during this period. There were though some strong fund
performers over this time which included the Vanguard Small Cap ETF, the
iShares S&P GSCI Commodity Index Trust, and the Vanguard Small Cap Value
ETF. During the second half of the year a group of active managers was
added to the Series. Overall, the underlying managers detracted from
relative performance over this period as well. The greatest detractors from
relative performance were the Sentinel Common Stock Fund and the Phoenix
Mid-Cap Growth Series. On the positive side, the Phoenix-Aberdeen
International Series and the Phoenix-Duff & Phelps Real Estate Securities
Series both were strong contributors to relative
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
10
DYNAMIC ASSET ALLOCATION SERIES: AGGRESSIVE GROWTH (CONTINUED)
performance. For the year 2009 the underlying managers had a negative
contribution to relative performance of the Series.
- - One additional item to note, the portfolio was impacted by an ETF
phenomenon that we will term as "market impact." At a high level, market
impact is the return difference between the ETF's market price and net
asset value "NAV." The result of market impact will cause an ETF's price to
reflect a premium or discount to its NAV. At each quarter/year end, a
return is calculated for specific periods such as 3-month, 1-year, etc. As
of December 2008, significant premiums were built in many ETFs. The buildup
in ETF premiums was likely due to credit crisis pricing uncertainty and a
trading imbalance of institutional investors repositioning their
portfolios. As of December 2009, the significant premiums had reversed in
most cases, thereby broadening the performance gap between the ETF's market
and NAV returns.
- - As an example, iShares MSCI EAFE Index "EFA" (was included in the
portfolios during the first half of 2009) had a premium of 3.16 percent to
its NAV as of December 2008. At the end of 2009, EFA was reflecting a
discount of 0.33 percent. When calculating the 1-year return for EFA
realized by an investor, the 3.49 percent pricing misfit would be
subtracted from the NAV return. The actual difference in EFA's market
versus NAV return for the 1-year period ending December 2009, was 4.44
percent. It's important to note that the market impact is normally quite
small, plus/minus 1 percent, on the ETFs that we use in the Portfolio.
Again, the large premiums and discounts were primarily driven by the events
surrounding the recent economic crises and have since reverted back to
historical levels.
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. ANY
SUCH OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR
CONDITIONS AND SHOULD NOT BE RELIED ON AS INVESTMENT ADVICE.
INVESTING IN SECTOR FUNDS OR NON-DIVERSIFIED FUNDS MAY BE MORE VOLATILE
THAN INVESTING IN BROADLY DIVERSIFIED FUNDS, AND MAY BE MORE SUSCEPTIBLE TO
ADVERSE ECONOMIC, POLITICAL OR REGULATORY DEVELOPMENTS AFFECTING A SINGLE
ISSUER THAN WOULD BE THE CASE IF IT WERE MORE BROADLY DIVERSIFIED.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and as a
percentage of total investments as of December 31, 2009.
Exchange-Traded Funds 49%
Equity Funds - Domestic 21%
Equity Funds - International 14
Commodity Funds 6
Fixed Income Funds 5
Real Estate Securities Funds 3
Mutual Funds 50
Equity Funds - Domestic 35%
Equity Funds - International 13
Fixed Income Funds 2
Other (includes short-term
investments) 1
---
Total 100%
===
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
Inception Inception
1 year to 12/31/09 Date
------ ----------- ---------
DYNAMIC ASSET ALLOCATION SERIES: AGGRESSIVE GROWTH 27.50% -1.00% 2/3/06
S&P 500(R) INDEX 26.46 -1.04 2/3/06
COMPOSITE INDEX FOR DYNAMIC ASSET ALLOCATION SERIES: AGGRESSIVE GROWTH 26.46 -0.38 2/3/06
SERIES EXPENSE RATIOS(2): GROSS: 1.39%; NET: 1.17%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIOS OF THE SERIES, BOTH NET AND GROSS ARE SET FORTH
ACCORDING TO THE PROSPECTUS FOR THE SERIES EFFECTIVE 6/22/09, AND MAY
DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES
IN THIS REPORT. NET EXPENSES: EXPENSES (INCLUDING ACQUIRED FUND FEES AND
EXPENSES) REDUCED BY A CONTRACTUAL WAIVER IN EFFECT THROUGH 4/30/10. GROSS
EXPENSES: DO NOT REFLECT THE EFFECT OF THE CONTRACTUAL WAIVER. SEE THE
FINANCIAL HIGHLIGHTS FOR MORE CURRENT INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 2/3/06 (inception of
the Series). Returns shown include the reinvestment of all distributions at net
asset value, and the change in share price for the stated period.
Dynamic Asset
Allocation
Series: Composite Index for Dynamic
Aggressive S&P 500(R) Asset Allocation Series:
Growth Index Aggressive Growth
------------- ---------- ---------------------------
2/3/06 $10,000 $10,000 $10,000
12/29/06 11,261 11,419 11,454
12/31/07 12,212 12,046 12,222
12/31/08 7,541 7,589 7,791
12/31/09 9,615 9,598 9,853
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
11
DYNAMIC ASSET ALLOCATION SERIES: GROWTH
PORTFOLIO MANAGER COMMENTARY
- - PHOENIX DYNAMIC ASSET ALLOCATION SERIES: GROWTH (THE "SERIES") is
diversified and has an investment objective to seek long-term capital
growth as its primary objective with current income as a secondary
consideration.
- - For the fiscal year ended December 31, 2009, the Series returned 23.76%.
For the same period, the S&P 500(R) Index, a broad-based equity index,
returned 26.46%, and the Composite Index for the Series returned 23.47%.
ALL PERFORMANCE FIGURES ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND
EXCLUDE THE EFFECT OF FEES AND EXPENSES ASSOCIATED WITH THE VARIABLE LIFE
INSURANCE OR ANNUITY PRODUCT THROUGH WHICH YOU INVEST. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE SHOWN ABOVE.
HOW DID THE MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE SERIES'
FISCAL YEAR?
MARKET COMMENTARY
- - Gradually improving macroeconomic news continued to emerge during the
second half of 2009. Both industrialized and emerging markets have seen
improvements (or at least more limited deterioration) on GDP growth,
industrial production, and new factory orders. Unemployment remains high,
but for most countries it appears to be approaching a path towards
improvement. Inflation remains subdued.
- - Credit markets have reflected both a moderate return to confidence and a
renewed investor interest for corporate bonds thanks to expansionary
monetary policies from the major central banks.
U.S. STOCK MARKET
- - The positive return for most equity indexes in 2009 has not made up for
past losses. The annualized total return to the Morningstar U.S. Market
Index from January 2007 through December 2009 is -5 percent.
- - The financial services sector was the laggard during the fourth quarter as
it was the only sector to post a negative return. Surprisingly, REITs,
which are often leveraged and therefore correlated to the performance of
the financial sector, outpaced the U.S. stock market as a whole.
- - The gap between trailing P/E including negative earnings and P/E excluding
negative earnings has started shrinking for most large-cap indexes. P/E
ratios for U.S. small cap stocks are still negative or extremely large when
including negative earnings.
- - The ratio including negatives for the S&P 500 Index approached 80 at the
end of 2009 according to S&P, while it exceeded 120 at the end of the third
quarter. The current 80 is still a large number compared to historical
ranges, but it is more reasonable than before.
- - Given the relatively stable current prices, the increase in the P/E
excluding negatives is explained by a growing number of companies posting
small but positive earnings.
U.S. BOND MARKET
- - Recent data from S&P has shown a decrease in corporate bond defaults in the
U.S. This is a promising sign of improvement in the credit markets and may
lead banks towards higher corporate lending. At the same time however, the
press reported record defaults in the commercial real estate sector which
is going to damage bank balance sheets. Such defaults mostly affect
mid-sized and smaller banks for which commercial real estate was one of the
few niches where they could compete against the larger financial
conglomerates.
- - Government yields for short-term Treasury bills have remained stable and
well below historical averages. Longer-term yields increased in proportion
to bond maturity: during the fourth quarter 2-year Treasury yields
increased by about 20 basis points, while 5-year yields increased by 37
basis points and 10-year yields by 53 basis points.
- - According to our calculation, 10-year and higher duration Treasury yields
are within their historical normal range. Therefore, despite a Federal
deficit estimated to exceed 10 percent of GDP in 2009, bond investors do
not seem concerned over the solvency of the United States.
- - Short-term yields have been kept low by monetary policy, thus leading to a
particularly steep yield curve. If intermediate yields revert to their
historical means, reflecting for example expectations of a return to less
accommodative monetary policy, we estimate that the price of the 5-year
Treasury bond could lose between 4 and 8 percent.
U.S. REITS
- - The FTSE NAREIT Equity REITs Index posted a 9.4 percent return during the
fourth quarter and 28 percent for the year. While large, this return is not
sufficient to cover the losses incurred by the index in 2008. The three
year annualized return for the index is -12.4 percent.
- - REIT yields, currently around 3.7 percent, are lower than those on U.S.
corporate bonds. The recent price rally may have been triggered by recent
announcements of mergers and acquisitions as the healthier, larger REITs
have started shopping for distressed REITs at bargain prices.
COMMODITIES
- - Spot prices for energy, precious metals, and other commodities increased in
the fourth quarter, with the energy-heavy S&P GSCI Index returning 8.4
percent for the quarter and 13.4 percent for the year. The more diversified
DJ UBS Index was up 9 percent during the quarter and 18.9 percent for the
year. Demand for raw materials and energy as well as agricultural
commodities spurred prices.
- - According to several observers, a further increase in demand may not have a
large effect on prices. Producers and intermediaries appear to have built
up inventories hoping to take advantage of higher prices. Therefore, such
inventories might be sufficient to satisfy an increased demand.
NON-U.S. EQUITY MARKETS
- - Non-U.S. markets grew less than the U.S. market. For the year the MSCI AC
World ex U.S. Index returned 32.39 percent in local currency and 42.14
percent in U.S. dollars. Industrialized countries were in line with this
finding, with the MSCI EAFE Index returning 32.46 percent in 2009.
- - The MSCI Emerging Markets Index was up 79.0 percent for 2009 and an
annualized 5.1 percent for the three-year period from 2007-2009.
Considering the dismal returns to industrialized stock markets in the same
period, one wonders whether this run (annualized +9.8 percent over the last
ten years) can and will continue.
NON-U.S. BOND MARKETS
- - Credit spreads, similar to those in the U.S., remain above their long-term
averages in most industrialized countries. Emerging market bonds have
recently outperformed, with the J.P. Morgan EMBI Global Index, representing
emerging market sovereign bonds denominated in hard currencies, up 1.5
percent for the fourth quarter. The J.P. Morgan GBI-EM Index, representing
sovereign bonds issued by emerging countries in local currencies, gained
2.3 percent for the fourth quarter. At this point emerging market bond
spreads are now within their historical range.
WHAT FACTORS AFFECTED THE SERIES' PERFORMANCE DURING ITS FISCAL YEAR?
- - Effective March 3, 2008, Ibbotson Associates became limited services
subadvisor to the Phoenix Dynamic Asset Allocation Series, and the
composite benchmark for the Series changed to 85% S&P 500(R)/15% Barclays
Capital U.S. Aggregate Bond.
- - The Series had an 85 percent equity and 15 percent fixed income allocation
during the first half of 2009. During the second half of the year this
allocation was changed to an 80 percent equity and 20 percent fixed income
allocation. During the first half of the year (85 percent equity and 15
percent fixed income) the Series under performed this benchmark primarily
due to the performance of the Large Cap Value Equity, Small Cap Value
Equity, and U.S. REIT asset classes. Upon the portfolio change to a 80
percent equity and 20 percent fixed income mandate, and through the rest of
the year, the asset class performance continued to under perform the
benchmark. The greatest asset class detractors from Series performance over
this time were Commodities and Short Term Bonds. Overall for 2009, the
asset allocation for the Series under performed the benchmark noted above.
- - Ibbotson creates a customized blended benchmark for each underlying
investment option in the portfolio and measures each manager's return for
the period against this benchmark. For the first half of the year the
underlying manager performance detracted from relative fund performance.
The Vanguard Large Cap ETF, SPDR S&P International Small Cap, and the
iShares MSCI EAFE Index were the greatest detractors from relative
performance during this period. There were though some strong fund
performers over this time which included the Vanguard Small Cap ETF, the
Vanguard Small Cap Value ETF, and the iShares S&P GSCI Commodity Index
Trust. During the second half of the year a group of active managers was
added to the Series. Overall, the underlying managers detracted from
relative performance over this period as well. The greatest detractors from
relative performance were the Sentinel Common Stock Fund and the Phoenix
Mid-Cap Growth Series. On the positive side, the Phoenix Aberdeen
International Series and the Phoenix-Duff & Phelps Real Estate Securities
Series both were strong contributors to relative performance. For the year
2009 the underlying managers had a negative contribution to relative
performance of the Growth fund.
- - One additional item to note, the portfolio was impacted by an ETF
phenomenon that we will term as "market impact." At a high level, market
impact is the return difference between the ETF's market price and net
asset value "NAV." The result of market impact will cause an ETF's price to
reflect a premium or discount
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
12
DYNAMIC ASSET ALLOCATION SERIES: GROWTH (CONTINUED)
to its NAV. At each quarter/year end, a return is calculated for specific
periods such as 3-month, 1-year, etc. As of December 2008, significant
premiums were built in many ETFs. The buildup in ETF premiums was likely
due to credit crisis pricing uncertainty and a trading imbalance of
institutional investors repositioning their portfolios. As of December
2009, the significant premiums had reversed in most cases, thereby
broadening the performance gap between the ETF's market and NAV returns.
- - As an example, iShares MSCI EAFE Index "EFA" (was included in the
portfolios during the first half of 2009) had a premium of 3.16 percent to
its NAV as of December 2008. At the end of 2009, EFA was reflecting a
discount of 0.33 percent. When calculating the 1-year return for EFA
realized by an investor, the 3.49 percent pricing misfit would be
subtracted from the NAV return. The actual difference in EFA's market
versus NAV return for the 1-year period ending December 2009, was 4.44
percent. It's important to note that the market impact is normally quite
small, plus/minus 1 percent, on the ETFs that we use in the Portfolio.
Again, the large premiums and discounts were primarily driven by the events
surrounding the recent economic crises and have since reverted back to
historical levels.
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. ANY
SUCH OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR
CONDITIONS AND SHOULD NOT BE RELIED ON AS INVESTMENT ADVICE.
INVESTING IN SECTOR FUNDS OR NON-DIVERSIFIED FUNDS MAY BE MORE VOLATILE
THAN INVESTING IN BROADLY DIVERSIFIED FUNDS, AND MAY BE MORE SUSCEPTIBLE TO
ADVERSE ECONOMIC, POLITICAL OR REGULATORY DEVELOPMENTS AFFECTING A SINGLE
ISSUER THAN WOULD BE THE CASE IF IT WERE MORE BROADLY DIVERSIFIED.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and as a
percentage of total investments as of December 31, 2009.
Exchange-Traded Funds 51%
Equity Funds - Domestic 19%
Fixed Income Funds 13
Equity Funds - International 12
Commodity Funds 5
Real Estate Securities Funds 2
Mutual Funds 48
Equity Funds - Domestic 31%
Equity Funds - International 11
Fixed Income Funds 6
Other (includes short-term
investments) 1
---
Total 100%
===
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
Inception Inception
1 year to 12/31/09 Date
------ ----------- ---------
DYNAMIC ASSET ALLOCATION SERIES: GROWTH 23.76% 0.00% 2/3/06
S&P 500(R) INDEX 26.46 -1.04 2/3/06
COMPOSITE INDEX FOR DYNAMIC ASSET ALLOCATION SERIES: GROWTH 23.47 0.71 2/3/06
SERIES EXPENSE RATIOS(2): GROSS: 1.28%; NET: 1.13%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIOS OF THE SERIES, BOTH NET AND GROSS ARE SET FORTH
ACCORDING TO THE PROSPECTUS FOR THE SERIES EFFECTIVE 6/22/09, AND MAY
DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES
IN THIS REPORT. NET EXPENSES: EXPENSES (INCLUDING ACQUIRED FUND FEES AND
EXPENSES) REDUCED BY A CONTRACTUAL WAIVER IN EFFECT THROUGH 4/30/10. GROSS
EXPENSES: DO NOT REFLECT THE EFFECT OF THE CONTRACTUAL WAIVER. SEE THE
FINANCIAL HIGHLIGHTS FOR MORE CURRENT INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 2/3/06 (inception of
the Series). Returns shown include the reinvestment of all distributions at net
asset value, and the change in share price for the stated period.
Dynamic Asset Composite Index for Dynamic
Allocation S&P 500(R) Asset Allocation
Series: Growth Index Series: Growth
-------------- ---------- ---------------------------
2/3/06 $10,000 $10,000 $10,000
12/29/06 10,998 11,419 11,235
12/31/07 11,914 12,046 12,000
12/31/08 8,080 7,589 8,328
12/31/09 10,000 9,598 10,282
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
13
DYNAMIC ASSET ALLOCATION SERIES: MODERATE
PORTFOLIO MANAGER COMMENTARY
- - PHOENIX DYNAMIC ASSET ALLOCATION SERIES: MODERATE (THE "SERIES") is
diversified and has an investment objective to seek current income with
capital growth as a secondary consideration.
- - For the fiscal year ended December 31, 2009, the Series returned 12.68%.
For the same period, the S&P 500(R) Index, a broad-based equity index,
returned 26.46%, and the Composite Index for the Series returned 16.34%.
ALL PERFORMANCE FIGURES ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND
EXCLUDE THE EFFECT OF FEES AND EXPENSES ASSOCIATED WITH THE VARIABLE LIFE
INSURANCE OR ANNUITY PRODUCT THROUGH WHICH YOU INVEST. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE SHOWN ABOVE.
HOW DID THE MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE SERIES'
FISCAL YEAR?
MARKET COMMENTARY
- - Gradually improving macroeconomic news continued to emerge during the
second half of 2009. Both industrialized and emerging markets have seen
improvements (or at least more limited deterioration) on GDP growth,
industrial production, and new factory orders. Unemployment remains high,
but for most countries it appears to be approaching a path towards
improvement. Inflation remains subdued.
- - Credit markets have reflected both a moderate return to confidence and a
renewed investor interest for corporate bonds thanks to expansionary
monetary policies from the major central banks.
U.S. STOCK MARKET
- - The positive return for most equity indexes in 2009 has not made up for
past losses. The annualized total return to the Morningstar U.S. Market
Index from January 2007 through December 2009 is -5 percent.
- - The financial services sector was the laggard during the fourth quarter as
it was the only sector to post a negative return. Surprisingly, REITs,
which are often leveraged and therefore correlated to the performance of
the financial sector, outpaced the U.S. stock market as a whole.
- - The gap between trailing P/E including negative earnings and P/E excluding
negative earnings has started shrinking for most large-cap indexes. P/E
ratios for U.S. small cap stocks are still negative or extremely large when
including negative earnings.
- - The ratio including negatives for the S&P 500 Index approached 80 at the
end of 2009 according to S&P, while it exceeded 120 at the end of the third
quarter. The current 80 is still a large number compared to historical
ranges, but it is more reasonable than before.
- - Given the relatively stable current prices, the increase in the P/E
excluding negatives is explained by a growing number of companies posting
small but positive earnings.
U.S. BOND MARKET
- - Recent data from S&P has shown a decrease in corporate bond defaults in the
U.S. This is a promising sign of improvement in the credit markets and may
lead banks towards higher corporate lending. At the same time however, the
press reported record defaults in the commercial real estate sector which
is going to damage bank balance sheets. Such defaults mostly affect
mid-sized and smaller banks for which commercial real estate was one of the
few niches where they could compete against the larger financial
conglomerates.
- - Government yields for short-term Treasury bills have remained stable and
well below historical averages. Longer-term yields increased in proportion
to bond maturity: during the fourth quarter 2-year Treasury yields
increased by about 20 basis points, while 5-year yields increased by 37
basis points and 10-year yields by 53 basis points.
- - According to our calculation, 10-year and higher duration Treasury yields
are within their historical normal range. Therefore, despite a Federal
deficit estimated to exceed 10 percent of GDP in 2009, bond investors do
not seem concerned over the solvency of the United States.
- - Short-term yields have been kept low by monetary policy, thus leading to a
particularly steep yield curve. If intermediate yields revert to their
historical means, reflecting for example expectations of a return to less
accommodative monetary policy, we estimate that the price of the 5-year
Treasury bond could lose between 4 and 8 percent.
U.S. REITS
- - The FTSE NAREIT Equity REITs Index posted a 9.4 percent return during the
fourth quarter and 28 percent for the year. While large, this return is not
sufficient to cover the losses incurred by the index in 2008. The three
year annualized return for the index is -12.4 percent.
- - REIT yields, currently around 3.7 percent, are lower than those on U.S.
corporate bonds. The recent price rally may have been triggered by recent
announcements of mergers and acquisitions as the healthier, larger REITs
have started shopping for distressed REITs at bargain prices.
COMMODITIES
- - Spot prices for energy, precious metals, and other commodities increased in
the fourth quarter, with the energy-heavy S&P GSCI Index returning 8.4
percent for the quarter and 13.4 percent for the year. The more diversified
DJ UBS Index was up 9 percent during the quarter and 18.9 percent for the
year. Demand for raw materials and energy as well as agricultural
commodities spurred prices.
- - According to several observers, a further increase in demand may not have a
large effect on prices. Producers and intermediaries appear to have built
up inventories hoping to take advantage of higher prices. Therefore, such
inventories might be sufficient to satisfy an increased demand.
NON-U.S. EQUITY MARKETS
- - Non-U.S. markets grew less than the U.S. market. For the year the MSCI AC
World ex U.S. Index returned 32.39 percent in local currency and 42.14
percent in U.S. dollars. Industrialized countries were in line with this
finding, with the MSCI EAFE Index returning 32.46 percent in 2009.
- - The MSCI Emerging Markets Index was up 79.0 percent for 2009 and an
annualized 5.1 percent for the three-year period from 2007-2009.
Considering the dismal returns to industrialized stock markets in the same
period, one wonders whether this run (annualized +9.8 percent over the last
ten years) can and will continue.
NON-U.S. BOND MARKETS
- - Credit spreads, similar to those in the U.S., remain above their long-term
averages in most industrialized countries. Emerging market bonds have
recently outperformed, with the J.P. Morgan EMBI Global Index, representing
emerging market sovereign bonds denominated in hard currencies, up 1.5
percent for the fourth quarter. The J.P. Morgan GBI-EM Index, representing
sovereign bonds issued by emerging countries in local currencies, gained
2.3 percent for the fourth quarter. At this point emerging market bond
spreads are now within their historical range.
WHAT FACTORS AFFECTED THE SERIES' PERFORMANCE DURING ITS FISCAL YEAR?
- - Effective March 3, 2008, Ibbotson Associates became limited services
subadvisor to the Phoenix Dynamic Asset Allocation Series, and the
composite benchmark for each Series changed to 50% S&P 500(R)/50% Barclays
Capital U.S. Aggregate Bond.
- - The Series had a 50 percent equity and 50 percent fixed income allocation
during the first half of 2009. During the second half of the year this
allocation was changed to a 40 percent equity and 60 percent fixed income
allocation.
- - Overall, the Series under performed its benchmark shown above. The greatest
detractors from performance during the first half of the year were the Long
Term Bond and Large Cap Value Equity asset classes. Upon the portfolio
change to a 40 percent equity and 60 percent fixed income mandate, and
through the rest of the year, the asset class performance continued to
under perform. The primary drivers of the under performance were the Short
Term Bond and Commodities asset classes. There were some asset classes that
did exhibit strong performance over this period, notably the Long Term Bond
and Small/Mid Cap Value Equity asset classes.
- - Ibbotson creates a customized blended benchmark for each underlying
investment option in the portfolio and measures each manager's return for
the period against this benchmark. For the first half of the year the
underlying manager performance detracted from relative fund performance.
The Vanguard Intermediate Term Bond ETF, Vanguard Large Cap ETF, and
IShares MSCI EAFE Index were the greatest detractors from relative
performance during this period. There were though some strong fund
performers over this time which included the Vanguard Small Cap ETF,
iShares S&P GSCI Commodity Index Trust, and the Vanguard Small Cap Value
ETF. During the second half of the year a group of active managers was
added to the Series. Overall, the underlying managers detracted from
relative performance over this period as well, although it was improved
from the first half of 2009. The greatest detractors from relative
performance were the Sentinel Common Stock Fund and the Phoenix Mid-Cap
Growth fund. On the positive side, the Phoenix Aberdeen International
Series and the JP Morgan Short Duration Bond Select fund both were strong
contributors to relative performance. For the year 2009 the underlying
managers had a negative contribution to relative performance of the Series.
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
14
DYNAMIC ASSET ALLOCATION SERIES: MODERATE (CONTINUED)
- - One additional item to note, the portfolio was impacted by an ETF
phenomenon that we will term as "market impact." At a high level, market
impact is the return difference between the ETF's market price and net
asset value "NAV." The result of market impact will cause an ETF's price to
reflect a premium or discount to its NAV. At each quarter/year end, a
return is calculated for specific periods such as 3-month, 1-year, etc. As
of December 2008, significant premiums were built in many ETFs. The buildup
in ETF premiums was likely due to credit crisis pricing uncertainty and a
trading imbalance of institutional investors repositioning their
portfolios. As of December 2009, the significant premiums had reversed in
most cases, thereby broadening the performance gap between the ETF's market
and NAV returns.
- - As an example, iShares MSCI EAFE Index "EFA" (was included in the
portfolios during the first half of 2009) had a premium of 3.16 percent to
its NAV as of December 2008. At the end of 2009, EFA was reflecting a
discount of 0.33 percent. When calculating the 1-year return for EFA
realized by an investor, the 3.49 percent pricing misfit would be
subtracted from the NAV return. The actual difference in EFA's market
versus NAV return for the 1-year period ending December 2009, was 4.44
percent. It's important to note that the market impact is normally quite
small, plus/minus 1 percent, on the ETFs that we use in the Portfolio.
Again, the large premiums and discounts were primarily driven by the events
surrounding the recent economic crises and have since reverted back to
historical levels.
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. ANY
SUCH OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR
CONDITIONS AND SHOULD NOT BE RELIED ON AS INVESTMENT ADVICE.
INVESTING IN SECTOR FUNDS OR NON-DIVERSIFIED FUNDS MAY BE MORE VOLATILE
THAN INVESTING IN BROADLY DIVERSIFIED FUNDS, AND MAY BE MORE SUSCEPTIBLE TO
ADVERSE ECONOMIC, POLITICAL OR REGULATORY DEVELOPMENTS AFFECTING A SINGLE
ISSUER THAN WOULD BE THE CASE IF IT WERE MORE BROADLY DIVERSIFIED.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and as a
percentage of total investments as of December 31, 2009.
Exchange-Traded Funds 55%
Fixed Income Funds 37%
Equity Funds - Domestic 12
Commodity Funds 3
Equity Funds - International 3
Mutual Funds 41
Fixed Income Funds 18%
Equity Funds - Domestic 16
Equity Funds - International 7
Other (includes short-term investments) 4
---
Total 100%
===
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
Inception Inception
1 year to 12/31/09 Date
------ ----------- ---------
DYNAMIC ASSET ALLOCATION SERIES: MODERATE 12.68% 2.05% 2/3/06
S&P 500(R) INDEX 26.46 -1.04 2/3/06
COMPOSITE INDEX FOR DYNAMIC ASSET ALLOCATION SERIES: MODERATE 16.34 2.99 2/3/06
SERIES EXPENSE RATIOS: GROSS(2): 1.25%; NET: 0.96%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIOS OF THE SERIES, BOTH NET AND GROSS ARE SET FORTH
ACCORDING TO THE PROSPECTUS FOR THE SERIES EFFECTIVE 6/22/09, AND MAY
DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES
IN THIS REPORT. NET EXPENSES: EXPENSES (INCLUDING ACQUIRED FUND FEES AND
EXPENSES) REDUCED BY A CONTRACTUAL WAIVER IN EFFECT THROUGH 4/30/10. GROSS
EXPENSES: DO NOT REFLECT THE EFFECT OF THE CONTRACTUAL WAIVER. SEE THE
FINANCIAL HIGHLIGHTS FOR MORE CURRENT INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 2/3/06 (inception of
the Series). Returns shown include the reinvestment of all distributions at net
asset value, and the change in share price for the stated period.
Dynamic Asset Composite Index for Dynamic
Allocation S&P 500(R) Asset Allocation
Series: Moderate Index Series: Moderate
---------------- ---------- ---------------------------
2/3/06 $10,000 $10,000 $10,000
12/29/06 10,569 11,419 10,806
12/31/07 11,412 12,046 11,550
12/31/08 9,610 7,589 9,646
12/31/09 10,828 9,598 11,222
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
15
DYNAMIC ASSET ALLOCATION SERIES: MODERATE GROWTH
PORTFOLIO MANAGER COMMENTARY
- - PHOENIX DYNAMIC ASSET ALLOCATION SERIES: MODERATE GROWTH (THE "SERIES") is
diversified and has an investment objective to seek long-term capital
growth and current income with a greater emphasis on capital growth.
- - For the fiscal year ended December 31, 2009, the Series returned 18.65%.
For the same period, the S&P 500(R) Index, a broad-based equity index,
returned 26.46%, and the Composite Index for the Series returned 20.44%.
ALL PERFORMANCE FIGURES ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND
EXCLUDE THE EFFECT OF FEES AND EXPENSES ASSOCIATED WITH THE VARIABLE LIFE
INSURANCE OR ANNUITY PRODUCT THROUGH WHICH YOU INVEST. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE SHOWN ABOVE.
HOW DID THE MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE SERIES'
FISCAL YEAR?
MARKET COMMENTARY
- - Gradually improving macroeconomic news continued to emerge during the
second half of 2009. Both industrialized and emerging markets have seen
improvements (or at least more limited deterioration) on GDP growth,
industrial production, and new factory orders. Unemployment remains high,
but for most countries it appears to be approaching a path towards
improvement. Inflation remains subdued.
- - Credit markets have reflected both a moderate return to confidence and a
renewed investor interest for corporate bonds thanks to expansionary
monetary policies from the major central banks.
U.S. STOCK MARKET
- - The positive return for most equity indexes in 2009 has not made up for
past losses. The annualized total return to the Morningstar U.S. Market
Index from January 2007 through December 2009 is -5 percent.
- - The financial services sector was the laggard during the fourth quarter as
it was the only sector to post a negative return. Surprisingly, REITs,
which are often leveraged and therefore correlated to the performance of
the financial sector, outpaced the U.S. stock market as a whole.
- - The gap between trailing P/E including negative earnings and P/E excluding
negative earnings has started shrinking for most large-cap indexes. P/E
ratios for U.S. small cap stocks are still negative or extremely large when
including negative earnings.
- - The ratio including negatives for the S&P 500 Index approached 80 at the
end of 2009 according to S&P, while it exceeded 120 at the end of the third
quarter. The current 80 is still a large number compared to historical
ranges, but it is more reasonable than before.
- - Given the relatively stable current prices, the increase in the P/E
excluding negatives is explained by a growing number of companies posting
small but positive earnings.
U.S. BOND MARKET
- - Recent data from S&P has shown a decrease in corporate bond defaults in the
U.S. This is a promising sign of improvement in the credit markets and may
lead banks towards higher corporate lending. At the same time however, the
press reported record defaults in the commercial real estate sector which
is going to damage bank balance sheets. Such defaults mostly affect
mid-sized and smaller banks for which commercial real estate was one of the
few niches where they could compete against the larger financial
conglomerates.
- - Government yields for short-term Treasury bills have remained stable and
well below historical averages. Longer-term yields increased in proportion
to bond maturity: during the fourth quarter 2-year Treasury yields
increased by about 20 basis points, while 5-year yields increased by 37
basis points and 10-year yields by 53 basis points.
- - According to our calculation, 10-year and higher duration Treasury yields
are within their historical normal range. Therefore, despite a Federal
deficit estimated to exceed 10 percent of GDP in 2009, bond investors do
not seem concerned over the solvency of the United States.
- - Short-term yields have been kept low by monetary policy, thus leading to a
particularly steep yield curve. If intermediate yields revert to their
historical means, reflecting for example expectations of a return to less
accommodative monetary policy, we estimate that the price of the 5-year
Treasury bond could lose between 4 and 8 percent.
U.S. REITS
- - The FTSE NAREIT Equity REITs Index posted a 9.4 percent return during the
fourth quarter and 28 percent for the year. While large, this return is not
sufficient to cover the losses incurred by the index in 2008. The three
year annualized return for the index is -12.4 percent.
- - REIT yields, currently around 3.7 percent, are lower than those on U.S.
corporate bonds. The recent price rally may have been triggered by recent
announcements of mergers and acquisitions as the healthier, larger REITs
have started shopping for distressed REITs at bargain prices.
COMMODITIES
- - Spot prices for energy, precious metals, and other commodities increased in
the fourth quarter, with the energy-heavy S&P GSCI Index returning 8.4
percent for the quarter and 13.4 percent for the year. The more diversified
DJ UBS Index was up 9 percent during the quarter and 18.9 percent for the
year. Demand for raw materials and energy as well as agricultural
commodities spurred prices.
- - According to several observers, a further increase in demand may not have a
large effect on prices. Producers and intermediaries appear to have built
up inventories hoping to take advantage of higher prices. Therefore, such
inventories might be sufficient to satisfy an increased demand.
NON-U.S. EQUITY MARKETS
- - Non-U.S. markets grew less than the U.S. market. For the year the MSCI AC
World ex U.S. Index returned 32.39 percent in local currency and 42.14
percent in U.S. dollars. Industrialized countries were in line with this
finding, with the MSCI EAFE Index returning 32.46 percent in 2009.
- - The MSCI Emerging Markets Index was up 79.0 percent for 2009 and an
annualized 5.1 percent for the three-year period from 2007-2009.
Considering the dismal returns to industrialized stock markets in the same
period, one wonders whether this run (annualized +9.8 percent over the last
ten years) can and will continue.
NON-U.S. BOND MARKETS
- - Credit spreads, similar to those in the U.S., remain above their long-term
averages in most industrialized countries. Emerging market bonds have
recently outperformed, with the J.P. Morgan EMBI Global Index, representing
emerging market sovereign bonds denominated in hard currencies, up 1.5
percent for the fourth quarter. The J.P. Morgan GBI-EM Index, representing
sovereign bonds issued by emerging countries in local currencies, gained
2.3 percent for the fourth quarter. At this point emerging market bond
spreads are now within their historical range.
WHAT FACTORS AFFECTED THE SERIES' PERFORMANCE DURING ITS FISCAL YEAR?
- - Effective March 3, 2008, Ibbotson Associates became limited services
subadvisor to the Phoenix Dynamic Asset Allocation Series, and the
composite benchmark for the Series changed to 70% S&P 500(R)/30% Barclays
Capital U.S. Aggregate Bond.
- - During the first half of 2009, The Series had a 70 percent equity and 30
percent fixed income allocation.
- - During the second half of the year this allocation was changed to a 60
percent equity and 40 percent fixed income allocation. During the first
half of the year (70 percent equity and 30 percent fixed income) the Series
under performed its benchmark primarily due to the performance of the Large
Cap Value Equity and Long Term Bond asset classes. Upon the portfolio
change to a 60 percent equity and 40 percent fixed income mandate, it
continued to under perform. The greatest asset class detractors from Series
performance over this time were Commodities and Short Term Bonds. Overall
for 2009, the asset allocation for the Series under performed the benchmark
noted above.
- - Ibbotson creates a customized blended benchmark for each underlying
investment option in the portfolio and measures each manager's return for
the period against this benchmark. For the first half of the year the
underlying manager performance detracted from relative fund performance.
The Vanguard Large Cap ETF, Vanguard Intermediate Term Bond ETF, and SPDR
S&P International Small Cap were the greatest detractors from relative
performance during this period. There were though some strong fund
performers over this time which included the Vanguard Small Cap ETF, the
Vanguard Small Cap Value ETF, and the iShares S&P GSCI Commodity Index
Trust. During the second half of the year a group of active managers was
added to the Series. Overall, the underlying managers detracted from
relative performance over this period as well, although it was improved
from the first half of 2009. The greatest detractors from relative
performance were the Sentinel Common Stock fund and the Phoenix Mid-Cap
Growth Series. On the positive side, the Phoenix Aberdeen International
Series and the
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
16
DYNAMIC ASSET ALLOCATION SERIES: MODERATE GROWTH (CONTINUED)
Phoenix-Duff & Phelps Real Estate Securities Series both were strong
contributors to relative performance. For the year 2009 the underlying
managers had a negative contribution to relative performance of the Series.
- - One additional item to note, the portfolio was impacted by an ETF
phenomenon that we will term as "market impact." At a high level, market
impact is the return difference between the ETF's market price and net
asset value "NAV." The result of market impact will cause an ETF's price to
reflect a premium or discount to its NAV. At each quarter/year end, a
return is calculated for specific periods such as 3-month, 1-year, etc. As
of December 2008, significant premiums were built in many ETFs. The buildup
in ETF premiums was likely due to credit crisis pricing uncertainty and a
trading imbalance of institutional investors repositioning their
portfolios. As of December 2009, the significant premiums had reversed in
most cases, thereby broadening the performance gap between the ETF's market
and NAV returns.
- - As an example, iShares MSCI EAFE Index "EFA" (was included in the
portfolios during the first half of 2009) had a premium of 3.16 percent to
its NAV as of December 2008. At the end of 2009, EFA was reflecting a
discount of 0.33 percent. When calculating the 1-year return for EFA
realized by an investor, the 3.49 percent pricing misfit would be
subtracted from the NAV return. The actual difference in EFA's market
versus NAV return for the 1-year period ending December 2009, was 4.44
percent. It's important to note that the market impact is normally quite
small, plus/minus 1 percent, on the ETFs that we use in the Portfolio.
Again, the large premiums and discounts were primarily driven by the events
surrounding the recent economic crises and have since reverted back to
historical levels.
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. ANY
SUCH OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR
CONDITIONS AND SHOULD NOT BE RELIED ON AS INVESTMENT ADVICE.
INVESTING IN SECTOR FUNDS OR NON-DIVERSIFIED FUNDS MAY BE MORE VOLATILE
THAN INVESTING IN BROADLY DIVERSIFIED FUNDS, AND MAY BE MORE SUSCEPTIBLE TO
ADVERSE ECONOMIC, POLITICAL OR REGULATORY DEVELOPMENTS AFFECTING A SINGLE
ISSUER THAN WOULD BE THE CASE IF IT WERE MORE BROADLY DIVERSIFIED.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and as a
percentage of total investments as of December 31, 2009.
Exchange-Traded Funds 54%
Fixed Income Funds 24%
Equity Funds - Domestic 15
Equity Funds - International 9
Commodity Funds 4
Real Estate Securities Funds 2
Mutual Funds 44
Equity Funds - Domestic 23%
Fixed Income Funds 12
Equity Funds - International 9
Other (includes short-term
investments) 2
---
Total 100%
===
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
Inception Inception
1 year to 12/31/09 Date
------ ----------- ---------
DYNAMIC ASSET ALLOCATION SERIES: MODERATE GROWTH 18.65% 1.06% 2/3/06
S&P 500(R) INDEX 26.46 -1.04 2/3/06
COMPOSITE INDEX FOR DYNAMIC ASSET ALLOCATION SERIES: MODERATE GROWTH 20.44 1.72 2/3/06
SERIES EXPENSE RATIOS(2): GROSS: 1.25%; NET: 1.04%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIOS OF THE SERIES, BOTH NET AND GROSS ARE SET FORTH
ACCORDING TO THE PROSPECTUS FOR THE SERIES EFFECTIVE 6/22/09, AND MAY
DIFFER FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES
IN THIS REPORT. NET EXPENSES: EXPENSES (INCLUDING ACQUIRED FUND FEES AND
EXPENSES) REDUCED BY A CONTRACTUAL WAIVER IN EFFECT THROUGH 4/30/10. GROSS
EXPENSES: DO NOT REFLECT THE EFFECT OF THE CONTRACTUAL WAIVER. SEE THE
FINANCIAL HIGHLIGHTS FOR MORE CURRENT INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 2/3/06 (inception of
the Series). Returns shown include the reinvestment of all distributions at net
asset value, and the change in share price for the stated period.
Dynamic Asset Composite Index for Dynamic
Allocation S&P 500(R) Asset Allocation
Series: Moderate Growth Index Series: Moderate Growth
------------------------ ---------- ---------------------------
2/3/06 $10,000 $10,000 $10,000
12/29/06 10,878 11,419 11,085
12/31/07 11,803 12,046 11,843
12/31/08 8,781 7,589 8,874
12/31/09 10,419 9,598 10,688
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
17
GROWTH AND INCOME SERIES
PORTFOLIO MANAGER COMMENTARY
- - PHOENIX GROWTH AND INCOME SERIES (THE "SERIES") is diversified and has an
investment objective to seek capital appreciation and current income.
- - For the fiscal year ended December 31, 2009, the Series returned 23.50%.
For the same period, the S&P 500(R) Index, a broad-based equity index,
returned 26.46%.
ALL PERFORMANCE FIGURES ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND
EXCLUDE THE EFFECT OF FEES AND EXPENSES ASSOCIATED WITH THE VARIABLE LIFE
INSURANCE OR ANNUITY PRODUCT THROUGH WHICH YOU INVEST. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE SHOWN ABOVE.
HOW DID THE MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE SERIES'
FISCAL YEAR?
- - The equity markets ended the year sharply higher with the benchmark S&P 500
up 26.46% on the year. However, 2009 started off very poorly for stocks as
the market was significantly lower in the first two months of the year. The
S&P bottomed in early March after several weeks of very heavy selling
pressure and overwhelming concern that a plethora of companies were on the
verge of bankruptcy. Eventually, easing Federal Reserve monetary policy and
billions of dollars worth of fiscal spending seemed to ease fears in the
market of impending doom. As economic data globally began to improve,
equity prices moved higher, and at the margin corporate earnings showed
signs of recovering.
WHAT FACTORS AFFECTED THE SERIES' PERFORMANCE DURING ITS FISCAL YEAR?
- - In late March new portfolio managers assumed responsibility for the Series.
Subsequent to the management change, the Series outperformed the S&P 500
index. However, for the calendar year 2009, the Series still underperformed
the index, because of the first quarter performance gap. The new managers
moved the Series into an overweighting of Energy stocks, Material stocks
(mining and agriculture), various Industrial stocks (transportation and
heavy machinery), and business technology names. Stocks in these sectors
and industry groups held by the Series helped drive solid performance. The
Series had less than a market weighting in Financial Stocks, such as banks,
and Consumer Discretionary stocks, such as retailers, which helped relative
performance in the second and fourth quarters of the year, but hurt
performance in the third quarter. Overall, in the three quarters since the
management change, both the sector allocation and stock selection helped
overall performance.
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. ANY
SUCH OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR
CONDITIONS AND SHOULD NOT BE RELIED ON AS INVESTMENT ADVICE.
INVESTING INTERNATIONALLY INVOLVES RISKS NOT ASSOCIATED WITH INVESTING
SOLELY IN THE U.S., SUCH AS CURRENCY FLUCTUATION, POLITICAL RISK,
DIFFERENCES IN ACCOUNTING AND THE LIMITED AVAILABILITY OF INFORMATION.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and as a
percentage of total investments as of December 31, 2009.
Information Technology 18%
Energy 17
Consumer Staples 13
Health Care 13
Industrials 12
Materials 9
Consumer Discretionary 5
Other (includes short-term
investments) 13
---
Total 100%
===
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
18
GROWTH AND INCOME SERIES (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
1 year 5 years 10 years
------ ------- --------
GROWTH AND INCOME SERIES 23.50% 1.03% -0.15%
S&P 500(R) INDEX 26.46 0.42 -0.96
SERIES EXPENSE RATIOS(2): GROSS: 0.99%; NET: 0.90%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIOS OF THE SERIES, BOTH NET AND GROSS ARE SET FORTH
ACCORDING TO THE PROSPECTUS FOR THE SERIES EFFECTIVE 5/1/09 AND MAY DIFFER
FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN
THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A CONTRACTUAL WAIVER IN
EFFECT THROUGH 4/30/10. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF THE
CONTRACTUAL WAIVER. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT
INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 12/31/99. Returns
shown include the reinvestment of all distributions at net asset value, and the
change in share price for the stated period.
Growth & Income
Series S&P 500(R) Index
--------------- ------------------
12/31/99 $10,000 $10,000
12/29/00 9,339 9,081
12/31/01 8,577 8,003
12/31/02 6,646 6,234
12/31/03 8,471 8,024
12/31/04 9,358 8,896
12/31/05 9,808 9,334
12/31/06 11,493 10,807
12/31/07 12,258 11,401
12/31/08 7,976 7,183
12/31/09 9,850 9,084
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
19
MID-CAP GROWTH SERIES
PORTFOLIO MANAGER COMMENTARY
- - PHOENIX MID-CAP GROWTH SERIES (THE "SERIES") is diversified and has an
investment objective to seek capital appreciation.
- - For the fiscal year ended December 31, 2009, the Series returned 30.33%.
For the same period, the S&P 500(R) Index, a broad-based equity index,
returned 26.46% and the Russell MidCap(R) Growth Index, the Series'
style-specific benchmark, returned 46.29%.
ALL PERFORMANCE FIGURES ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND
EXCLUDE THE EFFECT OF FEES AND EXPENSES ASSOCIATED WITH THE VARIABLE LIFE
INSURANCE OR ANNUITY PRODUCT THROUGH WHICH YOU INVEST. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE SHOWN ABOVE.
HOW DID THE MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE SERIES'
FISCAL YEAR AND WHAT FACTORS AFFECTED THE SERIES PERFORMANCE?
- - For the year ended December 31, 2009, the Series posted strong results but
underperformed its benchmark, the Russell MidCap(R) Growth Index.
- - While the markets ended 2009 decidedly up, the period contained two very
different periods--dramatic weakness carrying over from 2008 colored the
early part of the year, and then markets rallied from March through
year-end. Mid-cap stocks led their small and large-cap brethren. Growth
stocks outperformed value for the year. Information Technology and Energy
were the best performing Index sectors this period, while Utilities,
Industrials and Telecommunications were among the weakest.
- - Generally speaking, this year's rally was led by the lower quality area of
the market, including stocks with the smallest market cap, low ROE names up
nearly 70% vs 43% for the highest ROE names, low stock prices (under $5)
returning 195% for the year and non earners up nearly 94%. This was not
surprising or unprecedented, as low quality stocks tend to lead early on in
a market recovery. We saw this type of market environment in 2003. We
typically do not have exposure to this area given our stock selection
process and fundamental criteria. We also do not believe that these lower
quality names can outperform over longer periods of time. In fact, we
believe there are some signs that the low quality rally may already be
fading. We believe the markets will once again focus on fundamentals and
reward higher quality names with superior growth potential. Given this
market environment, security selection was weak across much of the
portfolio.
- - We saw particular weakness within Health Care and Information Technology
stocks.
- - In Health Care, both uncertainty surrounding health care reform and weak
earnings results impacted our holdings. Specifically, medical supplies and
services companies underperformed on concerns about lower hospital
spending. We sold Wright Medical, a joint replacement design and
manufacturer. Also our medical diagnostic holdings were weak and missed
earnings; Myriad Genetics and Illumina, two genetic research companies,
disappointed on earnings and lowered guidance. Within the sector, we are
currently focusing on companies we believe may be beneficiaries of health
care reform, such as payment management firms Express Scripts, Allscripts
and MedAssets. We also see potential in insulated areas, such as ResMed, a
company focused on sleep disorders, Sirona Dental, a dental instrument
maker, and other various Biotech names.
- - In Information Technology, our holdings, primarily software and services
names, didn't keep pace with higher beta area during the rally. Alliance
Data Systems was one such niche business service provider that
underperformed. Although in aggregate our security selection was weak
within Information Technology, Vistaprint, a lower cost business products
and services provider, was among our top performers, particularly strong
during the second half. Cognizant, Equinix and Marvell also performed very
well. In Technology, we have not significantly changed our positioning,
expecting holdings could benefit as long-delayed corporate spending
increases.
- - Within Industrials, while high quality holdings including Danaher,
Stericycle and Fastenal exceeded expectations, they were out of favor with
the market's higher beta preference this year. We expect benefits here too
from pent-up corporate spending. We continue to hold aerospace and defense
themed names such as Rockwell Collins and Precision Castparts. We sold
Corrections Corp., a prison outsourcing company, on concerns about spending
at the state level, and added to names that could benefit from economic
improvement, such as trucking firm C.H. Robinson.
- - In Consumer Discretionary stocks, our secondary education theme
underperformed this period, though holdings here also exceeded
expectations. We sold American Public Education and Grand Canyon, but
continue holding DeVry and Strayer. Our "retail survivors" theme was
beneficial, with Nordstrom among our top performers. We sold Staples and
Kohl's as they became too large for the portfolio, and are currently taking
a bifurcated approach to the retail market. On the lower end consumer area
we hold Dollar Tree, top performer Ross Stores, and TJX. On the higher end
provider, we hold Tiffany & Co., Coach and Polo Ralph Lauren. These high
end retailers provide the portfolio with exposure to internationally
generated revenue streams. We have also added to gaming, with companies
such as Penn National, Bally's and WMS Industries.
- - Within the portfolio, our Telecommunications holdings were a benefit to
relative performance, as was a zero allocation to Utilities. In
Telecommunications, tower companies, including our top performer, SBA
Communications, and American Tower, were strong this period.
- - Looking ahead, we see a recovery with muted growth, expecting GDP--likely
stronger in the first half of 2010 than the second--in the range of 3%.
Consumer weakness and jobless claims continue to be our main concerns.
Since the consumer can't help move the economy forward, we believe it is
critical that international markets, particularly BRIC economies show
robust growth. Profit margins appear to be fairly healthy with S&P earnings
forecast up 25% year over year at $75. So unlike last year we are looking
for top line growth as opposed to bottom line improvements. We believe
there is a great deal of pent-up corporate spending. This should benefit
some Industrials and Information Technology companies. In addition, we are
seeking "international exposure" through companies with international
revenue streams. We believe that with this sustained slower growth recovery
backdrop, the market will reward companies with strong managements that
exhibit quality growth and strong balance sheet characteristics.
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
20
MID-CAP GROWTH SERIES (CONTINUED)
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT ONLY THROUGH
THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. ANY SUCH OPINIONS
ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR CONDITIONS AND SHOULD NOT
BE RELIED ON AS INVESTMENT ADVICE.
INVESTING INTERNATIONALLY INVOLVES RISKS NOT ASSOCIATED WITH INVESTING SOLELY IN
THE U.S., SUCH AS CURRENCY FLUCTUATION, POLITICAL RISK, DIFFERENCES IN
ACCOUNTING AND THE LIMITED AVAILABILITY OF INFORMATION.
INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES RISKS,
SUCH AS RELATIVELY LOW TRADING VOLUMES, MORE PRICE VOLATILITY AND LESS LIQUIDITY
THAN SECURITIES FROM LARGER, MORE ESTABLISHED COMPANIES.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and as a
percentage of total investments as of December 31, 2009.
Information Technology 24%
Consumer Discretionary 20
Industrials 16
Health Care 13
Energy 9
Financials 5
Telecommunication Services 4
Other (includes short-term
investments) 9
---
Total 100%
===
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
1 year 5 years 10 years
------ ------- --------
MID-CAP GROWTH SERIES 30.33% -0.54% -2.61%
S&P 500(R) INDEX 26.46 0.42 -0.96
RUSSELL MIDCAP(R) GROWTH INDEX 46.29 2.40 -0.52
SERIES EXPENSE RATIO(2): 1.10%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIO OF THE SERIES IS SET FORTH ACCORDING TO THE PROSPECTUS
FOR THE SERIES EFFECTIVE 5/1/09, AND MAY DIFFER FROM THE EXPENSE RATIOS
DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE
FINANCIAL HIGHLIGHTS FOR MORE CURRENT INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 12/31/99. Returns
shown include the reinvestment of all distributions at net asset value, and the
change in share price for the stated period.
Mid-Cap Growth Russell MidCap(R)
Series S&P 500(R) Index Growth Index
-------------- ---------------- -----------------
12/31/99 $10,000 $10,000 $10,000
12/29/00 11,375 9,081 8,825
12/31/01 8,499 8,003 7,047
12/31/02 5,737 6,234 5,116
12/31/03 7,391 8,024 7,301
12/31/04 7,888 8,896 8,431
12/30/05 8,218 9,334 9,451
12/29/06 8,557 10,807 10,458
12/31/07 10,422 11,401 11,653
12/31/08 5,892 7,183 6,488
12/31/09 7,679 9,084 9,491
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
21
MID-CAP VALUE SERIES
PORTFOLIO MANAGER COMMENTARY
- - PHOENIX MID-CAP VALUE SERIES (THE "SERIES") is diversified and has an
investment objective to seek long-term capital appreciation.
- - For the fiscal year ended December 31, 2009, the Series returned 32.63%.
For the same period, the S&P 500(R) Index, a broad-based equity index,
returned 26.46% and the Russell 2500(TM) Value Index, the Series'
style-specific benchmark, returned 27.68%.
ALL PERFORMANCE FIGURES ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND
EXCLUDE THE EFFECT OF FEES AND EXPENSES ASSOCIATED WITH THE VARIABLE LIFE
INSURANCE OR ANNUITY PRODUCT THROUGH WHICH YOU INVEST. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE SHOWN ABOVE.
HOW DID THE MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE SERIES'
FISCAL YEAR?
- - The past year will be remembered for many things, not the least of which is
the hair-raising volatility produced by the stock market. Significant fears
about the financial system and its impact on the global economy caused the
major averages to fall to 12-year lows in March, but, as investor sentiment
turned, the market staged a powerful rally, led by aggressive, lower
quality securities, that added more than 65% to stock valuations by year
end. The low quality, high beta rally that began in March carried over into
the 2nd and 3rd quarters, allowing stocks to post an impressive double
digit gain. Improving economic data, referred to as "green shoots," gave
investors confidence that the worst of the recession is behind us, and they
sought the most aggressive securities in the market in order to fully
benefit from this newfound optimism. The government's release of bank
"stress test" results were also perceived positively, as the amount of
capital deemed necessary to be raised by the nation's major banks was
quickly acquired through public market offerings. In addition, the Federal
Reserve remained committed to keeping short-term interest rates near zero
while continuing to purchase mortgage backed securities and Treasury bonds
in an attempt to lower mortgage rates.
- - Later in the year, continued signs that the economy was recovering, coupled
with better than expected corporate earnings, buoyed the investor optimism
that has been in place for much of the year and led to a solid gain for the
equity markets in the 4th quarter. Economic improvement was seen on a
variety of fronts, including consumer spending, manufacturing, and
industrial production. In addition, inflationary pressures remained tame
while the key economic indicators, housing and employment, both showed
signs of sustainable recovery. The Fed re-committed to maintaining a 0% Fed
Funds rate for an extended period, while strong growth in emerging
economies aided U.S. corporate earnings.
- - The composition of the market rally changed in the 4th quarter when
investor risk appetites fell as they began to price in the potential for
lower liquidity levels and higher interest rates in 2010. Specifically,
leadership began to rotate out of high beta, lower quality, and smaller
market cap securities and into higher quality, larger market cap securities
that have sustainable earnings growth potential.
- - The sectors that benefitted the most from the low quality rally include
Technology, Consumer Discretionary, and REITs. Energy stocks also performed
well due to the rise in crude oil prices during the year. The worst
performing sector was Financial Services, as investors grew concerned about
credit quality and potential losses in regional bank loan portfolios.
WHAT FACTORS AFFECTED THE SERIES' PERFORMANCE DURING ITS FISCAL YEAR?
- - The Series slightly underperformed the Russell 2500(TM) Value Index for the
eight-month period ended December 31, 2009.* Relative performance was
hindered by security selection in the Technology sector as well as by
security selection, and an underweight, in REITs. These sectors were two of
the most heavily impacted by the low quality, high beta rally, and
therefore had a large impact on relative performance due to the portfolio's
focus on high quality stocks. The worst performing securities included
Cullen Frost Bankers and Comerica, Inc., which both declined as concerns
mounted over potential losses in regional bank loan portfolios. Other poor
performers included Willis Group Holdings, which reported poor earnings due
to soft P&C insurance pricing, and Jacobs Engineering, which fell on
concerns of slower capital equipment spending in the refinery industry.
Other poor performers included Alleghany Corp, which fell after disclosing
weaker investment income and underwriting revenues, and BJ's Wholesale
Club, a defensive stock that lagged in an environment that favored more
aggressive securities.
- - Relative performance was aided by security selection in the Consumer
Staples, Financial Services, and Utilities sectors. An underweight to bank
stocks was a key factor, as regional banks performed poorly due to fears
about credit quality. The best performing securities during the period
included Tupperware Brands, which reported strong international sales in
its beauty products division, and Mead Johnson Nutrition, which reported
better than expected earnings and was rumored to be a takeout candidate. JM
Smucker was bid higher after reporting better than expected results due to
market share gains across a number of product lines and falling commodity
costs, while Eastman Chemical posted multiple quarterly earnings surprises
and benefitted from the global recovery. Finally, Plains Exploration
rallied as crude oil prices rose in anticipation of stronger demand as the
recovery progresses.
* EFFECTIVE MAY 1, 2009, WESTWOOD MANAGEMENT CORP. BECAME THE SUBADVISOR TO
THE SERIES.
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. ANY
SUCH OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR
CONDITIONS AND SHOULD NOT BE RELIED ON AS INVESTMENT ADVICE.
MID-CAP STOCKS ARE MORE VOLATILE AND MAY BE LESS LIQUID THAN LARGE-CAP
STOCKS.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and as a
percentage of total investments as of December 31, 2009.
Financials 22%
Information Technology 14
Industrials 12
Consumer Staples 11
Health Care 11
Materials 11
Consumer Discretionary 7
Other (includes short-term
investments) 12
---
Total 100%
===
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
22
MID-CAP VALUE SERIES (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
1 year 5 years 10 years
------ ------- --------
MID-CAP VALUE SERIES 32.63% 1.57% 9.21%
S&P 500(R) INDEX 26.46 0.42 -0.96
RUSSELL 2500(TM) VALUE INDEX 27.68 0.84 8.18
SERIES EXPENSE RATIOS(2): GROSS: 1.32%; NET: 1.30%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIOS OF THE SERIES, BOTH NET AND GROSS ARE SET FORTH
ACCORDING TO THE PROSPECTUS FOR THE SERIES EFFECTIVE 5/1/09 AND MAY DIFFER
FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN
THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A CONTRACTUAL WAIVER IN
EFFECT THROUGH 4/30/10. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF THE
CONTRACTUAL WAIVER. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT
INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 12/31/99. Returns
shown include the reinvestment of all distributions at net asset value, and the
change in share price for the stated period.
Mid-Cap Value Russell 2500(TM)
Series S&P 500(R) Index Value Index
-------------- ---------------- -----------------
12/31/99 $10,000 $10,000 $10,000
12/29/00 11,689 9,081 12,079
12/31/01 14,376 8,003 13,255
12/31/02 13,147 6,234 11,946
12/31/03 18,533 8,024 17,314
12/31/04 22,315 8,896 21,049
12/30/05 24,040 9,334 22,678
12/29/06 27,625 10,807 27,255
12/31/07 28,177 11,401 25,273
12/31/08 18,189 7,183 17,189
12/31/09 24,124 9,084 21,946
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
23
MONEY MARKET SERIES
- - PHOENIX MONEY MARKET SERIES (THE "SERIES") is diversified and has an
investment objective to seek as high a level of current income as is
consistent with the preservation of capital and maintenance of liquidity.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and as a
percentage of total investments as of December 31, 2009.
Federal Agency Securities 72%
Commercial Paper 14
U.S. Treasury Bills 14
---
Total 100%
===
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
1 year 5 years 10 years
------ ------- --------
MONEY MARKET SERIES 0.06% 2.82% 2.67%
BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 5.93 4.97 6.33
CITIGROUP 90-DAY TREASURY BILLS 0.16 2.88 2.84
SERIES EXPENSE RATIO(2): 0.61%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIO OF THE SERIES IS SET FORTH ACCORDING TO THE PROSPECTUS
FOR THE SERIES EFFECTIVE 5/1/09, AND MAY DIFFER FROM THE EXPENSE RATIOS
DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE
FINANCIAL HIGHLIGHTS FOR MORE CURRENT INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 12/31/99. Returns
shown include the reinvestment of all distributions at net asset value, and the
change in share price for the stated period.
Barclays Capital Citigroup
Money Market U.S. Aggregate 90-Day Treasury
Series Bond Index Bills
------------ ---------------- ---------------
12/31/99 $10,000 $10,000 $10,000
12/29/00 10,603 11,163 10,596
12/31/01 11,008 12,105 11,029
12/31/02 11,165 13,347 11,217
12/31/03 11,241 13,895 11,337
12/31/04 11,330 14,498 11,478
12/30/05 11,623 14,850 11,822
12/29/06 12,136 15,493 12,385
12/31/07 12,728 16,573 12,972
12/31/08 13,013 17,441 13,205
12/31/09 13,021 18,475 13,226
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
24
THIS PAGE INTENTIONALLY BLANK.
MULTI-SECTOR FIXED INCOME SERIES
PORTFOLIO MANAGER COMMENTARY
- - PHOENIX MULTI-SECTOR FIXED INCOME SERIES (THE "SERIES") is diversified and
has an investment objective to seek long-term total return.
- - For the fiscal year ended December 31, 2009, the Series returned 40.13%.
For the same period, the Barclays Capital U.S. Aggregate Bond Index, a
broad-based fixed income index, returned 5.93%.
ALL PERFORMANCE FIGURES ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND
EXCLUDE THE EFFECT OF FEES AND EXPENSES ASSOCIATED WITH THE VARIABLE LIFE
INSURANCE OR ANNUITY PRODUCT THROUGH WHICH YOU INVEST. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE SHOWN ABOVE.
HOW DID THE MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE SERIES'
FISCAL YEAR?
- - The broad U.S. fixed income market, as represented by the Barclays Capital
Aggregate Bond Index returned 5.93% for the fiscal year ended December 31,
2009.
- - The Federal Reserve left the Fed Funds target rate unchanged at a range of
0-0.25% during the fiscal year, citing concerns of downside risks to growth
and near term economic weakness. Towards the end of 2009, the Federal
reserve cited that economic activity has continued to pick up,
deterioration in the labor market is abating, and financial market
conditions have become more supportive of economic growth. However, the
Federal Reserve decided to continue to leave the Fed Fund target rate at
0-0.25%, saying that economic conditions continued to warrant exceptionally
low levels of the federal funds rate for an extended period.
- - Since the beginning of the fiscal year the yield curve has steepened, with
rates increasing across most of the curve but increases more pronounced at
the long end of the curve.
- - During the first two quarters of 2009, the economy continued to show signs
of weakness with rising unemployment, continued weakness in the housing
market, declining retail sales, and historically low consumer confidence.
However, in the 2nd half of 2009 the economy began to show signs of
stabilizing with a modest improvement in several economic statistics. While
economic conditions remain weak the improvement during the 3rd and 4th
quarters coupled with better than expected corporate earnings gave market
participants evidence that we may have turned the corner towards an
improved economy. For the first time since the 2nd quarter of 2008 the
economy had positive economic growth, with 3rd quarter 2009 GDP coming in
at 2.2%. However, questions remained as to how much of this growth can be
attributed to the U.S. government's various economic stimulus initiatives
and what will happen to the economy as this stimulus is withdrawn.
- - The implementation of numerous government programs such as PPIP, TALF,
expanded quantitative easing via the Federal Reserve Bank's purchase of up
to $1.75 trillion long dated U.S. Treasuries, agency debt, and agency MBS,
coupled with the FASB decision to alter rules regarding mark to market
accounting continue to help improve sentiment in all fixed income markets
and inject liquidity into the system. The fixed income markets also
benefited from more stability in the financial system, an increased
appetite for riskier assets by investors, a brighter economic outlook, and
improved liquidity. The flight to quality during 2008 has reversed with
U.S. Treasuries underperforming nearly all spread sectors during 2009.
WHAT FACTORS AFFECTED THE SERIES' PERFORMANCE DURING ITS FISCAL YEAR?
- - The significant outperformance of fixed income spread sectors relative to
U.S. Treasuries and agency debentures was the key driver of the Series'
strong performance for the fiscal year. The Series benefited from its
overweight to spread product and lack of exposure to U.S. Treasuries and
agency debentures; two factors that hurt performance in fiscal year ending
December 31, 2008.
- - Among fixed income sectors, the Series' overweight to corporate high yield
(including high yield bank loans), emerging markets debt, non-U.S. Dollar
bonds, commercial mortgage backed securities, and corporate high quality
were all significant positive contributors to performance for the fiscal
year.
- - The Series' allocation to agency mortgage backed securities detracted the
most from performance during the fiscal year.
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. ANY
SUCH OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR
CONDITIONS AND SHOULD NOT BE RELIED ON AS INVESTMENT ADVICE.
INVESTING INTERNATIONALLY INVOLVES RISKS NOT ASSOCIATED WITH INVESTING
SOLELY IN THE U.S., SUCH AS CURRENCY FLUCTUATION, POLITICAL RISK,
DIFFERENCES IN ACCOUNTING AND THE LIMITED AVAILABILITY OF INFORMATION.
THE VALUE OF MORTGAGE-BACKED AND OTHER ASSET SECURITIES, INCLUDING
PASS-THROUGH TYPE SECURITIES AND COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)
MAY FLUCTUATE TO A GREATER DEGREE THAN OTHER DEBT SECURITIES IN RESPONSE TO
INTEREST RATE CHANGES.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and
as a percentage of total investments as of December 31, 2009.
Corporate Bonds 55%
Financials 22%
Energy 7
Total of all others 26
Foreign Government
Securities 15
Loan Agreements 13
Mortgage-Backed Securities 11
Other (includes short-term
investments) 6
---
Total 100%
===
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
26
MULTI-SECTOR FIXED INCOME SERIES (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
1 year 5 years 10 years
------ ------- --------
MULTI-SECTOR FIXED INCOME SERIES 40.13% 5.34% 7.03%
BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 5.93 4.97 6.33
SERIES EXPENSE RATIOS(2): GROSS 0.76%; NET 0.75%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIOS OF THE SERIES IS SET FORTH ACCORDING TO THE PROSPECTUS
FOR THE SERIES EFFECTIVE 5/1/09, AND MAY DIFFER FROM THE EXPENSE RATIOS
DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. NET EXPENSES:
EXPENSES REDUCED BY A CONTRACTUAL WAIVER IN EFFECT THROUGH 4/30/10. GROSS
EXPENSES: DO NOT REFLECT THE EFFECT OF THE CONTRACTUAL WAIVER. SEE THE
FINANCIAL HIGHLIGHTS FOR MORE CURRENT INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 12/31/99. Returns
shown include the reinvestment of all distributions at net asset value, and the
change in share price for the stated period.
Barclays
Multi-Sector Capital U.S.
Fixed Income Aggregate Bond
Series Index
------------ --------------
12/31/99 $10,000 $10,000
12/29/00 10,647 11,163
12/31/01 11,295 12,105
12/31/02 12,425 13,347
12/31/03 14,236 13,895
12/31/04 15,209 14,498
12/30/05 15,480 14,850
12/29/06 16,539 15,493
12/31/07 17,153 16,573
12/31/08 14,077 17,441
12/31/09 19,726 18,475
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
27
MULTI-SECTOR SHORT TERM BOND SERIES
PORTFOLIO MANAGER COMMENTARY
- - PHOENIX MULTI-SECTOR SHORT TERM BOND SERIES (THE "SERIES") is diversified
and has an investment objective to seek to provide high current income
while attempting to limit changes in the Series' net assets caused by
interest rate changes.
- - For the fiscal year ended December 31, 2009, the Series returned 32.07%.
For the same period, the Barclays Capital U.S. Aggregate Bond Index, a
broad-based fixed income index, returned 5.93% and the Bank of America
Merrill Lynch 1-2.99 Year Medium Quality Corporate Bonds Index, the Series'
style-specific benchmark, returned 16.62%.
ALL PERFORMANCE FIGURES ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND
EXCLUDE THE EFFECT OF FEES AND EXPENSES ASSOCIATED WITH THE VARIABLE LIFE
INSURANCE OR ANNUITY PRODUCT THROUGH WHICH YOU INVEST. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE SHOWN ABOVE.
HOW DID THE MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE SERIES'
FISCAL YEAR?
- - The broad U.S. fixed income market, as represented by the Barclays Capital
Aggregate Bond Index returned 5.93% for the fiscal year ended December 31,
2009.
- - The Federal Reserve (the "Fed") left the Fed Funds target rate unchanged at
a range of 0-0.25% during the fiscal year, citing concerns of downside
risks to growth and near term economic weakness. Towards the end of 2009,
the Federal reserve cited that economic activity has continued to pick up,
deterioration in the labor market is abating, and financial market
conditions have become more supportive of economic growth. However, the Fed
decided to continue to leave the Fed Fund target rate at 0-0.25%, saying
that economic conditions continued to warrant exceptionally low levels of
the federal funds rate for an extended period.
- - Since the beginning of the fiscal year the yield curve has steepened, with
rates increasing across most of the curve but increases more pronounced at
the long end of the curve.
- - During the first two quarters of 2009, the economy continued to show signs
of weakness with rising unemployment, continued weakness in the housing
market, declining retail sales, and historically low consumer confidence.
However, in the 2nd half of 2009 the economy began to show signs of
stabilizing with a modest improvement in several economic statistics. While
economic conditions remain weak the improvement during the 3rd and 4th
quarters coupled with better than expected corporate earnings gave market
participants evidence that we may have turned the corner towards an
improved economy. For the first time since the 2nd quarter of 2008 the
economy had positive economic growth, with 3rd quarter 2009 GDP coming in
at 2.2%. However, questions remained as to how much of this growth can be
attributed to the U.S. government's various economic stimulus initiatives
and what will happen to the economy as this stimulus is withdrawn.
