As filed with the Securities and Exchange Commission on November 28, 1997
File No. 33-65137
File No. 811-7455
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
Under the
SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.
Post-Effective Amendment No. 2
[X]
and/or
REGISTRATION STATEMENT
Under the
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 2 [X]
(Check appropriate box or boxes)
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PHOENIX-SENECA FUNDS
(Exact Name of Registrant as Specified in Charter)
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909 Montgomery Street, San Francisco, California 94133
(Address of Principal Executive Office) (Zip Code)
(415) 677-1500
(Registrant's Telephone Number, Including Area Code)
THOMAS N. STEENBURG
Vice President, Counsel and Secretary, Phoenix Duff & Phelps Corporation
56 Prospect Street, Hartford, CT 06115-0479
(Name and Address of Agent for Service)
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It is proposed that this filing will become effective (check
appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(i)
[ ] on pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on pursuant to paragraph (a)(i) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date
for a
previously filed post-effective amendment.
-------------
Copy to:
Andre W. Brewster, Esq.
Howard, Rice, Nemerovski, Canady, Falk & Rabkin
A Professional Corporation
Three Embarcadero Center
San Francisco, CA 94111
(415) 434-1600
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<PAGE>
PHOENIX-SENECA FUNDS
Phoenix-Seneca Growth Fund
Phoenix-Seneca Mid-Cap "EDGE"sm Fund
Phoenix-Seneca Bond Fund
Phoenix-Seneca Real Estate Securities Fund
Cross-Reference Sheet Showing Location in Prospectus
and Statement of Additional Information of
Information Required by Items of the Registration Form
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A
N-1A Location in
Item No. Item Registration Statement
- ---------- ----------------------------------------------------- ---------------------------------------------------
<S> <C> <C>
Part A:
Information Required in Prospectus
1. Cover Page Cover Page
2. Synopsis Introduction; Fund Expenses
3. Condensed Financial Information Financial Highlights Table
4. General Description of Registrant Introduction; Management; Investment Practices and
Risk Considerations; The Phoenix-Seneca Funds in
Detail; General Information
5. Management of the Fund Fund Expenses; Management; Investment Adviser, Subadviser
and Administrator; General Information
5A. Management's Discussion of Fund Performance Performance Information
6. Capital Stock and Other Securities Dividends and Capital Gains; General Information
7. Purchase of Securities Being Offered How to Buy Shares; Investor Account Services;
Distribution Plans
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings Not Applicable
Part B:
Information Required in Statement of Additional Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Trust
13. Investment Objectives and Policies Investment Objectives and Policies; Investment
Restrictions; Portfolio Turnover
14. Management of the Fund Trustees and Officers; Organization
15. Control Persons and Principal Holders of Securities Principal Shareholders and Control Persons;
Trustees and Officers
16. Investment Advisory and Other Services Advisory and Administrative Services
17. Brokerage Allocation and Other Practices Portfolio Brokerage; Portfolio Turnover
18. Capital Stock and Other Securities Organization
19. Purchase, Redemption and Pricing of Securities How to Buy Shares; Alternative Purchase
Being Offered Arrangements; Investor Account Services; How to
Redeem Shares; Net Asset Value
20. Tax Status Dividends, Distributions and Tax Status
21. Underwriters Advisory and Administrative Services
22. Calculation of Performance Data Calculation of the Funds' Returns
23. Financial Statements Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of this Registration Statement.
<PAGE>
PHOENIX-SENECA FUNDS
PROSPECTUS
January 28, 1998
Phoenix-Seneca Growth Fund seeks capital appreciation primarily through
investments in equity securities of companies that, in the Investment Adviser's
opinion, have the potential for above average market appreciation. Production
of income is incidental to this objective. The Fund seeks to outperform the
Standard & Poor's Index of 500 Stocks.
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund seeks capital appreciation primarily
through investments in equity securities of companies that, in the Investment
Adviser's opinion, have the potential for above average market appreciation.
Production of income is incidental to this objective. The Fund invests
primarily in companies with market capitalizations between $500 million and $5
billion. The Fund seeks to outperform the Standard & Poor's Mid-Cap 400 Index.
Phoenix-Seneca Bond Fund seeks both current income and capital
appreciation primarily by investing in a diversified portfolio of government
and corporate bonds and other debt securities. The Fund seeks a total return
higher than that of the Lehman Brothers Government/Corporate Index.
Phoenix-Seneca Real Estate Securities Fund seeks a high total return
through both long-term capital appreciation and current income from investments
related to United States real estate. The Fund invests primarily in securities
of issuers that are engaged principally in or whose businesses relate to
ownership and operation of real estate in the United States.
There can be no assurance that any of the Funds will achieve its
investment objectives or succeed in outperforming the indices described above.
For information about some of the principal risks involved in investments in
the Funds, see "Investment Practices and Risk Considerations."
This Prospectus sets forth concisely the information about the Funds that
a prospective investor should know before investing. No dealer, salesperson or
any other person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given or
made, such information or representations must not be relied upon as having
been authorized by the Funds, Adviser or Distributor. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any state in which, or to any person to whom, it
is unlawful to make such offer. Neither the delivery of this Prospectus nor any
sale hereunder shall, under any circumstances, create any implication that
information herein is correct at any time subsequent to its date. Investors
should read and retain this Prospectus for future reference. Additional
information about the Funds and the Trust is contained in the Statement of
Additional Information, dated January 28, 1998, which has been filed with the
Securities and Exchange Commission (the "Commission") and is available upon
request at no charge by calling (800) 243-4361 or by writing to Phoenix Equity
Planning Corporation at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield,
Connecticut 06083-2200. The Statement of Additional Information is incorporated
herein by reference. The Commission maintains a Web site (http://www.sec.gov)
that contains this Prospectus, the Statement of Additional Information,
material incorporated by reference, and other information regarding registrants
that file electronically with the Commission.
Fund shares are not deposits or obligations of, or endorsed or guaranteed
by, any bank or other financial institution, and they are not insured by the
Federal Deposit Insurance Corporation or any other agency of the United States
Government or any other governmental subdivision.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
INTRODUCTION ......................................................... 3
FUND EXPENSES ......................................................... 4
FINANCIAL HIGHLIGHTS ................................................ 7
PERFORMANCE INFORMATION ............................................. 9
MANAGEMENT ............................................................ 9
THE PHOENIX-SENECA FUNDS IN DETAIL .................................... 10
PHOENIX-SENECA GROWTH FUND AND PHOENIX-SENECA MID-CAP "EDGE"(SM) FUND .. 10
PHOENIX-SENECA BOND FUND ............................................. 11
PHOENIX-SENECA REAL ESTATE SECURITIES FUND ........................... 12
INVESTMENT PRACTICES AND RISK CONSIDERATIONS ........................ 13
DISTRIBUTION PLANS ................................................... 16
HOW TO BUY SHARES ................................................... 18
INVESTOR ACCOUNT SERVICES ............................................. 21
NET ASSET VALUE ...................................................... 23
HOW TO REDEEM SHARES ................................................ 23
PORTFOLIO TRANSACTIONS ................................................ 24
DIVIDENDS AND CAPITAL GAINS .......................................... 25
INCOME TAX CONSIDERATIONS ............................................. 25
INVESTMENT ADVISER, SUBADVISER AND ADMINISTRATOR ..................... 25
GENERAL INFORMATION ................................................... 26
</TABLE>
2
<PAGE>
INTRODUCTION
This Prospectus describes certain of the shares offered by and the
operations of the Phoenix-Seneca Funds (the "Trust"). The Trust is a
diversified, open-end management investment company established as a Delaware
business trust. Shares of the Trust are divided into four series, each a "Fund"
and collectively the "Funds." Each Fund has a different investment objective,
and is designed to meet different investment needs.
The Investment Advisers
Phoenix Investment Counsel, Inc. ("PIC" or the "Adviser") serves as
investment adviser to the Phoenix-Seneca Funds. Seneca Capital Management, LLC.
("Seneca" or the "Subadviser") serves as investment subadviser to the Phoenix-
Seneca Funds. All of the outstanding stock of PIC and a majority of the equity
interests of Seneca are owned by Phoenix Duff & Phelps Corporation. See
"Management" for a description of the Investment Advisory and Subadvisory
Agreements and management fees.
Distributor and Distribution Plans
Phoenix Equity Planning Corporation ("PEPCO" or "Distributor"), serves as
national distributor of the Funds' shares. See "Distribution Plans" and the
Statement of Additional Information. PEPCO also acts as Administrator of the
Funds and as such receives a fee. See "Management." PEPCO also serves as the
Funds' transfer agent. See "The Custodian and Transfer Agent."
The Funds have adopted distribution plans pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act") for four of the
five classes of each of the Funds. Pursuant to the distribution plan adopted
for Class A Shares, Class B Shares, Class C Shares and Class M Shares, the
Funds shall pay the Distributor 0.25% of the average daily net assets of each
Fund for furnishing shareholder services and, pursuant to the distributions
adopted for Class B Shares, Class C Shares and Class M Shares, the Funds will
reimburse the Distributor up to a maximum annual rate of 0.75%, 0.75%, and
0.25%, respectively, of the average daily net assets of each Fund for
distribution expenditures incurred in connection with the sale and promotion of
those Classes of Shares of each Fund. See "Distribution Plans." No distribution
plan has been adopted for Class X Shares.
Purchase of Shares
Each Fund currently offers one class of shares (Class X Shares) that may
be purchased by certain institutional investors at a price equal to their net
asset value per share. Each Fund also offers four additional classes of shares
that may be purchased at a price equal to their net asset value per share, plus
a sales charge which, at the election of the purchaser, may be imposed (i) at
the time of the purchase (Class A Shares and Class M Shares) or (ii) on a
contingent deferred basis (Class B Shares and Class C Shares).
Class X Shares are offered to [institutions] at the next determined net
asset value after receipt of the order by State Street Bank and Trust Company
("State Street Bank").
Class A and M Shares are offered to the public at the next determined net
asset value after receipt of the order by State Street Bank plus a sales
charge. The maximum initial sales charge is 4.75% and 3.50%, respectively, of
the offering price on single purchases of less than $50,000. The sales charges
are reduced on a graduated scale on single purchases of $50,000 or more.
Class B and C Shares are offered to the public at the next determined net
asset value after receipt of an order by State Street Bank with no sales
charge. Class B Shares are subject to a sales charge if they are redeemed
within five years of purchase. Class C Shares redeemed within one year of
purchase are subject to a 1% sales charge.
Shares of each Class represent an identical interest in the investment
portfolio of a Fund and have the same rights. For more information on fees and
charges applicable for each Fund and Class, refer to "Fund Expenses" and "How
to Buy Shares." Completed applications for the purchase of shares should be
mailed to the Phoenix-Seneca Funds, c/o State Street Bank and Trust Company,
P.O. Box 8301, Boston, MA 02266-8301.
Minimum Initial and Subsequent Investments
The minimum initial investment for purchases of Class A, Class B, Class C
or Class M Shares is $500 ($25 if using the bank draft investment program
designated "Investo-Matic") and the minimum subsequent investment is $25.
Exceptions to the minimum and subsequent investment amounts are available under
certain circumstances. The minimum initial investment for purchases of Class X
Shares is [$250,000] except for the Phoenix-Seneca Bond Fund which has a
minimum initial investment of [$10,000]. The minimum subsequent investment is
[ ]. See "How to Buy Shares."
Redemption of Shares
Class X, A and M Shares of a Fund may be redeemed at any time at the net
asset value per share next computed after receipt of a redemption request by
State Street Bank. Class B and C shareholders redeeming shares within certain
time periods of the date of purchase will normally be assessed a contingent
deferred sales charge. See "How to Redeem Shares."
Risk Factors
There can be no assurances that a Fund will achieve its investment
objectives. As a result of each Fund's substantial investment in the stock
market, the net asset value of a Fund's shares will fluctuate significantly in
response to changes in market and economic conditions, as well as the financial
condition and prospects of issuers in which each Fund invests.
See "Investment Practices and Risk Considerations" for more information on
relevant risks.
3
<PAGE>
FUND EXPENSES
The following table illustrates all fees and expenses, including pro forma
expenses where there is no expense history, a shareholder is expected to incur.
<TABLE>
<CAPTION>
Phoenix-Seneca Growth Fund
-----------------------------
Class X Class A
Shares Shares
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None 4.75%
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested None None
Dividends
Deferred Sales Load (as a percentage of original None None
purchase price or redemption proceeds, as
applicable)
Early Withdrawal Fee(1) 1.00% 1.00%
Exchange Fee None None
Annual Fund Operating Expenses(2)
(as a percentage of average net assets)
Management Fees 0.70% 0.70%
12b-1 Fees(3) None 0.25%
Other Expenses (After Expense Reimbursement)(4) 0.55% 0.90%
------ ------
Total Fund Operating Expenses 1.25% 1.85%
====== ======
<CAPTION>
Class B Class C Class M
Shares Shares Shares
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None None 3.50%
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested None None None
Dividends
Deferred Sales Load (as a percentage of original 5% during the first 1% during the None
purchase price or redemption proceeds, as year, decreasing 1% first year
applicable) annually to 2%
during the fourth
and fifth years;
decreasing to 0%
after the fifth year
Early Withdrawal Fee(1) 1.00% 1.00% 1.00%
Exchange Fee None None None
Annual Fund Operating Expenses(2)
(as a percentage of average net assets)
Management Fees 0.70% 0.70% 0.70%
12b-1 Fees(3) 1.00% 1.00% 0.50%
Other Expenses (After Expense Reimbursement)(4) 0.90% 0.90% 0.90%
--------------------- -------------- ------
Total Fund Operating Expenses 2.60% 2.60% 2.10%
===================== ============== ======
</TABLE>
<TABLE>
<CAPTION>
Phoenix-Seneca Mid-Cap
"EDGE"(sm) Fund
-----------------------------
Class X Class A
Shares Shares
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None 4.75%
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested None None
Dividends
Deferred Sales Load (as a percentage of original None None
purchase price or redemption proceeds, as
applicable)
Early Withdrawal Fee(1) 1.00% 1.00%
Exchange Fee None None
Annual Fund Operating Expenses(2)
(as a percentage of average net assets)
Management Fees 0.80% 0.80%
12b-1 Fees(3) None 0.25%
Other Expenses (After Expense Reimbursement)(5) 1.30% 1.65%
------ ------
Total Fund Operating Expenses 2.10% 2.70%
====== ======
<CAPTION>
Phoenix-Seneca Mid-Cap "EDGE" sm Fund
------------------------------------------------------
Class B Class C Class M
Shares Shares Shares
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None None 3.50%
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested None None None
Dividends
Deferred Sales Load (as a percentage of original 5% during the first 1% during the None
purchase price or redemption proceeds, as year, decreasing 1% first year
applicable) annually to 2%
during the fourth
and fifth years;
decreasing to 0%
after the fifth year
Early Withdrawal Fee(1) 1.00% 1.00% 1.00%
Exchange Fee None None None
Annual Fund Operating Expenses(2)
(as a percentage of average net assets)
Management Fees 0.80% 0.80% 0.80%
12b-1 Fees(3) 1.00% 1.00% 0.50%
Other Expenses (After Expense Reimbursement)(5) 1.65% 1.65% 1.65%
--------------------- -------------- ------
Total Fund Operating Expenses 3.45% 3.45% 2.95%
===================== ============== ======
</TABLE>
- -----------
(1) Applies only to redemptions (including by exchanges) of shares held less
than 90 days. The fee is paid to the Fund and is intended to protect
long-term investors from the cost of frequent investments and redemptions
by short-term investors. See "Redemption of Shares."
(2) As of the date of this prospectus, only the Class X and Class A Shares had
commenced operations. The percentages indicated for the other classes are
estimates and actual expenses may be more of less than the amounts shown.
(3) "12b-1 Fees" represent an asset based sales charge that, for long term
shareholders, may be higher than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers, Inc. ("NASD")
(4) The Adviser has agreed to reimburse the Growth Fund's operating expenses
other than Management Fees and Rule 12b-1 Fees for the amount by which
such operating expenses of Class X, Class A shares, Class B shares, Class
C shares and Class M shares exceed 1.25%, 1.85%, 2.60%, 2.60% and 2.10%,
respectively, of the average net assets through the fiscal year ended
September 30, 1998. Total Fund Operating Expenses for Class X, Class A,
Class B, Class C and Class M shares are estimated to be [ ],
respectively, absent such waiver or reimbursement for the fiscal year
ended September 30, 1998.
(5) The Adviser has agreed to reimburse the Mid-Cap "EDGE"(SM) Fund's operating
expenses other than Management Fees and Rule 12b-1 Fees for the amount by
which such operating expenses of Class X, Class A shares, Class B shares,
Class C shares and Class M shares exceed 2.10%, 2.70%, 3.45%, 3.45% and
2.95%, respectively, of the average net assets through the fiscal year
ended September 30, 1998. Total Fund Operating Expenses for Class X, Class
A, Class B, Class C and Class M shares are estimated to be [ ],
respectively, absent such waiver or reimbursement for the fiscal year
ended September 30, 1998.
4
<PAGE>
<TABLE>
<CAPTION>
Phoenix-Seneca Bond Fund
-----------------------------
Class X Class A
Shares Shares
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None 4.75%
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested None None
Dividends
Deferred Sales Load (as a percentage of original None None
purchase price or redemption proceeds, as
applicable)
Early Withdrawal Fee(1) 1.00% 1.00%
Exchange Fee None None
Annual Fund Operating Expenses(2)
(as a percentage of average net assets)
Management Fees 0.50% 0.50%
12b-1 Fees(3) None 0.25%
Other Expenses (After Expense Reimbursement)(4) 1.35% 1.70%
------ ------
Total Fund Operating Expenses 1.85% 2.45%
====== ======
<CAPTION>
Class B Class C Class M
Shares Shares Shares
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None None 3.50%
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested None None None
Dividends
Deferred Sales Load (as a percentage of original 5% during the first 1% during the None
purchase price or redemption proceeds, as year, decreasing 1% first year
applicable) annually to 2%
during the fourth
and fifth years;
decreasing to 0%
after the fifth year
Early Withdrawal Fee(1) 1.00% 1.00% 1.00%
Exchange Fee None None None
Annual Fund Operating Expenses(2)
(as a percentage of average net assets)
Management Fees 0.50% 0.50% 0.50%
12b-1 Fees(3) 1.00% 1.00% 0.50%
Other Expenses (After Expense Reimbursement)(4) 1.70% 1.70% 1.70%
--------------------- -------------- ------
Total Fund Operating Expenses 3.20% 3.20% 2.70%
===================== ============== ======
</TABLE>
<TABLE>
<CAPTION>
Phoenix-Seneca Real Estate
Securities Fund
-----------------------------
Class X Class A
Shares Shares
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None 4.75%
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested None None
Dividends
Deferred Sales Load (as a percentage of original None None
purchase price or redemption proceeds, as
applicable)
Early Withdrawal Fee(1) 1.00% 1.00%
Exchange Fee None None
Annual Fund Operating Expenses(2)
(as a percentage of average net assets)
Management Fees 0.85% 0.85%
12b-1 Fees(3) None 0.25%
Other Expenses (After Expense Reimbursement(5) 1.50% 1.95%
------ ------
Total Fund Operating Expenses 2.35% 3.05%
====== ======
<CAPTION>
Phoenix-Seneca Real Estate Securities Fund
------------------------------------------------------
Class B Class C Class M
Shares Shares Shares
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None None 3.50%
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested None None None
Dividends
Deferred Sales Load (as a percentage of original 5% during the first 1% during the None
purchase price or redemption proceeds, as year, decreasing 1% first year
applicable) annually to 2%
during the fourth
and fifth years;
decreasing to 0%
after the fifth year
Early Withdrawal Fee(1) 1.00% 1.00% 1.00%
Exchange Fee None None None
Annual Fund Operating Expenses(2)
(as a percentage of average net assets)
Management Fees 0.85% 0.85% 0.85%
12b-1 Fees(3) 1.00% 1.00% 0.50%
Other Expenses (After Expense Reimbursement(5) 1.95% 1.95% 1.95%
--------------------- -------------- ------
Total Fund Operating Expenses 3.80% 3.80% 3.30%
===================== ============== ======
</TABLE>
- -----------
(1) Applies only to redemptions (including by exchanges) of shares held less
than 90 days. The fee is paid to the Fund and is intended to protect
long-term investors from the cost of frequent investments and redemptions
by short-term investors. See "Redemption of Shares."
(2) As of the date of this prospectus, only the Class X and Class A Shares had
commenced operations. The percentages indicated for the other classes are
estimates and actual expenses may be more of less than the amounts shown.
(3) "12b-1 Fees" represent an asset based sales charge that, for long term
shareholders, may be higher than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers, Inc. ("NASD")
(4) The Adviser has agreed to reimburse the Bond Fund's operating expenses
other than Management Fees and Rule 12b-1 Fees for the amount by which
such operating expenses of Class X, Class A shares, Class B shares, Class
C shares and Class M shares exceed 1.85%, 2.45%, 3.20%, 3.20% and 2.70%,
respectively, of the average net assets through the fiscal year ended
September 30, 1998. Total Fund Operating Expenses for Class X, Class A,
Class B, Class C and Class M shares are estimated to be [ ],
respectively, absent such waiver or reimbursement for the fiscal year
ended September 30, 1998.