- - The implementation of numerous government programs such as PPIP, TALF,
expanded quantitative easing via the Federal Reserve Bank's purchase of up
to $1.75 trillion long dated U.S. Treasuries, agency debt, and agency MBS,
coupled with the FASB decision to alter rules regarding mark to market
accounting continue to help improve sentiment in all fixed income markets
and inject liquidity into the system. The fixed income markets also
benefited from more stability in the financial system, an increased
appetite for riskier assets by investors, a brighter economic outlook, and
improved liquidity. The flight to quality during 2008 has reversed with
U.S. Treasuries underperforming nearly all spread sectors during 2009.
WHAT FACTORS AFFECTED THE SERIES' PERFORMANCE DURING ITS FISCAL YEAR?
- - The significant outperformance of fixed income spread sectors relative to
U.S. Treasuries and agency debentures was the key driver of the Series'
strong performance for the fiscal year. The Series benefited from its
overweight to spread product and lack of exposure to U.S. Treasuries and
agency debentures; two factors that hurt performance in fiscal year ending
December 31, 2008.
- - Among fixed income sectors, the Series' overweight to corporate high yield
(including high yield bank loans), non-U.S. Dollar bonds, commercial
mortgage backed securities, emerging markets, asset backed securities, and
corporate high quality were all significant positive contributors to
performance for the fiscal year.
- - Although the Series' allocation to agency mortgage backed securities
contributed positively to performance, the sector underperformed most other
spread sectors during the fiscal year ending December 31, 2009.
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. ANY
SUCH OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR
CONDITIONS AND SHOULD NOT BE RELIED ON AS INVESTMENT ADVICE.
INVESTING INTERNATIONALLY INVOLVES RISKS NOT ASSOCIATED WITH INVESTING
SOLELY IN THE U.S., SUCH AS CURRENCY FLUCTUATION, POLITICAL RISK,
DIFFERENCES IN ACCOUNTING AND THE LIMITED AVAILABILITY OF INFORMATION.
THE VALUE OF MORTGAGE-BACKED AND OTHER ASSET SECURITIES, INCLUDING
PASS-THROUGH TYPE SECURITIES AND COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)
MAY FLUCTUATE TO A GREATER DEGREE THAN OTHER DEBT SECURITIES IN RESPONSE TO
INTEREST RATE CHANGES.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and as a
percentage of total investments as of December 31, 2009.
Corporate Bonds 41%
Financials 20%
Materials 5
Total of all others 16
Mortgage-Backed Securities 24
Foreign Government
Securities 12
Loan Agreements 11
Other (includes short-term
investments) 12
---
Total 100%
===
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
28
MULTI-SECTOR SHORT TERM BOND SERIES (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
Inception Inception
1 year 5 years to 12/31/09 Date
------ ------- ----------- ---------
MULTI-SECTOR SHORT TERM BOND SERIES 32.07% 5.46% 5.41% 6/2/03
BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 5.93 4.97 4.45 6/2/03
MERRILL LYNCH 1-2.99 YEAR MEDIUM QUALITY CORPORATE BONDS INDEX 16.62 4.54 4.00 6/2/03
SERIES EXPENSE RATIOS(2): GROSS: 0.85%; NET: 0.70%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIOS OF THE SERIES, BOTH NET AND GROSS ARE SET FORTH
ACCORDING TO THE PROSPECTUS FOR THE SERIES EFFECTIVE 5/1/09, AND MAY DIFFER
FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN
THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A CONTRACTUAL WAIVER IN
EFFECT THROUGH 4/30/10. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF THE
CONTRACTUAL WAIVER. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT
INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 6/2/03 (inception of
the Series). Returns shown include the reinvestment of all distributions at net
asset value, and the change in share price for the stated period.
Merrill Lynch
1-2.99 Year
Multi-Sector Barclays Capital Medium Quality
Short Term Bond U.S. Aggregate Corporate
Series Bond Index Bonds Index
--------------- ---------------- --------------
6/2/03 $10,000 $10,000 $10,000
12/31/03 10,296 10,018 10,144
12/31/04 10,845 10,453 10,340
12/30/05 10,993 10,707 10,536
12/29/06 11,621 11,171 11,042
12/31/07 12,085 11,949 11,628
12/31/08 10,713 12,575 11,071
12/31/09 14,149 13,321 12,912
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
29
SMALL-CAP GROWTH SERIES
PORTFOLIO MANAGER COMMENTARY
- - PHOENIX SMALL-CAP GROWTH SERIES (THE "SERIES") is diversified and has an
investment objective to seek long-term capital growth.
- - For the fiscal year ended December 31, 2009, the Series returned 22.39%.
For the same period, the S&P 500(R) Index, a broad-based equity index,
returned 26.46% and the Russell 2000(R) Growth Index, the Series'
style-specific benchmark, returned 34.47%.
ALL PERFORMANCE FIGURES ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND
EXCLUDE THE EFFECT OF FEES AND EXPENSES ASSOCIATED WITH THE VARIABLE LIFE
INSURANCE OR ANNUITY PRODUCT THROUGH WHICH YOU INVEST. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE SHOWN ABOVE.
HOW DID THE MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE SERIES'
FISCAL YEAR AND WHAT FACTORS AFFECTED THE SERIES PERFORMANCE?
- - For the year ended December 31, 2009, the Series posted strong results but
underperformed its benchmark, the Russell 2000(R) Growth Index.
- - While the markets ended 2009 decidedly up, the year contained two very
different periods. Dramatic weakness carrying over from 2008 colored the
early part of the year, and then markets rallied from March through
year-end. Growth stocks significantly outperformed value stocks during the
period, as often happens at inflection points in the market.
- - Last year, defensive stocks outperformed on a relative basis while the
markets were declining. This year, after the March low and into the current
rally, the situation was somewhat reversed. From March until fourth
quarter, the rally was led by low quality stocks--stocks under $5, in the
lowest capitalization range, with low or no-earnings, and stocks in the
lowest Return on Equity (ROE) quintiles. We typically lack exposure to
lower quality areas given our stock selection process and fundamental
criteria. Specifically some of the fundamental criteria such as robust
revenue and earnings growth, superior ROE and cash flow characteristics;
all of which were not rewarded in last year's market environment which led
to weak security selection across much of the portfolio. We also do not
believe that lower quality can outperform over the longer term. In fact, we
believe there are signs that the low quality rally may already be fading.
The market shifted somewhat during the fourth quarter, when larger
companies, high ROE stocks, and stocks over $20 assumed the lead. When
markets are focused on fundamentals, as the shift during the fourth quarter
suggests, our quality growth strategy tends to benefit.
- - Information Technology, Consumer Discretionary, and Materials were the best
performing Index sectors this period, while Financials, Industrials, and
Utilities were weakest. Within the portfolio, stock selection within
Energy, Telecommunications, and Financials was the largest relative
benefit.
- - Within Energy, an overweight position to oil & gas related names such as
Concho Resources, a high quality, good earnings visibility oil and gas
firm, was a significant benefit, followed by Arena Resources. Within
Telecommunications, tower company SBAC was a standout performer early in
the year. We took profits in SBAC and currently have a zero allocation to
Telecom. In Financials, higher quality asset managers and brokerage names
like Janus and Waddell and Reed performed well. We also benefited from
Jones Lange LaSalle, a well-run real estate manager. We continue to avoid
any finance companies with potential credit exposure.
- - Given that our higher quality discipline was out of favor for most of the
year, however, many of our holdings were disadvantaged versus the market.
This was most apparent in the Health Care, Information Technology, and
Industrials sectors.
- - Within Health Care, Psychiatric Solutions, Wright Medical, and Amedisys
were weak. We eliminated them on earnings disappointments and ongoing
pressure from weak hospital spending and health care reform uncertainty
plaguing this sector. We have, however, made select investments in hospital
outsourcing companies. Our focus is on outsourcing areas that offer
hospitals a method to operate more efficiently. Air Methods, an air
emergency transport company, Emergency Medical Services, an ER outsourcing
firm, Mednax, a neonatal specialist, and IPC: The Hospitalist, a company
that helps hospitals reduce risk by coordinating patient care across
specialties, are examples. Despite the aggregate weakness in the sector
this year, SXC Health Care, a health care software company, was a top
performer.
- - In Information Technology, our high quality holdings generally didn't keep
pace with their higher beta counterparts. Alliance Data Systems and Trimble
Navigation underperformed in particular, while Vistaprint, a lower cost
business products and services provider, was among top performers. We
repositioned Technology holdings somewhat recently, adding to companies
such as LivePerson, NetLogic Microsystems, and Varian Semiconductor that we
expect will benefit as business spending increases. Assuming hiring will
improve, we have also added to human resources related firms including
Success Factors and Ultimate Software.
- - Within Industrials, where holdings also underperformed as investor
attention was elsewhere, we have added to aerospace and defense, expecting
a benefit from improving economic growth. Holdings include AAR Corp. and
Heico, two aircraft parts firms.
- - In retrospect, we were too defensive early in the year within Consumer
Discretionary stocks. We sold Gymboree on missed earnings and consolidated
our education theme, selling DeVry, ITT, Lincoln, and Strayer. We shifted
the portfolio toward less defensive areas--companies we expect should do
well even with a slight uptick in consumer spending. Isle of Capri Casinos,
which we've since sold, Orient Express Hotels, and Royal Caribbean Cruises
are examples. Under the same thesis, growing niche retailers is another
area of interest. Holdings include Tractor Supply Co. and Ulta Cosmetics.
- - Looking ahead, we have positioned the portfolio for a recovery with
sustained muted growth, as consumer weakness and jobless claims continue to
be concerns. We have become less defensive within the portfolio over time,
expecting that even within a subdued growth backdrop, well-positioned
companies with clean balance sheets and good margins will benefit as
economic activity increases. We believe that especially now, stock
selection will be a key to outperformance, and that the market will
continue to reward companies that possess strong fundamentals and quality
growth characteristics over time.
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
30
SMALL-CAP GROWTH SERIES (CONTINUED)
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT ONLY THROUGH
THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. ANY SUCH OPINIONS
ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS AND
SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE.
INVESTING IN THE SECURITIES OF SMALL AND MID-SIZED COMPANIES INVOLVES RISKS,
SUCH AS RELATIVELY LOW TRADING VOLUMES, MORE PRICE VOLATILITY AND LESS LIQUIDITY
THAN SECURITIES FROM LARGER, MORE ESTABLISHED COMPANIES.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and as a
percentage of total investments as of December 31, 2009.
Information Technology 31%
Health Care 22
Consumer Discretionary 18
Industrials 15
Consumer Staples 4
Energy 4
Financials 3
Other (includes short-term investments) 3
---
Total 100%
===
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
Inception Inception
1 year 5 years to 12/31/09 Date
------ ------- ----------- ---------
SMALL-CAP GROWTH SERIES 22.39% 1.57% 7.51% 8/12/02
S&P 500(R) INDEX 26.46 0.42 4.95 8/12/02
RUSSELL 2000(R) GROWTH INDEX 34.47 0.87 8.19 8/12/02
SERIES EXPENSE RATIOS(2): GROSS: 1.20%; NET: 1.05%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIOS OF THE SERIES, BOTH NET AND GROSS ARE SET FORTH
ACCORDING TO THE PROSPECTUS FOR THE SERIES EFFECTIVE 5/1/09, AND MAY DIFFER
FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN
THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A CONTRACTUAL WAIVER IN
EFFECT THROUGH 4/30/10. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF THE
CONTRACTUAL WAIVER. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT
INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 8/12/02 (inception
of the Series). Returns shown include the reinvestment of all distributions at
net asset value, and the change in share price for the stated period.
Small-Cap S&P 500(R) Russell 2000(R)
Growth Series Index Growth Index
------------- ---------- ---------------
8/12/02 $10,000 $10,000 $10,000
12/31/02 10,085 9,806 10,092
12/31/03 15,468 12,622 14,990
12/31/04 15,797 13,993 17,135
12/30/05 18,268 14,683 17,847
12/29/06 21,821 17,000 20,228
12/31/07 25,333 17,934 21,654
12/31/08 13,953 11,299 13,308
12/31/09 17,076 14,289 17,896
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
31
SMALL-CAP VALUE SERIES
PORTFOLIO MANAGER COMMENTARY
- - PHOENIX SMALL-CAP VALUE SERIES (THE "SERIES") is diversified and has an
investment objective to seek long-term capital appreciation.
- - For the fiscal year ended December 31, 2009, the Series returned 20.90%.
For the same period, the S&P 500(R) Index, a broad-based equity index,
returned 26.46% and the Russell 2000(R) Value Index, the Series'
style-specific benchmark, returned 20.58%.
ALL PERFORMANCE FIGURES ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND
EXCLUDE THE EFFECT OF FEES AND EXPENSES ASSOCIATED WITH THE VARIABLE LIFE
INSURANCE OR ANNUITY PRODUCT THROUGH WHICH YOU INVEST. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE SHOWN ABOVE.
HOW DID THE MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE SERIES'
FISCAL YEAR?
- - The past year could well be characterized by the stock market's
hair-raising volatility. Significant fears about the strength of the
financial system and its impact on the global economy caused the major
index averages to fall to 12-year lows in March. But, as investor sentiment
turned, the market staged a powerful rally, led by aggressive, lower
quality securities. Very typical after market bottoms, the smallest of the
small- low quality stocks, that have the lowest ROE, outperformed.
- - Within the 2nd quarter, a continuation of better than expected economic
data, improvements in the credit markets, and positive investor sentiment
led to gains in the stock market. During times when markets discount an
improving economic environment, growth/high beta stocks become more
defensive, and value stocks become more cyclical. Essentially, the rally
that started in March and carried through the 3rd quarter, was due to
investors seeking stocks that would give them the "biggest bang for their
buck."
- - Despite a strong 3rd quarter, the market traded down in October as
investors digested somewhat disappointing economic data and the potential
for lower liquidity levels. The smallest of the smallcaps have had a big
run and valuations became less attractive. This change in sentiment
resulted in a decline in investor risk appetite and a rotation out of the
high beta securities which had led the rally since March, and into larger
and higher quality companies.
- - New signs that the economy was recovering renewed investor optimism and led
to a solid gain for the equity markets in the 4th quarter. In addition,
inflationary pressures remained tame while the key economic indicators,
housing and employment, both showed signs of sustainable recovery.
Volatility fell and as high yield spreads appeared more stable, the
Smallcap universe showed signs of improvement going into December. By the
end of the year, larger size seemed to matter more than high quality as the
largest names outperformed the overall index, as did the non-earners and
lowest ROE names.
- - Smallcap investors are now seeking higher quality names that have
sustainable earnings growth potential. The best performing sectors in the
benchmark for the period 5/1/09 - 12/31/09 were Energy, Health Care, and
Materials & Processing. Utilities and Consumer Discretionary were among the
weakest performing sectors, but the Financial Services sector was the worst
as investors were concerned throughout the year of the impact of lower
liquidity on these companies.
WHAT FACTORS AFFECTED THE SERIES' PERFORMANCE DURING ITS FISCAL YEAR?
- - The Series underperformed the Russell 2000(R) Value Index for the
eight-month period ended December 31, 2009.* An underweight in smallest
market caps (below $250 million) and lower quality securities was a
detractor to relative underperformance for most of the year, as they have
been the leaders in the recent rallies.
- - Relative performance was hindered by security selection in Materials &
Processing and Consumer Discretionary. Bottom contributor Northwest Pipe's
natural gas sector showed signs of a slower than expected recovery in
addition to decreased revenues across their product lines due to a
retraction in the industrial market. AptarGroup experienced reduced
discretionary spending, but order flow for their products has been
increasing and their pharmaceutical sectors continue to grow.
- - Retailers reported declining sales in both July and August (despite usual
back-to-school uptick trend) and reports of an unexpected 0.3% decline in
December, signaled restraint by consumers during the holidays as the
economy wrestles with high unemployment. Mall-based chains were hit hard,
and Buckle's shares fell after concerns it would experience weaker future
same store sales as its 22 month streak of double digit growth came to a
halt. Despite its status as one of the world's largest employee-benefits
consultancy, consumer discretionary holding Watson Wyatt Worldwide has been
negatively impacted by high unemployment. Names with solid exposure to the
global economic recovery, such as Tupperware Brands, posted strong
performance as its shares rose on better than expected 2nd and 3rd quarter
2009 earnings.
- - Names within Producer Durables were also a hindrance to performance. Layne
Christensen fell due to its energy end-market sensitivity and projected
weakness in those markets. In contrast, A.O. Smith Corp. was a top
performer after the announcement of a dividend increase. Despite a marginal
revenue miss, both their water and electric segments performed better than
expected this year. BE Aerospace fulfilled analysts expectations throughout
2009 and was bid up by investors.
- - Within Consumer Staples, Chattem, a top performer, was acquired by Sanofi
Aventis for a premium. The newly joined company will create the fifth
largest global consumer healthcare company (as measured by revenue). J&J
Snack Foods has been benefitting from lower commodity costs of sugar and
milk, but its share price fell as investors feared that this could reverse
over the next year.
- - The government's release of bank "stress test" results and the Fed's
re-committing to maintaining a 0% Fed Funds rate for an extended period was
perceived positively. Financial Services names such as IPC Holdings and
Suffolk Bancorp were strong performers amongst their peers.
- - Lastly, names within the Technology Sector positively added to performance
and benefited from the broad rally within the sector. Perot Systems, the
top contributor in the portfolio, was awarded a significant amount of new
business during the third quarter of 2009, resulting in positive earnings
growth. Ultimately, it jumped higher on the news that Dell Computer was
acquiring the company. Defensive Utility names were also an additive to
performance.
* EFFECTIVE MAY 1, 2009, WESTWOOD MANAGEMENT CORP. BECAME THE SUBADVISOR TO
THE SERIES.
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
32
SMALL-CAP VALUE SERIES (CONTINUED)
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT ONLY THROUGH
THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. ANY SUCH OPINIONS
ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR CONDITIONS AND SHOULD NOT
BE RELIED ON AS INVESTMENT ADVICE.
SMALL-CAP INVESTING INCLUDES THE RISK OF GREATER PRICE VOLATILITY, LESS
LIQUIDITY AND INCREASED COMPETITIVE THREAT.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and as a
percentage of total investments as of December 31, 2009.
Industrials 29%
Financials 16
Consumer Discretionary 15
Consumer Staples 11
Utilities 9
Information Technology 8
Materials 4
Other (includes short-term investments) 8
---
Total 100%
===
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
Inception Inception
1 year 5 years to 12/31/09 Date
------ ------- ----------- ---------
SMALL-CAP VALUE SERIES 20.90% -1.61% 6.88% 11/20/00
S&P 500(R) INDEX 26.46 0.42 -0.17 11/20/00
RUSSELL 2000(R) VALUE INDEX 20.58 -0.01 7.74 11/20/00
SERIES EXPENSE RATIOS(2): GROSS: 1.38%; NET: 1.30%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIOS OF THE SERIES, BOTH NET AND GROSS ARE SET FORTH
ACCORDING TO THE PROSPECTUS FOR THE SERIES EFFECTIVE 5/1/09, AND MAY DIFFER
FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN
THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A CONTRACTUAL WAIVER IN
EFFECT THROUGH 4/30/10. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF THE
CONTRACTUAL WAIVER. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT
INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 11/20/00 (inception
of the Series). Returns shown include the reinvestment of all distributions at
net asset value, and the change in share price for the stated period.
Small-Cap Value S&P 500(R) Russell 2000(R)
Series Index Value Index
--------------- ---------- ---------------
11/20/00 $10,000 $10,000 $10,000
12/29/00 10,644 9,844 10,945
12/31/01 12,321 8,675 12,479
12/31/02 11,269 6,758 11,054
12/31/03 16,212 8,699 16,141
12/31/04 19,888 9,643 19,732
12/30/05 21,371 10,119 20,661
12/29/06 24,950 11,715 25,512
12/31/07 24,426 12,359 23,018
12/31/08 15,166 7,786 16,360
12/31/09 18,336 9,847 19,726
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
33
STRATEGIC ALLOCATION SERIES
PORTFOLIO MANAGER COMMENTARY
- - PHOENIX STRATEGIC ALLOCATION SERIES (THE "SERIES") is diversified and has
an investment objective to seek high total return over an extended period
of time consistent with prudent investment risk.
- - For the fiscal year ended December 31, 2009, the Series returned 24.51%.
For the same period, the S&P 500(R) Index, a broad-based equity index,
returned 26.46% and the Barclays Capital U.S. Aggregate Bond Index, a
broad-based fixed income index, returned 5.93%. The Composite Index for the
Series, the Series' style-specific benchmark, returned 18.40%.
ALL PERFORMANCE FIGURES ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND
EXCLUDE THE EFFECT OF FEES AND EXPENSES ASSOCIATED WITH THE VARIABLE LIFE
INSURANCE OR ANNUITY PRODUCT THROUGH WHICH YOU INVEST. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE SHOWN ABOVE.
HOW DID THE EQUITY MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE
SERIES' FISCAL YEAR?
- - The equity markets ended the year sharply higher with the benchmark S&P 500
up 26.46% on the year. However, 2009 started off very poorly for stocks as
the market was significantly lower in the first two months of the year. The
S&P bottomed in early March after several weeks of very heavy selling
pressure and overwhelming concern that a plethora of companies were on the
verge of bankruptcy. Eventually, loose Federal Reserve (the "Fed") monetary
policy and billions of dollars worth of fiscal spending seemed to ease
fears in the market of impending doom. As economic data globally began to
improve, equity prices moved higher, and at the margin corporate earnings
showed signs of recovering.
WHAT FACTORS AFFECTED THE SERIES' PERFORMANCE DURING ITS FISCAL YEAR?
- - In late March new portfolio managers assumed responsibility for the equity
portion of the Series. Subsequent to the management change, the Series'
stock holdings outperformed the S&P 500 index. However, for the calendar
year 2009, the stocks within the Series slightly underperformed the index,
because of the first quarter performance gap. The new equity managers moved
the Series into an over-weighting of Energy stocks, Material stocks (mining
and agriculture), various Industrial stocks (transportation and heavy
machinery), and business technology names. Stocks in these sectors and
industry groups held by the Series helped drive solid performance. The
Series had less than a market weighting in Financial stocks, such as banks,
and Consumer Discretionary stocks, such as retailers, which helped relative
performance in the second and fourth quarters of the year, but hurt
performance in the third quarter. Overall, in the three quarters since the
management change, both the sector allocation and stock selection helped
overall performance within the equity holdings of the Series.
HOW DID THE FIXED INCOME MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE
SERIES' FISCAL YEAR?
- - The broad U.S. fixed income market, as represented by the Barclays Capital
Aggregate Bond Index returned 5.93% for the fiscal year ended December 31,
2009.
- - The Fed left the Fed Funds target rate unchanged at a range of 0-0.25%
during the fiscal year, citing concerns of downside risks to growth and
near term economic weakness. Towards the end of 2009, the Fed cited that
economic activity has continued to pick up, deterioration in the labor
market is abating, and financial market conditions have become more
supportive of economic growth. However, the Fed decided to continue to
leave the Fed Fund target rate at 0-0.25%, saying that economic conditions
continued to warrant exceptionally low levels of the federal funds rate for
an extended period.
- - Since the beginning of the fiscal year the yield curve has steepened, with
rates increasing across most of the curve but increases more pronounced at
the long end of the curve.
- - During the first two quarters of 2009, the economy continued to show signs
of weakness with rising unemployment, continued weakness in the housing
market, declining retail sales, and historically low consumer confidence.
However, in the 2nd half of 2009 the economy began to show signs of
stabilizing with a modest improvement in several economic statistics. While
economic conditions remain weak, the improvement during the 3rd and 4th
quarters coupled with better than expected corporate earnings gave market
participants evidence that we may have turned the corner towards an
improved economy. For the first time since the 2nd quarter of 2008 the
economy had positive economic growth, with 3rd quarter 2009 GDP coming in
at 2.2%. However, questions remained as to how much of this growth can be
attributed to the U.S. government's various economic stimulus initiatives
and what will happen to the economy as this stimulus is withdrawn.
- - The implementation of numerous government programs such as PPIP, TALF,
expanded quantitative easing via the Fed's purchase of up to $1.75 trillion
long dated U.S. Treasuries, agency debt, and agency MBS, coupled with the
FASB decision to alter rules regarding mark to market accounting continue
to help improve sentiment in all fixed income markets and inject liquidity
into the system. The fixed income markets also benefited from more
stability in the financial system, an increased appetite for riskier assets
by investors, a brighter economic outlook, and improved liquidity. The
flight to quality during 2008 has reversed with U.S. Treasuries
underperforming nearly all spread sectors during 2009.
WHAT FACTORS AFFECTED THE SERIES' PERFORMANCE DURING ITS FISCAL YEAR?
- - The significant outperformance of fixed income spread sectors relative to
U.S. Treasuries and agency debentures was the key driver of the Series'
strong performance for the fiscal year. The Series benefited from its
overweight to spread product and lack of exposure to U.S. Treasuries and
agency debentures; two factors that hurt performance in fiscal year ending
12/31/08.
- - Among fixed income sectors, the Series overweight to corporate high yield
(including high yield bank loans), commercial mortgage backed securities,
and corporate high quality were all significant positive contributors to
performance for the fiscal year.
- - Although the Series allocation to agency mortgage backed securities
contributed positively to performance, the sector underperformed most other
spread sectors during the fiscal year ending 12/31/09.
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
34
STRATEGIC ALLOCATION SERIES (CONTINUED)
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT ONLY THROUGH
THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. ANY SUCH OPINIONS
ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS AND
SHOULD NOT BE RELIED ON AS INVESTMENT ADVICE.
PORTFOLIOS THAT INVEST IN HIGH YIELD SECURITIES ARE SUBJECT TO GREATER CREDIT
RISK AND PRICE FLUCTUATION THAN PORTFOLIOS THAT INVEST IN HIGHER QUALITY
SECURITIES. THE SERIES' USE OF DERIVATIVES SUCH AS FUTURES, OPTIONS AND SWAP
AGREEMENTS TO PURSUE THE INVESTMENT OBJECTIVES MAY EXPOSE THE SERIES TO
ADDITIONAL RISKS THAT IT WOULD NOT BE SUBJECT TO IF THE INVESTMENT OPTIONS
INVESTED DIRECTLY IN THE SECURITIES UNDERLYING THOSE DERIVATIVES. THESE RISKS
MAY CAUSE THE SERIES TO EXPERIENCE HIGHER LOSSES THAN SERIES THAT DO NOT USE
DERIVATIVES.
THE ECONOMIES OF DEVELOPING COUNTRIES MAY BE ADVERSELY AFFECTED BY TRADE
BARRIERS, EXCHANGE CONTROLS, MANAGED ADJUSTMENTS IN RELATIVE CURRENCY VALUES AND
OTHER PROTAGONIST MEASURES IMPOSED OR NEGOTIATED BY THE COUNTRIES WITH WHICH
THEY TRADE.
THE VALUE OF MORTGAGE-BACKED AND OTHER ASSET SECURITIES, INCLUDING PASS-THROUGH
TYPE SECURITIES AND COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS) MAY FLUCTUATE TO
A GREATER DEGREE THAN OTHER DEBT SECURITIES IN RESPONSE TO INTEREST RATE
CHANGES.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and as a
percentage of total investments as of December 31, 2009.
Common Stocks 59%
Information Technology 11%
Energy 10
Consumer Staples 8
Total of all others 30
Corporate Bonds 18
Financials 8%
Industrials 2
Materials 2
Total of all others 6
Mortgage-Backed Securities 17
Municipal Bonds 2
Other (includes short-term investments 4
---
Total 100%
===
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
1 year 5 years 10 years
--------- ------- --------
STRATEGIC ALLOCATION SERIES 24.51% 2.45% 2.79%
S&P 500(R) INDEX 26.46 0.42 -0.96
BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX 5.93 4.97 6.33
COMPOSITE INDEX FOR STRATEGIC ALLOCATION SERIES 18.40 2.52 2.25
SERIES EXPENSE RATIOS(2): GROSS: 0.87%; NET: 0.85%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIOS OF THE SERIES ARE SET FORTH ACCORDING TO THE PROSPECTUS
FOR THE SERIES EFFECTIVE 5/1/09, AND MAY DIFFER FROM THE EXPENSE RATIOS
DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. NET EXPENSES:
EXPENSES REDUCED BY A CONTRACTUAL WAIVER IN EFFECT THROUGH 4/30/10. GROSS
EXPENSES: DO NOT REFLECT THE EFFECT OF THE CONTRACTUAL WAIVER. SEE THE
FINANCIAL HIGHLIGHTS FOR MORE CURRENT INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 12/31/99. Returns
shown include the reinvestment of all distributions at net asset value, and the
change in share price for the stated period.
Composite 60%
S&P 500(R)/40%
Barclays Barclays
Strategic Capital U.S. Capital U.S.
Allocation S&P 500(R) Aggregate Bond Aggregate Bond
Series Index Index Index
---------- ---------- ------------- --------------
12/31/99 $10,000 $10,000 $10,000 $10,000
12/29/00 10,058 9,081 11,163 9,898
12/31/01 10,246 8,003 12,105 9,531
12/31/02 9,060 6,234 13,347 8,596
12/31/03 10,860 8,024 13,895 10,185
12/31/04 11,670 8,896 14,498 11,029
12/30/05 11,879 9,334 14,850 11,472
12/29/06 13,386 10,807 15,493 12,746
12/31/07 14,187 11,401 16,573 13,540
12/31/08 10,577 7,183 17,441 10,552
12/31/09 13,170 9,084 18,475 12,493
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
35
ABERDEEN INTERNATIONAL SERIES
PORTFOLIO MANAGER COMMENTARY
- - PHOENIX-ABERDEEN INTERNATIONAL SERIES (THE "SERIES") is diversified and has
an investment objective to seek high total return consistent with
reasonable risk.
- - For the fiscal year ended December 31, 2009, the Series returned 39.87%.
For the same period, the S&P 500(R) Index, a broad-based equity index,
returned 26.46% and the MSCI EAFE(R) Index, the Series' style-specific
benchmark, returned 32.46%.
ALL PERFORMANCE FIGURES ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND
EXCLUDE THE EFFECT OF FEES AND EXPENSES ASSOCIATED WITH THE VARIABLE LIFE
INSURANCE OR ANNUITY PRODUCT THROUGH WHICH YOU INVEST. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE SHOWN ABOVE.
HOW DID THE MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE SERIES'
FISCAL YEAR?
- - Most major stock markets posted strong returns during the calendar year of
2009, with those areas of higher economic growth such as the emerging
market regions posting some of the strongest returns. Following on from the
credit crises in 2009, Central Banks and Western governments began pumping
money into the system to avert economic implosion by firstly reducing
interest rates to close to zero and then started the process of
quantitative easing whereby central banks buy back government bonds in
order to keep interest rates low. These actions began slowly to restore
confidence into the fragile system and have had the "desired" effect, at
least in the short term. Asset values soared in the 9 months ended December
2009 with stocks rising dramatically in some instances. Credit spreads also
narrowed and government bond yields began to rise in the fourth quarter of
2009. The monetary stimulus and quant easing policies experienced in 2009
cannot continue indefinitely and it remains to be seen when these practices
stop and what sort of lasting economic recovery there will be.
- - On a relative and absolute basis and despite continued strength in the
currency relative to the U.S.$, Japan was one of the worst performing
markets of 2009, with the MSCI Japan posting a positive return of only 6.4%
in U.S.$ compared to the 32.5% for the MSCI EAFE Index. The strength of the
currency hindered the profits of the large export portion of the economy
and the financial crises only heightened the lack of consumption within the
domestic economy with prices falling into the deflationary zone once again.
- - In contrast, continental Europe performed exceptionally well in 2009 with
the MSCI Europe Ex UK index rising 34.0%. This was boosted by a strong
currency which did not seem to hinder export led economies such as Germany
where the MSCI Germany index rose by 26.6%. After a disappointing 2008,
markets had become oversold and so managed to produce strong returns as
government policies began to take effect and as investors anticipated an
earnings recovery. Within Europe itself, some of the more peripheral
markets performed best such as Sweden (+65.9%), Belgium (+58.9%), Norway
(+88.6%) and Spain (+45.1%). Ireland was the worst performing market within
Europe rising by 12.9% as its economy bore the brunt of the financial
meltdown in the banking and property sectors which were both hit
particularly hard.
- - The UK market posted a noteworthy strong performance in 2009 with the MSCI
UK index rising by 45.3% in U.S.$. These strong returns are all the more
remarkable given the state of the banking system and UK economy. However,
it should be noted that a lot of the large corporates that dominate the
index have considerable overseas earnings not linked to the UK economy and
the large mining companies performed exceptionally well in 2009.
- - The stand out areas in terms of performance for 2009 were to be found
within the emerging market regions of the world. Seen as higher risk areas
to invest and boosted by the fact that their economies would benefit from
the policies put in place in the Western World sent a number of the local
markets soaring. The MSCI Latin American index rose by triple digits with
Brazil rising by a staggering 128.6% during the year, boosted by one of the
strongest currencies in the year. The broad MSCI Asia Pacific Index Ex
Japan rose by 68% in U.S.$ terms with the MSCI India index rising 102.8%.
WHAT FACTORS AFFECTED THE SERIES' PERFORMANCE DURING ITS FISCAL YEAR?
- - The Series rose by 39.87% during the year, compared to its benchmark, the
MSCI EAFE Index, which rose by 32.5% over the same period. Stock selection
was the main reason for the relative outperformance, particularly in parts
of Europe and Asia.
- - Within Europe, there were strong showings from some of the more cyclical
companies that had suffered in 2008. The French Industrial company,
Schneider Electric performed well as did the Dutch listed Philips
Electronics. Other strong performers within Europe were Swedish Bank
Nordea, and Tenaris, the Italian listed seamless steel pipe maker. Some of
the more defensive names within Europe underperformed the broad MSCI EAFE
Index such as Roche Pharmaceuticals and the insurance companies Zurich
Financial and Corp. Mapfre lagged the broader index.
- - An underweight position to Japan provided a positive contribution to
performance but stock selection was broadly neutral.
- - Within the UK, there were very strong returns from Standard Chartered that
generates most of its revenues and profits from emerging markets, and the
metals & mining company Rio Tinto, which was purchased a year ago, posted a
triple digit return, as did engineering and pump specialist Weir Group.
- - Our Asian holdings were mixed in 2009. Samsung Electronics performed very
well as did Hong Kong conglomerate Swire Pacific and Singapore Real Estate
developer City Developments. On a more negative note, despite operationally
performing well, the Australian Insurance company QBE, suffered from the
strength of the Australian dollar due to earning a large portion of its
profits from overseas.
- - Within the broader emerging markets exposure in the Series there were
strong showings from Brazilian oil giant Petrobras that continues to
increase production and find more oil off the North East coast, and Mexican
airport operator Asur performed well.
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
36
ABERDEEN INTERNATIONAL SERIES (CONTINUED)
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT ONLY THROUGH
THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. ANY SUCH OPINIONS
ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS AND
SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE.
INVESTING INTERNATIONALLY INVOLVES RISKS NOT ASSOCIATED WITH INVESTING SOLELY IN
THE U.S., SUCH AS CURRENCY FLUCTUATION, POLITICAL RISK, DIFFERENCES IN
ACCOUNTING AND THE LIMITED AVAILABILITY OF INFORMATION. THE ECONOMIES OF
DEVELOPING COUNTRIES MAY BE ADVERSELY AFFECTED BY TRADE BARRIERS, EXCHANGE
CONTROLS, MANAGED ADJUSTMENTS IN RELATIVE CURRENCY VALUES AND OTHER PROTAGONIST
MEASURES IMPOSED OR NEGOTIATED BY THE COUNTRIES WITH WHICH THEY TRADE.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and as a
percentage of total investments as of December 31, 2009.
Financials 27%
Energy 13
Industrials 13
Information Technology 12
Health Care 8
Consumer Staples 6
Utilities 6
Other (includes short-term investments) 15
---
Total 100%
===
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
1 year 5 years 10 years
------ ------- --------
ABERDEEN INTERNATIONAL SERIES 39.87% 8.18% 2.54%
S&P 500(R) INDEX 26.46 0.42 -0.96
MSCI EAFE(R) INDEX 32.46 4.02 1.58
SERIES EXPENSE RATIO(2): 1.02%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIO OF THE SERIES IS SET FORTH ACCORDING TO THE PROSPECTUS
FOR THE SERIES EFFECTIVE 5/1/09, AND MAY DIFFER FROM THE EXPENSE RATIOS
DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE
FINANCIAL HIGHLIGHTS FOR MORE CURRENT INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 12/31/99. Returns
shown include the reinvestment of all distributions at net asset value, and the
change in share price for the stated period.
Aberdeen
International S&P 500(R) MSCI EAFE(R)
Series Index Index
------------- ---------- ------------
12/31/99 $10,000 $10,000 $10,000
12/29/00 8,419 9,081 8,604
12/31/01 6,395 8,003 6,779
12/31/02 5,448 6,234 5,718
12/31/03 7,184 8,024 7,957
12/31/04 8,677 8,896 9,604
12/30/05 10,288 9,334 10,951
12/29/06 13,105 10,807 13,892
12/31/07 15,063 11,401 15,507
12/31/08 9,191 7,183 8,830
12/31/09 12,856 9,084 11,697
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
37
DUFF & PHELPS REAL ESTATE SECURITIES SERIES
PORTFOLIO MANAGER COMMENTARY
- - PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES (THE "SERIES") is
non-diversified and has an investment objective to seek capital
appreciation and income with approximately equal emphasis.
- - For the fiscal year ended December 31, 2009, the Series returned 29.11%.
For the same period, the S&P 500(R) Index, a broad-based equity index,
returned 26.46% and the FTSE NAREIT Equity REITs Index, the Series'
style-specific benchmark, returned 27.99%.
ALL PERFORMANCE FIGURES ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND
EXCLUDE THE EFFECT OF FEES AND EXPENSES ASSOCIATED WITH THE VARIABLE LIFE
INSURANCE OR ANNUITY PRODUCT THROUGH WHICH YOU INVEST. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE SHOWN ABOVE.
HOW DID THE MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE SERIES'
FISCAL YEAR?
- - Risk premiums contracted significantly in 2009 as measured by country risk
premiums or corporate bond spreads and have been a significant driver
behind the improvement in REIT equity prices over the last 12 months.
- - De-leveraging and capital preservation has been embraced by management
teams and rewarded by the market, as more than $18 billion has been raised
in over 50 equity issuances in the U.S. since late March 2009.
- - Over $8 billion of unsecured debt was issued by listed REITs in 2009, with
most of the offerings occurring in the third quarter forward.
- - Real estate transaction volume, while still down significantly from prior
years, is increasing and pricing is not showing the distress originally
anticipated by the market, particularly for high quality, well-located
assets.
WHAT FACTORS AFFECTED THE SERIES' PERFORMANCE DURING ITS FISCAL YEAR?
- - The Series outperformed its Benchmark and the S&P 500 in 2009.
- - Attribution results highlight positive contributions from both property
sector allocation and stock selection in the year, with the greatest
contribution from stock selection.
- - Property sectors contributing the most to the outperformance were Regional
Malls (due to both allocation and selection), Specialty (due to both
allocation and selection), and Diversified (due to both allocation and
selection) while the largest detractors were Office (due to selection),
Lodging (due to allocation), and Self Storage (due to allocation).
- - We see the recapitalization of the global real estate securities industry,
the majority of which has been completed, continuing to lower overall
leverage, and positioning the industry to take advantage of external growth
opportunities which will emerge over the next one to three years.
- - Commercial real estate debt maturities over the next few years will be a
catalyst for increased transaction activity, as in many cases new equity
will need to be injected to restore loan-to-value ratios to today's more
conservative levels.
- - Global real estate fundamentals will improve with a lag to the global
economy but, once demand returns, relatively benign levels of existing
supply will support a more robust recovery.
- - In the real estate downturn of the early '90s, REITs bottomed in fourth
quarter 1990, and rebounded by close to 60% before the private commercial
real estate prices bottomed in second quarter 1993, something you would
expect given the forward looking nature of equity markets.
- - The significant contraction in risk premiums over the last 12 months
contributed to the out performance of higher beta, lower quality stocks,
just as it has in previous cycles.
- - As the market shifts away from the recovery trade of 2009 to a focus on
fundamentals in 2010, we believe companies with better positioned balance
sheets and the capacity for growth will outperform.
- - No longer will the focus be on selling assets or equity to repair broken
balance sheets, but rather on returning to the more virtuous cycle of
issuing capital to make attractive acquisitions at positive spreads to
underlying cost of capital and growing cash flow per share and ultimately
dividends.
- - As long-term fundamental investors in real estate equities, with an
emphasis on growth-at-a-reasonable-price, we anxiously await the emergence
of this cycle and we believe our investment strategy is positioned to do
well in this environment.
- - We continue to emphasize secure, attractive and visible dividend yields and
diversification of holdings.
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. ANY
SUCH OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER
CONDITIONS AND SHOULD NOT BE RELIED ON AS INVESTMENT ADVICE. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THERE IS NO GUARANTEE
THAT MARKET FORECASTS WILL BE REALIZED.
INVESTING IN REITS INVOLVES CERTAIN RISKS SUCH AS REFINANCING, CHANGES IN
THE VALUE OF PROPERTIES REITS OWN, DEPENDENCY ON MANAGEMENT SKILLS,
ECONOMIC IMPACT ON THE INDUSTRY AND RISKS SIMILAR TO THOSE LINKED TO
SMALL-COMPANY INVESTING.
INVESTING IN SECTOR FUNDS OR NON-DIVERSIFIED FUNDS MAY BE MORE VOLATILE
THAN INVESTING IN BROADLY DIVERSIFIED FUNDS, AND MAY BE MORE SUSCEPTIBLE TO
ADVERSE ECONOMIC, POLITICAL OR REGULATORY DEVELOPMENTS AFFECTING A SINGLE
ISSUER THAN WOULD BE THE CASE IF IT WERE MORE BROADLY DIVERSIFIED.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and as a
percentage of total investments as of December 31, 2009.
Apartments 17%
Health Care 13
Regional Malls 13
Office 12
Shopping Centers 8
Self Storage 7
Specialty 7
Other (includes short-term investments) 23
---
Total 100%
===
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
38
DUFF & PHELPS REAL ESTATE SECURITIES SERIES (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
1 year 5 years 10 years
------ ------- --------
DUFF & PHELPS REAL ESTATE SECURITIES SERIES 29.11% 1.62% 12.17%
S&P 500(R) INDEX 26.46 0.42 -0.96
FTSE NAREIT EQUITY REITS INDEX 27.99 0.36 10.62
SERIES EXPENSE RATIO(2): 1.01%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIO OF THE SERIES IS SET FORTH ACCORDING TO THE PROSPECTUS
FOR THE SERIES EFFECTIVE 5/1/09 AND MAY DIFFER FROM THE EXPENSE RATIOS
DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN THIS REPORT. SEE THE
FINANCIAL HIGHLIGHTS FOR MORE CURRENT INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 12/31/99. Returns
shown include the reinvestment of all distributions at net asset value, and the
change in share price for the stated period.
Duff & Phelps
Real Estate FTSE NAREIT
Securities S&P 500(R) Equity REITs
Series Index Index
------------- ---------- ------------
12/31/99 $10,000 $10,000 $10,000
12/29/00 13,078 9,081 12,636
12/31/01 13,943 8,003 14,396
12/31/02 15,628 6,234 14,945
12/31/03 21,608 8,024 20,496
12/31/04 29,104 8,896 26,965
12/30/05 33,497 9,334 30,246
12/29/06 45,913 10,807 40,847
12/31/07 38,700 11,401 34,437
12/31/08 24,427 7,183 21,445
12/31/09 31,539 9,084 27,447
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
39
VAN KAMPEN COMSTOCK SERIES
PORTFOLIO MANAGER COMMENTARY
- - PHOENIX-VAN KAMPEN COMSTOCK SERIES (THE "SERIES") is diversified and has an
investment objective to seek long-term capital appreciation. The Series has
a secondary investment objective to seek current income.
- - For the fiscal year ended December 31, 2009, the Series returned 29.97%.
For the same period, the S&P 500(R) Index, a broad-based equity index,
returned 26.46% and the Russell 1000(R) Value Index, the Series'
style-specific benchmark, returned 19.69%.
ALL PERFORMANCE FIGURES ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND
EXCLUDE THE EFFECT OF FEES AND EXPENSES ASSOCIATED WITH THE VARIABLE LIFE
INSURANCE OR ANNUITY PRODUCT THROUGH WHICH YOU INVEST. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE SHOWN ABOVE.
HOW DID THE MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE SERIES'
FISCAL YEAR?
- - In 2009, the stock market staged a strong comeback from the substantial
declines caused by the financial crisis and economic recession, although
the market remained below its October 2007 high. In early March, equities
began a large rally from depressed valuation levels that continued through
the end of the period due to several factors including the lessening risk
of an economic depression, the strengthening financial system,
better-than-expected corporate earnings, and the Federal Reserve's zero
interest rate policy. However, unemployment rates remained high, serving as
a persistent threat to the fragile recovery.
- - While we have seen some improvements, we continue to believe the economy
faces some real risks and challenges, with the greatest headwind coming
from a prolonged period of reduced consumer spending. Paradoxically, while
higher savings and lower spending rates may be positive for the economy
over the long term, the trend is likely to dampen economic growth in the
near term.
WHAT FACTORS AFFECTED THE SERIES' PERFORMANCE DURING ITS FISCAL YEAR?
- - Relative to the Russell 1000(R) Value Index (the "Russell Index"), the
Series' significant overweight in information technology was the largest
positive contributor. On average during the period, the Series held a three
times larger weight than that of the Russell Index. The Series benefited
from holdings across the sector, including internet retail, hardware, and
semiconductors.
- - In the energy sector, both stock selection and an underweight aided
relative performance. The sector was among the weakest-performing groups in
the Russell Index for the period, and we have only recently begun building
a small position in selected stocks that fit our criteria, mostly
integrated oil companies.
- - Stock selection and a slight overweight in the basic materials sector also
bolstered performance, driven mainly by a paper company that restructured
its debt and benefited from synergies following an acquisition.
- - In the consumer discretionary sector, where the Series holds primarily
media stocks, a turnaround in ad spending propelled gains in the Series'
holdings.
- - Within health care, acquisitions made by Pfizer and Merck lifted the
Series' holdings in large-cap pharmaceutical stocks.
- - The financials sector was the single largest detractor from performance,
hampered by stock selection within insurance and diversified financials
companies. Some of the best-performing diversified financial companies
during the period were among the worst performers in the previous year.
However, we remained cautious about the financial health of many of these
companies and began building positions only after the credit markets began
stabilizing and we conducted a thorough evaluation of balance sheets.
- - Relative to the S&P 500(R) Index, the Series benefited from stock selection
in materials, an overweight in consumer discretionary, stock selection and
an underweight in the energy sector, and stock selection in health care.
However, relative gains were somewhat offset by the negative impact of an
underweight in the technology sector and stock selection in the financials
sector.
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT ONLY THROUGH
THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. ANY SUCH OPINIONS
ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR CONDITIONS AND SHOULD NOT
BE RELIED ON AS INVESTMENT ADVICE.
INVESTING INTERNATIONALLY INVOLVES RISKS NOT ASSOCIATED WITH INVESTING SOLELY IN
THE U.S., SUCH AS CURRENCY FLUCTUATION, POLITICAL RISK, DIFFERENCES IN
ACCOUNTING AND THE LIMITED AVAILABILITY OF INFORMATION.
THE ECONOMIES OF DEVELOPING COUNTRIES MAY BE ADVERSELY AFFECTED BY TRADE
BARRIERS, EXCHANGE CONTROLS, MANAGED ADJUSTMENTS IN RELATIVE CURRENCY VALUES AND
OTHER PROTAGONIST MEASURES IMPOSED OR NEGOTIATED BY THE COUNTRIES WITH WHICH
THEY TRADE.
THE SERIES' USE OF DERIVATIVES SUCH AS FUTURES, OPTIONS AND SWAP AGREEMENTS TO
PURSUE THEIR INVESTMENT OBJECTIVES MAY EXPOSE THE SERIES TO ADDITIONAL RISKS
THAT IT WOULD NOT BE SUBJECT TO IF IT INVESTED DIRECTLY IN THE SECURITIES
UNDERLYING THOSE DERIVATIVES. THESE RISKS MAY CAUSE THE SERIES TO EXPERIENCE
HIGHER LOSSES THAN SERIES THAT DO NOT USE DERIVATIVES.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and as a
percentage of total investments as of December 31, 2009.
Financials 23%
Consumer Discretionary 18
Health Care 15
Consumer Staples 12
Information Technology 11
Energy 7
Materials 5
Other (includes short-term investments) 9
---
Total 100%
===
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
40
VAN KAMPEN COMSTOCK SERIES (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
1 year 5 years 10 years
------ ------- --------
VAN KAMPEN COMSTOCK SERIES 29.97% 0.81% 2.11%
S&P 500(R) INDEX 26.46 0.42 -0.96
RUSSELL 1000(R) VALUE INDEX 19.69 -0.25 2.47
SERIES EXPENSE RATIOS(2): GROSS: 1.01%; NET: 0.95%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIOS OF THE SERIES, BOTH NET AND GROSS ARE SET FORTH
ACCORDING TO THE PROSPECTUS FOR THE SERIES EFFECTIVE 5/1/09 AND MAY DIFFER
FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN
THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A CONTRACTUAL WAIVER IN
EFFECT THROUGH 4/30/10. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF THE
CONTRACTUAL WAIVER. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT
INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 12/31/99. Returns
shown include the reinvestment of all distributions at net asset value, and the
change in share price for the stated period.
Van Kampen S&P 500(R) Russell 1000(R)
Comstock Series Index Value Index
--------------- ---------- ---------------
12/31/99 $10,000 $10,000 $10,000
12/29/00 13,216 9,081 10,701
12/31/01 10,843 8,003 10,103
12/31/02 8,465 6,234 8,535
12/31/03 10,485 8,024 11,098
12/31/04 11,840 8,896 12,928
12/30/05 12,482 9,334 13,840
12/29/06 15,091 10,807 16,919
12/31/07 14,756 11,401 16,890
12/31/08 9,484 7,183 10,666
12/31/09 12,327 9,084 12,766
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
41
VAN KAMPEN EQUITY 500 INDEX SERIES
PORTFOLIO MANAGER COMMENTARY
- - PHOENIX-VAN KAMPEN EQUITY 500 INDEX SERIES (THE "SERIES") is diversified
and has an investment objective to seek high total return.
- - For the fiscal year ended December 31, 2009, the Series returned 26.22%.
For the same period, the S&P 500(R) Index, a broad-based equity index,
returned 26.46%.
ALL PERFORMANCE FIGURES ASSUME THE REINVESTMENT OF DISTRIBUTIONS AND
EXCLUDE THE EFFECT OF FEES AND EXPENSES ASSOCIATED WITH THE VARIABLE LIFE
INSURANCE OR ANNUITY PRODUCT THROUGH WHICH YOU INVEST. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE HIGHER OR
LOWER THAN THE PERFORMANCE SHOWN ABOVE.
HOW DID THE MARKETS IN WHICH THE SERIES INVESTS PERFORM DURING THE SERIES'
FISCAL YEAR?
- - The S&P 500(R) Index (the "Index") returned 26.46 percent for the year
ended December 31, 2009. The year began with a rough start, with woes in
the financial system and significant declines in economic activity across
all sectors and segments of the economy. Unemployment kept rising, while
consumer confidence and spending collapsed. The recession, which spread
beyond the U.S. into developed and emerging markets as well, has been the
worst since the Great Depression. The U.S. equity market continued to
tumble, reaching its lowest point in March of 2009.
- - However, as a result of truly unprecedented global response in the first
half of 2009, so-called "green shoots"--tentative signs of improvement in
quite a few economic indicators--began to appear. Late summer saw a
stabilization of housing prices, a decline in inventories and positive
industrial production. Since early March markets embarked on a sizeable
rally following a slow stream of positive news through the end of the year.
Although unemployment remains high (at 10 percent in December), the
consensus at the end of the period seems to be that the global economy is
in the early stage of upturn and recession is over.
WHAT FACTORS AFFECTED THE SERIES' PERFORMANCE DURING ITS FISCAL YEAR?
- - Within the Index and therefore the Series, all ten sectors had positive
absolute performance during the 12-month period, with nine of them posting
double-digit returns. The best performing sectors were information
technology, materials and consumer discretionary. Commodity prices in 2009
led to the improvement in the performance of the materials and energy
sectors. The financials sector rebounded as a result of government
intervention.
- - The outperformance was pervasive as the economy showed signs of
improvement. Other performance trends within the Series and the Index
during the period included the outperformance of growth stocks within every
capitalization segment, as well as outperformance of small-cap stocks.
- - Because the Index is market capitalization weighted (and that the Series
seeks to replicate the performance attributes of the S&P 500 Index before
Series fees), the overall contribution of each sector was influenced by its
relative size within the S&P 500 Index and the Series. As such, the sectors
that contributed the most to the Series' return were information
technology, consumer discretionary and financials, while telecommunication
services and utilities were the least contributors.
- - The opinions are those of the Series' portfolio managers as of December 31,
2009 and are subject to change at any time due to market or economic
conditions. Portfolio holdings and sectors are subject to change daily. All
information provided is for informational purposes only and should not be
deemed as a recommendation to buy or sell the securities in the industries
shown above. The forecasts in this piece are not necessarily those of Van
Kampen, and may not actually come to pass.
- - Performance data quoted represents past performance, which is no guarantee
of future results, and current performance may be lower higher than the
figures shown. Investment returns and principal value will fluctuate and
fund shares, when redeemed, may be worth more or less than their original
cost.
- - There is no assurance that a mutual fund will achieve its investment
objective. All investments involve risk including the possible loss of
principal. Please refer to the prospectus for specific details regarding
the funds risk profile.
THE PRECEDING INFORMATION IS THE OPINION OF PORTFOLIO MANAGEMENT ONLY
THROUGH THE END OF PERIOD OF THE REPORT AS STATED ON THE COVER. ANY SUCH
OPINIONS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR CONDITIONS
AND SHOULD NOT BE RELIED ON AS INVESTMENT ADVICE.
INVESTING INTERNATIONALLY INVOLVES RISKS NOT ASSOCIATED WITH INVESTING
SOLELY IN THE U.S., SUCH AS CURRENCY FLUCTUATION, POLITICAL RISK,
DIFFERENCES IN ACCOUNTING AND THE LIMITED AVAILABILITY OF INFORMATION.
ASSET ALLOCATION
The following table presents asset allocations within certain sectors and as a
percentage of total investments as of December 31, 2009.
Information Technology 20%
Financials 14
Health Care 13
Consumer Staples 11
Energy 11
Consumer Discretionary 10
Industrials 10
Other (includes short-term investments) 11
---
Total 100%
===
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
42
VAN KAMPEN EQUITY 500 INDEX SERIES (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN(1) for periods ended 12/31/09
1 year 5 years 10 years
------ ------- --------
VAN KAMPEN EQUITY 500 INDEX SERIES 26.22% -0.35% -2.07%
S&P 500(R) INDEX 26.46 0.42 -0.96
SERIES EXPENSE RATIOS(2): GROSS: 0.60%; NET: 0.50%.
RETURNS REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS. THE
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. TOTAL
RETURN DOES NOT REFLECT EXPENSES ASSOCIATED WITH THE SEPARATE ACCOUNT SUCH AS
THE ADMINISTRATIVE FEES, ACCOUNT CHARGES AND SURRENDER CHARGES, WHICH IF
REFLECTED, WOULD REDUCE TOTAL RETURN. PERFORMANCE FIGURES MAY REFLECT VOLUNTARY
FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS. IN THE ABSENCE OF VOLUNTARY FEE
WAIVERS AND/OR EXPENSE REIMBURSEMENTS, THE TOTAL RETURN WOULD HAVE BEEN LOWER.
PLEASE VISIT PHOENIXWM.COM FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END.
(1) TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE AND THE
REINVESTMENT OF BOTH DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE EXPENSE RATIOS OF THE SERIES, BOTH NET AND GROSS ARE SET FORTH
ACCORDING TO THE PROSPECTUS FOR THE SERIES EFFECTIVE 5/1/09, AND MAY DIFFER
FROM THE EXPENSE RATIOS DISCLOSED IN THE FINANCIAL HIGHLIGHTS TABLES IN
THIS REPORT. NET EXPENSES: EXPENSES REDUCED BY A CONTRACTUAL WAIVER IN
EFFECT THROUGH 4/30/10. GROSS EXPENSES: DO NOT REFLECT THE EFFECT OF THE
CONTRACTUAL WAIVER. SEE THE FINANCIAL HIGHLIGHTS FOR MORE CURRENT
INFORMATION.
GROWTH OF $10,000 For periods ended 12/31
This chart assumes an initial investment of $10,000 made on 12/31/99. Returns
shown include the reinvestment of all distributions at net asset value, and the
change in share price for the stated period.
Van Kampen
Equity 500
Index Series S&P 500(R) Index
------------ ----------------
12/31/99 $10,000 $10,000
12/29/00 8,853 9,081
12/31/01 7,799 8,003
12/31/02 5,952 6,234
12/31/03 7,513 8,024
12/31/04 8,252 8,896
12/30/05 8,557 9,334
12/29/06 9,773 10,807
12/31/07 10,249 11,401
12/31/08 6,425 7,183
12/31/09 8,110 9,084
For information regarding the indexes and key investment terms, see the Key
Investment Terms and Footnote Legend starting on page 4.
43
PHOENIX CAPITAL GROWTH SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
-------------- -------------
COMMON STOCKS--97.9%
CONSUMER DISCRETIONARY--11.2%
Amazon.com, Inc.(2) 38,923 $ 5,236
Best Buy Co., Inc. 56,284 2,221
DIRECTV Class A(2) 125,589 4,188
Johnson Controls, Inc. 87,926 2,395
Lowe's Cos., Inc. 116,670 2,729
Staples, Inc. 99,407 2,444
Target Corp. 56,284 2,723
Time Warner, Inc.(2) 97,587 2,844
Wynn Resorts Ltd. 30,242 1,761
-------------
26,541
-------------
CONSUMER STAPLES--8.0%
Mead Johnson Nutrition Co.
Class A 28,002 1,224
PepsiCo, Inc. 68,045 4,137
Philip Morris International, Inc. 83,026 4,001
Procter & Gamble Co. (The) 115,648 7,012
Wal-Mart Stores, Inc. 46,763 2,499
-------------
18,873
-------------
ENERGY--8.6%
Canadian Natural Resources Ltd. 58,524 4,211
National Oilwell Varco, Inc. 109,530 4,829
Occidental Petroleum Corp. 50,544 4,112
Petroleo Brasileiro SA ADR 48,513 2,313
Range Resources Corp. 50,544 2,519
Southwestern Energy Co.(2) 50,124 2,416
-------------
20,400
-------------
FINANCIALS--2.7%
American Express Co. 70,845 2,871
JPMorgan Chase & Co. 84,426 3,518
-------------
6,389
-------------
HEALTH CARE--11.8%
Abbott Laboratories 79,211 4,277
Allergan, Inc. 37,523 2,364
Amgen, Inc.(2) 42,703 2,416
Baxter International, Inc. 50,929 2,988
Becton, Dickinson & Co. 25,867 2,040
Gilead Sciences, Inc.(2) 38,066 1,647
Johnson & Johnson 68,185 4,392
St. Jude Medical, Inc.(2) 90,026 3,311
Teva Pharmaceutical Industries Ltd.
Sponsored ADR 40,043 2,250
UnitedHealth Group, Inc. 73,085 2,228
-------------
27,913
-------------
SHARES VALUE
-------------- -------------
INDUSTRIALS--13.6%
3M Co. 35,703 $ 2,952
Caterpillar, Inc. 52,504 2,992
Cummins, Inc. 61,324 2,812
Danaher Corp. 32,167 2,419
Emerson Electric Co. 55,024 2,344
Joy Global, Inc. 46,763 2,412
Parker Hannifin Corp. 40,463 2,180
Raytheon Co. 45,363 2,337
Union Pacific Corp. 58,384 3,731
United Parcel Service, Inc. Class B 38,503 2,209
United Technologies Corp. 81,906 5,685
-------------
32,073
-------------
INFORMATION TECHNOLOGY--37.8%
Accenture plc Class A 60,904 2,528
Adobe Systems, Inc.(2) 136,230 5,011
Analog Devices, Inc. 74,765 2,361
Apple, Inc.(2) 51,524 10,864
Broadcom Corp. Class A(2) 44,803 1,409
Cisco Systems, Inc.(2) 235,602 5,640
Citrix Systems, Inc.(2) 69,725 2,901
Corning, Inc. 126,009 2,433
eBay, Inc.(2) 148,691 3,500
EMC Corp.(2) 249,218 4,354
Google, Inc. Class A(2) 14,996 9,297
Hewlett-Packard Co. 141,410 7,284
Intel Corp. 205,535 4,193
International Business Machines Corp. 42,738 5,594
Microsoft Corp. 368,366 11,232
Oracle Corp. 145,190 3,563
Visa, Inc. Class A 36,403 3,184
Yahoo!, Inc.(2) 240,117 4,029
-------------
89,377
-------------
Materials--4.2%
Freeport-McMoRan
Copper & Gold, Inc.(2) 58,314 4,682
Potash Corp. of Saskatchewan, Inc. 27,442 2,978
Praxair, Inc. 26,462 2,125
-------------
9,785
-------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $185,075) 231,351
-------------
TOTAL LONG-TERM INVESTMENTS--97.9%
(IDENTIFIED COST $185,075) 231,351
-------------
SHARES VALUE
-------------- -------------
SHORT-TERM INVESTMENTS--1.9%
MONEY MARKET MUTUAL FUNDS--1.9%
Dreyfus Cash Management Fund -
Institutional Shares (seven-day
effective yield 0.080%) 4,545,183 $ 4,545
-------------- -------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $4,545) 4,545
-------------
TOTAL INVESTMENTS--99.8%
(IDENTIFIED COST $189,620) 235,896(1)
-------------
Other assets and liabilities, net--0.2% 513
-------------
NET ASSETS--100.0% $ 236,409
=============
COUNTRY WEIGHTINGS as of 12/31/09+
United States 92%
Canada 3
Switzerland 2
Brazil 1
Ireland 1
Israel 1
---
Total 100%
---
+ % of total investments as of December 31, 2009
The following table provides a summary of inputs used to value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total
Value at Level 1 -
December 31, Quoted
2009 Prices
-------------- -------------
INVESTMENTS IN SECURITIES:
Equity Securities:
Common Stocks $ 231,351 $ 231,351
Short-Term Investments 4,545 4,545
-------------- -------------
Total $ 235,896 $ 235,896
-------------- -------------
There are no Level 2 (Significant Observable Inputs) and Level 3 (Significant
Unobservable Inputs) priced securities.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
44
PHOENIX DYNAMIC ASSET ALLOCATION SERIES: AGGRESSIVE GROWTH
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
-------------- -------------
EXCHANGE-TRADED FUNDS--49.2%
iShares S&P Developed Ex-U.S.
Property Index Fund 19,131 $ 587
iShares S&P Global Infrastructure
Index Fund 28,297 964
iShares S&P GSCI Commodity Index Trust(2) 37,090 1,180
SPDR S&P International Small Cap ETF 45,165 1,144
Vanguard Emerging Markets ETF 16,460 675
Vanguard Intermediate-Term Bond ETF 11,008 870
Vanguard Large-Cap ETF 11,263 571
Vanguard Small-Cap Value ETF 36,233 1,974
Vanguard Value ETF 33,750 1,612
-------------
TOTAL EXCHANGE-TRADED FUNDS
(IDENTIFIED COST $8,606) 9,577
-------------
MUTUAL FUNDS--50.4%
Phoenix Capital Growth Series(11) 97,460 1,250
Phoenix Mid-Cap Growth Series(11) 81,468 984
Phoenix Small-Cap Growth Series(11) 69,583 812
Phoenix-Aberdeen International Series(11) 175,770 2,613
Phoenix-Duff & Phelps Real Estate
Securities Series(11) 50,076 1,014
Sentinel Common Stock Fund 100,324 2,771
Sentinel Government Securities Fund 35,955 381
-------------
TOTAL MUTUAL FUNDS
(IDENTIFIED COST $8,055) 9,825
-------------
TOTAL LONG-TERM INVESTMENTS--99.6%
(IDENTIFIED COST $16,661) 19,402
-------------
SHARES VALUE
-------------- -------------
SHORT-TERM INVESTMENTS--0.5%
MONEY MARKET MUTUAL FUNDS--0.5%
Dreyfus Cash Management Fund -
Institutional Shares (seven-day
effective yield 0.080%) 103,118 $ 103
-------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $103) 103
-------------
TOTAL INVESTMENTS--100.1%
(IDENTIFIED COST $16,764) 19,505(1)
-------------
Other assets and liabilities, net--(0.1)% (25)
-------------
NET ASSETS--100.0% $ 19,480
=============
The following table provides a summary of inputs used to value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total
Value at Level 1 -
December 31, Quoted
2009 Prices
-------------- -------------
INVESTMENTS IN SECURITIES:
Equity Securities:
Exchange-Traded Funds $ 9,577 $ 9,577
Mutual Funds 9,825 9,825
Short-Term Investments 103 103
-------------- -------------
Total $ 19,505 $ 19,505
============== =============
There are no Level 2 (Significant Observable Inputs) and Level 3 (Significant
Unobservable Inputs) priced securities.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
45
PHOENIX DYNAMIC ASSET ALLOCATION SERIES: GROWTH
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
-------------- -------------
EXCHANGE-TRADED FUNDS--50.7%
iShares Barclays Treasury
Inflation Protected Securities
Bond Fund 9,827 $ 1,021
iShares S&P Developed Ex-U.S.
Property Index Fund 22,457 689
iShares S&P Global
Infrastructure Index Fund 39,623 1,350
iShares S&P GSCI Commodity
Index Trust(2) 54,760 1,743
SPDR S&P International Small
Cap ETF 74,660 1,891
Vanguard Emerging Markets
ETF 20,730 850
Vanguard Intermediate-Term
Bond ETF 25,780 2,039
Vanguard Large-Cap ETF 16,502 836
Vanguard Short-Term Bond
ETF 14,940 1,188
Vanguard Small-Cap Value
ETF 55,361 3,016
Vanguard Value ETF 56,140 2,681
-------------
TOTAL EXCHANGE-TRADED FUNDS
(IDENTIFIED COST $15,733) 17,304
-------------
MUTUAL FUNDS--48.7%
JPMorgan Short Duration Bond
Fund 94,173 1,022
Phoenix Capital Growth
Series(11) 169,757 2,177
Phoenix Mid-Cap Growth
Series(11) 126,666 1,530
SHARES VALUE
-------------- -------------
Phoenix Small-Cap Growth
Series(11) 102,626 $ 1,197
Phoenix-Aberdeen International
Series(11) 253,945 3,775
Phoenix-Duff & Phelps Real
Estate Securities Series(11) 67,241 1,362
Sentinel Common Stock
Fund 163,962 4,529
Sentinel Government
Securities Fund 96,351 1,020
-------------
TOTAL MUTUAL FUNDS
(IDENTIFIED COST $13,762) 16,612
-------------
TOTAL LONG-TERM INVESTMENTS--99.4%
(IDENTIFIED COST $29,495) 33,916
-------------
SHORT-TERM INVESTMENTS--0.8%
MONEY MARKET MUTUAL FUNDS--0.8%
Dreyfus Cash Management Fund -
Institutional Shares (seven-day
effective yield 0.080%) 260,899 261
-------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $261) 261
-------------
TOTAL INVESTMENTS--100.2%
(IDENTIFIED COST $29,756) 34,177(1)
-------------
Other assets and liabilities, net--(0.2)% (69)
-------------
NET ASSETS--100.0% $ 34,108
=============
The following table provides a summary of inputs used value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Level 1 -
Value at Quoted
December 31, 2009 Prices
----------------- ---------
INVESTMENTS IN SECURITIES:
Equity Securities:
Exchange-Traded Funds $ 17,304 $ 17,304
Mutual Funds 16,612 16,612
Short-Term Investments 261 261
----------------- ---------
Total $ 34,177 $ 34,177
================= =========
There are no Level 2 (Significant Observable Inputs) and Level 3 (Significant
Unobservable Inputs) priced securities.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
46
PHOENIX DYNAMIC ASSET ALLOCATION SERIES: MODERATE
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
-------------- -------------
EXCHANGE-TRADED FUNDS--54.9%
iShares Barclays Treasury
Inflation Protected Securities
Bond Fund 38,268 $ 3,976
iShares S&P GSCI Commodity
Index Trust(2) 31,330 997
SPDR S&P International Small
Cap ETF 39,090 990
Vanguard Intermediate-Term
Bond ETF 27,090 2,142
Vanguard Large-Cap ETF 13,098 664
Vanguard Long-Term Bond
ETF 26,076 1,986
Vanguard Short-Term Bond
ETF 52,020 4,138
Vanguard Small-Cap Value
ETF 24,178 1,317
Vanguard Value ETF 41,430 1,978
-------------
TOTAL EXCHANGE-TRADED FUNDS
(IDENTIFIED COST $16,386) 18,188
-------------
MUTUAL FUNDS--40.9%
JPMorgan Short Duration Bond
Fund 380,809 4,132
Phoenix Capital Growth
Series(11) 51,359 659
Phoenix Mid-Cap Growth
Series(11) 94,560 1,142
Phoenix-Aberdeen International
Series(11) 147,256 2,188
Sentinel Common Stock
Fund 130,610 3,607
Sentinel Government Securities
Fund 171,833 1,820
-------------
TOTAL MUTUAL FUNDS
(IDENTIFIED COST $12,266) 13,548
-------------
TOTAL LONG-TERM INVESTMENTS--95.8%
(IDENTIFIED COST $28,652) 31,736
-------------
SHARES VALUE
-------------- -------------
SHORT-TERM INVESTMENTS--3.7%
MONEY MARKET MUTUAL FUNDS--3.7%
Dreyfus Cash Management Fund -
Institutional Shares (seven-day
effective yield 0.080%) 1,221,743 $ 1,222
-------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $1,222) 1,222
-------------
TOTAL INVESTMENTS--99.5%
(IDENTIFIED COST $29,874) 32,958(1)
-------------
Other assets and liabilities, net--0.5% 154
-------------
NET ASSETS--100.0% $ 33,112
=============
The following table provides a summary of inputs used to value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Level 1 -
Value at Quoted
December 31, 2009 Prices
----------------- ---------
INVESTMENTS IN SECURITIES:
Equity Securities:
Exchange-Traded Funds $ 18,188 $ 18,188
Mutual Funds 13,548 13,548
Short-Term Investments 1,222 1,222
----------------- ---------
Total $ 32,958 $ 32,958
================= =========
There are no Level 2 (Significant Observable Inputs) and Level 3 (Significant
Unobservable Inputs) priced securities.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
47
PHOENIX DYNAMIC ASSET ALLOCATION SERIES: MODERATE GROWTH
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
-------------- -------------
EXCHANGE-TRADED FUNDS--53.4%
iShares Barclays Treasury
Inflation Protected Securities Bond Fund 18,769 $ 1,950
iShares S&P Developed Ex-U.S.
Property Index Fund 18,682 573
iShares S&P Global
Infrastructure Index Fund 25,052 854
iShares S&P GSCI Commodity
Index Trust (2) 36,390 1,158
SPDR S&P International Small Cap ETF 45,150 1,144
Vanguard Emerging Markets ETF 13,890 570
Vanguard Intermediate-Term Bond ETF 19,999 1,581
Vanguard Large-Cap ETF 14,277 723
Vanguard Long-Term Bond ETF 13,414 1,022
Vanguard Short-Term Bond ETF 30,040 2,389
Vanguard Small-Cap Value ETF 33,068 1,802
Vanguard Value ETF 38,470 1,837
-------------
TOTAL EXCHANGE-TRADED FUNDS
(IDENTIFIED COST $14,252) 15,603
-------------
MUTUAL FUNDS--43.6%
JPMorgan Short Duration Bond Fund 206,980 2,246
Phoenix Capital Growth Series(11) 78,966 1,013
Phoenix Mid-Cap Growth Series(11) 111,659 1,349
Phoenix-Aberdeen International Series(11) 172,651 2,567
Phoenix-Duff & Phelps Real
Estate Securities Series(11) 45,387 919
Sentinel Common Stock Fund 122,325 3,378
Sentinel Government Securities Fund 120,328 1,274
-------------
TOTAL MUTUAL FUNDS
(IDENTIFIED COST $11,062) 12,746
-------------
TOTAL LONG-TERM INVESTMENTS--97.0%
(IDENTIFIED COST $25,314) 28,349
-------------
SHARES VALUE
-------------- -------------
SHORT-TERM INVESTMENTS--2.2%
MONEY MARKET MUTUAL FUNDS--2.2%
Dreyfus Cash Management Fund -
Institutional Shares (seven-day
effective yield 0.080%) 657,193 $ 657
-------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $657) 657
-------------
TOTAL INVESTMENTS--99.2%
(IDENTIFIED COST $25,971) 29,006(1)
-------------
Other assets and liabilities, net--0.8% 230
-------------
NET ASSETS--100.0% $ 29,236
=============
The following table provides a summary of inputs used to value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Level 1
Value at Quoted
December 31, 2009 Prices
----------------- -------
INVESTMENTS IN SECURITIES:
Equity Securities:
Exchange-Traded Funds $15,603 $15,603
Mutual Funds 12,746 12,746
Short-Term Investments 657 657
------- -------
Total $29,006 $29,006
======= =======
There are no Level 2 (Significant Observable Inputs) and Level 3 (Significant
Unobservable Inputs) priced securities.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
48
PHOENIX GROWTH AND INCOME SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
-------------- -------------
COMMON STOCKS--97.3%
CONSUMER DISCRETIONARY--5.4%
McDonald's Corp. 31,000 $ 1,936
NIKE, Inc. Class B 30,000 1,982
Under Armour, Inc. Class A(2) 35,000 954
-------------
4,872
-------------
CONSUMER STAPLES--12.5%
Altria Group, Inc. 94,000 1,845
Bunge Ltd. 28,300 1,807
Clorox Co. (The) 32,000 1,952
Costco Wholesale Corp. 34,000 2,012
PepsiCo, Inc. 31,000 1,885
Philip Morris International, Inc. 38,000 1,831
-------------
11,332
-------------
ENERGY--16.9%
Chevron Corp. 25,000 1,925
ConocoPhillips 36,000 1,838
Halliburton Co. 63,000 1,896
Massey Energy Co. 41,000 1,722
Occidental Petroleum Corp. 26,000 2,115
Petroleo Brasileiro SA ADR 42,000 2,003
Valero Energy Corp. 100,000 1,675
Williams Cos., Inc. (The) 98,000 2,066
-------------
15,240
-------------
FINANCIALS--4.1%
Goldman Sachs Group, Inc. (The) 11,000 1,857
Hudson City Bancorp, Inc. 131,700 1,809
-------------
3,666
-------------
HEALTH CARE--12.8%
Biogen Idec, Inc.(2) 39,000 2,086
Gilead Sciences, Inc.(2) 40,000 1,731
Johnson & Johnson 31,200 2,010
Shire plc ADR 34,000 1,996
St. Jude Medical, Inc.(2) 45,000 1,655
UnitedHealth Group, Inc. 67,000 2,042
-------------
11,520
-------------
INDUSTRIALS--12.3%
Caterpillar, Inc. 20,000 1,140
Continental Airlines, Inc. Class B(2) 119,000 2,132
Dryships, Inc.(2) 306,000 1,781
Foster Wheeler AG(2) 61,000 1,796
L-3 Communications Holdings, Inc. 23,000 2,000
Union Pacific Corp. 35,000 2,236
-------------
11,085
-------------
SHARES VALUE
-------------- -------------
INFORMATION TECHNOLOGY--18.0%
Cisco Systems, Inc.(2) 96,000 $ 2,298
Corning, Inc. 102,000 1,970
Hewlett-Packard Co. 38,000 1,957
International Business Machines Corp. 17,200 2,252
Microsoft Corp. 65,000 1,982
Nokia Oyj Sponsored ADR 133,700 1,718
QUALCOMM, Inc. 41,700 1,929
Research In Motion Ltd.(2) 32,000 2,161
-------------
16,267
-------------
MATERIALS--8.9%
Alcoa, Inc. 99,000 1,596
Freeport-McMoRan Copper & Gold, Inc.(2) 31,000 2,489
Nucor Corp. 40,000 1,866
Potash Corp. of Saskatchewan, Inc. 19,000 2,061
-------------
8,012
-------------
TELECOMMUNICATION SERVICES--4.4%
AT&T, Inc. 71,000 1,990
Verizon Communications, Inc. 61,000 2,021
-------------
4,011
-------------
UTILITIES--2.0%
Exelon Corp.(2) 38,000 1,857
-------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $66,531) 87,862
-------------
EXCHANGE-TRADED FUNDS--1.9%
PowerShares Deutsche Bank
Agriculture Fund(2) 64,400 1,702
-------------
TOTAL EXCHANGE-TRADED FUNDS
(IDENTIFIED COST $1,605) 1,702
-------------
TOTAL LONG-TERM INVESTMENTS--99.2%
(IDENTIFIED COST $68,136) 89,564
-------------
SHORT-TERM INVESTMENTS--0.8%
MONEY MARKET MUTUAL FUNDS--0.8%
Dreyfus Cash Management Fund -
Institutional Shares (seven-day
effective yield 0.080%) 758,587 759
-------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $759) 759
-------------
TOTAL INVESTMENTS--100.0%
(IDENTIFIED COST $68,895) 90,323(1)
-------------
Other assets and liabilities, net--0.0% (23)
-------------
NET ASSETS--100.0% $ 90,300
=============
COUNTRY WEIGHTINGS as of 12/31/09+
United States 81%
Canada 5
Bermuda 4
Brazil 2
Greece 2
Switzerland 2
United Kingdom 2
Other 2
---
Total 100%
===
+ % of total investments as of December 31, 2009
The following table provides a summary of inputs used to value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Level 1 -
Value at Quoted
December 31, 2009 Prices
----------------- ---------
INVESTMENTS IN SECURITIES:
Equity Securities:
Common Stocks $87,862 $87,862
Exchange-Traded Funds 1,702 1,702
Short-Term Investments 759 759
------- -------
Total $90,323 $90,323
======= =======
There are no Level 2 (Significant Observable Inputs) and Level 3 (Significant
Unobservable Inputs) priced securities.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
49
PHOENIX MID-CAP GROWTH SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
------------ ------------
COMMON STOCKS--99.1%
CONSUMER DISCRETIONARY--20.1%
Bally Technologies, Inc.(2) 5,500 $ 227
Bed Bath & Beyond, Inc.(2) 12,300 475
Cablevision Systems Corp. Class A 8,000 207
CarMax, Inc.(2) 13,500 327
Coach, Inc. 7,500 274
Crew (J.) Group, Inc.(2) 8,750 391
DeVry, Inc. 8,900 505
Discovery Communications, Inc. Class A(2) 7,000 215
Dollar Tree, Inc.(2) 9,500 459
DreamWorks Animation SKG, Inc. Class A(2) 9,000 360
Marriott International, Inc. Class A 8,186 223
Nordstrom, Inc. 13,700 515
Penn National Gaming, Inc.(2) 19,500 530
Polo Ralph Lauren Corp. 1,500 121
priceline.com, Inc.(2) 2,000 437
Ross Stores, Inc. 17,000 726
Royal Caribbean Cruises Ltd.(2) 8,000 202
Scripps Networks Interactive, Inc. Class A 5,500 228
Strayer Education, Inc. 2,800 595
Tiffany & Co. 4,000 172
TJX Cos., Inc. (The) 12,200 446
Urban Outfitters, Inc.(2) 30,000 1,050
Williams-Sonoma, Inc. 14,200 295
WMS Industries, Inc.(2) 23,000 920
------------
9,900
------------
CONSUMER STAPLES--3.1%
Avon Products, Inc. 8,500 268
Church & Dwight Co., Inc. 7,700 465
Mead Johnson Nutrition Co. Class A 12,300 538
Smucker (J.M.) Co. (The) 4,500 278
------------
1,549
------------
ENERGY--8.6%
Alpha Natural Resources, Inc.(2) 4,500 195
Cabot Oil & Gas Corp. 8,000 349
CARBO Ceramics, Inc. 9,600 654
Concho Resources, Inc.(2) 21,100 947
Core Laboratories N.V. 4,400 520
Oceaneering International, Inc.(2) 5,000 293
Range Resources Corp. 12,600 628
Southwestern Energy Co.(2) 13,700 660
------------
4,246
------------
SHARES VALUE
------------ ------------
FINANCIALS--4.6%
Affiliated Managers Group, Inc.(2) 7,000 $ 472
Artio Global Investors, Inc.(2) 8,000 204
IntercontinentalExchange, Inc.(2) 4,750 533
Invesco Ltd. 21,000 493
MSCI, Inc. Class A(2) 18,000 572
------------
2,274
------------
HEALTH CARE--13.5%
Alexion Pharmaceuticals, Inc.(2) 10,500 513
Allscripts-Misys Healthcare Solutions, Inc.(2) 17,500 354
BioMarin Pharmaceutical, Inc.(2) 9,000 169
Dendreon Corp.(2) 7,000 184
Edwards Lifesciences Corp.(2) 5,500 478
Express Scripts, Inc.(2) 9,800 847
HMS Holdings Corp.(2) 8,750 426
Human Genome Sciences, Inc.(2) 13,000 398
Intuitive Surgical, Inc.(2) 1,000 303
Masimo Corp.(2) 6,000 183
MedAssets, Inc.(2) 12,000 255
Mylan, Inc.(2) 21,500 396
NuVasive, Inc.(2) 10,500 336
PSS World Medical, Inc.(2) 10,000 226
ResMed, Inc.(2) 5,000 261
Sirona Dental Systems, Inc.(2) 8,000 254
Talecris Biotherapeutics Holdings Corp.(2) 20,000 445
Vertex Pharmaceuticals, Inc.(2) 10,000 428
Volcano Corp.(2) 13,000 226
------------
6,682
------------
INDUSTRIALS--15.8%
Ametek, Inc. 16,500 631
Danaher Corp. 7,800 587
Expeditors International of Washington, Inc. 11,000 382
Fastenal Co. 15,000 625
Flowserve Corp. 4,000 378
Grainger (W.W.), Inc. 5,000 484
Hunt (J.B.) Transport Services, Inc. 14,200 458
IHS, Inc. Class A(2) 12,800 702
Precision Castparts Corp. 6,100 673
Robinson (C.H.) Worldwide, Inc. 12,600 740
Rockwell Collins, Inc. 6,500 360
Roper Industries, Inc. 8,000 419
Stericycle, Inc.(2) 15,000 827
Verisk Analytics, Inc. Class A(2) 17,500 530
------------
7,796
------------
SHARES VALUE
------------ ------------
INFORMATION TECHNOLOGY--24.6%
Activision Blizzard, Inc.(2) 42,500 $ 472
Alliance Data Systems Corp.(2) 4,000 258
Amphenol Corp. Class A 11,000 508
Analog Devices, Inc. 15,000 474
ANSYS, Inc.(2) 15,000 652
Avago Technologies Ltd.(2) 18,500 338
Citrix Systems, Inc.(2) 6,000 250
Cognizant Technology Solutions Corp. Class A(2) 12,500 566
Dolby Laboratories, Inc. Class A(2) 13,000 621
Equinix, Inc.(2) 5,600 595
GSI Commerce, Inc.(2) 7,500 190
Juniper Networks, Inc.(2) 19,500 520
Marvell Technology Group Ltd.(2) 28,300 587
McAfee, Inc.(2) 7,700 312
Microchip Technology, Inc. 21,000 610
MICROS Systems, Inc.(2) 7,300 227
National Instruments Corp. 13,000 383
NetApp, Inc.(2) 12,500 430
Novellus Systems, Inc.(2) 11,500 268
Rovi Corp.(2) 14,000 446
Salesforce.com, Inc.(2) 4,000 295
Silicon Laboratories, Inc.(2) 12,200 590
Solera Holdings, Inc. 4,000 144
Sybase, Inc.(2) 9,500 412
Trimble Navigation Ltd.(2) 17,500 441
Varian Semiconductor Equipment Associates,
Inc.(2) 9,800 352
VistaPrint NV(2) 14,000 793
Western Digital Corp.(2) 9,500 420
------------
12,154
------------
MATERIALS--4.4%
Airgas, Inc. 16,500 786
Cliffs Natural Resources, Inc. 8,500 392
Ecolab, Inc. 16,000 713
Nalco Holding Co. 10,000 255
------------
2,146
------------
TELECOMMUNICATION SERVICES--4.4%
American Tower Corp. Class A(2) 13,000 562
Crown Castle International Corp.(2) 7,000 273
NII Holdings, Inc.(2) 9,500 318
SBA Communications Corp. Class A(2) 30,200 1,032
------------
2,187
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $40,399) 48,932
------------
TOTAL LONG-TERM INVESTMENTS--99.1%
(IDENTIFIED COST $40,399) 48,932
------------
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
50
PHOENIX MID-CAP GROWTH SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
------------ ------------
SHORT-TERM INVESTMENTS--1.1%
MONEY MARKET MUTUAL FUNDS--1.1%
Dreyfus Cash Management Fund -
Institutional Shares (seven-day effective
yield 0.080%) 544,280 $ 544
------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $544) 544
------------
TOTAL INVESTMENTS--100.2%
(IDENTIFIED COST $40,943) 49,476(1)
------------
Other assets and liabilities, net--(0.2)% (76)
------------
NET ASSETS--100.0% $ 49,400
============
COUNTRY WEIGHTINGS as of 12/31/09+
United States 94%
Netherlands 3
Bermuda 2
Singapore 1
---
Total 100%
---
+ % of total investments as of December 31, 2009
The following table provides a summary of inputs used to value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Level 1 -
Value at Quoted
December 31, 2009 Prices
----------------- ---------
INVESTMENTS IN SECURITIES:
Equity Securities:
Common Stocks $48,932 $48,932
Short-Term Investments 544 544
------- -------
Total $49,476 $49,476
======= =======
There are no Level 2 (Significant Observable Inputs) and Level 3 (Significant
Unobservable Inputs) priced securities.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
51
PHOENIX MID-CAP VALUE SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
-------------- -------------
COMMON STOCKS--99.9%
CONSUMER DISCRETIONARY--7.3%
BorgWarner, Inc. 69,700 $ 2,316
Broadview Security, Inc.(2) 70,900 2,314
Gentex Corp. 135,200 2,413
Tupperware Brands Corp. 24,500 1,141
-------------
8,184
-------------
CONSUMER STAPLES--11.3%
Alberto-Culver Co. 82,500 2,416
BJ's Wholesale Club, Inc.(2) 62,500 2,044
Dr. Pepper Snapple Group, Inc. 79,400 2,247
Mead Johnson Nutrition Co. Class A 48,300 2,111
Molson Coors Brewing Co. Class B 34,300 1,549
Smucker (J.M.) Co. (The) 37,600 2,322
-------------
12,689
-------------
ENERGY--6.4%
Cabot Oil & Gas Corp. 56,800 2,476
Plains Exploration & Production Co.(2) 75,000 2,074
Southern Union Co. 113,300 2,572
-------------
7,122
-------------
FINANCIALS--21.7%
AXIS Capital Holdings Ltd. 70,700 2,009
Commerce Bancshares, Inc. 59,640 2,309
Eaton Vance Corp. 77,200 2,348
Equity Lifestyle Properties, Inc. 28,100 1,418
Everest Re Group Ltd. 24,300 2,082
HCC Insurance Holdings, Inc. 81,900 2,291
Healthcare Realty Trust, Inc. 55,600 1,193
Hudson City Bancorp, Inc. 168,700 2,316
Lazard Ltd. Class A 58,300 2,214
People's United Financial, Inc. 130,700 2,183
Safety Insurance Group, Inc. 28,800 1,043
Transatlantic Holdings, Inc. 22,600 1,178
Willis Group Holdings Ltd. 65,400 1,725
-------------
24,309
-------------
HEALTH CARE--11.0%
Cephalon, Inc.(2) 19,800 1,236
CONMED Corp.(2) 53,300 1,215
DENTSPLY International, Inc. 61,900 2,177
SHARES VALUE
-------------- -------------
HEALTH CARE--CONTINUED
Laboratory Corp. of America Holdings(2) 31,100 $ 2,327
Natus Medical, Inc.(2) 40,300 596
Talecris Biotherapeutics Holdings Corp.(2) 110,600 2,463
Universal Health Services, Inc.
Class B 73,400 2,239
-------------
12,253
-------------
INDUSTRIALS--12.3%
AGCO Corp.(2) 69,800 2,257
Alexander & Baldwin, Inc. 67,700 2,317
Alliant Techsystems, Inc.(2) 25,200 2,224
Gardner Denver, Inc. 30,400 1,294
Manpower, Inc. 14,800 808
Navistar International Corp.(2) 64,600 2,497
URS Corp.(2) 52,000 2,315
-------------
13,712
-------------
INFORMATION TECHNOLOGY--13.8%
Altera Corp. 59,400 1,344
Amphenol Corp. Class A 29,700 1,372
CACI International, Inc. Class A(2) 46,500 2,272
CommScope, Inc.(2) 86,900 2,305
FactSet Research Systems, Inc. 15,600 1,028
McAfee, Inc.(2) 56,400 2,288
Sybase, Inc.(2) 56,500 2,452
Total System Services, Inc. 133,900 2,312
-------------
15,373
-------------
MATERIALS--10.7%
Airgas, Inc. 47,600 2,266
Albemarle Corp. 62,700 2,280
Allegheny Technologies, Inc. 29,700 1,330
AptarGroup, Inc. 63,400 2,266
Cliffs Natural Resources, Inc. 30,200 1,392
Eastman Chemical Co. 41,200 2,482
-------------
12,016
-------------
UTILITIES--5.4%
DPL, Inc. 83,700 2,310
DTE Energy Co. 30,000 1,308
Wisconsin Energy Corp. 47,700 2,377
-------------
5,995
-------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $87,967) 111,653
-------------
TOTAL LONG-TERM INVESTMENTS--99.9%
(IDENTIFIED COST $87,967) 111,653
-------------
SHARES VALUE
-------------- -------------
SHORT-TERM INVESTMENTS--0.3%
MONEY MARKET MUTUAL FUNDS--0.3%
Dreyfus Cash Management Fund -
Institutional Shares (seven-day
effective yield 0.080%) 347,394 $ 347
-------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $347) 347
-------------
TOTAL INVESTMENTS--100.2%
(IDENTIFIED COST $88,314) 112,000(1)
-------------
Other Assets and Liabilities--(0.2)% (182)
-------------
NET ASSETS--100.0% $ 111,818
=============
COUNTRY WEIGHTINGS as of 12/31/09+
United States 93%
Bermuda 7
---
Total 100%
---
+ % of total investments as of December 31, 2009
The following table provides a summary of inputs used to value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total
Value at Level 1 -
December 31, Quoted
2009 Prices
------------ ----------
INVESTMENTS IN SECURITIES:
Equity Securities:
Common Stocks $111,653 $111,653
Short-Term Investments 347 347
-------- --------
Total $112,000 $112,000
======== ========
There are no Level 2 (Significant Observable Inputs) and Level 3 (Significant
Unobservable Inputs) priced securities.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
SEE NOTES TO FINANCIAL STATEMENTS
52
PHOENIX MONEY MARKET SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
FACE
VALUE VALUE
-------------- -------------
U.S. TREASURY BILLS(10)--13.3%
U.S. Treasury Bills
0.060%, 1/28/10 $ 15,000 $ 14,999
0.100%, 4/1/10 6,200 6,199
-------------
TOTAL U.S. TREASURY BILLS
(IDENTIFIED COST $21,198) 21,198
-------------
FEDERAL AGENCY SECURITIES(10)--71.8%
FHLB
0.090%, 1/11/10 150 150
0.030%, 1/13/10 2,260 2,260
0.090%, 1/13/10 3,500 3,500
0.010%, 1/20/10 2,600 2,600
0.030%, 1/20/10 11,155 11,155
0.065%, 1/20/10 3,055 3,055
0.075%, 1/20/10 2,145 2,145
0.080%, 1/20/10 2,975 2,975
0.100%, 1/21/10 2,000 2,000
0.020%, 1/22/10 2,000 2,000
0.035%, 1/22/10 3,505 3,505
0.045%, 1/22/10 3,330 3,330
0.070%, 1/22/10 3,150 3,150
0.080%, 1/22/10 2,080 2,080
FHLMC
0.020%, 1/4/10 2,780 2,780
0.020%, 1/5/10 3,500 3,500
0.090%, 1/11/10 2,100 2,100
0.020%, 1/19/10 3,585 3,585
0.020%, 1/20/10 2,100 2,100
0.065%, 1/20/10 1,700 1,700
0.025%, 1/25/10 5,000 5,000
0.120%, 1/25/10 2,150 2,150
0.030%, 2/2/10 4,125 4,125
0.050%, 2/3/10 2,000 2,000
0.045%, 2/8/10 1,710 1,710
0.060%, 2/16/10 3,500 3,499
FNMA
0.025%, 1/13/10 4,800 4,800
0.020%, 1/19/10 2,163 2,163
0.070%, 1/19/10 7,775 7,774
0.070%, 1/20/10 2,505 2,505
0.090%, 1/20/10 4,325 4,325
0.100%, 1/20/10 4,205 4,204
0.090%, 1/21/10 3,785 3,785
0.050%, 1/22/10 2,870 2,870
0.080%, 1/22/10 4,135 4,135
-------------
TOTAL FEDERAL AGENCY SECURITIES
(IDENTIFIED COST $114,715) 114,715
-------------
FACE
VALUE VALUE
-------------- -------------
FEDERAL AGENCY SECURITIES--VARIABLE(3)(14)--0.5%
SBA (Final Maturity 2/25/23)
0.750%, 1/1/10 $ 99 $ 99
SBA (Final Maturity 1/25/21)
0.750%, 1/1/10 12 12
SBA (Final Maturity 10/25/22)
0.750%, 1/1/10 195 195
SBA (Final Maturity 11/25/21)
0.875%, 1/1/10 181 181
SBA (Final Maturity 2/25/23)
0.750%, 1/1/10 129 129
SBA (Final Maturity 3/25/24)
0.625%, 1/1/10 56 56
SBA (Final Maturity 5/25/21)
0.750%, 1/1/10 53 53
-------------
TOTAL FEDERAL AGENCY SECURITIES--VARIABLE
(IDENTIFIED COST $725) 725
-------------
COMMERCIAL PAPER(10)--13.7%
Abbott Laboratories
0.100%, 1/5/10 2,500 2,500
Cargill, Inc.
0.110%, 1/20/10 885 885
0.130%, 1/22/10 3,500 3,500
Coca-Cola Enterprises, Inc.
0.120%, 2/22/10 3,000 2,999
Emerson Electric Co.
0.100%, 1/14/10 4,405 4,405
Philip Morris International, Inc.
0.100%, 1/22/10 3,000 3,000
0.110%, 1/22/10 1,690 1,690
Toyota Motor Credit Corp.
0.150%, 1/25/10 2,955 2,954
-------------
TOTAL COMMERCIAL PAPER
(IDENTIFIED COST $21,933) 21,933
-------------
TOTAL INVESTMENTS--99.3%
(IDENTIFIED COST $158,571) 158,571(1)
-------------
Other assets and liabilities, net--0.7% 1,150
-------------
NET ASSETS--100.0% $ 159,721
=============
The following table provides a summary of inputs used to value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Level 2 -
Value at Significant
December 31, Observable
2009 Inputs
------------ -----------
INVESTMENTS IN SECURITIES:
Debt Securities:
U.S. Government & Agency
Obligations $136,638 $136,638
Corporate Debt 21,933 21,933
-------- --------
Total $158,571 $158,571
======== ========
There are no Level 1 (quoted prices) or Level 3 (Significant Unobservable
Inputs) priced securities.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
53
PHOENIX MULTI-SECTOR FIXED INCOME SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
PAR
VALUE VALUE
-------------- -------------
U.S. GOVERNMENT SECURITIES--1.1%
U.S. Treasury Note
2.625%, 12/31/14 $ 2,250 $ 2,243
-------------
TOTAL U.S. GOVERNMENT SECURITIES
(IDENTIFIED COST $2,242) 2,243
-------------
MUNICIPAL BONDS--1.1%
CALIFORNIA--0.7%
Alameda Corridor Transportation
Authority Taxable Series 99-C,
(NATL-RE Insured)
6.600%, 10/1/29 1,750 1,489
-------------
MICHIGAN--0.1%
Tobacco Settlement Finance
Authority Taxable Series 06-A,
7.309%, 6/1/34 225 180
-------------
SOUTH DAKOTA--0.1%
Educational Enhancement Funding
Corp. Taxable Series 02-A,
6.720%, 6/1/25 218 191
-------------
VIRGINIA--0.2%
Tobacco Settlement Financing
Corp. Taxable Series 07-A1,
6.706%, 6/1/46 580 418
-------------
TOTAL MUNICIPAL BONDS
(IDENTIFIED COST $2,692) 2,278
-------------
FOREIGN GOVERNMENT SECURITIES--14.7%
Bolivarian Republic of Venezuela
9.250%, 9/15/27 295 217
9.375%, 1/13/34 850 576
Commonwealth of Australia
Series 121,
5.250%, 8/15/10 3,992 AUD 3,608
Commonwealth of Canada
2.750%, 12/1/10 2,611 CND 2,544
Commonwealth of New Zealand
Series 1111,
6.000%, 11/15/11 3,213 NZD 2,403
Federative Republic of Brazil
12.500%, 1/5/22 1,875 BRL 1,209
10.250%, 1/10/28 5,240 BRL 3,002
Kingdom of Norway
6.000%, 5/16/11 13,900 NOK 2,515
Republic of Argentina
PIK Interest Capitalization
8.280%, 12/31/33 4,428 3,332
Series GDP
3.169%, 12/15/35(3) 5,490 380
Republic of Colombia
12.000%, 10/22/15 1,935,000 COP 1,166
Republic of Indonesia
Series FR-23,
11.000%, 12/15/12 11,000,000 IDR 1,251
Series FR-30,
10.750%, 5/15/16 5,250,000 IDR 602
RegS
6.625%, 2/17/37(5) 1,385 1,362
Republic of Korea Series 1112,
4.750%, 12/10/11 600,000 KRW 519
PAR
VALUE VALUE
-------------- -------------
Republic of Poland
Series 0414,
5.750%, 4/25/14 1,450 PLZ $ 507
6.375%, 7/15/19 $ 80 87
Republic of South Africa
Series R-201
8.750%, 12/21/14 9,025 ZAR 1,236
Republic of Turkey
0.000%, 2/2/11 2,315 TRY 1,420
Republic of Ukraine 144A
6.580%, 11/21/16(4) 750 566
Russian Federation RegS
7.500%, 3/31/30(3)(5) 1,504 1,698
-------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(IDENTIFIED COST $25,810) 30,200
-------------
MORTGAGE-BACKED SECURITIES--11.1%
AGENCY--0.4%
FNMA
4.500%, 8/1/39 742 742
-------------
NON-AGENCY--10.7%
American Tower Trust 07-1A,
C 144A
5.615%, 4/15/37(4) 500 510
Bear Stearns Commercial
Mortgage Securities
06-PW12, A4
5.719%, 9/11/38(3) 1,545 1,569
06-PW14, A4
5.201%, 12/11/38 650 625
05-PW10, A4
5.405%, 12/11/40(3) 1,750 1,715
05-T20, A4A
5.150%, 10/12/42(3) 475 466
07-PW18, AM
6.084%, 6/11/47(3) 1,475 1,069
Citigroup-Deutsche Bank
Commercial Mortgage
Trust 07-CD4, A4
5.322%, 12/11/50 725 629
Credit Suisse Mortgage Capital
Certificates 06-C1, A3
5.548%, 2/15/39(3) 1,250 1,260
Crown Castle Towers
LLC 05-1A, B 144A
4.878%, 6/15/35(4) 800 808
GE Capital Commercial
Mortgage Corp. 03-C1, C
4.975%, 1/10/38(3) 450 437
GMAC Commercial Mortgage
Securities, Inc. 04-C2, A3
5.134%, 8/10/38 850 847
GS Mortgage Securities
Corp. II 07-GG10, A4
5.805%, 8/10/45(3) 1,090 936
JPMorgan Chase Commercial
Mortgage Securities Corp.
05-LDP5, AM
5.221%, 12/15/44(3) 580 487
06-LDP7, A4
5.875%, 4/15/45(3) 623 600
06-LDP9, A3
5.336%, 5/15/47 850 737
07-LD12, A4
5.882%, 2/15/51(3) 1,000 866
PAR
VALUE VALUE
-------------- -------------
NON-AGENCY--CONTINUED
Lehman Brothers-UBS
Commercial Mortgage Trust
07-C2, H 144A
5.992%, 2/15/40(3)(4) $ 1,400 $ 178
05-C3, AM
4.794%, 7/15/40 600 506
07-C7, A3
5.866%, 9/15/45(3) 600 527
Merrill Lynch-Countrywide
Commercial Mortgage
Trust 06-4, A3
5.172%, 12/12/49(3) 1,100 972
Morgan Stanley Capital I
05-HQ5, A3
5.007%, 1/14/42 850 856
06-IQ12, A4
5.332%, 12/15/43 1,300 1,206
07-IQ14, A4
5.692%, 4/15/49(3) 880 742
Residential Accredit Loans,
Inc. 02-QS12, B1
6.250%, 9/25/32 511 97
Timberstar Trust 06-1A, A
144A
5.668%, 10/15/36(4) 1,275 1,211
Wachovia Bank Commercial
Mortgage Trust
04-C12, A4
5.237%, 7/15/41(3) 825 819
07-C30, A5
5.342%, 12/15/43 770 596
07-C33, A4
5.902%, 2/15/51(3) 1,000 821
-------------
22,092
-------------
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $23,092) 22,834
-------------
ASSET-BACKED SECURITIES--1.9%
Bombardier Capital Mortgage
Securitization Corp. 99-A, A3
5.980%, 1/15/18(3) 770 650
Carmax Auto Owner Trust
07-2, B
5.370%, 3/15/13 600 607
Conseco Finance Securitizations
Corp. 01-3, A4
6.910%, 5/1/33(3) 1,139 1,092
Dunkin Securitization 06-1,
M1 144A
8.285%, 6/20/31(4) 1,100 930
FMAC Loan Receivables
Trust 98-CA, A2 144A
6.660%, 9/15/20(4) 43 42
Harley-Davidson Motorcycle
Trust 07-2, C
5.410%, 8/15/15 700 697
-------------
TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $4,151) 4,018
-------------
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
54
PHOENIX MULTI-SECTOR FIXED INCOME SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
PAR
VALUE VALUE
-------------- -------------
CORPORATE BONDS--55.1%
CONSUMER DISCRETIONARY--5.0%
American Axle & Manufacturing
Holdings, Inc. 144A
9.250%, 1/15/17(4) $ 300 $ 306
Ameristar Casinos, Inc. 144A
9.250%, 6/1/14(4) 82 85
Blockbuster, Inc. 144A
11.750%, 10/1/14(4) 659 629
COX Communications, Inc. 144A
8.375%, 3/1/39(4) 650 809
DigitalGlobe, Inc. 144A
10.500%, 5/1/14(4) 100 107
DIRECTV Holdings LLC/DIRECTV
Financing Co., Inc.
6.375%, 6/15/15 1,000 1,039
DuPont Fabros Technology LP
144A
8.500%, 12/15/17(4) 550 562
Eastman Kodak Co.
7.250%, 11/15/13 290 239
Ford Motor Credit Co. LLC
8.000%, 6/1/14 635 653
Hasbro, Inc.
6.300%, 9/15/17 475 503
International Game Technology
7.500%, 6/15/19 140 152
Landry's Restaurants, Inc. 144A
11.625%, 12/1/15(4) 466 496
Mediacom LLC/Mediacom
Capital Corp. 144A
9.125%, 8/15/19(4) 250 256
MGM MIRAGE 144A
11.125%, 5/15/17(4) 275 306
Mobile Mini, Inc.
6.875%, 5/1/15 250 237
Pokagon Gaming Authority 144A
10.375%, 6/15/14(4) 117 122
QVC, Inc. 144A
7.500%, 10/1/19(4) 280 287
Royal Caribbean Cruises Ltd.
6.875%, 12/1/13 1,250 1,234
SABMiller plc 144A
6.625%, 8/15/33(4) 75 77
Scientific Games Corp. 144A
7.875%, 6/15/16(4) 100 101
Scientific Games International, Inc.
9.250%, 6/15/19 230 243
Seminole Hard Rock Entertainment,
Inc./Seminole Hard Rock
International LLC 144A
2.754%, 3/15/14(3)(4) 125 104
Seneca Gaming Corp. Series B
7.250%, 5/1/12 20 20
Starwood Hotels & Resorts
Worldwide, Inc.
7.150%, 12/1/19 150 150
Time Warner Cable, Inc.
6.750%, 7/1/18 650 714
Toys R US Property Co.,
LLC 144A
8.500%, 12/1/17(4) 400 409
PAR
VALUE VALUE
-------------- -------------
CONSUMER DISCRETIONARY--CONTINUED
TRW Automotive Holdings
Corp. 144A
8.875%, 12/1/17(4) $ 80 $ 84
Videotron Ltee
6.375%, 12/15/15 300 295
9.125%, 4/15/18 83 92
-------------
10,311
-------------
CONSUMER STAPLES--2.9%
BAT International Finance plc
144A
9.500%, 11/15/18(4) 180 228
Bunge Limited Finance Corp.
8.500%, 6/15/19 250 285
Constellation Brands, Inc.
8.375%, 12/15/14 280 300
Dean Holding Co.
6.900%, 10/15/17 50 48
Georgia-Pacific LLC 144A
7.125%, 1/15/17(4) 1,400 1,424
Reynolds American, Inc.
7.300%, 7/15/15 750 810
7.625%, 6/1/16 600 654
Tyson Foods, Inc.
10.500%, 3/1/14 60 69
7.850%, 4/1/16 325 335
UST, Inc.
5.750%, 3/1/18 500 488
Yankee Acquisition Corp.
Series B,
8.500%, 2/15/15 625 623
Series B,
9.750%, 2/15/17 815 807
-------------
6,071
-------------
ENERGY--7.0%
Antero Resources Finance
Corp. 144A
9.375%, 12/1/17(4) 250 256
Buckeye Partners LP
6.050%, 1/15/18 390 404
Cloud Peak Energy Resources
LLC/Cloud Peak Energy Finance
Corp. 144A
8.250%, 12/15/17(4) 80 80
Denbury Resources, Inc.
7.500%, 12/15/15 930 932
Expro Finance Luxembourg
SCA 144A
8.500%, 12/15/16(4) 630 629
Gazprom International SA
144A
7.201%, 2/1/20(4) 696 710
Gazprom OAO (Gaz Capital SA)
144A
6.212%, 11/22/16(4) 1,530 1,465
144A
8.146%, 4/11/18(4) 145 153
144A
6.510%, 3/7/22(4) 520 477
PAR
VALUE VALUE
-------------- -------------
ENERGY--CONTINUED
Helix Energy Solutions Group,
Inc. 144A
9.500%, 1/15/16(4) $ 400 $ 412
KazMunaiGaz Finance Sub BV
144A
9.125%, 7/2/18(4) 600 666
Kern River Funding Corp. 144A
4.893%, 4/30/18(4) 67 67
Kinder Morgan Energy
Partners LP
6.850%, 2/15/20 195 216
Kinder Morgan Finance Co.
5.700%, 1/5/16 700 676
Korea National Oil Corp. 144A
5.375%, 7/30/14(4) 280 296
NuStar PipeLine Operating
Partnership LP
5.875%, 6/1/13 125 129
OPTI Canada, Inc.
7.875%, 12/15/14 400 330
Petro-Canada
6.050%, 5/15/18 240 258
Petrohawk Energy Corp.
10.500%, 8/1/14 875 960
Petroleos de Venezuela S.A.
5.250%, 4/12/17 1,500 829
Pride International, Inc.
8.500%, 6/15/19 525 606
Questar Market Resources, Inc.
6.800%, 3/1/20 300 313
Smith International, Inc.
9.750%, 3/15/19 380 481
Swift Energy Co.
8.875%, 1/15/20 500 515
TengizChevroil Finance Co.
S.A.R.L. 144A
6.124%, 11/15/14(4) 715 715
Venoco, Inc. 144A
11.500%, 10/1/17(4) 400 422
Weatherford International Ltd.
9.625%, 3/1/19 567 707
Western Refining, Inc. 144A
11.250%, 6/15/17(4) 900 819
-------------
14,523
-------------
FINANCIALS--22.1%
ABH Financial Ltd.
(Alfa Markets Ltd.) 144A
8.200%, 6/25/12(4) 250 251
AFLAC, Inc.
8.500%, 5/15/19 350 403
Agile Property Holdings Ltd. 144A
10.000%, 11/14/16(4) 100 102
Alfa Invest Ltd. 144A
9.250%, 6/24/13(4) 575 581
Allstate Corp.
6.125%, 5/15/37(3) 1,250 1,087
Americo Life, Inc. 144A
7.875%, 5/1/13(4) 200 176
Assurant, Inc.
5.625%, 2/15/14 520 533
6.750%, 2/15/34 75 68
Atlantic Finance Ltd. 144A
8.750%, 5/27/14(4) 650 668
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
55
PHOENIX MULTI-SECTOR FIXED INCOME SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
PAR
VALUE VALUE
-------------- -------------
FINANCIALS--CONTINUED
BAC Capital Trust XI
6.625%, 5/23/36 $ 525 $ 476
Banco do Brasil SA 144A
8.500%, 10/29/49(4) 200 213
Bank of America Corp.
5.420%, 3/15/17 600 592
Series K,
8.000%, 12/29/49(3) 625 602
Barclays Bank plc
6.750%, 5/22/19 540 602
BBVA International Preferred SA
Unipersonal
5.919%, 12/31/49(3) 300 242
Bear Stearns Cos., Inc. LLC
(The)
7.250%, 2/1/18 1,250 1,435
Berkley (W.R.) Corp.
5.875%, 2/15/13 75 76
BlackRock, Inc. Series 2,
5.000%, 12/10/19 425 418
Blackstone Holdings Finance Co.
LLC 144A
6.625%, 8/15/19(4) 340 333
Capital One Bank
5.750%, 9/15/10 125 129
Chubb Corp.
6.375%, 3/29/49(3) 1,250 1,162
Citigroup, Inc.
5.000%, 9/15/14 575 554
4.875%, 5/7/15 1,975 1,862
Deutsche Bank Financial LLC
5.375%, 3/2/15 271 283
Export-Import Bank of Korea
8.125%, 1/21/14 340 395
Farmers Insurance Exchange 144A
8.625%, 5/1/24(4) 75 73
Fifth Third Bancorp
4.500%, 6/1/18 500 408
First Tennessee Bank N.A.
4.625%, 5/15/13 500 465
Ford Motor Credit Co. LLC
7.875%, 6/15/10 615 624
8.625%, 11/1/10 650 669
9.875%, 8/10/11 575 602
Genworth Financial, Inc.
5.750%, 6/15/14 375 359
6.515%, 5/22/18 400 366
Glen Meadow Pass-Through
Trust 144A
6.505%, 2/12/49(3)(4) 840 624
Glencore Funding LLC 144A
6.000%, 4/15/14(4) 1,150 1,177
GMAC, Inc.
144A
7.250%, 3/2/11(4) 791 791
144A
6.875%, 9/15/11(4) 628 625
144A
6.000%, 12/15/11(4) 633 627
Goldman Sachs Group, Inc. (The)
5.950%, 1/18/18 480 507
7.500%, 2/15/19 320 373
PAR
VALUE VALUE
-------------- -------------
FINANCIALS--CONTINUED
HBOs plc 144A
6.750%, 5/21/18(4) $ 200 $ 186
Health Care REIT, Inc.
5.875%, 5/15/15 1,775 1,738
Hertz Corp. (The)
8.875%, 1/1/14 600 616
10.500%, 1/1/16 150 161
Hudson United Bank
7.000%, 5/15/12 80 85
Hyundai Capital Services, Inc.
144A
6.000%, 5/5/15(4) 200 209
ICICI Bank Ltd. 144A
6.375%, 4/30/22(3)(4) 625 563
Jefferies Group, Inc.
5.500%, 3/15/16 225 216
JPMorgan Chase & Co.
6.300%, 4/23/19 850 935
Series 1,
7.900%, 12/31/49(3) 429 442
Kazkommerts International
BV RegS
8.500%, 4/16/13(5) 500 450
8.000%, 11/3/15(5) 1,000 847
KeyBank NA
5.800%, 7/1/14 300 292
Kimco Realty Corp.
6.875%, 10/1/19 300 305
Kingsway America, Inc.
7.500%, 2/1/14 125 71
Korea Development Bank
5.300%, 1/17/13 313 329
Liberty Mutual Group, Inc.
144A
5.750%, 3/15/14(4) 200 197
144A
7.000%, 3/15/34(4) 150 129
Liberty Mutual Insurance Co. 144A
8.500%, 5/15/25(4) 25 26
Lincoln National Corp.
8.750%, 7/1/19 285 326
6.050%, 4/20/49(3) 325 255
Lukoil International Finance
BV 144A
7.250%, 11/5/19(4) 300 302
Mack-Cali Realty LP
5.125%, 2/15/14 700 666
Markel Corp.
6.800%, 2/15/13 175 177
Metropolitan Life Global Funding I
144A
5.125%, 6/10/14(4) 140 148
Morgan Stanley
6.000%, 5/13/14 265 285
4.200%, 11/20/14 280 280
144A
10.090%, 5/3/17(4) 1,000 BRL 531
New York Life Insurance Co. 144A
5.875%, 5/15/33(4) 100 92
NYMAGIC, Inc.
6.500%, 3/15/14 150 124
PAR
VALUE VALUE
-------------- -------------
FINANCIALS--CONTINUED
OJSC AK Transneft
(TransCapitalInvest Ltd.)
144A
5.670%, 3/5/14(4) $ 610 $ 615
One Beacon U.S. Holdings
5.875%, 5/15/13 175 175
OneAmerica Financial Partners,
Inc. 144A
7.000%, 10/15/33(4) 175 132
Petroplus Finance Ltd. 144A
6.750%, 5/1/14(4) 500 472
Pinnacle Foods Finance
LLC/Pinnacle Foods Finance
Corp. 144A
9.250%, 4/1/15(4) 75 77
PNC Financial Services Group,
Inc.
8.250%, 5/29/49(3) 650 657
PNC Funding Corp.
5.625%, 2/1/17 500 495
Principal Financial Group, Inc.
8.875%, 5/15/19 1,150 1,327
Progressive Corp. (The)
6.250%, 12/1/32 75 77
ProLogis
6.625%, 5/15/18 275 261
Prudential Financial, Inc.
8.875%, 6/15/38(3) 485 514
Realty Income Corp.
6.750%, 8/15/19 425 416
Regions Financial Corp.
7.750%, 11/10/14 300 296
Resona Bank Ltd. 144A
5.850%, 9/29/49(3)(4) 1,250 1,091
Russian Agricultural Bank
OJSC (RSHB Capital SA)
144A
9.000%, 6/11/14(4) 120 136
144A
6.299%, 5/15/17(4) 615 619
SLM Corp.
5.450%, 4/25/11 250 249
0.636%, 1/31/14(3)(7) 50 39
8.450%, 6/15/18 950 937
Sovereign Bank
8.750%, 5/30/18 600 693
StanCorp Financial Group, Inc.
6.875%, 10/1/12 225 240
TNK-BP Finance SA 144A
7.500%, 3/13/13(4) 425 447
Universal City Development
Partners Ltd.
144A
8.875%, 11/15/15(4) 45 44
144A
10.875%, 11/15/16(4) 150 151
Unum Group
7.125%, 9/30/16 250 259
UOB Cayman Ltd. 144A
5.796%, 12/29/49(3)(4) 700 636
Wachovia Bank
5.000%, 8/15/15 300 307
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
56
PHOENIX MULTI-SECTOR FIXED INCOME SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
PAR
VALUE VALUE
-------------- -------------
FINANCIALS--CONTINUED
Woori Bank 144A
6.125%, 5/3/16(3)(4) $ 1,000 $ 996
XL Capital Ltd.
5.250%, 9/15/14 570 558
Zions Bancorp
7.750%, 9/23/14 115 101
6.000%, 9/15/15 125 89
-------------
45,622
-------------
HEALTH CARE--0.8%
Express Scripts, Inc.
6.250%, 6/15/14 145 158
Fresenius Medical Care Capital
Trust IV
7.875%, 6/15/11 25 26
Quest Diagnostics, Inc.
6.400%, 7/1/17 510 560
Select Medical Corp.
7.625%, 2/1/15 500 487
U.S. Oncology, Inc.
9.125%, 8/15/17 400 422
Valeant Pharmaceuticals
International 144A
8.375%, 6/15/16(4) 48 50
-------------
1,703
-------------
INDUSTRIALS--4.7%
Allied Waste North America, Inc.
6.125%, 2/15/14 500 509
American Airlines, Inc. 01-1,
6.977%, 5/23/21 788 634
Cintas Corp. No. 2
6.000%, 6/1/12 50 54
Continental Airlines, Inc. 98-1A,
6.648%, 9/15/17 626 604
Delta Air Lines, Inc. 00-A1,
7.379%, 11/18/11 294 293
DRS Technologies, Inc.
6.625%, 2/1/16 500 479
Equifax, Inc.
6.300%, 7/1/17 1,250 1,275
Esco Corp. 144A
8.625%, 12/15/13(4) 600 600
General Cable Corp.
7.125%, 4/1/17 500 494
General Maritime Corp. 144A
12.000%, 11/15/17(4) 130 136
Global Aviation Holdings Ltd. 144A
14.000%, 8/15/13(4) 395 395
Ingersoll-Rand Global Holdings
Co. Ltd. 9.500%, 4/15/14 360 430
Kennametal, Inc.
7.200%, 6/15/12 225 236
Malaysia International Shipping
Corp. Capital Ltd. 144A
6.125%, 7/1/14(4) 1,250 1,350
Owens Corning, Inc.
6.500%, 12/1/16 675 691
Precision Castparts Corp.
5.600%, 12/15/13 150 157
PAR
VALUE VALUE
-------------- -------------
INDUSTRIALS--CONTINUED
Smiths Group plc 144A
7.200%, 5/15/19(4) $ 130 $ 145
United Airlines, Inc. 00-2A,
7.032%, 10/1/10 103 103
United Rentals North America, Inc.
6.500%, 2/15/12 815 817
10.875%, 6/15/16 225 246
-------------
9,648
-------------
INFORMATION TECHNOLOGY--2.3%
Broadridge Financial Solutions, Inc.
6.125%, 6/1/17 1,000 972
Corning, Inc.
6.625%, 5/15/19 63 69
Jabil Circuit, Inc.
8.250%, 3/15/18 900 967
National Semiconductor Corp.
6.600%, 6/15/17 500 513
Seagate Technology HDD
Holdings, Inc.
6.375%, 10/1/11 480 491
SunGard Data Systems, Inc.
9.125%, 8/15/13 1,000 1,030
Xerox Corp.
6.750%, 2/1/17 600 644
-------------
4,686
-------------
MATERIALS--6.3%
Allegheny Technologies, Inc.
9.375%, 6/1/19 925 1,065
Anglo American Capital plc 144A
9.375%, 4/8/19(4) 230 292
ArcelorMittal
9.000%, 2/15/15 250 295
6.125%, 6/1/18 490 506
Bemis Co., Inc.
6.800%, 8/1/19 140 154
Building Materials Corp. of America
7.750%, 8/1/14 610 607
Cabot Finance BV 144A
5.250%, 9/1/13(4) 750 774
Catalyst Paper Corp.
7.375%, 3/1/14 1,055 649
CRH America, Inc.
8.125%, 7/15/18 1,100 1,283
Domtar Corp.
5.375%, 12/1/13 533 517
7.125%, 8/15/15 447 451
Dow Chemical Co. (The)
8.550%, 5/15/19 550 656
Edgen Murray Corp. 144A
12.250%, 1/15/15(4) 350 346
Gerdau Holdings, Inc. 144A
7.000%, 1/20/20(4) 200 205
Hanson Australia Funding Ltd.
5.250%, 3/15/13 125 123
Ineos Group Holdings plc 144A
8.500%, 2/15/16(4) 950 644
Koppers, Inc. 144A
7.875%, 12/1/19(4) 120 122
PAR
VALUE VALUE
-------------- -------------
MATERIALS--CONTINUED
Nalco Co.
8.875%, 11/15/13 $ 340 $ 352
Nova Chemicals Corp.
4.538%, 11/15/13(3) 1,268 1,166
Plastipak Holdings, Inc. 144A
8.500%, 12/15/15(4) 500 516
Steel Dynamics, Inc.
7.375%, 11/1/12 337 349
Vedanta Resources plc 144A
9.500%, 7/18/18(4) 625 637
Verso Paper Holdings LLC/Verso
Paper, Inc.
144A
11.500%, 7/1/14(4) 475 525
Series B,
11.375%, 8/1/16 850 688
-------------
12,922
-------------
TELECOMMUNICATION SERVICES--2.2%
Clearwire Corp. 144A
12.000%, 12/1/15(4) 150 153
Frontier Communications Corp.
8.125%, 10/1/18 150 153
Nextel Communications, Inc.
Series E
6.875%, 10/31/13 235 229
Series D
7.375%, 8/1/15 1,000 978
OJSC Vimpel Communications
(UBS Luxembourg SA) 144A
8.375%, 10/22/11(4) 250 266
144A (VIP Finance Ireland Ltd.)
9.125%, 4/30/18(4) 250 268
Qwest Corp.
8.375%, 5/1/16 300 322
6.500%, 6/1/17 307 302
Telecom Italia Capital S.A.
6.999%, 6/4/18 600 660
7.175%, 6/18/19 500 557
Wind Acquisition Finance SA 144A
11.750%, 7/15/17(4) 350 384
Windstream Corp.
7.000%, 3/15/19 250 235
-------------
4,507
-------------
UTILITIES--1.8%
Allegheny Energy Supply Co. LLC
144A
8.250%, 4/15/12(4) 250 274
AmeriGas Partners LP
7.250%, 5/20/15 500 502
Centrais Eletricas Brasileiras SA
144A 6.875%, 7/30/19(4) 135 146
Israel Electric Corp. Ltd. 144A
7.250%, 1/15/19(4) 345 374
Majapahit Holding BV
144A
7.250%, 6/28/17(4) 725 745
144A
7.750%, 1/20/20(4) 100 105
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
57
PHOENIX MULTI-SECTOR FIXED INCOME SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
PAR
VALUE VALUE
-------------- -------------
UTILITIES--CONTINUED
Midwest Generation LLC Series B
8.560%, 1/2/16 $ 209 $ 211
Northeast Utilities
5.650%, 6/1/13 465 481
Sempra Energy
6.000%, 10/15/39 350 346
Southern California Edison Co. 04-G,
5.750%, 4/1/35 125 128
Texas Competitive Electric Holdings
Co. LLC Series A
10.250%, 11/1/15 360 293
-------------
3,605
-------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $108,916) 113,598
-------------
CONVERTIBLE BONDS--0.2%
MATERIALS--0.2%
Vale Capital Ltd. Series RIO Cv.
6.880%, 6/15/10 6 324
-------------
TOTAL CONVERTIBLE BONDS
(IDENTIFIED COST $301) 324
-------------
LOAN AGREEMENTS(3)--12.5%
CONSUMER DISCRETIONARY--5.3%
AMF Bowling Worldwide, Inc.
Tranche B,
2.739%, 5/17/13 811 699
Cengage Learning Acquisitions,
Inc. Tranche
2.740%, 7/5/14 695 625
Ceridian Corp. Tranche
3.254%, 11/8/14 1,140 1,033
Charter Communications
Operating LLC Tranche B,
4.650%, 3/6/14 973 914
Ford Motor Co. Tranche B-1,
3.265%, 12/15/13 597 554
Getty Images, Inc. Tranche B,
6.250%, 7/2/15 355 357
Harrah's Operating Co., Inc.
Tranche B-2,
3.282%, 1/28/15 530 432
Isle of Capri Casinos, Inc.
Tranche A-DD, 1.995%, 11/25/13 119 113
Tranche B-DD, 1.995%, 11/25/13 136 128
Tranche, 2.033%, 11/25/13 339 320
Lamar Media Corp. Tranche F,
5.500%, 11/30/13 189 190
Landry's Restaurant, Inc. Tranche
8.750%, 5/13/11 331 334
Mark IV Industries Tranche
10.500%, 5/13/14(8) 225 205
Tranche 12.500%, 11/13/14(8) 32 29
PAR
VALUE VALUE
-------------- -------------
CONSUMER DISCRETIONARY--CONTINUED
Neiman-Marcus Group, Inc. (The) Tranche
2.269%, 4/6/13 $ 1,842 $ 1,669
Nielsen Finance LLC/Nielsen Finance Co.
Tranche 2.242%, 8/9/13 683 643
Tranche B, 3.992%, 5/1/16 397 375
PTI Group, Inc. Tranche
9.250%, 2/18/13 279 240
Totes Isotoner Corp. Tranche
6.422%, 1/16/14 500 247
Univision Communications, Inc.
Tranche B, 2.522%, 9/29/14 1,450 1,263
VWR Funding, Inc. Tranche,
2.746%, 6/29/14 557 502
-------------
10,872
-------------
ENERGY--0.4%
ATP Oil & Gas Corp. Tranche B-2,
11.750%, 1/15/11 112 109
Tranche B-1, 11.250%, 7/15/14 721 704
-------------
813
-------------
FINANCIALS--0.4%
Hertz Corp. Tranche B,
2.023%, 12/21/12 386 371
Letter of Credit 2.042%, 12/21/12 83 80
Synatech, Inc. Tranche
2.230%, 4/1/14 499 414
Universal City Tranche
6.500%, 11/6/14 63 63
-------------
928
-------------
HEALTH CARE--0.5%
Health Management Associates,
Inc. Tranche B, 2.190%, 2/28/14 237 223
Psychiatric Solutions, Inc. Tranche B
2.024%, 7/1/12 697 663
RehabCare Group, Inc. Tranche B,
6.000%, 11/24/15 150 149
-------------
1,035
-------------
INDUSTRIALS--0.8%
Harland Clarke Holdings Corp.
Tranche B, 2.774%, 6/30/14 183 153
Hawker Beechcraft, Inc.
Letter of Credit, 2.283%, 3/26/14 22 17
Tranche B, 3.200%, 3/26/14 377 285
PAR
VALUE VALUE
-------------- -------------
INDUSTRIALS--CONTINUED
ServiceMaster Co. (The) Tranche DD,
2.745%, 7/24/14 $ 45 $ 41
Tranche B, 2.773%, 7/24/14 451 409
Trans Network Services
6.000%, 11/18/15 870 871
-------------
1,776
-------------
INFORMATION TECHNOLOGY--2.3%
Allen Systems Group, Inc.
Tranche 8.500%, 10/20/13 55 55
11.000%, 4/20/14 100 98
Avaya, Inc. Tranche B-1,
3.074%, 10/26/14 746 648
CommScope, Inc. Tranche B,
2.821%, 12/27/14 350 341
Dresser, Inc. PIK Loan
5.999%, 5/4/15 1,055 982
First Data Corp. Tranche B-1,
3.006%, 9/24/14 570 508
Tranche B-3, 3.019%, 9/24/14 816 725
Freescale Semiconductor, Inc. Tranche
1.985%, 12/1/13 512 449
Reynolds & Reynolds Co. (The)
Tranche 2.241%, 10/24/12 943 877
-------------
4,683
-------------
MATERIALS--1.4%
Anchor Glass Container Corp.
Tranche B, 6.750%, 6/20/14 526 528
Ashland, Inc. Tranche B,
7.650%, 5/13/14 126 128
Berry Plastics Group, Inc.
Tranche C, 2.300%, 4/3/15 843 738
Boise Paper Holdings LLC
Tranche B, 5.750%, 2/22/14 260 262
Building Materials Corp. of
America Tranche B,
6.063%, 9/15/14 445 406
Nalco Co. Tranche B,
6.500%, 5/13/16 219 222
Solutia, Inc. Tranche
7.250%, 2/28/14 517 527
-------------
2,811
-------------
TELECOMMUNICATION SERVICES--0.5%
Level 3 Communications, Inc. Tranche A,
2.593%, 3/13/14 865 788
Tranche B, 11.500%, 3/13/14 230 246
-------------
1,034
-------------
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
58
PHOENIX MULTI-SECTOR FIXED INCOME SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
PAR
VALUE VALUE
-------------- -------------
UTILITIES--0.9%
Calpine Corp. Tranche
3.165%, 3/29/14 $ 643 $ 611
NRG Energy, Inc. Tranche B,
2.013%, 2/1/13 201 192
Letter of Credit 2.033%, 2/1/13 522 499
Texas Competitive Electric
Holdings Co. LLC Tranche B-2,
3.751%, 10/10/14 430 350
Tranche B-3, 3.757%, 10/10/14 246 199
-------------
1,851
-------------
TOTAL LOAN AGREEMENTS
(IDENTIFIED COST $25,110) 25,803
-------------
SHARES
--------------
PREFERRED STOCK--0.2%
FINANCIALS--0.2%
FNMA Pfd. 8.250% 63,000 70
GMAC, Inc. (Pfd.) Series G
144A 7.00%(4) 434 286
Saul Centers, Inc. Series A Pfd.
8.000% 425 10
-------------
TOTAL PREFERRED STOCK
(IDENTIFIED COST $1,235) 366
-------------
COMMON STOCKS--0.1%
CONSUMER DISCRETIONARY--0.1%
Mark IV Industries(8) 217 2
Mark IV Industries(8) 10,159 208
-------------
210
-------------
TELECOMMUNICATION SERVICES--0.0%
AT&T Latin America Corp.
Class A(2)(6)(8) 64,050 0
-------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $473) 210
-------------
TOTAL LONG-TERM INVESTMENTS--98.0%
(IDENTIFIED COST $194,022) 201,874
-------------
SHORT-TERM INVESTMENTS--1.8%
MONEY MARKET MUTUAL FUNDS--1.8%
Dreyfus Cash Management Fund -
Institutional Shares (seven-day
effective yield 0.080%) 3,791,393 3,791
-------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $3,791) 3,791
-------------
TOTAL INVESTMENTS--99.8%
(IDENTIFIED COST $197,813) 205,665(1)
-------------
Other Assets and Liabilities--0.2% 442
-------------
NET ASSETS--100.0% $ 206,107
=============
COUNTRY WEIGHTINGS as of 12/31/09+
United States 71%
Russia 3
Argentina 2
Australia 2
Brazil 2
Canada 2
Indonesia 2
Other 16
---
Total 100%
===
+ % of total investments as of December 31, 2009
FOREIGN CURRENCIES:
AUD Australian Dollar
BRL Brazil Real
CND Canadian Dollar
COP Colombian Peso
IDR Indonesian Rupiah
KRW Korean Won
NOK Norwegian Krone
NZD New Zealand Dollar
PLZ Polish Zloty
TRY New Turkish Lira
ZAR South Africa Rand
The following table provides a summary of inputs used to value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Level 2 - Level 3 -
Value at Level 1 - Significant Significant
December 31, Quoted Observable Unobservable
2009 Prices Inputs Inputs
----------- --------- ----------- ------------
INVESTMENTS IN SECURITIES:
Debt Securities:
U.S. Government
Securities $ 2,243 $ -- $ 2,243 $ --
Municipal
Securities 2,278 -- 2,278 --
Foreign
Government
Securities 30,200 -- 30,200 --
Mortgage-
Backed
Securities 22,834 -- 22,834 --
Asset-Backed
Securities 4,018 -- 4,018 --
Corporate
Debt 139,725 -- 139,491 234
Equity Securities:
Preferred
Stock 366 366 -- --
Common Stock 210 -- -- 210
Short-Term
Investments 3,791 3,791 -- --
-------- ------ -------- ----
Total $205,665 $4,157 $201,064 $444
======== ====== ======== ====
The following is a reconciliation of assets of the Series for Level 3
investments for which significant unobservable inputs were used to determine
fair value:
Mortgage-Backed Asset-Backed Corporate Common
Total Securities Securities Debt Stocks(b)
------- --------------- ------------ --------- ---------
INVESTMENTS IN SECURITIES:
BALANCE AS OF DECEMBER 31, 2008 ........ $ 2,108 $ 1,488 $ 197 $ 423 $ --
Accrued discounts/premiums(a) .......... 10 9 (2) 3 --
Realized gain (loss)(c) ................ (943) (809) (134) --(f) --
Change in unrealized appreciation
(depreciation)(c) ................... 1,498 1,325 184 (11) --
Net purchases (sales)(d) ............... (517) (292) (203) (22) --
Transfers in and/or out of Level 3(e) .. (1,712) (1,721) (42) (159) 210
------- ------- ----- ----- ----
Balance as of December 31, 2009 ........ $ 444 $ -- $ -- $ 234 $210
======= ======= ===== ===== ====
(a) Disclosed in the Statement of operations under interest income.
(b) Level 3 Common Stock has a beginning balance of $0.
(c) Disclosed in the Statement of Operations under Net realized and unrealized
gain (loss) on investments.
(d) Includes paydowns.
(e) "Transfers in and/or out" represent the ending value as of December 31,
2009, for any investment security where a change in the pricing level
occurred from the beginning to the end of the period.
(f) Amount is less than $500.
Level 3 securities are without an active market or market participants and
therefore are internally fair valued. These internally fair valued securities
derive their valuation based on the review of inputs such as, but not limited
to, similar securities, liquidity factors, capital structure, and credit
analysis.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
59
PHOENIX MULTI-SECTOR SHORT TERM BOND SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
PAR
VALUE VALUE
-------------- -------------
U.S. GOVERNMENT SECURITIES--2.6%
U.S. Treasury Notes
1.750%, 8/15/12 $ 75 $ 75
2.125%, 11/30/14 350 342
2.625%, 12/31/14 350 349
3.375%, 11/15/19 100 96
-------------
TOTAL U.S. GOVERNMENT SECURITIES
(IDENTIFIED COST $870) 862
-------------
MUNICIPAL BONDS--0.4%
CONNECTICUT--0.2%
Mashantucket Western Pequot
Tribe Taxable Series A, 144A
(NATL-RE Insured)
6.910%, 9/1/12 (4) 100 72
-------------
VIRGINIA--0.2%
Tobacco Settlement Financing
Corp. Taxable Series 07-A1,
6.706%, 6/1/46 105 76
-------------
TOTAL MUNICIPAL BONDS
(IDENTIFIED COST $198) 148
-------------
FOREIGN GOVERNMENT SECURITIES--12.4%
Bolivarian Republic of Venezuela
10.750%, 9/19/13 80 71
RegS 5.750%, 2/26/16(5) 55 36
RegS 7.000%, 12/1/18(5) 70 45
Commonwealth of Australia
Series 121,
5.250%, 8/15/10 625 AUD 565
Commonwealth of Canada
2.750%, 12/1/10 567 CND 552
Commonwealth of New Zealand
Series 1111,
6.000%, 11/15/11 529 NZD 396
Federative Republic of Brazil
12.500%, 1/5/16 275 BRL 179
12.500%, 1/5/22 250 BRL 161
Kingdom of Norway
6.000%, 5/16/11 2,300 NOK 416
Republic of Argentina
PIK Interest Capitalization
8.280%, 12/31/33 406 305
Series GDP
3.169%, 12/15/35(3) 1,250 87
Republic of Colombia
12.000%, 10/22/15 395,000 COP 238
Republic of Indonesia
Series FR-23,
11.000%, 12/15/12 1,800,000 IDR 205
Series FR-30,
10.750%, 5/15/16 700,000 IDR 80
Republic of Korea
Series 1112,
4.750%, 12/10/11 175,000 KRW 151
Republic of Poland
Series 0414,
5.750%, 4/25/14 425 PLZ 149
6.375%, 7/15/19 35 38
PAR
VALUE VALUE
-------------- -------------
Republic of South Africa
Series R-201
8.750%, 12/21/14 1,625 ZAR $ 222
Republic of Turkey
0.000%, 2/2/11 375 TRY 230
-------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(IDENTIFIED COST $3,633) 4,126
-------------
MORTGAGE-BACKED SECURITIES--23.7%
AGENCY--4.8%
FNMA
4.000%, 7/1/19 $ 134 137
5.000%, 2/1/20 69 73
5.000%, 8/1/20 35 36
6.000%, 8/1/34 137 147
5.000%, 6/1/35 369 380
6.000%, 8/1/37 45 48
6.000%, 10/1/37 108 114
5.500%, 2/1/38 205 214
5.500%, 6/1/38 139 146
4.500%, 10/1/39 320 319
-------------
1,614
-------------
NON-AGENCY--18.9%
Banc of America Commercial
Mortgage, Inc. 05-6, AM
5.179%, 9/10/47 (3) 40 34
Bear Stearns Commercial
Mortgage Securities
06-PW12, A4
5.719%, 9/11/38(3) 150 152
06-PW14, A4
5.201%, 12/11/38 100 96
05-PW10, A4
5.405%, 12/11/40(3) 75 74
07-PW18, A4
5.700%, 6/11/50 75 66
Citigroup-Deutsche Bank
Commercial Mortgage Trust
05-CD1, AM
5.224%, 7/15/44(3) 90 76
07-CD4, A4
5.322%, 12/11/50 95 82
Credit Suisse First Boston
Mortgage Securities
Corp. 03-8, 3A24,
5.500%, 4/25/33 235 220
Crown Castle Towers LLC
05-1A, AFX 144A
4.643%, 6/15/35(4) 250 253
05-1A, B 144A
4.878%, 6/15/35(4) 190 192
GE Capital Commercial
Mortgage Corp. 03-C1, C
4.975%, 1/10/38 (3) 105 102
GMAC Commercial Mortgage
Securities, Inc.
98-C2, E
6.500%, 5/15/35 50 50
04-C2, A4
5.301%, 8/10/38(3) 100 99
04-C3, A4
4.547%, 12/10/41 180 180
PAR
VALUE VALUE
-------------- -------------
NON-AGENCY--CONTINUED
GS Mortgage Securities Corp. II
07-EOP, G 144A
0.755%, 3/6/20(3)(4) $ 130 $ 109
07-EOP, H 144A
0.885%, 3/6/20(3)(4) 110 91
04-GG2, A4
4.964%, 8/10/38 100 101
07-GG10, A4
5.805%, 8/10/45(3) 185 159
GSR Mortgage Loan
Trust 05-5F, 2A2
5.500%, 6/25/35 170 169
IndyMac Index Mortgage
Loan Trust 07-AR2, B1
5.770%, 6/25/37 (3) 134 4
JPMorgan Chase Commercial
Mortgage Securities
Trust 09-IWST, A1
4.314%, 12/23/39 85 84
JPMorgan Chase Commercial
Mortgage Securities Corp.