(5) The Adviser has agreed to reimburse the Real Estate Securities Fund's
operating expenses other than Management Fees and Rule 12b-1 Fees for the
amount by which such operating expenses of Class X, Class A shares, Class
B shares, Class C shares and Class M shares exceed 2.35%, 3.05%, 3.80%,
3.80% and 3.30%, respectively, of the average net assets through the
fiscal year ended September 30, 1998. Total Fund Operating Expenses for
Class X, Class A, Class B, Class C and Class M shares are estimated to be
[ ], respectively absent such waiver or reimbursement for the
fiscal year ended September 30, 1998.
5
<PAGE>
Example*:
<TABLE>
<CAPTION>
Cumulative Expenses Paid for the Period
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a hypothetical $1,000
investment assuming (1) a 5% annual return and (2) redemption at the
end of each time period:
Phoenix-Seneca Growth Fund
Class X Shares
Class A Shares
Class B Shares
Class C Shares
Class M Shares
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
Class X Shares
Class A Shares
Class B Shares
Class C Shares
Class M Shares
Phoenix-Seneca Bond Fund
Class X Shares
Class A Shares
Class B Shares
Class C Shares
Class M Shares
Phoenix-Seneca Real Estate Securities Fund
Class X Shares
Class A Shares
Class B Shares
Class C Shares
Class M Shares
</TABLE>
<TABLE>
<CAPTION>
Cumulative Expenses Paid for the Period
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on the same $1,000
investment assuming no redemption at the end of each period:
Phoenix-Seneca Growth Fund
Class X Shares
Class A Shares
Class B Shares
Class C Shares
Class M Shares
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
Class X Shares
Class A Shares
Class B Shares
Class C Shares
Class M Shares
Phoenix-Seneca Bond Fund
Class X Shares
Class A Shares
Class B Shares
Class C Shares
Class M Shares
Phoenix-Seneca Real Estate Securities Fund
Class X Shares
Class A Shares
Class B Shares
Class C Shares
Class M Shares
</TABLE>
*The purpose of the table above is to help the investor understand the
various costs and expenses that the investor will bear directly or indirectly.
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown. See
"Management of the Funds," "Distribution Plans" and "How to Buy Shares."
6
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights covering the periods from commencement
of operations of each Fund through September 30, 1997 have been audited by
Deloitte & Touche LLP, independent public accountants, whose report thereon
appears in the Funds' annual report. The financial statements and financial
highlights are incorporated by reference into the Statement of Additional
Information. The annual report contains additional performance information and
will be made available upon request and without charge.
Phoenix-Seneca Funds--Class "X" (Institutional) Shares
(selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Real Estate
Bond Fund Securities Fund
Year Period Year Period
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1997 1996* 1997 1996*
--------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net Asset Value at Beginning of Period ... $ 10.09 $ 10.00 $ 11.10 $ 10.00
---------- ---------- ----------- ----------
Income from Investment Operations:
Net Investment Income(1) ............... 0.62 0.31 0.13 0.13
Net Realized and Unrealized Gain on
Investments ........................... 0.47 0.08 3.77 1.10
---------- ---------- ----------- ----------
Total from Investment Operations ...... 1.09 0.39 3.90 1.23
---------- ---------- ----------- ----------
Distributions to Shareholders from
Net Investment Income .................. (0.69) (0.30) (0.28) (0.13)
Net Realized Gains ..................... (0.02) -- (0.01) --
---------- ---------- ----------- ----------
Total Distribution ..................... (0.71) (0.30) (0.29) (0.13)
---------- ---------- ----------- ----------
Net Asset Value at End of Period ......... $ 10.47 $ 10.09 $ 14.71 $ 11.10
========== ========== =========== ==========
Total Return(2) ........................ 11.26% 4.02% 35.44% 12.39%
Ratios & Supplemental Data
Net Assets at End of Period ............ $8,922,161 $3,926,664 $28,192,515 $1,073,080
Ratio of Operating Expenses to Average
Net Assets(3) ........................... 1.53% 0.56%(3) 1.99% 1.00%(3)
Ratio of Operating Expenses to Average Net
Assets(4) .............................. 3.41% 9.31%(3) 1.99% 53.04%(3)
Ratio of Net Investment Income
(Loss) to Average Net Assets ............ 6.31% 7.54%(3) 2.38% 4.39%(3)
Portfolio Turnover Rate .................. 99.68% 52.82% 75.68% 30.70%
Average Commission Rate(5) ............... N/A N/A $ 0.0559 $ 0.0564
<CAPTION>
Mid-Cap
Growth Fund "EDGE"(SM) Fund
---------------------------------- ---------------------------------
Year Period Year Period
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1997 1996* 1997 1996*
--------------- ------------------ --------------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value at Beginning of Period ... $ 13.74 $ 10.00 $ 14.97 $ 10.00
----------- ----------- ------------ ----------
Income from Investment Operations:
Net Investment Income(1) ............... 0.03 0.03 (0.17) 0.01
Net Realized and Unrealized Gain on
Investments ........................... 3.50 3.71 1.84 4.96
----------- ----------- ------------ ----------
Total from Investment Operations ...... 3.53 3.74 1.67 4.97
----------- ----------- ------------ ----------
Distributions to Shareholders from
Net Investment Income .................. (0.07) -- (0.07) --
Net Realized Gains ..................... (0.77) -- (0.10) --
----------- ----------- ------------ ----------
Total Distribution ..................... (0.84) -- (0.17) --
----------- ----------- ------------ ----------
Net Asset Value at End of Period ......... $ 16.43 $ 13.74 $ 16.47 $ 14.97
=========== =========== ============ ==========
Total Return(2) ........................ 27.27% 37.40% 11.39% 49.70%
Ratios & Supplemental Data
Net Assets at End of Period ............ $34,092,888 $12,919,525 $9,390,224 $7,427,656
Ratio of Operating Expenses to Average
Net Assets(3) ........................... 1.52% 0.81%(3) 1.74% 0.90%(3)
Ratio of Operating Expenses to Average Net
Assets(4) .............................. 1.52% 3.49%(3) 2.77% 5.73%(3)
Ratio of Net Investment Income
(Loss) to Average Net Assets ............ 0.31% 0.76%(3) (0.97)% 0.27%(3)
Portfolio Turnover Rate .................. 145.69% 87.66% 283.60% 72.34%
Average Commission Rate(5) ............... $ 0.0595 $ 0.0598 $ 0.0580 $ 0.0595
</TABLE>
* The Growth, Mid-Cap "EDGE"SM, Bond, and Real Estate Securities Funds
commenced investment operations on March 8, 1996, March 8, 1996, March 7,
1996, and March 12, 1996, respectively.
(1) Net investment income/loss is after waiver of certain fees and
reimbursement of certain expenses by the Investment Manager. If the
Investment Manager had not waived fees and reimbursed expenses, net
investment income (loss) per share would have been as follows for the year
ended September 30, 1997 and the period ended September 30, 1996,
respectively: $0.47 and $(0.05) for the Bond Fund; $0.13 and $(1.45) for
the Real Estate Securities Fund; $0.03 and $(0.09) for the Growth Fund;
$(0.33) and $(0.19) for the Mid-Cap "Edge"(SM) Fund.
(2) Total return represents total return for the period indicated. The total
return would have been lower if certain fees and expenses had not been
waived or reimbursed by the Investment Manager.
(3) Annualized.
(4) The Investment Manager had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been as
indicated.
(5) The average commission paid is applicable for the Funds that invest greater
than 10% of average net assets in equity securities transactions on which
commissions are charged.
7
<PAGE>
Phoenix-Seneca Funds--Class "A" (Administrative) Shares
(selected data for a share outstanding throughout the indicated period)
<TABLE>
<CAPTION>
Real Estate
Bond Fund Securities Fund
--------------- ------------------------------
Period Year Period
Ended Ended Ended
September 30, September 30 September 30,
1996 1997 1996*
--------------- -------------- ---------------
<S> <C> <C> <C>
Net Asset Value at Beginning of Period $ 10.00 $ 11.08 $ 10.00
---------- ---------- ----------
Income from Investment Operations:
Net Investment Income(1) ............... 0.29 0.03 0.13
Net Realized and Unrealized Gain on
Investments ........................... 0.09 3.78 1.08
---------- ---------- ----------
Total from Investment Operations ...... 0.38 3.81 1.21
---------- ---------- ----------
Distributions to Shareholders from
Net Investment Income .................. (0.29) (0.20) (0.13)
In Excess of Net Investment Income ... -- -- --
Net realized gains ..................... -- (0.01) --
---------- ---------- ----------
Total distribution .................. (0.29) (0.21) (0.13)
---------- ---------- ----------
Net Asset Value at End of Period ...... $ 10.09 $ 14.68 $ 11.08
========== ========== ==========
Total Return(2) ........................ 3.86% 34.54% 12.22%
Ratios & Supplemental Data
Net Assets at End of Period ............ $ 195,930 $3,175,932 $ 222,483
Ratio of Operating Expenses to Average
Net Assets(3) ........................ 1.21%(3) 2.91% 1.65%(3)
Ratio of Operatiang Expenses to Average
Net Assets(3)(4) ..................... 39.23% 3.79% 73.01%
Ratio of Net Investment Income (Loss) to
Average Net Assets(3) .................. 6.46% 1.37% 4.61%
Portfolio Turnover Rate ............... 52.82% 75.68% 30.70%
Average Commission Rate(5) ............ N/A $ 0.0559 $ 0.0564
<CAPTION>
Mid-Cap
Growth Fund "Edge"(SM) Fund
------------------------------- ---------------------------------
Year Period Year Period
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1997 1996* 1997 1996*
--------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value at Beginning of Period $ 13.63 $ 10.00 $ 14.94 $ 10.00
------------ ----------- ------------ -----------
Income from Investment Operations:
Net Investment Income(1) ............... (0.08) -- (0.25) (0.01)
Net Realized and Unrealized Gain on
Investments ........................... 3.50 3.63 1.90 4.95
------------ ----------- ------------ -----------
Total from Investment Operations ...... 3.42 3.63 1.65 4.94
------------ ----------- ------------ -----------
Distributions to Shareholders from
Net Investment Income .................. -- -- -- --
In Excess of Net Investment Income ... -- -- -- --
Net realized gains ..................... (0.77) -- (0.10) --
------------ ----------- ------------ -----------
Total distribution .................. (0.77) -- (0.10) --
------------ ----------- ------------ -----------
Net Asset Value at End of Period ...... $ 16.28 $ 13.63 $ 16.49 $ 14.94
============ =========== ============ ===========
Total Return(2) ........................ 26.51% 36.30% 11.25% 49.30%
Ratios & Supplemental Data
Net Assets at End of Period ............ $6,013,427 $ 466,401 $2,419,475 $ 1,355,493
Ratio of Operating Expenses to Average
Net Assets(3) ........................ 2.48% 1.46%(3) 2.37% 1.55%(3)
Ratio of Operatiang Expenses to Average
Net Assets(3)(4) ..................... 2.63% 14.01%(3) 4.32% 9.73%(3)
Ratio of Net Investment Income (Loss) to
Average Net Assets(3) .................. (0.62)% 0.16%(3) (1.60)% (0.46)%(3)
Portfolio Turnover Rate ............... 145.69% 87.66% 283.60% 72.34%
Average Commission Rate(5) ............ $ 0.0595 $ 0.0598 $ 0.0580 $ 0.0595
</TABLE>
* The Growth, Mid-Cap "EDGE"SM, Bond, and Real Estate Securities Funds
commenced investment operations on March 8, 1996, March 8, 1996, March 7,
1996 and March 12, 1996, respectively.
** As of December 26, 1996, the Bond Administrataive Shares merged with Bond
Institutional Shares.
(1) Net investment income (loss) is after waiver of certain fees and
reimbursement of certain expenses by the Investment Manager. If the
Investment Manager had not waived fees and reimbursed expenses, net
investment income/loss per share would have been as follows for the year
ended September 30, 1997 and the period ended September 30, 1996,
respectively: $(0.09) and $(0.34) for the Growth Fund; $(0.55) and $(0.20)
for Mid-Cap "Edge"(SM) Fund; $(0.04) and $(1.96) for the Real Estate
Securities Fund and $(1.41) for the Bond Fund for the period ended
September 30, 1996.
(2) Total return represents total return for the period indicated. The total
return would have been lower if certain fees and expenses had not been
waived or reimbursed by the Investment Manager.
(3) Annualized.
(4) If the Investment Manager had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been as
indicated.
(5) The average commission paid is applicable for the Funds that invest greater
than 10% of average net assets in equity securities transactions on which
commissions are charged.
8
<PAGE>
PERFORMANCE INFORMATION
Each Fund may, from time to time, include its yield and total return in
advertisements or reports to shareholders or prospective investors. Both yield
and total return figures are computed separately for each Class of Shares of
each Fund in accordance with formulas specified by the Securities and Exchange
Commission and are based on historical earnings and are not intended to
indicate future performance.
The yield of each Fund will be computed by dividing the Fund's net
investment income over a 30-day period by an average value of invested assets
(using the average number of shares entitled to receive dividends and the
maximum offering price per share at the end of the period), all in accordance
with applicable regulatory requirements. Such amount will be compounded for six
months and then annualized for a twelve-month period to derive the Fund's
yield.
Standardized quotations of average annual total return for each Class of
Shares of a Fund will be expressed in terms of the average annual compound rate
of return of a hypothetical investment in such Class of Shares over a period of
1, 5 and 10 years (or up to the life of the Fund). Standardized total return
quotations reflect the deduction of a proportional share of each class's
expenses (on an annual basis), deduction of the maximum initial sales load in
the case of Class A and M Shares and the maximum contingent deferred sales
charge applicable to a complete redemption of the investment in the case of
Class B and C Shares, and assume that all dividends and distributions are
reinvested when paid. Each Fund may also quote supplementally a rate of total
return over different periods of time by means of aggregate, average, and
year-by-year or other types of total return figures. In addition, each Fund may
from time to time publish materials citing historical volatility for shares of
that Fund.
Each Fund may from time to time include in advertisements containing total
return the ranking of those performance figures relative to such figures for
groups of mutual funds having similar investment objectives as categorized by
ranking services such as Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Weisenberger Financial Services, Inc. and Morningstar, Inc.
Additionally, each Fund may compare that Fund's performance results to other
investment or savings vehicles (such as certificates of deposit) and may refer
to results published in various publications such as Changing Times, Forbes,
Fortune, Money, Barrons, Business Week, Investor's Daily, Stanger's Mutual Fund
Monitor, The Stanger Register, Stanger's Investment Adviser, The Wall Street
Journal, The New York Times, Consumer Reports, Registered Representative,
Financial Planning, Financial Services Weekly, Financial World, U.S. News and
World Report, Standard & Poor's The Outlook, and Personal Investor. The Funds
may from time to time illustrate the benefits of tax deferral by comparing
taxable investments to investments made through tax-deferred retirement plans.
The total return may also be used to compare the performance of each Fund
against certain widely acknowledged outside standards or indices for stock and
bond market performance, such as the S&P 500, S&P Mid-Cap Index, Dow Jones
Industrial Average, Europe Australia Far East Index (EAFE), Consumer Price
Index, Lehman Brothers Corporate Index and Lehman Brothers T-Bond Index. The
S&P 500 is a commonly quoted measure of stock market performance and represents
common stocks of companies of varying sizes segmented across 90 different
industries which are listed on the New York Stock Exchange, the American Stock
Exchange or traded over the NASDAQ National Market System.
Advertisements, sales literature and other communications may contain
information about a Fund or Adviser's current investment strategies and
management style. Current strategies and style may change to allow a Fund to
respond quickly to changing market and economic conditions. From time to time,
a Fund may include specific portfolio holdings or industries in such
communications. To illustrate components of overall performance, a Fund may
separate its cumulative and average annual returns into income and capital
gains components.
Performance information for a Fund reflects only the performance of a
hypothetical investment in Class X, Class A, Class B, Class C or Class M Shares
of the Fund during the particular time period in which the calculations are
based. Performance information should be considered in light of each Fund's
investment objectives and policies, characteristics and quality of its
portfolio, and the market conditions during the given time period, and should
not be considered as a representation of what may be achieved in the future.
For a description of the methods used to determine total return for each Fund,
see the Statement of Additional Information ("SAI").
The Trust's Annual Report, available upon request and without charge, will
contain a discussion of the performance of each Fund and a comparison of that
performance to a securities market index.
MANAGEMENT
Overall responsibility for the management and supervision of the Trust and
the Funds rests with the Trustees of Phoenix-Seneca Funds (the "Trustees").
PIC's services under its Investment Management Agreement and PEPCO's services
under the Administrative Services Agreement with the Trust are subject to the
direction of the Trustees. Seneca's services under the Subadvisory Agreement
are subject to the direction of both the Trustees and PIC.
Phoenix Investment Counsel, Inc. ("PIC") is the investment adviser for the
Phoenix-Seneca Funds pursuant to an Investment Advisory Agreement. PIC is
located at 56 Prospect Street, Hartford, Connecticut 06115-0480. PIC was
originally organized in 1932 as John P. Chase, Inc. In addition to the
Phoenix-Seneca Funds, PIC also serves as investment adviser to other entities
including Phoenix Duff & Phelps Institutional Mutual Funds (except Enhanced
Reserves Portfolio and Real Estate Equity Securities Portfolio), Phoenix Series
Fund, Phoenix Multi-Portfolio Fund (all portfolios other than the
9
<PAGE>
Real Estate Securities Portfolio), Phoenix Strategic Allocation Fund, Inc.,
Phoenix Strategic Equity Series Fund (all funds except Phoenix Equity
Opportunities Fund), Phoenix Equity Series Fund, Phoenix Investment Trust 97
and The Phoenix Edge Series Fund (all series other than the Real Estate
Securities Series and Aberdeen New Asia Series) and as subadviser to the
SunAmerica Series Trust, among other investment advisory clients. As of
December 31, 1996, PIC had approximately $18.2 billion in assets under
management.
All of the outstanding stock of PIC is owned by Phoenix Equity Planning
Corporation ("PEPCO"), a subsidiary of Phoenix Duff & Phelps Corporation.
Phoenix Home Life is a majority shareholder of Phoenix Duff & Phelps
Corporation. Phoenix Home Life is in the business of writing ordinary and group
life and health insurance and annuities. Its principal offices are located at
One American Row, Hartford, Connecticut 06115. Phoenix Duff & Phelps
Corporation is a New York Stock Exchange traded company that provides various
financial advisory services to institutional investors, corporations and
individuals through operating subsidiaries.
The Funds' investment subadviser is Seneca Capital Management, LLC
("Seneca"). Its principal offices are located at 909 Montgomery Street, San
Francisco, California 94133. Under a Subadvisory Agreement with PIC and the
Trust, Seneca's duties to each Fund include: (1) supervising and managing the
investments of that Fund and directing the purchase and sale of its
investments; and (2) ensuring that investments follow the investment objective,
strategies, and policies of that Fund and comply with government regulations.
PEPCO has also entered into an Administrative Services Agreement with the
Trust under which it performs, or arranges for the performance of, the
following services, among others: (1) providing the Funds with administrative
and clerical services; (2) overseeing the maintenance of the Funds' books and
records by the Funds' custodian; (3) preparing the Funds' income tax returns;
(4) registering the Funds' shares with those states and other jurisdictions
where shares are offered or sold; (5) initial preparation and filing of proxy
materials and reports to Fund shareholders and the Securities and Exchange
Commission ("SEC") and (6) providing the personnel and all necessary office
equipment to perform the foregoing services. PEPCO has entered into an
agreement with State Street Bank and Trust Company ("State Street"), 1776
Heritage Drive, North Quincy, Massachusetts 01701, pursuant to which State
Street will perform substantially all of those services.
For more information about the Adviser, Subadviser, Administrator and
their functions, see "Investment Adviser Subadviser and Administrator."
The Custodian and Transfer Agent
The custodian of the assets of the Trust is Investors Fiduciary Trust
Company at 127 West 10th Street, Kansas City, Missouri 64105. The Trust has
authorized the custodian to appoint one or more subcustodians for the assets of
the Trust held outside the United States.
Pursuant to a Transfer Agent and Service Agreement with the Phoenix-Seneca
Funds, PEPCO acts as transfer agent for the Trust (the "Transfer Agent") for
which it is paid $19.25 for daily dividend accounts and $14.95 for non-daily
dividend shareholder accounts plus out-of-pocket expenses. The Transfer Agent
is authorized to engage sub-agents to perform certain shareholder servicing
functions from time to time for which such agents shall be paid a fee by PEPCO.
THE PHOENIX-SENECA FUNDS
IN DETAIL
Fund Objectives, Strategies and Policies. The investment objectives,
strategies, and policies of each Fund are described below. There can be no
assurance that these objectives will be met. The "Investment Practices and Risk
Considerations" section describes in greater detail some specific risks of the
types of securities in which the Funds invest and practices in which the Funds
may engage.
Fundamental Policies. An investment policy that a Fund has adopted as
"fundamental" may be changed only with the approval of a majority of
shareholders. Most of the strategies and policies described below and described
in the SAI are not fundamental. This means those strategies and policies may be
changed by the Trustees without shareholder approval. See "Investment
Restrictions" in the SAI for more information concerning the fundamental and
non-fundamental investment policies of the Funds.
PHOENIX-SENECA GROWTH FUND and
PHOENIX-SENECA MID-CAP
"EDGE"(SM) FUND
Investment Objective: Capital appreciation; production of income is
incidental. The Phoenix-Seneca Growth Fund seeks appreciation greater than that
of the S&P 500 Index and the Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund seeks
appreciation greater than that of the S&P Mid-Cap Index.
Investment Strategies and Policies. Each of these Funds invests primarily
in common stocks of growth companies that meet certain fundamental standards
and that the Investment Adviser believes have the potential for above average
market appreciation. These Funds generally invest at least 65% of their assets
in common stocks. The Phoenix-Seneca Growth Fund has no limitations as to the
market capitalizations of companies in which it invests, but generally focuses
a portion of its portfolio on large, well-known companies, many with market
capitalizations in excess of $5 billion, that have an established history of
profitability and/or dividend payment. The Phoenix-Seneca Mid-Cap "EDGE"(SM)
Fund generally invests at least 65% of its assets in companies with market
capitalizations between $500 million and $5 billion, although it may at times
have significant investments in companies with higher or lower market
capitalizations. At times, both Funds may invest in some of the same
securities.
In evaluating companies' potential for market appreciation, the Investment
Adviser seeks companies that, among other
10
<PAGE>
things, it believes will demonstrate greater long-term earnings growth than the
average company included in, for the Phoenix-Seneca Growth Fund, the S&P 500
or, for the Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund, the S&P Mid-Cap Index. This
approach is based on the belief that growth in a company's earnings will
correlate with growth in the price of its stock. The Investment Adviser seeks
to identify companies that have the most attractive earnings prospects and
favorable valuations. Although this analysis stresses the long-term potential
for earnings growth, these Funds may buy securities in anticipation of
relatively short-term price gains and may engage in other opportunistic trading
activities.
These Funds may also invest in preferred stocks, warrants, and debt
instruments, including bonds convertible into common stocks. When the
Investment Adviser determines that market conditions warrant, the Funds may
invest without limit in cash and cash equivalents for temporary defensive
purposes, although this is not expected to occur routinely. These Funds may
engage in hedging transactions using, among other things, options and futures
contracts. See "Investment Practices and Risk Considerations--Options, Futures,
and Other Derivatives."
These Funds may invest as much as 20% of their assets in foreign
securities if those securities meet the same criteria for the Funds'
investments in general. At times the Funds may have no foreign investments.
Generally, the Funds' foreign investments will be made through American
depositary receipts ("ADRs") or stocks of foreign issuers that are traded
directly on U.S. securities exchanges or in the Nasdaq Stock Market.
To enable the Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund to invest effectively
in companies with small- to medium-sized market capitalizations, the Trust
currently does not expect to offer shares of that Fund to the public at any
time when the net assets of the Fund exceed $500 million. This limit is subject
to change.
As these Funds invest primarily in common stocks, their investments are
subject to stock market price volatility. The Funds are intended for investors
who have the perspective, patience, and financial ability to take on
above-average stock market volatility in pursuit of long-term capital growth.
Prices of securities issued by medium-capitalization companies are often more
volatile than those of large, well-established companies, in part because of
the relatively fewer shares available and the potential for developments in a
smaller company's business to have a relatively greater impact on its earnings
and revenues than developments in the business of larger companies. In
addition, the risk of insolvency (with attendant losses to shareholders) is
greater for smaller companies than for larger companies. As a result, because
of its investment focus on companies with medium-capitalizations, the
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund's performance can be expected to be more
volatile than that of the Phoenix-Seneca Growth Fund.
PHOENIX-SENECA BOND FUND
Investment Objective: High total return--both current income and capital
appreciation. This Fund seeks to outperform the Lehman Brothers
Government/Corporate Index.
Investment Strategies and Policies. This Fund invests in a diversified
portfolio of corporate bonds and other debt securities. It normally maintains a
dollar-weighted average maturity of between two and ten years, although
maturities of individual securities may be significantly longer. The Fund also
generally seeks to maintain a dollar-weighted average duration of between two
and eight years. The Investment Adviser actively manages this Fund's portfolio,
adjusting the weighted average portfolio maturity in response to expected
changes in interest rates. During periods of rising interest rates, the
Investment Adviser may shorten the portfolio's average maturity to reduce the
effect of bond price declines on the Fund's net asset value. Conversely, when
interest rates are falling and bond prices are rising, the Fund may lengthen
its average maturity. The Investment Manager also considers bond performance in
particular industry sectors and individual issue characteristics and may engage
in opportunistic trading activities.
The Fund's investments may include securities issued or guaranteed by the
U.S. Government or its agencies and instrumentalities, publicly-traded and
privately-placed corporate securities, and municipal obligations. The Fund may
also invest in mortgage-backed securities issued by various federal agencies
and government-sponsored enterprises and in other mortgage-related or
asset-backed securities. Investments in mortgage-related and other asset-backed
securities can be subject to the risk of early repayment of principal. For more
information, see "Investment Practices and Risk Considerations--Mortgage-Backed
and Asset-Backed Securities" and the SAI.
"Duration" is an important criterion in selecting securities for this
Fund. Duration is a measure of the expected life of a debt security that was
developed as a more precise alternative to the concept of "term to maturity."
Traditionally, a debt security's "term to maturity" has been used as a proxy
for the sensitivity of the security's price to changes in interest rates (the
"interest rate risk" or "volatility" of the security). But "term to maturity"
measures only the time until a security provides its final payment, taking no
account of the pattern of payments before maturity. Duration is a measure of
the expected life of a debt security on a present-value basis, incorporating a
bond's yield, coupon interest payments, final maturity, and call features into
one measure. It takes the length of the time intervals between the present time
and the time that interest and principal payments are scheduled or, in the case
of a callable bond, expected to be received, and weights them by the present
values of the cash to be received at each future time. For any debt security
with interest payments occurring before the payment of principal, duration is
always less than maturity. In general, all other things being equal, the lower
the
11
<PAGE>
stated or coupon rate of interest on a security, the longer the security's
duration. Conversely, the higher the stated or coupon rate of interest, the
shorter the duration.
There are situations where even the standard duration calculation does not
properly reflect the interest rate exposure of a security. For example,
floating- and variable-rate securities often have final maturities of ten or
more years. However, their interest rate exposure corresponds to the frequency
of the coupon reset. With mortgage pass-through securities, the stated final
maturity is generally 30 years, but currently expected prepayment rates are
more critical in determining the securities' interest rate exposure.
The Fund invests at least 65% of its assets in investment-grade bonds (i.e.,
rated Baa or higher by Moody's Investors Service ("Moody's") or BBB or higher
by Standard & Poor's Corporation ("S&P")), although it may invest to a lesser
extent in securities rated as low as B by Moody's or S&P. The Fund may also
invest in unrated securities of similar qualities, as determined by the
Investment Adviser.
In general, lower-rated bonds, which will be a lesser component of this
Fund, offer higher returns than investment-grade bonds, but they also carry
higher risks. These can include: a) a higher risk of insolvency, especially
during economic downturns; b) a lower degree of liquidity; and c) greater price
volatility. The Fund will not purchase below-investment-grade securities when
the purchase would increase the Fund's holdings of such securities to 35% or
more of the Portfolio's value. If the Fund owns a security that was
"investment-grade" when the Fund acquired it but the security is downgraded by
a ratings service, the Fund may or may not choose to sell the security. This
depends on the Investment Adviser's assessment of the issuer's prospects. See
"General Information--Summary of Bond Ratings" for a description of bond
ratings and "Investment Practices and Risk
Considerations--Below-Investment-Grade Securities" for a discussion of some of
the risks involved in investments in low-rated bonds.
The Fund may invest as much as 20% of its assets in securities of issuers
organized in jurisdictions outside the United States if they meet the same
criteria described above for the Fund's investments in general. At times the
Fund may have no foreign investments. See "Investment Practices and Risk
Considerations--Foreign Securities."
This Fund ordinarily invests in common stock only as a result of
conversion of bonds, exercise of warrants, or extraordinary business events.
PHOENIX-SENECA REAL ESTATE SECURITIES FUND
Investment Objective: High total return, both current income and long-term
capital appreciation, through investments in REITs and real estate-related
securities.
Investment Strategies and Policies. This Fund generally invests at least
65% of its assets in equity or debt securities of issuers that are principally
engaged in businesses in the United States real estate industry or in related
businesses. An issuer is considered "principally" engaged in such a business if
at least 50% of the issuer's assets, gross income, or net income are
attributable to ownership, construction, management, or sale of real estate
located in the United States, or to products or services related to the real
estate industry. Examples of issuers participating directly in the real estate
industry include equity REITs (which own real estate directly), mortgage REITs
(which make short-term construction or real estate development loans or invest
in long-term mortgages or mortgage pools), other companies whose assets consist
substantially of real property and interests in real property, real estate
brokers and developers and companies that manage real estate. Issuers are not
considered to be participating in the real estate industry simply because they
own significant amounts of real estate if such ownership is incidental to
another business unrelated to real estate. Examples of issuers whose products
or services are related to the real estate industry include manufacturers and
distributors of building supplies and financial institutions that originate or
service mortgage loans.
This Fund generally focuses on investments in common stocks but also may
invest in debt securities of REITs and other real estate-related issuers,
preferred stocks, convertible securities, warrants, and publicly-traded limited
partnerships that invest in real estate. In addition, the Fund may invest up to
35% of its assets in equity and debt securities outside the real estate
industry or related businesses. Investments in debt securities are primarily
limited to investment-grade securities; the Fund may not invest 35% or more of
its assets in securities rated lower than BBB by S&P or Baa by Moody's and
unrated debt securities that the Adviser considers to be of comparable quality.
In general, lower-rated debt securities offer higher returns than
investment-grade bonds but also carry higher risks. See "General
Information--Summary of Bond Ratings" for a description of bond ratings and
"Investment Practices and Risk Considerations--Below-Investment Grade
Securities" for a discussion of some of the risks involved in investments in
low-rated debt securities.
This Fund is classified as a non-diversified investment company under the
Investment Company Act of 1940 (the "1940 Act"), which means that it is not
limited by that Act in the proportion of its assets it may invest in the
securities of any single issuer. The Fund does, however, comply with
diversification requirements imposed by the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment company. As a
non-diversified investment company, the Fund may invest a greater proportion of
its assets in the securities of a small number of issuers and, as a result, may
be subject to a greater risk as to portfolio securities. If the Fund takes
concentrated positions in a small number of issuers, its return may fluctuate
more than that of a diversified company as a result of changes in the price of
any of those securities.
This Fund does not make direct investments in real estate. However,
because it may invest in debt securities of issuers
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primarily engaged in real estate ownership, it is possible that the Fund could
become the direct owner of real estate as a result of a default on those
securities. Rental income or income from the disposition of such assets could
adversely affect the Fund's status as a regulated investment company for
Federal income tax purposes. See "Income Tax Considerations."
INVESTMENT PRACTICES
AND RISK CONSIDERATIONS
Portfolio Turnover. The rate of portfolio turnover generally is not
important in investment decisionmaking for any of the Funds. Decisions to buy
and sell securities are based on the anticipated contribution of a security to
achievement of a Fund's investment objectives. Sales can result from, for
example, securities reaching a price objective, anticipated changes in interest
rates, changes in the creditworthiness of issuers, or general financial or
market developments. The Funds may sell one security and simultaneously buy
another of comparable quality and may simultaneously buy and sell the same
security to take advantage of short-term differences in bond yields. Funds may
buy individual securities in anticipation of relatively short-term price gains.
A Fund's liquidity needs may also necessitate sales. Because these factors
generally are not tied to the length of time a security has been held, a
significant number of short-term transactions may result.
The total portfolio turnover rate of each Fund for the period ended
September 30, 1997, is shown in the Financial Highlights table that appears
earlier in this Prospectus. A 100% annual turnover rate would occur if all of a
Fund's securities were replaced one time during a one-year period.
While portfolio transactions are necessary to achieve a Fund's investment
objectives, a high level of turnover entails certain costs. The higher the
turnover, the higher the overall brokerage commissions, dealer mark-ups and
mark-downs, and other direct transaction costs. High turnover can also result
in acceleration of the realization of gains, which may be short-term in nature
and thus taxable to shareholders at ordinary rates. In any particular period a
Fund's turnover rate may be higher than that of other mutual funds with similar
investment objectives.
Certain tax considerations can restrict a Fund's ability to sell
securities in some circumstances when those securities have been held for less
than three months. See "Income Tax Considerations" and the SAI.
Repurchase Agreements. Each Fund may enter into repurchase agreements. In
a repurchase agreement, a Fund buys a security and the seller simultaneously
agrees to repurchase the security on a specified future date at an agreed-upon
price. The repurchase price reflects an agreed-upon interest rate during the
time the Fund's money is invested in the security. Because the security
constitutes collateral for the repurchase obligation, a repurchase agreement
can be considered a collateralized loan. The Fund's risk is the ability of the
seller to pay the agreed-upon price on the delivery date. If the seller is
unable to make a timely repurchase, the Fund could experience delays in the
receipt of expected proceeds, suffer a loss in principal or current interest,
or incur costs in liquidating the collateral. The Trustees have established
criteria to evaluate the creditworthiness of parties with whom the Funds may
enter into repurchase agreements.
The securities underlying repurchase agreements are not subject to the
average weighted maturity or duration restrictions otherwise applicable to the
Phoenix-Seneca Bond Fund's investments. The Funds will limit repurchase
agreements to securities issued by the United States Government, its agencies,
and its instrumentalities.
Reverse Repurchase Agreements; Borrowing. Funds may enter into reverse
repurchase agreements and "dollar roll" transactions with selected banks, U.S.
securities dealers and other financial institutions. In a reverse repurchase
agreement, a Fund sells securities and simultaneously agrees to repurchase them
at a price that reflects an agreed-upon rate of interest. A dollar roll
transaction is similar to a reverse repurchase agreement, except that the
counterparty is not required to deliver the same security to the Fund that it
received (or had the right to receive) from the Fund, but may deliver a
substantially identical security to the Fund upon the closing of the
transaction. Funds will use the proceeds of reverse repurchase agreements and
dollar rolls to make other investments that either mature or are subject to an
agreement to resell at or before the date the reverse repurchase agreement or
dollar roll expires. When a Fund enters into a reverse repurchase agreement or
dollar roll transaction, it will maintain a segregated account consisting of
cash or high-quality liquid debt securities in an amount at least equal to its
repurchase obligation under the agreement. Reverse repurchase agreements and
dollar rolls are a form of leverage that increases the opportunity for gain and
the risk of loss for a given change in market value. There may also be a risk
of delay in the recovery of the underlying securities if the counterparty
experiences financial difficulties.
Each Fund may borrow money from banks and, to secure borrowings, may
mortgage or pledge securities. A Fund may incur such borrowings, together with
amounts borrowed through reverse repurchase agreements and dollar rolls, up to
one-third of the Fund's net assets. These limitations on borrowings are a
fundamental policy of the Funds. If a Fund borrows money, its share price may
be subject to greater fluctuation until the borrowing is paid off.
Below-Investment-Grade Securities. No Fund may invest 35% or more of its
net assets in debt securities that are rated below "investment grade" by S&P or
Moody's. A Fund will not invest in securities rated lower than B by S&P or
Moody's or unrated securities whose quality the Investment Adviser determines
to be lower than those ratings. "Investment grade" refers to securities rated
BBB or better by S&P or Baa or better by Moody's. Below-investment-grade
securities (so-called "junk bonds") generally pay higher current income but may
be considered speculative because they present a greater risk that the issuer
will not be able to make interest or principal
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payments on time. If this happens, a Fund would lose income and could expect a
decline in the market value of the securities affected. Prices of such
securities tend to react more to prevailing economic and industry conditions,
issuers' unique financial situations, and the bonds' coupon rates than to small
changes in prevailing interest rates. However, during an economic downturn or a
period of rising interest rates, issuers of these securities, generally
highly-leveraged companies, can have trouble making principal and interest
payments, meeting projected business goals, and obtaining additional financing.
Each Fund may also invest in unrated debt securities. Unrated debt
securities, while not necessarily of lower quality than rated securities, may
not have as broad a market. Because of the size and perceived demand for an
issue, among other factors, certain issuers may decide not to pay the cost of
getting a rating for their bonds. The Investment Adviser will analyze the
creditworthiness of the issuer of an unrated security, as well as any financial
institution or other party responsible for payments on the security. Unrated
debt securities are included in Phoenix-Seneca Bond Fund's 35% limit on below-
investment-grade debt unless the Investment Adviser determines those securities
to be the equivalent of investment-grade securities. See "General
Information--Summary of Bond Ratings" and the SAI for a description of bond
rating categories.
REITs and Other Real Estate-Related Investments. The value of investments
in issuers that hold real estate, particularly equity REITs, may be affected by
changes in the values of real properties owned by the issuers, and the value of
investments in mortgage REITs may also be affected by the quality of the credit
they have extended. Investments in businesses related to the real estate
industry may also be affected by changes in the value of real estate generally
or in particular geographical areas in which the businesses operate primarily.
Interest rates can be a significant factor both in real estate values and in
related businesses. Increases in interest rates can cause or contribute to
declines in real estate prices and can cause slowdowns in such related
businesses as real estate sales and construction.
Investing in REITs, particularly equity REITs, may also involve risks
similar to those associated with small-capitalization companies, in that their
securities may trade less frequently and in a lower volume than those of
larger-capitalization companies and may be subject to abrupt and large price
movements. At times, the market price of a REIT's securities may be less than
the value of its investments in real estate. REITs often are not diversified
and are therefore subject to the risk of financing a limited number of projects
or properties. REITs depend on the skills of their management and are often
heavily dependent on cash flow from properties. Mortgage REITs are subject to
risks of default by borrowers. Some REITs are "self-liquidating"--i.e., their
existence is limited to a specific term--and present the risk of liquidating at
a time that is not economically opportune for their investors. REITs also run
the risks of failing to qualify for special tax treatment under the Code and of
maintaining exemptions under the 1940 Act.
Delayed Delivery Transactions. Funds may sometimes purchase or sell
securities on a when-issued or forward commitment basis. In such "delayed
delivery" transactions, the price of securities is established at the time the
commitment to purchase or sell is made. Delivery of and payment for these
securities typically occur up to 90 days after the commitment is made. The
market price of a security at the time of delivery may be higher or lower than
the price contracted for, and there is some risk the transaction may not be
consummated. When a Fund makes a commitment to buy securities on a forward
commitment or when-issued basis, it will maintain a segregated account
consisting of cash or high-quality liquid debt securities in an amount at least
equal to the commitments.
Short Sales. A Fund may sell securities that it owns or has the right to
acquire at no additional cost but does not intend to deliver to the buyer, a
practice known as selling short "against the box." These transactions allow a
Fund to hedge against price fluctuations by locking in a sale price for
securities the Fund does not wish to sell immediately, for example, to postpone
recognition of a gain or loss for federal income tax purposes or satisfy
certain tests applicable to regulated investment companies under the Code.
Subject to restrictions (if any) imposed by state law, a Fund may also sell
securities that it does not own or have the right to acquire. When a Fund does
so, it will maintain with its custodian in a segregated account cash or
high-quality liquid debt securities in an amount at least equal to the
difference between the current market value of the securities sold short and
any amounts required to be deposited as collateral with the selling broker in
connection with the short sale (not including the proceeds of the short sale).
It is currently expected that a Fund will not sell securities short if, as a
result, the total amount of all "open" short positions would exceed one-third
of the value of the Fund. This limitation may be changed at any time.
Illiquid Securities. A Fund may invest up to 15% of its net assets in
illiquid securities--securities that may not be sold within seven days at
approximately the price used in determining the Fund's net asset value.
Securities may be illiquid when they are held subject to legal or contractual
restrictions on resale, usually because they have not been registered for sale
to the general public ("restricted securities"), or when there is a limited
market for them. Repurchase agreements that mature in more than seven days are
considered illiquid securities.
Certain restricted securities that may be resold to institutional
investors pursuant to Rule 144A under the Federal Securities Act of 1933 may
not be considered illiquid if a sufficient dealer or institutional trading
market exists for them. The Investment Adviser is responsible for determining
whether such a market exists as to Rule 144A securities, and whether such
securities must be considered illiquid, under guidelines approved by the
Trustees. Institutional trading markets for Rule 144A securities are relatively
new. Liquidity of the Funds' investments could be impaired if trading markets
for these securities do not develop further or decline.
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Foreign Securities. Each Fund may invest in securities, including U.S.
dollar- or foreign currency-denominated debt securities, of foreign issuers.
Foreign equity investments are generally limited to securities traded on U.S.
exchanges or in the Nasdaq Stock Market and ADRs evidencing ownership of
foreign securities. ADR's are dollar-denominated and are issued by domestic
banks or securities firms and traded in the U.S.
Securities of foreign issuers involve different, and sometimes greater,
risks than securities of U.S. issuers. These include an increased risk of
adverse political and economic developments, and, as to certain countries, the
possibility of expropriation, nationalization or confiscatory taxation or
limitations on the removal of the funds or other assets of a Fund.
Currency exchange rates may fluctuate significantly over short periods and
can be subject to unpredictable change based on such factors as political
developments and currency controls by foreign governments. Because the Funds,
particularly the Phoenix-Seneca Bond Fund, may invest in securities denominated
in foreign currencies, they may seek to hedge foreign currency risks by
engaging in foreign currency exchange transactions. These may include buying or
selling foreign currencies on a spot basis, entering into foreign currency
forward contracts, and buying and selling foreign currency options, foreign
currency futures, and options on foreign currency futures. Many of these
activities constitute "derivatives" transactions. See "Options, Futures, and
Other Derivatives."