05-LDP5, AM
5.221%, 12/15/44(3) 50 42
06-LDP7, A4
5.875%, 4/15/45(3) 140 135
07-LD12, A4
5.882%, 2/15/51(3) 100 87
JPMorgan Mortgage
Trust 06-A1, B1
5.278%, 2/25/36 (3) 246 23
Lehman Brothers-UBS
Commercial Mortgage Trust
06-C3, AM
5.712%, 3/15/39(3) 25 20
06-C6, A4
5.372%, 9/15/39 170 162
07-C2, A2
5.303%, 2/15/40 225 230
07-C2, A3
5.430%, 2/15/40 115 99
05-C3, AM
4.794%, 7/15/40 70 59
07-C6, A2
5.845%, 7/15/40 150 152
Merrill Lynch Mortgage
Investors, Inc. 06-3, 2A1
6.064%, 10/25/36 (3) 108 93
Merrill Lynch Mortgage
Trust 06-C1, AM
5.656%, 5/12/39 (3) 110 87
Merrill Lynch-Countrywide
Commercial Mortgage
Trust 06-4, A3
5.172%, 12/12/49 (3) 250 221
Morgan Stanley Capital I
06-T23, A4
5.810%, 8/12/41(3) 100 101
05-HQ5, A3
5.007%, 1/14/42 150 151
06-IQ12, A4
5.332%, 12/15/43 300 278
07-IQ14, A4
5.692%, 4/15/49(3) 140 118
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
60
PHOENIX MULTI-SECTOR SHORT TERM BOND SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
PAR
VALUE VALUE
-------------- -------------
NON-AGENCY--CONTINUED
Residential Funding
Mortgage Securities I,
Inc. 06-S4, A2
6.000%, 4/25/36 $ 132 $ 114
Salomon Brothers Mortgage
Securities VII, Inc. 01-C1, D
6.831%, 12/18/35 (3) 60 59
SBA Commercial Mortgage
Backed Securities Trust
06-1A, A 144A
5.314%, 11/15/36(4) 190 194
06-1A, B 144A
5.451%, 11/15/36(4) 95 97
Wachovia Bank Commercial
Mortgage Trust
04-C12, A2
5.001%, 7/15/41 369 374
04-C12, A4
5.237%, 7/15/41(3) 175 174
07-C30, A5
5.342%, 12/15/43 200 155
05-C22, AM
5.315%, 12/15/44(3) 20 17
07-C33, A4
5.902%, 2/15/51(3) 160 131
Wachovia Mortgage Loan
Trust LLC 06-A, B1
5.279%, 5/20/36 (3) 247 21
Wells Fargo Mortgage
Backed Securities Trust
04-R, 2A1
3.003%, 9/25/34(3) 165 156
04-EE, 2A3
3.108%, 12/25/34(3) 96 73
05-AR4, 2A2
4.338%, 4/25/35(3) 204 182
06-AR10, 5A3
5.894%, 7/25/36(3) 123 95
-------------
6,293
-------------
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $8,265) 7,907
-------------
ASSET-BACKED SECURITIES--6.9%
American General Mortgage
Loan Trust 06-1, A2 144A
5.750%, 12/25/35 (3)(4) 128 128
Avis Budget Rental Car Funding
AESOP LLC 09-2A, A 144A
5.680%, 2/20/13 (4) 175 181
Banc of America Alternative
Loan Trust 03-10, 2A1
6.000%, 12/25/33 69 69
Banc of America Mortgage
Securities, Inc.
5.250%, 2/25/35 97 90
Banc of America Securities
Auto Trust 06-G1, B
5.340%, 2/18/11 100 100
Bombardier Capital Mortgage
Securitization Corp. 99-A, A3
5.980%, 1/15/18 (3) 92 78
PAR
VALUE VALUE
-------------- -------------
Carmax Auto Owner Trust
07-2, B 5.370%, 3/15/13 $ 95 $ 96
09-2, A4 2.820%, 12/15/14 250 248
Chase Funding Mortgage
Loan Asset-Backed
Certificates 04-1,1A4
4.111%, 8/25/30 33 31
CPS Auto Trust 08-A,
A4 144A
7.130%, 10/15/14 (4) 200 204
Daimler Chrysler Auto
Trust 08-B, A4A
5.320%, 11/10/14 135 141
Dunkin Securitization 06-1,
M1 144A
8.285%, 6/20/31 (4) 160 135
FMAC Loan Receivables
Trust 98-CA, A2 144A
6.660%, 9/15/20 (4) 9 9
GMAC Mortgage Corp.
Loan Trust
06-HE2, A3
6.320%, 5/25/36(3) 346 156
06-HE3, A2
5.750%, 10/25/36(3) 223 166
Green Tree Financial Corp. 94-1,
A5
7.650%, 4/15/19 65 64
Harley-Davidson Motorcycle
Trust 07-2, C
5.410%, 8/15/15 180 179
JPMorgan Mortgage Acquisition
Corp. 06-CW2, AF3
5.777%, 8/25/36 (3) 225 150
Wells Fargo Mortgage Backed
Securities Trust 06-12, A2
6.000%, 10/25/36 85 77
-------------
TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $2,610) 2,302
-------------
CORPORATE BONDS--41.1%
CONSUMER DISCRETIONARY--3.5%
Ameristar Casinos, Inc. 144A
9.250%, 6/1/14 (4) 8 8
COX Communications, Inc.
4.625%, 6/1/13 250 260
Daimler Finance North
America LLC
6.500%, 11/15/13 70 77
DigitalGlobe, Inc. 144A
10.500%, 5/1/14 (4) 10 11
DIRECTV Holdings
LLC/DIRECTV Financing Co., Inc.
6.375%, 6/15/15 100 104
DuPont Fabros Technology
LP 144A
8.500%, 12/15/17 (4) 75 77
Equity One, Inc.
6.250%, 12/15/14 40 39
Ford Motor Credit Co. LLC
8.000%, 6/1/14 100 103
Harrah's Operating Co., Inc.
144A
11.250%, 6/1/17 (4) 50 52
PAR
VALUE VALUE
-------------- -------------
CONSUMER DISCRETIONARY--CONTINUED
International Game Technology
7.500%, 6/15/19 $ 20 $ 22
Landry's Restaurants, Inc. 144A
11.625%, 12/1/15 (4) 60 64
McJunkin Red Man Corp. 144A
9.500%, 12/15/16 (4) 50 49
MGM MIRAGE 144A
10.375%, 5/15/14 (4) 3 3
Mobile Mini, Inc.
6.875%, 5/1/15 20 19
QVC, Inc. 144A
7.500%, 10/1/19 (4) 40 41
Scientific Games Corp. 144A
7.875%, 6/15/16 (4) 25 25
Scientific Games International,
Inc.
9.250%, 6/15/19 30 32
Seminole Hard Rock
Entertainment, Inc./Seminole
Hard Rock International
LLC 144A
2.754%, 3/15/14 (3)(4) 25 21
Seneca Gaming Corp.
Series B 7.250%, 5/1/12 5 5
Starwood Hotels & Resort
Worldwide, Inc.
6.250%, 2/15/13 63 65
Videotron Ltee
6.375%, 12/15/15 95 93
-------------
1,170
-------------
CONSUMER STAPLES--0.6%
Cargill, Inc. 144A
5.600%, 9/15/12 (4) 115 124
Yankee Acquisition Corp.
Series B,
8.500%, 2/15/15 80 80
-------------
204
-------------
ENERGY--4.5%
Anadarko Petroleum Corp.
8.700%, 3/15/19 75 93
Buckeye Partners LP
6.050%, 1/15/18 15 16
Cenovus Energy, Inc. 144A
4.500%, 9/15/14 (4) 32 33
Denbury Resources, Inc.
7.500%, 12/15/15 135 135
Expro Finance Luxembourg
SCA 144A
8.500%, 12/15/16 (4) 100 100
Gazprom OAO (Gaz Capital SA)
144A
6.212%, 11/22/16 (4) 360 345
Helix Energy Solutions Group,
Inc. 144A
9.500%, 1/15/16 (4) 13 13
KazMunaiGaz Finance Sub BV
144A
8.375%, 7/2/13 (4) 100 107
Kinder Morgan Energy Partners
LP
6.850%, 2/15/20 30 33
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
61
PHOENIX MULTI-SECTOR SHORT TERM BOND SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
PAR
VALUE VALUE
-------------- -------------
ENERGY--CONTINUED
NAK Naftogaz Ukraine
9.500%, 9/30/14(9) $ 100 $ 84
Pacific Rubiales Energy Corp.
144A
8.750%, 11/10/16 (4) 100 106
Petrohawk Energy Corp.
10.500%, 8/1/14 125 137
Pride International, Inc.
8.500%, 6/15/19 80 92
SEACOR Holdings, Inc.
7.375%, 10/1/19 50 51
Smith International, Inc.
9.750%, 3/15/19 60 76
Western Refining, Inc.
144A
7.754%, 6/15/14(3)(4) 65 59
144A
11.250%, 6/15/17(4) 35 32
-------------
1,512
-------------
FINANCIALS--19.7%
AFLAC, Inc.
8.500%, 5/15/19 21 24
Allstate Corp.
6.125%, 5/15/37(3) 140 122
American Express Credit Corp.
5.125%, 8/25/14 25 26
American Honda Finance Corp.
144A
6.700%, 10/1/13 (4) 150 164
Assurant, Inc.
5.625%, 2/15/14 75 77
Atlantic Finance Ltd. 144A
8.750%, 5/27/14 (4) 100 103
Avalonbay Communities, Inc.
5.700%, 3/15/17 50 51
Bank of America Corp.
7.400%, 1/15/11 185 196
BBVA International Preferred
SA Unipersonal
5.919%, 12/31/49(3) 45 36
BlackRock, Inc.
3.500%, 12/10/14 50 49
Brandywine Operating
Partnership LP
7.500%, 5/15/15 70 71
Chubb Corp.
6.375%, 3/29/67(3) 140 130
CIT Group, Inc.
7.000%, 5/1/13 15 14
7.000%, 5/1/14 22 20
7.000%, 5/1/15 22 20
7.000%, 5/1/16 37 32
7.000%, 5/1/17 51 45
Citigroup, Inc.
5.000%, 9/15/14 90 87
4.875%, 5/7/15 300 283
Colonial Realty LP
4.800%, 4/1/11 72 70
ERAC USA Finance Co.
144A
5.800%, 10/15/12 (4) 195 204
PAR
VALUE VALUE
-------------- -------------
FINANCIALS--CONTINUED
Fifth Third Bancorp
6.250%, 5/1/13 $ 30 $ 31
4.500%, 6/1/18 75 61
First Tennessee Bank N.A.
0.413%, 2/14/11(3) 100 96
Ford Motor Credit Co. LLC
9.875%, 8/10/11 118 124
General Electric Capital Corp.
3.750%, 11/14/14 60 60
Genworth Financial, Inc.
5.750%, 6/15/14 110 105
6.515%, 5/22/18 40 37
Glen Meadow Pass-Through
Trust 144A
6.505%, 2/12/67 (3)(4) 110 82
GMAC, Inc. 144A
6.875%, 9/15/11 (4) 24 24
Goldman Sachs Group, Inc. (The)
7.500%, 2/15/19 64 75
Hertz Corp. (The)
8.875%, 1/1/14 100 103
Hyundai Capital Services, Inc.
144A
6.000%, 5/5/15 (4) 100 104
ICICI Bank Ltd. 144A
5.750%, 11/16/10 (4) 175 179
JPMorgan Chase & Co.
5.750%, 1/2/13 55 59
6.300%, 4/23/19 75 83
Series 1,
7.900%, 12/31/49(3) 96 99
KeyBank N.A.
4.950%, 9/15/15 35 33
KeyCorp
6.500%, 5/14/13 75 77
Kimco Realty Corp.
4.820%, 8/15/11 155 156
Lincoln National Corp.
8.750%, 7/1/19 75 86
6.050%, 4/20/67(3) 40 31
Lukoil International Finance
BV 144A
6.375%, 11/5/14 (4) 100 103
MassMutual Global Funding II
144A
3.500%, 3/15/10 (4) 100 100
Mercantile Bankshares Corp.
4.625%, 4/15/13 84 85
Merrill Lynch & Co., Inc.
6.150%, 4/25/13 75 80
MetLife, Inc.
6.750%, 6/1/16 18 20
Morgan Stanley 144A
10.090%, 5/3/17 (4) 250 BRL 133
National Australia Bank Ltd.
144A
5.350%, 6/12/13 (4) 285 307
Nationwide Health Properties,
Inc.
6.250%, 2/1/13 130 132
OJSC AK Transneft
(TransCapitalInvest Ltd.)
144A
5.670%, 3/5/14 (4) 270 272
PAR
VALUE VALUE
-------------- -------------
FINANCIALS--CONTINUED
Piper Jaffray Equipment
Trust Securities 144A
6.000%, 9/10/11 (4) $ 92 $ 92
PNC Funding Corp.
5.625%, 2/1/17 70 69
Principal Financial Group, Inc.
7.875%, 5/15/14 55 61
ProLogis
7.625%, 8/15/14 75 78
6.625%, 5/15/18 35 33
Prudential Financial, Inc.
4.750%, 9/17/15 80 81
8.875%, 6/15/38(3) 65 69
Regions Financial Corp.
7.750%, 11/10/14 70 69
Russian Agricultural Bank
OJSC (RSHB Capital SA)
144A
6.299%, 5/15/17 (4) 100 101
Simon Property Group LP
5.600%, 9/1/11 205 214
SLM Corp.
0.600%, 2/1/10(3) 250 250
Textron Financial Corp.
5.125%, 11/1/10 100 101
TNK-BP Finance SA RegS
6.125%, 3/20/12 (5) 115 120
Universal City Development
Partners Ltd. 144A
8.875%, 11/15/15 (4) 10 10
Unum Group
7.125%, 9/30/16 55 57
Wachovia Corp.
5.300%, 10/15/11 130 138
WEA Finance LLC/WT Finance
Australia 144A
5.750%, 9/2/15 (4) 75 79
Westpac Banking Corp.
4.200%, 2/27/15 80 81
XL Capital Ltd.
5.250%, 9/15/14 85 83
Zions Bancorp
7.750%, 9/23/14 30 26
-------------
6,573
-------------
HEALTH CARE--1.0%
CareFusion Corp. 144A
5.125%, 8/1/14 (4) 60 63
Express Scripts, Inc.
6.250%, 6/15/14 30 33
HCA, Inc.
9.125%, 11/15/14 145 153
Select Medical Corp.
7.625%, 2/1/15 55 54
U.S. Oncology, Inc.
9.125%, 8/15/17 37 39
-------------
342
-------------
INDUSTRIALS--2.6%
American Airlines, Inc. 01-1,
6.977%, 5/23/21 129 104
Continental Airlines, Inc. 98-1A,
6.648%, 9/15/17 123 118
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
62
PHOENIX MULTI-SECTOR SHORT TERM BOND SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
PAR
VALUE VALUE
-------------- -------------
INDUSTRIALS--CONTINUED
Delta Air Lines, Inc. 00-A1,
7.379%, 5/18/10 $ 36 $ 36
Esco Corp. 144A
8.625%, 12/15/13 (4) 154 154
Hutchison Whampoa
International Ltd. 144A
4.625%, 9/11/15 (4) 100 101
Ingersoll-Rand Global
Holdings Co. Ltd.
9.500%, 4/15/14 40 48
Owens Corning, Inc.
6.500%, 12/1/16 70 72
Smiths Group plc 144A
7.200%, 5/15/19 (4) 20 22
Steelcase, Inc.
6.500%, 8/15/11 100 102
Toledo Edison Co. (The)
7.250%, 5/1/20 30 34
United Airlines, Inc. 00-2A,
7.032%, 10/1/10 10 10
United Rentals North America, Inc.
10.875%, 6/15/16 55 60
USG Corp. 144A
9.750%, 8/1/14 (4) 13 14
-------------
875
-------------
INFORMATION TECHNOLOGY--1.4%
Agilent Technologies, Inc.
5.500%, 9/14/15 35 37
Corning, Inc.
6.625%, 5/15/19 10 11
Crown Castle Holdings
GS V LLC/Crown Castle GS III
Corp. 144A
7.750%, 5/1/17 (4) 75 80
Jabil Circuit, Inc.
7.750%, 7/15/16 48 50
National Semiconductor Corp.
6.600%, 6/15/17 70 72
NXP BV/NXP Funding LLC
3.034%, 10/15/13(3) 105 87
Xerox Corp.
5.650%, 5/15/13 120 125
-------------
462
-------------
MATERIALS--4.8%
Airgas, Inc.
4.500%, 9/15/14 25 25
Allegheny Technologies, Inc.
9.375%, 6/1/19 140 161
ArcelorMittal
5.375%, 6/1/13 135 142
9.000%, 2/15/15 40 47
Bemis Co., Inc.
5.650%, 8/1/14 20 21
Catalyst Paper Corp.
7.375%, 3/1/14 50 31
Commercial Metals Co.
7.350%, 8/15/18 140 149
CRH America, Inc.
8.125%, 7/15/18 130 152
Domtar Corp.
5.375%, 12/1/13 54 52
7.125%, 8/15/15 46 47
PAR
VALUE VALUE
-------------- -------------
MATERIALS--CONTINUED
Dow Chemical Co. (The)
7.600%, 5/15/14 $ 50 $ 57
5.900%, 2/15/15 50 54
International Paper Co.
9.375%, 5/15/19 62 76
Koppers, Inc. 144A
7.875%, 12/1/19 (4) 15 15
Nalco Co. 8.875%, 11/15/13 50 52
Nova Chemicals Corp.
3.649%, 11/15/13(3) 300 276
Vedanta Resources plc 144A
8.750%, 1/15/14 (4) 100 103
Verso Paper Holdings LLC/Verso
Paper, Inc. 144A
11.500%, 7/1/14(4) 50 55
Series B,
4.031%, 8/1/14(3) 85 68
-------------
1,583
-------------
TELECOMMUNICATION SERVICES--1.6%
Axtel SAB de C.V. 144A
9.000%, 9/22/19 (4) 12 12
Clearwire Corp. 144A
12.000%, 12/1/15 (4) 15 15
Embarq Corp.
6.738%, 6/1/13 50 54
Nextel Communications, Inc.
Series D
7.375%, 8/1/15 75 73
OJSC Vimpel Communications
(VIP Finance Ireland Ltd.) 144A
8.375%, 4/30/13 (4) 100 106
Telecom Italia Capital SA
6.175%, 6/18/14 100 109
Virgin Media Finance plc Series 1,
9.500%, 8/15/16 100 108
Windstream Corp. 144A
7.875%, 11/1/17 (4) 60 60
-------------
537
-------------
UTILITIES--1.4%
Allegheny Energy Supply Co. LLC
144A
8.250%, 4/15/12 (4) 40 44
AmeriGas Partners LP
7.250%, 5/20/15 25 25
Korea Electric Power Corp. 144A
5.500%, 7/21/14 (4) 100 106
NiSource Finance Corp.
7.875%, 11/15/10 60 63
Northeast Utilities
5.650%, 6/1/13 105 109
Sempra Energy
6.500%, 6/1/16 35 38
Texas Competitive Electric
Holdings Co. LLC Series A
10.250%, 11/1/15 36 29
TransAlta Corp.
4.750%, 1/15/15 35 35
-------------
449
-------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $13,030) 13,707
-------------
PAR
VALUE VALUE
-------------- -------------
CONVERTIBLE BONDS--0.2%
MATERIALS--0.2%
Georgia-Pacific Corp. 144A
7.000%, 1/15/15 (4) $ 75 $ 76
-------------
TOTAL CONVERTIBLE BONDS
(IDENTIFIED COST $76) 76
-------------
LOAN AGREEMENTS(3)--11.1%
CONSUMER DISCRETIONARY--3.7%
AMF Bowling Worldwide, Inc.
Tranche B,
2.742%, 5/7/13 56 48
Building Materials Holding Corp.
Tranche B,
7.375%, 10/10/11(9) 123 43
Cengage Learning Acquisitions,
Inc. Tranche
2.745%, 7/5/14 114 103
Ceridian Corp. Tranche
3.254%, 1/1/00 100 91
Ford Motor Co. Tranche B-1,
3.323%, 12/15/13 292 271
Getty Images, Inc. Tranche B,
6.250%, 7/2/15 82 83
Harrah's Operating Co., Inc.
Tranche B-2,
3.282%, 1/28/15 33 26
Tranche B-4,
9.500%, 10/31/16 30 30
Intelsat Jackson Holding Ltd.
Tranche
3.244%, 2/1/14 90 82
Isle of Capri Casinos, Inc.
Tranche B-DD,
1.995%, 11/25/13 12 12
Tranche A-DD,
1.995%, 11/25/13 11 10
Tranche,
2.033%, 11/25/13 31 29
Mediacom Illinois LLC
Tranche D,
5.500%, 3/31/17 88 88
Neiman-Marcus Group, Inc.
(The) Tranche
2.269%, 4/6/13 49 44
Nielsen Finance LLC/Nielsen
Finance Co.
Tranche
2.238%, 8/9/13 58 55
Tranche B,
3.988%, 5/1/16 33 31
PTI Group, Inc. Tranche
9.250%, 2/18/13 45 39
Totes Isotoner Corp. Tranche B,
3.811%, 1/16/13 13 10
Univision Communications, Inc.
Tranche B,
2.522%, 9/29/14 85 74
VWR Funding, Inc. Tranche,
2.734%, 6/29/14 65 58
-------------
1,227
-------------
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
63
PHOENIX MULTI-SECTOR SHORT TERM BOND SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
PAR
VALUE VALUE
-------------- -------------
CONSUMER STAPLES--0.1%
Reynolds Group Holdings Ltd.
Tranche
6.250%, 11/5/15 $ 25 $ 25
-------------
ENERGY--0.3%
ATP Oil & Gas Corp.
Tranche B-2,
11.750%, 1/15/11 13 13
Tranche B-1,
11.250%, 7/15/14 85 83
-------------
96
-------------
FINANCIALS--0.3%
Pinnacle Foods Finance LLC/Pinnacle
Food Finance Corp. Tranche B,
2.995%, 4/2/14 45 42
Universal City Tranche
0.000%, 11/6/14 13 12
Vanguard Health Holdings Co.,
II LLC Tranche B
2.497%, 9/23/11 50 49
-------------
103
-------------
HEALTH CARE--0.7%
Health Management Associates,
Inc. Tranche B,
2.190%, 2/28/14 32 30
HealthSouth Corp.
Tranche 1,
2.535%, 3/10/13 56 54
Tranche 2,
4.045%, 3/15/14 46 45
Psychiatric Solutions, Inc.
Tranche B
2.024%, 7/1/12 119 113
-------------
242
-------------
INDUSTRIALS--1.4%
ARAMARK Corp.
Tranche
2.132%, 1/26/14 40 38
Letter of Credit
2.282%, 1/26/14 3 2
EnergySolutions LLC
Tranche
4.010%, 6/7/13 107 104
Harland Clarke Holdings
Corp. Tranche B,
2.757%, 6/30/14 90 75
Protection One Alarm Monitoring,
Inc. Tranche B-2,
6.250%, 3/31/14 20 20
PAR
VALUE VALUE
-------------- -------------
INDUSTRIALS--CONTINUED
ServiceMaster Co. (The)
Tranche DD,
2.750%, 7/24/14 $ 14 $ 13
Tranche B,
2.795%, 7/24/14 140 127
Trans Network Services
6.000%, 11/18/15 100 100
-------------
479
-------------
INFORMATION TECHNOLOGY--1.2%
Allen Systems Group, Inc.
Tranche
8.500%, 10/20/13 35 35
Avaya, Inc. Tranche B-1,
3.074%, 10/26/14 85 73
Dresser, Inc. PIK Loan
5.999%, 5/4/15 60 56
Freescale Semiconductor, Inc.
Tranche
2.000%, 12/1/13 85 74
Reynolds & Reynolds Co. (The)
Tranche
2.245%, 10/24/12 173 161
-------------
399
-------------
MATERIALS--1.5%
Anchor Glass Container Corp.
Tranche B,
6.750%, 6/20/14 120 120
Ashland, Inc. Tranche B,
7.650%, 5/13/14 40 41
Berry Plastics Group, Inc.
Tranche C,
2.300%, 4/3/15 144 126
Building Materials Corp. of
America Tranche B,
6.063%, 9/15/14 40 37
Huntsman International LLC
Tranche B,
1.995%, 4/21/14 17 16
JohnsonDiversity, Inc. Tranche
5.500%, 11/24/15 50 50
Nalco Co. Tranche B,
6.500%, 5/13/16 30 30
Solutia, Inc. Tranche
7.250%, 2/28/14 74 75
-------------
495
-------------
TELECOMMUNICATION SERVICES--1.3%
Level 3 Communications, Inc.
Tranche A,
2.593%, 3/13/14 87 79
Tranche B,
11.500%, 3/13/14 26 28
MetroPCS Wireless, Inc.
Tranche B,
2.531%, 11/3/13 70 68
nTelos, Inc. Tranche
5.750%, 8/7/15 253 255
-------------
430
-------------
PAR
VALUE VALUE
-------------- -------------
UTILITIES--0.6%
NRG Energy, Inc.
Tranche B,
2.013%, 2/1/13 $ 13 $ 14
Letter of Credit
2.033%, 2/1/13 104 99
Texas Competitive Electric
Holdings Co. LLC
Tranche B-2,
3.755%, 10/10/14 61 49
Tranche B-3,
3.755%, 10/10/14 49 40
-------------
202
-------------
TOTAL LOAN AGREEMENTS
(IDENTIFIED COST $3,673) 3,698
-------------
SHARES
--------------
PREFERRED STOCK--0.0%
FINANCIALS--0.0%
GMAC, Inc. (Pfd.) Series G 144A 7.00%(4) 5 3
-------------
TOTAL PREFERRED STOCK
(IDENTIFIED COST $2) 3
-------------
COMMON STOCKS--0.1%
FINANCIALS--0.1%
CIT Group, Inc.(2) 1,257 35
-------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $45) 35
-------------
TOTAL LONG-TERM INVESTMENTS--98.5%
(IDENTIFIED COST $32,402) 32,864
-------------
SHORT-TERM INVESTMENTS--0.8%
MONEY MARKET MUTUAL FUNDS--0.8%
Dreyfus Cash Management Fund -
Institutional Shares (seven-day
effective yield 0.080%) 268,433 268
-------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $268) 268
-------------
TOTAL INVESTMENTS--99.3%
(IDENTIFIED COST $32,670) 33,132(1)
-------------
Other Assets and Liabilities--0.7% 220
-------------
NET ASSETS--100.0% $ 33,352
=============
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
64
PHOENIX MULTI-SECTOR SHORT TERM BOND SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
COUNTRY WEIGHTINGS as of 12/31/09+
United States 78%
Australia 3
Canada 3
Russia 2
Luxembourg 1
New Zealand 1
Norway 1
Other 11
---
Total 100%
===
+ % of total investments as of December 31, 2009
FOREIGN CURRENCIES:
AUD Australian Dollar
BRL Brazil Real
CND Canadian Dollar
COP Colombian Peso
IDR Indonesian Rupiah
KRW Korean Won
NOK Norwegian Krone
NZD New Zealand Dollar
PLZ Polish Zloty
TRY New Turkish Lira
ZAR South Africa Rand
The following table provides a summary of inputs used to value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Level 2 -
Value at Level 1 - Significant
December 31, Quoted Observable
2009 Prices Inputs
------------ --------- -----------
INVESTMENTS IN SECURITIES:
Debt Securities:
U.S. Government Securities .......... $ 862 $ -- $ 862
Municipal Securities ................ 148 -- 148
Foreign Government Securities ....... 4,126 -- 4,126
Mortgage-Backed Securities .......... 7,907 -- 7,907
Asset-Backed Securities ............. 2,302 -- 2,302
Corporate Debt ...................... 17,481 -- 17,481
Equity Securities:
Preferred Stock ..................... 3 3 --
Common Stocks ....................... 35 35 --
Short-Term Investments .............. 268 268 --
------- ---- -------
Total ............................ $33,132 $306 $32,826
======= ==== =======
There are no Level 3 (significant unobservable inputs) priced securities.
The following is a reconciliation of assets of the Series for Level 3
investments for which significant unobservable inputs were used to determine
fair value:
Mortgage-Backed Asset-Backed Corporate
Total Securities Securities Debt
----- --------------- ------------ ---------
INVESTMENTS IN SECURITIES:
BALANCE AS OF DECEMBER 31, 2008 ........... $ 865 $ 245 $ 207 $ 413
Accrued discounts/premiums(a) ............. 2 (1) --(e) 3
Realized gain (loss)(b) ................... (172) (157) (17) 2
Change in unrealized appreciation
(depreciation)(b) ...................... 429 234 65 130
Net purchases (sales)(d) .................. (580) (20) (246) (314)
Transfers in and/or out of Level 3(c) ..... (544) (301) (9) (234)
----- ----- ----- -----
BALANCE AS OF DECEMBER 31, 2009 ........... $ -- $ -- $ -- $ --
===== ===== ===== =====
(a) Disclosed in the Statement of Operations under interest income.
(b) Disclosed in the Statement of Operations under Net realized and unrealized
gain (loss) on investments.
(c) "Transfers in and/or out" represent the ending value as of December 31,
2009, for any investment security where a change in the pricing level
occurred from the beginning to the end of the period.
(d) Includes paydowns.
(e) Amount is less than $500.
Level 3 securities are without an active market or market participants and
therefore are internally fair valued. These internally fair valued securities
derive their valuation based on the review of inputs such as, but not limited
to, similar securities, liquidity factors, capital structure, and credit
analysis.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
65
PHOENIX SMALL-CAP GROWTH SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
-------------- -------------
COMMON STOCKS--98.9%
CONSUMER DISCRETIONARY--18.2%
Capella Education Co.(2) 8,500 $ 640
Focus Media Holding Ltd. ADR(2) 23,100 366
hhgregg, Inc.(2) 28,300 623
Jarden Corp. 17,600 544
Lululemon Athletica, Inc.(2) 15,100 455
Orient-Express Hotel Ltd.
Class A(2) 42,500 431
Royal Caribbean Cruises Ltd.(2) 22,500 569
Tractor Supply Co.(2) 6,800 360
Ulta Salon, Cosmetics &
Fragrance, Inc.(2) 16,600 302
Warnaco Group, Inc. (The)(2) 6,000 253
WMS Industries, Inc.(2) 6,000 240
-------------
4,783
-------------
CONSUMER STAPLES--3.8%
Central European Distribution
Corp.(2) 9,800 279
Diamond Foods, Inc. 12,100 430
Elizabeth Arden, Inc.(2) 19,900 287
-------------
996
-------------
ENERGY--4.2%
Arena Resources, Inc.(2) 11,300 487
Concho Resources, Inc.(2) 13,585 610
-------------
1,097
-------------
FINANCIALS--3.0%
Jones Lang LaSalle, Inc. 6,900 417
Waddell & Reed Financial, Inc.
Class A 12,300 375
-------------
792
-------------
HEALTH CARE--21.4%
Air Methods Corp.(2) 10,500 353
Alexion Pharmaceuticals, Inc.(2) 7,700 376
Align Technology, Inc.(2) 16,300 290
Emergency Medical Services
Corp. Class A(2) 8,100 439
HMS Holdings Corp.(2) 11,500 560
Human Genome Sciences, Inc.(2) 14,500 444
Inverness Medical Innovations,
Inc.(2) 9,500 394
IPC (The) Hospitalist Co.,
Inc.(2) 11,000 366
Magellan Health Services, Inc.(2) 7,100 289
Mednax, Inc.(2) 7,200 433
PSS World Medical, Inc.(2) 17,000 384
Sirona Dental Systems, Inc.(2) 15,700 498
SXC Health Solutions Corp.(2) 10,200 550
Zoll Medical Corp.(2) 9,800 262
-------------
5,638
-------------
INDUSTRIALS--13.3%
AAR Corp.(2) 13,300 306
Cornell Cos., Inc.(2) 15,900 361
Harbin Electric, Inc.(2) 20,100 413
Healthcare Services Group, Inc. 18,000 386
Heico Corp. 14,900 660
SHARES VALUE
-------------- -------------
INDUSTRIALS--CONTINUED
ICF International, Inc.(2) 12,200 $ 327
Manitowoc Co., Inc. (The) 30,600 305
Nordson Corp. 4,700 288
Smartheat, Inc.(2) 31,200 453
-------------
3,499
-------------
INFORMATION TECHNOLOGY--32.3%
ArcSight, Inc.(2) 13,400 343
AsiaInfo Holdings, Inc.(2) 10,800 329
Compellent Technologies, Inc.(2) 22,100 501
Global Defense Technology &
Systems, Inc.(2) 21,400 352
Hittite Microwave Corp.(2) 7,300 298
Informatica Corp.(2) 17,300 447
LivePerson, Inc.(2) 68,700 479
Manhattan Associates,
Inc.(2) 12,600 303
NetLogic Microsystems,
Inc.(2) 7,900 365
NIC, Inc. 34,800 318
Nuance Communications,
Inc.(2) 18,800 292
Rackspace Hosting, Inc.(2) 24,800 517
RightNow Technologies, Inc.(2) 24,400 424
Silicon Laboratories, Inc.(2) 6,800 329
Solera Holdings, Inc. 16,600 598
Sourcefire, Inc.(2) 16,300 436
SuccessFactors, Inc.(2) 18,400 305
Taleo Corp. Class A(2) 14,200 334
Ultimate Software Group, Inc.(2) 12,900 379
Varian Semiconductor
Equipment Associates, Inc.(2) 8,800 316
Veeco Instruments, Inc.(2) 14,400 476
VistaPrint NV(2) 6,500 368
-------------
8,509
-------------
MATERIALS--2.7%
Nalco Holding Co. 16,000 408
NewMarket Corp. 2,600 298
-------------
706
-------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $19,601) 26,020
-------------
TOTAL LONG-TERM INVESTMENTS--98.9%
(IDENTIFIED COST $19,601) 26,020
-------------
SHORT-TERM INVESTMENTS--0.0%
MONEY MARKET MUTUAL FUNDS--0.0%
Dreyfus Cash Management Fund -
Institutional Shares (seven-day
effective yield 0.080%) 11 --(13)
-------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $0) 0
-------------
TOTAL INVESTMENTS--98.9%
(IDENTIFIED COST $19,601) 26,020(1)
-------------
Other assets and liabilities, net--1.1% 290
-------------
NET ASSETS--100.0% $ 26,310
=============
COUNTRY WEIGHTINGS as of 12/31/09+
United States 91%
Bermuda 2
Canada 2
Liberia 2
Netherlands 2
China 1
---
Total 100%
---
+ % of total investments as of December 31, 2009
The following table provides a summary of inputs used to value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Level 1 -
Value at Quoted
December 31, 2009 Prices
----------------- ---------
INVESTMENTS IN SECURITIES:
Equity Securities:
Common Stocks $26,020 $26,020
Short-Term Investments --(13) --(13)
------- -------
Total $26,020 $26,020
======= =======
There are no Level 2 (Significant Observable Inputs) and Level 3 (Significant
Unobservable Inputs) priced securities.
The following is a reconciliation of assets of the Series for Level 3
investments for which significant unobservable inputs were used to determine
fair value:
Common
Stocks
------
INVESTMENTS IN SECURITIES:
BALANCE AS OF DECEMBER 31, 2008........ $ 30
Accrued discounts/premiums............. --
Realized gain (loss)(a)................ 12
Change in unrealized appreciation
(depreciation)(a)................... --
Net purchases (sales).................. (42)
Transfers in and/or out of Level 3(b).. --
----
BALANCE AS OF DECEMBER 31, 2009........ $ --
====
(a) Disclosed in the Statement of Operations under Net realized and unrealized
gain (loss) on investments.
(b) "Transfers in and/or out" represent the ending value as of December 31,
2009, for any investment security where a change in the pricing level
occurred from the beginning to the end of the period.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
66
PHOENIX SMALL-CAP VALUE SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
-------------- -------------
COMMON STOCKS--98.3%
CONSUMER DISCRETIONARY--15.3%
Broadview Security, Inc.(2) 25,600 $ 835
Gentex Corp. 45,400 810
John Wiley & Sons, Inc.
Class A 23,300 976
Marcus Corp. (The) 62,400 800
Regis Corp. 49,300 768
Vail Resorts, Inc.(2) 23,000 869
Wolverine World Wide, Inc. 30,700 835
-------------
5,893
-------------
CONSUMER STAPLES--10.8%
BJ's Wholesale Club, Inc.(2) 24,100 788
Casey's General Stores, Inc. 25,700 821
Chattem, Inc.(2) 4,300 401
Diamond Foods, Inc. 14,000 498
J & J Snack Foods Corp. 19,800 791
Spartan Stores, Inc. 58,500 836
-------------
4,135
-------------
ENERGY--4.2%
Approach Resources, Inc.(2) 26,100 202
Atlas Energy, Inc. 29,700 896
Rex Energy Corp.(2) 41,500 498
-------------
1,596
-------------
FINANCIALS--16.1%
BancFirst Corp. 10,300 382
Chemical Financial Corp. 17,245 407
Equity Lifestyle Properties, Inc. 15,900 802
First Niagara Financial Group,
Inc. 55,500 772
Knight Capital Group, Inc.
Class A(2) 53,000 816
Mack-Cali Realty Corp. 12,200 422
Stifel Financial Corp.(2) 15,000 889
Suffolk Bancorp 6,700 199
Texas Capital Bancshares, Inc.(2) 49,300 688
UMB Financial Corp. 21,000 826
-------------
6,203
-------------
HEALTH CARE--2.1%
CryoLife, Inc.(2) 128,400 824
-------------
INDUSTRIALS--28.3%
Astec Industries, Inc.(2) 29,400 792
BE Aerospace, Inc.(2) 37,900 891
Beacon Roofing Supply, Inc.(2) 49,958 799
Genesee & Wyoming, Inc.
Class A(2) 23,800 777
Kaydon Corp. 21,300 762
Landstar System, Inc. 10,400 403
SHARES VALUE
-------------- -------------
INDUSTRIALS--CONTINUED
Layne Christensen Co.(2) 11,600 $ 333
Lennox International, Inc. 10,800 422
Middleby Corp.(2) 15,900 779
Moog, Inc. Class A(2) 26,900 786
Northwest Pipe Co.(2) 15,292 411
Rollins, Inc. 42,600 821
Saia, Inc.(2) 25,200 373
Smith (A.O.) Corp. 19,600 850
Teledyne Technologies, Inc.(2) 21,600 829
Wabtec Corp. 20,800 850
-------------
10,878
-------------
INFORMATION TECHNOLOGY--8.4%
ManTech International Corp.
Class A(2) 16,800 811
MKS Instruments, Inc.(2) 46,099 803
Progress Software Corp.(2) 28,100 821
ValueClick, Inc.(2) 76,600 775
-------------
3,210
-------------
MATERIALS--4.2%
Sensient Technologies Corp. 28,600 752
Thompson Creek Metals Co.,
Inc.(2) 72,300 847
-------------
1,599
-------------
UTILITIES--8.9%
Avista Corp. 38,800 838
Cleco Corp. 33,400 913
Portland General Electric Co. 42,300 863
Westar Energy, Inc. 37,200 808
-------------
3,422
-------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $32,639) 37,760
-------------
TOTAL LONG-TERM INVESTMENTS--98.3%
(IDENTIFIED COST $32,639) 37,760
-------------
SHORT-TERM INVESTMENTS--1.4%
MONEY MARKET MUTUAL FUNDS--1.4%
Dreyfus Cash Management Fund -
Institutional Shares (seven-day
effective yield 0.080%) 549,099 549
-------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $549) 549
-------------
TOTAL INVESTMENTS--99.7%
(IDENTIFIED COST $33,188) 38,309(1)
-------------
Other assets and liabilities, net--0.3% 111
-------------
NET ASSETS--100.0% $ 38,420
=============
The following table provides a summary of inputs used to value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Level 1 -
Value at Quoted
December 31, 2009 Prices
----------------- ---------
INVESTMENTS IN SECURITIES:
Equity Securities:
Common Stocks $37,760 $37,760
Short-Term Investments 549 549
------- -------
Total $38,309 $38,309
======= =======
There are no Level 2 (Significant Observable Inputs) and Level 3 (Significant
Unobservable Inputs) priced securities.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
67
PHOENIX STRATEGIC ALLOCATION SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
PAR
VALUE VALUE
-------------- -------------
MUNICIPAL BONDS--2.1%
CALIFORNIA--1.2%
Alameda Corridor Transportation
Authority Taxable Series 99-C,
(NATL-RE Insured) 6.600%, 10/1/29 $ 1,000 $ 851
Kern County Pension Obligation
Taxable (NATL-RE Insured)
7.260%, 8/15/14 420 444
Sonoma County Pension
Obligation Taxable
(FSA Insured)
6.625%, 6/1/13 795 831
-------------
2,126
-------------
FLORIDA--0.1%
Miami-Dade County Educational
Facilities Authority Taxable
Series C 5.480%, 4/1/16 105 103
-------------
PENNSYLVANIA--0.7%
City of Pittsburgh Pension
Obligation Taxable Series C
(NATL-RE, FGIC Insured)
6.500%, 3/1/17 1,250 1,232
-------------
VIRGINIA--0.1%
Tobacco Settlement Financing
Corp. Taxable Series 07-A1,
6.706%, 6/1/46 220 159
-------------
TOTAL MUNICIPAL BONDS
(IDENTIFIED COST $3,699) 3,620
-------------
FOREIGN GOVERNMENT SECURITIES--0.8%
Bolivarian Republic of Venezuela
9.250%, 9/15/27 95 70
Commonwealth of Australia
Series 121, 5.250%, 8/15/10 265 AUD 240
Commonwealth of Canada
2.750%, 12/1/10 76 CND 74
Commonwealth of New Zealand
Series 1111, 6.000%, 11/15/11 316 NZD 236
Federative Republic of Brazil
10.250%, 1/10/28 250 BRL 143
Kingdom of Norway
5.000%, 5/15/15 900 NOK 165
Republic of Colombia
12.000%, 10/22/15 85,000 COP 51
Republic of Poland
6.375%, 7/15/19 95 103
Republic of South Africa
Series R-201
8.750%, 12/21/14 1,250 ZAR 171
Republic of Turkey
0.000%, 2/2/11 115 TRY 71
-------------
TOTAL FOREIGN GOVERNMENT SECURITIES
(IDENTIFIED COST $1,341) 1,324
-------------
PAR
VALUE VALUE
-------------- -------------
MORTGAGE-BACKED SECURITIES--16.5%
AGENCY--8.0%
FNMA
4.000%, 6/1/20 $ 440 $ 444
4.500%, 7/1/20 35 36
4.000%, 5/1/31 589 569
6.500%, 10/1/31 22 24
6.000%, 9/1/32 128 137
5.000%, 10/1/33 1,157 1,192
5.000%, 10/1/35 350 360
6.000%, 9/1/36 193 205
5.000%, 2/1/37 814 836
5.500%, 4/1/37 196 206
6.000%, 10/1/37 261 277
5.000%, 5/1/38 1,278 1,313
5.500%, 6/1/38 223 233
5.500%, 6/1/38 158 166
5.500%, 11/1/38 419 440
5.500%, 11/1/38 1,263 1,323
6.000%, 11/1/38 618 656
4.000%, 1/1/39 329 317
5.000%, 1/1/39 344 353
6.000%, 1/1/39 281 298
4.500%, 3/1/39 541 540
5.000%, 3/1/39 368 378
6.000%, 3/1/39 241 256
4.500%, 4/1/39 1,162 1,161
4.500%, 5/1/39 1,176 1,175
GNMA
6.500%, 11/15/23 70 75
6.500%, 12/15/23 13 14
6.500%, 2/15/24 101 108
6.500%, 6/15/28 129 139
6.500%, 7/15/31 82 88
6.500%, 11/15/31 82 88
6.500%, 2/15/32 55 59
6.500%, 4/15/32 82 88
-------------
13,554
-------------
NON-AGENCY--8.5%
Banc of America Funding Corp.
05-8, 1A1 5.500%, 1/25/36 469 430
Bear Stearns Adjustable Rate
Mortgage Trust 05-12, 13A1
5.429%, 2/25/36 (3) 493 403
Bear Stearns Commercial
Mortgage Securities 06-PW12, A4
5.719%, 9/11/38(3) 940 955
07-PW18, AM 6.084%, 6/11/50(3) 550 398
Citigroup Mortgage Loan
Trust, Inc. 05-5, 2A3
5.000%, 8/25/35 367 347
Citigroup/Deutsche Bank
Commercial Mortgage Trust 06-CD2, A4
5.363%, 1/15/46 (3) 1,190 1,138
PAR
VALUE VALUE
-------------- -------------
NON-AGENCY--CONTINUED
Credit Suisse Mortgage Capital
Certificates 06-C1, A4
5.548%, 2/15/39 (3) $ 1,710 $ 1,684
Crown Castle Towers LLC
05-1A, AFX 144A
4.643%, 6/15/35 (4) 800 808
GE Capital Commercial
Mortgage Corp. 03-C1, C
4.975%, 1/10/38 (3) 175 170
GS Mortgage Securities Corp. II
05-GG4, AJ 4.782%, 7/10/39 800 609
07-GG10, A4 5.805%, 8/10/45(3) 460 395
JPMorgan Chase Commercial
Mortgage Securities Corp.
07-LD12, A4 5.882%, 2/15/51 (3) 425 368
Lehman Brothers-UBS
Commercial Mortgage Trust 06-C6, A4
5.372%, 9/15/39 325 310
07-C2, A2 5.303%, 2/15/40 1,230 1,259
07-C6, A2 5.845%, 7/15/40 500 506
07-C7, A3 5.866%, 9/15/45(3) 700 614
Morgan Stanley Capital I 06-T23, A4
5.810%, 8/12/41(3) 790 796
06-IQ12, A4 5.332%, 12/15/43 525 487
SBA Commercial Mortgage-Backed
Securities Trust 06-1A, A 144A
5.314%, 11/15/36 (4) 500 511
Timberstar Trust 06-1A, A 144A
5.668%, 10/15/36 (4) 675 641
Wachovia Bank Commercial Mortgage Trust
07-C30, A5 5.342%, 12/15/43 285 221
07-C33, A4 5.902%, 2/15/51(3) 425 349
Wells Fargo Mortgage-Backed
Securities Trust 04-EE, 2A3
3.108%, 12/25/34(3) 326 248
05-AR4, 2A2 4.338%, 4/25/35(3) 123 109
05-AR4, 2A1 4.338%, 4/25/35(3) 818 712
-------------
14,468
-------------
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $28,381) 28,022
-------------
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
68
PHOENIX STRATEGIC ALLOCATION SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
PAR
VALUE VALUE
-------------- -------------
ASSET-BACKED SECURITIES--1.1%
Bayview Financial Acquisition
Trust 06-A, 1A2 5.483%, 2/28/41 (3) $ 325 $ 282
Bosphorus Financial Services Ltd. 144A
2.073%, 2/15/12 (3)(4) 225 215
Capital One Auto Finance Trust 07-B, A3A
5.030%, 4/15/12 142 143
Dunkin Securitization 06-1, M1 144A
8.285%, 6/20/31 (4) 305 258
JPMorgan Mortgage Acquisition Corp.
06-CW2, AF3 5.777%, 8/25/36(3) 470 313
06-CW2, AF4 6.080%, 8/25/36(3) 530 298
Residential Funding Mortgage
Securities II, Inc. 06-HSA1, A3
5.230%, 2/25/36 (3) 987 346
-------------
TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $2,986) 1,855
-------------
CORPORATE BONDS--17.7%
CONSUMER DISCRETIONARY--1.4%
Arcos Dorados B.V. 144A
7.500%, 10/1/19 (4) 125 124
Daimler Finance North America LLC
6.500%, 11/15/13 130 142
DIRECTV Holdings LLC/DIRECTV
Financing Co., Inc.
6.375%, 6/15/15 160 166
DuPont Fabros Technology LP 144A
8.500%, 12/15/17 (4) 125 128
Equity One, Inc. 6.250%, 12/15/14 100 98
Harrah's Operating Co., Inc. 144A
11.250%, 6/1/17 (4) 125 131
Hasbro, Inc. 6.300%, 9/15/17 200 212
International Game Technology
7.500%, 6/15/19 150 163
Korea Expressway Corp. 144A
4.500%, 3/23/15 (4) 100 102
Landry's Restaurants, Inc. 144A
11.625%, 12/1/15 (4) 83 88
QVC, Inc. 144A
7.500%, 10/1/19 (4) 150 154
Royal Caribbean Cruises Ltd.
7.250%, 6/15/16 285 277
Seneca Gaming Corp. Series B
7.250%, 5/1/12 225 220
Staples, Inc.
9.750%, 1/15/14 40 49
Starwood Hotels & Resorts Worldwide, Inc.
7.150%, 12/1/19 75 75
PAR
VALUE VALUE
-------------- -------------
CONSUMER DISCRETIONARY--CONTINUED
Time Warner Cable, Inc.
5.850%, 5/1/17 $ 130 $ 137
Videotron Ltee
6.375%, 12/15/15 175 172
-------------
2,438
-------------
CONSUMER STAPLES--0.7%
BAT International Finance plc 144A
9.500%, 11/15/18 (4) 50 64
Reynolds American, Inc.
7.300%, 7/15/15 600 648
Tate & Lyle International
Finance plc 144A 6.625%, 6/15/16 (4) 275 285
Tyson Foods, Inc.
7.850%, 4/1/16 125 129
-------------
1,126
-------------
ENERGY--1.1%
Buckeye Partners LP 6.050%, 1/15/18 50 52
Cenovus Energy, Inc. 144A
5.700%, 10/15/19 (4) 45 47
Denbury Resources, Inc.
7.500%, 12/15/15 185 185
Enterprise Products Operating LLC
7.625%, 2/15/12 130 144
Expro Finance Luxembourg SCA 144A
8.500%, 12/15/16 (4) 125 125
Helix Energy Solutions Group, Inc. 144A
9.500%, 1/15/16 (4) 50 51
Holly Corp. 144A 9.875%, 6/15/17 (4) 12 13
Kinder Morgan Finance Co. 5.700%, 1/5/16 225 217
Pacific Rubiales Energy Corp. 144A
8.750%, 11/10/16 (4) 125 132
Petrohawk Energy Corp.
10.500%, 8/1/14 100 110
Petropower I Funding Trust 144A
7.360%, 2/15/14 (4) 297 295
Questar Market Resources, Inc.
6.800%, 3/1/20 100 104
SEACOR Holdings, Inc. 7.375%, 10/1/19 150 152
Swift Energy Co. 7.125%, 6/1/17 175 166
Weatherford International Ltd.
9.625%, 3/1/19 45 56
-------------
1,849
-------------
FINANCIALS--8.3%
Abu Dhabi Commercial Bank 144A
4.750%, 10/8/14 (4) 150 139
AFLAC, Inc. 8.500%, 5/15/19 100 115
PAR
VALUE VALUE
-------------- -------------
FINANCIALS--CONTINUED
American Express Credit Corp. Series C,
7.300%, 8/20/13 $ 200 $ 225
Assurant, Inc. 5.625%, 2/15/14 250 256
BAC Capital Trust XI 6.625%, 5/23/36 325 294
Bank of America Corp. 5.650%, 5/1/18 400 406
Bank of New York/Mellon Corp. (The)
4.950%, 11/1/12 180 194
Barclays Bank plc 5.200%, 7/10/14 140 148
BBVA International Preferred
SA Unipersonal 5.919%, 12/31/49(3) 60 48
Bear Stearns Cos., Inc. LLC (The)
7.250%, 2/1/18 250 287
BlackRock, Inc. Series 2, 5.000%, 12/10/19 125 123
Blackstone Holdings Finance Co. LLC 144A
6.625%, 8/15/19 (4) 135 132
Brandywine Operating Partnership LP
7.500%, 5/15/15 125 127
Citigroup, Inc. 5.000%, 9/15/14 40 39
4.875%, 5/7/15 195 184
Credit Suisse New York 5.000%, 5/15/13 260 277
Deutsche Bank Financial LLC 5.375%, 3/2/15 131 137
Export-Import Bank of Korea 5.875%, 1/14/15 100 107
Fibria Overseas Finance Ltd. 144A
9.250%, 10/30/19 (4) 100 113
Fifth Third Bancorp 4.500%, 6/1/18 150 122
FMR LLC 144A 5.350%, 11/15/21 (4) 250 239
Ford Motor Credit Co. LLC 8.625%, 11/1/10 180 185
9.875%, 8/10/11 238 249
7.800%, 6/1/12 200 202
General Electric Capital Corp.
5.375%, 10/20/16 700 728
Genworth Financial, Inc. 5.750%, 6/15/14 125 120
6.515%, 5/22/18 85 78
Glen Meadow Pass-Through Trust 144A
6.505%, 2/12/67 (3)(4) 135 100
GMAC LLC 144A 6.875%, 8/28/12 (4) 316 313
GMAC, Inc. 144A 6.875%, 9/15/11(4) 24 24
144A 6.750%, 12/1/14(4) 49 47
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
69
PHOENIX STRATEGIC ALLOCATION SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
PAR
VALUE VALUE
-------------- -------------
FINANCIALS--CONTINUED
Goldman Sachs Group, Inc. (The)
5.950%, 1/18/18 $ 165 $ 174
6.150%, 4/1/18 175 187
HRPT Properties Trust
5.750%, 11/1/15 275 259
Hyundai Capital Services, Inc.
144A
6.000%, 5/5/15 (4) 100 104
JPMorgan Chase & Co.
5.250%, 5/1/15 250 260
Series 1,
7.900%, 12/31/49(3) 89 92
KeyBank N.A.
4.950%, 9/15/15 170 158
Kimco Realty Corp.
6.875%, 10/1/19 150 153
Korea Development Bank
5.300%, 1/17/13 137 144
LBG Capital No. 1 plc 144A
7.880%, 11/1/20 (4) 1,000 810
Lincoln National Corp.
6.050%, 4/20/67(3) 50 39
Lukoil International Finance BV
144A
7.250%, 11/5/19 (4) 175 176
Mercantile Bankshares Corp.
4.625%, 4/15/13 208 211
Morgan Stanley
4.200%, 11/20/14 100 100
National Capital Trust II 144A
5.486%, 12/29/49 (3)(4) 950 759
Petroplus Finance Ltd. 144A
6.750%, 5/1/14 (4) 150 142
ProLogis
7.625%, 8/15/14 150 157
6.625%, 5/15/18 120 114
Prudential Financial, Inc.
4.750%, 9/17/15 150 152
8.875%, 6/15/38(3) 50 53
Realty Income Corp.
6.750%, 8/15/19 110 108
Regions Financial Corp.
7.750%, 11/10/14 100 99
SLM Corp.
0.000%, 2/1/10(3) 1,950 1,952
SunTrust Banks, Inc.
5.250%, 11/5/12 150 156
UFJ Finance AEC
6.750%, 7/15/13 275 306
Universal City Development
Partners Ltd. 144A
8.875%, 11/15/15 (4) 20 20
Unum Group
7.125%, 9/30/16 125 129
Wachovia Corp.
4.875%, 2/15/14 355 361
Westfield Capital Corp.
Ltd./Westfield Finance
Authority 144A
5.125%, 11/15/14 (4) 355 366
Zions Bancorp.
5.650%, 5/15/14 1,000 729
-------------
14,228
-------------
PAR
VALUE VALUE
-------------- -------------
HEALTH CARE--0.2%
Quest Diagnostics, Inc.
6.400%, 7/1/17 $ 280 $ 307
-------------
INDUSTRIALS--2.0%
American Airlines, Inc. 01-1,
6.977%, 5/23/21 373 301
Continental Airlines, Inc. 98-1A,
6.648%, 9/15/17 345 332
DI Finance/DynCorp International,
Inc. Series B,
9.500%, 2/15/13 125 127
Equifax, Inc.
6.300%, 7/1/17 240 245
Hutchison Whampoa International
Ltd. 144A
5.750%, 9/11/19 (4) 115 117
ITW Cupids Financing Trust I
144A
6.550%, 12/31/11 (4) 2,000 1,991
Owens Corning, Inc.
6.500%, 12/1/16 60 61
United Rentals North America, Inc.
6.500%, 2/15/12 175 175
USG Corp. 144A
9.750%, 8/1/14 (4) 21 23
-------------
3,372
-------------
INFORMATION TECHNOLOGY--0.6%
Agilent Technologies, Inc.
5.500%, 9/14/15 75 79
Broadridge Financial Solutions, Inc.
6.125%, 6/1/17 250 243
Crown Castle Holdings GS V
LLC/Crown Castle GS III Corp.
144A
7.750%, 5/1/17 (4) 150 160
Intuit, Inc. 5.750%, 3/15/17 71 73
Jabil Circuit, Inc.
8.250%, 3/15/18 170 183
Xerox Corp.
6.750%, 2/1/17 325 349
-------------
1,087
-------------
MATERIALS--1.5%
Agrium, Inc.
6.750%, 1/15/19 180 195
Airgas, Inc.
4.500%, 9/15/14 38 39
ArcelorMittal
6.125%, 6/1/18 180 186
Ashland, Inc. 144A
9.125%, 6/1/17 (4) 125 138
Bemis Co., Inc.
6.800%, 8/1/19 40 44
Catalyst Paper Corp.
7.375%, 3/1/14 180 111
Celulosa Arauco
7.250%, 7/29/19 150 163
Commercial Metals Co.
7.350%, 8/15/18 170 181
PAR
VALUE VALUE
-------------- -------------
MATERIALS--CONTINUED
CRH America, Inc.
6.000%, 9/30/16 $ 255 $ 266
8.125%, 7/15/18 150 175
Dow Chemical Co. (The)
8.550%, 5/15/19 150 179
Georgia Gulf Corp. 144A
9.000%, 1/15/17 (4) 125 127
Gerdau Holdings, Inc. 144A
7.000%, 1/20/20 (4) 100 103
JonhsonDiversey, Inc. 144A
8.250%, 11/15/19 (4) 15 15
Koppers, Inc. 144A
7.875%, 12/1/19 (4) 30 30
Nova Chemicals Corp.
3.649%, 11/15/13(3) 170 156
Vale Overseas Ltd.
5.625%, 9/15/19 150 151
Verso Paper Holdings LLC/Verso
Paper, Inc. Series B,
4.031%, 8/1/14 (3) 93 74
Xstrata Canada Corp.
5.500%, 6/15/17 260 259
-------------
2,592
-------------
TELECOMMUNICATION SERVICES--0.6%
Axtel SAB de C.V. 144A
9.000%, 9/22/19 (4) 38 39
Cincinnati Bell, Inc.
8.250%, 10/15/17 60 61
Clearwire Corp. 144A
12.000%, 12/1/15 (4) 40 41
Frontier Communications Corp.
8.125%, 10/1/18 75 76
OJSC Vimpel Communications
144A (VIP Finance Ireland Ltd.)
9.125%, 4/30/18 (4) 125 134
Qwest Corp.
7.875%, 9/1/11 125 131
6.500%, 6/1/17 143 141
Telecom Italia Capital S.A.
5.250%, 10/1/15 200 209
Virgin Media Finance plc Series 1,
9.500%, 8/15/16 100 108
Windstream Corp. 144A
7.875%, 11/1/17 (4) 90 89
-------------
1,029
-------------
UTILITIES--1.3%
Allegheny Energy Supply Co. LLC
144A
8.250%, 4/15/12 (4) 110 120
AmeriGas Partners LP
7.250%, 5/20/15 500 503
Centrais Eletricas Brasileiras
SA 144A
6.875%, 7/30/19 (4) 100 108
Great River Energy 144A
5.829%, 7/1/17 (4) 114 124
Korea Electric Power Corp.
144A
5.500%, 7/21/14 (4) 100 106
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
70
PHOENIX STRATEGIC ALLOCATION SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
PAR
VALUE VALUE
-------------- -------------
UTILITIES--CONTINUED
Majapahit Holding BV 144A
7.750%, 1/20/20(4) $ 200 $ 211
Midwest Generation LLC
Series B 8.560%, 1/2/16 92 93
Northeast Utilities
5.650%, 6/1/13 200 207
Sempra Energy
6.000%, 10/15/39 150 148
TransAlta Corp.
4.750%, 1/15/15 65 65
United Energy Distribution
Holdings Property Ltd. 144A
5.450%, 4/15/16(4) 500 469
-------------
2,154
-------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $29,936) 30,182
-------------
CONVERTIBLE BONDS--0.1%
MATERIALS--0.1%
Georgia-Pacific Corp. 144A
7.000%, 1/15/15(4) 125 127
-------------
TOTAL CONVERTIBLE BONDS
(IDENTIFIED COST $128) 127
-------------
LOAN AGREEMENTS(3)--0.2%
CONSUMER DISCRETIONARY--0.0%
Lamar Media Corp. Tranche F,
5.500%, 3/31/14 40 40
-------------
CONSUMER STAPLES--0.0%
Reynolds Group Holdings Ltd.
Tranche
6.250%, 11/5/15 45 45
-------------
FINANCIALS--0.0%
Universal City Tranche
6.500%, 11/6/14 19 19
-------------
HEALTH CARE--0.1%
RehabCare Group, Inc. Tranche B,
6.000%, 11/24/15 55 54
-------------
INDUSTRIALS--0.0%
Protection One Alarm Monitoring, Inc.
Tranche B-2,
6.250%, 3/31/14 30 30
-------------
MATERIALS--0.0%
Gentek Holding LLC Tranche
7.000%, 10/29/14 50 51
-------------
UTILITIES--0.1%
Texas Competitive Electric
Holdings Co. LLC Tranche B-2,
3.755%, 10/10/14 71 58
-------------
TOTAL LOAN AGREEMENTS
(IDENTIFIED COST $307) 297
-------------
SHARES VALUE
-------------- -------------
PREFERRED STOCK--0.0%
FINANCIALS--0.0%
GMAC, Inc. (Pfd.) Series G 144A
7.00%(4) 84 $ 55
-------------
TOTAL PREFERRED STOCK
(IDENTIFIED COST $27) 55
-------------
COMMON STOCKS--59.0%
CONSUMER DISCRETIONARY--3.4%
McDonald's Corp. 40,000 2,498
NIKE, Inc. Class B 34,000 2,246
Under Armour, Inc. Class A(2) 41,000 1,118
-------------
5,862
-------------
CONSUMER STAPLES--7.8%
Altria Group, Inc. 113,500 2,228
Bunge Ltd. 34,300 2,189
Clorox Co. (The) 37,000 2,257
Costco Wholesale Corp. 39,000 2,308
PepsiCo, Inc. 35,000 2,128
Philip Morris International, Inc. 45,000 2,168
-------------
13,278
-------------
ENERGY--10.3%
Chevron Corp. 28,000 2,156
ConocoPhillips 43,000 2,196
Halliburton Co. 71,000 2,136
Massey Energy Co. 48,000 2,017
Occidental Petroleum Corp. 32,000 2,603
Petroleo Brasileiro SA ADR 49,000 2,336
Valero Energy Corp. 105,000 1,759
Williams Cos., Inc. (The) 112,000 2,361
-------------
17,564
-------------
FINANCIALS--2.5%
Goldman Sachs Group, Inc. (The) 12,000 2,026
Hudson City Bancorp, Inc. 159,200 2,186
-------------
4,212
-------------
HEALTH CARE--7.7%
Biogen Idec, Inc.(2) 44,000 2,354
Gilead Sciences, Inc.(2) 47,000 2,034
Johnson & Johnson 37,700 2,428
Shire plc ADR 38,000 2,231
St. Jude Medical, Inc.(2) 52,000 1,913
UnitedHealth Group, Inc. 71,000 2,164
-------------
13,124
-------------
INDUSTRIALS--7.3%
Caterpillar, Inc. 23,000 1,311
Continental Airlines, Inc. Class B(2) 137,000 2,455
Dryships, Inc.(2) 353,000 2,054
Foster Wheeler AG(2) 69,000 2,031
SHARES VALUE
-------------- -------------
INDUSTRIALS--CONTINUED
L-3 Communications Holdings, Inc. 26,000 $ 2,261
Union Pacific Corp. 35,000 2,237
-------------
12,349
-------------
INFORMATION TECHNOLOGY--10.9%
Cisco Systems, Inc.(2) 99,000 2,370
Corning, Inc. 117,000 2,259
Hewlett-Packard Co. 43,000 2,215
International Business Machines Corp. 20,000 2,618
Microsoft Corp. 73,000 2,226
Nokia Oyj Sponsored ADR 161,600 2,077
QUALCOMM, Inc. 50,400 2,331
Research In Motion Ltd.(2) 36,000 2,431
-------------
18,527
-------------
MATERIALS--5.1%
Alcoa, Inc. 103,000 1,660
Freeport-McMoRan
Copper & Gold, Inc.(2) 30,000 2,409
Nucor Corp. 47,000 2,193
Potash Corp. of Saskatchewan, Inc. 22,000 2,387
-------------
8,649
-------------
TELECOMMUNICATION SERVICES--2.8%
AT&T, Inc. 84,000 2,355
Verizon Communications, Inc. 72,000 2,385
-------------
4,740
-------------
UTILITIES--1.2%
Exelon Corp.(2) 43,000 2,101
-------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $77,925) 100,406
-------------
EXCHANGE-TRADED FUNDS--1.2%
PowerShares Deutsche Bank
Agriculture Fund(2) 77,900 2,060
-------------
TOTAL EXCHANGE-TRADED FUNDS
(IDENTIFIED COST $1,941) 2,060
-------------
TOTAL LONG-TERM INVESTMENTS--98.7%
(IDENTIFIED COST $146,671) 167,948
-------------
SHORT-TERM INVESTMENTS--1.0%
MONEY MARKET MUTUAL FUNDS--1.0%
Dreyfus Cash Management Fund -
Institutional Shares (seven-day
effective yield 0.080%) 1,708,044 1,708
-------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $1,708) 1,708
-------------
TOTAL INVESTMENTS--99.7%
(IDENTIFIED COST $148,379) 169,656(1)
-------------
Other Assets and Liabilities--0.3% 591
-------------
NET ASSETS--100.0% $ 170,247
=============
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
71
PHOENIX STRATEGIC ALLOCATION SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
COUNTRY WEIGHTINGS as of 12/31/09+
United States 83%
Bermuda 3
Canada 3
Brazil 2
United Kingdom 2
Finland 1
Switzerland 1
Other 5
---
Total 100%
---
+ % of total investments as of December 31, 2009
FOREIGN CURRENCIES:
AUD Australian Dollar
BRL Brazil Real
CND Canadian Dollar
COP Colombian Peso
NOK Norwegian Krone
NZD New Zealand Dollar
TRY New Turkish Lira
ZAR South Africa Rand
The following table provides a summary of inputs used to value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Level 2 -
Value at Level 1 - Significant
December 31, Quoted Observable
2009 Prices Inputs
------------ --------- -----------
INVESTMENTS IN SECURITIES:
Debt Securities:
Municipal Debt ................. $ 3,620 $ -- $ 3,620
Foreign Government Securities... 1,324 -- 1,324
Mortgage-Backed Securities ..... 28,022 -- 28,022
Asset-Backed Securities ........ 1,855 -- 1,855
Corporate Debt ................. 30,606 -- 30,606
Equity Securities:
Preferred Stock ................ 55 55 --
Common Stocks .................. 100,406 100,406 --
Exchange-Traded Funds .......... 2,060 2,060 --
Short-Term Investments ......... 1,708 1,708 --
-------- -------- -------
Total ....................... $169,656 $104,229 $65,427
======== ======== =======
There are no Level 3 (significant unobservable inputs) priced securities.
The following is a reconciliation of assets of the Series for Level 3
investments for which significant unobservable inputs were used:
Mortgage-Backed Corporate
Total Securities Debt
------- --------------- ---------
INVESTMENTS IN SECURITIES:
BALANCE AS OF DECEMBER 31, 2008 ..... $ 1,205 $ 524 $ 681
Accrued discounts/premiums(a) ....... (1) (2) 1
Realized gain (loss)(b) ............. (189) (185) (4)
Change in unrealized appreciation
(depreciation)(b) ................ 494 386 108
Net purchases (sales)(c) ............ (449) (82) (367)
Transfers in and/or out of
Level 3(d) ....................... (1,060) (641) (419)
------- ----- -----
BALANCE AS OF DECEMBER 31, 2009 ..... $ -- $ -- $ --
======= ===== =====
(a) Disclosed in the Statement of Operations under interest income.
(b) Disclosed in the Statement of Operations under Net realized and unrealized
gain (loss) on investments.
(c) Includes paydowns.
(d) "Transfers in and/or out" represent the ending value as of December 31,
2009, for any investment security where a change in the pricing level
occurred from the beginning to the end of the period.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
72
PHOENIX-ABERDEEN INTERNATIONAL SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
-------------- -------------
PREFERRED STOCK--4.2%
INFORMATION TECHNOLOGY--4.2%
Samsung Electronics Co.,
Ltd. Pfd.