Lending Securities. As a way to earn additional income, each of the Funds
may lend its portfolio securities to creditworthy persons not affiliated with
the Funds. Such loans must be secured by cash collateral or by irrevocable
letters of credit maintained on a current basis in an amount at least equal to
the market value of the securities lent. Under the terms of these loans, a Fund
must continue to receive the equivalent of the interest and dividends paid by
the issuer on the securities lent and interest on the investment of the
collateral and must have the right to call the loan and obtain the securities
lent at any time on five trading days' notice. This includes the right to call
the loan to enable the Fund to exercise its voting rights. Such loans may not
exceed one-third of the lending Fund's net assets at market value. This
percentage limitation constitutes a "fundamental" policy that can be changed
only by a vote of a majority of shareholders. Lending securities to
broker-dealers and institutions could result in a loss or a delay in recovering
the Fund's securities.
Options, Futures, Swaps and Other Derivatives. The Funds may buy and write
call and put options on securities, securities indices, and foreign currencies,
and may enter into futures contracts and use options on futures contracts. The
Funds may also enter into swap agreements relating to interest rates, foreign
currencies, and securities indices and forward foreign currency contracts. All
of these may be referred to as "derivatives" transactions. The Funds may use
these techniques to hedge against changes in interest rates, foreign currency
exchange rates, changes in securities prices or other factors affecting the
value of their investments, or as part of their overall investment strategies.
Each Fund will maintain segregated accounts consisting of liquid assets, such
as cash, U.S. Government securities, or other high-grade debt securities (or,
as permitted by applicable regulations, enter into certain offsetting positions
to cover its obligations under derivatives transactions) to avoid "leveraging"
the Fund.
Gains and losses on "derivatives" transactions depend on the Investment
Adviser's ability to predict correctly the direction of interests rates,
securities prices, currency exchange rates, or other factors. Risks in the use
of these derivatives include: a) the risk that interest rates, securities
prices, or currency exchange rates or other factors affecting the value of the
Fund's investments do not move in the directions being hedged against, in which
case the Fund will have incurred the cost of the derivative (either its
purchase price or, by writing an option, losing the opportunity to profit from
increases in the value of the securities covered) with no tangible benefit; b)
imperfect correlation between the price of derivatives and the movements of the
securities prices, interest rates or currency exchange rates being hedged; c)
the possible absence of a liquid secondary market for any particular derivative
at any time; d) the potential loss if the counterparty to the transaction does
not perform as promised; and e) the possible need to defer closing out certain
positions to avoid adverse tax consequences. In particular, the risk of loss
from certain types of futures transactions is potentially unlimited. More
information on derivatives is contained in the SAI.
Mortgage-Backed and Asset-Backed Securities. Each Fund may invest in
mortgage-backed and other asset-backed securities. The Phoenix-Seneca Bond Fund
and the Phoenix-Seneca Real Estate Securities Fund are more likely to invest in
such securities than the other Funds. Mortgage-backed securities represent
direct or indirect participations in, or are secured by and payable from,
mortgage loans secured by real property. They include pass-through instruments,
representing an undivided interest in a pool of mortgages, in which the holder
receives a share of all interest and principal payments from the mortgages in
the pool. For many of these securities, the U.S. government, the issuing
agency, or a private entity guarantees payment of interest and principal or
provides other forms of credit enhancement. Some mortgage pass-through
securities entitle the holders to all or a substantial portion of the interest
payments on a pool of mortgage assets ("Interest Only" securities, or "IOs")
while others entitle the holders to all or a substantial portion of the
principal payments ("Principal Only" securities or "POs"). Mortgage-backed
securities also include collateralized mortgage obligations ("CMOs"), a term
that generally includes debt instruments collateralized by mortgage loans or
mortgage pass-through securities and multi-class pass-through securities. CMO's
are generally issued in classes, each representing an obligation with a stated
maturity or final distribution date and a specific fixed or floating coupon
rate. Payments of principal and interest on the underlying mortgage assets may
be allocated among the classes in various ways, resulting in differing
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predictability of cash flows among the classes. Other asset-backed securities
apply techniques similar to those used in mortgage-backed securities to base
obligations on financial assets other than mortgages, including automobile
receivables, credit card receivables, loans to finance boats, recreational
vehicles, and mobile homes, computer, copier, railcar, and medical equipment
leases, and trade, healthcare, and franchise receivables.
Part of the cash flow of mortgage-backed or other asset-backed securities may
be from the early payoff of some of the underlying loans. The specific amount
and timing of such prepayments are difficult to predict, creating "prepayment
risk." For mortgage-related securities, prepayments are likely to increase
during periods of declining long-term interest rates because borrowers tend to
refinance when interest rates drop. In the event of very high prepayments, a
Fund may be required to invest these proceeds at a lower interest rate, causing
the Fund to earn less than if the prepayments had not occurred. Prepayments are
likely to decrease during periods of rising interest rates, causing the
expected average life of mortgage-related securities to become longer. This
variability of prepayments will tend to limit price gains when interest rates
drop and to exaggerate price declines when interest rates rise. In general, the
obligations supporting other asset-backed securities are of shorter maturities
than mortgage loans and are less likely to experience substantial prepayments.
However, the risks relating to default may be greater.
The Investment Adviser expects additional assets will be "securitized" in
the future. A Fund may invest in any such instruments or variations on them to
the extent consistent with the Fund's investment objectives and policies.
Structured Securities. The Funds may invest in debt securities, preferred
stock, or convertible securities, the principal amount, redemption terms, or
conversion terms of which are related to a specified securities or other index,
the market prices of specified securities, commodities, or other assets, or
specified foreign currency exchange rates. These securities are sometimes
referred to as "structured notes," "structured securities," or "asset-based"
securities. A Fund's investments in these securities are subject to the limits
as to quality that are applicable to debt securities generally. If a structured
security is backed by a bank letter of credit or other credit enhancement, a
Fund may take the enhancement into account in assessing the quality of the
security. The prices of structured securities have historically been subject to
high volatility and their interest or dividend rates may at times be
substantially below prevailing market rates.
Zero Coupon Bonds. Each Fund may invest in zero coupon bonds and "strips."
The Phoenix-Seneca Bond Fund is more likely to invest in such securities than
the other Funds. Zero coupon bonds do not make regular interest payments.
Instead, they are sold at a discount from face value. A single lump sum that
represents both principal and interest is paid at maturity. Strips are debt
securities whose interest coupons have been "stripped" away and traded
separately after the securities are issued, and are therefore generally
comparable to zero coupon bonds. The market value of zero coupon bonds and
strips generally is more sensitive to interest rate fluctuations than
interest-paying securities of comparable term and quality.
Variable Rate, Floating Rate, or Variable Amount Securities. Each Fund may
invest in variable rate, floating rate, or variable amount securities. These
are generally short-term unsecured obligations of private issuers. They are
generally interest-bearing notes on which the interest rate fluctuates on a
scheduled basis.
Investments in Other Investment Companies. Each Fund may invest up to 10%
of its total assets in the shares of other investment companies, but only up to
5% of its assets in any one other investment company. In addition, a Fund may
not purchase more than 3% of the securities of any one investment company.
Investments in other investment companies involve investment management,
distribution, and other fees and expenses paid by such investment companies.
These are in addition to the fees and expenses the Funds incur directly in
connection with their operations. The Funds may invest cash balances in money
market mutual funds.
Notwithstanding these limitations, the Funds reserve the right to convert
to a "master/feeder" structure at a future date. Under such a structure, one or
more "feeder" funds, such as the Funds, invest all of their assets in a
"master" fund, which, in turn, invests directly in a portfolio of securities.
If required by applicable law, the Funds will seek shareholder approval before
converting to a master/feeder structure. If the requisite regulatory
authorities determine that such approval is not required, shareholders will be
deemed, by purchasing shares, to have consented to such a conversion and no
further shareholder approval will be sought. Such a conversion is expressly
permitted under the investment objective and fundamental policies of each Fund.
Diversification. Diversifying a Fund's investment portfolio can reduce the
risks of investing. With the exception of the Phoenix-Seneca Real Estate
Securities Fund, as to 75% of its assets no Fund will make an investment that
would result in more than 5% of its total assets being invested in any one
issuer or in the Fund owning more than 10% of the outstanding voting securities
of any issuer, in each case excluding certain government securities, cash and
certain other assets. In addition, with the exception of Phoenix-Seneca Real
Estate Securities Fund, no Fund invests more than 25% of its assets in any one
industry. These limitations are fundamental policies of the Funds (other than
the Phoenix-Seneca Real Estate Securities Fund). The Phoenix-Seneca Real Estate
Securities Fund generally invests at least 65% of its assets in securities of
issuers that are principally engaged in businesses in the U.S. real estate
industry or related businesses. See "The Phoenix-Seneca Funds in
Detail--Phoenix-Seneca Real Estate Securities Fund."
DISTRIBUTION PLANS
The offices of PEPCO, the national distributor of the Funds' shares, are
located at 100 Bright Meadow Boulevard, P.O. Box
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2200, Enfield, Connecticut 06083-2200. Thomas N. Steenburg is an officer of the
Funds and an officer of PEPCO.
PEPCO and the Funds have entered into distribution agreements under which
PEPCO has agreed to use its best efforts to find purchasers for Funds shares
sold subject to an initial sales charge and those sold subject to a contingent
deferred sales charge. The Funds have granted PEPCO the exclusive right to
purchase from the Funds and resell, as principal, shares needed to fill
unconditional orders for Funds shares. PEPCO may sell Funds shares through its
registered representatives or through securities dealers with whom it has sales
agreements. PEPCO may also sell Funds shares pursuant to sales agreements
entered into with banks or bank-affiliated securities brokers who, acting as
agent for their customers, place orders for Funds shares with PEPCO. Although
the Glass-Steagall Act prohibits banks and bank affiliates from engaging in the
business of underwriting, distributing or selling securities (including mutual
fund shares), banking regulators have not indicated that such institutions are
prohibited from purchasing mutual fund shares upon the order and for the
account of their customers. If, because of changes in law or regulations, or
because of new interpretations of existing law, it is determined that agency
transactions of banks or bank-affiliated securities brokers are not permitted
under the Glass-Steagall Act, the Trustees will consider what action, if any,
is appropriate. It is not anticipated that termination of sales agreements with
banks or bank-affiliated securities brokers would result in a loss to their
customers or a change in the net asset value per share of a Fund.
The sale of Fund shares through a securities broker affiliated with a
particular bank is not expected to preclude the Funds from borrowing from such
bank or from availing itself of custodial or transfer agency services offered
by such bank.
The Trustees have adopted separate distribution plans under Rule 12b-1 of
the 1940 Act for each class of shares of each Fund of the Trust other than
Class X (the "Class A Plan," the "Class B Plan," the "Class C Plan," the "Class
M Plan," and collectively the "Plans"). The Plans permit the Funds to pay the
Distributor for furnishing shareholder services and to reimburse the
Distributor for expenses incurred in connection with the sale and promotion of
Fund shares. A 12b-1 fee paid by one series may be used to finance distribution
of the shares of another series based on the number of shareholder accounts
within the Funds. Pursuant to the Plans, the Funds pay the Distributor 0.25%
annually for the average daily net assets of each of the Class A, Class B,
Class C and Class M Shares, and reimburse the Distributor for actual expenses
of the Distributor up to 0.75% annually for the average daily net assets of the
Funds' Class B and C Shares, and up to 0.25% annually for the average daily net
assets of the Funds' Class M Shares.
Expenditures incurred under the Plans may consist of: (i) commissions to
sales personnel for selling shares of the Funds (including underwriting
commissions and finance charges related to the payment of commissions for sales
of Class B and C Shares); (ii) compensation, sales incentives and payments to
sales, marketing and service personnel; (iii) payments to broker-dealers and
other financial institutions which have entered into agreements with the
Distributor for services rendered in connection with the sale and distribution
of shares of the Funds and provision of shareholder services; (iv) payment of
expenses incurred in sales and promotional activities, including advertising
expenditures related to the Funds; (v) the costs of preparing and distributing
promotional materials; (vi) the cost of printing the Funds' Prospectus and
Statement of Additional Information for distribution to potential investors;
(vii) such other similar services that the Trustees determine are reasonably
calculated to result in the sale of shares of the Funds. The Service Fee, 0.25%
annually of the average daily net assets of each Fund, is paid as compensation
for providing services to shareholders, including assistance in connection with
inquiries related to shareholder accounts. From the Service Fee, the
Distributor expects to pay a quarterly fee to qualifying broker/dealer firms,
as compensation for providing personal services to shareholders and/or
maintaining shareholder accounts, with respect to shares sold by such firms.
This fee will not exceed on an annual basis 0.25% of the average annual net
asset value of such shares, and will be in addition to sales charges on Fund
shares which are reallowed to such firms.
In order to receive payments under the Plans, participants must meet such
qualifications as are to be established in the sole discretion of the
Distributor, such as services to the Funds' shareholders; or services providing
the Funds with more efficient methods of offering shares to groups of clients,
members or prospects of a participant; or services permitting bulking of
purchases or sales, or transmission of such purchases or sales by computerized
tape or other electronic equipment; or other batch processing.
On a quarterly basis, the Funds' Trustees review a report on expenditures
under each Plan and the purposes for which expenditures were made. The Trustees
conduct an additional, more extensive review annually in determining whether
each Plan will be continued. By its terms, continuation of each Plan from year
to year is contingent on annual approval by a majority of the Trustees and by a
majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) and who have no direct or indirect financial interest in the
operation of any Plan or any related agreements (the "Plan Trustees"). Each
Plan provides that it may not be amended to increase materially the costs which
the Funds may bear without approval of the applicable class of shareholders of
the affected Fund of the Trust and that other material amendments must be
approved by a majority of the Plan Trustees by vote cast in person at a meeting
called for the purpose of considering such amendments. Each Plan further
provides that while it is in effect, the selection and nomination of Trustees
who are not "interested persons" shall be committed to the discretion of the
Trustees who are not "interested persons." Each Plan may be terminated at any
time by vote of a majority of the Plan Trustees or a majority of the applicable
class of outstanding shares of the each Fund.
The NASD regards certain distribution fees as asset-based sales charges
subject to NASD sales load limits. The NASD's
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maximum sales charge rule may require the Trustees to suspend distribution fees
or amend any or all of the Plans.
HOW TO BUY SHARES
How do you invest?
You may open a fund account with an initial investment of $500. This
amount is reduced to $25 for investments made under the "Investo-Matic" plan
(see the Fund's Application), individual retirement accounts or under the
systematic exchange privilege described below. The initial investment
requirement is waived for investments made under pension, profit sharing or
employee benefit plans as well as in connection with reinvested dividends and
distributions.
You may make additional investments at any time with at least $25. The
subsequent investment minimum is waived for investments made under pension,
profit sharing or employee benefit plans as well as in connection with
reinvested dividends and distributions.
An application should be completed to open a new Phoenix-Seneca Funds
account. A check for the amount you wish to invest, made payable to the
"Phoenix-Seneca Funds", (along with the completed application if opening a new
account), must be sent to: Phoenix-Seneca Funds, c/o State Street Bank and Trust
Company ("State Street Bank"), P.O. Box 8301, Boston, MA 02266-8301. You may
also write to the Distributor at 100 Bright Meadow Boulevard, Enfield,
Connecticut 06083-2200 or call (800) 243-1574.
Shares are sold at the public offering price based on the net asset value
for the class of shares bought next determined after State Street Bank receives
your order. In most cases, in order to receive that day's public offering
price, State Street Bank must receive your order before the close of regular
trading on the New York Stock Exchange. See "Net Asset Value."
What are the classes and how do they differ?
Each Fund presently offers investors five classes of shares which bear
sales and distribution charges in different amounts.
Class X Shares. If you are eligible to purchase and do purchase Class X
shares you pay no sales charge at any time. The minimum initial investment is
[$250,000] except for the Phoenix-Seneca Bond Fund which has a minimum initial
investment of [$10,000].
Class A Shares. If you buy Class A Shares, you will pay a sales charge at
the time of purchase equal to 4.75% of the offering price (4.99% of the amount
invested). The sales charge may be reduced or waived under certain conditions.
Class A Shares are not subject to any charges by the Fund when they are sold.
Class A Shares have lower Rule 12b-1 fees and pay higher dividends than any
other class.
Class B Shares. If you buy Class B Shares, you will not pay a sales charge
at the time of purchase. If you sell your Class B Shares within the first 5
years after they are purchased, you will pay a sales charge of up to 5% of your
shares' value. See "Deferred Sales Charge Alternative--Class B Shares." This
charge declines over a period of five years to zero and may be waived under
certain conditions. Class B shares have higher Rule 12b-1 fees and pay lower
dividends than Class A and M Shares. Class B Shares automatically convert to
Class A Shares eight years after purchase. The Distributor intends to limit
investments in Class B Shares to: (a) $250,000 for any person; (b) $1 million
for any unallocated employer sponsored plan; and (c) $250,000 for each
participant in any allocated qualified employer sponsored plan, including
401(k) plans, provided such plan uses an approved participant tracking system.
Class B Shares will not be sold to any qualified employee benefit plan,
endowment fund or foundation if, on the date of the initial investment, such
entity has assets of over $10 million or more than 200 participant employees.
Class B Shares will not be sold to anyone who is over 85 years old.
Class C Shares. If you buy Class C Shares, you will not pay a sales charge
at the time of purchase. If you sell your Class C Shares within the first year
after they are purchased, you will pay a sales charge of 1% of your shares'
value. See "Deferred Sales Charge Alternative--Class C Shares." Class C Shares
have the same Rule 12b-1 fees and pay comparable dividends as Class B Shares.
Class C Shares do not convert to any other class of shares of the Fund.
Class M Shares. If you buy Class M Shares, you will pay a sales charge at
the time of purchase equal to 3.50% of the offering price (3.63% of the amount
invested). Class M Shares are not subject to any charges by the Fund when they
are sold. Class M Shares have lower Rule 12b-1 fees and pay higher dividends
than Class B and C Shares.
What arrangement is best for you?
The alternative purchase arrangement permits you to choose the method of
buying shares that is most beneficial to you given the amount of the purchase,
the length of time you expect to hold the shares, whether you wish to receive
distributions in cash or to reinvest them in additional shares, and other
circumstances. You should consider whether, during the anticipated term of your
investment, the accumulated continuing distribution and service fees and
contingent deferred sales charges of one class would be more than the initial
sales charge and accumulated distribution and service fees of another class of
shares bought at the same time. See "Distribution Plans" and "Fund Expenses."
Initial Sales Charge Alternative--Class A and M Shares
The public offering price of Class A and M Shares is the net asset value
plus a sales charge that varies depending on the size of any "person's" (see
"How To Obtain Reduced Initial Sales Charges--Class A and M Shares: Combination
Purchase Privilege") purchase. Shares issued based on the automatic
reinvestment of income dividends or capital gains distributions are not subject
to any sales charges. The sales
18
<PAGE>
charge is divided between your investment dealer and the Distributor as shown
on the following tables.
Class A Shares
<TABLE>
<CAPTION>
Sales Charge as
a percentage of
- -----------------------------------------------------------------
Amount of Net Dealer Discount
Transaction Offering Amount Percentage of
at Offering Price Price Invested Offering Price
- -------------------- ---------- ---------- ----------------
<S> <C> <C> <C>
Under $50,000 4.75% 4.99% 4.25%
$50,000 but under
$100,000 4.50 4.71 4.00
$100,000 but under
$250,000 3.50 3.63 3.00
$250,000 but under
$500,000 3.00 3.09 2.75
$500,000 but under
$1,000,000 2.00 2.04 1.75
$1,000,000 or more None None None
</TABLE>
Class M Shares
<TABLE>
<CAPTION>
Sales Charge as
a percentage of
- ----------------------------------------------------------------
Amount of Net Dealer Discount
Transaction Offering Amount Percentage of
at Offering Price Price Invested Offering Price
- ------------------- ---------- ---------- ----------------
<S> <C> <C> <C>
Under $50,000 3.50% 3.63% 3.00%
$50,000 but under
$100,000 2.50 2.56 2.00
$100,000 but under
$250,000 1.50 1.52 1.00
$250,000 but under
$500,000 1.00 1.01 1.00
$500,000 or more None None None
</TABLE>
Deferred Sales Charge Alternative--
Class B and C Shares
Class B and C Shares are purchased without an initial sales charge;
however, shares sold within a specified time period are subject to a declining
contingent deferred sales charge (the "CDSC") at the rates set forth below. The
charge will be multiplied by the then current market value or the initial cost
of the Shares being redeemed, whichever is less. No sales charge will be
imposed on increases in net asset value. In addition, shares issued based on
the automatic reinvestment of income dividends or capital gains distributions
are not subject to any sales charges. To minimize the CDSC, shares not subject
to any charge will be redeemed first, followed by shares held the longest time.
The Distributor will add up all shares bought in any month and use the last day
of the preceding month in calculating the amount of shares owned and time
period held for Class B Shares. The trade date will be used for purposes of
aging Class C Share investments.
Deferred Sales charge you may pay to sell Class B Shares
<TABLE>
<CAPTION>
Year 1 2 3 4 5 6+
- ------ ---- ---- ---- ---- ---- ---
<S> <C> <C> <C> <C> <C> <C>
CDSC 5% 4% 3% 2% 2% 0%
</TABLE>
Deferred Sales charge you may pay to sell Class C Shares
<TABLE>
<CAPTION>
Year 1 2+
- ------ ---- ----
<S> <C> <C> <C> <C> <C> <C>
CDSC 1% 0%
</TABLE>
Dealer Concessions
In addition to the dealer discount on purchases of Class A and M Shares,
the Distributor intends to pay investment dealers a sales commission of 4% of
the sale price of Class B Shares and a sales commission of 1% of the sale price
of Class C Shares sold by such dealers. Your broker, dealer or investment
adviser may also charge you additional commissions or fees for their services
in selling shares to you provided they notify the Distributor of their
intention to do so.
Dealers and other entities who enter into special arrangements with the
Distributor may receive compensation for the sale and promotion of shares of
the Funds and/or for providing other shareholder services. Depending on the
nature of the services, these fees may be paid either from the Trust through
distribution fees, service fees or transfer agent fees or in some cases, the
Distributor may pay certain fees from its own profits and resources. From its
own profits and resources, the Distributor does intend to: (a) sponsor sales
contests, training and educational meetings and provide additional compensation
to qualifying dealers in the form of trips, merchandise or expense
reimbursements; (b) from time to time pay special incentive and retention fees
to qualified wholesalers, registered financial institutions and third party
marketers; (c) pay broker/dealers an amount equal to 1% of the first $3 million
of Class A Share purchases by an account held in the name of a qualified
employee benefit plan with at least 100 eligible employees, 0.50% on the next
$3 million, plus 0.25% on the amount in excess of $6 million; and (d) excluding
purchases as described in (c) above, pay broker/dealers an amount equal to 1%
of the amount of Class A Shares sold above $1 million but under $3 million,
0.50% on the next $3 million, plus 0.25% on the amount in excess of $6 million.
If part or all of such investment, including investments by qualified employee
benefit plans, is subsequently redeemed within one year of the investment date,
the broker-dealer will refund to the Distributor such amounts paid with respect
to the investment. In addition, the Distributor may pay the entire applicable
sales charge on purchases of Class A Shares to selected dealers and agents. Any
dealer who receives more than 90% of a sales charge may be deemed to be an
"underwriter" under the Securities Act of 1933.
How To Obtain Reduced Initial Sales Charges--
Class A and M Shares
Investors choosing Class A or M Shares may be entitled to reduced sales
charges. The five ways in which sales charges may be avoided or reduced are
described below.
Qualified Purchasers. If you fall within any one of the following
categories, you will not have to pay a sales charge on your purchase of Class A
or M Shares: (1) any trustee, director or officer of the Phoenix Funds, the
Phoenix-Engemann Funds, Phoenix-Seneca Funds or any other mutual fund advised,
subadvised or distributed by the Adviser, Distributor or any corporate
affiliate of either or both the Adviser and Distributor; (2) any director or
officer, or any full-time employee or sales representative (for at least 90
days), of the Adviser or Distributor; (3) registered representatives and
19
<PAGE>
employees of securities dealers with whom Distributor has sales agreements; (4)
any qualified retirement plan exclusively for persons described above; (5) any
officer, director or employee of a corporate affiliate of the Adviser or
Distributor; (6) any spouse, child, parent, grandparent, brother or sister of
any person named in (1), (2), (3) or (5) above; (7) employee benefit plans for
employees of the Adviser, Distributor and/or their corporate affiliates; (8)
any employee or agent who retires from Phoenix Home Life, Distributor and/or
their corporate affiliates; (9) any account held in the name of a qualified
employee benefit plan, endowment fund or foundation if, on the date of the
initial investment, the plan, fund or foundation has assets of $10,000,000 or
more or at least 100 eligible employees; (10) any person with a direct rollover
transfer of shares from an established Phoenix Fund, Phoenix-Engemann Fund, or
Phoenix-Seneca Fund qualified plan; (11) any Phoenix Home Life separate account
which funds group annuity contracts offered to qualified employee benefit
plans; (12) any state, county, city, department, authority or similar agency
prohibited by law from paying a sales charge; (13) any fully matriculated
student in any U.S. service academy; (14) any unallocated account held by a
third party administrator, registered investment adviser, trust company, or
bank trust department which exercises discretionary authority and holds the
account in a fiduciary, agency, custodial or similar capacity, if in the
aggregate such accounts held by such entity equal or exceed $1,000,000; (15)
any person who is investing redemption proceeds from investment companies other
than the Phoenix Funds, Phoenix-Engemann Funds, or Phoenix-Seneca Funds if, in
connection with the purchases or redemption of the redeemed shares, the
investor paid a prior sales charge provided such investor supplies verification
that the redemption occurred within 90 days of the Phoenix Fund,
Phoenix-Engemann Funds, or Phoenix-Seneca Funds purchase and that a sales
charge was paid; (16) any deferred compensation plan established for the
benefit of any Phoenix Fund, Phoenix-Engemann Funds, or Phoenix-Seneca Funds
trustee or director; provided that sales to persons listed in (1) through (15)
above are made upon the written assurance of the purchaser that the purchase is
made for investment purposes and that the shares so acquired will not be resold
except to the Fund; (17) purchasers of Class A or M Shares bought through
investment advisors and financial planners who charge an advisory, consulting
or other fee for their services and buy shares for their own accounts or the
accounts of their clients; (18) retirement plans and deferred compensation
plans and trusts used to fund those plans (including, for example, plans
qualified or created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in
each case if those purchases are made through a broker or agent or other
financial intermediary that has made special arrangements with the Distributor
for such purchases; or (19) clients of investment advisors or financial
planners who buy shares for their own accounts but only if their accounts are
linked to a master account of their investment advisor or financial planner on
the books and records of the broker, agent or financial intermediary with which
the Distributor has made such special arrangements (each of the investors
described in (17) through (19) may be charged a fee by the broker, agent or
financial intermediary for purchasing shares).
Combination Purchase Privilege. Your purchase of any class of shares of
the Phoenix-Seneca Funds or any other Affiliated Phoenix Fund, (other than
Phoenix Money Market Fund Series Class A Shares), if made at the same time by
the same "person," will be added together to determine whether the combined sum
entitles you to an immediate reduction in sales charges. A "person" is defined
in this and the following sections as (a) any individual, their spouse and
minor children purchasing shares for his or their own account (including an IRA
account) including his or their own trust; (b) a trustee or other fiduciary
purchasing for a single trust, estate or single fiduciary account (even though
more than one beneficiary may exist); (c) multiple employer trusts or Section
403(b) plans for the same employer; (d) multiple accounts (up to 200) under a
qualified employee benefit plan or administered by a third party administrator;
or (e) trust companies, bank trust departments, registered investment advisers,
and similar entities placing orders or providing administrative services with
respect to funds over which they exercise discretionary investment authority
and which are held in a fiduciary, agency, custodial or similar capacity,
provided all shares are held of record in the name, or nominee name, of the
entity placing the order.
An "Affiliated Phoenix Fund" means any other mutual fund advised,
subadvised or distributed by the Adviser or Distributor or any corporate
affiliate of either or both the Adviser and Distributor provided such other
mutual fund extends reciprocal privileges to shareholders of the Phoenix Funds.
Letter of Intent. If you sign a Letter of Intent, your purchase of any
class of shares of the Phoenix-Seneca Funds or any other Affiliated Phoenix
Fund (other than Phoenix Money Market Fund Series Class A Shares), if made by
the same person within a thirteen month period, will be added together to
determine whether you are entitled to an immediate reduction in sales charges.
Sales charges are reduced based on the overall amount you indicate that you
will buy under the Letter of Intent. The Letter of Intent is a mutually
non-binding arrangement between you and the Distributor. Since the Distributor
doesn't know whether you will ultimately fulfill the Letter of Intent, shares
worth 5% of the amount of each purchase will be set aside until you fulfill the
Letter of Intent. When you buy enough shares to fulfill the Letter of Intent,
these shares will no longer be restricted. If, on the other hand, you do not
satisfy the Letter of Intent, or otherwise wish to sell any restricted shares,
you will be given the choice of either buying enough shares to fulfill the
Letter of Intent or paying the difference between any sales charge you
previously paid and the otherwise applicable sales charge based on the intended
aggregate purchases described in the Letter of Intent. You will be given 20
days to make this decision. If you do not exercise either election, the
Distributor will automatically redeem the number of your restricted shares
needed to make
20
<PAGE>
up the deficiency in sales charges received. The Distributor will redeem
restricted Class A or M Shares before Class C or B Shares, respectively. Oldest
shares will be redeemed before selling newer shares. Any remaining shares will
then be deposited to your account.
Right of Accumulation. Your purchase of any class of shares of the
Phoenix-Seneca Funds or any other Affiliated Phoenix Fund, if made over time by
the same person may be added together to determine whether the combined sum
entitles you to a prospective reduction in sales charges. You must provide
certain account information to the Distributor to exercise this right.
Associations. Certain groups or associations may be treated as a "person"
and qualify for reduced Class A Share sales charges. The group or association
must: (1) have been in existence for at least six months; (2) have a legitimate
purpose other than to purchase mutual fund shares at a reduced sales charge;
(3) work through an investment dealer; or (4) not be a group whose sole reason
for existing is to consist of members who are credit card holders of a
particular company, policyholders of an insurance company, customers of a bank
or a broker-dealer or clients of an investment adviser.
How To Obtain Reduced Deferred Sales Charges--
Class B and C Shares
The CDSC is waived on the redemption (sale) of Class B and C Shares if the
redemption is made (a) within one year of death (i) of the sole shareholder on
an individual account, (ii) of a joint tenant where the surviving joint tenant
is the deceased's spouse, or (iii) of the beneficiary of a Uniform Gifts to
Minors Act (UGMA), Uniform Transfers to Minors Act (UTMA) or other custodial
account; (b) within one year of disability, as defined in Code Section
72(m)(7); (c) as a mandatory distribution upon reaching age 70-1/2 under any
retirement plan qualified under Code Sections 401, 408 or 403(b) or resulting
from the tax-free return of an excess contribution to an IRA; (d) by 401(k)
plans using an approved participant tracking system for participant hardships,
death, disability or normal retirement, and loans which are subsequently
repaid; (e) based on the exercise of exchange privileges among Class B and C
Shares of the Phoenix-Seneca Funds or any other Affiliated Phoenix Fund; (f)
based on any direct rollover transfer of shares from an established
Phoenix-Seneca Funds or any other Affiliated Phoenix Fund qualified plan into a
Phoenix-Seneca Funds or any other Affiliated Phoenix Fund IRA by participants
terminating from the qualified plan; and (g) based on the systematic withdrawal
program (Class B Shares only). If, as described in condition (a) above, an
account is transferred to an account registered in the name of a deceased's
estate, the CDSC will be waived on any redemption from the estate account
occurring within one year of the death. If the Class B or C Shares are not
redeemed within one year of the death, they will remain subject to the
applicable CDSC.
Conversion Feature--Class B Shares
Class B Shares will automatically convert to Class A Shares of the same
Fund eight years after they are bought. Conversion will be on the basis of the
then prevailing net asset value of Class A and B Shares. There is no sales
load, fee or other charge for this feature. Class B Shares acquired through
dividend or distribution reinvestments will be converted into Class A Shares at
the same time that other Class B Shares are converted based on the proportion
that the reinvested shares bear to purchased Class B Shares. The conversion
feature is subject to the continuing availability of an opinion of counsel or a
ruling of the Internal Revenue Service that the assessment of the higher
distribution fees and associated costs with respect to Class B Shares does not
result in any dividends or distributions constituting "preferential dividends"
under the Code, and that the conversion of shares does not constitute a taxable
event under federal income tax law. If the conversion feature is suspended,
Class B Shares would continue to be subject to the higher distribution fee for
an indefinite period. Even if the Funds were unable to obtain such assurances,
it might continue to make distributions if doing so would assist in complying
with its general practice of distributing sufficient income to reduce or
eliminate federal taxes otherwise payable by the Funds.
INVESTOR ACCOUNT SERVICES
The Trust mails periodic statements and reports to shareholders. In order
to reduce the volume and cost of mailings, to the extent possible, only one
copy of most Fund reports will be mailed to households for multiple accounts
with the same surname at the same household address. Please contact PEPCO to
request additional copies of shareholder reports toll free at (800) 243-4361.
In most cases, changes to any shareholder account may be accomplished by
calling Shareholder Services at (800) 243-1574. More information relating to
the shareholder account services can be found in the Funds' Statement of
Additional Information ("SAI").
Bank Draft Investing Program (Investo-Matic Plan). By completing the
Investo-Matic Section of the New Account Application, you may authorize the
bank named in the form to draw $25 or more from your personal checking or
savings account to be used to purchase additional shares for your account. The
amount you designate will be made available, in form payable to the order of
the Transfer Agent, by the bank on the date the bank draws on your account and
will be used to purchase shares at the applicable offering price.
Distribution Option. The Funds currently declare all income dividends and
all capital gain distributions, if any, payable in shares of the Fund at net
asset value or, at your option, in cash. By exercising the distribution option,
you may elect to: (1) receive both dividends and capital gain distributions in
additional shares or (2) receive dividends in cash and capital gain
distributions in additional shares or (3) receive both dividends and capital
gain distributions in cash. If you elect to receive dividends and/or
distributions in cash and the check cannot be delivered or remains uncashed due
to an invalid address, then the dividend and/or distribution will be reinvested
after the Transfer Agent has been informed
21
<PAGE>
that the proceeds are undeliverable. Additional shares will be purchased in
your account at the then current net asset value. Dividends and capital gain
distributions received in shares are taxable to you and credited to your
account in full and fractional shares computed at the closing net asset value
on the next business day after the record date. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.
Systematic Withdrawal Program. The Systematic Withdrawal Program allows
you to periodically redeem a portion of your account on a predetermined
monthly, quarterly, semiannual or annual basis. A sufficient number of full and
fractional shares will be redeemed so that the designated payment is made on or
about the 20th day of the month. Shares are tendered for redemption by the
Transfer Agent, as agent for the shareowner, on or about the 15th of the month
at the closing net asset value on the date of redemption. The Systematic
Withdrawal Program also provides for redemptions to be tendered on or about the
10th, 15th or 25th of the month with proceeds to be directed through Automated
Clearing House (ACH) to your bank account. In addition to the limitations
stated below, withdrawals may not be less than $25 and minimum account balance
requirements shall continue to apply.
Shareholders participating in the Systematic Withdrawal Program must own
shares of a Fund worth $5,000 or more, as determined by the then current net
asset value per share, and elect to have all dividends reinvested. Participants
in the Program redeeming Class C Shares will be subject to any applicable
contingent deferred sales charge. The purchase of shares while participating in
the withdrawal program will ordinarily be disadvantageous to the Class A or M
Shares investor since a sales charge will be paid by the investor on the
purchase of Class A or M Shares at the same time as other shares are being
redeemed. For this reason, investors in Class A or M Shares may not participate
in an automatic investment program while participating in the Systematic
Withdrawal Program.
Through the Program, Class B shareholders may withdraw up to 1% of their
aggregate net investments (purchases, at initial value, to date net of
non-Program redemptions) each month or up to 3% of their aggregate net
investments each quarter without incurring otherwise applicable contingent
deferred sales charges. Class B shareholders redeeming more shares than the
percentage permitted by the withdrawal program will be subject to any
applicable contingent deferred sales charge on all shares redeemed.
Accordingly, the purchase of Class B Shares will generally not be suitable for
an investor who anticipates withdrawing sums in excess of the above limits
shortly after purchase.
Tax Sheltered Retirement Plans. Shares of the Funds are offered in
connection with the following qualified prototype retirement plans: IRA,
Rollover IRA, SEP-IRA, SIMPLE IRA, SIMPLE 401(k), Profit-Sharing and Money
Purchase Pension Plans which can be adopted by self-employed persons ("Keogh")
and by corporations and 403(b) Retirement Plans. Write or call PEPCO at (800)
243-4361 for further information about the plans.
Exchange Privileges
You may exchange shares of one Phoenix-Seneca Fund for shares of another
Phoenix-Seneca Fund or any other Affiliated Phoenix Fund without paying any
fees or sales charges. On exchanges with share classes that carry a contingent
deferred sales charge, the CDSC schedule of the original shares purchased
continues to apply. Shares held in book-entry form may be exchanged for shares
of the same class of other Phoenix-Seneca Funds or any other Affiliated Phoenix
Fund, provided the following conditions are met: (1) the shares that will be
acquired in the exchange (the "Acquired Shares") are available for sale; (2)
the Acquired Shares are the same class as the shares to be surrendered (the
"Exchanged Shares"); (3) the Acquired Shares will be registered to the same
shareholder account as the Exchanged Shares; (4) the account value of the Fund
whose shares are to be acquired must equal or exceed the minimum initial
investment amount required by that Fund, as applicable, after the exchange is
made; and (5) if you have elected not to use the telephone exchange privilege
(see below), a properly executed exchange request must be received by the
Distributor. Exchanges may be made over the telephone or in writing and may be
made at one time or systematically over a period of time. Note, each Phoenix
Fund, Phoenix-Engemann Fund or Phoenix-Seneca Fund has different investment
objectives and policies. You should read the prospectus of the Fund into which
the exchange is to be made before making any exchanges. This privilege may be
modified or terminated at any time on 60 days' notice.
[Market Timer Restrictions. Because excessive trading can hurt Fund
performance and harm shareholders, the Funds reserve the right to temporarily
or permanently terminate exchange privileges or reject any specific order from
anyone whose transactions seem to follow a timing pattern, including those who
request more than one exchange out of a fund within any 30 day period. The
Distributor has entered into agreements with certain market timer entities
permitting them to exchange their clients' shares by telephone. These
privileges are limited under those agreements. The Distributor has the right to
reject or suspend these privileges upon reasonable notice.]
Telephone Exchanges. If permitted in your state and unless you waive this
privilege in writing, you or your broker may sell or exchange your shares over
the phone by calling the Distributor at (800) 243-1574. Reasonable procedures
will be used to confirm that telephone instructions are genuine. In addition to
requiring that the exchange is only made between accounts with identical
registrations, the Distributor may require address or other forms of
identification and will record telephone instructions. All exchanges will be
confirmed in writing to you. If procedures reasonably designed to prevent
unauthorized telephone exchanges are not followed, the Funds and/or Distributor
may be liable for following telephone instructions that prove to be fraudulent.
Broker/dealers other
22
<PAGE>
than the Distributor assume the risk of any loss resulting from any
unauthorized telephone exchange instructions from their firm or their
registered representatives. You assume the risk if the Distributor acts upon
unauthorized instructions it reasonably believes to be genuine. During times of
severe economic or market changes, this privilege may be difficult to exercise
or may be temporarily suspended. In such event, an exchange may be effected by
written request by the registered shareowner(s).
NET ASSET VALUE
The net asset value per share of each Fund is determined as of the close
of regular trading of the New York Stock Exchange (the "Exchange") on days when
the Exchange is open for trading. The net asset value per share of a Fund is
determined by adding the values of all securities and other assets of the Fund,
subtracting liabilities, and dividing by the total number of outstanding shares
of the Fund. The total liability allocated to a class, plus that class's
distribution fee and any other expenses allocated solely to that class, are
deducted from the proportionate interest of such class in the assets of the
Fund, and the resulting amount of each is divided by the number of shares of
that class outstanding to produce the net asset value per share.
The Funds' investments are valued at market value or, where market
quotations are not available, at fair value as determined in good faith by the
Trustees or their delegates. Foreign and domestic debt securities (other than
short-term investments) are valued on the basis of broker quotations or
valuations provided by a pricing service approved by the Trustees when such
prices are believed to reflect the fair value of such securities. Foreign and
domestic equity securities are valued at the last sale price or, if there has
been no sale that day, at the last bid price, generally. Short-term investments
having a remaining maturity of less than sixty-one days are valued at amortized
cost, which the Trustees have determined approximates market value. For further
information about security valuations, see the SAI.
HOW TO REDEEM SHARES
You have the right to have the Funds buy back shares at the net asset
value next determined after receipt of a redemption order, and any other
required documentation in proper form, by Phoenix-Seneca Funds c/o State Street
Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301. In the case of a
Class B or C Share redemption, you will be subject to the applicable deferred
sales charge, if any, for such shares (see "Deferred Sales Charge
Alternative--Class B and C Shares," above). Subject to certain restrictions,
shares may be redeemed by telephone or in writing. In addition, shares may be
sold through securities dealers, brokers or agents who may charge customary
commissions or fees for their services. The Funds do not charge any redemption
fees. Payment for shares redeemed is made within seven days, provided that
redemption proceeds will not be disbursed until each check used for purchases
of shares has been cleared for payment by your bank, which may take up to 15
days after receipt of the check.
The requirements to redeem shares are outlined in the table below.
Additional documentation may be required for redemptions by corporations,
partnerships or other organizations, executors, administrators, trustees,
custodians, guardians, or from IRA's or other retirement plans, or if
redemption is requested by anyone but the shareholder(s) of record. To avoid
delay in redemption or transfer, shareholders having questions about specific
requirements should contact the Funds at (800) 243-1574. Redemption requests
will not be honored until all required documents in proper form have been
received.
How can I sell my Shares?