1.620% 39,000 $ 17,579
-------------
TOTAL PREFERRED STOCK
(IDENTIFIED COST $11,414) 17,579
-------------
COMMON STOCKS--94.1%
CONSUMER DISCRETIONARY--3.0%
adidas AG 231,300 12,528
-------------
CONSUMER STAPLES--6.3%
British American Tobacco plc 428,331 13,905
Metro AG 65,700 4,013
Nestle S.A. Registered Shares 176,750 8,578
-------------
26,496
-------------
ENERGY--13.0%
ENI S.p.A. 659,700 16,800
PetroChina Co. Ltd. Class H 5,478,000 6,512
Petroleo Brasileiro SA
Sponsored ADR 346,800 14,701
Royal Dutch Shell plc
Class B 120,800 3,518
Tenaris S.A. ADR 317,600 13,546
-------------
55,077
-------------
FINANCIALS--27.2%
City Developments Ltd. 1,424,000 11,643
Daito Trust Construction
Co. Ltd. 163,900 7,760
Intesa Sanpaolo S.p.A.(2) 2,513,900 11,313
Mapfre SA 2,634,372 11,063
Mapfre SA(8) 58,541 224
Nordea Bank AB 1,173,700 11,892
Oversea-Chinese Banking
Corp. Ltd. 1,453,431 9,359
QBE Insurance Group Ltd. 606,700 13,845
Standard Chartered plc 521,400 13,163
Swire Pacific Ltd. Class B 4,650,000 10,170
Zurich Financial Services AG
Registered Shares 65,000 14,211
-------------
114,643
-------------
HEALTH CARE--8.0%
AstraZeneca plc 188,900 8,878
Roche Holding AG Registered
Shares 79,600 13,613
Takeda Pharmaceutical Co.,
Ltd. 271,800 11,198
-------------
33,689
-------------
SHARES VALUE
-------------- -------------
INDUSTRIALS--12.9%
Deutsche Post AG
Registered Shares 264,500 $ 5,112
FANUC Ltd. 91,400 8,519
Grupo Aeroportuario del Sureste
S.A. de C.V. ADR 227,300 11,776
Koninklijke Philips Electronics
N.V. 353,300 10,443
Schneider Electric SA 98,291 11,429
Weir Group plc (The) 640,200 7,383
-------------
54,662
-------------
INFORMATION TECHNOLOGY--7.9%
Canon, Inc. 259,850 11,054
Taiwan Semiconductor
Manufacturing Co. Ltd.,
Sponsored ADR 1,304,665 14,925
Telefonaktiebolaget LM Ericsson
Class B 788,000 7,254
-------------
33,233
-------------
MATERIALS--5.2%
Rio Tinto plc 234,700 12,673
Shin-Etsu Chemical Co. Ltd. 161,600 9,124
-------------
21,797
-------------
TELECOMMUNICATION SERVICES--5.0%
China Mobile Ltd. 624,500 5,810
Vodafone Group plc 6,573,300 15,222
-------------
21,032
-------------
UTILITIES--5.6%
Centrica plc 1,397,600 6,331
E.ON AG 414,900 17,415
-------------
23,746
-------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $311,606) 396,903
-------------
TOTAL LONG-TERM INVESTMENTS--98.3%
(IDENTIFIED COST $323,020) 414,482
-------------
SHORT-TERM INVESTMENTS--1.7%
MONEY MARKET MUTUAL FUNDS--1.7%
Dreyfus Cash Management Fund -
Institutional Shares (seven-day
effective yield 0.080%) 7,307,639 7,308
-------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $7,308) 7,308
-------------
TOTAL INVESTMENTS--100.0%
(IDENTIFIED COST $330,328) 421,790(1)
-------------
Other assets and liabilities, net--0.0% (84)
-------------
NET ASSETS--100.0% $ 421,706
=============
COUNTRY WEIGHTINGS as of 12/31/09+
United Kingdom 18%
Japan 11
Germany 9
United States (includes short-term investments) 9
Italy 7
Singapore 5
Switzerland 5
Other 36
---
Total 100%
---
+ % of total investments as of December 31, 2009
The following table provides a summary of inputs used to value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Level 2 - Level 3 -
Value at Level 1 - Significant Significant
December 31, Quoted Observable Unobservable
2009 Prices Prices Prices
------------ --------- ----------- ------------
INVESTMENTS IN SECURITIES:
Equity Securities:
Preferred
Stocks $ 17,579 $ -- $ 17,579 $ --
Common
Stocks 396,903 54,948 341,731 224
Short-Term
Investments 7,308 7,308 -- --
-------- ------- -------- ----
Total $421,790 $62,256 $359,310 $224
======== ======= ======== ====
The following is a reconciliation of assets of the Series for Level 3
investments for which significant unobservable inputs were used to determine
fair value:
Common
Stocks
------
INVESTMENTS IN SECURITIES:
BALANCE AS OF DECEMBER 31, 2008 ........ $ --
Accrued discounts/premiums ............. --
Realized gain (loss)(a) ................ --
Change in unrealized appreciation
(depreciation)(a) ................... --
Net purchases (sales) .................. --
Transfers in and/or out of Level 3(b) .. 224
----
BALANCE AS OF DECEMBER 31, 2009 ........ $224
====
(a) Disclosed in the Statement of Operations under Net realized and unrealized
gain (loss) on investments.
(b) "Transfers in and/or out" represent the ending value as of December 31,
2009, for any investment security where a change in the pricing level
occurred from the beginning to the end of the period.
Level 3 securities are without an active market or market participants and
therefore are internally fair valued. These internally fair valued securities
derive their valuation based on the review of inputs such as, but not limited
to, similar securities, liquidity factors, capital structure, and credit
analysis.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
73
PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
-------------- -------------
COMMON STOCKS--97.1%
REAL ESTATE INVESTMENT TRUSTS--97.1%
DIVERSIFIED--5.2%
Vornado Realty Trust 84,236 $ 5,891
-------------
HEALTH CARE--12.8%
HCP, Inc. 149,029 4,551
Health Care REIT, Inc. 71,927 3,188
Nationwide Health Properties,
Inc. 74,625 2,625
Ventas, Inc. 93,721 4,100
-------------
14,464
-------------
INDUSTRIAL/OFFICE--21.0%
INDUSTRIAL--5.2%
AMB Property Corp. 83,783 2,140
Eastgroup Properties, Inc. 10,784 413
ProLogis 239,573 3,280
-------------
5,833
-------------
MIXED--3.3%
Duke Realty Corp. 114,830 1,397
Liberty Property Trust 74,064 2,371
-------------
3,768
-------------
OFFICE--12.5%
Alexandria Real Estate
Equities, Inc. 17,828 1,146
BioMed Realty Trust, Inc. 85,111 1,343
Boston Properties, Inc. 71,424 4,791
Corporate Office Properties
Trust 32,543 1,192
Douglas Emmett, Inc. 27,925 398
Highwoods Properties, Inc. 48,522 1,618
Mack-Cali Realty Corp. 56,395 1,950
SL Green Realty Corp. 33,121 1,664
-------------
14,102
-------------
23,703
-------------
LODGING/RESORTS--4.8%
Host Hotels & Resorts, Inc.(2) 337,099 3,934
LaSalle Hotel Properties 58,861 1,250
Sunstone Hotel Investors, Inc.(2) 25,176 223
-------------
5,407
-------------
SHARES VALUE
-------------- -------------
RESIDENTIAL--17.5%
APARTMENTS--16.6%
American Campus Communities, Inc. 20,553 $ 578
Apartment Investment &
Management Co. Class A 87,699 1,396
AvalonBay Communities, Inc. 38,453 3,157
BRE Properties, Inc. 42,595 1,409
Equity Residential 182,339 6,159
Essex Property Trust, Inc. 23,246 1,944
Home Properties, Inc. 23,782 1,135
UDR, Inc. 178,989 2,943
-------------
18,721
-------------
MANUFACTURED HOMES--0.9%
Equity Lifestyle Properties, Inc. 18,912 955
-------------
19,676
-------------
RETAIL--21.9%
FREE STANDING--0.6%
National Retail Properties, Inc. 33,476 711
-------------
REGIONAL MALLS--13.3%
CBL & Associates Properties, Inc. 29,498 285
Macerich Co. (The) 69,823 2,510
Simon Property Group, Inc. 144,456 11,528
Taubman Centers, Inc. 18,778 674
-------------
14,997
-------------
SHOPPING CENTERS--8.0%
Federal Realty Investments Trust 35,744 2,421
Kimco Realty Corp. 272,839 3,691
Regency Centers Corp. 19,593 687
Tanger Factory Outlet Centers, Inc. 55,223 2,153
-------------
8,952
-------------
24,660
-------------
SELF STORAGE--7.1%
Extra Space Storage, Inc. 142,905 1,651
Public Storage 75,087 6,116
U-Store-It Trust 27,090 198
-------------
7,965
-------------
SHARES VALUE
-------------- -------------
SPECIALTY--6.8%
Digital Realty Trust, Inc. 99,149 $ 4,985
Entertainment Properties Trust 26,637 939
Plum Creek Timber Co., Inc. 47,605 1,798
-------------
7,722
-------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $77,430) 109,488
-------------
TOTAL LONG-TERM INVESTMENTS--97.1%
(IDENTIFIED COST $77,430) 109,488
-------------
SHORT-TERM INVESTMENTS--3.0%
MONEY MARKET MUTUAL FUNDS--3.0%
Dreyfus Cash Management Fund -
Institutional Shares (seven-day
effective yield 0.080%) 3,329,845 3,330
-------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $3,330) 3,330
-------------
TOTAL INVESTMENTS--100.1%
(IDENTIFIED COST $80,760) 112,818(a)
-------------
Other assets and liabilities, net--(0.1)% (68)
-------------
NET ASSETS--100.0% $ 112,750
=============
The following table provides a summary of inputs used to value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Level 1 -
Value at Quoted
December 31, 2009 Prices
----------------- ---------
INVESTMENTS IN SECURITIES:
Equity Securities:
Real Estate
Investment Trusts $109,488 $ 109,488
Short-Term Investments 3,330 3,330
-------- ---------
Total $112,818 $ 112,818
======== =========
There are no Level 2 (Significant Observable Inputs) and Level 3 (Significant
Unobservable Inputs) priced securities.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
74
PHOENIX-VAN KAMPEN COMSTOCK SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
-------------- -------------
PREFERRED STOCK--0.3%
FINANCIALS--0.3%
Bank of America Corp. Pfd. 10.00% 8,000 $ 119
-------------
TOTAL PREFERRED STOCK
(IDENTIFIED COST $120) 119
-------------
COMMON STOCKS--98.8%
CONSUMER DISCRETIONARY--18.2%
Comcast Corp. Class A 113,299 1,910
DIRECTV Class A(2) 19,383 646
Home Depot, Inc. (The) 16,600 480
Lowe's Cos., Inc. 18,900 442
Macy's, Inc. 21,336 358
News Corp. Class B 49,500 788
Penney (J.C.) Co., Inc. 11,800 314
Target Corp. 4,200 203
Time Warner Cable, Inc.(2) 12,485 517
Time Warner, Inc.(2) 28,233 823
Viacom, Inc. Class B(2) 66,400 1,974
-------------
8,455
-------------
CONSUMER STAPLES--12.7%
Altria Group, Inc. 19,600 385
Cadbury plc Sponsored ADR 5,036 259
Coca-Cola Co. (The) 13,000 741
CVS Caremark Corp. 16,500 531
Dr. Pepper Snapple Group, Inc. 7,152 202
Kraft Foods, Inc. Class A 36,324 987
Mead Johnson Nutrition Co. 1,579 69
Philip Morris International, Inc. 10,100 487
Procter & Gamble Co. (The) 3,100 188
Unilever N.V. - NY Registered Shares 29,400 951
Wal-Mart Stores, Inc. 20,500 1,096
-------------
5,896
-------------
ENERGY--7.5%
BP plc Sponsored ADR 6,100 354
Chevron Corp. 10,400 801
ConocoPhillips 12,700 648
Halliburton Co. 25,100 755
Royal Dutch Shell plc ADR 6,100 367
Smith International, Inc. 7,400 201
Total SA Sponsored ADR 6,100 391
-------------
3,517
-------------
FINANCIALS--22.4%
AFLAC, Inc. 4,700 217
Bank of America Corp. 58,702 884
Bank of New York Mellon Corp. (The) 32,345 905
Berkshire Hathaway, Inc. Class B(2) 110 361
Chubb Corp. (The) 47,500 2,336
Citigroup, Inc. 94,900 314
SHARES VALUE
-------------- -------------
FINANCIALS--CONTINUED
Goldman Sachs Group, Inc. (The) 2,000 $ 338
JPMorgan Chase & Co. 33,500 1,396
MetLife, Inc. 15,800 559
PNC Financial Services Group, Inc. 10,500 554
State Street Corp. 4,300 187
Torchmark Corp. 8,800 387
Travelers Cos., Inc. (The) 23,300 1,162
U.S. Bancorp 13,500 304
Wells Fargo & Co. 19,800 534
-------------
10,438
-------------
HEALTH CARE--14.5%
Abbott Laboratories 6,400 345
Boston Scientific Corp.(2) 52,000 468
Bristol-Myers Squibb Co. 43,899 1,109
Cardinal Health, Inc. 24,400 787
Eli Lilly & Co. 14,600 521
GlaxoSmithKline plc Sponsored ADR 5,400 228
Merck & Co., Inc. 25,663 938
Pfizer, Inc. 70,969 1,291
Roche Holding AG Sponsored ADR 8,400 354
UnitedHealth Group, Inc. 11,700 357
WellPoint, Inc.(2) 5,800 338
-------------
6,736
-------------
INDUSTRIALS--3.0%
Emerson Electric Co. 6,300 268
General Electric Co. 37,000 560
Honeywell International, Inc. 5,500 216
Ingersoll-Rand plc 10,300 368
-------------
1,412
-------------
INFORMATION TECHNOLOGY--10.8%
Accenture plc Class A 6,200 257
Cisco Systems, Inc.(2) 24,700 591
Cognex Corp. 6,300 112
Dell, Inc.(2) 30,563 439
eBay, Inc.(2) 57,200 1,347
Hewlett-Packard Co. 12,000 618
Intel Corp. 31,400 641
KLA-Tencor Corp. 9,000 325
Microsoft Corp. 6,100 186
Western Union Co. (The) 7,700 145
Yahoo!, Inc.(2) 21,500 361
-------------
5,022
-------------
MATERIALS--4.9%
Alcoa, Inc. 35,500 572
Du Pont (E.I.) de Nemours & Co. 9,099 307
International Paper Co. 51,915 1,390
-------------
2,269
-------------
SHARES VALUE
-------------- -------------
TELECOMMUNICATION SERVICES--4.5%
AT&T, Inc. 26,000 $ 729
Verizon Communications, Inc. 32,200 1,067
Vodafone Group plc
Sponsored ADR 13,700 316
-------------
2,112
-------------
UTILITIES--0.3%
Sempra Energy 2,900 162
-------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $42,886) 46,019
-------------
TOTAL LONG-TERM INVESTMENTS--99.1%
(IDENTIFIED COST $43,006) 46,138
SHORT-TERM INVESTMENTS--0.9%
-------------
MONEY MARKET MUTUAL FUNDS--0.9%
Dreyfus Cash Management Fund -
Institutional Shares (seven-day
effective yield 0.080%) 409,182 409
-------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $409) 409
-------------
TOTAL INVESTMENTS--100.0%
(IDENTIFIED COST $43,415) 46,547(1)
-------------
Other assets and liabilities, net--0.0% 18
-------------
NET ASSETS--100.0% $ 46,565
=============
COUNTRY WEIGHTINGS as of 12/31/09+
United States 91%
United Kingdom 3
Netherlands 2
Switzerland 2
France 1
Ireland 1
Total 100%
+ % of total investments as of December 31, 2009
The following table provides a summary of inputs used to value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Level 1 -
Value at Quoted
December 31, 2009 Prices
----------------- ---------
INVESTMENTS IN SECURITIES:
Equity Securities:
Common Stocks $46,138 $46,138
Short-Term Investments 409 409
------- -------
Total $46,547 $46,547
======= =======
There are no Level 2 (Significant Observable Inputs) and Level 3 (Significant
Unobservable Inputs) priced securities.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
75
PHOENIX-VAN KAMPEN EQUITY 500 INDEX SERIES
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
-------------- -------------
COMMON STOCKS--99.1%
CONSUMER DISCRETIONARY--9.5%
Abercrombie & Fitch Co. Class A 708 $ 25
Amazon.com, Inc.(2) 2,122 285
Apollo Group, Inc. Class A(2) 953 58
AutoNation, Inc.(2) 878 17
AutoZone, Inc.(2) 155 25
Bed Bath & Beyond, Inc.(2) 1,772 68
Best Buy Co., Inc. 2,103 83
Big Lots, Inc.(2) 668 19
Black & Decker Corp. (The) 489 32
Carnival Corp.(2) 2,688 85
CBS Corp. Class B 4,113 58
Coach, Inc. 2,170 79
Comcast Corp. Class A 18,019 304
D.R. Horton, Inc. 2,241 24
Darden Restaurants, Inc. 1,080 38
DeVry, Inc. 443 25
DIRECTV Class A(2) 6,293 210
Eastman Kodak Co.(2) 2,184 9
Expedia, Inc.(2) 1,581 41
Family Dollar Stores, Inc. 664 19
Ford Motor Co.(2) 21,932 219
Fortune Brands, Inc. 900 39
GameStop Corp. Class A(2) 1,332 29
Gannett Co., Inc. 1,856 28
Gap, Inc. (The) 3,136 66
Genuine Parts Co. 950 36
Goodyear Tire & Rubber Co. (The)(2) 1,963 28
H&R Block, Inc. 2,089 47
Harley-Davidson, Inc. 1,322 33
Harman International Industries, Inc. 476 17
Hasbro, Inc. 602 19
Home Depot, Inc. (The) 10,794 312
International Game Technology 1,776 33
Interpublic Group of Cos., Inc.(The)(2) 3,877 29
Johnson Controls, Inc. 4,176 114
Kohl's Corp.(2) 1,929 104
Leggett & Platt, Inc. 1,271 26
Lennar Corp. Class A 1,150 15
Limited Brands, Inc. 1,419 27
Lowe's Cos., Inc. 9,448 221
Macy's, Inc. 2,511 42
Marriott International, Inc. Class A 1,422 39
Mattel, Inc. 2,196 44
McDonald's Corp. 6,953 434
McGraw-Hill Cos., Inc. (The) 2,177 73
Meredith Corp. 294 9
New York Times Co. (The) Class A(2) 948 12
Newell Rubbermaid, Inc. 1,368 21
News Corp. Class A 14,661 201
NIKE, Inc. Class B 2,515 166
Nordstrom, Inc. 920 35
O'Reilly Automotive, Inc.(2) 1,029 39
Office Depot, Inc.(2) 2,236 14
Omnicom Group, Inc. 2,153 84
Penney (J.C.) Co., Inc. 1,479 39
SHARES VALUE
-------------- -------------
CONSUMER DISCRETIONARY--CONTINUED
Polo Ralph Lauren Corp. 296 $ 24
priceline.com, Inc.(2) 285 62
Pulte Homes, Inc.(2) 1,739 17
RadioShack Corp. 1,018 20
Ross Stores, Inc. 665 28
Scripps Networks Interactive, Inc. Class A 422 18
Sears Holdings Corp.(2) 243 20
Sherwin-Williams Co. (The) 586 36
Staples, Inc. 4,429 109
Starbucks Corp.(2) 4,514 104
Starwood Hotels & Resorts Worldwide, Inc. 1,076 39
Target Corp. 4,897 237
Tiffany & Co. 680 29
Time Warner Cable, Inc.(2) 2,325 96
Time Warner, Inc.(2) 7,719 225
TJX Cos., Inc. (The) 2,618 96
VF Corp. 521 38
Viacom, Inc. Class B(2) 3,846 114
Walt Disney Co. (The) 12,197 393
Washington Post Co. (The) Class B 49 22
Whirlpool Corp. 406 33
Wyndham Worldwide Corp. 1,443 29
Wynn Resorts Ltd. 501 29
Yum! Brands, Inc. 2,937 103
-------------
6,119
-------------
CONSUMER STAPLES--11.2%
Altria Group, Inc. 13,309 261
Archer-Daniels-Midland Co. 3,954 124
Avon Products, Inc. 2,552 80
Brown-Forman Corp. Class B 621 33
Campbell Soup Co. 1,235 42
Clorox Co. (The) 930 57
Coca-Cola Co. (The) 14,819 845
Coca-Cola Enterprises, Inc. 1,904 40
Colgate-Palmolive Co. 3,252 267
ConAgra Foods, Inc. 3,056 70
Constellation Brands, Inc. Class A(2) 1,584 25
Costco Wholesale Corp. 2,828 167
CVS Caremark Corp. 8,957 289
Dean Foods Co.(2) 1,252 23
Dr. Pepper Snapple Group, Inc. 1,560 44
Estee Lauder Cos., Inc. (The) Class A 652 32
General Mills, Inc. 2,096 148
H.J. Heinz Co. 1,948 83
Hershey Co. (The) 1,031 37
Hormel Foods Corp. 550 21
Kellogg Co. 1,520 81
Kimberly-Clark Corp. 2,670 170
Kraft Foods, Inc. Class A 9,383 255
Kroger Co. (The) 4,082 84
Lorillard, Inc. 1,042 84
McCormick & Co., Inc. 694 25
Mead Johnson Nutrition Co. Class A 1,463 64
Molson Coors Brewing Co. Class B 962 44
SHARES VALUE
-------------- -------------
CONSUMER STAPLES--CONTINUED
Pepsi Bottling Group, Inc. (The) 798 $ 30
PepsiCo, Inc. 9,950 605
Philip Morris International, Inc. 12,306 593
Procter & Gamble Co. (The) 18,933 1,148
Reynolds American, Inc. 1,101 58
Safeway, Inc. 2,303 49
Sara Lee Corp. 4,523 55
Smucker (J.M.) Co. (The) 730 45
SUPERVALU, Inc. 1,723 22
SYSCO Corp. 3,840 107
Tyson Foods, Inc. Class A 2,458 30
Wal-Mart Stores, Inc. 13,754 735
Walgreen Co. 6,478 238
Whole Foods Market, Inc.(2) 673 19
-------------
7,229
-------------
ENERGY--11.4%
Anadarko Petroleum Corp. 3,230 202
Apache Corp. 2,143 221
Baker Hughes, Inc. 2,154 87
BJ Services Co. 1,595 30
Cabot Oil & Gas Corp. 527 23
Cameron International Corp.(2) 1,422 60
Chesapeake Energy Corp. 4,141 107
Chevron Corp. 12,845 989
ConocoPhillips 9,694 495
Consol Energy, Inc. 1,171 58
Denbury Resources, Inc.(2) 1,537 23
Devon Energy Corp. 2,951 217
Diamond Offshore Drilling, Inc. 399 39
El Paso Corp. 4,491 44
EOG Resources, Inc. 1,613 157
Exxon Mobil Corp. 30,497 2,080
FMC Technologies, Inc.(2) 725 42
Halliburton Co. 5,861 176
Hess Corp. 1,914 116
Marathon Oil Corp. 4,592 143
Massey Energy Co. 693 29
Murphy Oil Corp. 1,115 61
Nabors Industries Ltd.(2) 1,617 35
National Oilwell Varco, Inc. 2,679 118
Noble Energy, Inc. 1,042 74
Occidental Petroleum Corp. 5,278 429
Peabody Energy Corp. 1,815 82
Pioneer Natural Resources Co. 624 30
Range Resources Corp. 1,013 51
Rowan Cos., Inc.(2) 919 21
Schlumberger Ltd. 7,764 505
Smith International, Inc. 1,401 38
Southwestern Energy Co.(2) 2,098 101
Spectra Energy Corp. 4,253 87
Sunoco, Inc. 951 25
Tesoro Corp. 1,126 15
Valero Energy Corp. 3,687 62
Williams Cos., Inc. (The) 3,958 84
XTO Energy, Inc. 3,868 180
-------------
7,336
-------------
FINANCIALS--14.2%
AFLAC, Inc. 2,939 136
Allstate Corp. (The) 3,306 99
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
76
PHOENIX-VAN KAMPEN EQUITY 500 INDEX SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
-------------- -------------
FINANCIALS--CONTINUED
American Express Co. 7,668 $ 311
American International Group, Inc.(2) 1,070 32
Ameriprise Financial, Inc. 1,762 68
AON Corp. 1,600 61
Apartment Investment &
Management Co. Class A 946 15
Assurant, Inc. 957 28
AvalonBay Communities, Inc. 451 37
Bank of America Corp. 63,607 958
Bank of New York Mellon Corp. (The) 7,528 211
BB&T Corp. 4,415 112
Boston Properties, Inc. 796 53
Capital One Financial Corp. 3,065 118
CB Richard Ellis Group, Inc. Class A(2) 1,814 25
Charles Schwab Corp. (The) 6,070 114
Chubb Corp. (The) 2,070 102
Cincinnati Financial Corp. 802 21
Citigroup, Inc. 127,404 422
CME Group, Inc. 418 140
Comerica, Inc. 1,189 35
Discover Financial Services 3,904 57
E*TRADE Financial Corp.(2) 6,407 11
Equity Residential 1,740 59
Federated Investors, Inc. Class B 721 20
Fifth Third Bancorp 4,944 48
First Horizon National Corp.(2) 1,793 24
Franklin Resources, Inc. 926 98
Genworth Financial, Inc. Class A(2) 2,652 30
Goldman Sachs Group, Inc. (The) 3,353 566
Hartford Financial Services
Group, Inc. (The) 2,451 57
HCP, Inc. 2,056 63
Health Care REIT, Inc. 801 35
Host Hotels & Resorts, Inc.(2) 4,340 51
Hudson City Bancorp, Inc. 3,338 46
Huntington Bancshares, Inc. 2,961 11
IntercontinentalExchange, Inc.(2) 479 54
Invesco Ltd. 2,614 61
Janus Capital Group, Inc. 1,284 17
JPMorgan Chase & Co. 25,547 1,065
KeyCorp 5,996 33
Kimco Realty Corp. 2,127 29
Legg Mason, Inc. 1,155 35
Leucadia National Corp.(2) 1,440 34
Lincoln National Corp. 2,082 52
Loews Corp. 2,171 79
M&T Bank Corp. 628 42
Marsh & McLennan Cos., Inc. 3,681 81
Marshall & Ilsley Corp. 4,652 25
MetLife, Inc. 5,369 190
Moody's Corp. 1,178 32
Morgan Stanley 8,609 255
NASDAQ OMX Group, Inc. (The)(2) 1,108 22
Northern Trust Corp. 1,625 85
NYSE Euronext, Inc. 1,706 43
SHARES VALUE
-------------- -------------
FINANCIALS--CONTINUED
People's United Financial, Inc. 2,080 $ 35
Plum Creek Timber Co., Inc. 968 37
PNC Financial Services Group, Inc. 3,093 163
Principal Financial Group, Inc. 1,981 48
Progressive Corp. (The)(2) 4,011 72
ProLogis 2,648 36
Prudential Financial, Inc. 3,115 155
Public Storage 862 70
Regions Financial Corp. 7,010 37
Simon Property Group, Inc. 1,760 140
SLM Corp.(2) 2,513 28
State Street Corp. 3,044 133
SunTrust Banks, Inc. 3,185 65
T. Rowe Price Group, Inc. 1,787 95
Torchmark Corp. 680 30
Travelers Cos., Inc. (The) 3,404 170
U.S. Bancorp 12,432 280
Unum Group 2,003 39
Ventas, Inc. 863 38
Vornado Realty Trust 964 67
Wells Fargo & Co. 32,696 882
XL Capital Ltd. Class A 1,946 36
Zions Bancorp 938 12
-------------
9,176
-------------
HEALTH CARE--12.6%
Abbott Laboratories 9,890 534
Aetna, Inc. 2,783 88
Allergan, Inc. 1,948 123
AmerisourceBergen Corp. 1,924 50
Amgen, Inc.(2) 6,635 375
Bard (C.R.), Inc. 653 51
Baxter International, Inc. 3,916 230
Becton, Dickinson & Co. 1,495 118
Biogen Idec, Inc.(2) 1,958 105
Boston Scientific Corp.(2) 9,603 86
Bristol-Myers Squibb Co. 11,154 282
Cardinal Health, Inc. 2,171 70
CareFusion Corp.(2) 1,303 33
Celgene Corp.(2) 3,077 171
Cephalon, Inc.(2) 557 35
CIGNA Corp. 1,735 61
Coventry Health Care, Inc.(2) 1,212 29
DaVita, Inc.(2) 631 37
DENTSPLY International, Inc. 813 29
Eli Lilly & Co. 6,634 237
Express Scripts, Inc.(2) 1,850 160
Forest Laboratories, Inc.(2) 1,976 63
Genzyme Corp.(2) 1,823 89
Gilead Sciences, Inc.(2) 5,634 244
Hospira, Inc.(2) 997 51
Humana, Inc.(2) 1,000 44
IMS Health, Inc. 1,480 31
Intuitive Surgical, Inc.(2) 240 73
Johnson & Johnson 17,879 1,151
King Pharmaceuticals, Inc.(2) 2,005 25
Laboratory Corp. of America Holdings(2) 708 53
Life Technologies Corp.(2) 1,108 58
McKesson Corp. 1,771 111
Medco Health Solutions, Inc.(2) 3,112 199
SHARES VALUE
-------------- -------------
HEALTH CARE--CONTINUED
Medtronic, Inc. 6,986 $ 307
Merck & Co., Inc. 19,508 713
Millipore Corp.(2) 449 32
Mylan, Inc.(2) 1,675 31
Patterson Cos., Inc.(2) 742 21
PerkinElmer, Inc. 961 20
Pfizer, Inc. 52,346 952
Quest Diagnostics, Inc. 933 56
St. Jude Medical, Inc.(2) 2,157 79
Stryker Corp. 1,772 89
Tenet Healthcare Corp.(2) 3,377 18
Thermo Fisher Scientific, Inc.(2) 2,618 125
UnitedHealth Group, Inc. 7,304 223
Varian Medical Systems, Inc.(2) 687 32
Waters Corp.(2) 577 36
Watson Pharmaceuticals, Inc.(2) 851 34
WellPoint, Inc.(2) 3,075 179
Zimmer Holdings, Inc.(2) 1,303 77
-------------
8,120
-------------
INDUSTRIALS--10.1%
3M Co. 4,631 383
Avery Dennison Corp. 865 32
Boeing Co. (The) 4,726 256
Burlington Northern Santa Fe Corp. 1,641 162
Caterpillar, Inc. 3,912 223
Cintas Corp. 1,069 28
CSX Corp. 2,429 118
Cummins, Inc. 1,302 60
Danaher Corp. 1,642 123
Deere & Co. 2,794 151
Donnelley (R.R.) & Sons Co. 1,055 23
Dover Corp. 1,182 49
Dun & Bradstreet Corp. 274 23
Eaton Corp. 1,106 70
Emerson Electric Co. 4,797 204
Equifax, Inc. 1,028 32
Expeditors International of
Washington, Inc. 1,427 50
Fastenal Co. 705 29
FedEx Corp. 1,936 161
First Solar, Inc.(2) 325 44
Flowserve Corp. 318 30
Fluor Corp. 1,212 55
General Dynamics Corp. 2,561 175
General Electric Co.(12) 68,192 1,032
Goodrich Corp. 772 50
Grainger (W.W.), Inc. 376 36
Honeywell International, Inc. 4,920 193
Illinois Tool Works, Inc. 2,518 121
Iron Mountain, Inc.(2) 988 22
ITT Corp. 1,218 61
Jacobs Engineering Group, Inc.(2) 717 27
L-3 Communications Holdings, Inc. 674 59
Lockheed Martin Corp. 2,101 158
Masco Corp. 2,058 28
Monster Worldwide, Inc.(2) 1,002 17
Norfolk Southern Corp. 2,416 127
Northrop Grumman Corp. 2,114 118
PACCAR, Inc. 2,210 80
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
77
PHOENIX-VAN KAMPEN EQUITY 500 INDEX SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
-------------- -------------
INDUSTRIALS--CONTINUED
Pall Corp. 584 $ 21
Parker Hannifin Corp. 1,077 58
Pitney Bowes, Inc. 1,122 25
Precision Castparts Corp. 964 106
Quanta Services, Inc. 1,410 29
Raytheon Co. 2,362 122
Republic Services, Inc. 2,118 60
Robert Half International, Inc. 794 21
Robinson (C.H.) Worldwide, Inc. 1,178 69
Rockwell Automation, Inc. 849 40
Rockwell Collins, Inc. 1,022 57
Roper Industries, Inc. 599 31
Ryder System, Inc. 452 19
Snap-On, Inc. 467 20
Southwest Airlines Co. 4,424 51
Stanley Works (The) 397 20
Stericycle, Inc.(2) 441 24
Textron, Inc. 1,962 37
Union Pacific Corp. 3,222 206
United Parcel Service, Inc.
Class B 6,287 361
United Technologies Corp. 6,134 426
Waste Management, Inc. 3,244 110
-------------
6,523
-------------
INFORMATION TECHNOLOGY--19.8%
Adobe Systems, Inc.(2) 3,281 121
Advanced Micro Devices, Inc.(2) 4,280 41
Affiliated Computer Services, Inc.
Class A(2) 535 32
Agilent Technologies, Inc.(2) 2,157 67
Akamai Technologies, Inc.(2) 867 22
Altera Corp. 1,741 39
Amphenol Corp. Class A 1,122 52
Analog Devices, Inc. 1,876 59
Apple, Inc.(2) 5,835 1,230
Applied Materials, Inc. 8,791 123
Autodesk, Inc.(2) 1,343 34
Automatic Data Processing, Inc. 3,207 137
BMC Software, Inc.(2) 1,230 49
Broadcom Corp. Class A(2) 2,982 94
CA, Inc. 2,592 58
Cisco Systems, Inc.(2) 37,339 894
Citrix Systems, Inc.(2) 1,121 47
Cognizant Technology Solutions
Corp. Class A(2) 1,953 88
Computer Sciences Corp.(2) 967 56
Compuware Corp.(2) 2,005 14
Corning, Inc. 10,090 195
Dell, Inc.(2) 11,246 161
eBay, Inc.(2) 7,321 172
Electronic Arts, Inc.(2) 2,084 37
EMC Corp.(2) 13,507 236
Fidelity National Information
Services, Inc. 2,361 55
Fiserv, Inc.(2) 1,041 50
FLIR Systems, Inc.(2) 1,129 37
Google, Inc. Class A(2) 1,565 970
Harris Corp. 731 35
Hewlett-Packard Co. 15,401 793
Intel Corp. 35,901 732
SHARES VALUE
-------------- -------------
INFORMATION TECHNOLOGY--CONTINUED
International Business Machines Corp. 8,515 $ 1,115
Intuit, Inc.(2) 2,250 69
Jabil Circuit, Inc. 1,599 28
JDS Uniphase Corp.(2) 1,789 15
Juniper Networks, Inc.(2) 3,645 97
KLA-Tencor Corp. 946 34
Lexmark International, Inc.
Class A(2) 638 17
Linear Technology Corp. 1,337 41
LSI Corp.(2) 5,248 32
MasterCard, Inc. Class A 619 158
McAfee, Inc.(2) 950 39
MEMC Electronic Materials, Inc.(2) 1,826 25
Microchip Technology, Inc. 999 29
Micron Technology, Inc.(2) 6,113 65
Microsoft Corp. 49,569 1,511
Molex, Inc. 684 15
Motorola, Inc.(2) 15,117 117
National Semiconductor Corp. 1,587 24
NetApp, Inc.(2) 2,053 71
Novell, Inc.(2) 2,809 12
Novellus Systems, Inc.(2) 795 19
NVIDIA Corp.(2) 3,370 63
Oracle Corp. 24,938 612
Paychex, Inc. 2,217 68
QLogic Corp.(2) 1,041 20
QUALCOMM, Inc. 10,904 504
Red Hat, Inc.(2) 1,358 42
SAIC, Inc.(2) 2,312 44
Salesforce.com, Inc.(2) 620 46
SanDisk Corp.(2) 1,685 49
Sun Microsystems, Inc.(2) 4,719 44
Symantec Corp.(2) 5,079 91
Tellabs, Inc.(2) 3,238 18
Teradata Corp.(2) 972 31
Teradyne, Inc.(2) 1,377 15
Texas Instruments, Inc. 8,172 213
Total System Services, Inc. 1,601 28
VeriSign, Inc.(2) 1,151 28
Visa, Inc. Class A 2,962 259
Western Digital Corp.(2) 1,611 71
Western Union Co. (The) 4,125 78
Xerox Corp. 5,352 45
Xilinx, Inc. 1,657 42
Yahoo!, Inc.(2) 7,693 129
-------------
12,803
-------------
MATERIALS--3.5%
Air Products & Chemicals, Inc. 1,304 106
Airgas, Inc. 559 27
AK Steel Holding Corp. 911 19
Alcoa, Inc. 6,511 105
Allegheny Technologies, Inc. 491 22
Ball Corp. 503 26
Bemis Co., Inc. 811 24
CF Industries Holdings, Inc. 294 27
Cliffs Natural Resources, Inc. 710 33
Dow Chemical Co. (The) 7,394 204
SHARES VALUE
-------------- -------------
MATERIALS--CONTINUED
Du Pont (E.I.) de Nemours & Co. 6,017 $ 203
Eastman Chemical Co. 371 22
Ecolab, Inc. 1,465 65
FMC Corp. 501 28
Freeport-McMoRan Copper & Gold, Inc.(2) 2,692 216
International Flavors & Fragrances, Inc. 640 26
International Paper Co. 2,686 72
MeadWestvaco Corp. 901 26
Monsanto Co. 3,434 281
Newmont Mining Corp. 3,024 143
Nucor Corp. 1,967 92
Owens-Illinois, Inc.(2) 988 32
Pactiv Corp.(2) 1,069 26
PPG Industries, Inc. 1,101 64
Praxair, Inc. 1,993 160
Sealed Air Corp. 1,284 28
Sigma-Aldrich Corp. 782 40
Titanium Metals Corp.(2) 692 9
United States Steel Corp. 946 52
Vulcan Materials Co. 896 47
Weyerhaeuser Co. 1,443 62
-------------
2,287
-------------
TELECOMMUNICATION SERVICES--3.1%
American Tower Corp. Class A(2) 2,475 107
AT&T, Inc. 38,255 1,072
CenturyTel, Inc. 2,115 77
Frontier Communications Corp. 2,533 20
MetroPCS Communications, Inc.(2) 1,353 10
Qwest Communications International, Inc. 8,900 37
Sprint Nextel Corp.(2) 20,487 75
Verizon Communications, Inc. 18,111 600
Windstream Corp. 2,341 26
-------------
2,024
-------------
UTILITIES--3.7%
AES Corp. (The)(2) 4,282 57
Allegheny Energy, Inc. 825 19
Ameren Corp. 1,772 49
American Electric Power Co., Inc. 3,109 108
CenterPoint Energy, Inc. 2,800 41
CMS Energy Corp. 1,840 29
Consolidated Edison, Inc. 1,949 89
Constellation Energy Group, Inc. 1,452 51
Dominion Resources, Inc. 3,752 146
DTE Energy Co. 980 43
Duke Energy Corp. 8,033 138
Edison International 1,919 67
Entergy Corp. 1,211 99
EQT Corp. 756 33
Exelon Corp.(2) 4,212 206
FirstEnergy Corp. 1,998 93
FPL Group, Inc. 2,629 139
Integrys Energy Group, Inc. 622 26
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
78
PHOENIX-VAN KAMPEN EQUITY 500 INDEX SERIES
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2009
($ reported in thousands)
SHARES VALUE
-------------- -------------
UTILITIES--CONTINUED
Nicor, Inc. 368 $ 15
NiSource, Inc. 1,392 21
Northeast Utilities 1,197 31
Pepco Holdings, Inc. 1,759 30
PG&E Corp. 2,348 105
Pinnacle West Capital Corp. 820 30
PPL Corp. 2,272 73
Progress Energy, Inc. 1,842 76
Public Service Enterprise Group, Inc. 3,099 103
Questar Corp. 1,045 43
SCANA Corp. 546 21
Sempra Energy 1,483 83
Southern Co. (The) 5,231 174
TECO Energy, Inc. 1,731 28
Wisconsin Energy Corp. 675 34
Xcel Energy, Inc. 3,023 64
-------------
2,364
-------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $55,843) 63,981
-------------
TOTAL LONG-TERM INVESTMENTS--99.1%
(IDENTIFIED COST $55,843) 63,981
-------------
SHORT-TERM INVESTMENTS--0.9%
MONEY MARKET MUTUAL FUNDS--0.9%
Dreyfus Cash Management Fund -
Institutional Shares (seven-day
effective yield 0.080%) 590,020 590
-------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $590) 590
-------------
TOTAL INVESTMENTS--100.0%
(IDENTIFIED COST $56,433) 64,571(1)
-------------
Other Assets and Liabilities--0.0% 23
-------------
NET ASSETS--100.0% $ 64,594
=============
ABBREVIATIONS:
REIT Real Estate Investment Trust
At December 31, 2009, the series had entered into futures contracts as follows:
Value of Market Unrealized
Number of Contracts Value of Appreciation
Expiration Date Contracts When Opened Contracts (Depreciation)
--------------- --------- ----------- --------- --------------
S&P 500 E-Mini March 2010 15 $828 $833 $5
==
The following table provides a summary of inputs used to value the Series' net
assets as of December 31, 2009 (see Security Valuation Note 2A in the Notes to
Financial Statements):
Total Value at Level 1 -
December 31, 2009 Quoted Prices
----------------- -------------
INVESTMENTS IN SECURITIES:
Equity Securities:
Common Stocks $63,981 $63,981
Short-Term Investments 590 590
------- -------
Total $64,571 $64,571
======= =======
Other Financial Instruments*
Futures Contracts $ 5 $ 5
There are no Level 2 (Significant Observable Inputs) or Level 3 (Significant
Unobservable Inputs) priced securities.
* Other financial Instruments are futures contracts which are valued at the
unrealized appreciation (depreciation) on the investment.
Refer to Key Investment Terms and Footnote Legend starting on page 4.
See Notes to Financial Statements
79
THE PHOENIX EDGE SERIES FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2009
(Reported in thousands except shares and per share amounts)
DYNAMIC
ASSET DYNAMIC DYNAMIC
ALLOCATION ASSET ASSET
CAPITAL SERIES: ALLOCATION ALLOCATION
GROWTH AGGRESSIVE SERIES: SERIES:
SERIES GROWTH GROWTH MODERATE
----------- ---------- ---------- ----------
ASSETS
Investments in securities at value(1) .......................... $ 235,896 $ 12,832 $ 24,136 $ 28,969
Investments in affiliated Series at value(2) ................... -- 6,673 10,041 3,989
Cash ........................................................... -- -- -- 120
Receivables ....................................................
Investment securities sold .................................. 2,998 -- -- 54
Fund shares sold ............................................ --(3) 1 45 6
Receivable from advisor ..................................... -- 3 3 4
Dividends and interest ...................................... 263 -- 2 9
Prepaid expenses ............................................... 24 2 3 3
Other assets ................................................... 46 4 7 7
----------- ---------- ---------- ----------
Total assets ................................................ 239,227 19,515 34,237 33,161
----------- ---------- ---------- ----------
LIABILITIES
Cash overdraft ................................................. -- -- 84 --
Payables
Fund shares repurchased ..................................... 126 1 --(3) 4
Investment securities purchased ............................. 2,420 -- -- --
Investment advisory fee ..................................... 98 -- -- --
Distribution and service fees ............................... -- 4 7 7
Administration fee .......................................... 17 1 2 2
Transfer agent fees and expenses ............................ 1 1 1 1
Service fees ................................................ 17 1 2 2
Trustees' fee and expenses .................................. 7 1 1 1
Professional fee ............................................ 37 19 20 20
Other accrued expenses ...................................... 49 3 5 5
Trustee deferred compensation plan ............................. 46 4 7 7
----------- ---------- ---------- ----------
Total liabilities ........................................ 2,818 35 129 49
--------- ---------- ---------- ----------
NET ASSETS ........................................................ $ 236,409 $ 19,480 $ 34,108 $ 33,112
=========== ========== ========== ==========
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest ............ $ 357,600 $ 24,276 $ 40,812 $ 33,245
Accumulated undistributed net investment income (loss) 181 --(3) (6) (3)
Accumulated undistributed net realized gain (loss) .......... (167,648) (7,537) (11,119) (3,214)
Net unrealized appreciation (depreciation) .................. 46,276 2,741 4,421 3,084
----------- ---------- ---------- ----------
NET ASSETS ........................................................ $ 236,409 $ 19,480 $ 34,108 $ 33,112
=========== ========== ========== ==========
Net asset value and offering price per share ...................... $ 12.83 $ 8.86 $ 9.14 $ 9.73
=========== ========== ========== ==========
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization ........................................ 18,432,599 2,197,810 3,733,694 3,402,124
----------- ---------- ---------- ----------
(1) Investments in securities at cost .......................... $ 189,620 $ 11,423 $ 21,781 $ 26,603
(2) Investments in affiliated Series at cost ................... $ -- $ 5,341 $ 7,975 $ 3,271
(3) Amount is less than $500 (not reported in thousands)
See Notes to Financial Statements
80
THE PHOENIX EDGE SERIES FUND
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 2009
(Reported in thousands except shares and per share amounts)
DYNAMIC
ASSET
ALLOCATION GROWTH
SERIES: AND MID-CAP MID-CAP
MODERATE INCOME GROWTH VALUE
GROWTH SERIES SERIES SERIES
---------- ---------- ---------- -----------
ASSETS
Investments in securities at value(1) ....................... $ 23,158 $ 90,323 $ 49,476 $ 112,000
Investments in affiliated Series at value(2) ................ 5,848 -- -- --
Cash ........................................................ -- 4 -- --
Receivables
Fund shares sold ......................................... 345 -- --(3) --
Receivable from advisor .................................. 3 -- -- --
Dividends and interest ................................... 5 138 14 152
Prepaid expenses ............................................ 3 10 5 11
Other assets ................................................ 6 18 10 22
---------- ---------- ---------- -----------
Total assets ............................................. 29,368 90,493 49,505 112,185
---------- ---------- ---------- -----------
LIABILITIES
Cash overdraft .............................................. 90 -- -- --
Payables
Fund shares repurchased .................................. --(3) 73 25 178
Investment advisory fee .................................. -- 43 25 101
Distribution and service fees ............................ 6 -- -- --
Administration fee ....................................... 2 6 3 8
Transfer agent fees and expenses ......................... 1 1 1 1
Service fees ............................................. 2 7 4 8
Trustees' fee and expenses ............................... 1 3 1 3
Professional fee ......................................... 19 29 27 30
Other accrued expenses ................................... 5 13 9 16
Trustee deferred compensation plan .......................... 6 18 10 22
---------- ---------- ---------- -----------
Total liabilities ........................................ 132 193 105 367
---------- ---------- ---------- -----------
NET ASSETS ..................................................... $ 29,236 $ 90,300 $ 49,400 $ 111,818
========== ========== ========== ===========
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest ............ $ 32,271 $ 89,916 $ 78,959 $ 131,158
Accumulated undistributed net investment income (loss) ...... (4) 245 (13) 215
Accumulated undistributed net realized gain (loss) .......... (6,066) (21,289) (38,079) (43,241)
Net unrealized appreciation (depreciation) .................. 3,035 21,428 8,533 23,686
---------- ---------- ---------- -----------
NET ASSETS ..................................................... $ 29,236 $ 90,300 $ 49,400 $ 111,818
========== ========== ========== ===========
Net asset value and offering price per share ................... $ 9.22 $ 11.49 $ 12.08 $ 9.82
---------- ---------- ---------- -----------
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization ..................................... 3,169,487 7,862,366 4,088,796 11,389,709
---------- ---------- ---------- -----------
(1) Investments in securities at cost ....................... $ 21,277 $ 68,895 $ 40,943 $ 88,314
(2) Investments in affiliated Series at cost ................ $ 4,694 $ -- $ -- $ --
(3) Amount is less than $500 (not reported in thousands)
See Notes to Financial Statements
81
THE PHOENIX EDGE SERIES FUND
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 2009
(Reported in thousands except shares and per share amounts)
MULTI- MULTI-
SECTOR SECTOR
MONEY FIXED SHORT TERM SMALL-CAP SMALL-CAP
MARKET INCOME BOND GROWTH VALUE
SERIES SERIES SERIES SERIES SERIES
----------- ----------- ---------- ---------- ----------
ASSETS
Investments in securities at value(1) ................... $ 158,571 $ 205,665 $ 33,132 $ 26,020 $ 38,309
Cash .................................................... 1,187 57 10 -- --
Receivables
Investment securities sold ........................... -- 1,524 621 362 461
Fund shares sold ..................................... 9 -- -- 4 61
Receivable from advisor .............................. 28 -- -- -- --
Dividends and interest ............................... 1 2,985 340 5 50
Tax reclaims ......................................... -- -- --(2) -- --
Prepaid expenses ........................................ 22 23 3 3 4
Other assets ............................................ 31 40 7 5 7
----------- ----------- ---------- ---------- ----------
Total assets ......................................... 159,849 210,294 34,113 26,399 38,892
----------- ----------- ---------- ---------- ----------
LIABILITIES
Cash overdraft .......................................... -- -- -- 34 --
Payables
Fund shares repurchased .............................. 22 232 101 3 35
Investment securities purchased ...................... -- 3,736 607 -- 358
Dividend distributions ............................... -- -- -- -- --
Investment advisory fee .............................. -- 68 3 9 32
Administration fee ................................... 5 15 2 2 3
Transfer agent fees and expenses ..................... 1 1 1 1 1
Service fees ......................................... 13 16 3 2 3
Trustees' fee and expenses ........................... 5 6 1 1 1
Professional fee ..................................... 27 38 28 26 26
Other accrued expenses ............................... 24 35 8 6 6
Trustee deferred compensation plan ...................... 31 40 7 5 7
----------- ----------- ---------- ---------- ----------
Total liabilities .................................... 128 4,187 761 89 472
----------- ----------- ---------- ---------- ----------
NET ASSETS ................................................. $ 159,721 $ 206,107 $ 33,352 $ 26,310 $ 38,420
=========== =========== ========== ========== ==========
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial
interest .......................................... $ 159,722 $ 219,539 $ 36,109 $ 32,284 $ 55,211
Accumulated undistributed net investment income
(loss) ............................................ -- 1,909 417 (10) 24
Accumulated undistributed net realized gain (loss) ... (1) (23,201) (3,635) (12,383) (21,936)
Net unrealized appreciation (depreciation) ........... -- 7,860 461 6,419 5,121
----------- ----------- ---------- ---------- ----------
NET ASSETS ................................................. $ 159,721 $ 206,107 $ 33,352 $ 26,310 $ 38,420
=========== =========== ========== ========== ==========
Net asset value and offering price per share ............... $ 10.00 $ 8.98 $ 10.15 $ 11.66 $ 10.55
----------- ----------- ---------- ---------- ----------
Shares of beneficial interest outstanding,
$1 par value, unlimited authorization ................... 15,972,214 22,939,827 3,286,714 2,255,990 3,642,560
----------- ----------- ---------- ---------- ----------
(1) Investments in securities at cost ................... $ 158,571 $ 197,813 $ 32,670 $ 19,601 $ 33,188
(2) Amount is less than $500 (not reported in thousands)
See Notes to Financial Statements
82
THE PHOENIX EDGE SERIES FUND
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 2009
(Reported in thousands except shares and per share amounts)
DUFF &
PHELPS VAN KAMPEN
STRATEGIC ABERDEEN REAL ESTATE VAN KAMPEN EQUITY
ALLOCATION INTERNATIONAL SECURITIES COMSTOCK 500 INDEX
SERIES SERIES SERIES SERIES SERIES
----------- ------------- ----------- ---------- ----------
ASSETS
Investments in securities at value(1) ................... $ 169,656 $ 421,790 $ 112,818 $ 46,547 $ 64,571
Cash .................................................... --(2) 57 -- 1 2
Receivables
Investment securities sold ........................... 10 235 1,164 -- --
Dividends and interest ............................... 768 493 404 99 108
Tax reclaims ......................................... -- 592 -- 2 --(2)
Prepaid expenses ........................................ 18 42 10 5 7
Other assets ............................................ 33 82 22 9 13
----------- ----------- ---------- ---------- ----------
Total assets ...................................... 170,485 423,291 114,418 46,663 64,701
----------- ----------- ---------- ---------- ----------
LIABILITIES
Payables
Fund shares repurchased .............................. 16 1,067 284 23 29
Investment securities purchased ...................... 25 -- 1,224 -- --
Investment advisory fee .............................. 69 244 72 21 4
Administration fee ................................... 12 30 8 3 4
Transfer agent fees and expenses ..................... 1 1 1 1 1
Service fees ......................................... 13 31 8 4 5
Trustees' fee and expenses ........................... 5 13 3 2 2
Professional fee ..................................... 36 50 30 27 28
Other accrued expenses ............................... 28 67 16 8 13
Variation margin for futures contracts ............... -- -- -- -- 8
Trustee deferred compensation plan ...................... 33 82 22 9 13
----------- ----------- ---------- ---------- ----------
Total liabilities ................................. 238 1,585 1,668 98 107
----------- ----------- ---------- ---------- ----------
NET ASSETS ................................................. $ 170,247 $ 421,706 $ 112,750 $ 46,565 $ 64,594
=========== =========== ========== ========== ==========
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest ........ $ 180,737 $ 401,747 $ 97,398 $ 59,556 $ 83,232
Accumulated undistributed net investment income (loss) .. 589 414 758 118 100
Accumulated undistributed net realized gain (loss) ...... (32,355) (71,932) (17,464) (16,241) (26,881)
Net unrealized appreciation (depreciation) .............. 21,276 91,477 32,058 3,132 8,143
----------- ----------- ---------- ---------- ----------
NET ASSETS ................................................. $ 170,247 $ 421,706 $ 112,750 $ 46,565 $ 64,594
=========== =========== ========== ========== ==========
Net asset value and offering price per share ............... $ 11.11 $ 14.86 $ 20.25 $ 9.79 $ 10.01
----------- ----------- ---------- ---------- ----------
Shares of beneficial interest outstanding,
$1 par value, unlimited authorization ................... 15,319,387 28,378,563 5,567,525 4,754,462 6,454,261
----------- ----------- ---------- ---------- ----------
(1) Investments in securities at cost ................... $ 148,379 $ 330,328 $ 80,760 $ 43,415 $ 56,433
(2) Amount is less than $500 (not reported in thousands).
See Notes to Financial Statements
83
THE PHOENIX EDGE SERIES FUND
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2009
(Reported in thousands)
DYNAMIC
ASSET DYNAMIC DYNAMIC
ALLOCATION ASSET ASSET
CAPITAL SERIES: ALLOCATION ALLOCATION
GROWTH AGGRESSIVE SERIES: SERIES:
SERIES GROWTH GROWTH MODERATE
-------- ---------- ---------- ----------
INVESTMENT INCOME
Dividends ................................................ $ 3,572 $ -- $ -- $ --
Income distributions received from affiliated Series ..... -- 88 121 51
Income distributions received from non-affiliated funds .. -- 317 639 744
Interest ................................................. 217 -- -- --
Foreign taxes withheld ................................... (15) -- -- --
-------- ------- -------- -------
Total investment income ............................... 3,774 405 760 795
-------- ------- -------- -------
EXPENSES
Investment advisory fee .................................. 1,465 40 76 67
Administration fee ....................................... 178 13 25 23
Distribution and service fees ............................ -- 40 74 67
Transfer agent fee and expenses .......................... 7 8 10 10
Service fees ............................................. 204 15 26 23
Custodian fees ........................................... 51 3 5 5
Printing fees and expenses ............................... 110 6 9 8
Professional fees ........................................ 90 26 29 29
Trustees' fee and expenses ............................... 53 4 8 6
Miscellaneous ............................................ 75 6 10 7
-------- ------- -------- -------
Total expenses ........................................ 2,233 161 272 245
Less expenses reimbursed by investment advisor ........... (244) (56) (77) (71)
-------- ------- -------- -------
Net expenses .......................................... 1,989 105 195 174
-------- ------- -------- -------
NET INVESTMENT INCOME .................................... 1,785 300 565 621
-------- ------- -------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on securities ................... (14,258) (6,241) (8,825) (2,024)
Net realized gain (loss) on affiliated Series ............ -- 2 123 31
Capital gain distributions from investment companies ..... -- 8 21 40
Net change in unrealized appreciation (depreciation) on
investments ........................................... 68,484 8,280 11,904 3,549
Net change in unrealized appreciation (depreciation) on
affiliated Series ..................................... -- 1,770 2,850 1,282
-------- ------- -------- -------
NET GAIN (LOSS) ON INVESTMENTS ........................... 54,226 3,819 6,073 2,878
-------- ------- -------- -------
Net increase in net assets resulting from operations ..... $ 56,011 $ 4,119 $ 6,638 $ 3,499
======== ======= ======== =======
(1) Amount is less than $500 (not reported in thousands).
See Notes to Financial Statements
84
THE PHOENIX EDGE SERIES FUND
STATEMENTS OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 2009
(Reported in thousands)
DYNAMIC
ASSET
ALLOCATION
SERIES: GROWTH MID-CAP MID-CAP
MODERATE AND INCOME GROWTH VALUE
GROWTH SERIES SERIES SERIES
---------- ---------- ------- --------
INVESTMENT INCOME
Dividends .................................................. $ -- $ 1,899 $ 253 $ 1,849
Income distributions from affiliated Series ................ 78 -- -- --
Income distributions from non-affiliated funds ............. 597 -- -- --
Interest ................................................... -- 3 -- --
Foreign taxes withheld ..................................... -- (17) (1) (2)
------- -------- ------- --------
Total investment income ................................. 675 1,885 252 1,847
------- -------- ------- --------
EXPENSES
Investment advisory fee .................................... 61 576 339 1,022
Administration fee ......................................... 20 70 36 83
Distribution and service fees .............................. 60 -- -- --
Transfer agent fee and expenses ............................ 2 7 7 7
Service fees ............................................... 28 80 41 95
Custodian fees ............................................. 5 15 14 16
Printing fees and expenses ................................. 7 27 17 53
Professional fees .......................................... 28 86 41 56
Trustees' fee and expenses ................................. 6 21 11 24
Miscellaneous .............................................. 8 30 15 33
------- -------- ------- --------
Total expenses .......................................... 225 912 521 1,389
Less expenses reimbursed by investment advisor ............. (69) (137) (55) (123)
------- -------- ------- --------
Net expenses ............................................ 156 775 466 1,266
------- -------- ------- --------
NET INVESTMENT INCOME (LOSS) ............................... 519 1,110 (214) 581
------- -------- ------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on securities ..................... (4,227) (14,894) (7,789) (34,773)
Net realized gain (loss) on affiliated Series .............. 41 -- -- --
Capital gain distributions from investment companies ....... 28 -- -- --
Net realized gain (loss) on foreign currency transactions .. -- -- 2 --
Net change in unrealized appreciation (depreciation) on
investments ............................................. 6,253 31,283 19,626 62,915
Net change in unrealized appreciation (depreciation) on
affiliated Series ....................................... 1,684 -- -- --
Net change in unrealized appreciation (depreciation) on
foreign currency translations ........................... -- -- --(1) --
------- -------- ------- --------
NET GAIN (LOSS) ON INVESTMENTS ............................. 3,779 16,389 11,839 28,142
------- -------- ------- --------
Net increase in net assets resulting from operations ....... $ 4,298 $ 17,499 $11,625 $ 28,723
======= ======== ======= ========
(1) Amount is less than $500 (not reported in thousands).
See Notes to Financial Statements
85
THE PHOENIX EDGE SERIES FUND
STATEMENTS OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 2009
(Reported in thousands)
MULTI-
MULTI- SECTOR
SECTOR SHORT
MONEY FIXED TERM SMALL- SMALL-
MARKET INCOME BOND CAP GROWTH CAP VALUE
SERIES SERIES SERIES SERIES SERIES
------ ------- ------- ---------- ---------
INVESTMENT INCOME
Interest ...................................................... $ 788 $15,116 $ 2,164 $ -- $ --
Dividends ..................................................... -- 39 4 51 508
Foreign taxes withheld ........................................ -- (33) (3) -- (1)
------ ------- ------- ------- --------
Total investment income .................................... 788 15,122 2,165 51 507
------ ------- ------- ------- --------
EXPENSES
Investment advisory fee ....................................... 743 968 159 203 371
Administration fee ............................................ 65 165 27 20 30
Transfer agent fee and expenses ............................... 8 7 7 7 8
Service fees .................................................. 184 189 31 23 34
Custodian fees ................................................ 23 40 23 18 11
Printing fees and expenses .................................... 64 57 9 14 19
Professional fees ............................................. 91 81 39 36 39
Trustees' fee and expenses .................................... 50 50 9 6 9
Miscellaneous ................................................. 115 73 13 9 13
------ ------- ------- ------- --------
Total expenses ............................................. 1,343 1,630 317 336 534
Less expenses reimbursed by investment advisor ................ (653) (178) (94) (86) (75)
------ ------- ------- ------- --------
Net expenses ............................................... 690 1,452 223 250 459
------ ------- ------- ------- --------
NET INVESTMENT INCOME (LOSS) .................................. 98 13,670 1,942 (199) 48
------ ------- ------- ------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities ............................... (1) (7,216) (2,059) (2,107) (16,898)
Net realized gain (loss) on foreign currency transactions ..... -- (14) (5) -- --
Net change in unrealized appreciation (depreciation)
on investments ............................................. -- 58,835 8,790 7,135 23,499
Net change in unrealized appreciation (depreciation) on foreign
currency translations ...................................... -- (28) (16) -- --
------ ------- ------- ------- --------
NET GAIN (LOSS) ON INVESTMENTS ................................ (1) 51,577 6,710 5,028 6,601
------ ------- ------- ------- --------
Net increase in net assets resulting from operations .......... $ 97 $65,247 $ 8,652 $ 4,829 $ 6,649
====== ======= ======= ======= ========
See Notes to Financial Statements
86
THE PHOENIX EDGE SERIES FUND
STATEMENTS OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 2009
(Reported in thousands)
DUFF & VAN
PHELPS REAL VAN KAMPEN
STRATEGIC ABERDEEN ESTATE KAMPEN EQUITY 500
ALLOCATION INTERNATIONAL SECURITIES COMSTOCK INDEX
SERIES SERIES SERIES SERIES SERIES
---------- ------------- ----------- -------- ----------
INVESTMENT INCOME
Dividends ..................................................... $ 2,229 $ 13,891 $ 3,391 $ 1,108 $ 1,429
Interest ...................................................... 3,918 9 -- -- 5
Foreign taxes withheld ........................................ (24) (1,116) -- (8) --
-------- -------- ------- ------- -------
Total investment income .................................... 6,123 12,784 3,391 1,100 1,434
-------- -------- ------- ------- -------
EXPENSES
Investment advisory fee ....................................... 959 2,624 652 305 181
Administration fee ............................................ 136 305 73 37 51
Transfer agent fee and expenses ............................... 7 8 7 8 7
Service fees .................................................. 156 345 83 42 59
Custodian fees ................................................ 34 119 14 14 31
Printing fees and expenses .................................... 42 106 31 13 16
Professional fees ............................................. 73 128 51 40 44
Trustees' fee and expenses .................................... 42 89 22 11 16
Miscellaneous ................................................. 62 121 30 15 12
-------- -------- ------- ------- -------
Total expenses ............................................. 1,511 3,845 963 485 417
Less expenses reimbursed by investment advisor ................ (152) (150) (7) (71) (116)
-------- -------- ------- ------- -------
Net expenses ............................................... 1,359 3,695 956 414 301
-------- -------- ------- ------- -------
NET INVESTMENT INCOME ......................................... 4,764 9,089 2,435 686 1,133
-------- -------- ------- ------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities ............................... (23,231) (49,376) (5,835) (6,355) (3,892)
Net realized gain (loss) on foreign currency transactions ..... 1 40 -- -- --
Net realized gain (loss) on futures ........................... -- -- -- -- 130
Net change in unrealized appreciation (depreciation)
on investments ............................................. 53,466 167,159 30,994 17,310 16,395
Net change in unrealized appreciation (depreciation)
on foreign currency translations ........................... -- 23 -- -- --
Net change in unrealized appreciation (depreciation)
on futures ................................................. -- -- -- -- (14)
-------- -------- ------- ------- -------
NET GAIN (LOSS) ON INVESTMENTS ................................ 30,236 117,846 25,159 10,955 12,619
-------- -------- ------- ------- -------
Net increase in net assets resulting from operations .......... $ 35,000 $126,935 $27,594 $11,641 $13,752
======== ======== ======= ======= =======
See Notes to Financial Statements
87
THE PHOENIX EDGE SERIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
(Reported in thousands)
DYNAMIC ASSET ALLOCATION
CAPITAL GROWTH SERIES SERIES: AGGRESSIVE GROWTH
-------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2009 2008 2009 2008
------------ ------------ ------------ ------------
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) .................................. $ 1,785 $ 239 $ 300 $ 331
Net realized gain (loss) ...................................... (14,258) (57,791) (6,231) (672)
Net change in unrealized appreciation (depreciation) .......... 68,484 (92,774) 10,050 (9,160)
-------- --------- -------- --------
Increase (decrease) in net assets resulting from operations ... 56,011 (150,326) 4,119 (9,501)
-------- --------- -------- --------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ......................................... (1,802) (99) (306) (332)
Net realized short-term gains ................................. -- -- -- (33)
Net realized long-term gains .................................. -- -- -- (183)
-------- --------- -------- --------
Decrease in net assets from distributions to shareholders ..... (1,802) (99) (306) (548)
-------- --------- -------- --------
FROM SHARE TRANSACTIONS
Sales of shares ............................................... 12,955 8,299 2,855 5,504
Reinvestment of distributions ................................. 1,802 99 306 548
Shares repurchased ............................................ (35,745) (55,397) (2,297) (4,626)
-------- --------- -------- --------
Increase (decrease) in net assets from share transactions ..... (20,988) (46,999) 864 1,426
-------- --------- -------- --------
Net increase (decrease) in net assets ......................... 33,221 (197,424) 4,677 (8,623)
NET ASSETS
Beginning of period ........................................... 203,188 400,612 14,803 23,426
-------- --------- -------- --------
End of period ................................................. $236,409 $ 203,188 $ 19,480 $ 14,803
======== ========= ======== ========
Accumulated undistributed net investment income (loss) at end
of period .................................................. $ 181 $ 198 $ --(1) $ (1)
======================================================================================================================
SHARES
Sales of shares ............................................... 1,217 641 385 515
Reinvestment of distributions ................................. 148 7 36 74
Shares repurchased ............................................ (3,354) (4,064) (317) (470)
-------- --------- -------- --------
Net increase/(decrease) ....................................... (1,989) (3,416) 104 (119)
======== ========= ======== ========
(1) Amount is less than $500 (not reported in thousands).
See Notes to Financial Statements
88
DYNAMIC ASSET ALLOCATION DYNAMIC ASSET ALLOCATION DYNAMIC ASSET ALLOCATION
SERIES: GROWTH SERIES: MODERATE SERIES: MODERATE GROWTH GROWTH AND INCOME SERIES
- -------------------------- -------------------------- -------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2009 2008 2009 2008 2009 2008 2009 2008
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 565 $ 738 $ 621 $ 443 $ 519 $ 580 $ 1,110 $ 1,835
(8,681) (1,407) (1,953) (904) (4,158) (957) (14,894) (5,791)
14,754 (12,576) 4,831 (2,069) 7,937 (6,207) 31,283 (45,826)
------- -------- -------- ------- ------- ------- -------- --------
6,638 (13,245) 3,499 (2,530) 4,298 (6,584) 17,499 (49,782)
------- -------- -------- ------- ------- ------- -------- --------
(590) (741) (669) (443) (548) (581) (1,309) (1,577)
-- (2) (3) (61) -- (1) -- --
(3) (401) (2) (217) -- (648) -- (1,580)
------- -------- -------- ------- ------- ------- -------- --------
(593) (1,144) (674) (721) (548) (1,230) (1,309) (3,157)
------- -------- -------- ------- ------- ------- -------- --------
5,037 11,226 18,745 23,375 8,431 12,816 3,147 2,911
593 1,144 674 721 548 1,230 1,309 3,157
(5,753) (5,984) (12,165) (5,149) (5,491) (3,919) (15,457) (27,092)
------- -------- -------- ------- ------- ------- -------- --------
(123) 6,386 7,254 18,947 3,488 10,127 (11,001) (21,024)
------- -------- -------- ------- ------- ------- -------- --------
5,922 (8,003) 10,079 15,696 7,238 2,313 5,189 (73,963)
28,186 36,189 23,033 7,337 21,998 19,685 85,111 159,074
------- -------- -------- ------- ------- ------- -------- --------
$34,108 $ 28,186 $ 33,112 $23,033 $29,236 $21,998 $ 90,300 $ 85,111
======= ======== ======== ======= ======= ======= ======== ========
======================================================================================================================
$ (6) $ (3) $ (3) $ (1) $ (4) $ (1) $ 245 $ 456
637 1,086 2,102 2,397 1,008 1,299 338 247
69 148 71 81 61 153 130 271
(722) (621) (1,378) (547) (673) (422) (1,614) (2,157)
------- -------- -------- ------- ------- ------- -------- --------
(16) 613 795 1,931 396 1,030 (1,146) (1,639)
======= ======== ======== ======= ======= ======= ======== ========
See Notes to Financial Statements
89
THE PHOENIX EDGE SERIES FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
(Reported in thousands)
MID-CAP GROWTH SERIES MID-CAP VALUE SERIES
--------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2009 2008 2009 2008
------------ ------------ ------------ -------------
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) .......................................... $ (214) $ (477) $ 581 $ 567
Net realized gain (loss) .............................................. (7,787) (13,249) (34,773) (2,207)
Net change in unrealized appreciation (depreciation) .................. 19,626 (19,902) 62,915 (48,035)
------- -------- -------- --------
Increase (decrease) in net assets resulting from operations ........... 11,625 (33,628) 28,723 (49,675)
------- -------- -------- --------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income ................................................. -- -- (825) (200)
Net realized short-term gains ......................................... -- -- (34) (1,321)
Net realized long-term gains .......................................... -- -- (1,069) (6,120)
------- -------- -------- --------
Decrease in net assets from distributions to shareholders ............. -- -- (1,928) (7,641)
------- -------- -------- --------
FROM SHARE TRANSACTIONS
Sales of shares ....................................................... 6,581 3,837 4,659 18,723
Reinvestment of distributions ......................................... -- -- 1,928 7,641
Shares repurchased .................................................... (8,930) (17,338) (13,710) (15,156)
------- -------- -------- --------
Increase (decrease) in net assets from share transactions ............. (2,349) (13,501) (7,123) 11,208
------- -------- -------- --------
Net increase (decrease) in net assets ................................. 9,276 (47,129) 19,672 (46,108)
NET ASSETS
Beginning of period ................................................... 40,124 87,253 92,146 138,254
------- -------- -------- --------
End of period ......................................................... $49,400 $ 40,124 $111,818 $ 92,146
======= ======== ======== ========
Accumulated undistributed net investment income (loss) at
end of period ...................................................... $ (13) $ (11) $ 215 $ 480
====================================================================================================================================
SHARES
Sales of shares ....................................................... 656 297 632 1,758
Reinvestment of distributions -- -- 238 940
Shares repurchased .................................................... (896) (1,290) (1,684) (1,393)
------- -------- -------- --------
Net increase/(decrease) ............................................... (240) (993) (814) 1,305
======= ======== ======== ========
(1) Amount is less than $500 (not reported in thousands).