<TABLE>
<S> <C> <C> <C>
[Phone Graphic]
By Phone [bullet] Sales up to $50,000
[bullet] Not available on most retirement accounts
(800) 243-1574 [bullet] Requests received after 4 PM will be
executed on the following business day
[Envelope Graphic]
In Writing [bullet] Letter of instruction from the registered
owner including the fund and account
number and the number of shares or dollar
amount you wish to sell
[bullet] No signature guarantee is required if your
shares are registered individually, jointly,
or as custodian under the Uniform Gifts to
Minors Act or Uniform Transfers to Minors
Act, the proceeds of the redemption do not
exceed $50,000, and the proceeds are
payable to the registered owner(s) at the
address of record
[Checkwriting Graphic]
[bullet] Available to the Phoenix-Seneca Bond
By Check Fund only
[bullet] Select checkwriting on your New Account
Application
[bullet] $500 or more per check
[bullet] Cannot be used to close an account
</TABLE>
Telephone Redemptions
The Funds and the Transfer Agent will employ reasonable procedures to
confirm that telephone instructions are genuine. Address and bank account
information will be verified, telephone redemption instructions will be
recorded on tape, and all redemptions will be confirmed in writing to you. If
there has been an address change within the past 60 days, a telephone
redemption will not be authorized. To the extent that procedures reasonably
designed to prevent unauthorized telephone redemptions are not followed, the
Funds and/or the Transfer Agent may be liable for following telephone
instructions for redemption transactions that prove to be fraudulent.
Broker/dealers other than PEPCO have agreed to bear the risk of any loss
resulting from any unauthorized telephone redemption instruction from the firm
or its registered representatives. However, you would bear the risk of loss
resulting from instructions entered by an unauthorized third party that the
Funds and/or the Transfer Agent reasonably believe to be genuine. The Telephone
Redemption Privilege may be modified or terminated at any time on 60 days'
notice to shareholders. In addition, during times of drastic economic or market
changes, the Telephone Redemption Privilege may be difficult to exercise or may
be temporarily suspended. In such event, a redemption may be effected by
written request by following the procedure outlined above.
23
<PAGE>
Written Redemptions
If you elect not to use the telephone redemption or telephone exchange
privileges, you must submit your request in writing. If the shares are being
exchanged between accounts that are not identically registered, the signature
on such request must be guaranteed by an eligible guarantor institution as
defined by the Transfer Agent in accordance with its signature guarantee
procedures. Currently, such procedures generally permit guarantees by banks,
broker dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations.
Account Reinstatement Privilege
You have a one time privilege of using redemption proceeds from Class A,
B, C and M Shares to purchase Class A Shares of any Phoenix-Seneca Fund or any
other affiliated Phoenix Fund with no sales charge (at net asset value next
determined after the request for reinvestment is made). For Federal income tax
purposes, a redemption and reinvestment will be treated as a sale and purchase
of shares. Special rules may apply in computing the amount of gain or loss in
these situations. (See "Dividends, Distributions and Taxes" for information on
the Federal income tax treatment of a disposition of shares.) A written request
to reinstate your account must be received by the Transfer Agent within 180
days of the redemption, accompanied by payment for the shares (not in excess of
the redemption value). Class B shareholders who have had the contingent
deferred sales charge waived through participation in the Systematic Withdrawal
Program are not eligible to use the Reinstatement Privilege.
Redemption of Small Accounts
Due to the relatively high cost of maintaining small accounts, the Funds
reserve the right to redeem, at net asset value, the shares of any shareholder
whose account has a value, due to redemptions, of less than $200. Before the
Funds redeem these shares, the shareholder will be given notice that the value
of the shares in the account is less than the minimum amount and will be
allowed 30 days to make an additional investment in an amount which will
increase the value of the account to at least $200.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement and Subadvisory Agreement,
the Investment Adviser/Subadviser places orders for the purchase and sale of
portfolio investments for the Funds' accounts with brokers or dealers selected
by it in its discretion. In effecting such purchases and sales, the Investment
Adviser/Subadviser seeks the best price and execution of the Funds' orders.
Commission rates are a component of the Investment Adviser's/Subadviser's
analysis of price. Factors the Investment Adviser/Subadviser considers in
evaluating execution quality include the ability of a broker or dealer to
effect the transaction, the broker's or dealer's clearance and settlement
facilities and capabilities, its reliability and financial stability, a
dealer's willingness to commit capital, the size of the transaction, and the
market for the security involved.
Many securities, both debt and equity, are traded primarily in the
over-the-counter market. For transactions traded in that market, dealers
generally act as principal rather than as agent and receive a markup or
markdown on the transaction price rather than a commission. The Funds intend to
deal with primary market makers for securities traded in the over-the-counter
markets except where more favorable execution and price can be obtained
elsewhere. Funds may also purchase securities directly from issuers or from
underwriters or dealers as part of an offering of securities. Purchases from
dealers and underwriters in such offerings include a discount or concession
granted by the issuer to the underwriter.
In selecting brokers and dealers, the Investment Adviser/
Subadviser considers not only the factors described above relating to price and
execution quality, but also the value of research services and products
provided to the Investment Adviser. As a result, a Fund may pay higher
commission rates to such brokers than the lowest available when the Investment
Adviser/Subadviserbelieves it is reasonable to do so in light of the value of
the brokerage and research services provided by the broker effecting the
transaction. The Investment Adviser/Subadviser also may consider sales of
shares of the Trust as a factor in selection of broker-dealers to execute
portfolio transactions of the Trust. In addition, the Trust may direct the
Investment Adviser/Subadviser, subject to obtaining best execution, to execute
a portion of one or more Fund's portfolio transactions through certain
broker-dealers in exchange for the broker-dealers' agreement to satisfy or pay
obligations that the Fund has incurred for, among other things, custodial,
accounting, or transfer agency services. These practices could result in a Fund
paying higher aggregate transaction costs than would otherwise be the case.
[Subject to the foregoing considerations of price and execution, the Funds
may use GMG Securities in connection with portfolio transactions in
exchange-traded securities. GMG Securities is a member of the American Stock
Exchange and the National Association of Securities Dealers, Inc. The ownership
of GMG Securities overlaps with the ownership of the Investment Adviser
although GMG Securities may not be an "affiliated person" of the Investment
Adviser within the meaning of the 1940 Act.
GMG Securities may receive brokerage commissions from the Funds, limited
to "usual and customary broker's commissions," as contemplated by the 1940 Act,
and subject to GMG Securities being able to provide execution at least as
favorable as that provided by other qualified brokers. The Trustees have
developed procedures to ensure that the commissions paid to GMG Securities are
limited to "usual and customary broker's commissions" as contemplated in the
1940 Act. On a quarterly basis, the Trustees will review the securities
transactions of each Fund effected by GMG Securities (if any) for compliance
with those procedures.
Some securities considered for investment by the Funds may also be
appropriate for other clients served by the Investment Adviser or its
affiliates, including accounts in which the Investment Adviser or persons
associated with the
24
<PAGE>
Investment Adviser are investors, such as investment partnerships of which the
Investment Adviser or such associated persons is the general partner. If a
purchase or sale of securities consistent with the investment policies of a
Fund and one or more of these clients served by the Investment Adviser or its
affiliates is considered at or about the same time, transactions in such
securities will be allocated among the Fund and clients in a manner deemed fair
and reasonable by the Investment Adviser.
DIVIDENDS AND CAPITAL GAINS
The Funds distribute substantially all of their net investment income in
the form of dividends to shareholders. The following table shows how often each
Fund pays dividends.
<TABLE>
<CAPTION>
Dividend
Fund Paid
- -------------------------------------------- ----------
<S> <C>
Phoenix-Seneca Growth Fund Annually
Phoenix-Seneca Mid-Cap "Edge"(SM) Fund Annually
Phoenix-Seneca Bond Fund Monthly
Phoenix-Seneca Real Estate Securities Fund Quarterly
</TABLE>
Each of the Funds distributes net capital gains, if any, annually.
Shareholders may select from among the following distribution options:
<TABLE>
<S> <C>
Reinvested Have all dividends and capital gains
distributions reinvested in additional shares
of the same or any other Phoenix-Seneca
Fund or any other affiliated Phoenix Fund.
If a shareholder does not choose one of the
other options, this option will be selected
automatically.
Cash and Have either dividends or capital gains paid in
Reinvested cash and the other reinvested in additional
shares in the same or any other Phoenix-
Seneca Fund or any other affiliated Phoenix
Fund; or
All Cash Have dividends and capital gains distributions
paid in cash.
</TABLE>
Each Fund makes distributions on a per share basis to the shareholders of
record as of the distribution date of that Fund, regardless of how long the
shares have been held. That means if an investor buys shares just before or on
a record date, he or she will pay the full price for the shares and then may
receive a portion of the price back as a taxable distribution.
INCOME TAX CONSIDERATIONS
Federal Taxes. For each taxable year, each Fund intends to qualify as a
regulated investment company under Subchapter M of the Code. Qualifying
regulated investment companies distributing substantially all of their ordinary
income and capital gains are not subject to federal income or excise tax on any
net investment income and net realized capital gains distributed to
shareholders. However, the shareholders are subject to tax on these
distributions.
Dividends paid by a Fund from net investment income, the excess of net
short-term capital gain over net long-term capital loss, and original issue
discount or certain market discount income are taxable to shareholders as
ordinary income. Distributions paid by a Fund from the excess of net long-term
capital gain over net short-term capital loss are taxable as long-term capital
gains regardless of how long the shareholders have held their shares. These tax
consequences apply regardless of whether distributions are received in cash or
reinvested in shares. A portion of the dividends paid to corporate shareholders
may qualify for the corporate dividends-received deduction to the extent the
Fund earns qualifying dividends. Each Fund will notify shareholders after each
calendar year of the amount and character of distributions they received from
that Fund for federal tax purposes.
For IRAs and pension plans, dividends and capital gains will be reinvested
and not taxed until the beneficiary receives a qualified distribution from the
IRA or pension plan.
Shareholders should consider the tax implications of buying shares
immediately prior to a distribution. Investors who purchase shares shortly
before the record date for a distribution will pay a per share price that
includes the value of the anticipated distribution. They will be taxed when
they receive the distribution even though the distribution represents a return
of a portion of the purchase price.
Redemptions and exchanges of shares are taxable events that may represent
a gain or a loss for the shareholder.
Individuals and certain other types of shareholders may be subject to
backup withholding of federal income tax on distributions, redemptions and
exchanges if they fail to furnish their correct taxpayer identification number.
Individuals, corporations and other shareholders that are not U.S. persons
under the Code are subject to different tax rules. They may be subject to
nonresident alien withholding on amounts considered ordinary dividends from the
Fund.
New investors must certify that their social security or taxpayer
identification numbers are correct. They must also certify that they are not
subject to backup withholding for failure to report income to the Internal
Revenue Service.
Other Taxes. In addition to federal taxes, investors may be subject to
state and local taxes on payments received from a Fund. Depending on the state
tax rules pertaining to a shareholder, a portion of the dividends paid by a
Fund that come from direct obligations of the U.S. Treasury and certain
agencies may be exempt from state and local taxes. Investors should consult
their tax advisers regarding specific questions as to federal, state and local
taxes.
INVESTMENT ADVISER,
SUBADVISER AND ADMINISTRATOR
As Investment Adviser, PIC is responsible for making investment decisions
for the Funds and for selecting brokers and dealers to execute transactions for
each Fund. PIC has delegated this responsibility to Seneca pursuant to the
25
<PAGE>
Subadvisory Agreement. Seneca (including its predecessor, GMG/Seneca Capital
Management, L.P.) has been an investment adviser since 1989, managing equity
and fixed-income securities portfolios primarily for institutions and
individuals. Seneca is owned by certain of its employees, including Ms. Seneca,
the former limited partners of GMG/ Seneca Capital Management, L.P. and
Phoenix Duff & Phelps Corporation. Under Seneca's "operating agreement," Ms.
Seneca is the Chief Executive Officer and Chief Investment Officer of Seneca
Capital Management, LLC.
Investment and trading decisions for each Fund are made by a team of
managers and analysts headed by two team leaders. The team leaders for each
Fund are primarily responsible for the day-to-day decisions related to that
Fund. The team leader of any one Fund may be on another Fund team.
Gail P. Seneca is a team leader for each of the Funds. From October 1987
until October 1989, she was Senior Vice President of the Asset Management
Division of Wells Fargo Bank and from October 1983 to September 1987, she was
Investment Strategist and Portfolio Manager for Chase Lincoln Bank, heading the
fixed income division.
Richard D. Little is the other team leader for the Phoenix-Seneca Growth
Fund and the Phoenix-Seneca Mid-Cap "Edge" (SM) Fund. Mr. Little has been with
Seneca since December 1989. He is a general partner and director of Equities.
Before he joined Seneca, Mr. Little held positions as an analyst, board member,
and regional manager with Smith Barney, NatWest Securities, and Montgomery
Securities.
Charles B. Dicke is the other team leader for the Phoenix-Seneca Bond Fund.
He has been a Fixed-Income Portfolio Manager with Seneca since October 1991.
Before joining Seneca, he was a Vice President with Lehman Brothers, serving as
a Product Manager for Government agency securities and a strategist on
fixed-income portfolios.
David Shapiro is the other team leader for the Phoenix-Seneca Real Estate
Securities Fund. He has been a Portfolio Manager with Seneca since February
1996. Before joining Seneca, he was a Portfolio Manager with Genesis Realty
since May 1995. Prior to that, he was a managing director of The ADCO Group from
1992 to 1995.
Management Fee. For its services to the Funds, the Investment Adviser
receives a Management Fee based on an annual percentage of the average daily
net assets of each Fund. It is accrued daily, and paid monthly. The annual fee
percentages are 0.70% for the Phoenix-Seneca Growth Fund, 0.80% for the
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund, 0.50% for the Phoenix-Seneca Bond Fund,
and 0.85% for the Phoenix-Seneca Real Estate Securities Fund. The Investment
Adviser pays the Investment Subadviser a fee of 0.35% for the Phoenix-Seneca
Growth Fund, 0.40% for the Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund, 0.25% for the
Phoenix-Seneca Bond Fund, and 0.425% for the Phoenix-Seneca Real Estate
Securities Fund. The Subadviser's approach to locating attractive investments
in medium-capitalization companies, evaluating and monitoring them, and
effecting transactions in such securities requires more effort and resources
than traditional management of large-capitalization equity portfolios and bond
portfolios, as does the specialized nature of investing in real estate and real
estate-related securities. Accordingly, the management fees for the
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund and the Phoenix-Seneca Real Estate
Securities Fund are higher than the management fees paid by most other mutual
funds that do not pursue these types of investment programs. The Investment
Adviser will reduce the Management Fee each Fund must pay if the fee exceeds
any state-imposed expense limitations, excluding permissible items, such as
brokerage commissions, Rule 12b-1 payments, interest, taxes and litigation
expenses.
Administrative Services. Pursuant to an Administrative Services Agreement,
PEPCO is responsible for the day-to-day administrative functions of the Trust.
PEPCO has entered into an agreement with State Street pursuant to which State
Street performs most of those functions. Among other things, State Street
provides the Trust and each Fund with clerical, data processing, and other,
similar services and support; handles the registration of the Funds' shares
under the securities laws of those states and other jurisdictions where the
shares are offered; assists in the preparation of SEC registration materials,
periodic reports, and proxy materials; and provides bookkeeping and accounting
services, including maintaining the accounts, books and records that are
required under applicable laws. For these services, each Fund pays PEPCO a fee
based on the average net assets of the Fund. The Investment Adviser may waive
some or all of these fees from time to time at its discretion, and may
reimburse a Fund for a portion of a Fund's expenses.
The Investment Adviser may waive some or all of its Management Fee and/or
Administrative Fee as to any Fund from time to time at its discretion, and may
reimburse a Fund for a portion of the Fund's expenses. These practices will
increase a Fund's return and are intended to make the Fund more competitive.
The Investment Adviser has undertaken to effect such waivers and reimbursements
to the extent necessary to prevent each Fund's overall expenses from exceeding
certain levels at least through September 30, 1998. Thereafter, any such
waivers or reimbursements the Investment Adviser may provide may be terminated
at any time.
GENERAL INFORMATION
Phoenix-Seneca Funds. Phoenix-Seneca Funds was organized as a Delaware
business trust on December 18, 1995 under the name "Seneca Funds." The Trust is
registered with the Securities and Exchange Commission under the 1940 Act as an
open-end management investment company of the series type. Each Fund
constitutes a separate series. The fiscal year-end of each of the Funds is
September 30.
26
<PAGE>
The Trust is authorized to issue and sell multiple classes of shares for
each series of shares of the Funds. Each of the Trust's existing series
currently has five classes of shares, Class X Shares, formerly known as
Institutional Shares, Class A Shares, formerly known as Administrative Shares,
and Class B Shares, Class C Shares, and Class M Shares. The Trust may issue
additional series and additional classes of existing series of shares in the
future with such rights, preferences, and privileges as the Trustees may
determine (subject to compliance with applicable law), without the consent of
shareholders.
Except for the differences noted elsewhere in this Prospectus, each share
of a Fund has equal dividend, redemption and liquidation rights with other
shares of that Fund and upon issuance is fully paid and nonassessable. Each
share of each class represents an identical legal interest in the same
investments of a Fund, except that each class bears certain expenses related
solely to that class. In particular, Class A, Class M, and Classes B and C have
successively higher fees and expenses relating to the way in which they are
distributed and the services provided to their class. Each class has exclusive
voting rights under the [Rule 18f-3 Plan]. In the event that a meeting of
shareholders is called, separate votes will be taken by each class only if a
matter affects, or requires the vote of, just that class. Although the legal
rights of holders of each class of shares are identical, it is likely that the
difference in expenses will result in different net asset values and/or
dividends. The classes may also have different exchange privileges.
As a Delaware business trust, the Trust is not required to hold regular
annual meetings of shareholders. Ordinarily there will be no shareholder
meetings, unless called by the Trustees, requested by shareholders holding 10%
or more of the outstanding shares under circumstances in which the 1940 Act or
Delaware law require that a meeting be held upon such request, or required by
the 1940 Act or Delaware law. Shareholders are entitled to cast one vote for
each dollar of net asset value of their shares on the record date. At a
shareholders meeting, if one is called, issues that affect all the Funds and
classes in substantially the same way will be voted on by all shareholders of
all Funds. Issues that do not affect a Fund or a class will not be voted on by
shareholders of that Fund or class. Issues that affect all Funds, but in which
their interests are not substantially the same, will be voted on separately by
each Fund.
Other Expenses. The Trust bears all costs of its operations. Trust
expenses directly attributable to a Fund or a class of shares are charged to
that Fund or class; other expenses are allocated among all the Funds. Class A,
Class B, Class C and Class M Shares may be purchased in employee benefit plan
accounts and in accounts maintained with financial institutions and financial
services companies such as broker-dealers. Employee benefit plan administrators
and financial institutions and financial services companies through which Class
A, Class B, Class C and Class M Shares are purchased may be paid fees by the
Funds for transfer agency, accounting, recordkeeping, and administrative and
other services provided with respect to such shares. Those services may include
maintaining account records, aggregating and processing orders to purchase,
redeem, and exchange Class A, Class B, Class C and Class M Shares, processing
dividend payments, forwarding shareholder communications, and providing
subaccounting services for shares held beneficially.
Material Legal Proceedings. There are no material legal proceedings to
which the Trust is subject, or to which the Investment Adviser or the
Distributor are subject, that are likely to have a material adverse effect on
their ability to perform their obligations to the Trust or on the Trust itself.
Summary of Bond Ratings. Following is a summary of the grade indicators
used by two of the most prominent, independent rating agencies (Moody's
Investors Service, Inc. and Standard & Poor's Corporation) to rate the quality
of bonds. The first four categories are generally considered investment quality
bonds. Those below that level are of lower quality and are sometimes referred
to as "junk bonds."
<TABLE>
<CAPTION>
Investment Grade Standard
- ------------------------------------------------ Moody's Poor's
<S> <C> <C>
Highest quality .............................. Aaa AAA
High quality ................................. Aa AA
Upper medium ................................. A A
Medium, speculative features .................. Baa BBB
Lower Quality
Moderately speculative ........................ Ba BB
Speculative ................................. B B
Very Speculative .............................. Caa CCC
Very high risk .............................. Ca CC
Highest risk, may not be paying interest ...... C C
In arrears or default ........................ C D
</TABLE>
For more detailed information on bond ratings, including gradations within
each category of quality, see the SAI.
27
<PAGE>
PART B
PHOENIX-SENECA FUNDS
PHOENIX-SENECA GROWTH FUND
PHOENIX-SENECA MID-CAP "EDGE"(SM) FUND
PHOENIX-SENECA BOND FUND
PHOENIX-SENECA REAL ESTATE SECURITIES FUND
(each a "Fund" and collectively, the "Funds")
Statement of Additional Information
January 28, 1998
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the prospectus of the Funds, dated January 28, 1998,
as amended and/or supplemented from time to time (the "Prospectus"), copies of
which may be obtained without charge by writing to Phoenix-Seneca Funds (the
"Trust"), care of its transfer agent, Phoenix Equity Planning Corporate
("PEPCO"), 100 Bright Meadow Boulevard, Enfield, Connecticut 06082, or by
calling 1-800-243-4361.