See Notes to Financial Statements
90
MULTI-SECTOR FIXED MULTI-SECTOR SHORT
MONEY MARKET SERIES INCOME SERIES TERM BOND SERIES SMALL-CAP GROWTH SERIES
- --------------------------- --------------------------- --------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2009 2008 2009 2008 2009 2008 2009 2008
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 98 $ 4,254 $ 13,670 $ 14,736 $ 1,942 $ 2,889 $ (199) $ (301)
(1) (3,190) (7,230) (6,290) (2,064) (853) (2,107) (10,091)
-- 3,217 58,807 (48,993) 8,774 (7,686) 7,135 (12,596)
-------- -------- -------- -------- -------- -------- ------- --------
97 4,281 65,247 (40,547) 8,652 (5,650) 4,829 (22,988)
-------- -------- -------- -------- -------- -------- ------- --------
(99) (4,253) (13,684) (16,140) (2,144) (2,849) -- --
(20) -- -- -- -- -- -- (166)
-- -- -- -- -- -- -- (1,185)
-------- -------- -------- -------- -------- -------- ------- --------
(119) (4,253) (13,684) (16,140) (2,144) (2,849) -- (1,351)
-------- -------- -------- -------- -------- -------- ------- --------
61,890 127,851 8,187 20,080 9,033 24,709 2,661 3,388
119 4,253 13,684 16,140 2,144 2,849 -- 1,351
(108,962) (94,873) (40,228) (57,499) (24,959) (22,601) (6,896) (10,452)
-------- -------- -------- -------- -------- -------- ------- --------
(46,953) 37,231 (18,357) (21,279) (13,782) 4,957 (4,235) (5,713)
-------- -------- -------- -------- -------- -------- ------- --------
(46,975) 37,259 33,206 (77,966) (7,274) (3,542) 594 (30,052)
206,696 169,437 172,901 250,867 40,626 44,168 25,716 55,768
-------- -------- -------- -------- -------- -------- ------- --------
$159,721 $206,696 $206,107 $172,901 $ 33,352 $ 40,626 $26,310 $ 25,716
======== ======== ======== ======== ======== ======== ======= ========
$ --(1) $ 1 $ 1,909 $ 1,770 $ 417 $ 570 $ (10) $ (9)
=====================================================================================================================
6,189 12,785 1,080 2,390 951 2,508 272 247
12 425 1,613 2,062 220 319 -- 92
(10,896) (9,486) (4,939) (6,879) (2,817) (2,370) (715) (764)
-------- -------- -------- -------- -------- -------- ------- --------
(4,695) 3,724 (2,246) (2,427) (1,646) 457 (443) (425)
======== ======== ======== ======== ======== ======== ======= ========
See Notes to Financial Statements
91
THE PHOENIX EDGE SERIES FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
(Reported in thousands)
SMALL-CAP VALUE SERIES STRATEGIC ALLOCATION SERIES
--------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2009 2008 2009 2008
------------ ------------ ------------ ------------
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) ........................................... $ 48 $ 197 $ 4,764 $ 7,000
Net realized gain (loss) ............................................... (16,898) (5,021) (23,230) (8,768)
Net change in unrealized appreciation (depreciation) ................... 23,499 (20,962) 53,466 (59,653)
-------- -------- -------- ---------
Increase (decrease) in net assets resulting from operations ............ 6,649 (25,786) 35,000 (61,421)
-------- -------- -------- ---------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income .................................................. (162) (59) (5,775) (6,415)
Net realized short-term gains .......................................... -- (346) -- (392)
Net realized long-term gains ........................................... -- (1,112) -- (1,819)
-------- -------- -------- ---------
Decrease in net assets from distributions to shareholders .............. (162) (1,517) (5,775) (8,626)
-------- -------- -------- ---------
FROM SHARE TRANSACTIONS
Sales of shares ........................................................ 1,997 11,653 2,235 4,033
Reinvestment of distributions .......................................... 162 1,517 5,775 8,626
Shares repurchased ..................................................... (8,238) (21,097) (30,259) (49,994)
-------- -------- -------- ---------
Increase (decrease) in net assets from share transactions .............. (6,079) (7,927) (22,249) (37,335)
-------- -------- -------- ---------
CAPITAL CONTRIBUTIONS
Fair Funds settlement(1) ............................................... -- -- -- --
Net increase (decrease) in net assets .................................. 408 (35,230) 6,976 (107,382)
NET ASSETS
Beginning of period .................................................... 38,012 73,242 163,271 270,653
-------- -------- -------- ---------
End of period .......................................................... $ 38,420 $ 38,012 $170,247 $ 163,271
======== ======== ======== =========
Accumulated undistributed net investment income (loss) at
end of period ....................................................... $ 24 $ 138 $ 589 $ 1,634
====================================================================================================================================
SHARES
Sales of shares ........................................................ 236 867 231 357
Reinvestment of distributions .......................................... 19 118 566 800
Shares repurchased ..................................................... (948) (1,713) (3,132) (4,396)
-------- -------- -------- ---------
Net increase/(decrease) ................................................ (693) (728) (2,335) (3,239)
======== ======== ======== =========
(1) The Series was a recipient of a distribution from a Fair Fund established
by United States Securities and Exchange Commission. The proceeds received
were part of the Millennium Partners, L.P. and Bear Stearns & Co., Inc.
settlements.
See Notes to Financial Statements
92
DUFF & PHELPS
ABERDEEN REAL ESTATE VAN KAMPEN
INTERNATIONAL SERIES SECURITIES SERIES VAN KAMPEN COMSTOCK SERIES EQUITY 500 INDEX SERIES
- --------------------------- --------------------------- --------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2009 2008 2009 2008 2009 2008 2009 2008
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 9,089 $ 10,868 $ 2,435 $ 2,863 $ 686 $ 1,366 $ 1,133 $ 1,692
(49,336) (22,572) (5,835) (11,283) (6,355) (9,606) (3,762) (3,006)
167,182 (184,774) 30,994 (41,460) 17,310 (18,757) 16,381 (40,098)
-------- --------- -------- -------- -------- -------- -------- --------
126,935 (196,478) 27,594 (49,880) 11,641 (26,997) 13,752 (41,412)
-------- --------- -------- -------- -------- -------- -------- --------
(11,634) (8,592) (3,192) (1,898) (899) (1,124) (1,390) (1,544)
-- (4) -- (769) -- (338) -- --
-- (18,488) -- (2,191) -- (1,025) -- --
-------- --------- -------- -------- -------- -------- -------- --------
(11,634) (27,084) (3,192) (4,858) (899) (2,487) (1,390) (1,544)
-------- --------- -------- -------- -------- -------- -------- --------
25,380 49,222 10,072 20,706 4,672 2,028 1,906 2,607
11,634 27,084 3,192 4,858 899 2,487 1,390 1,544
(50,846) (34,720) (11,115) (19,767) (13,593) (18,558) (15,238) (20,665)
-------- --------- -------- -------- -------- -------- -------- --------
(13,832) 41,586 2,149 5,797 (8,022) (14,043) (11,942) (16,514)
-------- --------- -------- -------- -------- -------- -------- --------
300 -- -- -- -- -- -- --
101,769 (181,976) 26,551 (48,941) 2,720 (43,527) 420 (59,470)
319,937 501,913 86,199 135,140 43,845 87,372 64,174 123,644
-------- --------- -------- -------- -------- -------- -------- --------
$421,706 $ 319,937 $112,750 $ 86,199 $ 46,565 $ 43,845 $ 64,594 $ 64,174
======== ========= ======== ======== ======== ======== ======== ========
$ 414 $ 2,620 $ 758 $ 1,515 $ 118 $ 331 $ 100 $ 357
===================================================================================================================
2,281 3,383 740 875 640 206 223 240
841 1,787 201 210 103 263 150 170
(3,971) (2,162) (676) (821) (1,690) (1,761) (1,833) (1,858)
-------- --------- -------- -------- -------- -------- -------- --------
(849) 3,008 265 264 (947) (1,292) (1,460) (1,448)
======== ========= ======== ======== ======== ======== ======== ========
See Notes to Financial Statements
93
THE PHOENIX EDGE SERIES FUND
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET NET DIVIDENDS DISTRIBUTIONS
ASSET NET REALIZED TOTAL FROM FROM
VALUE, INVESTMENT AND FROM NET NET
BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED
OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS
--------- ---------- ----------- ---------- ---------- -------------
CAPITAL GROWTH SERIES
1/1/09 to 12/31/09 $ 9.95 0.09(1) 2.89 2.98 (0.10) --
1/1/08 to 12/31/08 16.81 0.01(1) (6.87) (6.86) --(5) --
1/1/07 to 12/31/07 15.21 0.04(1) 1.60 1.64 (0.04) --
1/1/06 to 12/31/06 14.77 0.04(1) 0.43 0.47 (0.03) --
1/1/05 to 12/31/05 14.25 0.01(1) 0.52 0.53 (0.01) --
DYNAMIC ASSET ALLOCATION SERIES: AGGRESSIVE GROWTH
1/1/09 to 12/31/09 $ 7.07 0.14(1) 1.79 1.93 (0.14) --
1/1/08 to 12/31/08 11.86 0.16(1) (4.68) (4.52) (0.16) (0.11)
1/1/07 to 12/31/07 11.15 0.16(1) 0.78 0.94 (0.13) (0.10)
2/3/06 (inception) to 12/31/06 10.00 0.11 1.15 1.26 (0.11) --
DYNAMIC ASSET ALLOCATION SERIES: GROWTH
1/1/09 to 12/31/09 $ 7.52 0.15(1) 1.63 1.78 (0.16) --(5)
1/1/08 to 12/31/08 11.54 0.21(1) (3.91) (3.70) (0.21) (0.11)
1/1/07 to 12/31/07 10.87 0.22(1) 0.69 0.91 (0.16) (0.08)
2/3/06 (inception) to 12/31/06 10.00 0.13 0.87 1.00 (0.13) --
DYNAMIC ASSET ALLOCATION SERIES: MODERATE
1/1/09 to 12/31/09 $ 8.83 0.21(1) 0.90 1.11 (0.21) --(5)
1/1/08 to 12/31/08 10.86 0.32(1) (2.04) (1.72) (0.20) (0.11)
1/1/07 to 12/31/07 10.41 0.30(1) 0.54 0.84 (0.24) (0.15)
2/3/06 (inception) to 12/31/06 10.00 0.15 0.42 0.57 (0.16) --
DYNAMIC ASSET ALLOCATION SERIES: MODERATE GROWTH
1/1/09 to 12/31/09 $ 7.93 0.18(1) 1.29 1.47 (0.18) --
1/1/08 to 12/31/08 11.30 0.26(1) (3.15) (2.89) (0.23) (0.25)
1/1/07 to 12/31/07 10.72 0.24(1) 0.67 0.91 (0.20) (0.13)
2/3/06 (inception) to 12/31/06 10.00 0.14 0.74 0.88 (0.14) (0.02)
GROWTH AND INCOME SERIES
1/1/09 to 12/31/09 $ 9.45 0.13(1) 2.07 2.20 (0.16) --
1/1/08 to 12/31/08 14.94 0.19(1) (5.35) (5.16) (0.17) (0.16)
1/1/07 to 12/31/07 14.51 0.16(1) 0.81 0.97 (0.15) (0.39)
1/1/06 to 12/31/06 12.52 0.16(1) 1.98 2.14 (0.15) --
1/1/05 to 12/31/05 12.07 0.13(1) 0.45 0.58 (0.13) --
MID-CAP GROWTH SERIES
1/1/09 to 12/31/09 $ 9.27 (0.05)(1) 2.86 2.81 -- --
1/1/08 to 12/31/08 16.40 (0.10)(1) (7.03) (7.13) -- --
1/1/07 to 12/31/07 13.46 (0.11)(1) 3.05 2.94 -- --
1/1/06 to 12/31/06 12.93 (0.09)(1) 0.62 0.53 -- --
1/1/05 to 12/31/05 12.41 (0.09)(1) 0.61 0.52 -- --
The footnote legend is at the end of the financial highlights.
See Notes to Financial Statements
94
RATIO OF
GROSS OPERATING
EXPENSES RATIO OF
NET NET RATIO OF TO AVERAGE NET
CHANGE ASSET ASSETS, NET OPERATING NET ASSETS INVESTMENT
IN VALUE, END OF EXPENSES (BEFORE INCOME PORTFOLIO
TOTAL NET ASSET END OF TOTAL PERIOD TO AVERAGE WAIVERS AND TO AVERAGE TURNOVER
DISTRIBUTIONS VALUE PERIOD RETURN (000S) NET ASSETS REIMBURSEMENTS) NET ASSETS RATE
- ------------- --------- ------ ------ -------- ------------- --------------- ---------- ----------
(0.10) 2.88 $12.83 29.93% $236,409 0.95% 1.07% 0.85% 107%
-- (6.86) 9.95 (40.78) 203,188 0.94 0.94 0.08 164
(0.04) 1.60 16.81 10.75 400,612 0.91 0.91 0.22 88
(0.03) 0.44 15.21 3.22 435,126 0.92 0.92 0.25 182
(0.01) 0.52 14.77 3.71 462,402 0.89 0.89 0.06 73
(0.14) 1.79 $ 8.86 27.50% $ 19,480 0.65%(4)(7) 1.00%(4)(7) 1.88% 101%
(0.27) (4.79) 7.07 (38.25) 14,803 0.70 1.02 1.58 185
(0.23) 0.71 11.86 8.45 23,426 0.70 1.04 1.37 105
(0.11) 1.15 11.15 12.61(3) 11,297 0.70(2) 1.67(2) 2.26(2) 110(3)
(0.16) 1.62 $ 9.14 23.76% $ 34,108 0.66%(4)(7) 0.92%(4)(7) 1.91% 96%
(0.32) (4.02) 7.52 (32.18) 28,186 0.70 0.95 2.06 182
(0.24) 0.67 11.54 8.33 36,189 0.70 1.03 1.88 127
(0.13) 0.87 10.87 9.98(3) 13,063 0.70(2) 1.58(2) 2.61(2) 125(3)
(0.21) 0.90 $ 9.73 12.68% $ 33,112 0.65%(4)(7) 0.92%(4)(7) 2.32% 96%
(0.31) (2.03) 8.83 (15.80) 23,033 0.70 1.09 3.25 126
(0.39) 0.45 10.86 7.98 7,337 0.70 1.49 2.80 140
(0.16) 0.41 10.41 5.69(3) 3,861 0.70(2) 3.10(2) 3.58(2) 81(3)
(0.18) 1.29 $ 9.22 18.65% $ 29,236 0.65%(4)(7) 0.94%(4)(7) 2.17% 86%
(0.48) (3.37) 7.93 (25.60) 21,998 0.70 1.01 2.60 177
(0.33) 0.58 11.30 8.50 19,685 0.70 1.11 2.14 146
(0.16) 0.72 10.72 8.78(3) 9,364 0.70(2) 1.99(2) 3.20(2) 106(3)
(0.16) 2.04 $11.49 23.50% $ 90,300 0.94% 1.11% 1.35% 109%
(0.33) (5.49) 9.45 (34.93) 85,111 0.85 0.99 1.51 56
(0.54) 0.43 14.94 6.66 159,074 0.85 0.95 1.03 44
(0.15) 1.99 14.51 17.18 167,529 0.91(4) 0.97 1.17 37
(0.13) 0.45 12.52 4.80 141,038 0.95 0.99 1.04 44
-- 2.81 $12.08 30.33% $ 49,399 1.10% 1.23% (0.51)% 73%
-- (7.13) 9.27 (43.47) 40,124 1.10 1.10 (0.75) 64
-- 2.94 16.40 21.80 87,253 1.05 1.05 (0.73) 149
-- 0.53 13.46 4.13 89,512 1.13(4) 1.14 (0.72) 80
-- 0.52 12.93 4.18 47,162 1.15 1.21 (0.76) 178
See Notes to Financial Statements
95
THE PHOENIX EDGE SERIES FUND
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET NET DIVIDENDS DISTRIBUTIONS
ASSET NET REALIZED TOTAL FROM FROM
VALUE, INVESTMENT AND PAYMENT FROM NET NET
BEGINNING INCOME UNREALIZED BY INVESTMENT INVESTMENT REALIZED
OF PERIOD (LOSS) GAIN (LOSS) AFFILIATE OPERATIONS INCOME GAINS
--------- ---------- ----------- --------- ---------- ---------- -------------
MID-CAP VALUE SERIES
1/1/09 to 12/31/09 $ 7.55 0.05(1) 2.38 $ -- 2.43 (0.07) (0.09)
1/1/08 to 12/31/08 12.68 0.05(1) (4.50) -- (4.45) (0.02) (0.66)
1/1/07 to 12/31/07 14.12 0.02(1) 0.31 -- 0.33 (0.02) (1.75)
1/1/06 to 12/31/06 14.01 0.07(1) 1.98 -- 2.05 (0.06) (1.88)
1/1/05 to 12/31/05 14.02 0.01(1) 1.08 -- 1.09 (0.02) (1.08)
MONEY MARKET SERIES
1/1/09 to 12/31/09 $10.00 0.01(1) -- $ -- 0.01 (0.01) --(5)
1/1/08 to 12/31/08 10.00 0.22(1) (0.17) 0.17 0.22 (0.22) --
1/1/07 to 12/31/07 10.00 0.47(1) -- -- 0.47 (0.47) --
1/1/06 to 12/31/06 10.00 0.43 -- -- 0.43 (0.43) --
1/1/05 to 12/31/05 10.00 0.26 -- -- 0.26 (0.26) --
MULTI-SECTOR FIXED INCOME SERIES
1/1/09 to 12/31/09 $ 6.86 0.57(1) 2.15 $ -- 2.72 (0.60) --
1/1/08 to 12/31/08 9.09 0.57(1) (2.15) -- (1.58) (0.65) --
1/1/07 to 12/31/07 9.25 0.53(1) (0.19) -- 0.34 (0.50) --
1/1/06 to 12/31/06 9.14 0.52(1) 0.09 -- 0.61 (0.50) --
1/1/05 to 12/31/05 9.43 0.50(1) (0.34) -- 0.16 (0.45) --
MULTI-SECTOR SHORT TERM BOND SERIES
1/1/09 to 12/31/09 $ 8.23 0.57(1) 2.03 $ -- 2.60 (0.68) --
1/1/08 to 12/31/08 9.87 0.54(1) (1.63) -- (1.09) (0.55) --
1/1/07 to 12/31/07 10.01 0.53(1) (0.13) -- 0.40 (0.54) --
1/1/06 to 12/31/06 9.93 0.49(1) 0.06 -- 0.55 (0.47) --
1/1/05 to 12/31/05 10.16 0.45(1) (0.31) -- 0.14 (0.37) --
SMALL-CAP GROWTH SERIES
1/1/09 to 12/31/09 $ 9.53 (0.08)(1) 2.21 $ -- 2.13 -- --
1/1/08 to 12/31/08 17.85 (0.10)(1) (7.76) -- (7.86) -- (0.46)
1/1/07 to 12/31/07 18.65 (0.12)(1) 3.07 -- 2.95 -- (3.75)
1/1/06 to 12/31/06 15.61 (0.10)(1) 3.14 -- 3.04 -- --
1/1/05 to 12/31/05 14.72 (0.08)(1) 2.38 -- 2.30 -- (1.41)
SMALL-CAP VALUE SERIES
1/1/09 to 12/31/09 $ 8.77 0.01(1) 1.81 $ -- 1.82 (0.04) --
1/1/08 to 12/31/08 14.46 0.04(1) (5.42) -- (5.38) (0.01) (0.30)
1/1/07 to 12/31/07 17.03 --(1)(5) (0.30) -- (0.30) -- (2.27)
1/1/06 to 12/31/06 17.02 0.04(1) 2.77 -- 2.81 (0.04) (2.76)
1/1/05 to 12/31/05 16.74 (0.03)(1) 1.28 -- 1.25 -- (0.97)
The footnote legend is at the end of the financial highlights.
See Notes to Financial Statements
96
RATIO OF
GROSS OPERATING
EXPENSES RATIO OF
NET NET RATIO OF TO AVERAGE NET
CHANGE ASSET ASSETS, NET OPERATING NET ASSETS INVESTMENT
IN VALUE, END OF EXPENSES (BEFORE INCOME PORTFOLIO
TOTAL NET ASSET END OF TOTAL PERIOD TO AVERAGE WAIVERS AND TO AVERAGE TURNOVER
DISTRIBUTIONS VALUE PERIOD RETURN (000S) NET ASSETS REIMBURSEMENTS) NET ASSETS RATE
- ------------- --------- ------ ------ -------- ------------- --------------- ---------- ----------
(0.16) 2.27 $ 9.82 32.63% $111,818 1.30% 1.43% 0.60% 127%
(0.68) (5.13) 7.55 (35.45) 92,146 1.30 1.32 0.46 49
(1.77) (1.44) 12.68 2.00 138,254 1.29 1.29 0.11 33
(1.94) 0.11 14.12 14.91 131,717 1.30 1.32 0.46 52
(1.10) (0.01) 14.01 7.73 121,855 1.30 1.33 0.07 37
(0.01) -- $10.00 0.06% $159,721 0.37% 0.72% 0.05% N/A
(0.22) -- 10.00 2.25(6) 206,696 0.61 0.61 2.19 N/A
(0.47) -- 10.00 4.88 169,437 0.57 0.57 4.74 N/A
(0.43) -- 10.00 4.41 157,158 0.65 0.66 4.35 N/A
(0.26) -- 10.00 2.58 146,431 0.65 0.66 2.54 N/A
(0.60) 2.12 $ 8.98 40.13% $206,107 0.75% 0.84% 7.06% 72%
(0.65) (2.23) 6.86 (17.93) 172,901 0.75 0.76 6.69 72
(0.50) (0.16) 9.09 3.71 250,867 0.74 0.74 5.65 94
(0.50) 0.11 9.25 6.84 245,750 0.74 0.74 5.60 90
(0.45) (0.29) 9.14 1.78 239,097 0.75 0.75 5.37 91
(0.68) 1.92 $10.15 32.07% $ 33,352 0.70% 1.00% 6.11% 77%
(0.55) (1.64) 8.23 (11.35) 40,626 0.70 0.85 5.66 96
(0.54) (0.14) 9.87 3.99 44,168 0.70 0.82 5.23 73
(0.47) 0.08 10.01 5.71 46,663 0.70 0.88 4.92 87
(0.37) (0.23) 9.93 1.36 47,534 0.70 0.98 4.45 91
-- 2.13 $11.66 22.39% $ 26,310 1.05% 1.41% (0.83)% 262%
(0.46) (8.32) 9.53 (44.92) 25,716 1.00 1.20 (0.75) 177
(3.75) (0.80) 17.85 16.10 55,768 1.00 1.12 (0.62) 59
-- 3.04 18.65 19.45 57,653 1.00 1.27 (0.59) 147
(1.41) 0.89 15.61 15.64 23,178 1.00 1.65 (0.54) 182
(0.04) 1.78 $10.55 20.90% $ 38,421 1.30% 1.51% 0.14% 153%
(0.31) (5.69) 8.77 (37.91) 38,012 1.30 1.38 0.33 50
(2.27) (2.57) 14.46 (2.10) 73,242 1.30 1.31 (0.03) 32
(2.80) 0.01 17.03 16.75 82,771 1.30 1.35 0.21 55
(0.97) 0.28 17.02 7.46 72,422 1.30 1.40 (0.19) 32
See Notes to Financial Statements
97
THE PHOENIX EDGE SERIES FUND
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
NET NET DIVIDENDS DISTRIBUTIONS
ASSET NET REALIZED TOTAL FROM FROM
VALUE, INVESTMENT AND FROM NET NET
BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED
OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAINS
--------- ---------- ----------- ---------- ---------- -------------
STRATEGIC ALLOCATION SERIES
1/1/09 to 12/31/09 $ 9.25 0.29(1) 1.94 2.23 (0.37) --
1/1/08 to 12/31/08 12.95 0.37(1) (3.60) (3.23) (0.35) (0.12)
1/1/07 to 12/31/07 13.30 0.36(1) 0.43 0.79 (0.37) (0.77)
1/1/06 to 12/31/06 13.78 0.38(1) 1.31 1.69 (0.38) (1.79)
1/1/05 to 12/31/05 14.24 0.34(1) (0.08) 0.26 (0.33) (0.39)
ABERDEEN INTERNATIONAL SERIES
1/1/09 to 12/31/09 $10.95 0.31(1) 4.01 4.32 (0.41) --
1/1/08 to 12/31/08 19.14 0.40(1) (7.57) (7.17) (0.31) (0.71)
1/1/07 to 12/31/07 17.80 0.40(1) 2.25 2.65 (0.30) (1.01)
1/1/06 to 12/31/06 14.29 0.33(1) 3.53 3.86 (0.35) --
1/1/05 to 12/31/05 12.54 0.46(1) 1.86 2.32 (0.57) --
DUFF & PHELPS REAL ESTATE SECURITIES SERIES
1/1/09 to 12/31/09 $16.26 0.44(1) 4.12 4.56 (0.57) --
1/1/08 to 12/31/08 26.82 0.56(1) (10.17) (9.61) (0.37) (0.58)
1/1/07 to 12/31/07 35.60 0.51(1) (6.00) (5.49) (0.44) (2.85)
1/1/06 to 12/31/06 28.38 0.45(1) 9.90 10.35 (0.44) (2.69)
1/1/05 to 12/31/05 26.39 0.44(1) 3.46 3.90 (0.44) (1.47)
VAN KAMPEN COMSTOCK SERIES
1/1/09 to 12/31/09 $ 7.69 0.13(1) 2.15 2.28 (0.18) --
1/1/08 to 12/31/08 12.49 0.22(1) (4.61) (4.39) (0.19) (0.22)
1/1/07 to 12/31/07 13.71 0.23(1) (0.51) (0.28) (0.23) (0.71)
1/1/06 to 12/31/06 13.73 0.22(1) 2.65 2.87 (0.26) (2.63)
1/1/05 to 12/31/05 13.18 0.16(1) 0.55 0.71 (0.16) --
VAN KAMPEN EQUITY 500 INDEX SERIES
1/1/09 to 12/31/09 $ 8.11 0.16(1) 1.95 2.11 (0.21) --
1/1/08 to 12/31/08 13.21 0.20(1) (5.11) (4.91) (0.19) --
1/1/07 to 12/31/07 12.77 0.18(1) 0.44 0.62 (0.18) --
1/1/06 to 12/31/06 11.32 0.16 1.44 1.60 (0.15) --
1/1/05 to 12/31/05 11.05 0.13 0.28 0.41 (0.14) --
FOOTNOTE LEGEND:
(1) Computed using average shares outstanding.
(2) Annualized.
(3) Not annualized.
(4) Represents a blended operating expense ratio.
(5) Amount is less than $0.005.
(6) Total return includes the effect of a payment by affiliate. Without this
effect, the total return would have been 0.56%. See Note 3 in the Notes to
Financial Statements.
(7) The expense ratio does not include fees and expenses associated with the
underlying funds or series in which the Series invests in.
See Notes to Financial Statements
98
RATIO OF
GROSS OPERATING
EXPENSES RATIO OF
NET NET RATIO OF TO AVERAGE NET
CHANGE ASSET ASSETS, NET OPERATING NET ASSETS INVESTMENT
IN VALUE, END OF EXPENSES (BEFORE INCOME PORTFOLIO
TOTAL NET ASSET END OF TOTAL PERIOD TO AVERAGE WAIVERS AND TO AVERAGE TURNOVER
DISTRIBUTIONS VALUE PERIOD RETURN (000S) NET ASSETS REIMBURSEMENTS) NET ASSETS RATE
- ------------- --------- ------ ------ -------- ------------- --------------- ---------- ----------
(0.37) 1.86 $11.11 24.51% $170,247 0.85% 0.95% 2.98% 89%
(0.47) (3.70) 9.25 (25.45) 163,271 0.85 0.87 3.19 50
(1.14) (0.35) 12.95 5.98 270,653 0.84 0.84 2.62 52
(2.17) (0.48) 13.30 12.69 316,145 0.83 0.84 2.66 86
(0.72) (0.46) 13.78 1.79 352,742 0.79 0.79 2.39 62
(0.41) 3.91 $14.86 39.87% $421,706 1.03% 1.08% 2.55% 26%
(1.02) (8.19) 10.95 (38.98) 319,937 1.00 1.00 2.56 33
(1.31) 1.34 19.14 14.94 501,913 0.98 0.98 2.10 34
(0.35) 3.51 17.80 27.37 421,281 1.01 1.01 2.06 56
(0.57) 1.75 14.29 18.57 190,634 1.06 1.06 3.56 44
(0.57) 3.99 $20.25 29.11% $112,750 1.10% 1.11% 2.80% 43%
(0.95) (10.56) 16.26 (36.88) 86,199 1.01 1.01 2.33 42
(3.29) (8.78) 26.82 (15.71) 135,140 0.98 0.98 1.50 23
(3.13) 7.22 35.60 37.07 187,922 1.02 1.02 1.37 28
(1.91) 1.99 28.38 15.10 137,281 1.03 1.03 1.62 26
(0.18) 2.10 $ 9.79 29.97% $ 46,565 0.95% 1.11% 1.58% 22%
(0.41) (4.80) 7.69 (35.73) 43,845 0.95 1.01 2.09 20
(0.94) (1.22) 12.49 (2.22) 87,372 0.95 0.96 1.61 15
(2.89) (0.02) 13.71 20.90 108,209 0.95 1.00 1.50 105
(0.16) 0.55 13.73 5.43 106,716 0.95 0.99 1.25 58
(0.21) 1.90 $10.01 26.22% $ 64,594 0.50% 0.69% 1.88% 7%
(0.19) (5.10) 8.11 (37.31) 64,174 0.50 0.65 1.78 11
(0.18) 0.44 13.21 4.87 123,644 0.58 0.73 1.34 3
(0.15) 1.45 12.77 14.21 142,346 0.63(4) 0.77 1.36 74
(0.14) 0.27 11.32 3.69 105,058 0.65 0.72 1.22 14
See Notes to Financial Statements
99
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
NOTE 1--ORGANIZATION
The Phoenix Edge Series Fund (the "Fund") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end management investment company. The
Fund is organized with Series, which are available only to the following
separate accounts: Phoenix Life Variable Accumulation Account, Phoenix Life
Variable Universal Life Account, PHL Variable Accumulation Account, PHLVIC
Variable Universal Life Account, Phoenix Life and Annuity Variable
Universal Life Account, PHL Variable Accumulation Account II, PHL Variable
Accumulation Account IV, PHL Variable VA Account I and Phoenix Life
Separate Accounts B, C, and D.
The Fund is comprised of 18 Series (each a "Series"). Each Series'
investment objective is outlined in the respective Series' summary page,
starting on page 8.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of increases and decreases in net assets from operations during the
reporting period. Actual results could differ from those estimates and
those differences could be significant.
A. SECURITY VALUATION
Equity securities are valued at the official closing price (typically
last sale) on the exchange on which the securities are primarily
traded, or if no closing price is available, at the last bid price.
Debt securities are valued on the basis of broker quotations or
valuations provided by a pricing service, which utilizes information
with respect to recent sales, market transactions in comparable
securities, quotations from dealers, and various relationships between
securities in determining value. Due to continued volatility in the
current market, valuations developed through pricing techniques may
materially vary from the actual amounts realized upon sale of the
securities.
As required, some securities and assets may be valued at fair value as
determined in good faith by or under the direction of the Board of
Trustees.
Certain foreign common stocks may be fair valued in cases where
closing prices are not readily available or are deemed not reflective
of readily available market prices. For example, significant events
(such as movement in the U.S. securities market, or other regional and
local developments) may occur between the time that foreign markets
close (where the security is principally traded) and the time that the
Series calculates its net asset value (generally, the close of the
NYSE) that may impact the value of securities traded in these foreign
markets. In these cases, information from an external vendor may be
utilized to adjust closing market prices of certain foreign common
stocks to reflect their fair value. Because the frequency of
significant events is not predictable, fair valuation of certain
foreign common stocks may occur on a frequent basis.
Investments in underlying mutual funds are valued at each fund's
closing net asset value.
Short-term investments having a remaining maturity of 60 days or less
are valued at amortized cost, which approximates fair market value.
Money Market Series uses the amortized cost method of security
valuation absent extraordinary or unusual market conditions. In the
opinion of the Trustees, this represents the fair value of the
securities. The deviations between the net asset value per share are
monitored by using available market quotations and Money Market's net
asset value per share using amortized cost. If the deviation exceeds
1/2 of 1%, the Board of Trustees will consider what action, if any,
should be initiated to provide fair valuation. Using this method, the
Series attempts to maintain a constant net asset value of $10 per
share.
The Series utilize a fair value hierarchy which prioritizes the inputs
to valuation techniques used to measure fair value into three broad
levels.
- Level 1 - quoted prices in active markets for identical
securities
- Level 2 - prices determined using other significant observable
inputs (including quoted prices for similar securities, interest
rates, prepayment speeds, credit risk, etc.)
- Level 3 - prices determined using significant unobservable inputs
(including the Series' own assumptions in determining the fair
value of investments)
A summary of the inputs used to value the Series' net assets by each
major security type is disclosed at the end of the Schedules of
Investments for each Series. The inputs or methodology used for
valuing securities are not necessarily an indication of the risk
associated with investing in those securities. For example, money
market securities may be valued using amortized cost, in accordance
with the Investment Company Act of 1940 Act. Generally, amortized cost
reflects the current fair value of a security, but since the value is
not obtained from a quoted price in an active market, such securities
are reflected within Level 2.
B. SECURITY TRANSACTIONS AND RELATED INCOME
Security transactions are recorded on the trade date. Dividend income
is recorded on the ex-dividend date, or in the case of certain foreign
securities, as soon as the Series is notified. Interest income is
recorded on the accrual basis. Each Series amortizes premiums and
accretes discounts using the effective interest method. Realized gains
and losses are determined on the identified cost basis.
Dividend income is recorded using Management's estimate of the income
included in distributions received from the REIT investments.
Distributions received in excess of this estimated amount are recorded
as a reduction of the cost of investments or reclassified to capital
gains. The actual amounts of income, return of capital, and capital
gains are only determined by each REIT after its fiscal year-end, and
may differ from the estimated amounts.
100
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2009
C. INCOME TAXES
Each Series is treated as a separate taxable entity. It is the policy
of each Series in the Fund to comply with the requirements of
Subchapter M of the Internal Revenue Code and to distribute
substantially all of its taxable income to its shareholders.
Therefore, no provision for federal income taxes or excise taxes has
been made.
Certain Series may be subject to foreign taxes on income, gains on
investments or currency repatriation, a portion of which may be
recoverable. Each Series will accrue such taxes and recoveries as
applicable based upon current interpretations of the tax rules and
regulations that exist in the markets in which they invest. The Series
have adopted the authoritative guidance on accounting for and
disclosure of uncertainty in tax positions, which requires the Series
to determine whether a tax position is more likely than not to be
sustained upon examination, including resolution of any related
appeals or litigation processes, based on the technical merits of the
position. The Series have determined that there was no effect on the
financial statements from the adoption of this authoritative guidance.
The Series do not expect that the total amount of unrecognized tax
benefits will materially change over the next twelve months. The
Series file tax returns as prescribed by the tax laws of the
jurisdictions in which they operate. In the normal course of business,
the Series are subject to examination by federal, state and local
jurisdictions, where applicable. As of December 31, 2009, the tax
years that remain subject to examination by the major tax
jurisdictions under the statute of limitations is from the year 2006
forward (with limited exceptions).
D. DISTRIBUTIONS TO SHAREHOLDERS
Distributions are recorded by each Series on the ex-dividend date. For
Money Market Series, income distributions are declared and recorded
daily. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from
accounting principles generally accepted in the United States of
America. These differences may include the treatment of non-taxable
dividends, market premium and discount, non-deductible expenses,
expiring capital loss carryovers, foreign currency gain or loss, gain
or loss on futures contracts, partnerships, operating losses and
losses deferred due to wash sales. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassifications to capital paid in on shares of beneficial interest.
E. EXPENSES
Expenses incurred by the Fund with respect to more than one Series are
allocated in proportion to the net assets of each Series, except where
allocation of direct expense to each Series or an alternative
allocation method is deemed more appropriate. In addition to the net
operating expenses that the Series bear directly, the contract owners,
as investors in the Series, indirectly bear the Series' pro-rata
expenses of the underlying funds in which each Series invests.
F. FOREIGN CURRENCY TRANSLATION
Foreign securities and other assets and liabilities are valued using
the foreign currency exchange rate effective at the end of the
reporting period. Cost of investments is translated at the currency
exchange rate effective at the trade date. The gain or loss resulting
from a change in currency exchange rates between the trade and
settlement date of a portfolio transaction is treated as a gain or
loss on foreign currency. Likewise, the gain or loss resulting from a
change in currency exchange rates between the date income is accrued
and is paid is treated as a gain or loss on foreign currency. The
Series does not isolate that portion of the results of operations
arising from changes in exchange rates or from fluctuations which
arise due to changes in the market prices of securities.
G. DERIVATIVE FINANCIAL INSTRUMENTS
Disclosures about derivative instruments and hedging activities are
intended to improve financial reporting for derivative instruments by
requiring enhanced disclosure that enables investors to understand how
and why a Series uses derivatives, how derivatives are accounted for,
and how derivative instruments affect a Series' results of operations
and financial position. Summarized below are the specific types of
derivative instruments used by the Series.
FORWARD CURRENCY CONTRACTS: A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date,
which may be any number of days from the date of the contract agreed
upon by the parties, at a price set at the time of the contract. These
contracts are traded directly between currency traders and their
customers. The contract is marked-to-market daily and the change in
market value is recorded by each Series as an unrealized gain or loss
in the Statement of Operations. When the contract is closed or offset
with the same counterparty, the Series records a realized gain or loss
equal to the change in the value of the contract when it was opened
and the value at the time it was closed or offset. This is presented
in the Statement of Operations as net realized gain (loss) from
foreign currency transactions.
The Multi-Sector Fixed Income Series and the Multi-Sector Short Term
Bond Series held forward currency contracts during the current
reporting period. Each Series may enter into forward currency
contracts as part of its overall investment technique to gain or
lessen exposure to various currencies. Forward currency contracts
involve, to varying degrees, elements of market risk in excess of the
amount recognized in the Statement of Assets and Liabilities. Risks
arise from the possible movements in foreign exchange rates or if the
counterparty does not perform under the contract.
At December 31, 2009, there were no open forward currency contracts
held by the Series.
FUTURES CONTRACTS: A futures contract is an agreement between two
parties to purchase (long) or sell (short) a security at a set price
for delivery on a future date. Upon entering into a futures contract,
the Series is required to pledge to the broker an amount of cash
and/or securities equal to the "initial margin" requirements of the
futures exchange on which the contract is traded. Pursuant to the
contract, the Series agrees to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin and
are recorded by the Series for financial statement purposes on a daily
basis as unrealized gains or losses. When the contract expires or is
closed, gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was
closed is realized. This is presented in the Statement of Operations
as net realized gain (loss) on futures contracts. Certain Series may
enter into futures contracts as a hedge against anticipated changes in
the market value of their portfolio securities. The potential risk to
the Series is that the change in value of the futures contract may not
correspond to the change in value of the hedged instruments.
101
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2009
The Van Kampen Equity 500 Index Series (the "Series") may purchase and
sell stock index futures ("futures contracts") for the following
reasons: to simulate full investment in the S&P 500(R) Index while
retaining a cash balance for the fund management purposes; to
facilitate trading; to reduce transaction costs; or to seek higher
investment returns when a futures contract is priced more attractively
than stocks comprising the S&P 500(R) Index. These futures contracts
involve elements of market risk in excess of the amount reflected in
the Statement of Assets and Liabilities. The Series bears the risk of
an unfavorable change in the value of the underlying securities. Risks
may also arise upon entering into these contracts from the potential
inability of the counterparties to meet the terms of their contracts.
For open futures contracts as of December 31, 2009, see the Schedule
of Investments, which is also indicative of activity for the year
ended December 31, 2009.
WARRANTS AND RIGHTS: Certain Series hold warrants and rights acquired
either through a direct purchase, including as part of private
placement, or pursuant to corporate actions. Warrants and rights
entitle the holder to buy a proportionate amount of common stock at a
specific price and time through the expiration dates. Such warrants
and rights are held as long positions by the Series until exercised,
sold or expired. Equity-linked warrants are purchased in order to own
local exposure to certain countries in which the Series are not
locally registered. Warrants and rights are valued at fair value in
accordance with the Board of Trustees' approved fair valuation
procedures.
The following is a summary of the fair value of the Series' derivative
instrument holdings, categorized by primary risk exposure as of
December 31, 2009 ($ reported in thousands):
ASSET DERIVATIVES FAIR VALUE
--------------------------------
TOTAL VALUE AT EQUITY
DECEMBER 31, 2009 CONTRACTS(1)
----------------- ------------
Van Kampen Equity 500 Index Series .. $5 $5
The following tables set forth by primary risk exposure by the Series for the
realized gains (losses) and change in unrealized gains (losses) by type of
derivative contract for the period ended December 31, 2009 ($ reported in
thousands):
REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN
RESULTS OF OPERATIONS
-----------------------------------------------------------
EQUITY CONTRACTS(2) FOREIGN EXCHANGE CONTRACTS(3) TOTAL
------------------- ----------------------------- -----
Growth and Income Series ............. $(46) $-- $(46)
Multi-Sector Fixed Income Series ..... -- (3) (3)
Multi-Sector Short Term Bond Series .. -- (1) (1)
Van Kampen Equity 500 Index Series ... 130 -- 130
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON
DERIVATIVES RECOGNIZED IN RESULTS OF OPERATIONS
-----------------------------------------------------------
EQUITY CONTRACTS(4) FOREIGN EXCHANGE CONTRACTS(5) TOTAL
------------------- ----------------------------- -----
Multi-Sector Fixed Income Series ..... $ -- $(65) $(65)
Multi-Sector Short Term Bond Series .. -- (15) (15)
Van Kampen Equity 500 Index Series ... (14) -- (14)
(1) Includes cumulative appreciation (depreciation) of futures contracts as
reported in the Schedule of Investments. Only unsettled variation margin
receivable (payable) for futures contracts is reported within the Statement
of Assets and Liabilities.
(2) Located within the Statement of Operations as Net realized gain (loss) on
futures.
(3) Located within the Statement of Operations as Net realized gain (loss) on
foreign currency transactions.
(4) Located within the Statement of Operations as Net change in unrealized
appreciation (depreciation) on futures.
(5) Located within the Statement of Operations as Net change in unrealized
appreciation (depreciation) on foreign currency translations.
H. LOAN AGREEMENTS
Certain Series may invest in direct debt instruments, which are
interests in amounts owed by a corporate, governmental, or other
borrower to lenders or lending syndicates. The Series' investments in
loans may be in the form of participations in loans or assignments of
all or a portion of loans from third parties. A loan is often
administered by a bank or other financial institution (the lender)
that acts as agent for all holders. The agent administers the terms of
the loan, as specified in the loan agreement. When investing in a loan
participation, the Series has the right to receive payments of
principal, interest and any fees to which it is entitled only from the
lender selling the loan agreement and only upon receipt by the lender
of payments from the borrower. The Series generally has no right to
enforce compliance with the terms of the loan agreement with the
borrower. As a result, the Series may be subject to the credit risk of
both the borrower and the lender that is selling the loan agreement.
When the Series purchases assignments from lenders, it acquires direct
rights against the borrower on the loan. Direct indebtedness of
emerging countries involves a risk that the government entities
responsible for the repayment of the debt may be unable, or unwilling,
to pay the principal and interest when due.
I. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Certain Series may engage in when-issued or delayed delivery
transactions. Each Series records when-issued and delayed delivery
securities on the trade date. Each Series maintains collateral for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis begin earning interest on the settlement date.
102
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2009
NOTE 3--INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
($ REPORTED IN THOUSANDS EXCEPT AS NOTED)
A. ADVISOR
The advisor to the Fund is Phoenix Variable Advisors, Inc. ("PVA")
(the "Advisor"). PVA is a wholly-owned subsidiary of PM Holdings, Inc.
PVA is an indirect, wholly-owned subsidiary of Phoenix Life Insurance
Company ("PLIC").
As compensation for its service to the Fund, the Advisor is entitled
to a fee based upon the following annual rates as a percentage of the
average daily net assets of each separate Series listed below:
RATE FOR RATE FOR RATE FOR
FIRST $100 MILLION NEXT $50 MILLION OVER $150 MILLION
------------------ ----------------- -----------------
Mid-Cap Value Series ................................. 1.05% 1.00% 0.95%
Small-Cap Value Series ............................... 1.05 1.00 0.95
RATE FOR RATE FOR RATE FOR
FIRST $250 MILLION NEXT $250 MILLION OVER $500 MILLION
------------------ ----------------- -----------------
Capital Growth Series ................................ 0.70% 0.65% 0.60%
Dynamic Asset Allocation Series: Aggressive Growth# .. 0.15 0.15 0.15
Dynamic Asset Allocation Series: Growth# ............. 0.15 0.15 0.15
Dynamic Asset Allocation Series: Moderate# ........... 0.15 0.15 0.15
Dynamic Asset Allocation Series: Moderate Growth# .... 0.15 0.15 0.15
Growth and Income Series ............................. 0.70 0.65 0.60
Mid-Cap Growth Series ................................ 0.80 0.80 0.80
Money Market Series .................................. 0.40 0.35 0.30
Multi-Sector Fixed Income Series ..................... 0.50 0.45 0.40
Multi-Sector Short Term Bond Series .................. 0.50 0.45 0.40
Small-Cap Growth Series .............................. 0.85 0.85 0.85
Strategic Allocation Series .......................... 0.60 0.55 0.50
Aberdeen International Series ........................ 0.75 0.70 0.65
Van Kampen Comstock Series ........................... 0.70 0.65 0.60
Van Kampen Equity 500 Index Series ................... 0.30 0.30 0.30
RATE FOR RATE FOR RATE OVER
FIRST BILLION NEXT BILLION $2 BILLION
------------- ------------ ----------
Duff & Phelps Real Estate Securities Series........... 0.75% 0.70% 0.65%
# Effective June 22, 2009, the fee changed from 0.40% to 0.15%.
B. SUBADVISORS
Pursuant to subadvisory agreements, PVA delegates certain investment
decisions and/or research functions with respect to the following
Series to the subadvisor indicated, for which each is paid a fee by
the Advisor.
SERIES SUBADVISOR
- ------ ----------------
Capital Growth Series Neuberger(1)
Dynamic Asset Allocation Series: Aggressive Growth Ibbotson(2)
Dynamic Asset Allocation Series: Growth Ibbotson(2)
Dynamic Asset Allocation Series: Moderate Ibbotson(2)
Dynamic Asset Allocation Series: Moderate Growth Ibbotson(2)
Growth and Income Series Virtus(3)
Mid-Cap Growth Series Neuberger(1)
Mid-Cap Value Series Westwood(4)+
Money Market Series Goodwin(5)*
Multi-Sector Fixed Income Series Goodwin(5)*
Multi-Sector Short Term Bond Series Goodwin(5)*
Small-Cap Growth Series Neuberger(1)
Small-Cap Value Series Westwood(4)+
Strategic Allocation Series
(equity portion) Virtus(3)
Strategic Allocation Series
(fixed income portion) Goodwin(5)*
SERIES SUBADVISOR
- ------ ----------------
Aberdeen International Series Aberdeen(6)
Duff & Phelps Real Estate Securities Series Duff & Phelps(7)
Van Kampen Comstock Series Van Kampen(8)
Van Kampen Equity 500 Index Series Van Kampen(8)
(1) Neuberger Berman Management, LLC
(2) Ibbotson Associates, Inc.
(3) Virtus Investment Advisers, Inc.
(4) Westwood Management Corp.
(5) Goodwin Capital Advisers, Inc.
(6) Aberdeen Asset Management, Inc.
(7) Duff & Phelps Investment Management Company
(8) Morgan Stanley Investment Management Inc. d/b/a Van Kampen
+ Prior to May 1, 2009, AllianceBernstein L.P. served as subadvisor to the
Series.
* Affiliated company.
103
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2009
C. EXPENSE LIMITS
The Advisor has contractually agreed to reimburse expenses of the Fund
(excluding advisory and management fees, Rule 12b-1 fees, interest,
taxes, brokerage commissions, expenses incurred in connection with any
merger or reorganization and extraordinary expenses such as litigation
expenses), so that such expenses do not exceed the operating expenses
of the Series' average net assets (the "expense caps") until April 30,
2010, as listed in the chart below.
MAXIMUM OPERATING
EXPENSE
-----------------
Capital Growth Series 0.25%
Dynamic Asset Allocation Series:
Aggressive Growth 0.15
Dynamic Asset Allocation Series: Growth 0.15
Dynamic Asset Allocation Series: Moderate 0.15
Dynamic Asset Allocation Series:
Moderate Growth 0.15
Growth and Income Series 0.20
Mid-Cap Growth Series 0.30
Mid-Cap Value Series 0.25
Money Market Series(1) 0.25
MAXIMUM OPERATING
EXPENSE
-----------------
Multi-Sector Fixed Income Series 0.25%
Multi-Sector Short Term Bond Series 0.20
Small-Cap Growth Series 0.20
Small-Cap Value Series 0.25
Strategic Allocation Series 0.25
Aberdeen International Series 0.30
Duff & Phelps Real Estate
Securities Series 0.35
Van Kampen Comstock Series 0.25
Van Kampen Equity 500 Index Series 0.20
(1) The Advisor has voluntarily agreed to reduce its advisory fee and/or
reimburse certain operating expenses to maintain the Series' current
annualized yield at or above 0.01% (1 basis point).
D. ADMINISTRATION, DISTRIBUTION AND SERVICE FEES
VP Distributors, Inc. ("VP Distributors") serves as the Administrator
to the Fund. For the fiscal year ended December 31, 2009 (the
"period"), the Fund incurred administration fees totaling $1,357.
VP Distributors served as the distributor for all the Series' shares
through March 31, 2009. Effective March 31, 2009, Phoenix Equity
Planning Corporation ("PEPCO"), formerly PFG Distribution Company,
became the distributor for all the Series' shares and continues to
serve. For its services each Phoenix Dynamic Asset Allocation Series
pays PEPCO distribution and/or service fees at an annual rate not to
exceed 0.25% of the average daily net assets of each respective
Phoenix Dynamic Asset Allocation Series.
Pursuant to a Service Agreement, PLIC, a wholly-owned subsidiary of
The Phoenix Companies, Inc. ("PNX"), receives a service fee for
providing certain stock transfer and accounting services for each
series. For the period ended December 31, 2009, the Fund paid PLIC
$1,518.
E. AFFILIATED SHARES
At December 31, 2009, PLIC and its affiliates held shares in the Fund
which aggregate the following:
AGGREGATE NET
SHARES ASSET VALUE
------ -------------
Dynamic Asset Allocation Series: Aggressive Growth .. 21,695 $192
Dynamic Asset Allocation Series: Growth ............. 21,892 200
Dynamic Asset Allocation Series: Moderate ........... 22,250 217
Dynamic Asset Allocation Series: Moderate Growth .... 22,591 208
F. TRUSTEE COMPENSATION
The Fund provides a deferred compensation plan for its disinterested
trustees. Under the deferred compensation plan, disinterested trustees
may elect to defer all or a portion of their compensation. Amounts
deferred are retained by the Fund, and then, to the extent permitted
by the 1940 Act, in turn, may be invested in the shares of
unaffiliated mutual funds or variable annuities selected by the
disinterested trustees. Investments in such unaffiliated mutual funds
are included in "Other Assets" on the Statement of Assets and
Liabilities at December 31, 2009.
G. OTHER
On September 16, 2008, certain subsidiaries of PNX purchased three
short-term notes from the Money Market Series. These notes were
purchased at a price equal to the notes par totaling $9,190, of which
$3,217 was a contribution from certain subsidiaries representing the
amount in excess of the estimated value of the notes determined in
good faith.
NOTE 4--PURCHASES AND SALES OF SECURITIES
($ REPORTED IN THOUSANDS EXCEPT AS NOTED)
Purchases and sales of securities (excluding U.S. Government and agency
securities, short-term securities, futures contracts, and forward currency
contracts) during the period ended December 31, 2009, were as follows:
PURCHASES SALES
--------- --------
Capital Growth Series ............................... $217,518 $233,026
Dynamic Asset Allocation Series: Aggressive Growth .. 16,837 15,999
Dynamic Asset Allocation Series: Growth ............. 28,163 28,371
Dynamic Asset Allocation Series: Moderate ........... 31,326 24,732
Dynamic Asset Allocation Series: Moderate Growth .... 23,137 20,403
Growth and Income Series ............................ 88,100 98,628
Mid-Cap Growth Series ............................... 30,191 32,789
Mid-Cap Value Series ................................ 120,501 125,040
Multi-Sector Fixed Income Series .................... 120,718 117,667
Multi-Sector Short Term Bond Series ................. 19,936 29,593
Strategic Allocation Series ......................... 120,891 150,824
Aberdeen International Series ....................... 89,697 92,424
Small-Cap Growth Series ............................. 61,118 65,054
104
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2009
PURCHASES SALES
--------- -------
Small-Cap Value Series ....................... $52,293 $58,184
Duff & Phelps Real Estate Securities Series .. 38,199 36,882
Van Kampen Comstock Series ................... 9,264 15,484
Van Kampen Equity 500 Index Series ........... 4,171 16,118
Purchases and sales of long-term U.S. Government and agency securities during
the period ended December 31, 2009, were as follows:
PURCHASES SALES
--------- -------
Multi-Sector Fixed Income Series ............. $16,183 $33,330
Multi-Sector Short Term Bond Series .......... 4,366 8,396
Strategic Allocation Series .................. 18,917 10,911
NOTE 5--CREDIT RISK AND ASSET CONCENTRATIONS
In countries with limited or developing markets, investments may present
greater risks than in more developed markets, and the prices of such
investments may be volatile. The consequences of political, social or
economic changes in these markets may have disruptive effects on the market
prices of these investments and the income they generate, as well as a
Series' ability to repatriate such amounts.
High-yield/high-risk securities typically entail greater price volatility
and/or principal and interest rate risk. There is a greater chance that an
issuer will not be able to make principal and interest payments on time.
Analysis of the creditworthiness of issuers of high-yield securities may be
complex, and as a result, it may be more difficult for the advisors and/or
subadvisors to accurately predict risk.
Certain Series may invest in exchange traded notes which are unsecured
obligations of the notes sponsor. This may expose the Series to liquidity
and general credit risk of the note sponsor, in addition to the intended
investment risk and exposure.
Many municipalities insure repayment for their obligations. Although bond
insurance reduces the risk of loss due to default by an issuer, such bonds
remain subject to the risk that the market may fluctuate for other reasons
and there is no assurance that the insurance company will meet its
obligations. Insured securities have been identified in the Schedule of
Investments. A real or perceived decline in creditworthiness of a bond
insurer can have an adverse impact on the value of insured bonds held in
the Funds.
Certain Series may invest a high percentage of their assets in specific
sectors of the market in their pursuit of a greater investment return.
Fluctuations in these sectors of concentration may have a greater impact on
a Series, positive or negative, than if a Series did not concentrate its
investments in such sectors.
At December 31, 2009, the Series held securities in specific sectors as
detailed below:
PERCENTAGE OF
SERIES SECTOR TOTAL INVESTMENTS
- ------- ---------------------- -----------------
Capital Growth Series .......... Information Technology 38%
Small-Cap Growth Series ........ Information Technology 31
Small-Cap Value Series ......... Industrials 29
Aberdeen International Series .. Financials 27
NOTE 6--ILLIQUID AND RESTRICTED SECURITIES
Investments shall be considered illiquid if they cannot be disposed of in
seven days in the ordinary course of business at the approximate amount at
which such securities have been valued by the Series. Additionally, the
following information is also considered in determining illiquidity: the
frequency of trades and quotes for the investment; whether the investment
is listed for trading on a recognized domestic exchange and/or whether two
or more brokers are willing to purchase or sell the security at a
comparable price; the extent of market making activity in the investment;
and the nature of the market for investment. Illiquid securities are noted
as such within each Series' Schedule of Investments where applicable.
Restricted securities are illiquid securities, as defined above, not
registered under the Securities Act of 1933. Generally, 144A securities
are excluded from this category, except where defined as illiquid.
At December 31, 2009, the Fund did not hold any restricted securities.
Each Series will bear any costs, including those involved in registration
under the Securities Act of 1933, in connection with the disposition of
such securities.
NOTE 7--INDEMNIFICATIONS
Under the Fund's organizational documents and in a separate agreement among
the Disinterested Trustees and the Fund, its trustees and officers are
indemnified against certain liabilities arising out of the performance of
their duties to the Fund. In addition, the Series enter into contracts that
contain a variety of indemnifications. The Series' maximum exposure under
these arrangements is unknown. However, the Fund has not had prior claims
or losses pursuant to these arrangements.
NOTE 8--REGULATORY EXAMS
Federal and state regulatory authorities from time to time make inquiries
and conduct examinations regarding compliance by The Phoenix Companies,
Inc. and its subsidiaries (collectively "the Company") with securities and
other laws and regulations affecting their registered products.
105
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2009
NOTE 9--MANAGER OF MANAGERS
The Fund and PVA have received an exemptive order from the Securities and
Exchange Commission ("SEC") granting exemptions from certain provisions of
the 1940 Act, as amended, pursuant to which PVA will, subject to review and
approval of the Fund's Board of Trustees, be permitted to enter into and
materially amend subadvisory agreements without such agreements being
approved by the shareholders of the applicable Series of the Fund. PVA will
continue to have the ultimate responsibility to oversee the subadvisors and
recommend their hiring, termination and replacement.
NOTE 10--MIXED AND SHARED FUNDING
Shares of the Fund are not directly offered to the public. Shares of the
Fund are currently offered through separate accounts to fund variable
accumulation annuity contracts and variable universal life insurance
policies issued by Phoenix Life Insurance Company, PHL Variable Insurance
Company, and Phoenix Life and Annuity Company, and could be offered to
separate accounts of other insurance companies in the future.
The interests of variable annuity contract owners and variable life policy
owners could diverge based on differences in federal and state regulatory
requirements, tax laws, investment management or other unanticipated
developments. The Fund's Trustees do not foresee any such differences or
disadvantages at this time. However, the Fund's Trustees intend to monitor
for any material conflicts and will determine what action, if any, should
be taken in response to such conflicts. If such a conflict should occur,
one or more separate accounts may be required to withdraw its investment in
the Fund, or shares of another fund may be substituted.
NOTE 11--EXEMPTIVE ORDER
On April 28, 2009, the SEC issued an order under Section 12(d)(1)(J) of the
1940 Act granting an exemption from Sections 12(d)(1)(A) and (B) of the
1940 Act and under Sections 6(c) and 17(b) of the 1940 Act granting an
exemption from Section 17(a) of the 1940 Act, which permits the Phoenix
Dynamic Asset Allocation Series to invest in other affiliated and
unaffiliated funds, including exchange traded and retail funds. The Series
can invest in affiliated and unaffiliated funds and exchange traded funds.
NOTE 12--FEDERAL INCOME TAX INFORMATION
($ REPORTED IN THOUSANDS EXCEPT AS NOTED)
At December 31, 2009, federal tax cost and aggregate gross unrealized
appreciation (depreciation) of securities held by each Series were as follows:
NET UNREALIZED
FEDERAL UNREALIZED UNREALIZED APPRECIATION
TAX COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
-------- ------------ -------------- --------------
Capital Growth Series ............................... $191,924 $ 45,397 $ (1,425) $ 43,972
Dynamic Asset Allocation Series: Aggressive Growth .. 17,452 2,077 (24) 2,053
Dynamic Asset Allocation Series: Growth ............. 30,916 3,445 (184) 3,261
Dynamic Asset Allocation Series: Moderate ........... 30,863 2,141 (46) 2,095
Dynamic Asset Allocation Series: Moderate Growth .... 26,831 2,291 (116) 2,175
Growth and Income Series ............................ 69,364 21,621 (662) 20,959
Mid-Cap Growth Series ............................... 41,023 9,079 (626) 8,453
Mid-Cap Value Series ................................ 88,391 23,641 (32) 23,609
Money Market Series ................................. 158,571 -- -- --
Multi-Sector Fixed Income Series .................... 198,419 15,408 (8,162) 7,246
Multi-Sector Short Term Bond Series ................. 32,673 1,970 (1,511) 459
Small-Cap Growth Series ............................. 19,802 6,280 (62) 6,218
Small-Cap Value Series .............................. 33,241 5,594 (526) 5,068
Strategic Allocation Series ......................... 148,856 25,063 (4,263) 20,800
Aberdeen International Series ....................... 332,194 102,659 (13,063) 89,596
Duff & Phelps Real Estate Securities Series ......... 84,659 28,868 (709) 28,159
Van Kampen Comstock Series .......................... 44,258 5,407 (3,118) 2,289
Van Kampen Equity 500 Index Series .................. 60,512 12,498 (8,439) 4,059
The following Series have capital loss carryovers which may be used to offset
future capital gains, as follows:
EXPIRATION YEAR
------------------------------------------------------------------------
2010 2011 2012 2013 2014 2016 2017 TOTAL
-------- ------ ------ ----- ---- ------- ------- --------
Capital Growth Series ............. $ 84,342 $5,973 $2,820 $ -- $ -- $45,874 $26,333 $165,342
Dynamic Asset Allocation Series:
Aggressive Growth ............... -- -- -- -- -- -- 6,815 6,815
Dynamic Asset Allocation Series:
Growth .......................... -- -- -- -- -- -- 9,960 9,960
Dynamic Asset Allocation Series:
Moderate ........................ -- -- -- -- -- -- 2,225 2,225
Dynamic Asset Allocation Series:
Moderate Growth ................. -- -- -- -- -- -- 5,199 5,199
Growth and Income Series .......... -- -- -- -- -- 1,571 19,094 20,665
Mid-Cap Growth Series ............. 16,035 -- -- 981 -- 9,927 10,422 37,365
Mid-Cap Value Series .............. -- -- -- -- -- -- 43,165 43,165
Money Market Series ............... -- -- -- -- -- -- 1 1
Multi-Sector Fixed Income Series .. 7,850 -- -- -- -- 2,491 11,514 21,855
Multi-Sector Short Term Bond
Series .......................... -- -- 137 159 167 696 2,451 3,610
106
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2009
EXPIRATION YEAR
--------------------------------------------------------------------
2010 2011 2012 2013 2014 2016 2017 TOTAL
------ ------ ---- ------ ---- ------- ------- -------
Small-Cap Growth Series ......... $ -- $ -- $ -- $ -- $ -- $ 6,003 $ 6,178 $12,181
Small-Cap Value Series .......... -- -- -- -- -- 1,393 20,490 21,883
Strategic Allocation Series ..... -- -- -- -- -- 2,705 29,076 31,781
Aberdeen International Series ... -- -- -- -- -- 11,128 58,239 69,367
Duff & Phelps Real Estate
Securities Series ............ -- -- -- -- -- 1,270 12,295 13,565
Van Kampen Comstock Series ...... -- -- -- -- -- 5,035 10,363 15,398
Van Kampen Equity 500 Index
Series ....................... 7,244 8,185 575 1,188 -- 1,784 3,784 22,760
The Fund may not realize the benefit of these losses to the extent each Series
does not realize gains on investments prior to the expiration of the capital
loss carryovers. The Capital Growth Series, the Mid-Cap Growth Series and the
Van Kampen Equity 500 Index Series amounts include losses acquired in connection
with prior years' mergers.
The following Series had capital loss carryovers which expired in 2009:
Capital Growth Series ..................... $192,231
Mid-Cap Growth Series ..................... 39,730
Multi-Sector Fixed Income Series .......... 4,981
Under current tax law, foreign currency and capital losses realized after
October 31 may be deferred and treated as occurring on the first day of the
following tax year. For the period ended December 31, 2009, the following Series
deferred and/or recognized post-October losses as follows:
CAPITAL CAPITAL CURRENCY
LOSS LOSS LOSS
DEFERRED RECOGNIZED RECOGNIZED
-------- ---------- ----------
Capital Growth Series ............................... $ -- $10,432 $--
Dynamic Asset Allocation Series: Aggressive Growth .. 32 368 --
Dynamic Asset Allocation Series: Growth ............. -- 34 --
Dynamic Asset Allocation Series: Moderate ........... -- -- --
Dynamic Asset Allocation Series: Moderate Growth .... 7 11 --
Growth and Income Series ............................ 155 3,563 --
Mid-Cap Growth Series ............................... 633 3,162 --
Mid-Cap Value Series ................................ --* 8,473 --
Money Market Series ................................. -- -- --
Multi-Sector Fixed Income Series .................... 740 5,103 13
Multi-Sector Short Term Bond Series ................. 23 359 --
Small-Cap Growth Series ............................. -- 3,158 --
Small-Cap Value Series .............................. --* 3,446 --
Strategic Allocation Series ......................... 97 4,513 --
Aberdeen International Series ....................... 699 10,312 --
Duff & Phelps Real Estate Securities Series ......... -- 7,653 --
Van Kampen Comstock Series .......................... -- 4,377 --
Van Kampen Equity 500 Index Series .................. 36 1,098 --
* Amount is less than $500.
The components of distributable earnings on a tax basis (excluding
unrealized appreciation (depreciation), which are disclosed in the
respective schedule of investments) consist of undistributed ordinary
income and undistributed long-term capital gains as follows:
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY INCOME LONG-TERM CAPITAL
--------------- -----------------
Capital Growth Series ............................... $ 233 $--
Dynamic Asset Allocation Series: Aggressive Growth .. 3 --
Dynamic Asset Allocation Series: Growth ............. -- --
Dynamic Asset Allocation Series: Moderate ........... -- --
Dynamic Asset Allocation Series: Moderate Growth .... -- --
Growth and Income Series ............................ 267 --
Mid-Cap Growth Series ............................... -- --
Mid-Cap Value Series ................................ 236 --
Money Market Series ................................. 30 --
Multi-Sector Fixed Income Series .................... 1,945 --
Multi-Sector Short Term Bond Series ................. 427 --
Small-Cap Growth Series ............................. -- --
Small-Cap Value Series .............................. 35 --
Strategic Allocation Series ......................... 627 --
Aberdeen International Series ....................... 480 --
Duff & Phelps Real Estate Securities Series ......... 779 --
Van Kampen Comstock Series .......................... 131 --
Van Kampen Equity 500 Index Series .................. 118 --
107
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2009
The differences between the book and tax basis components of distributable
earnings relate principally to the timing of recognition of income and
gains for federal tax purposes. Short-term gains distributions reported in
the Statements of Changes in Net Assets, if any, are reported as ordinary
income for federal tax purposes. Distributors are determined on a tax basis
and may differ from net investment income and realized capital gains for
financial reporting purposes.
NOTE 13--RECLASSIFICATION OF CAPITAL ACCOUNTS
($ REPORTED IN THOUSANDS)
For financial reporting purposes, book basis capital accounts are adjusted
to reflect the tax character of permanent book/tax differences. Permanent
reclassifications can arise from differing treatment of certain income and
gain transactions, nondeductible current year net operating losses,
expiring capital loss carryovers and investments in passive foreign
investment companies. The reclassifications have no impact on the net
assets or net asset values of the Series. As of December 31, 2009, the
Series recorded reclassifications to increase (decrease) the accounts
listed below, as follows:
CAPITAL PAID IN UNDISTRIBUTED ACCUMULATED
ON SHARES OF NET INVESTMENT NET REALIZED
BENEFICIAL INTEREST INCOME (LOSS) GAIN (LOSS)
------------------- -------------- ------------
Capital Growth Series ............................... $(192,231) $ --(1) $192,231
Dynamic Asset Allocation Series: Aggressive Growth .. -- 7 (7)
Dynamic Asset Allocation Series: Growth ............. (5) 22 (17)
Dynamic Asset Allocation Series: Moderate ........... (13) 46 (33)
Dynamic Asset Allocation Series: Moderate Growth .... (3) 26 (23)
Growth and Income Series ............................ -- (12) 12
Mid-Cap Growth Series ............................... (39,936) 212 39,724
Mid-Cap Value Series ................................ --(1) (21) 21
Money Market Series ................................. -- -- --
Multi-Sector Fixed Income Series .................... (4,981) 153 4,828
Multi-Sector Short Term Bond Series ................. --(1) 49 (49)
Small-Cap Growth Series ............................. (198) 198 --(1)
Small-Cap Value Series .............................. -- -- --
Strategic Allocation Series ......................... --(1) (34) 34
Aberdeen International Series ....................... (299) 339 (40)
Duff & Phelps Real Estate Securities Series ......... -- -- --
Van Kampen Comstock Series .......................... -- -- --
Van Kampen Equity 500 Index Series .................. (173) --(1) 173
(1) Amount is less than $500.