THE STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
THE TRUST .................................... 1
INVESTMENT OBJECTIVES AND POLICIES ............ 1
INVESTMENT RESTRICTIONS ..................... 12
CALCULATION OF THE FUNDS' PERFORMANCE ......... 15
ADVISORY AND ADMINISTRATIVE SERVICES ......... 17
TRUSTEES AND OFFICERS ........................ 21
NET ASSET VALUE .............................. 23
HOW TO BUY SHARES ........................... 24
ALTERNATIVE PURCHASE ARRANGEMENTS ............ 24
INVESTOR ACCOUNT SERVICES ..................... 25
REDEMPTION OF SHARES ........................ 26
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS ...... 26
PORTFOLIO BROKERAGE ........................... 28
PORTFOLIO TURNOVER ........................... 30
ORGANIZATION ................................. 30
CUSTODIAN .................................... 31
TRANSFER AGENT .............................. 32
INDEPENDENT AUDITORS ........................ 32
FINANCIAL STATEMENTS ........................ 32
APPENDIX .................................... 32
GLOSSARY .................................... 33
</TABLE>
<PAGE>
THE TRUST
The Trust consists of four separate Funds: The Phoenix-Seneca Growth Fund;
the Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund; the Phoenix-Seneca Bond Fund; and
the Phoenix-Seneca Real Estate Securities Fund. Each Fund offers five classes of
shares: Class X, Class A, Class B, Class C and Class M. Class X Shares are
offered to institutional investors such as pension and profit sharing plans,
employee benefit trusts, endowments, foundations, and corporations. The four
additional classes of shares may be purchased at a price equal to their net
asset vlaue per share, plus a sales charge which, at the election of the
purchaser, may be imposed (i) at the time of purchase (Class A and Class M) or
(ii) on a contingent deferred basis (Class B and Class C).
All capitalized terms not defined herein have the meanings set forth in
the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and general investment policies of each Fund are
described in the Prospectus. This Statement of Additional Information should be
read in conjunction with the Prospectus. See in particular, "The Phoenix-Seneca
Funds in Detail" and "Investment Practices and Risk Considerations" in the
Prospectus. Additional information concerning the characteristics of certain
securities in which the Funds may invest and certain practices in which they
may engage is set forth below. The Appendix to this Statement of Additional
Information contains a description of the quality categories of corporate bonds
in which the Funds may invest, and a Glossary describing some of the Funds'
investments.
Repurchase Agreements
Each Fund may enter into repurchase agreements with banks, broker-dealers
or other financial institutions in order to generate additional current income.
Under a repurchase agreement, a Fund acquires a security from a seller subject
to resale to the seller at an agreed upon price and date. The resale price
reflects an agreed upon interest rate effective for the time period the
security is held by the Fund. The repurchase price may be higher than the
purchase price, the difference being income to the Fund, or the purchase and
repurchase price may be the same, with interest payable to the Fund at a stated
rate together with the repurchase price on repurchase. In either case, the
income to the Fund is unrelated to the interest rate on the security.
Typically, repurchase agreements are in effect for one week or less, but may be
in effect for longer periods of time. Repurchase agreements of more than one
week's duration are subject to each Fund's limitation on investments in
illiquid securities.
Repurchase agreements are considered by the Securities and Exchange
Commission (the "SEC") to be loans by the purchaser collateralized by the
underlying securities. In an attempt to reduce the risk of incurring a loss on
a repurchase agreement, the Funds will generally enter into repurchase
agreements only with domestic banks with total assets in excess of one billion
dollars, primary dealers in U.S. Government securities reporting to the Federal
Reserve Bank of New York or broker-dealers approved by the Trustees of the
Trust. The Investment Adviser will monitor the value of the underlying
securities throughout the term of the agreement to attempt to ensure that their
market value always equals or exceeds the agreed-upon repurchase price to be
paid to a Fund. Each Fund will maintain a segregated account with its
custodian, or a subcustodian for the securities and other collateral, if any,
acquired under a repurchase agreement for the term of the agreement.
In addition to the risk of the seller's default or a decline in value of
the underlying security (see "Investment Practices and Risk
Considerations--Repurchase Agreements" in the Prospectus), a Fund also might
incur disposition costs in connection with liquidating the underlying
securities. If the seller becomes insolvent and subject to liquidation or
reorganization under the Bankruptcy Code or other laws, a court may determine
that the underlying security is collateral for a loan by a Fund not within the
control of that Fund and therefore subject to sale by the seller's trustee in
bankruptcy. Finally, it is possible that a Fund may not be able to perfect its
interest in the underlying security and may be deemed an unsecured creditor of
the seller.
Corporate Debt Securities
A Fund's investments in debt securities of domestic or foreign corporate
issuers are limited to bonds, debentures, notes and other similar corporate
debt instruments, including convertible securities that meet the Fund's minimum
ratings criteria or if unrated are, in the Investment Adviser's opinion,
comparable in quality to corporate debt securities that meet those criteria.
The rate of return or return of principal on some debt obligations may be
linked or indexed to the level of exchange rates between the U.S. Dollar and a
foreign currency or currencies or to the value of commodities, such as gold.
Convertible Securities. A convertible security is a bond, debenture, note,
or other security that entitles the holder to acquire common stock or other
equity securities of the same or a different issuer. It generally entitles the
holder to receive interest paid or accrued until the security matures or is
redeemed, converted, or exchanged. Before conversion, convertible securities
have characteristics similar to nonconvertible debt securities. Convertible
securities rank senior to common stock in a corporation's capital structure
and, therefore, generally entail less risk than the corporation's common stock,
although the extent to which this is true depends in large measure on the
degree to which the convertible security sells above its value as a
fixed-income security.
A convertible security may be subject to redemption or conversion at the
option of the issuer at a predetermined price. If a convertible security held
by a Fund is called for redemption, the Fund could be required to permit the
issuer to redeem the security and convert it to the underlying common stock.
The Phoenix-Seneca Bond Fund generally would invest in convertible securities
1
<PAGE>
for their favorable price characteristics and total return potential and would
normally not exercise an option to convert. The Phoenix- Seneca Growth Fund and
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund might be more willing to convert such
securities to common stock.
Below-Investment Grade Securities. Investments in below-investment grade
securities (see Appendix for an explanation of the various ratings) generally
provide greater income (leading to the name "high-yield" securities) and
opportunity for capital appreciation than investments in higher quality
securities, but they also typically entail greater price volatility and
principal and income risk. These securities are regarded as predominantly
speculative as to the issuer's continuing ability to meet principal and
interest payment obligations. The markets for these securities are relatively
new and many of the outstanding high-yield securities have not endured a major
business recession. A long-term track record on default rates, such as that for
investment-grade corporate bonds, does not exist for these securities. Analysis
of the creditworthiness of issuers of lower-quality debt securities may be more
complex than for issuers of higher-quality debt securities.
High-yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment-grade securities.
The prices of high-yield securities have been found to be less sensitive to
interest-rate changes than higher-quality investments, but more sensitive to
adverse economic developments or individual corporate developments. A
projection of an economic downturn or of a period of rising interests rates,
for example, could cause a decline in high-yield securities prices because the
advent of a recession could lessen the ability of a highly-leveraged company to
make principal and interest payments. If an issuer of high-yield securities
defaults, in addition to risking payment of all or a portion of interest and
principal, the Funds may incur additional expenses to seek recovery. Market
prices of high-yield securities structured as zero-coupon or pay-in-kind
securities are affected to a greater extent by interest rate changes, and
therefore tend to be more volatile than securities that pay interest
periodically and in cash.
The secondary market on which high-yield securities are traded may be less
liquid than the market for higher- grade securities. Less liquidity could
adversely affect the price at which a Fund could sell a high-yield security and
could adversely affect the daily net asset value of the Fund's shares. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of high-yield securities,
especially in a thinly-traded market. When secondary markets for these
securities are less liquid than the market for higher-grade securities, it may
be more difficult to value the high-yield securities because the valuation may
require more research and judgment may play a greater role in valuation because
of the lack of reliable, objective data.
Delayed Delivery Transactions
Each Fund may purchase securities on a when-issued or forward commitment
basis. These transactions are also know as delayed delivery transactions. (The
phrase "delayed delivery" is not intended to include purchases where a delay in
delivery involves only a brief period required by the selling party solely to
locate appropriate certificates and prepare them for submission for clearance
and settlement in the customary way.) Delayed delivery transactions involve a
commitment by a Fund to purchase or sell securities at a future date
(ordinarily up to 90 days later). The price of the underlying securities
(usually expressed in terms of yield) and the date when the securities will be
delivered and paid for (the settlement date) are fixed at the time the
transaction is negotiated. When-issued purchases and forward commitments are
negotiated directly with the selling party.
When-issued purchases and forward commitments enable a Fund to lock in
what is believed to be an attractive price or yield on a particular security
for a period of time, regardless of future changes in interest rates. For
example, in periods of rising interest rates and falling bond prices, a Fund
might sell debt securities it owns on a forward commitment basis to limit its
exposure to falling prices. In periods of falling interest rates and rising
prices, a Fund might sell securities it owns and purchase the same or similar
securities on a when-issued or forward commitment basis, thereby obtaining the
benefit of currently higher yields. A Fund will not enter into such
transactions for the purpose of leverage.
The value of securities purchased on a when-issued or forward commitment
basis and any subsequent fluctuations in their value will be reflected in the
Fund's net asset value starting on the date of the agreement to purchase the
securities, and the Fund will be subject to the rights and risks of ownership
of the securities on that date. A Fund will not earn interest on securities it
has committed to purchase until they are paid for and received.
When a Fund makes a forward commitment to sell securities it owns, the
proceeds to be received upon settlement will be included in the Fund's assets.
Fluctuations in the market value of the underlying securities will not be
reflected in the Fund's net asset value as long as the commitment to sell
remains in effect. Settlement of when-issued purchases and forward commitment
transactions generally takes place up to 90 days after the date of the
transaction, but a Fund may agree to a longer settlement period.
A Fund will make commitments to purchase securities on a when-issued basis
or to purchase or sell securities on a forward commitment basis only with the
intention of completing the transaction and actually purchasing or selling the
securities. If deemed advisable as a matter of investment strategy, however, a
Fund may dispose of or renegotiate a commitment after it is entered into. A
Fund also may sell securities it has committed to purchase before those
securities are delivered to the Fund on the settlement date. The Fund may
realize a capital gain or loss in connection with these transactions.
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When a Fund purchases securities on a when-issued or forward-commitment
basis, the Custodian will maintain in a segregated account securities having a
value (determined daily) at least equal to the amount of the Fund's purchase
commitments. These procedures are designed to ensure that each Fund will
maintain sufficient assets at all times to cover its obligations under when-
issued purchases and forward commitments.
Mortgage-Related and Other Asset-Backed Securities
Mortgage Pass-Through Securities. These are interests in pools of mortgage
loans, assembled and issued by various governmental, government-related, and
private organizations. Unlike other forms of debt securities, which normally
provide for periodic payment of interest in fixed amounts with principal
payments at maturity or specified call dates, these securities provide a
monthly payment consisting of both interest and principal payments. In effect,
these payments are a "pass-through" of the monthly payments made by the
individual borrowers on their residential or commercial mortgage loans, net of
any fees paid to the issuer or guarantor of such securities. Additional
payments are caused by repayments of principal resulting from the sale of the
underlying property, refinancing or foreclosure, net of fees or costs.
"Modified pass-through" securities (such as securities issued by the Government
National Mortgage Association ("GNMA")) entitle the holder to receive all
interest and principal payments owed on the mortgage pool, net of certain fees,
at the scheduled payment dates regardless of whether or not the mortgagor
actually makes the payment.
The principal governmental guarantor of mortgage-related securities is
GNMA. GNMA is a wholly owned United States Government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the United States Government, the timely
payment of principal and interest on securities issued by institutions approved
by GNMA (such as savings and loan institutions, commercial banks and mortgage
bankers) and backed by pools of Federal Housing Administration insured or
Veterans Administration guaranteed mortgages.
Government-related guarantors whose obligations are not backed by the full
faith and credit of the United States Government include the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"). FNMA is a government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. FNMA purchases conventional (i.e., not insured or
guaranteed by any government agency) residential mortgages from a list of
approved seller/servicers which include state and federally chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. FHLMC is a government-sponsored corporation formerly
owned by the twelve Federal Home Loan Banks and now owned entirely by private
stockholders. FHLMC issues Participation Certificates ("Pcs") that represent
interests in conventional mortgages from FHLMC's national portfolio. FNMA and
FHLMC guarantee the timely payment of interest and ultimate collection of
principal on securities they issue, but their guarantees are not backed by the
full faith and credit of the United States Government.
Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of conventional residential mortgage loans. Such
issuers may, in addition, be the originators and/or servicers of the underlying
mortgage loans as well as the guarantors of the mortgage-related securities.
Pools created by such non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because there are no
direct or indirect government or agency guarantees of payments for such
securities. However, timely payment of interest and principal of these pools
may be supported by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance and letters of credit. The
insurance and guarantees are issued by governmental entities, private insurers
and the mortgage poolers. Such insurance and guarantees and the
creditworthiness of the issuers thereof will be considered in determining
whether a mortgage-related security meets a Fund's investment quality
standards. There can be no assurance that the private insurers or guarantors
can meet their obligations under the insurance policies or guarantee
arrangements. Funds may buy mortgage-related securities without insurance or
guarantees if, through an examination of the loan experience and practices of
the originator/servicers and poolers, the Investment Adviser determines that
the securities meet the Funds' quality standards. Securities issued by certain
private organizations may not be readily marketable.
Mortgage-backed securities that are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, are not subject to the Funds'
industry concentration restrictions, set forth below under "Investment
Restrictions," by virtue of the exclusion from the test available to all U.S.
Government securities. The Funds will take the position that privately-issued
mortgage-related securities do not represent interests in any particular
"industry" or group of industries. The assets underlying such securities may be
represented by a portfolio of first lien residential mortgages (including both
whole mortgage loans and mortgage participation interests) or portfolios of
mortgage pass-through securities issued or guaranteed by GNMA, FNMA or FHLMC.
Mortgage loans underlying a mortgage-related security may in turn be insured or
guaranteed by the Federal Housing Administration or the Department of Veterans
Affairs. In the case of private issue mortgage-related securities whose
underlying assets are neither U.S. Government securities nor U.S.
Government-insured mortgages, to the extent that real properties securing such
assets may be located in the same geographical region, the security may be
subject to a greater risk of default than other comparable securities in the
event of adverse economic, political or business developments that may affect
such region and, ultimately, the ability of residential homeowners to make
payments of principal and interest on the underlying mortgages.
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Collateralized Mortgage Obligations (CMOs). A CMO is similar to a bond in
that interest and prepaid principal is paid, in most cases, semiannually. CMOs
may be collateralized by whole mortgage loans or by portfolios of mortgage
pass-through securities guaranteed by entities such as GNMA, FHLMC, or FNMA,
and their income streams.
CMOs are typically structured in multiple classes, each bearing a
different stated maturity. Actual maturity and average life will depend upon
the prepayment experience of the collateral. CMOs provide for a modified form
of call protection through a de facto breakdown of the underlying pool of
mortgages according to how quickly the loans are repaid. Monthly payment of
principal received from the pool of underlying mortgages, including
prepayments, is first returned to investors holding the shortest maturity
class. Investors holding the longer maturity classes typically receive
principal only after the first class has been retired. An investor may be
partially guarded against a sooner than desired return of principal because of
the sequential payments.
FHLMC CMOs are debt obligations of FHLMC issued in multiple classes having
different maturity dates and are secured by the pledge of a pool of
conventional mortgage loans purchased by FHLMC. Unlike FHLMC Pcs, payments of
principal and interest on the CMOs are made semiannually rather than monthly.
The amount of principal payable on each semiannual payment date is determined
in accordance with FHLMC's mandatory sinking fund schedule. Sinking fund
payments in the CMOs are allocated to the retirement of the individual classes
of bonds in the order of their stated maturities. Payments of principal on the
mortgage loans in the collateral pool in excess of the amount of FHLMC's
minimum sinking fund obligation for any payment date are paid to the holders of
the CMOs as additional sinking-fund payments. Because of the "pass-through"
nature of all principal payments received on the collateral pool in excess of
FHLMC's minimum sinking fund requirement, the rate at which principal of the
CMOs is actually repaid is likely to be such that each class of bonds will be
retired in advance of its scheduled maturity date. If collection of principal
(including prepayments) on the mortgage loans during any semiannual payment
period is not sufficient to meet FHLMC's minimum sinking fund obligation on the
next sinking fund payment date, FHLMC agrees to make up the deficiency from its
general funds.
CMO Residuals. CMO residuals are derivative mortgage securities issued by
agencies or instrumentalities of the U.S. Government or by private originators
of, or investors in, mortgage loans. As described above, the cash flow
generated by the mortgage assets underlying a series of CMOs is applied first
to make required payments of principal and interest on the CMOs and second to
pay the related administrative expenses of the issuer. The "residual" in a CMO
structure generally represents the interest in any excess cash flow remaining
after making the foregoing payments. Each payment of such excess cash flow to a
holder of the related CMO residual represents income and/or a return of
capital. The amount of residual cash flow resulting from a CMO will depend on,
among other things, the characteristics of the mortgage assets, the coupon rate
of each class of CMO, prevailing interest rates, the amount of administrative
expenses and, in particular, the prepayment experience on the mortgage assets.
In addition, if a series of a CMO includes a class that bears interest at an
adjustable rate, the yield to maturity on the related CMO residual will also be
extremely sensitive to changes in the level of the index upon which interest
rate adjustments are based. As described below with respect to stripped
mortgage-backed securities, in certain circumstances a Fund may fail to recoup
fully its initial investment in a CMO residual.
CMO residuals are generally purchased and sold by institutional investors
through several investment banking firms acting as brokers or dealers. The CMO
residual market has only very recently developed and CMO residuals currently
may not have the liquidity of other more established securities trading in
other markets. CMO residuals may be subject to certain restrictions on
transferability, may be deemed "illiquid," and may be subject to a Fund's
limitations on investment in illiquid securities.
Stripped Mortgage-Backed Securities. Stripped mortgage-backed securities
("SMBS") are derivative multi-class mortgage securities. They may be issued by
agencies or instrumentalities of the U.S. Government, or by private originators
of, or investors in, mortgage loans. SMBS are usually structured with two
classes that receive different proportions of the interest and principal
distributions on a pool of mortgage assets. A common type of SMBS will have one
class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and
the remainder of the principal. In the most extreme case, one class will
receive all of the interest (the interest-only or "IO" class), while the other
class will receive all of the principal (the principal-only or "PO" class). The
yield to maturity on an IO class security is extremely sensitive to the rate of
principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on a Fund's yield to maturity from these securities. If the underlying
mortgage assets experience greater than anticipated prepayments of principal, a
Fund may fail to recoup fully its initial investment in these securities even
if the security is in one of the highest rating categories.
Although SMBS are purchased and sold by institutional investors through
several investment banking firms acting as brokers or dealers, these securities
were only recently developed. As a result, established trading markets have not
yet developed and, accordingly, these securities may be deemed "illiquid" and
subject to a Fund's limitations on investment in illiquid securities.
A Fund may invest in other mortgage-related securities with features
similar to those described above, to the extent consistent with the Fund's
investment objectives and policies.
Other Asset-Backed Securities. Through trusts and other special purpose
entities, various types of securities based on financial assets other than
mortgage loans are increasingly available, in both pass-through structures
similar to mortgage pass-through
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securities described above and in other structures more like CMOs. As with
mortgage-related securities, these asset-backed securities are often backed by
a pool of financial assets representing the obligations of a number of
different parties. They often include credit- enhancement features similar to
mortgage-related securities.
Financial assets on which these securities are based include automobile
receivables; credit card receivables; loans to finance boats, recreational
vehicles, and mobile homes; computer, copier, railcar, and medical equipment
leases; and trade, healthcare, and franchise receivables. In general, the
obligations supporting these asset-backed securities are of shorter maturities
than mortgage loans and are less likely to experience substantial prepayments.
However, obligations such as credit card receivables are generally unsecured
and the obligors are often entitled to protection under a number of state and
federal consumer credit laws granting, among other things, rights to set off
certain amounts owed on the credit cards, thus reducing the balance due. Other
obligations that are secured, such as automobile receivables, may present
issuers with difficulties in perfecting and executing on the security
interests, particularly where the issuer allows the servicers of the
receivables to retain possession of the underlying obligations, thus increasing
the risk that recoveries on defaulted obligations may not be adequate to
support payments on the securities.
The Investment Adviser expects additional assets will be "securitized" in
the future. A Fund may invest in any such instruments or variations on them to
the extent consistent with the Fund's investment objectives and policies.
Foreign Securities
Each of the Funds may invest in U.S. Dollar- or foreign
currency-denominated corporate debt securities of foreign issuers (including
preferred or preference stock), certain foreign bank obligations and U.S.
Dollar- or foreign currency-denominated obligations of foreign governments or
their subdivisions, agencies and instrumentalities, international agencies and
supranational entities. Phoenix-Seneca Growth Fund and Phoenix-Seneca Mid-Cap
"EDGE"(SM) Fund may each invest up to 20% of its total assets directly in common
stocks issued by foreign companies or in securities represented by ADRs. Each
Fund will limit its investment in securities denominated in foreign currencies
to no more than 20% of the Fund's total assets.
Investing in the securities of foreign issuers involves special risks and
considerations not typically associated with investing in U.S. companies. These
include differences in accounting, auditing and financial reporting standards,
generally higher commission rates on foreign portfolio transactions, the
possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country), political instability which may
affect U.S. investments in foreign countries and potential restrictions on the
flow of international capital. In addition, foreign securities and dividends
and interest payable on those securities may be subject to foreign taxes,
including taxes withheld from payments on those securities. Foreign securities
often trade with less frequency and volume than domestic securities and
therefore may exhibit greater price volatility. Changes in foreign exchange
rates will affect the value of those securities which are denominated or quoted
in currencies other than the U.S. Dollar.