NOTE 14--OTHER
The insurance company affiliates of the Fund distribute the Fund as
investment options in variable annuity and life insurance products
("Variable Products") underwritten by a Phoenix affiliated insurance
company through non-affiliated advisors, broker-dealers and other financial
intermediaries.
On March 3, 2009, State Farm informed the Phoenix affiliated insurance
companies that it intended to suspend the sale of Phoenix Variable Products
pending a re-evaluation of the relationship between the two companies.
During 2008, State Farm was the largest distributor of annuity and life
insurance products accounting for approximately 27% of the total life
insurance premiums and approximately 68% of the annuity deposits.
On March 4, 2009, National Life Group also informed Phoenix affiliated
insurance companies that it intended to suspend the sale of Phoenix
products. In 2008, National Life was the second largest distributor of
annuity products accounting for approximately 14% of our annual deposits.
The actions by these key distribution partners have materially and
adversely affected new sales and the Phoenix relationships with
distributors in general.
NOTE 15--TREASURY GUARANTEE PROGRAM
($ REPORTED IN THOUSANDS)
On September 30, 2008, the Board authorized the Money Market Series (the
"Series") to apply for participation in the Department of the Treasury's
Temporary Money Market Fund Guarantee Program (the "Program"). The Series
was subsequently accepted into the Program. Subject to certain conditions
and limitations, in the event that the per share value of the Series fell
below $9.95 and the Series liquidated its holdings, the Program would have
provided coverage to shareholders in the Series for up to $10.00 per share
for the lesser of either the number of shares the investor held in the
Series at the close of business on September 19, 2008 or the number of
shares the investor held the date the per share value fell below $9.95.
Shares acquired by investors after September 19, 2008 generally were not
eligible for protection under the Program. The Series paid $79 to
participate in the Program through September 18, 2009, at which time the
Program expired.
108
THE PHOENIX EDGE SERIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2009
NOTE 16--RECENT ACCOUNTING PRONOUNCEMENTS
In January 2010, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") No. 2010-06 "Improving Disclosures
about Fair Value Measurements." ASU 2010-06 amends FASB Accounting
Standards Codification Topic 820, Fair Value Measurements and Disclosures,
to require additional disclosures regarding fair value measurements.
Certain disclosures required by ASU No. 2010-06 are effective for interim
and annual reporting periods beginning after December 15, 2009, and other
required disclosures are effective for fiscal years beginning after
December 15, 2010, and for interim periods within those fiscal years.
Management is currently evaluating the impact ASU No. 2010-06 will have on
its financial statement disclosures.
NOTE 17--SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Series
through the date the financial statements were available for issuance, and
has determined that the following subsequent events require recognition or
disclosure in these financial statements.
1. On January, 6, 2010, the Company announced that it had signed a
definitive agreement with Tiptree Financial Partners, LP for it to
acquire Phoenix's private placement insurance business, PFG Holdings,
Inc., including PEPCO, the principal underwriter for the Fund. The
transaction, which is subject to regulatory approvals and other
customary closing conditions, is expected to close in the second
quarter of 2010. It is expected that PEPCO will be replaced by a
Company affiliated broker-dealer, 1851 Securities, Inc., subject to
the approval of the Board of Trustees. The Company expects to file a
new member application for 1851 Securities, Inc. with the Financial
Industry Regulatory Authority on or about March 1, 2010.
2. A Special Meeting of Shareholders (the "Meeting") of the Phoenix Money
Market Series (the "Series"), a Series of the Fund was held on January
20, 2010, and the shareholders approved the liquidation of the assets
of the Series and distributed the liquidation proceeds for the benefit
of the previous Series' shareholders to the Federated Prime Money Fund
II, as well as other underlying mutual funds. The liquidation was
completed on January 22, 2010.
3. VP Distributors, Inc., the Fund's administrator, sub-contracts with
PNC Global Investment Servicing (U.S.), Inc. ("PNCGIS") to provide
certain sub-administrative services. Additionally, PNCGIS also
provides the Funds' transfer agency services.
On February 2, 2010, The PNC Financial Services Group, Inc. ("PNC")
entered into a Stock Purchase Agreement (the "Stock Purchase
Agreement") with The Bank of New York Mellon Corporation ("BNY
Mellon"). Upon the terms and subject to the conditions set forth in
the Stock Purchase Agreement, which has been approved by the board of
directors of each company, PNC will sell to BNY Mellon (the "Stock
Sale") 100% of the issued and outstanding shares of PNC Global
Investment Servicing, Inc., an indirect, wholly-owned subsidiary of
PNC. The Stock Sale includes PNCGIS, and is expected to close in the
third quarter of 2010.
109
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(PRICEWATERHOUSECOOPERS LOGO)
To the Board of Trustees and Shareholders of
The Phoenix Edge Series Fund
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the 18 series (constituting
The Phoenix Edge Series Fund, hereafter referred to as the "Fund") at December
31, 2009, and the results of each of their operations for the year then ended,
the changes in each of their net assets for each of the two years in the period
then ended and each of their financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2009 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Philadelphia, Pennsylvania
February 22, 2010
110
THE PHOENIX EDGE SERIES FUND
TAX INFORMATION NOTICE (UNAUDITED)
DECEMBER 31, 2009
For the fiscal year ended December 31, 2009, the Series make the following
disclosures for federal income tax purposes: the percentages of ordinary income
dividends earned by the Series which qualify for the dividends received
deduction ("DRD") for corporate shareholders; the actual percentage of DRD for
the calendar year will be designated in year-end tax statements. The Series
designate the amounts below, or if subsequently different, as long-term capital
gains dividends ("LTCG") (reported in thousands).
DRD LTCG
--- ----
Capital Growth Series 100% $--
Dynamic Asset Allocation Series: Aggressive Growth 51 --
Dynamic Asset Allocation Series: Growth 45 --
Dynamic Asset Allocation Series: Moderate 23 --
Dynamic Asset Allocation Series: Moderate Growth 32 --
Growth and Income Series 100 --
Mid-Cap Growth Series -- --
Mid-Cap Value Series 100 --
Money Market Series -- --
Multi-Sector Fixed Income Series -- --
Multi-Sector Short Term Bond Series -- --
Small-Cap Growth Series -- --
Small-Cap Value Series 100 --
Strategic Allocation Series 43 --
Aberdeen International Series -- --
Duff & Phelps Real Estate Securities Series -- --
Van Kampen Comstock Series 100 --
Van Kampen Equity 500 Index Series 100 --
111
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENTS FOR PHOENIX CAPITAL GROWTH SERIES (THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Fund's advisory and subadvisory agreements. At a meeting held
November 16 and 17, 2009, Phoenix Variable Advisors, Inc. ("PVA") (the
"Advisor") recommended to the Board, including a majority of disinterested
Trustees, as that term is defined in Section 2(a) (19) of the Investment Company
Act of 1940, as amended ("1940 Act"), the approval of the investment advisory
agreement (the "Advisory Agreement") between PVA and the Fund. Pursuant to the
Advisory Agreement between PVA and the Fund, PVA provides advisory services to
the Series. Pursuant to the Subadvisory Agreement between PVA and the Neuberger
Berman Management LLC, (the "Subadvisor"), the Subadvisor provides the day to
day investment management for the Series. The Subadvisory Agreement had
previously been approved at the March 4 and 5, 2009 Board meeting.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of disinterested Trustees, determined
that the fee structure was reasonable. While attention was given to all
information furnished, the following discusses the primary factors relevant to
the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by PVA and its
affiliates to the Series and its shareholders were reasonable. The Board
received and reviewed substantial written information from PVA as requested. The
Board's conclusion was based, in part, upon services provided by PVA to other
series of The Fund such as quarterly reports provided by PVA 1) comparing the
performance of the Series with a peer group and benchmark, 2) showing that the
investment policies and restrictions were followed and 3) covering matters such
as the compliance of investment personnel and other access persons with the Code
of Ethics of PVA and the Series, the adherence to fair value pricing procedures
established by the Board, the monitoring of portfolio compliance, information on
illiquid securities and derivatives, brokerage commissions and presentations
regarding the economic environment and general investment outlook. The Board
noted that PVA was responsible for the general oversight of investment programs
and the monitoring of Subadvisor's investment performance and its compliance
with applicable laws, regulations, policies and procedures. With respect to
compliance monitoring, the Board noted that PVA will require quarterly
compliance certifications from the Subadvisor and will conduct compliance due
diligence visits at the Subadvisor. The Board also considered the experience of
PVA having acted as an investment adviser to mutual funds for 10 years, its
current experience in acting as an investment adviser to 18 mutual funds, and
its role under the Fund's "manager of managers" exemptive relief under the 1940
Act. The Board also considered the shareholder services that are provided to
Series' shareholders by an affiliate of PVA, noting continuing improvements by
management in the scope and quality of services and favorable reports on such
service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed emphasis on investment
performance of the Series in view of its importance to shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report for the Series prepared by Lipper Financial Services
("Lipper") furnished for the contract renewal process at the November 16 and 17,
2009 Board meeting. The Lipper report showed the investment performance on the
Series' shares for the 1, 3, 5, and 10 year periods ended September 30, 2009 and
year-to-date period ended September 30, 2009. The Board reviewed the investment
performance of the Series, along with comparative performance information with a
peer group of funds and a relative market index. The Board noted that the Series
had performed below the index for all periods. The Series was ranked 193rd of
230 for its peer group for the year-to-date period ended September 30, 2009. The
Board also noted that the Subadvisor had managed the Series since September 15,
2008.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses at the meeting. Consideration was given to a
comparative analysis of the management fees and total expense rations of the
Series compared with those of a group of funds selected by Lipper as the Series'
appropriate Lipper expense peer group as of September 30, 2009. The Board noted
that the total expenses of the Series were above the median and the average of
the total expenses for comparable funds and that the contractual management fee
was above the median and the average for the peer group. The Board was satisfied
with the management fee and total expenses of the Series in comparison to its
expenses group as shown in the Lipper report and concluded that such fee and
expenses are reasonable.
PROFITABILITY. The Board also considered the level of profits realized
by PVA and its affiliates in connection with the operation of the Series. In
this regard, the Board reviewed the Series' profitability analysis that
addressed the overall profitability of PVA for its management of The Fund
family, as well as its profits and that of its affiliates, for managing the
Series. Specific attention was given to the methodology followed in allocating
costs to the Series, it being recognized that allocation methodologies are
inherently subjective and various allocation methodologies may each be
reasonable while producing different results. In this regard, the Board noted
that the allocation appeared reasonable. The Board also considered the voluntary
reimbursements provided to the Series by PVA. The Board concluded that the
profitability to PVA from the Series was reasonable.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
112
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AGREEMENT
FOR PHOENIX DYNAMIC ASSET ALLOCATION SERIES: AGGRESSIVE GROWTH (THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Series' advisory and subadvisory agreements. At a meeting held
November 16 and 17, 2009, Phoenix Variable Advisors, Inc. ("PVA") (the
"Advisor") recommended to the Board, including a majority of disinterested
Trustees, as that term is defined in Section 2(a) (19) of the Investment Company
Act of 1940, as amended ("1940 Act"), the approval of the investment advisory
agreement (the "Advisory Agreement") between PVA and the Fund and the investment
subadvisory agreement (the "Subadvisory Agreement") between PVA and Ibbotson
Associates Inc. (the "Subadvisor"). Pursuant to the Advisory Agreement between
PVA and the Fund, PVA provides advisory services to the Series. Pursuant to the
Subadvisory Agreement between PVA and the Subadvisor, the Subadvisor provides
recommendations to the Advisor for the day to day investment management for the
Series.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of the Independent Trustees,
determined that the fee structure was fair and reasonable and that approval of
each agreement was in the best interests of the Series and its shareholders.
While attention was given to all information furnished, the following discusses
the primary factors relevant to the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by PVA and its
affiliates to the Series and its shareholders were reasonable. The Board's
conclusion was based, in part, upon services provided to the Series such as
quarterly reports provided by PVA 1) comparing performance with a peer group and
benchmark, 2) showing that the investment policies and restrictions were
followed and 3) covering matters such as the compliance of investment personnel
and other access persons with the Code of Ethics of PVA, the adherence to fair
value pricing procedures established by the Board, the monitoring of portfolio
compliance, information on illiquid securities and derivatives, brokerage
commissions and presentations regarding the economic environment and general
investment outlook. The Board noted that PVA was responsible for the general
oversight of investment programs and the monitoring of the Subadvisor's
investment performance and their compliance with applicable laws, regulations,
policies and procedures. With respect to compliance monitoring, the Board noted
that PVA required quarterly compliance certifications from the Subadvisor and
conducted compliance due diligence visits at the Subadvisor. The Board also
considered the experience of PVA having acted as an investment adviser to mutual
funds for 10 years, its current experience in acting as an investment adviser to
18 mutual funds, and its role under the Fund's "manager of managers" exemptive
relief under the 1940 Act. The Board also considered the transfer agent and
shareholder services that are provided to Series' shareholders by an affiliate
of PVA, noting continuing improvements by management in the scope and quality of
services and favorable reports on such service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report presented at the November 16 and 17, 2009 Board meeting for
the Series prepared by Lipper Financial Services ("Lipper"), which considered
performance for the 1 and 3 year period and the year-to-date period ended
September 30, 2009. The Board reviewed the investment performance of the Series,
along with comparative performance information given for a peer group and a
relevant market index. The Board noted that the Series had performed above the
index for the year-to-date and 3 year periods and below the index for the 1 year
period. The Series was ranked 82nd out of 234 for its peer group for the
year-to-date period ended September 30, 2009.
PROFITABILITY. The Board also considered the level of profits realized
by PVA and its affiliates in connection with the operation of the Series. In
this regard, the Board reviewed the Series profitability analysis that addressed
the overall profitability of PVA for its management of The Fund family, as well
as its profits and that of its affiliates, for managing the Series. Specific
attention was given to the methodology followed in allocating costs to the
Series, it being recognized that allocation methodologies are inherently
subjective and various allocation methodologies may each be reasonable while
producing different results. In this regard, the Board noted that the allocation
appeared reasonable. The Board also considered the voluntary reimbursements
provided to the Series by PVA. The Board concluded that the profitability to PVA
from the Series was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses at the meeting. Consideration was given to a
comparative analysis of the management fees and total expense rations of the
Series compared with those of a group of funds selected by Lipper as the Series'
appropriate Lipper expense peer group as of September 30, 2009. The Board noted
that the total expenses of the Series were above the median and the average
total expenses for comparable funds and that the contractual management fee was
above the median and the average for the peer group. The Board was satisfied
with the management fee and total expenses of the Series in comparison to its
expenses group as shown in the Lipper report and concluded that such fee and
expenses are reasonable.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
113
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AGREEMENT
FOR PHOENIX DYNAMIC ASSET ALLOCATION SERIES: AGGRESSIVE GROWTH (THE "SERIES")
(CONTINUED)
SUBADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by the
Subadvisor to the Series and its shareholders were reasonable. It noted that the
Subadvisor was a limited service Subadvisor in that the Advisor had the
discretion to accept or reject its recommendations. In addition, the Board
received from the Subadvisor and reviewed substantial written information as
requested. In the course of their deliberations and evaluation of materials, the
Trustees considered, among other things the following factors: the Subadvisor,
its current personnel (including particularly those personnel with
responsibilities for providing investment and compliance services to the
Series), and its financial condition, resources and investment process; the
terms of the subadvisory agreement, including the standard of care and
termination provisions; the scope and quality of the services that the
Subadvisor would provide to the Series; the structure and rate of advisory fees
payable to the Subadvisor by PVA; the methodology used by the Subadvisor in
determining the compensation payable to portfolio managers and the competition
for investment management talent; and the Subadvisor's compliance records. The
Board's opinion was based upon the extensive experience of the Subadvisor and
the portfolio managers and the experience the Subadvisor had as the previous
advisor for the Series. With respect to portfolio manager compensation, the
Board noted that a primary factor in the Subadvisor's determination of the
amount of bonus compensation to portfolio managers was the relative investment
performance of the funds that they managed which would align their interests
with those of the Series' shareholders. The Board also considered the adequacy
of the Subadvisor's compliance program, based on the information provided by the
Subadvisor.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to the shareholders. While
consideration was given to performance reports and discussions at all Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was furnished for the contract renewal process at the November
16 and 17, 2009 Board meeting. The Lipper report showed the investment
performance of the Series' shares for 1 and 3 year periods ended September 30,
2009 and the year-to-date period ended September 30, 2009. The Board reviewed
the investment performance of the Series, along with comparative performance
information given for a peer group of funds and a relevant market index. The
Board noted that the Series had performed above the index for the year-to-date
and 3 year periods ended September 30, 2009 and below the index for the 1 year
period. The Series was ranked 82nd out of 234 for its peer group for the
year-to-date period ended September 30, 2009.
PROFITABILITY. The Board noted that all fees under the Subadvisory
Agreement would be paid by PVA out of the advisory fees that it receives under
this Advisory Agreement with the Series, and not by the Series. For this reason,
the expected profitability of the Subadvisor related to its relationship with
the Series or the potential economies of scale with respect to the Subadvisor's
advice to the Series were not material factors in the Board's deliberation.
SUBADVISORY FEE. The Board did not consider comparative fee
information of subadvisory fees but noted that the subadvisory fee is paid by
PVA and not by the Series.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
114
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AGREEMENT
FOR PHOENIX DYNAMIC ASSET ALLOCATION SERIES: GROWTH (THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Series' advisory and subadvisory agreements. At a meeting held
November 16 and 17, 2009, Phoenix Variable Advisors, Inc. ("PVA") (the
"Advisor") recommended to the Board, including a majority of disinterested
Trustees, as that term is defined in Section 2(a) (19) of the Investment Company
Act of 1940, as amended ("1940 Act"), the approval of the investment advisory
agreement (the "Advisory Agreement") between PVA and the Fund and the investment
subadvisory agreement (the "Subadvisory Agreement") between PVA and Ibbotson
Associates Inc. (the "Subadvisor"). Pursuant to the Advisory Agreement between
PVA and the Fund, PVA provides advisory services to the Series. Pursuant to the
Subadvisory Agreement between PVA and the Subadvisor, the Subadvisor provides
recommendations to the Advisor for the day to day investment management for the
Series.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of the Independent Trustees,
determined that the fee structure was fair and reasonable and that approval of
each agreement was in the best interests of the Series and its shareholders.
While attention was given to all information furnished, the following discusses
the primary factors relevant to the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by PVA and its
affiliates to the Series and its shareholders were reasonable. The Board's
conclusion was based, in part, upon services provided to the Series such as
quarterly reports provided by PVA 1) comparing performance with a peer group and
benchmark, 2) showing that the investment policies and restrictions were
followed and 3) covering matters such as the compliance of investment personnel
and other access persons with the Code of Ethics of PVA, the adherence to fair
value pricing procedures established by the Board, the monitoring of portfolio
compliance, information on illiquid securities and derivatives, brokerage
commissions and presentations regarding the economic environment and general
investment outlook. The Board noted that PVA was responsible for the general
oversight of investment programs and the monitoring of the Subadvisor's
investment performance and their compliance with applicable laws, regulations,
policies and procedures. With respect to compliance monitoring, the Board noted
that PVA required quarterly compliance certifications from the Subadvisor and
conducted compliance due diligence visits at the Subadvisor. The Board also
considered the experience of PVA having acted as an investment adviser to mutual
funds for 10 years, its current experience in acting as an investment adviser to
18 mutual funds, and its role under the Fund's "manager of managers" exemptive
relief under the 1940 Act. The Board also considered the transfer agent and
shareholder services that are provided to Series' shareholders by an affiliate
of PVA, noting continuing improvements by management in the scope and quality of
services and favorable reports on such service conducted by third parties. The
Board also noted that PVA and the Series had recently been granted relief from
the Securities and Exchange Commission to invest in acquired funds that are
unaffiliated with PVA or the Series.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report presented at the November 16 and 17, 2009 Board meeting for
the Series prepared by Lipper Financial Services ("Lipper"), which considered
performance for the 1 and 3 year periods and the year-to-date period ended
September 30, 2009. The Board reviewed the investment performance of the Series,
along with comparative performance information given for a peer group and a
relevant market index. The Board noted that the Series had performed above the
index for the year-to-date and 3 year periods and below the index for the 1 year
period. The Series was ranked 211th out of 237 for its peer group for the
year-to-date period ended September 30, 2009.
PROFITABILITY. The Board also considered the level of profits realized
by PVA and its affiliates in connection with the operation of the Series. In
this regard, the Board reviewed the Series profitability analysis that addressed
the overall profitability of PVA for its management of The Fund family, as well
as its profits and that of its affiliates, for managing the Series. Specific
attention was given to the methodology followed in allocating costs to the
Series, it being recognized that allocation methodologies are inherently
subjective and various allocation methodologies may each be reasonable while
producing different results. In this regard, the Board noted that the allocation
appeared reasonable. The Board also considered the voluntary reimbursements
provided to the Series by PVA. The Board concluded that the profitability to PVA
from the Series was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses at the meeting. Consideration was given to a
comparative analysis of the management fees and total expense rations of the
Series compared with those of a group of funds selected by Lipper as the Series'
appropriate Lipper expense peer group as of September 30, 2009. The Board noted
that the total expenses of the Series were above the median and the average of
the total expenses for comparable funds and that the contractual management fee
was above the median and the average for the peer group. The Board was satisfied
with the management fee and total expenses of the Series in comparison to its
expenses group as shown in the Lipper report and concluded that such fee and
expenses are reasonable.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
115
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AGREEMENT
FOR PHOENIX DYNAMIC ASSET ALLOCATION SERIES: GROWTH (THE "SERIES") (CONTINUED)
SUBADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by the
Subadvisor to the Series and its shareholders were reasonable. It noted that the
Subadvisor was a limited service Subadvisor in that the Advisor had the
discretion to accept or reject its recommendations. In addition, the Board
received from the Subadvisor and reviewed substantial written information as
requested. In the course of their deliberations and evaluation of materials, the
Trustees considered, among other things the following factors: the Subadvisor,
its current personnel (including particularly those personnel with
responsibilities for providing investment and compliance services to the
Series), and its financial condition, resources and investment process; the
terms of the subadvisory agreement, including the standard of care and
termination provisions; the scope and quality of the services that the
Subadvisor would provide to the Series; the structure and rate of advisory fees
payable to the Subadvisor by PVA; the methodology used by the Subadvisor in
determining the compensation payable to portfolio managers and the competition
for investment management talent; and the Subadvisor's compliance records. The
Board's opinion was based upon the extensive experience of the Subadvisor and
the portfolio managers and the experience the Subadvisor had as the previous
advisor for the Series. With respect to portfolio manager compensation, the
Board noted that a primary factor in the Subadvisor's determination of the
amount of bonus compensation to portfolio managers was the relative investment
performance of the funds that they managed which would align their interests
with those of the Series' shareholders. The Board also considered the adequacy
of the Subadvisor's compliance program, based on the information provided by the
Subadvisor.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to the shareholders. While
consideration was given to performance reports and discussions at all Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was furnished for the contract renewal process at the November
16 and 17, 2009 Board meeting. The Lipper report showed the investment
performance of the Series' shares for 1 and 3 year periods ended September 30,
2009 and the year-to-date period ended September 30, 2009. The Board reviewed
the investment performance of the Series, along with comparative performance
information given for a peer group of funds and a relevant market index. The
Board noted that the Series had performed above the index for the year-to-date
and 1 year periods ended September 30, 2009 and below the index for the 1 year
period. The Series was ranked 211th out of 237 for its peer group for the
year-to-date period ended September 30, 2009.
PROFITABILITY. The Board noted that all fees under the Subadvisory
Agreement would be paid by PVA out of the advisory fees that it receives under
this Advisory Agreement with the Series, and not by the Series. For this reason,
the expected profitability of the Subadvisor related to its relationship with
the Series or the potential economies of scale with respect to the Subadvisor's
advice to the Series were not material factors in the Board's deliberation.
SUBADVISORY FEE. The Board did not consider comparative fee
information of subadvisory fees but noted that the subadvisory fee is paid by
PVA and not by the Series.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
116
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AGREEMENT
FOR PHOENIX DYNAMIC ASSET ALLOCATION SERIES: MODERATE (THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Series' advisory and subadvisory agreements. At a meeting held
November 16 and 17, 2009, Phoenix Variable Advisors, Inc. ("PVA") (the
"Advisor") recommended to the Board, including a majority of disinterested
Trustees, as that term is defined in Section 2(a) (19) of the Investment Company
Act of 1940, as amended ("1940 Act"), the approval of the investment advisory
agreement (the "Advisory Agreement") between PVA and the Fund and the investment
subadvisory agreement (the "Subadvisory Agreement") between PVA and Ibbotson
Associates Inc. (the "Subadvisor"). Pursuant to the Advisory Agreement between
PVA and the Fund, PVA provides advisory services to the Series. Pursuant to the
Subadvisory Agreement between PVA and the Subadvisor, the Subadvisor provides
recommendations to the Advisor for the day to day investment management for the
Series.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of the Independent Trustees,
determined that the fee structure was fair and reasonable and that approval of
each agreement was in the best interests of the Series and its shareholders.
While attention was given to all information furnished, the following discusses
the primary factors relevant to the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by PVA and its
affiliates to the Series and its shareholders were reasonable. The Board's
conclusion was based, in part, upon services provided to the Series such as
quarterly reports provided by PVA 1) comparing performance with a peer group and
benchmark, 2) showing that the investment policies and restrictions were
followed and 3) covering matters such as the compliance of investment personnel
and other access persons with the Code of Ethics of PVA, the adherence to fair
value pricing procedures established by the Board, the monitoring of portfolio
compliance, information on illiquid securities and derivatives, brokerage
commissions and presentations regarding the economic environment and general
investment outlook. The Board noted that PVA was responsible for the general
oversight of investment programs and the monitoring of the Subadvisor's
investment performance and their compliance with applicable laws, regulations,
policies and procedures. With respect to compliance monitoring, the Board noted
that PVA required quarterly compliance certifications from the Subadvisor and
conducted compliance due diligence visits at the Subadvisor. The Board also
considered the experience of PVA having acted as an investment adviser to mutual
funds for 10 years, its current experience in acting as an investment adviser to
18 mutual funds, and its role under the Fund's "manager of managers" exemptive
relief under the 1940 Act. The Board also considered the transfer agent and
shareholder services that are provided to Series' shareholders by an affiliate
of PVA, noting continuing improvements by management in the scope and quality of
services and favorable reports on such service conducted by third parties. The
Board also noted that PVA and the Series had recently been granted relief from
the Securities and Exchange Commission to invest in acquired funds that are
unaffiliated with PVA or the Series.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report presented at the November 16 and 17, 2009 Board meeting for
the Series prepared by Lipper Financial Services ("Lipper"), which considered
performance for the 1 and 3 year periods and the year-to-date period ended
September 30, 2009. The Board reviewed the investment performance of the Series,
along with comparative performance information given for a peer group and a
relevant market index. The Board noted that the Series had performed below the
index for the year-to-date and 1 year periods and above the index for the 3 year
period. The Series was ranked 74th out of 93 for its peer group for the
year-to-date period ended September 30, 2009.
PROFITABILITY. The Board also considered the level of profits realized
by PVA and its affiliates in connection with the operation of the Series. In
this regard, the Board reviewed the Series profitability analysis that addressed
the overall profitability of PVA for its management of The Fund family, as well
as its profits and that of its affiliates, for managing the Series. Specific
attention was given to the methodology followed in allocating costs to the
Series, it being recognized that allocation methodologies are inherently
subjective and various allocation methodologies may each be reasonable while
producing different results. In this regard, the Board noted that the allocation
appeared reasonable. The Board also considered the voluntary reimbursements
provided to the Series by PVA. The Board concluded that the profitability to PVA
from the Series was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses at the meeting. Consideration was given to a
comparative analysis of the management fees and total expense ratios of the
Series compared with those of a group of funds selected by Lipper as the Series'
appropriate Lipper expense peer group as of September 30, 2009. The Board noted
that the total expenses of the Series were below the median and the average
total expenses for comparable funds and that the contractual management fee was
above the median and the average for the peer group. The Board was satisfied
with the management fee and total expenses of the Series in comparison to its
expenses group as shown in the Lipper report and concluded that such fee and
expenses are reasonable.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
117
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AGREEMENT
FOR PHOENIX DYNAMIC ASSET ALLOCATION SERIES: MODERATE (THE "SERIES") (CONTINUED)
SUBADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by the
Subadvisor to the Series and its shareholders were reasonable. It noted that the
Subadvisor was a limited service Subadvisor in that the Advisor had the
discretion to accept or reject its recommendations. In addition, the Board
received from the Subadvisor and reviewed substantial written information as
requested. In the course of their deliberations and evaluation of materials, the
Trustees considered, among other things the following factors: the Subadvisor,
its current personnel (including particularly those personnel with
responsibilities for providing investment and compliance services to the
Series), and its financial condition, resources and investment process; the
terms of the subadvisory agreement, including the standard of care and
termination provisions; the scope and quality of the services that the
Subadvisor would provide to the Series; the structure and rate of advisory fees
payable to the Subadvisor by PVA; the methodology used by the Subadvisor in
determining the compensation payable to portfolio managers and the competition
for investment management talent; and the Subadvisor's compliance records. The
Board's opinion was based upon the extensive experience of the Subadvisor and
the portfolio managers and the experience the Subadvisor had as the previous
advisor for the Series. With respect to portfolio manager compensation, the
Board noted that a primary factor in the Subadvisor's determination of the
amount of bonus compensation to portfolio managers was the relative investment
performance of the funds that they managed which would align their interests
with those of the Series' shareholders. The Board also considered the adequacy
of the Subadvisor's compliance program, based on the information provided by the
Subadvisor.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to the shareholders. While
consideration was given to performance reports and discussions at all Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was furnished for the contract renewal process at the November
16 and 17, 2009 Board meeting. The Lipper report showed the investment
performance of the Series' shares for 1 and 3 year periods ended September 30,
2009 and the year-to-date period ended September 30, 2009. The Board reviewed
the investment performance of the Series, along with comparative performance
information given for a peer group of funds and a relevant market index. The
Board noted that the Series had performed below the index for the year-to-date
and 1 year periods ended September 30, 2009 and above the index for the 3 year
period ended September 30, 2009. The Series was ranked 74th out of 93 for its
peer group for the year-to-date period ended September 30, 2009.
PROFITABILITY. The Board noted that all fees under the Subadvisory
Agreement would be paid by PVA out of the advisory fees that it receives under
this Advisory Agreement with the Series, and not by the Series. For this reason,
the expected profitability of the Subadvisor related to its relationship with
the Series or the potential economies of scale with respect to the Subadvisor's
advice to the Series were not material factors in the Board's deliberation.
SUBADVISORY FEE. The Board did not consider comparative fee
information of subadvisory fees but noted that the subadvisory fee is paid by
PVA and not by the Series.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
118
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AGREEMENT
FOR PHOENIX DYNAMIC ASSET ALLOCATION SERIES: MODERATE GROWTH (THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Series' advisory and subadvisory agreements. At a meeting held
November 16 and 17, 2009, Phoenix Variable Advisors, Inc. ("PVA") (the
"Advisor") recommended to the Board, including a majority of disinterested
Trustees, as that term is defined in Section 2(a) (19) of the Investment Company
Act of 1940, as amended ("1940 Act"), the approval of the investment advisory
agreement (the "Advisory Agreement") between PVA and the Fund and the investment
subadvisory agreement (the "Subadvisory Agreement") between PVA and Ibbotson
Associates Inc. (the "Subadvisor"). Pursuant to the Advisory Agreement between
PVA and the Fund, PVA provides advisory services to the Series. Pursuant to the
Subadvisory Agreement between PVA and the Subadvisor, the Subadvisor provides
recommendations to the Advisor for the day to day investment management for the
Series.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of the Independent Trustees,
determined that the fee structure was fair and reasonable and that approval of
each agreement was in the best interests of the Series and its shareholders.
While attention was given to all information furnished, the following discusses
the primary factors relevant to the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by PVA and its
affiliates to the Series and its shareholders were reasonable. The Board's
conclusion was based, in part, upon services provided to the Series such as
quarterly reports provided by PVA 1) comparing performance with a peer group and
benchmark, 2) showing that the investment policies and restrictions were
followed and 3) covering matters such as the compliance of investment personnel
and other access persons with the Code of Ethics of PVA, the adherence to fair
value pricing procedures established by the Board, the monitoring of portfolio
compliance, information on illiquid securities and derivatives, brokerage
commissions and presentations regarding the economic environment and general
investment outlook. The Board noted that PVA was responsible for the general
oversight of investment programs and the monitoring of the Subadvisor's
investment performance and their compliance with applicable laws, regulations,
policies and procedures. With respect to compliance monitoring, the Board noted
that PVA required quarterly compliance certifications from the Subadvisor and
conducted compliance due diligence visits at the Subadvisor. The Board also
considered the experience of PVA having acted as an investment adviser to mutual
funds for 10 years, its current experience in acting as an investment adviser to
18 mutual funds, and its role under the Fund's "manager of managers" exemptive
relief under the 1940 Act. The Board also considered the transfer agent and
shareholder services that are provided to Series' shareholders by an affiliate
of PVA, noting continuing improvements by management in the scope and quality of
services and favorable reports on such service conducted by third parties. The
Board also noted that PVA and the Series had recently been granted relief from
the Securities and Exchange Commission to invest in acquired funds that are
unaffiliated with PVA or the Series.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report presented at the November 16 and 17, 2009 Board meeting for
the Series prepared by Lipper Financial Services ("Lipper"), which considered
performance for the 1 and 3 year periods and the year-to-date period ended
September 30, 2009. The Board reviewed the investment performance of the Series,
along with comparative performance information given for a peer group and a
relevant market index. The Board that the Series had performed above the index
for the 3 year period ended September 30, 2009 and below the index for the
year-to-date and 1 year period ended September 30, 2009. The Series was ranked
151st out of 192 for its peer group for the year-to-date period ended September
30, 2009.
PROFITABILITY. The Board also considered the level of profits realized
by PVA and its affiliates in connection with the operation of the Series. In
this regard, the Board reviewed the Series profitability analysis that addressed
the overall profitability of PVA for its management of The Fund family, as well
as its profits and that of its affiliates, for managing the Series. Specific
attention was given to the methodology followed in allocating costs to the
Series, it being recognized that allocation methodologies are inherently
subjective and various allocation methodologies may each be reasonable while
producing different results. In this regard, the Board noted that the allocation
appeared reasonable. The Board also considered the voluntary reimbursements
provided to the Series by PVA. The Board concluded that the profitability to PVA
from the Series was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses at the meeting. Consideration was given to a
comparative analysis of the management fees and total expense ratios of the
Series compared with those of a group of funds selected by Lipper as the Series'
appropriate Lipper expense peer group as of September 30, 2009. The Board noted
that the total expenses of the Series were above the median and the average
total expenses for comparable funds and that the contractual management fee was
above the median and the average for the peer group. The Board was satisfied
with the management fee and total expenses of the Series in comparison to its
expenses group as shown in the Lipper report and concluded that such fee and
expenses are reasonable.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
119
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AGREEMENT
FOR PHOENIX DYNAMIC ASSET ALLOCATION SERIES: MODERATE GROWTH (THE "SERIES")
(CONTINUED)
SUBADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by the
Subadvisor to the Series and its shareholders were reasonable. It noted that the
Subadvisor was a limited service Subadvisor in that the Advisor had the
discretion to accept or reject its recommendations. In addition, the Board
received from the Subadvisor and reviewed substantial written information as
requested. In the course of their deliberations and evaluation of materials, the
Trustees considered, among other things the following factors: the Subadvisor,
its current personnel (including particularly those personnel with
responsibilities for providing investment and compliance services to the
Series), and its financial condition, resources and investment process; the
terms of the subadvisory agreement, including the standard of care and
termination provisions; the scope and quality of the services that the
Subadvisor would provide to the Series; the structure and rate of advisory fees
payable to the Subadvisor by PVA; the methodology used by the Subadvisor in
determining the compensation payable to portfolio managers and the competition
for investment management talent; and the Subadvisor's compliance records. The
Board's opinion was based upon the extensive experience of the Subadvisor and
the portfolio managers and the experience the Subadvisor had as the previous
advisor for the Series. With respect to portfolio manager compensation, the
Board noted that a primary factor in the Subadvisor's determination of the
amount of bonus compensation to portfolio managers was the relative investment
performance of the funds that they managed which would align their interests
with those of the Series' shareholders. The Board also considered the adequacy
of the Subadvisor's compliance program, based on the information provided by the
Subadvisor.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to the shareholders. While
consideration was given to performance reports and discussions at all Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was furnished for the contract renewal process at the November
16 and 17, 2009 Board meeting. The Lipper report showed the investment
performance of the Series' shares for 1 and 3 year periods ended September 30,
2009 and the year-to-date period ended September 30, 2009. The Board reviewed
the investment performance of the Series, along with comparative performance
information given for a peer group of funds and a relevant market index. The
Board noted that the Series had performed above the index for the 3 year period
ended September 30, 2009 and below the index for the year-to-date and 1 year
period ended September 30, 2009. The Series was ranked 151st out of 192 for its
peer group for the year-to-date period ended September 30, 2009.
PROFITABILITY. The Board noted that all fees under the Subadvisory
Agreement would be paid by PVA out of the advisory fees that it receives under
this Advisory Agreement with the Series, and not by the Series. For this reason,
the expected profitability of the Subadvisor related to its relationship with
the Series or the potential economies of scale with respect to the Subadvisor's
advice to the Series were not material factors in the Board's deliberation.
SUBADVISORY FEE. The Board did not consider comparative fee
information of subadvisory fees but noted that the subadvisory fee is paid by
PVA and not by the Series.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
120
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENTS FOR PHOENIX GROWTH AND INCOME SERIES (THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Fund's advisory and subadvisory agreements. At a meeting held
November 16 and 17, 2009, Phoenix Variable Advisors, Inc. ("PVA") (the
"Advisor") recommended to the Board, including a majority of disinterested
Trustees, as that term is defined in Section 2(a) (19) of the Investment Company
Act of 1940, as amended ("1940 Act"), the approval of the investment advisory
agreement (the "Advisory Agreement") between PVA and the Fund and the investment
subadvisory agreement (the "Subadvisory Agreement") between PVA and Virtus
Investment Advisers, Inc. (the "Subadvisor"). Pursuant to the Advisory Agreement
between PVA and the Fund, PVA provides advisory services to the Series. Pursuant
to the Subadvisory Agreement between PVA and the Subadvisor, the Subadvisor
provides the day to day investment management for the Series.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of disinterested Trustees, determined
that the fee structure was reasonable. While attention was given to all
information furnished, the following discusses the primary factors relevant to
the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by PVA and its
affiliates to the Series and its shareholders were reasonable. The Board
received and reviewed substantial written information from PVA as requested. The
Board's conclusion was based, in part, upon services provided by PVA to other
series of The Fund such as quarterly reports provided by PVA 1) comparing
performance with a peer group and benchmark, 2) showing that the investment
policies and restrictions were followed and 3) covering matters such as the
compliance of investment personnel and other access persons with the Code of
Ethics of PVA, the adherence to fair value pricing procedures established by the
Board, the monitoring of portfolio compliance, information on illiquid
securities and derivatives, brokerage commissions and presentations regarding
the economic environment and general investment outlook. The Board noted that
PVA was responsible for the general oversight of investment programs and the
monitoring of subadvisor's investment performance and their compliance with
applicable laws, regulations, policies and procedures. With respect to
compliance monitoring, the Board noted that PVA will require quarterly
compliance certifications from the Subadvisor and will conduct compliance due
diligence visits at the Subadvisor. The Board also considered the experience of
PVA having acted as an investment adviser to mutual funds for 10 years, its
current experience in acting as an investment adviser to 18 mutual funds, and
its role under the Fund's "manager of managers" exemptive relief under the 1940
Act. The Board also considered the shareholder services that are provided to
Series shareholders by an affiliate of PVA, noting continuing improvements by
management in the scope and quality of services and favorable reports on such
service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was furnished for the contract renewal process at the November
16 and 17, 2009 Board meeting. The Lipper report showed the investment
performance of the Series' shares for 1, 3, 5, and 10 year periods ended
September 30, 2009 and year-to-date period ended September 30, 2009. The Board
reviewed the investment performance of the Series, along with comparative
performance information given for a peer group of funds and a relevant market
index. The Board noted that the Series had performed above the index for the 3,
5, and 10 year periods ended September 30, 2009, and under performed the index
for the 1 year and year-to-date periods ended September 30, 2009. The Series was
ranked 168th out of 211 for its peer group for the year-to-date period ended
September 30, 2009.
PROFITABILITY. The Board reviewed the profitability analysis that
addressed the overall profitability of PVA for its management of The Fund
family, as well as its profits and that of its affiliates, for managing the
Series. Specific attention was given to the methodology followed in allocating
costs to the Series, since allocation methodologies are inherently subjective
and various allocation methodologies may each be reasonable while producing
different results. In this regard, the Board noted that the allocation
methodology appeared reasonable. The Board also noted the contractual
reimbursements provided to the Series. The Board concluded that the expected
profitability to PVA from the Series was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses. Consideration was given to a comparative analysis
of the management fees and total expense ratios of the Series compared with
those of a group of funds selected by Lipper as the Series' appropriate Lipper
expense peer group as of September 30, 2009. The Board noted that the total
expenses of the Series were below the median and average total expenses for
comparable funds and that the contractual management fee was above the median
and average for the peer group. Due to the size of the Series, the Board
considered the management fee and total expenses of the Series in comparison to
its expense peer group as shown in the Lipper report and concluded that such fee
and expenses were reasonable.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
121
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENTS FOR PHOENIX GROWTH AND INCOME SERIES (THE "SERIES")
(CONTINUED)
SUBADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by the
Subadvisor to the Series and its shareholders were reasonable. In addition, the
Board received from the Subadvisor and reviewed substantial written information
as requested. In the course of their deliberations and evaluation of materials,
the Trustees considered, among other things the following factors: the
Subadvisor, its current personnel (including particularly those personnel with
responsibilities for providing investment and compliance services to the
Series), and its financial condition, resources and investment process; the
terms of the Subadvisory Agreement, including the standard of care and
termination provisions; the scope and quality of the services that Subadvisor
would provide to the Series; the structure and rate of advisory fees payable to
the Subadvisor by PVA; the methodology used by the Subadvisor in determining the
compensation payable to portfolio managers and the competition for investment
management talent; and the Subadvisor's compliance record. The Board's opinion
was based upon the extensive experience of the Subadvisor and the portfolio
managers and the experience the Subadvisor had as the previous advisor for the
Series. With respect to portfolio manager compensation, the Board noted that a
primary factor in the Subadvisor's determination of the amount of bonus
compensation to portfolio managers was the relative investment performance of
the funds that they managed which would align their interests with those of the
Series' shareholders. The Board also considered the adequacy of the Subadvisor's
compliance program, based on the information provided by the Subadvisor.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to the shareholders. While
consideration was given to performance reports and discussions at all Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was furnished for the contract renewal process at the November
16 and 17, 2009 Board meeting. The Lipper report showed the investment
performance of the Series' shares for the 1, 3, 5, and 10 year periods ended
September 30, 2009 and the year-to-date period ended September 30, 2009. The
Board reviewed the investment performance of the Series, along with comparative
performance information given for a peer group of funds and a relevant market
index. The Board noted that the Series had performed above the index for the 3,
5, and 10 year periods ended September 30, 2009, and under performed the index
for the 1 year and year-to-date periods ended September 30, 2009. The Series was
ranked 168th out of 211 for its peer group for the year ended September 30,
2009.
PROFITABILITY. The Board noted that all fees under the Subadvisory
Agreement would be paid by PVA out of the advisory fees that it receives under
this Advisory Agreement with the Series, and not by the Series. For this reason,
the expected profitability of the Subadvisor related to its relationship with
the Series or the potential economies of scale with respect to the Subadvisor's
advice to the Series were not material factors in the Board's deliberation.
SUBADVISORY FEE. The Board did not consider comparative fee
information of subadvisory fees but noted that the subadvisory fee is paid by
PVA and not by the Series.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
122
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENTS FOR PHOENIX MONEY MARKET SERIES (THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Fund's advisory and subadvisory agreements. At a meeting held
November 16 and 17, 2009, Phoenix Variable Advisors, Inc. ("PVA") (the
"Advisor") recommended to the Board, including a majority of disinterested
Trustees, as that term is defined in Section 2(a) (19) of the Investment Company
Act of 1940, as amended ("1940 Act"), the approval of the investment advisory
agreement (the "Advisory Agreement") between PVA and the Fund and the investment
subadvisory agreement (the "Subadvisory Agreement") between PVA and Goodwin
Capital Advisers, Inc. (the "Subadvisor"). Pursuant to the Advisory Agreement
between PVA and the Fund, PVA provides advisory services to the Series. Pursuant
to the Subadvisory Agreement between PVA and the Subadvisor, the Subadvisor
provides the day to day investment management for the Series.
Previously, on December 8, 2009, the Board of Trustees had approved a
Plan of Liquidation ("Plan") for the Series and recommended to shareholders that
they approve the Plan. The proposed Series' replacement in the separate accounts
sponsored by the Phoenix insurance companies was the Federated Prime Money
Market Fund II. These matters were to be submitted for shareholder votes at a
Special Meeting of Shareholders to be held on or about January 20, 2010, with
the liquidation taking place at the end of the business day January 22, 2010.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of disinterested Trustees, determined
that the fee structure was reasonable. While attention was given to all
information furnished, the following discusses the primary factors relevant to
the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by PVA and its
affiliates to the Series and its shareholders were reasonable. The Board
received and reviewed substantial written information from PVA as requested. The
Board's conclusion was based, in part, upon services provided by PVA to other
series of The Fund such as quarterly reports provided by PVA 1) comparing
performance with a peer group and benchmark, 2) showing that the investment
policies and restrictions were followed and 3) covering matters such as the
compliance of investment personnel and other access persons with the Code of
Ethics of PVA, the adherence to fair value pricing procedures established by the
Board, the monitoring of portfolio compliance, information on illiquid
securities and derivatives, brokerage commissions and presentations regarding
the economic environment and general investment outlook. The Board noted that
PVA was responsible for the general oversight of investment programs and the
monitoring of subadvisor's investment performance and their compliance with
applicable laws, regulations, policies and procedures. With respect to
compliance monitoring, the Board noted that PVA will require quarterly
compliance certifications from the Subadvisor and will conduct compliance due
diligence visits at the Subadvisor. The Board also considered the experience of
PVA having acted as an investment adviser to mutual funds for 10 years, its
current experience in acting as an investment adviser to 18 mutual funds, and
its role under the Fund's "manager of managers" exemptive relief under the 1940
Act. The Board also considered the shareholder services that are provided to
Series shareholders by an affiliate of PVA, noting continuing improvements by
management in the scope and quality of services and favorable reports on such
service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was furnished for the contract renewal process at the November
16 and 17, 2009 Board meeting. The Lipper report showed the investment
performance of the Series' shares for the 1, 3, 5, and 10 year periods ended
September 30, 2009 and the year-to-date period ended September 30, 2009. The
Board reviewed the investment performance of the Series, along with comparative
performance information given for a peer group of funds and a relevant market
index. The Board noted that the performance of the Series was above the index
for the 1 and 3 year periods ended September 30, 2009, and below the index for
the 5 and 10 year periods ended September 30, 2009 and the year-to-date period
ended September 30, 2009. The Series was ranked 72nd out of 107 for its peer
group for the year-to-date period ended September 30, 2009. The Board also noted
that the Series participated in the U.S. Treasury Temporary Guarantee Program
("Guarantee Program") until September 18, 2009.
PROFITABILITY. The Board reviewed the profitability analysis that
addressed the overall profitability of PVA for its management of The Fund
family, as well as its profits and that of its affiliates, for managing the
Series. Specific attention was given to the methodology followed in allocating
costs to the Series since allocation methodologies are inherently subjective and
various allocation methodologies may each be reasonable while producing
different results. In this regard, the Board noted that the allocation
methodology appeared reasonable. The Board also noted the contractual
reimbursements provided to the Series. The Board concluded that the expected
profitability to PVA from the Series was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses. Consideration was given to a comparative analysis
of the management fees and total expense ratios of the Series compared with
those of a group of funds selected by Lipper as the Series' appropriate Lipper
expense peer group as of September 30, 2009. The Board noted that the total
expenses of the Series were below the median and average total expenses for
comparable funds and that the contractual management fee was at the median and
above average for the peer group. The Board considered the management fee and
total expenses of the Series in comparison to its expense peer group as shown in
the Lipper report and concluded that such fee and expenses were reasonable.
123
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENTS FOR PHOENIX MONEY MARKET SERIES (THE "SERIES")
(CONTINUED)
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
SUBADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by the
Subadvisor to the Series and its shareholders were reasonable. In addition, the
Board received from the Subadvisor and reviewed substantial written information
as requested. In the course of their deliberations and evaluation of materials,
the Trustees considered, among other things the following factors: the
Subadvisor, its current personnel (including particularly those personnel with
responsibilities for providing investment and compliance services to the
Series), and its financial condition, resources and investment process; the
terms of the Subadvisory Agreement, including the standard of care and
termination provisions; the scope and quality of the services that the
Subadvisor would provide to the Series; the structure and rate of advisory fees
payable to the Subadvisor by PVA; the methodology used by the Subadvisor in
determining the compensation payable to portfolio managers and the competition
for investment management talent; and the Subadvisor's compliance record. The
Board's opinion was based, in part, upon the extensive experience of the
portfolio managers and, in particular, their experience in managing the Series
as employees of Goodwin Capital Advisers, Inc. With respect to portfolio manager
compensation, the Board noted that a primary factor in the Subadvisor's
determination of the amount of bonus compensation to portfolio managers was the
relative investment performance of the funds that they managed, which would
align their interests with those of the Series' shareholders. The Board also
considered the adequacy of the Subadvisor's compliance program, based on the
information provided by the Subadvisor.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to the shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was furnished for the contract renewal process at the November
16 and 17, 2009 Board meeting. The Lipper report showed the investment
performance of the Series' shares for the 1, 3, 5, and 10 year periods ended
September 30, 2009 and the year-to-date period ended September 30, 2009. The
Board reviewed the investment performance of the Series, along with comparative
performance information given for a peer group of funds and a relevant market
index. The Board noted that the performance of the Series was above the index
for the 1 and 3 year periods ended September 30, 2009, and below the index for
the 5 and 10 year periods ended September 30, 2009 and the year-to-date period
ended September 30, 2009. The Series was ranked 72nd out of 107 for its peer
group for the year-to-date period ended September 30, 2009. The Board also noted
that the Series was approved to participate in the U.S. Treasury Temporary
Guarantee Program ("Guarantee Period") until September 18, 2009.
PROFITABILITY. The Board noted that all fees under the Subadvisory
Agreement would be paid by PVA out of the advisory fees that it receives under
this Advisory Agreement with the Series, and not by the Series. For this reason,
the expected profitability of the Subadvisor related to its relationship with
the Series or the potential economies of scale with respect to the Subadvisor's
advice to the Series were not material factors in the Board's deliberation.
SUBADVISORY FEE. The Board did not consider comparative fee
information of subadvisory fees but noted that the subadvisory fee is paid by
PVA and not by the Series.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
124
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENTS FOR PHOENIX MID-CAP GROWTH SERIES (THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Fund's advisory and subadvisory agreements. The Board of Trustees is
responsible for determining whether to approve the Fund's advisory and
subadvisory agreements. At a meeting held November 16 and 17, 2009, Phoenix
Variable Advisors, Inc. ("PVA") (the "Advisor") recommended to the Board,
including a majority of disinterested Trustees, as that term is defined in
Section 2(a) (19) of the Investment Company Act of 1940, as amended ("1940
Act"), the approval of the investment advisory agreement (the "Advisory
Agreement") between PVA and the Fund. Pursuant to the Advisory Agreement between
PVA and the Fund, PVA provides advisory services to the Series. Pursuant to the
Subadvisory Agreement between PVA and the Neuberger Berman Management LLC, (the
"Subadvisor"), the Subadvisor provides the day to day investment management for
the Series. The Subadvisory Agreement had previously been approved at the March
4 and 5, 2009 Board meeting.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of disinterested Trustees, determined
that the fee structure was fair and reasonable. While attention was given to all
information furnished, the following discusses the primary factors relevant to
the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by PVA and its
affiliates to the Series and its shareholders were reasonable. The Board
received and reviewed substantial written information from PVA as requested. The
Board's conclusion was based, in part, upon services provided by PVA to other
series of The Fund such as quarterly reports provided by PVA 1) comparing the
performance of the Series with a peer group and benchmark, 2) showing that the
investment policies and restrictions were followed and 3) covering matters such
as the compliance of investment personnel and other access persons with the Code
of Ethics of PVA and the Series, the adherence to fair value pricing procedures
established by the Board, the monitoring of portfolio compliance, information on
illiquid securities and derivatives, brokerage commissions and presentations
regarding the economic environment and general investment outlook. The Board
noted that PVA was responsible for the general oversight of investment programs
and the monitoring of subadvisor's investment performance and their compliance
with applicable laws, regulations, policies and procedures. With respect to
compliance monitoring, the Board noted that PVA will require quarterly
compliance certifications from the Subadvisor and will conduct compliance due
diligence visits at the Subadvisor. The Board also considered the experience of
PVA having acted as an investment adviser to mutual funds for 10 years, its
current experience in acting as an investment adviser to 18 mutual funds, and
its role under the Fund's "manager of managers" exemptive relief under the 1940
Act. The Board also considered the shareholder services that are provided to
Series' shareholders by an affiliate of PVA, noting continuing improvements by
management in the scope and quality of services and favorable reports on such
service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed emphasis on investment
performance on the Series in view of its importance to shareholders. While
consideration was given to performance reports and discussions at all Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Series prepared by Lipper Financial Services
("Lipper") furnished for the contract renewal process at the November 16 and 17,
2009 Board meeting. The Lipper report showed the investment performance on the
Series' shares for the 1, 3, 5, and 10 year periods ended September 30, 2009 and
year-to-date period ended September 30, 2009. The Board reviewed the investment
performance of the Series, along with comparative performance information with a
peer group of funds and a relative market index. The Board noted that the Series
had performed below the index for all periods ended September 30, 2009. The
Series was ranked 126th out of 133 for its peer group for the year-to-date
period ended September 30, 2009. The Board also noted that the Subadvisor had
managed the Series since September 15, 2008.
PROFITABILITY. The Board also considered the level of profits realized
by PVA and its affiliates in connection with the operation of the Series. In
this regard, the Board reviewed the Series profitability analysis that addressed
the overall profitability of PVA for its management of The Fund family, as well
as its profits and that of its affiliates, for managing the Series. Specific
attention was given to the methodology followed in allocating costs to the
Series, it being recognized that allocation methodologies are inherently
subjective and various allocation methodologies may each be reasonable while
producing different results. In this regard, the Board noted that the allocation
appeared reasonable. The Board also noted the voluntary reimbursements provided
to the Series. The Board concluded that the profitability to PVA from the Series
were reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses. Consideration was given to a comparative analysis
of the management fees and total expense rations of the Series compared with
those of a group of funds selected by Lipper as the Series' appropriate Lipper
expense peer group as of September 30, 2009. The Board noted that the total
expenses of the Series was below the median and the average total expenses for
comparable funds and that the contractual management fee was above the median
and the average for the peer group. The Board was satisfied with the management
fee and total expenses of the Series in comparison to its expenses group as
shown in the Lipper report and concluded that such fee and expenses are
reasonable.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
125
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENTS FOR PHOENIX MID-CAP VALUE SERIES (THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Fund's advisory and subadvisory agreements. At a meeting held
November 16 and 17, 2009, Phoenix Variable Advisors, Inc. ("PVA") (the
"Advisor") recommended to the Board, including a majority of disinterested
Trustees, as that term is defined in Section 2(a) (19) of the Investment Company
Act of 1940, as amended ("1940 Act"), the approval of the investment advisory
agreement (the "Advisory Agreement") between PVA and the Fund. Pursuant to the
Advisory Agreement between PVA and the Fund, PVA provides advisory services to
the Series. Pursuant to the Subadvisory Agreement between PVA and the Westwood
Management Corp. (the "Subadvisor"), the Subadvisor provides the day to day
investment management for the Series. The Subadvisory Agreement had previously
been approved at the March 4 and 5, 2009 Board meeting.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of disinterested Trustees, determined
that the fee structure was reasonable. While attention was given to all
information furnished, the following discusses the primary factors relevant to
the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent, and quality of the overall services to be provided by PVA and
its affiliates to the Series and its shareholders were reasonable. The Board
received and reviewed substantial written information from PVA as requested. The
Board's conclusion was based, in part, upon services provided by PVA to the
Series of the Fund such as quarterly reports provided by PVA 1) comparing
performance with a peer group and benchmark, 2) showing that the investment
policies and restrictions were followed and 3) covering matters such as the
compliance of investment personnel and other access persons with the Code of
Ethics of PVA, the adherence to fair value pricing procedures established by the
Board, the monitoring of portfolio compliance, information on illiquid
securities and derivatives, brokerage commissions and presentations regarding
the economic environment and general investment outlook. The Board noted that
PVA was responsible for the general oversight of investment programs and the
monitoring of Subadvisor's investment performance and their compliance with
applicable laws, regulations, policies, and procedures. With respect to
compliance monitoring, the Board noted that PVA will require quarterly
compliance certifications from the Subadvisor and will conduct compliance due
diligence visits at the Subadvisor. The Board also considered the experience of
PVA having acted as an investment adviser to mutual funds for 10 years, its
current experience in acting as an investment adviser to 18 mutual funds, and
its role under the Fund's "manager of managers" exemptive relief under the 1940
Act. The Board also considered the shareholder services that are provided to
Series shareholders by an affiliate of PVA, noting continuing improvements by
management in the scope and quality of services and favorable reports on such
service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed emphasis on investment
performance on the Series in view of its importance to shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report for the Series prepared by Lipper Financial Services
("Lipper") furnished for the contract renewal process at the November 16 and 17,
2009 Board meeting. The Lipper report showed the investment performance on the
Series' shares for the 1, 3, 5, and 10 year periods ended September 30, 2009 and
year-to-date period ended September 30, 2009. The Board reviewed the investment
performance of the Series, along with comparative performance information with a
peer group of funds and a relative market index. The Board noted that the Series
had performed above the index for all periods ended September 30, 2009 and below
the index for the 1 year period ended September 30, 2009. The Series was ranked
36th out of 69 for its peer group for the year-to-date period ended September
30, 2009. The Board also noted that the Subadvisor had managed the Series since
May 1, 2009.
PROFITABILITY. The Board also considered the level of profits realized
by PVA and its affiliates in connection with the operation of the Series. In
this regard, the Board reviewed the Series profitability analysis that addressed
the overall profitability of PVA for its management of The Fund family, as well
as its profits and that of its affiliates, for managing the Series. Specific
attention was given to the methodology followed in allocating costs to the
Series, it being recognized that allocation methodologies are inherently
subjective and various allocation methodologies may each be reasonable while
producing different results. In this regard, the Board noted that the allocation
appeared reasonable. The Board also noted the voluntary reimbursements provided
to the Series. The Board concluded that the profitability to PVA from the Series
were reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses at the meeting. Consideration was given to a
comparative analysis of the management fees and total expense rations of the
Series compared with those of a group of funds selected by Lipper as the Series'
appropriate Lipper expense peer group as of September 30, 2009. The Board noted
that the total expenses of the Series was above the median and the average of
the total expenses for comparable funds and that the contractual management fee
was above the median and the average for the peer group. The Board was satisfied
with the management fee and total expenses of the Series in comparison to its
expenses group as shown in the Lipper report and concluded that such fee and
expenses are reasonable.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
126
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY,
SUBADVISORY AND SUB SUBADVISORY AGREEMENTS FOR PHOENIX MULTI-SECTOR
FIXED INCOME SERIES (THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Fund's advisory and subadvisory agreements. At a meeting held
November 16 and 17, 2009, Phoenix Variable Advisors, Inc. ("PVA") (the
"Advisor") recommended to the Board, including a majority of disinterested
Trustees, as that term is defined in Section 2(a) (19) of the Investment Company
Act of 1940, as amended ("1940 Act"), the approval of the investment advisory
agreement (the "Advisory Agreement") between PVA and the Fund and the investment
subadvisory agreement (the "Subadvisory Agreement") between PVA and Goodwin
Capital Advisers, Inc. (the "Subadvisor"). Pursuant to the Advisory Agreement
between PVA and the Fund, PVA provides advisory services to the Series. Pursuant
to the Subadvisory Agreement between PVA and the Subadvisor, the Subadvisor
provides the day to day investment management for the Series. Pursuant to the
Sub Subadvisory Agreement between the Subadvisor and Virtus Investment Advisers,
Inc. (the "Sub Subadvisor"), approved at the June 4 and 5, 2009 Board meeting,
the Sub Subadvisor provides the day to day management of the municipal
securities for the Series.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of disinterested Trustees, determined
that the fee structure was reasonable. While attention was given to all
information furnished, the following discusses the primary factors relevant to
the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by PVA and its
affiliates to the Series and its shareholders were reasonable. The Board
received and reviewed substantial written information from PVA as requested. The
Board's conclusion was based, in part, upon services provided by PVA to other
series of The Fund such as quarterly reports provided by PVA 1) comparing
performance with a peer group and benchmark, 2) showing that the investment
policies and restrictions were followed and 3) covering matters such as the
compliance of investment personnel and other access persons with the Code of
Ethics of PVA, the adherence to fair value pricing procedures established by the
Board, the monitoring of portfolio compliance, information on illiquid
securities and derivatives, brokerage commissions and presentations regarding
the economic environment and general investment outlook. The Board noted that
PVA was responsible for the general oversight of investment programs and the
monitoring of the subadvisor's investment performance and their compliance with
applicable laws, regulations, policies and procedures. With respect to
compliance monitoring, the Board noted that PVA will require quarterly
compliance certifications from the Subadvisor and will conduct compliance due
diligence visits at the Subadvisor. The Board also considered the experience of
PVA having acted as an investment adviser to mutual funds for 10 years, its
current experience in acting as an investment adviser to 18 mutual funds, and
its role under the Fund's "manager of managers" exemptive relief under the 1940
Act. The Board also considered the shareholder services that are provided to
Series shareholders by an affiliate of PVA, noting continuing improvements by
management in the scope and quality of services and favorable reports on such
service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was furnished for the contract renewal process at the November
16 and 17, 2009 Board meeting. The Lipper report showed the investment
performance of the Series' shares for the 1, 3, 5, and 10 year periods ended
September 30, 2009 and the year-to-date period ended September 30, 2009. The
Board reviewed the investment performance of the Series, along with comparative
performance information given for a peer group of funds and a relevant market
index. The Series had performed above the index for the 1, 5 and 10 year periods
ended September 30, 2009 and the year-to-date period ended September 30, 2009
and below the index for the 3 year period ended September 30, 2009. The Series
was ranked 3rd out of 65 for its peer group for the year-to-date period ended
September 30, 2009.
PROFITABILITY. The Board reviewed the profitability analysis that
addressed the overall profitability of PVA for its management of The Fund
family, as well as its profits and that of its affiliates, for managing the
Series. Specific attention was given to the methodology followed in allocating
costs to the Series, since allocation methodologies are inherently subjective
and various allocation methodologies may each be reasonable while producing
different results. In this regard, the Board noted that the allocation
methodology appeared reasonable. The Board also noted the contractual
reimbursements provided to the Series. The Board concluded that the expected
profitability to PVA from the Series was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses. Consideration was given to a comparative analysis
of the management fees and total expense ratios of the Series compared with
those of a group of funds selected by Lipper as the Series' appropriate Lipper
expense peer group as of September 30, 2009. The Board noted that the total
expenses of the Series were below the median and average total expenses for
comparable funds and that the contractual management fee was below the median
and the average for the peer group. The Board considered the management fee and
total expenses of the Series in comparison to its expense group as shown in the
Lipper report and concluded that such fee and expenses were reasonable.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
127
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY,
SUBADVISORY AND SUB SUBADVISORY AGREEMENTS FOR PHOENIX MULTI-SECTOR
FIXED INCOME SERIES (THE "SERIES") (CONTINUED)
SUBADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by the
Subadvisor to the Series and its shareholders would be satisfactory. In
addition, the Board received from the Subadvisor and reviewed substantial
written information as requested. In the course of their deliberations and
evaluation of materials, the Trustees considered among other things the
following factors: the Subadvisor, its current personnel (including particularly
those personnel with responsibilities for providing investment and compliance
services to the Series), and its financial condition, resources and investment
process; the terms of the Subadvisory Agreement, including the standard of care
and termination provisions; the scope and quality of the services that
Subadvisor would provide to the Series; the structure and rate of advisory fees
payable to the Subadvisor by PVA; the methodology used by the Subadvisor in
determining the compensation payable to portfolio managers and the competition
for investment management talent; and the Subadvisor's compliance record. The
Board's opinion was based upon the extensive experience of the portfolio
managers and, in particular, their experience in managing the Series as
employees of Goodwin Capital Advisers, Inc. With respect to portfolio manager
compensation, the Board noted that a primary factor in the Subadvisor's
determination of the amount of bonus compensation to portfolio managers was the
relative investment performance of the funds that they managed which would align
their interests with those of the Series' shareholders. The Board also
considered the adequacy of the Subadvisor's compliance program, based on the
information provided by the Subadvisor.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to the shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was furnished for the contract renewal process. The Lipper
report showed the investment performance of the Series' shares for the 1, 3, 5
and 10 year periods ended September 30, 2009 and the year-to-date period ended
September 30, 2009. The Board reviewed the investment performance of the Series,
along with comparative performance information given for a peer group of funds
and a relevant market index. The Board noted that the Series had performed above
the index for the 1, 5, and 10 year periods ended September 30, 2009 and the
year-to-date period ended September 30, 2009 and performed below the index for
the 3 year period ended September 30, 2009. The Series was ranked 3rd out of 65
for its peer group for the year-to-date period ended September 30, 2009.
PROFITABILITY. The Board noted that the subadvisory fee is paid by PVA
and not by the Series and that the profitability of the Subadvisor was not a
material consideration.
SUBADVISORY FEE. The Board did not consider comparative fee
information of subadvisory fees but noted that the subadvisory fee is paid by
PVA and not by the Series.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
SUB-SUBADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. At the June 8 and 9, 2009
Board meeting, the Board approved a Sub Subadvisory Agreement between the
Subadvisor and the Sub Subadvisor to furnish portfolio management services for
the Series with respect to the purchase and sale of municipal securities only,
subject to the final determination of the sub subadvisory fees payable by the
Subadvisor to the Sub Subadvisor. The SubSubadvisory Agreement was effective on
October 15, 2009. The Board concluded that the nature, extent and quality of the
overall services to be provided by the Sub-Subadvisor to the Series and its
shareholders would be satisfactory. In addition, the Board received from the
Sub-Subadvisor and reviewed substantial written information as requested. In the
course of their deliberations and evaluation of materials, the Trustees
considered among other things the following factors: the Sub-Subadvisor, its
current personnel (including particularly those personnel with responsibilities
for providing investment and compliance services to the Series), and its
financial condition, resources and investment process; the terms of the
Sub-Subadvisory Agreement, including the standard of care and termination
provisions; the scope and quality of the services that Sub-Subadvisor would
provide to the Series; the structure and rate of sub subadvisory fees payable to
the Subadvisor; the methodology used by the Sub Subadvisor in determining the
compensation payable to portfolio managers and the competition for investment
management talent; and the Sub Subadvisor's compliance record. The Board's
opinion was based upon the extensive experience of the portfolio managers and,
in particular, their experience in managing the Series as employees of Goodwin
Capital Advisers, Inc. and Virtus Investment Advisers, Inc. With respect to
portfolio manager compensation, the Board noted that a primary factor in the Sub
Subadvisor's determination of the amount of bonus compensation to portfolio
managers was the relative investment performance of the funds that they managed
which would align their interests with those of the Series' shareholders. The
Board also considered the adequacy of the Sub Subadvisor's compliance program,
based on the information provided by the Subadvisor.
128
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY,
SUBADVISORY AND SUB SUBADVISORY AGREEMENTS FOR PHOENIX MULTI-SECTOR
FIXED INCOME SERIES (THE "SERIES") (CONTINUED)
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to the shareholders. While
consideration was given to performance reports and discussions at all Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was previously furnished for the contract renewal process at
the November, 2008. The Lipper report showed the investment performance of the
Series' shares for the 1, 3, 5 and 10 year periods ended September 30, 2008 and
the year-to-date period ended September 30, 2008. The Board reviewed the
investment performance of the Series, along with comparative performance
information for a peer group of funds and a relevant market index. The Board
noted that the Series had performed above the index for the 10 year period ended
September 30, 2008 and below the 1, 3 and 5 year periods ended September 30,
2008 and the year-to-date period ended September 30, 2008. The Series was ranked
46th out of 59 for its peer group for the year-to-date period ended September
30, 2008.
PROFITABILITY. The Board noted that all fees under the Sub Subadvisory
Agreement would be paid by PVA out of the advisory fees that it receives under
this Advisory Agreement with the Series, and not by the Series. For that reason,
the expected profitability of the Subadvisor related to its relationship with
the Series or the potential economies of scale with respect to the Sub
Subadvisor's advice to the Series were not material factors in the Board's
deliberation.
SUB SUBADVISORY FEE. The Board did not consider comparative fee
information of sub subadvisory fees but noted that the sub subadvisory fee is
paid by PVA and not by the Series.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
129
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY, SUBADVISORY
AND SUB SUBADVISORY AGREEMENTS FOR PHOENIX MULTI-SECTOR
SHORT TERM BOND SERIES (THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Fund's advisory and subadvisory agreements. At a meeting held
November 16 and 17, 2009, Phoenix Variable Advisors, Inc. ("PVA") (the
"Advisor") recommended to the Board, including a majority of disinterested
Trustees, as that term is defined in Section 2(a) (19), the approval of the
investment advisory agreement (the "Advisory Agreement") between PVA and the
Fund and the investment subadvisory agreement (the "Subadvisory Agreement")
between PVA and Goodwin Capital Advisers, Inc. (the "Subadvisor"). Pursuant to
the Advisory Agreement between PVA and the Fund, PVA provides advisory services
to the Series. Pursuant to the Subadvisory Agreement between PVA and the
Subadvisor, the Subadvisor provides the day to day investment management for the
Series. Pursuant to the Sub Subadvisory Agreement between the Subadvisor and
Virtus Investment Advisers, Inc. (the "Sub Subadvisor"), approved at the June 4
and 5, 2009 Board meeting, the Sub Subadvisor provides the day to day management
of the municipal securities for the Series.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of disinterested Trustees, determined
that the fee structure was reasonable. While attention was given to all
information furnished, the following discusses the primary factors relevant to
the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by PVA and its
affiliates to the Series and its shareholders were reasonable. The Board
received and reviewed substantial written information from PVA as requested. The
Board's conclusion was based, in part, upon services provided by PVA to other
series of The Fund such as quarterly reports provided by PVA 1) comparing
performance with a peer group and benchmark, 2) showing that the investment
policies and restrictions were followed and 3) covering matters such as the
compliance of investment personnel and other access persons with the Code of
Ethics of PVA, the adherence to fair value pricing procedures established by the
Board, the monitoring of portfolio compliance, information on illiquid
securities and derivatives, brokerage commissions and presentations regarding
the economic environment and general investment outlook. The Board noted that
PVA was responsible for the general oversight of investment programs and the
monitoring of subadvisor's investment performance and their compliance with
applicable laws, regulations, policies and procedures. With respect to
compliance monitoring, the Board noted that PVA will require quarterly
compliance certifications from the Subadvisor and will conduct compliance due
diligence visits at the Subadvisor. The Board also considered the experience of
PVA having acted as an investment adviser to mutual funds for 10 years, its
current experience in acting as an investment adviser to 18 mutual funds, and
its role under the Fund's "manager of managers" exemptive relief under the 1940
Act. The Board also considered the shareholder services that are provided to
Series shareholders by an affiliate of PVA, noting continuing improvements by
management in the scope and quality of services and favorable reports on such
service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was furnished for the contract renewal process at the November
16 and 17, 2009 Board meeting. The Lipper report showed the investment
performance of the Series' shares for the 1, 3, and 5 year periods ended
September 30, 2009 and the year-to-date period ended September 30, 2009. The
Board reviewed the investment performance of the Series, along with comparative
performance information given for a peer group of funds and a relevant market
index. The Board noted that the Series had performed above the index for all
periods ended September 30, 2009. The Series was ranked 1st out of 38 for its
peer group for the year-to-date period ended September 30, 2009.
PROFITABILITY. The Board reviewed the profitability analysis that
addressed the overall profitability of PVA for its management of The Fund
family, as well as its profits and that of its affiliates, for managing the
Series. Specific attention was given to the methodology followed in allocating
costs to the Series since allocation methodologies are inherently subjective and
various allocation methodologies may each be reasonable while producing
different results. In this regard, the Board noted that the allocation
methodology appeared reasonable. The Board also noted the contractual
reimbursements provided to the Series. The Board concluded that the expected
profitability to PVA from the Series was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses. Consideration was given to a comparative analysis
of the management fees and total expense ratios of the Series compared with
those of a group of funds selected by Lipper as the Series' appropriate Lipper
expense peer group as of September 30, 2009. The Board noted that the total
expenses of the Series were below the median and average total expenses for
comparable funds and that the contractual management fee was above the median
and the average for the peer group. The Board considered the management fee and
total expenses of the Series in comparison to its expense peer group as shown in
the Lipper report and concluded that such fee and expenses were reasonable.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
130
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY, SUBADVISORY
AND SUB SUBADVISORY AGREEMENTS FOR PHOENIX MULTI-SECTOR
SHORT TERM BOND SERIES (THE "SERIES") (CONTINUED)
SUBADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by the
Subadvisor to the Series and its shareholders were reasonable. In addition, the
Board received from the Subadvisor and reviewed substantial written information
as requested. In the course of their deliberations and evaluation of materials,
the Trustees considered, among other things the following factors: the
Subadvisor, its current personnel (including particularly those personnel with
responsibilities for providing investment and compliance services to the
Series), and its financial condition, resources and investment process; the
terms of the Subadvisory Agreement, including the standard of care and
termination provisions; the scope and quality of the services that Subadvisor
would provide to the Series; the structure and rate of advisory fees payable to
the Subadvisor by PVA; the methodology used by the Subadvisor in determining the
compensation payable to portfolio managers and the competition for investment
management talent; and the Subadvisor's compliance record. The Board's opinion
was based upon the extensive experience of the portfolio managers and, in
particular, their experience in managing the Series as employees of Phoenix
Investment Counsel, Inc., the previous advisor for the Series. With respect to
portfolio manager compensation, the Board noted that a primary factor in the
Subadvisor's determination of the amount of bonus compensation to portfolio
managers was the relative investment performance of the funds that they managed
which would align their interest with those of the Series' shareholders. The
Board also considered the adequacy of the Subadvisor's compliance program, based
on the information provided by the Subadvisor.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to the shareholders. While
consideration was given to performance reports and discussions at all Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was furnished for the contract renewal process at the November
16 and 17, 2009 Board meeting. The Lipper report showed the investment
performance of the Series' shares for the 1, 3, and 5 year periods ended
September 30, 2009 and the year-to-date period ended September 30, 2009. The
Board reviewed the investment performance of the Series, along with comparative
performance information for a peer group of funds and a relevant market index.
The Board noted that the Series had performed above the index for all periods
ended September 30, 2009. The Series was ranked 1st out of 38 for its peer group
for the year-to-date period ended September 30, 2009.
PROFITABILITY. The Board noted that all fees under the Subadvisory
Agreement would be paid by PVA out of the advisory fees that it receives under
this Advisory Agreement with the Series, and not by the Series. For that reason,
the expected profitability of the Subadvisor related to its relationship with
the Series or the potential economies of scale with respect to the Subadvisor's
advice to the Series were not material factors in the Board's deliberation.
SUBADVISORY FEE. The Board did not consider comparative fee
information of subadvisory fees but noted that the subadvisory fee is paid by
PVA and not by the Series.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
SUB-SUBADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. At the June 8 and 9, 2009
Board meeting, the Board adopted a Sub Subadvisory Agreement between the
Subadvisor and Virtus Investment Advisors, Inc. ("Sub Subadvisor") to furnish
portfolio management services for the Series with respect to recommendations for
the purchase and sale of municipal securities only, subject to the final
determination of the sub subadvisory fees payable by the Subadvisor to the Sub
Subadvisor. The Sub Subadvisory Agreement was effective on October 15, 2009. The
Board concluded that the nature, extent and quality of the overall services to
be provided by the Sub-Subadvisor to the Series and its shareholders would be
satisfactory. In addition, the Board received from the Sub-Subadvisor and
reviewed substantial written information as requested. In the course of their
deliberations and evaluation of materials, the Trustees considered among other
things the following factors: the Sub-Subadvisor, its current personnel
(including particularly those personnel with responsibilities for providing
investment and compliance services to the Series), and its financial condition,
resources and investment process; the terms of the Sub-Subadvisory Agreement,
including the standard of care and termination provisions; the scope and quality
of the services that Sub-Subadvisor would provide to the Series; the structure
and rate of sub subadvisory fees payable to the Subadvisor; the methodology used
by the Sub Subadvisor in determining the compensation payable to portfolio
managers and the competition for investment management talent; and the Sub
Subadvisor's compliance record. The Board's opinion was based upon the extensive
experience of the portfolio managers and, in particular, their experience in
managing the Series as employees of Goodwin Capital Advisers, Inc. and Virtus
Investment Advisers, Inc. With respect to portfolio manager compensation, the
Board noted that a primary factor in the Sub Subadvisor's determination of the
amount of bonus compensation to portfolio managers was the relative investment
performance of the funds that they managed which would align their interests
with those of the Series' shareholders. The Board also considered the adequacy
of the Sub Subadvisor's compliance program, based on the information provided by
the Subadvisor.
131
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY, SUBADVISORY
AND SUB SUBADVISORY AGREEMENTS FOR PHOENIX MULTI-SECTOR
SHORT TERM BOND SERIES (THE "SERIES") (CONTINUED)
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to the shareholders. While
consideration was given to performance reports and discussions at all Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was previously furnished for the contract renewal process at
the November, 2008. The Lipper report showed the investment performance of the
Series' shares for the 1, 3, and 5 year periods ended September 30, 2008 and the
year-to-date period ended September 30, 2008. The Board reviewed the investment
performance of the Series, along with comparative performance information for a
peer group of funds and a relevant market index. The Board noted that the Series
had performed above the index for the 5 year period ended September 30, 2008 and
below the 1 and 3 year periods ended September 30, 2008 and the year-to-date
period ended September 30, 2008. The Series was ranked 32nd out of 38 for its
peer group for the year-to-date period ended September 30, 2008.
PROFITABILITY. The Board noted that all fees under the Sub Subadvisory
Agreement would be paid by PVA out of the advisory fees that it receives under
this Advisory Agreement with the Series, and not by the Series. For that reason,
the expected profitability of the Subadvisor related to its relationship with
the Series or the potential economies of scale with respect to the Sub
Subadvisor's advice to the Series were not material factors in the Board's
deliberation.
SUB SUBADVISORY FEE. The Board did not consider comparative fee
information of subadvisory fees but noted that the sub subadvisory fee is paid
by PVA and not by the Series.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
132
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENTS FOR PHOENIX SMALL-CAP GROWTH SERIES (THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Fund's advisory and subadvisory agreements. At a meeting held
November 16 and 17, 2009, Phoenix Variable Advisors, Inc. ("PVA") (the
"Advisor") recommended to the Board, including a majority of disinterested
Trustees, as that term is defined in Section 2(a) (19) of the Investment Company
Act of 1940, as amended ("1940 Act"), the approval of the investment advisory
agreement (the "Advisory Agreement") between PVA and the Fund. Pursuant to the
Advisory Agreement between PVA and the Fund, PVA provides advisory services to
the Series. Pursuant to the Subadvisory Agreement between PVA and the Neuberger
Berman Management LLC (the "Subadvisor"), the Subadvisor provides the day to day
investment management for the Series. The Subadvisory Agreement had previously
been approved at the March 4 and 5, 2009 Board meeting.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of disinterested Trustees, determined
that the subadvisory fee was reasonable. While attention was given to all
information furnished, the following discusses the primary factors relevant to
the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by PVA and its
affiliates to the Series and its shareholders were reasonable. The Board
received and reviewed substantial written information from PVA as requested. The
Board's conclusion was based, in part, upon services provided by PVA to other
series of The Fund such as quarterly reports provided by PVA 1) comparing the
performance of the Series with a peer group and benchmark, 2) showing that the
investment policies and restrictions were followed and 3) covering matters such
as the compliance of investment personnel and other access persons with the Code
of Ethics of PVA and the Series, the adherence to fair value pricing procedures
established by the Board, the monitoring of portfolio compliance, information on
illiquid securities and derivatives, brokerage commissions and presentations
regarding the economic environment and general investment outlook. The Board
noted that PVA was responsible for the general oversight of investment programs
and the monitoring of subadvisor's investment performance and their compliance
with applicable laws, regulations, policies and procedures. With respect to
compliance monitoring, the Board noted that PVA will require quarterly
compliance certifications from the Subadvisor and will conduct compliance due
diligence visits at the Subadvisor. The Board also considered the experience of
PVA having acted as an investment adviser to mutual funds for 10 years, its
current experience in acting as an investment adviser to 18 mutual funds, and
its role under the Fund's "manager of managers" exemptive relief under the 1940
Act. The Board also considered the shareholder services that are provided to
Series' shareholders by an affiliate of PVA, noting continuing improvements by
management in the scope and quality of services and favorable reports on such
service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed emphasis on investment
performance on the Series in view of its importance to shareholders. While
consideration was given to performance reports and discussions at all Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Series prepared by Lipper Financial Services
("Lipper") furnished for the contract renewal process at the November 16 and 17,
2009 Board meeting. The Lipper report showed the investment performance on the
Series' shares for the 1, 3, and 5 year periods ended September 30, 2009 and
year-to-date period ended September 30, 2009. The Board reviewed the investment
performance of the Series, along with comparative performance information with a
peer group of funds and a relative market index. The Board noted that the Series
had performed above the index for the 5 year period ended September 30, 2009 and
below the index for the 1 and 3 year periods ended September 30, 2009 and the
year-to-date period ended September 30, 2009. The Series was ranked 102nd out of
109 for its peer group for the year-to-date period ended September 30, 2009. The
Board also noted that the Subadvisor had managed the Series since September 15,
2008.
PROFITABILITY. The Board also considered the level of profits realized
by PVA and its affiliates in connection with the operation of the Series. In
this regard, the Board reviewed the Series profitability analysis that addressed
the overall profitability of PVA for its management of The Fund family, as well
as its profits and that of its affiliates, for managing the Series. Specific
attention was given to the methodology followed in allocating costs to the
Series, it being recognized that allocation methodologies are inherently
subjective and various allocation methodologies may each be reasonable while
producing different results. In this regard, the Board noted that the allocation
appeared reasonable. The Board also noted the voluntary reimbursements provided
to the Series. The Board concluded that the profitability to PVA from the Series
was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses. Consideration was given to a comparative analysis
of the management fees and total expense rations of the Series compared with
those of a group of funds selected by Lipper as the Series' appropriate Lipper
expense peer group as of September 30, 2009. The Board noted that the total
expenses of the Series were below the median and average total expenses for
comparable funds and that the contractual management fee was above the median
and average for the peer group. The Board was satisfied with the management fee
and total expenses of the Series in comparison to its expenses group as shown in
the Lipper report and concluded that such fee and expenses are reasonable.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
133
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENTS FOR PHOENIX SMALL-CAP VALUE SERIES (THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Fund's advisory and subadvisory agreements. At a meeting held
November 16 and 17, 2009, Phoenix Variable Advisors, Inc. ("PVA") (the
"Advisor") recommended to the Board, including a majority of disinterested
Trustees, as that term is defined in Section 2(a) (19) of the Investment Company
Act of 1940, as amended ("1940 Act"), the approval of the investment advisory
agreement (the "Advisory Agreement") between PVA and the Fund. Pursuant to the
Advisory Agreement between PVA and the Fund, PVA provides advisory services to
the Series. Pursuant to the Subadvisory Agreement between PVA and the Westwood
Management Corp. (the "Subadvisor"), the Subadvisor provides the day to day
investment management for the Series. The Subadvisory Agreement had previously
been approved at the March 4 and 5, 2009 Board meeting.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of disinterested Trustees, determined
that the fee structure was reasonable. While attention was given to all
information furnished, the following discusses the primary factors relevant to
the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent, and quality of the overall services to be provided by PVA and
its affiliates to the Series and its shareholders were reasonable. The Board
received and reviewed substantial written information from PVA as requested. The
Board's conclusion was based, in part, upon services provided by PVA to the
Series of the Fund such as quarterly reports provided by PVA 1) comparing
performance with a peer group and benchmark, 2) showing that the investment
policies and restrictions were followed and 3) covering matters such as the
compliance of investment personnel and other access persons with the Code of
Ethics of PVA, the adherence to fair value pricing procedures established by the
Board, the monitoring of portfolio compliance, information on illiquid
securities and derivatives, brokerage commissions and presentations regarding
the economic environment and general investment outlook. The Board noted that
PVA was responsible for the general oversight of investment programs and the
monitoring of Subadvisor's investment performance and their compliance with
applicable laws, regulations, policies, and procedures. With respect to
compliance monitoring, the Board noted that PVA will require quarterly
compliance certifications from the Subadvisor and will conduct compliance due
diligence visits at the Subadvisor. The Board also considered the experience of
PVA having acted as an investment adviser to mutual funds for 10 years, its
current experience in acting as an investment adviser to 18 mutual funds, and
its role under the Fund's "manager of managers" exemptive relief under the 1940
Act. The Board also considered the transfer agent and shareholder services that
are provided to Series shareholders by an affiliate of PVA, noting continuing
improvements by management in the scope and quality of services and favorable
reports on such service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed emphasis on investment
performance on the Series in view of its importance to shareholders. While
consideration was given to performance reports and discussions at all Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Series prepared by Lipper Financial Services
("Lipper") furnished for the contract renewal process at the November 16 and 17,
2009 Board meeting. The Lipper report showed the investment performance on the
Series' shares for the 1, 3, and 5 year periods ended September 30, 2009 and
year-to-date period ended September 30, 2009. The Board reviewed the investment
performance of the Series, along with comparative performance information with a
peer group of funds and a relative market index. The Board noted that the Series
had performed above the index for year-to-date period ended September 30, 2009
and below the index for the 1, 3 and 5 year periods ended September 30, 2009.
The Series was ranked 56th out of 60 for its peer group for the year-to-date
period ended September 30, 2009. The Board also noted that the Subadvisor had
managed the Series since May 1, 2009.
PROFITABILITY. The Board also considered the level of profits realized
by PVA and its affiliates in connection with the operation of the Series. In
this regard, the Board reviewed the Series profitability analysis that addressed
the overall profitability of PVA for its management of The Fund family, as well
as its profits and that of its affiliates, for managing the Series. Specific
attention was given to the methodology followed in allocating costs to the
Series, it being recognized that allocation methodologies are inherently
subjective and various allocation methodologies may each be reasonable while
producing different results. In this regard, the Board noted that the allocation
appeared reasonable. The Board also noted the voluntary reimbursements provided
to the Series. The Board concluded that the profitability to PVA from the Series
was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses at the meeting. Consideration was given to a
comparative analysis of the management fees and total expense rations of the
Series compared with those of a group of funds selected by Lipper as the Series'
appropriate Lipper expense peer group as of September 30, 2009. The Board noted
that the total expenses of the Series were above the median and the average
total expenses for comparable funds and that the contractual management fee was
above the median and the average for the peer group. The Board was satisfied
with the management fee and total expenses of the Series in comparison to its
expenses group as shown in the Lipper report and concluded that such fee and
expenses are reasonable.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
134
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY,
SUBADVISORY, AND SUB SUBADVISORY AGREEMENTS FOR PHOENIX STRATEGIC
ALLOCATION SERIES (THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Fund's advisory and subadvisory agreements. At a meeting held
November 16 and 17, 2009, Phoenix Variable Advisors, Inc. ("PVA") (the
"Advisor") recommended to the Board, including a majority of disinterested
Trustees, as that term is defined in Section 2(a) (19) of the Investment Company
Act of 1940, as amended ("1940 Act"), the approval of the investment advisory
agreement (the "Advisory Agreement") between PVA and the Fund and the investment
subadvisory agreements (the "Subadvisory Agreements") between PVA and Virtus
Investment Advisers, Inc. ("VIA") for the equity income portion of the Series
and between PVA and Goodwin Capital Advisers, Inc. ("Goodwin") for the fixed
income portion of the Series (collectively with VIA the "Subadvisors"). Pursuant
to the Advisory Agreement between PVA and the Fund, PVA provides advisory
services to the Series. Pursuant to the Subadvisory Agreements between PVA and
the Subadvisors, the Subadvisors provide the day to day investment management
for the Series. Pursuant to the Sub Subadvisory Agreement between Goodwin and
VIA (also the "Sub Subadvisor"), approved at the June 4 and 5, 2009 Board
meeting, the Sub Subadvisor provides the day to day management of the municipal
securities for the Series.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of disinterested Trustees, determined
that the fee structure was reasonable. While attention was given to all
information furnished, the following discusses the primary factors relevant to
the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by PVA and its
affiliates to the Series and its shareholders were reasonable. The Board
received and reviewed substantial written information from PVA as requested. The
Board's conclusion was based, in part, upon services provided by PVA to other
series of The Fund such as quarterly reports provided by PVA 1) comparing
performance with a peer group and benchmark, 2) showing that the investment
policies and restrictions were followed and 3) covering matters such as the
compliance of investment personnel and other access persons with the Code of
Ethics of PVA, the adherence to fair value pricing procedures established by the
Board, the monitoring of portfolio compliance, information on illiquid
securities and derivatives, brokerage commissions and presentations regarding
the economic environment and general investment outlook. The Board noted that
PVA was responsible for the general oversight of investment programs and the
monitoring of subadvisors' investment performance and their compliance with
applicable laws, regulations, policies and procedures. With respect to
compliance monitoring, the Board noted that PVA will require quarterly
compliance certifications from the Subadvisors and will conduct compliance due
diligence visits at the Subadvisors. The Board also considered the experience of
PVA having acted as an investment adviser to mutual funds for 10 years, its
current experience in acting as an investment adviser to 18 mutual funds, and
its role under the Fund's "manager of managers" exemptive relief under the 1940
Act. The Board also considered the shareholder services that are provided to
Series shareholders by an affiliate of PVA, noting continuing improvements by
management in the scope and quality of services and favorable reports on such
service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was furnished for the contract renewal process at the November
16 and 17, 2009 Board meeting. The Lipper report showed the investment
performance of the Series' shares for the 1, 3, 5 and 10 year periods ended
September 30, 2009 and the year-to-date period ended September 30, 2009. The
Board reviewed the investment performance of the Series, along with comparative
performance information given for a peer group of funds and a relevant market
index. The Board noted that the Series performed above the index for the
year-to-date, 1 and 10 year periods ended September 30, 2009 and below the index
for the 3 and 5 year periods ended September 30, 2009. The Series ranked 93rd
out of 192 for its peer group for the year-to-date period ended September 30,
2009.
PROFITABILITY. The Board reviewed the profitability analysis that
addressed the overall profitability of PVA for its management of The Fund
family, as well as its profits and that of its affiliates, for managing the
Series. Specific attention was given to the methodology followed in allocating
costs to the Series since allocation methodologies are inherently subjective and
various allocation methodologies may each be reasonable while producing
different results. In this regard, the Board noted that the allocation
methodology appeared reasonable. The Board also noted the contractual
reimbursements provided to the Series. The Board concluded that the expected
profitability to PVA from the Series was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses. Consideration was given to a comparative analysis
of the management fees and total expense ratios of the Series compared with
those of a group of funds selected by Lipper as its appropriate Lipper expense
peer group as of September 30, 2009. The Board noted that the total expenses of
the Series were below the median and average total expenses for comparable funds
and that the contractual management fee was below the average and the median for
the peer group. The Board considered the management fee and total expenses of
the Series in comparison to its peer group as shown in the Lipper report and
concluded that such fee and expenses were reasonable.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
135
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY,
SUBADVISORY, AND SUB SUBADVISORY AGREEMENTS FOR PHOENIX STRATEGIC
ALLOCATION SERIES (THE "SERIES") (CONTINUED)
SUBADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by the
Subadvisors to the Series and its shareholders were reasonable. The Board
considered the division of the Series assets to be managed by the Subadvisors.
Specifically, VIA will manage the equity assets, and Goodwin will manage the
fixed assets. In addition, the Board received from the Subadvisors and reviewed
substantial written information as requested. In the course of their
deliberations and evaluation of materials, the Trustees considered, among other
things the following factors: the Subadvisors, their current personnel
(including particularly those personnel with responsibilities for providing
investment and compliance services to the Series), and their financial
condition, resources and investment process; the terms of the Subadvisory
Agreements, including the standard of care and termination provisions; the scope
and quality of the services that the Subadvisors would provide to the Series;
the structure and rate of advisory fees payable to the Subadvisors by PVA, the
methodology used by the Subadvisors in determining the compensation payable to
portfolio managers and the competition for investment management talent; and the
Subadvisors' compliance record. The Board's opinion was based upon the extensive
experience of the Subadvisors and the portfolio managers. The Board also
considered VIA's experience as the previous advisor for the Series. With respect
to portfolio manager compensation, the Board noted that a primary factor in the
Subadvisors' determination of the amount of bonus compensation to portfolio
managers was the relative investment performance of the funds that they managed
which would align their interests with those of the Series' shareholders. The
Board also considered the adequacy of the Subadvisors' compliance program, based
on the information provided by the Subadvisors.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to the shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was furnished for the contract renewal process at the November
16 and 17, 2009 Board meeting. The Lipper report showed the investment
performance of the Series' shares for the 1, 3, 5 and 10 year periods ended
September 30, 2009 and the year-to-date period ended September 30, 2009. The
Board reviewed the investment performance of the Series, along with comparative
performance information given for a peer group of funds and a relevant market
index. The Board noted that the Series performed above the index for the
year-to-date, 1 and 10 year periods ended September 30, 2009 and below the index
for the 3 and 5 year period ended September 30, 2009. The Series was ranked 93rd
out of 193 for its peer group for the year-to-date period ended September 30,
2009.
PROFITABILITY. The Board noted that all fees under the Subadvisory
Agreement would be paid by PVA out of the advisory fees that it receives under
this Advisory Agreement with the Series, and not by the Series. For that reason,
the expected profitability of the Subadvisor related to its relationship with
the Series or the potential economies of scale with respect to the Subadvisor's
advice to the Series were not material factors in the Board's deliberation.
SUBADVISORY FEE. The Board did not consider comparative fee
information of subadvisory fees but noted that the subadvisory fee is paid by
PVA and not by the Series.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
SUB-SUBADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. At the June 8 and 9, 2009
Board meeting, The Board adopted a Sub Subadvisory Agreement between the Goodwin
and the Sub Subadvisor to furnish portfolio management services for the Series
with respect to recommendations for the purchase and sale of municipal
securities only, subject to the final determination of the sub subadvisory fees
payable by the Subadvisor to the Sub Subadvisor. The Sub Subadvisory Agreement
was effective on October 15, 2009. The Board concluded that the nature, extent
and quality of the overall services to be provided by the Sub-Subadvisor to the
Series and its shareholders would be satisfactory. In addition, the Board
received from the Sub-Subadvisor and reviewed substantial written information as
requested. In the course of their deliberations and evaluation of materials, the
Trustees considered among other things the following factors: the
Sub-Subadvisor, its current personnel (including particularly those personnel
with responsibilities for providing investment and compliance services to the
Series), and its financial condition, resources and investment process; the
terms of the Sub-Subadvisory Agreement, including the standard of care and
termination provisions; the scope and quality of the services that
Sub-Subadvisor would provide to the Series; the structure and rate of sub
subadvisory fees payable to the Subadvisor; the methodology used by the Sub
Subadvisor in determining the compensation payable to portfolio managers and the
competition for investment management talent; and the Sub Subadvisor's
compliance record. The Board's opinion was based upon the extensive experience
of the portfolio managers and, in particular, their experience in managing the
Series as employees of Goodwin Capital Advisers, Inc. and Virtus Investment
Advisers, Inc. With respect to portfolio manager compensation, the Board noted
that a primary factor in the Sub Subadvisor's determination of the amount of
bonus compensation to portfolio managers was the relative investment performance
of the funds that they managed which would align their interests with those of
the Series' shareholders. The Board also considered the adequacy of the Sub
Subadvisor's compliance program, based on the information provided by the
Subadvisor.
136
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY,
SUBADVISORY, AND SUB SUBADVISORY AGREEMENTS FOR PHOENIX STRATEGIC
ALLOCATION SERIES (THE "SERIES") (CONTINUED)
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to the shareholders. While
consideration was given to performance reports and discussions at all Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was previously furnished for the contract renewal process at
the November, 2008. The Lipper report showed the investment performance of the
Series' shares for the 1, 3, 5, and 10 year periods ended September 30, 2008 and
the year-to-date period ended September 30, 2008. The Board reviewed the
investment performance of the Series, along with comparative performance
information for a peer group of funds and a relevant market index. The Board
noted that the Series had performed above the index for the 10 year period ended
September 30, 2008 and below the 1, 3 and 5 year periods ended September 30,
2008 and the year-to-date period ended September 30, 2008. The Series was ranked
67th out of 159 for its peer group for the year-to-date period ended September
30, 2008.
PROFITABILITY. The Board noted that all fees under the Sub Subadvisory
Agreement would be paid by PVA out of the advisory fees that it receives under
this Advisory Agreement with the Series, and not by the Series. For that reason,
the expected profitability of the Subadvisor related to its relationship with
the Series or the potential economies of scale with respect to the Sub
Subadvisor's advice to the Series were not material factors in the Board's
deliberation.
SUB SUBADVISORY FEE. The Board did not consider comparative fee
information of subadvisory fees but noted that the sub subadvisory fee is paid
by PVA and not by the Series.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
137
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENTS FOR PHOENIX-ABERDEEN INTERNATIONAL SERIES (THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Fund's advisory and subadvisory agreements. At a meeting held
November 16 and 17, 2009, Phoenix Variable Advisors, Inc. ("PVA") (the
"Advisor") recommended to the Board, including a majority of disinterested
Trustees, as that term is defined in Section 2(a) (19) of the Investment Company
Act of 1940, as amended ("1940 Act"), approved the investment advisory agreement
(the "Advisory Agreement") between PVA and the Fund and the investment
subadvisory agreement (the "Subadvisory Agreement") between PVA and Aberdeen
Asset Management Inc. (the "Subadvisor"). Pursuant to the Advisory Agreement
between PVA and the Fund, PVA provides advisory services to the Series. Pursuant
to the Subadvisory Agreement between PVA and the Subadvisor, the Subadvisor
provides the day to day investment management for the Series.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of disinterested Trustees, determined
that the fee structure was reasonable. While attention was given to all
information furnished, the following discusses the primary factors relevant to
the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by PVA and its
affiliates to the Series and its shareholders were reasonable. The Board
received and reviewed substantial written information from PVA as requested. The
Board's conclusion was based, in part, upon services provided by PVA to other
series of The Phoenix Edge Series Fund such as quarterly reports provided by PVA
1) comparing performance with a peer group and benchmark, 2) showing that the
investment policies and restrictions were followed and 3) covering matters such
as the compliance of investment personnel and other access persons with the Code
of Ethics of PVA, the adherence to fair value pricing procedures established by
the Board, the monitoring of portfolio compliance, information on illiquid
securities and derivatives, brokerage commissions and presentations regarding
the economic environment and general investment outlook. The Board noted that
PVA was responsible for the general oversight of investment programs and the
monitoring of subadvisor's investment performance and their compliance with
applicable laws, regulations, policies and procedures. With respect to
compliance monitoring, the Board noted that PVA will require quarterly
compliance certifications from the Subadvisor and will conduct compliance due
diligence visits at the Subadvisor. The Board also considered the experience of
PVA having acted as an investment adviser to mutual funds for 10 years, its
current experience in acting as an investment adviser to 18 mutual funds, and
its role under the Fund's "manager of managers" exemptive relief under the 1940
Act. The Board also considered the shareholder services that are provided to
Series shareholders by an affiliate of PVA, noting continuing improvements by
management in the scope and quality of services and favorable reports on such
service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to shareholders. In this
regard, the Board considered the detailed performance review process of the
Investment Performance Committee. While consideration was given to performance
reports and discussions at Board meetings throughout the year, particular
attention in assessing such performance was given to a report for the Series
prepared by Lipper Financial Services ("Lipper"), which was furnished for the
contract renewal process at the November 16 and 17, 2009 Board meeting. The
Lipper report showed the investment performance of the Series' shares for the 1,
3, 5, and 10 year periods ended September 30, 2009 and the year-to-date period
ended September 30, 2009. The Board reviewed the investment performance of the
Series, along with comparative performance information given for a peer group of
funds and a relevant market index. The Board noted that the Series had performed
above the index for all periods ended September 30, 2009. The Series was ranked
19th out of 66 for its peer group for the year-to-date period ended September
30, 2009.
PROFITABILITY. The Board reviewed the profitability analysis that
addressed the overall profitability of PVA for its management of The Fund
family, as well as its profits and that of its affiliates, for managing the
Series. Specific attention was given to the methodology followed in allocating
costs to the Series, since allocation methodologies are inherently subjective
and various allocation methodologies may each be reasonable while producing
different results. In this regard, the Board noted that the allocation
methodology appeared reasonable. The Board also noted the contractual
reimbursements provided to the Series. The Board concluded that the expected
profitability to PVA from the Series was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses. Consideration was given to a comparative analysis
of the management fees and total expense ratios of the Series compared with
those of a group of funds selected by Lipper as the Series' appropriate Lipper
expense peer group as of September 30, 2009. The Board noted that the total
expenses of the Series were below the median and average total expenses for
comparable funds and that the contractual management fee was below the median
and average for the peer group. The Board considered the management fee and
total expenses of the Series in comparison to its peer group as shown in the
Lipper report and concluded that such fee and expenses were reasonable.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
138
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENTS FOR PHOENIX-ABERDEEN INTERNATIONAL SERIES
(THE "SERIES") (CONTINUED)
SUBADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by the
Subadvisor to the Series and its shareholders were reasonable. In addition, the
Board received from the Subadvisor and reviewed substantial written information
as requested. In the course of their deliberations and evaluation of materials,
the Trustees considered, among other things the following factors: the
Subadvisor, its current personnel (including particularly those personnel with
responsibilities for providing investment and compliance services to the
Series), and its financial condition, resources and investment process; the
terms of the subadvisory agreement, including the standard of care and
termination provisions; the scope and quality of the services that Subadvisor
would provide to the Series; the structure and rate of advisory fees payable to
the Subadvisor by PVA; the methodology used by the Subadvisor in determining the
compensation payable to portfolio managers and the competition for investment
management talent; and the Subadvisor's compliance record. The Board's opinion
was based, in part, upon the extensive experience of the Subadvisor and the
portfolio managers. In this regard, the Board noted that the portfolio
management team has many years of experience in the investment management
business. With respect to portfolio manager compensation, the Board noted that a
primary factor in the Subadvisor's determination of the amount of bonus
compensation to portfolio managers was the relative investment performance of
the funds that they managed, which would align their interests with those of the
Series' shareholders. The Board also considered the adequacy of the Subadvisor's
compliance program, based on the information provided by the Subadvisor.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to the shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was furnished for the contract renewal process at the November
16 and 17, 2009 Board meeting. The Lipper report showed the investment
performance of the Series' shares for the 1, 3, 5, and 10 year periods ended
September 30, 2009 and the year-to-date period ended September 30, 2009. The
Board reviewed the investment performance of the Series, along with comparative
performance information given for a peer group of funds and a relevant market
index. The Board noted that the Series had performed above the index for all
periods ended September 30, 2009. The Series was ranked 19th out of 66 for its
peer group for the year-to-date ended September 30, 2009.
PROFITABILITY. The Board noted that all fees under the Subadvisory
Agreement would be paid by PVA out of the advisory fees that it receives under
this Advisory Agreement with the Series, and not by the Series. For this reason,
the expected profitability of the Subadvisor related to its relationship with
the Series or the potential economies of scale with respect to the Subadvisor's
advice to the Series were not material factors in the Board's deliberation.
SUBADVISORY FEE. The Board did not consider comparative fee
information of subadvisory fees but noted that the subadvisory fee is paid by
PVA and not by the Series.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
139
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENTS FOR PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES
SERIES (THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Fund's advisory and subadvisory agreements. At a meeting held
November 16 and 17, 2009, Phoenix Variable Advisors, Inc. ("PVA") (the
"Advisor") recommended to the Board, including a majority of disinterested
Trustees, as that term is defined in Section 2(a) (19) of the Investment Company
Act of 1940, as amended ("1940 Act"), approved the investment advisory agreement
(the "Advisory Agreement") between PVA and the Fund and the investment
subadvisory agreement (the "Subadvisory Agreement") between PVA and Duff &
Phelps Investment Management Company (the "Subadvisor"). Pursuant to the
Advisory Agreement between PVA and the Fund, PVA provides advisory services to
the Series. Pursuant to the Subadvisory Agreement between PVA and the
Subadvisor, the Subadvisor provides the day to day investment management for the
Series.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of disinterested Trustees, determined
that the fee structure was reasonable. While attention was given to all
information furnished, the following discusses the primary factors relevant to
the Board's decision.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by PVA and its
affiliates to the Series and its shareholders were reasonable. The Board
received and reviewed substantial written information from PVA as requested. The
Board's conclusion was based, in part, upon services provided by PVA to other
series of The Fund such as quarterly reports provided by PVA 1) comparing
performance with a peer group and benchmark, 2) showing that the investment
policies and restrictions were followed and 3) covering matters such as the
compliance of investment personnel and other access persons with the Code of
Ethics of PVA, the adherence to fair value pricing procedures established by the
Board, the monitoring of portfolio compliance, information on illiquid
securities and derivatives, brokerage commissions and presentations regarding
the economic environment and general investment outlook. The Board noted that
PVA was responsible for the general oversight of investment programs and the
monitoring of subadvisor's investment performance and their compliance with
applicable laws, regulations, policies and procedures. With respect to
compliance monitoring, the Board noted that PVA will require quarterly
compliance certifications from the Subadvisor and will conduct compliance due
diligence visits at the Subadvisor. The Board also considered the experience of
PVA having acted as an investment adviser to mutual funds for 9 years, its
current experience in acting as an investment adviser to 18 mutual funds, and
its role under the Fund's "manager of managers" exemptive relief under the 1940
Act. The Board also considered the shareholder services that are provided to
Series shareholders by an affiliate of PVA, noting continuing improvements by
management in the scope and quality of services and favorable reports on such
service conducted by third parties.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was furnished for the contract renewal process at the November
16 and 17, 2009 Board meeting. The Lipper report showed the investment
performance of the Series' shares for the 1, 3, 5, and 10 year periods ended
September 30, 2009 and the year-to-date period ended September 30. The Board
reviewed the investment performance of the Series, along with the comparative
performance information given for a peer group of funds and a relevant market
index. The Board noted that the Series had performed above the index for all
periods ended September 30, 2009. The Series was ranked 57th out of 67 for its
peer group for the year-to-date period ended September 30, 2009.
PROFITABILITY. The Board reviewed the profitability analysis that
addressed the overall profitability of PVA for its management of The Fund
family, as well as its profits and that of its affiliates, for managing the
Series. Specific attention was given to the methodology followed in allocating
costs to the Series, since allocation methodologies are inherently subjective
and various allocation methodologies may each be reasonable while producing
different results. In this regard, the Board noted that the allocation
methodology appeared reasonable. The Board also noted the contractual
reimbursements provided to the Series. The Board concluded that the expected
profitability to PVA from the Series was reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses. Consideration was given to a comparative analysis
of the management fees and total expense ratios of the Series compared with
those of a group of funds selected by Lipper as the Series' appropriate Lipper
expense peer group as of September 30, 2009. The Board noted that the total
expenses of the Series were lower than the median and average total expenses for
comparable funds, and the contractual management fee was lower than the median
for the peer group. The Board considered the management fee and total expenses
of the Series in comparison to its peer group as shown in the Lipper report and
concluded that such fee and expenses were reasonable.
ECONOMIES OF SCALE. The Board noted that it was likely that PVA and
the Series would achieve certain economies of scale as the assets grow covering
certain fixed costs. The Board concluded that shareholders would have an
opportunity to benefit from these economies of scale.
140
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENTS FOR PHOENIX-DUFF & PHELPS REAL ESTATE SECURITIES
SERIES (THE "SERIES") (CONTINUED)
SUBADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by the
Subadvisor to the Series and its shareholders were reasonable. In addition, the
Board received from the Subadvisor and reviewed substantial written information
as requested. In the course of their deliberations and evaluation of materials,
the Trustees considered, among other things the following factors: the
Subadvisor, its current personnel (including particularly those personnel with
responsibilities for providing investment and compliance services to the
Series), and its financial condition, resources and investment process; the
terms of the subadvisory agreement, including the standard of care and
termination provisions; the scope and quality of the services that the
Subadvisor would provide to the Series; the structure and rate of advisory fees
payable to the Subadvisor by PVA; the methodology used by the Subadvisor in
determining the compensation payable to portfolio managers and the competition
for investment management talent; and the Subadvisor's compliance records. The
Board's opinion was based upon the extensive experience of the Subadvisor and
the portfolio managers and the experience the Subadvisor had as the previous
advisor for the Series. With respect to portfolio manager compensation, the
Board noted that a primary factor in the Subadvisor's determination of the
amount of bonus compensation to portfolio managers was the relative investment
performance of the funds that they managed which would align their interests
with those of the Series' shareholders. The Board also considered the adequacy
of the Subadvisor's compliance program, based on the information provided by the
Subadvisor.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to the shareholders. While
consideration was given to performance reports and discussions at all Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Series prepared by Lipper Financial Services
("Lipper"), which was furnished for the contract renewal process at the November
16 and 17, 2009 Board meeting. The Lipper report showed the investment
performance of the Series' shares for 1, 3, 5, and 10 year periods ended
September 30, 2009 and the year-to-date period ended September 30, 2009. The
Board reviewed the investment performance of the Series, along with comparative
performance information given for a peer group of funds and a relevant market
index. The Board noted that the Series had performed above the index for all
periods ended September 30, 2009. The Series was ranked 57th out of 67 for its
peer group for the year-to-date period ended September 30, 2009.
PROFITABILITY. The Board noted that all fees under the Subadvisory
Agreement would be paid by PVA out of the advisory fees that it receives under
this Advisory Agreement with the Series, and not by the Series. For this reason,
the expected profitability of the Subadvisor related to its relationship with
the Series or the potential economies of scale with respect to the Subadvisor's
advice to the Series were not material factors in the Board's deliberation.
SUBADVISORY FEE. The Board did not consider comparative fee
information of subadvisory fees but noted that the subadvisory fee is paid by
PVA and not by the Series.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
141
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENTS FOR PHOENIX-VAN KAMPEN COMSTOCK SERIES (THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Series' advisory and subadvisory agreements. At a meeting held
November 16 and 17, 2009, Phoenix Variable Advisors, Inc. ("PVA") ("Advisors")
recommended to the Board, including a majority of the independent Trustees, as
that term is defined in Section 2(a) (19) of the Investment Company Act of 1940,
as amended ("1940 Act"), approved the investment advisory agreement (the
"Advisory Agreement") between PVA and the Fund and the investment subadvisory
agreement (the "Subadvisory Agreement") between PVA and Morgan Stanley
Investment Management, Inc. d/b/a Van Kampen ("Van Kampen") (the "Subadvisor").
Pursuant to the Advisory Agreement, PVA and the Fund, PVA provides advisory
services to the Series. Pursuant to the Subadvisory Agreement between PVA and
Subadvisor, the Subadvisor provides the day to day investment management for the
Series.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of the Independent Trustees,
determined that the fee structure was fair and reasonable and that approval of
each agreement was in the best interests of the Series and its shareholders.
While attention was given to all information furnished, the following discusses
the primary factors relevant to the Board's decision.
Also during this process, the Board was notified at the November 16
and 17, 2009 Board meeting, that the Subadvisor entered into a transactional
agreement with INVESCO Ltd on October 19, 2009, to sell Morgan Stanley's Van
Kampen asset management business and portions of the Subadvisor's related
businesses to INVESCO Ltd. The portfolio management teams are included in this
transaction and are expected to joint the INVESCO group after the transaction
closes. The transaction, which is subject to customary conditions, is currently
expected to close in mid-2010.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by PVA and its
affiliates to the Series and its shareholders were reasonable. The Board
received and reviewed substantial written information from PVA as requested. The
Board's conclusion was based, in part, upon services provided by PVA to other
series of The Fund such as quarterly reports provided by PVA 1) comparing the
performance of the Series with a peer group and benchmark, 2) showing that the
investment policies and restrictions were followed and 3) covering matters such
as the compliance of investment personnel and other access persons with the Code
of Ethics of PVA and the Series, the adherence to fair value pricing procedures
established by the Board, the monitoring of portfolio compliance, information on
illiquid securities and derivatives, brokerage commissions and presentations
regarding the economic environment and general investment outlook. The Board
noted that PVA was responsible for the general oversight of investment programs
and the monitoring of subadvisor's investment performance and its compliance
with applicable laws, regulations, policies and procedures. With respect to
compliance monitoring, the Board noted that PVA require quarterly compliance
certifications from the Subadvisor and conducts compliance due diligence visits
at the Subadvisor. The Board also considered the experience of PVA having acted
as an investment adviser to mutual funds for 10 years, its current experience in
acting as an investment adviser to 18 mutual funds, and its role under the
Fund's "manager of managers" exemptive relief under the 1940 Act. The Board also
considered the shareholder services that are provided to Series' shareholders by
an affiliate of PVA, noting continuing improvements by management in the scope
and quality of services and favorable reports on such service conducted by third
parties.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report for the Series prepared by Lipper Financial Services
("Lipper") furnished for the contract renewal process at the November 16 and 17,
2009 Board meeting. The Lipper report showed the investment performance of the
Series' shares for the 1, 3, 5, and 10 year periods ended September 30, 2009 and
the year-to-date period September 30, 2009. The Board reviewed the investment
performance of the Series, along with comparative performance information with a
peer group of funds and a relevant market index. The Board noted that the Series
had performed above the index for all periods ended September 30, 2009. The
Series was ranked 13th out of 124 for its peer group for the year-to-date period
ended September 30, 2009.
PROFITABILITY. The Board also considered the level of profits realized
by PVA and its affiliates in connection with the operation of the Series. In
this regard, the Board reviewed the Series profitability analysis that addressed
the overall profitably of PVA for its management of The Fund family, as well as
its profits and that of its affiliates, for managing the Series. Specific
attention was given to the methodology followed in allocating costs to the
Series, it being recognized that allocation methodologies are inherently
subjective and various allocation methodologies may each be reasonable while
producing different results. In this regard, the Board noted that the allocation
appeared reasonable. The Board also noted the voluntary reimbursements provided
to the Series. The Board concluded that the profitability to PVA from the Series
were reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses. Consideration was given to a comparative analysis
of the management fees and total expense ratios of the Series compared with
those of a group of funds selected by Lipper as the Series' appropriate Lipper
expense peer group as of September 30, 2009. The Board noted that the total
expenses of the Series were at the median of the average total expenses for
comparable funds and that the contractual management fee was above the median
for the peer group. The Board was satisfied with the management fee and total
expenses of the Series in comparison to its expense group as shown in the Lipper
report and concluded that such fee and expenses were reasonable.
142
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENTS FOR PHOENIX-VAN KAMPEN COMSTOCK SERIES (THE "SERIES")
(CONTINUED)
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
SUBADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services that are to be provided by
the Subadvisor to the Series and its shareholders were reasonable. In addition,
the Board received from the Subadvisor and reviewed substantial written
information as requested. In the course of their deliberations and evaluation of
materials, the Trustees considered, among other things the following factors:
the Subadvisor, its current personnel (including particularly those personnel
with responsibilities for providing investment and compliance services to the
Series), and its financial condition, resources and investment process; the
terms of the Subadvisory Agreement, including the standard of care and
termination provisions; the scope and quality of the services that Subadvisor
would provide to the Series; the structure and rate of advisory fees payable to
the Subadvisor by PVA; the methodology used by the Subadvisor in determining the
compensation payable to portfolio managers and the competition for investment
management talent; and the Subadvisor's compliance record. The Board's opinion
was based upon the extensive experience of the Subadvisor and the portfolio
managers. With respect to portfolio manager compensation, the Board noted that a
primary factor in the Subadvisor's determination of the amount of bonus
compensation to portfolio managers was the relative investment performance of
the funds that they managed which would align their interests with those of the
Series' shareholders. The Board also considered the adequacy of the Subadvisor's
compliance program, based on the information provided by the Subadvisor.
INVESTMENT PERFORMANCE. The Board placed emphasis on the investment
performance of the Series in view of its importance to shareholders. While
consideration was given to performance reports and discussions at Board meetings
throughout the year, particular attention in assessing such performance was
given to a report for the Series prepared by Lipper Financial Services
("Lipper") furnished for the contract renewal process at the November 16 and 17,
2009 Board meeting. The Lipper report showed the investment performance of the
Series' shares for the 1, 3, 5 and 10 year periods ended September 30, 2009 and
the year-to-date period September 30, 2009. The Board reviewed the investment
performance of the Series, along with comparative performance information with a
peer group of funds and a relevant market index. The Board noted that the Series
had performed above the index for all periods ended September 30, 2009. The
Series was ranked 13th out of 124 for its peer group for the year-to-date period
ended September 30, 2009.
PROFITABILITY. The Board noted that all fees under the Subadvisory
Agreement would be paid by PVA out of the advisory fees that it receives under
this Advisory Agreement with the Series, and not by the Series. For this reason,
the expected profitability of the Subadvisory related to its relationship with
the Series or the potential economies of scale with respect to the Subadvisor's
advice to the Series were not material factors in the Board's deliberation.
SUBADVISORY FEE. The Board did not consider comparative fee
information of subadvisory fees but noted that the subadvisory fee is paid by
PVA and not by the Series.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
143
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENTS FOR PHOENIX-VAN KAMPEN EQUITY 500 INDEX SERIES
(THE "SERIES")
The Board of Trustees is responsible for determining whether to
approve the Series' advisory and subadvisory agreements. At a meeting held
November 16 and 17, 2009, Phoenix Variable Advisors, Inc. ("PVA") (the
"Advisor") recommended to the Board, including a majority of the independent
Trustees, as that term is defined in Section 2(a) (19) of the Investment Company
Act of 1940, as amended ("1940 Act"), approved the investment advisory agreement
(the "Advisory Agreement") between PVA and the Fund and the investment
subadvisory agreement (the "Subadvisory Agreement") between PVA and Morgan
Stanley Investment Management, Inc. d/b/a Van Kampen ("Van Kampen") (the
"Subadvisor"). Pursuant to the Advisory Agreement, PVA and the Fund, PVA
provides advisory services to the Series. Pursuant to the Subadvisory Agreement
between PVA and Subadvisor, the Subadvisor provides the day to day investment
management for the Series.
During the review process, the Board received assistance and advice
from, and met separately with, independent legal counsel. In approving each
agreement, the Board, including a majority of the Independent Trustees,
determined that the fee structure was fair and reasonable and that approval of
each agreement was in the best interests of the Series and its shareholders.
While attention was given to all information furnished, the following discusses
the primary factors relevant to the Board's decision.
Also during this process, the Board was notified at the November 16
and 17, 2009 Board meeting, that the Subadvisor entered into a transactional
agreement with INVESCO Ltd on October 19, 2009, to sell Morgan Stanley's Van
Kampen asset management business and portions of the Subadvisor's related
businesses to INVESCO Ltd. The portfolio management teams are included in this
transaction and are expected to joint the INVESCO group after the transaction
closes. The transaction, which is subject to customary conditions, is currently
expected to close in mid-2010.
ADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services to be provided by PVA and its
affiliates to the Series and its shareholders were reasonable. The Board
received and reviewed substantial written information from PVA as requested. The
Board's conclusion was based, in part, upon services provided by PVA to other
series of The Fund such as quarterly reports provided by PVA 1) comparing the
performance of the Series with a peer group and benchmark, 2) showing that the
investment policies and restrictions were followed and 3) covering matters such
as the compliance of investment personnel and other access persons with the Code
of Ethics of PVA and the Series, the adherence to fair value pricing procedures
established by the Board, the monitoring of portfolio compliance, information on
illiquid securities and derivatives, brokerage commissions and presentations
regarding the economic environment and general investment outlook. The Board
noted that PVA was responsible for the general oversight of investment programs
and the monitoring of subadvisor's investment performance and its compliance
with applicable laws, regulations, policies and procedures. With respect to
compliance monitoring, the Board noted that PVA required quarterly compliance
certifications from the Subadvisor and conducted compliance due diligence visits
at the Subadvisor. The Board also considered the experience of PVA having acted
as an investment adviser to mutual funds for 10 years, its current experience in
acting as an investment adviser to 18 mutual funds, and its role under the
Fund's "manager of managers" exemptive relief under the 1940 Act. The Board also
considered the shareholder services that are provided to Series' shareholders by
an affiliate of PVA, noting continuing improvements by management in the scope
and quality of services and favorable reports on such service conducted by third
parties.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the
investment performance of the Series in view of its importance to shareholders.
While consideration was given to performance reports and discussions at Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Series prepared by Lipper Financial Services
("Lipper") furnished for the contract renewal process at the November 16 and 17,
2009 Board meeting. The Lipper report showed the investment performance of the
Series' shares for the 1, 3, 5, and 10 year periods ended September 30, 2009 and
the year-to-date period September 30, 2009. The Board reviewed the investment
performance of the Series, along with comparative performance information with a
peer group of funds and a relevant market index. The Board noted that the Series
had performed below its index for all periods ended September 30, 2009. The
Series was ranked 28th out of 59 for its peer group for the year-to-date period
ended September 30, 2009.
PROFITABILITY. The Board also considered the level of profits realized
by PVA and its affiliates in connection with the operation of the Series. In
this regard, the Board reviewed the Series profitability analysis that addressed
the overall profitably of PVA for its management of The Fund family, as well as
its profits and that of its affiliates, for managing the Series. Specific
attention was given to the methodology followed in allocating costs to the
Series, it being recognized that allocation methodologies are inherently
subjective and various allocation methodologies may each be reasonable while
producing different results. In this regard, the Board noted that the allocation
appeared reasonable. The Board also noted the voluntary reimbursements provided
to the Series. The Board concluded that the profitability to PVA from the Series
were reasonable.
MANAGEMENT FEE AND TOTAL EXPENSES. The Board also placed emphasis on
the review of Series expenses. Consideration was given to a comparative analysis
of the management fees and total expense ratios of the Series compared with
those of a group of funds selected by Lipper as the Series' appropriate Lipper
expense peer group as of September 30, 2009. The Board noted that the total
expenses of the Series were below the median and average total expenses for
comparable funds and the contractual management fee was above the median for the
peer group. The Board was satisfied with the management fee and total expenses
of the Series in comparison to its expense group as shown in the Lipper report
and concluded that such fee and expenses were reasonable.
144
THE PHOENIX EDGE SERIES FUND ("FUND")
BOARD OF TRUSTEES' CONSIDERATION OF INVESTMENT ADVISORY AND
SUBADVISORY AGREEMENTS FOR PHOENIX-VAN KAMPEN EQUITY 500 INDEX SERIES
(THE "SERIES") (CONTINUED)
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
SUBADVISORY AGREEMENT CONSIDERATIONS
NATURE, EXTENT AND QUALITY OF SERVICES. The Board concluded that the
nature, extent and quality of the overall services that are to be provided by
the Subadvisor to the Series and its shareholders were reasonable. In addition,
the Board received from the Subadvisor and reviewed substantial written
information as requested. In the course of their deliberations and evaluation of
materials, the Trustees considered, among other things the following factors:
the Subadvisor, its current personnel (including particularly those personnel
with responsibilities for providing investment and compliance services to the
Series), and its financial condition, resources and investment process; the
terms of the Subadvisory Agreement, including the standard of care and
termination provisions; the scope and quality of the services that Subadvisor
would provide to the Series; the structure and rate of advisory fees payable to
the Subadvisor by PVA; the methodology used by the Subadvisor in determining the
compensation payable to portfolio managers and the competition for investment
management talent; and the Subadvisor's compliance record. The Board's opinion
was based upon the extensive experience of the Subadvisor and the portfolio
managers. With respect to portfolio manager compensation, the Board noted that a
primary factor in the Subadvisor's determination of the amount of bonus
compensation to portfolio managers was the relative investment performance of
the funds that they managed which would align their interests with those of the
Series' shareholders. The Board also considered the adequacy of the Subadvisor's
compliance program, based on the information provided by the Subadvisor.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the
investment performance of the Series in view of its importance to shareholders.
While consideration was given to performance reports and discussions at Board
meetings throughout the year, particular attention in assessing such performance
was given to a report for the Series prepared by Lipper Financial Services
("Lipper") furnished for the contract renewal process at the November 16 and 17,
2009 Board meeting. The Lipper report showed the investment performance of the
Series' shares for the 1, 3, 5, and 10 year periods ended September 30, 2009 and
the year-to-date period September 30, 2009. The Board reviewed the investment
performance of the Series, along with comparative performance information with a
peer group of funds and a relevant market index. The Board noted that the Series
had performed below its index for all periods ended September 30, 2009. The
Series was ranked 28th out of 59 for its peer group for the year-to-date period
ended September 30, 2009.
PROFITABILITY. The Board noted that all fees under the Subadvisory
Agreement would be paid by PVA out of the advisory fees that it receives under
this Advisory Agreement with this Series, and not by the Series. For this
reason, the expected profitability of the Subadvisory related to its
relationship with the Series or the potential economies of scale with respect to
the Subadvisor's advice to the Series were not material factors in the Board's
deliberation.
SUBADVISORY FEE. The Board did not consider comparative fee
information of subadvisory fees but noted that the subadvisory fee is paid by
PVA and not by the Series.
ECONOMIES OF SCALE. The Board noted that the Series probably would not
achieve certain economies of scale since it would be unlikely that the Fund
assets would grow in the near future. The Board concluded that currently,
shareholders would not have an opportunity to benefit from any economies of
scale unless PVA and its affiliates sought other distribution arrangements for
the Series in addition to PVA and its affiliates.
145
FUND MANAGEMENT TABLES
Information pertaining to the Trustees and officers of the Trust as of December
31, 2009, is set forth below. The statement of additional information (SAI)
includes additional information about the Trustees and is available without
charge, upon request, by calling (800) 541-0171.
The address of each individual, unless otherwise noted, is c/o CT Corporate
Systems, 155 Federal Street, Boston, MA 02110.
DISINTERESTED TRUSTEES
NAME
YEAR OF BIRTH
YEAR ELECTED
# OF PORTFOLIOS IN FUND PRINCIPAL OCCUPATION(S)
COMPLEX DURING PAST 5 YEARS AND
OVERSEEN BY TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE
- ------------------------ ------------------------------------------------------------------------
Frank M. Ellmer, CPA Retired.
YOB: 1940
Elected: 1999
18 Portfolios
Roger A. Gelfenbien Retired. Director, Webster Bank (2003-present). Director USAllianz
YOB: 1943 Variable Insurance Product Trust, 23 funds (1999-present).
Elected: 2000 Chairman/Trustee.
18 Portfolios
Eunice S. Groark Attorney. Director, Peoples' Bank (1995-present).
YOB: 1938
Elected: 1999
18 Portfolios
Frank E. Grzelecki* Retired. Director, Barnes Group Inc. (1997-present).
YOB: 1937
Elected: 2000
18 Portfolios
John R. Mallin Partner/Attorney, McCarter & English, LLP (2003-present).
YOB: 1950
Elected: 1999
18 Portfolios
Hassell H. McClellan Associate Professor, Wallace E. Carroll School of Management, Boston
YOB: 1945 College (1984-present). Independent Trustee, John Hancock Trust and John
Elected: 2008 Hancock Funds II. Board of Overseers, Tufts University School of Dental
18 Portfolios Medicine.
* Retired from the Fund January 1, 2010.
146
FUND MANAGEMENT TABLES
Each of the individuals listed below is an "interested person" of the Fund, as
defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
INTERESTED TRUSTEES
NAME
YEAR OF BIRTH
YEAR ELECTED
# OF PORTFOLIOS IN FUND PRINCIPAL OCCUPATION(S)
COMPLEX DURING PAST 5 YEARS AND
OVERSEEN BY TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE
- ------------------------ ------------------------------------------------------------------------
Philip R. McLoughlin** Partner, Cross Pond Partners, LLC, (2006-present). Director, Argo Group
YOB: 1946 International Holdings Ltd. (Insurance), World Trust Fund and KBC Asset
Elected 2003 Management, Ltd. (1991-present). Chairman and Trustee, Virtus Mutual
Chairman Funds.
18 Portfolios
Philip K. Polkinghorn*** Senior Executive Vice President and President, Life & Annuity, The
One American Row Phoenix Companies, Inc. (2007-present); Executive Vice President, The
Hartford, CT 06102 Phoenix Companies, Inc. (2004-2007); Senior Executive Vice President and
YOB: 1957 President, Life & Annuity, Phoenix Life Insurance Company
Elected 2004 (2007-present); Executive Vice President, Phoenix Life Insurance Company
President (2004-2007); Director and President, PHL Variable Insurance Company
18 Portfolios (2004-present); Director and Executive Vice President, Phoenix Equity
Planning Corporation (2004-present); Director and President, Phoenix
Life and Annuity Company (2004-present); Director and President, Phoenix
Variable Advisors, Inc. (2004-present); Director, AGL Life Assurance
Company (2004-present); Director, PFG Distribution Company
(2004-present); Director, PFG Holdings, Inc. (2004-present); Director,
Philadelphia Financial Group, Inc. (2004-present); Director, Phoenix
Distribution Holding Company (2004-present); Director; Phoenix
Foundation (2004-present); Director, Phoenix Life and Reassurance
Company of New York (2004-present); Director, Phoenix Life Solutions,
Inc. (2004-present); Director, Phoenix Alternative Investment Advisers,
Inc. (2004-2008); Director, PM Holdings, Inc. (2004-present).
** Mr. McLoughlin is an "interested person," as defined in the Investment
Company Act of 1940, by reason of his former relationship with Phoenix
Investment Partners, Ltd. and its affiliates.
*** Mr. Polkinghorn is an "interested person," as defined under the Investment
Company Act of 1940, by reason of his position with the Trust's advisors
and/or their affiliates.
147
FUND MANAGEMENT TABLES
NAME, ADDRESS, YEAR OF BIRTH AND LENGTH OF PRINCIPAL OCCUPATION(S)
POSITION(S) WITH TRUST TIME SERVED DURING PAST 5 YEARS
- -------------------------------- ------------ ------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES
Thomas M. Buckingham Served since Senior Vice President, Phoenix Life and Annuity Company
One American Row 2009 (2007-present); Senior Vice President, PHL Variable
Hartford, CT 06102 Insurance Company (2007-present); Director, Phoenix Variable
YOB: 1977 Advisors, Inc. (2007-present); Senior Vice President, L&A
Senior Vice President Product Development, The Phoenix Companies, Inc.
(2007-present); Senior Vice President, L&A Product
Development, Phoenix Life Insurance Company (2007-present);
Vice President, The Phoenix Companies, Inc. (2004-2007).
Marc Baltuch Served since Chief Compliance Officer, Zweig-DiMenna Associates LLC
900 Third Avenue 2004 (1989-present); Vice President and Chief Compliance Officer,
New York, NY 10022 certain of the Funds within the Virtus Mutual Fund Complex;
YOB: 1945 Vice President, The Zweig Total Return Fund, Inc.
Chief Compliance Officer (2004-present); Vice President, The Zweig Fund, Inc.
(2004-present); President and Director of Watermark
Securities, Inc. (1991-present); Assistant Secretary of
Gotham Advisors Inc. (1990-2005).
W. Patrick Bradley Served since Senior Vice President, Fund Administration (2009-present).
100 Pearl St. 2006 Vice President, Mutual Fund Administration, Virtus
Hartford, CT 06115 Investment Partners, Ltd. (2004-2009). Chief Financial
YOB: 1972 Officer and Treasurer (2005-present), certain funds within
Senior Vice President, Chief the Virtus Mutual Funds. Assistant Treasurer, certain funds
Financial Officer, Treasurer and within the Virtus Mutual Funds (2004-present). Senior
Principal Accounting Officer Manager (2002-2004). Audit Services, Deloitte & Touche, LLP.
Kathleen A. McGah Served since Vice President and Counsel, The Phoenix Companies, Inc.
One American Row 2005 (2005-present), Vice President and Counsel, Phoenix Life
Hartford, CT 06102 Insurance Company (2005-present); Vice President and
YOB: 1950 Assistant Secretary, PHL Variable Insurance Company
Vice President, Chief Legal (2005-present); Vice President and Assistant Secretary,
Officer, Counsel and Secretary American Phoenix Life and Reassurance Company
(2005-present); Vice President and Assistant Secretary,
Phoenix Life and Annuity Company (2005-present); Vice
President and Assistant Secretary, Phoenix Variable
Advisors, Inc. (2005-present); Vice President and Assistant
Secretary, Phoenix Life Solutions, Inc. (2007-present) and
Vice President and Assistant Secretary, Phoenix Investment
Counsel, Inc. (2006-2008). Chief Legal Officer and Secretary
of five mutual funds and six variable annuity separate
accounts within the Travelers Life & Annuity complex
(2004-2005). Deputy General Counsel (1999-2005), The
Travelers Insurance Company.
148
THE PHOENIX EDGE SERIES FUND
c/o CT Corporate Systems
155 Federal Street
Boston, MA 02110
BOARD OF TRUSTEES
Frank M. Ellmer, CPA
Roger A. Gelfenbien
Eunice S. Groark
Frank E. Grzelecki*
John R. Mallin
Hassell H. McClellan
Philip R. McLoughlin
Philip K. Polkinghorn
EXECUTIVE OFFICERS
Philip R. McLoughlin, Chairman
Philip K. Polkinghorn, President
Thomas M. Buckingham, Senior Vice President
Marc Baltuch, Chief Compliance Officer
W. Patrick Bradley, Senior Vice President,
Chief Financial Officer, Treasurer and
Principal Accounting Officer
Kathleen A. McGah, Vice President, Chief
Legal Officer, Counsel and Secretary
INVESTMENT ADVISOR
Phoenix Variable Advisors, Inc.
One American Row
Hartford, CT 06102-5056
CUSTODIAN
The Bank of New York Mellon
One Wall Street
New York, NY 10286
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
2001 Market Street
Philadelphia, PA 19103-7042
* Retired from the Fund January 1, 2010.
(PHOENIX LOGO)
PHOENIX LIFE INSURANCE COMPANY
PO Box 22012
Albany, NY 12201-2012
NOT INSURED BY FDIC/NCUSIF OR ANY FEDERAL GOVERNMENT AGENCY.
NO BANK GUARANTEE. NOT A DEPOSIT. MAY LOSE VALUE.
Phoenix Life Insurance Company
A member of The Phoenix Companies, Inc.
phoenixwm.com
BPD37302
G0144A (C) 2009 The Phoenix Companies, Inc. 12-09
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party.
(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, and that relates to any element of
the code of ethics described in Item 2(b) of the instructions for
completion of Form N-CSR.
(d) The registrant has not granted any waivers, during the period covered
by this report, including an implicit waiver, from a provision of the
code of ethics that applies to the registrant's principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, regardless of
whether these individuals are employed by the registrant or a third
party, that relates to one or more of the items set forth in paragraph
(b) of the instructions for completion of this Item.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant's Board of Trustees has determined that the Registrant
has an "audit committee financial expert" serving on its Audit
Committee.
(a)(2) Frank M. Ellmer has been determined by the Registrant to possess the
technical attributes identified in Instruction 2(b) of Item 3 to Form
N-CSR to qualify as an "audit committee financial expert." Mr. Ellmer
is an "independent" trustee pursuant to paragraph (a)(2) of Item 3 to
Form N-CSR.
(a)(3) Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
- ----------
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services that
are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years are
$373,100 for 2009 and $383,900 for 2008.
Audit-Related Fees
- ------------------
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of this
Item are $55,368 for 2009 and $41,071 for 2008. This represents the
review of the semi-annual financial statements, and out of pocket
expenses.
Tax Fees
- --------
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $57,014 for 2009 and
$56,220 for 2008.
"Tax Fees" are those primarily associated with review of the Trust's
tax provision and qualification as a regulated investment company (RIC)
in connection with audits of the Trust's financial statement, review of
year-end distributions by the Fund to avoid excise tax for the Trust,
periodic discussion with management on tax issues affecting the Trust,
and reviewing and signing the Fund's federal income tax returns.
All Other Fees
- --------------
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than
the services reported in paragraphs (a) through (c) of this Item are $0
for 2009 and $0 for 2008.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
The Phoenix Edge Series Fund (the "Fund") Board has adopted policies
and procedures with regard to the pre-approval of services provided by
PwC. Audit, audit-related and tax compliance services provided to the
Fund on an annual basis require specific pre-approval by the Board. As
noted above, the Board must also approve other non-audit services
provided to the Fund and those non-audit services provided to the
Fund's Affiliated Service Providers that relate directly to the
operations and financial reporting of the Fund. Certain of these
non-audit services that the Board believes are a) consistent with the
SEC's auditor independence rules and b) routine and recurring services
that will not impair the independence of the independent auditors may
be approved by the Board without consideration on a specific
case-by-case basis ("general pre-approval").
The Audit Committee has determined that Mr. Ellmer, Chair of the Audit
Committee, may provide pre-approval for such services that meet the
above requirements in the event such approval is sought between
regularly scheduled meetings. In any event, the Board is informed of
each service approved subject to general pre-approval at the next
regularly scheduled in-person board meeting.
(e)(2) The percentage of services described in each of paragraphs (b) through
(d) of this Item that were approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:
(b) 100% for 2009 and 100% for 2008
(c) 100% for 2009 and 100% for 2008
(d) Not applicable
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was less than fifty percent.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services
to the registrant for each of the last two fiscal years of the
registrant was $414,669 for 2009 and $1,624,671 for 2008.
(h) The registrant's audit committee of the board of directors has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of trustees, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's second fiscal
quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) The Phoenix Edge Series Fund
--------------------------------------------------------------------
By (Signature and Title)* /s/ Philip K. Polkinghorn
-------------------------------------------------------
Philip K. Polkinghorn, President
(principal executive officer)
Date March 9, 2010
----------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Philip K. Polkinghorn
-------------------------------------------------------
Philip K. Polkinghorn, President
(principal executive officer)
Date March 9, 2010
----------------------------------------------------------------------------
By (Signature and Title)* /s/ W. Patrick Bradley
-------------------------------------------------------
W. Patrick Bradley, Vice President, Chief Financial
Officer, Treasurer and Principal Accounting Officer
(principal financial officer)
Date March 8, 2010
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.