ADRs are dollar-denominated receipts issued generally by domestic banks
and representing the deposit with the bank of a security of a foreign issuer,
and are publicly traded on exchanges or over-the-counter in the United States.
ADRS may be issued as sponsored or unsponsored programs. In sponsored programs,
an issuer has made arrangements to have its securities trade in the form of
ADRs. In unsponsored programs, the issuer may not be directly involved in the
creation of the program. Although regulatory requirements with respect to
sponsored and unsponsored programs are generally similar, in some cases it may
be easier to obtain financial information from an issuer that has participated
in the creation of a sponsored program.
Each of the Funds also may purchase and sell foreign currency options and
foreign currency futures contracts and related options and enter into forward
foreign currency exchange contracts in order to protect against uncertainty in
the level of future foreign exchange rates in the purchase and sale of
securities. The Funds may also use foreign currency options and foreign
currency forward contracts to increase exposure to a foreign currency or to
shift exposure to foreign currency fluctuations from one country to another.
A forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts may be bought or sold to
protect a Fund against a possible loss resulting from an adverse change in the
relationship between foreign currencies and the U.S. Dollar or to increase
exposure to a particular foreign currency. Open positions in such forward
contracts are covered by the segregation with the Trust's custodian of high
quality short-term investments and are marked to market daily. Although such
contracts are intended to minimize the risk of loss due to a decline in the
value of the currencies being hedged against, at the same time, they tend to
limit any potential gain which might result should the value of such currencies
increase.
Options and Futures
The Funds may, as described in the Prospectus, purchase and sell (write)
both put options and call options on securities, securities indexes, and
foreign currencies, and enter into interest rate, foreign currency and index
futures contracts and purchase and sell options on such futures contracts
("futures options"). The Funds also may enter into swap agreements with respect
to foreign currencies, interest rates and securities indices. If other types of
options or futures options are traded in the future, a Fund
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may also use those instruments, provided that the Trustees determine that their
use is consistent with the Fund's investment objective, and provided that their
use is consistent with restrictions applicable to options and futures contracts
currently eligible for use by the Trust.
Options
The purpose of writing covered put and call options generally is to hedge
against fluctuations in the market value of a Fund's portfolio securities. Each
Fund may purchase or sell call and put options on securities indices for a
similar purpose. Such a hedge is limited to the degree that the extent of the
price change of the underlying security is less than the difference between the
option premium received by the Fund and the option strike price. To the extent
the underlying security's price change exceeds this amount, written put and
call options will not provide an effective hedge.
Writing Call Options. Each Fund may write (sell) covered call options on
securities ("calls") when the Investment Adviser considers such sales
appropriate. When a Fund writes a call, it receives a premium and grants the
purchaser the right to buy the underlying security at any time during the call
period (usually between three and nine months) at a fixed exercise price
regardless of market price changes during the call period. If the call is
exercised, the Fund forgoes any gain but is not subject to any loss on any
change in the market price of the underlying security relative to the exercise
price. A Fund will write such options subject to any applicable limitations or
restrictions imposed by law.
A written call option is covered if the Fund owns the security underlying
the option. A written call option may also be covered by purchasing an
offsetting option or any other option which, by virtue of its exercise price or
otherwise, reduces the Fund's net exposure on its written option position. In
addition, the Fund may cover such options by maintaining cash, U.S. Government
securities or high-grade debt securities rated with one of the top three
ratings categories by Moody's or S&P ("High-Grade Debt Securities") in a
segregated account in amounts sufficient to ensure that it is able to meet its
obligations under the written call should it be exercised. This method does not
reduce the potential loss to the Fund should the value of the underlying
security increase and the option be exercised.
Purchasing Call Options. Each Fund may purchase a call option when the
Investment Adviser believes the value of the underlying security will rise or
to effect a "closing purchase transaction" as to a call option the Fund has
written (sold). A Fund will realize a profit (or loss) from a closing purchase
transaction if the amount paid to purchase a call is less (or more) than the
amount received from the sale thereof.
Writing Put Options. A put option written by a Fund obligates the Fund to
purchase the specified security at a specified price if the option is exercised
at any time before the expiration date. A written put option may be covered by
maintaining in a segregated account cash, U.S. Government securities or
High-Grade Debt Securities. While this may help ensure that a Fund will have
sufficient assets to meet its obligations under the option contract should it
be exercised, it will not reduce the potential loss to the Fund should the
value of the underlying security decrease and the option be exercised.
Purchasing Put Options. A Fund may purchase a put option when the
Investment Adviser believes the value of the underlying security will decline.
A Fund may purchase put options on securities in its portfolio in order to
hedge against a decline in the value of such securities ("protective puts") or
to effect closing purchase transactions as to puts it has written. A Fund will
realize a profit (or loss) from a closing purchase transaction if the amount
paid to purchase a put is less (or more) than the amount received from the sale
thereof.
Options on Securities Indices. Unlike a stock option, which gives the
holder the right to purchase or sell a specified stock at a specified price, an
option on a securities index gives the holder the right to receive a cash
"exercise settlement amount" equal to (i) the difference between the exercise
price of the option and the value of the underlying securities index on the
exercise date multiplied by (ii) a fixed "index multiplier." Like an option on
a specific security, when a Fund purchases a put or a call option on an index,
it places the entire amount of the premium paid at risk, for if, at the
expiration date, the value of the index has decreased below the exercise price
(in the case of a call) or increased above the exercise price (in the case of a
put), the option will expire worthless.
A securities index fluctuates with changes in the market values of the
stocks included in the index. For example, some securities index options are
based on a broad market index such as the S&P 500. Others are based on a
narrower market index such as the Standard & Poor's 100 Stock Index. Indices
may also be based on an industry or market segment such as the AMEX Oil and Gas
Index or the Computer and Business Equipment Index. Options on securities
indices are currently traded on the Chicago Board Options Exchange, the New
York Stock Exchange ("NYSE") and the American Stock Exchange.
Funds may purchase put options on securities indices to hedge against an
anticipated decline in stock market prices that might adversely affect the
value of a Fund's portfolio securities. If a Fund purchases such a put option,
the amount of the payment it would receive upon exercising the option would
depend on the extent of any decline in the level of the securities index below
the exercise price. Such payments would tend to offset a decline in the value
of the Fund's portfolio securities. However, if the level of the securities
index increases and remains above the exercise price while the put option is
outstanding, a Fund will not
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be able to profitably exercise the option and will lose the amount of the
premium and any transaction costs. Such loss may be partially or wholly offset
by an increase in the value of a Fund's portfolio securities.
A Fund may purchase call options on securities indices in order to
participate in an anticipated increase in stock market prices or to offset
anticipated price increases on securities that it intends to buy in the future.
If a Fund purchases a call option on a securities index, the amount of the
payment it would receive upon exercising the option would depend on the extent
of any increase in the level of the securities index above the exercise price.
Such payments would in effect allow the Fund to benefit from stock market
appreciation even though it may not have had sufficient cash to purchase the
underlying stocks. Such payments may also offset increases in the prices of
stocks that the Fund intends to purchase. If, however, the level of the
securities index declines and remains below the exercise price while the call
option is outstanding, a Fund will not be able to exercise the option
profitably and will lose the amount of the premium and transaction costs. Such
loss may be partially or wholly offset by a reduction in the price a Fund pays
to buy additional securities for its portfolio.
Each of the Funds may write (sell) covered call or put options on a
securities index. Such options may be covered by purchasing an offsetting
option which, by virtue of its exercise price or otherwise, reduces the Fund's
net exposure on its written option position or by owning securities whose price
changes are expected to be similar to those of the underlying index or by
having an absolute and immediate right to acquire such securities without
additional cash consideration or for additional cash consideration (held in a
segregated account by its custodian) upon conversion or exchange of other
securities in their respective portfolios. In addition, the Fund may cover such
options by maintaining cash, U.S. Government securities or High-Grade Debt
Securities with a value equal to the exercise price in a segregated account
with the Custodian or by using the other methods described above.
The extent to which options on securities indices will provide a Fund with
an effective hedge against interest rate or stock market risk will depend on
the extent to which the stocks comprising the indices correlate with the
composition of the Fund's portfolio. Moreover, the ability to hedge effectively
depends upon the ability to predict movements in interest rates or the stock
market. Some options on securities indices may not have a broad and liquid
secondary market, in which case options purchased by the Fund may not be closed
out and the Fund could lose more than its option premium when the option
expires.
The purchase and sale of option contracts is a highly specialized activity
that involves investment techniques and risks different from those ordinarily
associated with investment companies. Transaction costs relating to options
transactions may tend to be higher than the costs of transactions in
securities. In addition, if a Fund were to write a substantial number of option
contracts that are exercised, the portfolio turnover rate of that Fund could
increase.
Foreign Currency Options. A Fund may buy or sell put and call options on
foreign currencies either on exchanges or in the over-the-counter market. A
call option on a foreign currency gives the purchaser of the option the right
to buy a foreign currency at the exercise price until the option expires. A put
option gives the option-holder a similar right to sell the underlying currency.
Currency options traded on U.S. or other exchanges may be subject to position
limits which may limit the ability of a Fund to reduce foreign currency risk
using such options. Over-the-counter options differ from exchange-traded
options in that they are two-party contracts with price and other terms
negotiated between buyer and seller, and generally do not have as much market
liquidity as exchange-traded options.
Futures Transactions
Each Fund may purchase and sell futures contracts for hedging purposes and
in an attempt to increase total return. A futures contract is an agreement
between two parties to buy and sell a security for a set price at a future
time. Each Fund may also enter into index-based futures contracts and interest
rate futures contracts. Futures contracts on indices provide for a final cash
settlement on the expiration date based on changes in the relevant index. All
futures contracts are traded on designated "contract markets" licensed and
regulated by the Commodity Futures Trading Commission (the "CFTC") which,
through their clearing corporations, guarantee performance of the contracts.
Generally, while market interest rates increase, the value of outstanding
debt securities declines (and vice versa). If a Fund holds long-term debt
securities and the Investment Adviser anticipates a rise in long-term interest
rates, it could, in lieu of disposing of its portfolio securities, enter into
futures contracts for the sale of similar long-term securities. If rates
increased and the value of a Fund's portfolio securities declined, the value of
that Fund's futures contract would increase, thereby preventing net asset value
from declining as much as it otherwise would have. If the Investment Adviser
expects long-term interest rates to decline, a Fund might enter into futures
contracts for the purchase of long-term securities, so that it could offset
anticipated increases in the cost of such securities it intends to purchase
while continuing to hold higher-yielding short-term securities or waiting or
the long-term market to stabilize. Similar techniques may be used by the Funds
to hedge stock market risk.
Each Fund also may purchase and sell listed put and call options on
futures contracts. An option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put), at a specified exercise price at any time during the option
period. When an option on a futures contract is exercised, settlement is
effected by the payment of cash representing the difference between the current
market price of the futures contract and the exercise price of the option. The
risk of loss to a Fund purchasing an option on a futures contract is limited to
the premium paid for the option.
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A Fund may purchase put options on futures contracts in lieu of, and for
the same purpose as, its sale of a futures contract: to hedge a long position
in the underlying futures contract. The purchase of call options on futures
contracts is intended to serve the same purpose as the actual purchase of the
futures contract.
A Fund would write a call option on a futures contract in order to hedge
against a decline in the prices of the securities underlying the futures
contracts. If the price of the futures contract at expiration is below the
exercise price, the applicable Fund would retain the option premium, which
would offset, in part, any decline in the value of its portfolio securities.
The writing of a put option on a futures contract is similar to the
purchase of the futures contract, except that, if market price declines, a Fund
would pay more than the market price for the underlying securities. The net
cost to a Fund will be reduced, however, by the premium received on the sale of
the put, less any transaction costs.
Each Fund may engage in "straddle" transactions, which involve the
purchase or sale of combinations of call and put options on the same underlying
securities or futures contracts.
In purchasing and selling futures contracts and related options, each Fund
intends to comply with rules and interpretations of the CFTC and of the SEC.
Limitations on the Use of Futures Contracts and Futures Options
Each Fund will engage in futures and related options transactions only for
bona fide hedging purposes in accordance with CFTC regulations or in an attempt
to increase total return to the extent permitted by such regulations. In
hedging transactions, a Fund will seek to invest in futures contracts and
futures options the prices of which are substantially related to price
fluctuations in securities held by the Fund or which it expects to purchase.
Except as stated below, a Fund's futures transactions will be entered into for
traditional hedging purposes--that is, futures contracts will be sold to
protect against a decline in the price of securities that the Fund owns, or
futures contracts will be purchased to protect the Fund against an increase in
the price of securities it intends to purchase. As evidence of this hedging
intent, the Fund expects that on 75% or more of the occasions on which it takes
a long futures (or option) position (involving the purchase of futures
contracts), a Fund will have purchased, or will be in the process of
purchasing, equivalent amounts of related securities in the cash market at the
time when the futures (or option) position is closed out. However, in
particular cases, when it is economically advantageous for a Fund to do so, a
long futures position may be terminated (or an option may expire) without the
corresponding purchase of securities. As an alternative to compliance with the
bona fide hedging definition, a CFTC regulation permits a Fund to elect to
comply with a different test, under which the sum of the amounts of initial
margin deposits and premiums on its futures positions entered into for the
purpose of seeking to increase total return (net of the amount the positions
were "in the money" at the time of purchase) would not exceed 5% of that Fund's
net assets, after taking into account unrealized gains and losses on such
positions. A Fund will engage in transactions in futures contracts and related
options only to the extent such transactions are consistent with the
requirements of the Internal Revenue Code of 1986, as amended (the "Code"), for
maintaining its qualification as a regulated investment company for Federal
income tax purposes (see "Dividends, Distributions, and Tax Status").
A Fund will be required, in connection with transactions in futures
contracts and the writing of options on futures contracts, to make margin
deposits, which will be held by the Fund's custodian (or a subcustodian) for
the benefit of the merchant through whom a Fund engages in such futures and
options transactions. In the case of futures contracts or options thereon
requiring the Fund to purchase securities, the Fund must segregate cash, U.S.
Government securities or High-Grade Debt Securities in an account maintained by
the Custodian to cover such contracts and options that is marked to market
daily.
Special Considerations and Risks Related to Options and Futures Transactions
Exchange markets in options on certain securities are a relatively new and
untested concept. It is impossible to predict the amount of trading interest
that may exist in such options, and there can be no assurance that viable
exchange markets will develop or continue.
The exchanges will not continue indefinitely to introduce new expirations
to replace expiring options on particular issues because trading interest in
many issues of longer duration tends to center on the most recently auctioned
issues. The expirations introduced at the commencement of options trading on a
particular issue will be allowed to run out, with the possible addition of a
limited number of new expirations as the original expirations expire. Options
trading on each issue of securities with longer durations will thus be phased
out as new options are listed on more recent issues, and a full range of
expirations will not ordinarily be available for every issue on which options
are traded.
In the event of a shortage of the underlying securities deliverable on
exercise of an option, the Options Clearing Corporation ("OCC") has the
authority to permit other, generally comparable, securities to be delivered in
fulfillment of option exercise obligations. It may also adjust the exercise
prices of the affected options by setting different prices at which otherwise
ineligible securities may be delivered. As an alternative to permitting such
substitute deliveries, the OCC may impose special exercise settlement
procedures.
The hours of trading for options on securities may not conform to the
hours during which the underlying securities are traded. To the extent the
markets for underlying securities close before the options markets, significant
price and rate movements can
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take place in the options markets that cannot be reflected in the underlying
markets. In addition, to the extent that the options markets close before the
markets for the underlying securities, price and rate movements can take place
in the underlying markets that cannot be reflected in the options markets.
Prior to exercise or expiration, an option position can be terminated only
by entering into a closing purchase or sale transaction. This requires a
secondary market on an exchange for call or put options of the same series.
Similarly, positions in futures may be closed out only on an exchange which
provides a secondary market for such futures. There can be no assurance that a
liquid secondary market will exist for any particular call or put option or
futures contract at any specific time. Thus, it may not be possible to close an
option or futures position. In the event of adverse price movements, a Fund
would continue to be required to make daily payments of maintenance margin for
futures contracts or options on futures contracts position written by that
Fund. A Fund may have to sell portfolio securities at a time when it may be
disadvantageous to do so if it has insufficient cash to meet the daily
maintenance margin requirements. In addition, a Fund may be required to take or
make delivery of the instruments underlying futures contracts it holds. The
inability to close options and futures positions also could have an adverse
impact on a Fund's ability to effectively hedge its portfolios.
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security (whether or not
covered) that may be written by a single investor, whether acting alone or in
concert with others (regardless of whether such options are written on the same
or different exchanges or are held or written on one or more accounts or
through one or more brokers). An exchange may order the liquidation of
positions found to be in violation of applicable trading limits and it may
impose other sanctions or restrictions. The Trust and other clients advised by
the Investment Adviser and its affiliates may be deemed to constitute a group
for these purposes. In light of these limits, the Trustees may determine at any
time to restrict or terminate the Funds' transactions in options. The
Investment Adviser does not believe that these trading and position limits will
have any adverse investment techniques for hedging the Trust's portfolios.
Over-the-counter ("OTC") options are purchased from or sold to securities
dealers, financial institutions or other parties ("Counterparties") through
direct agreement with the counterparty. In contrast to exchange-listed options,
which generally have standardized terms and performance mechanics, all the
terms of an OTC option, including such terms as method of settlement, term,
exercise price, premium, guarantees and security, are set by negotiation of the
parties.
Unless the parties provide for it, there is no central clearing or
guaranty function in the OTC option market. As a result, if the counterparty
fails to make delivery of the security or other instrument underlying an OTC
option it has entered into with a Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, the Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Investment Adviser must assess the
creditworthiness of each such counterparty or any guarantor or credit
enhancement of the counterparty's credit to determine the likelihood that the
terms of the OTC option will be satisfied. The staff of the SEC currently takes
the position that OTC options purchased by a Fund, and portfolio securities
"covering" the amount of a Fund's obligation pursuant to an OTC option sold by
it (the cost of the sell-back plus the in-the-money amount, if any) are
illiquid, and are subject to each Fund's limitation on investing no more than
15% of its assets in illiquid securities. However, for options written with
"primary dealers" in U.S. Government securities pursuant to an agreement
requiring a closing transaction at a formula price, the amount considered to be
illiquid may be calculated by reference to a formula price.
The loss from investing in futures transactions is potentially unlimited.
In addition, utilization of futures in hedging transactions may fail where
there is an imperfect correlation in movements in the price of futures
contracts and movements in the price of the securities which are the subject of
the hedge. If the price of the futures contract moves more or less than the
price of the security, a Fund will experience a gain or loss that will not be
completely offset by movements in the price of the securities which are the
subject of the hedge. There is also a risk of imperfect correlation where the
securities underlying futures contracts have different maturities than the
portfolio securities being hedged. Transactions in options on futures contracts
involve similar risks.
Swap Agreements
The Funds may enter into interest rate, index and currency exchange rate
swap agreements in attempts to obtain a particular desired return at a lower
cost to the Fund than if the Fund had invested directly in an instrument that
yielded that desired return. Swap agreements are two-party contracts entered
into primarily by institutional investors for periods ranging from a few weeks
to more than one year. In a standard "swap" transaction, two parties agree to
exchange the returns (or differentials in rates of return) earned or realized
on particular predetermined investments or instruments. The gross returns to be
exchanged or "swapped" between the parties are calculated with respect to a
"notional amount," i.e., the return on or increase in value of a particular
dollar amount invested at a particular interest rate, in a particular foreign
currency, or in a "basket" of securities representing a particular index. The
"notional amount" of the swap agreement is only a fictive basis on which to
calculate the obligations the parties to a swap agreement have agreed to
exchange. A Fund's obligations (or rights) under a swap agreement will
generally be equal only to the amount to be paid or received under the
agreement based on the relative values of the positions held by each party to
the agreement (the "net amount"). A Fund's obligations under a swap agreement
will be accrued daily (offset against any amounts owing to the Fund) and any
accrued but unpaid net amounts owed to a swap counterparty will be covered by
the maintenance
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of a segregated account consisting of cash, U.S. Government securities, or High
Grade Debt Securities, to avoid leveraging of the Fund's portfolio. A Fund will
not enter into a swap agreement with any single party if the net amount owed or
to be received under existing contracts with that party would exceed 5% of the
Fund's assets.
Whether a Fund's use of swap agreements enhance the Fund's total return
will depend on the Investment Adviser's ability correctly to predict whether
certain types of investments are likely to produce greater returns than other
investments. Because they are two-party contracts and may have terms of greater
than seven days, swap agreements may be considered to be illiquid. Moreover, a
Fund bears the risk of loss of the amount expected to be received under a swap
agreement in the event of the default or bankruptcy of a swap agreement
counterparty. The Investment Adviser will cause a Fund to enter into swap
agreements only with counterparties that would be eligible for consideration as
repurchase agreement counterparties under the Funds' repurchase agreement
guidelines. Certain restrictions imposed on the Funds by the Internal Revenue
Code may limit the Funds' ability to use swap agreements. The swaps market is a
relatively new market and is largely unregulated. It is possible that
developments in the swaps market, including potential government regulation,
could adversely affect a Fund's ability to terminate existing swap agreements
or to realize amounts to be received under such agreements.
Certain swap agreements are exempt from most provisions of the Commodity
Exchange Act ("CEA") and, therefore, are not regulated as futures or commodity
option transactions under the CEA, pursuant to regulations of the CFTC. To
qualify for this exemption, a swap agreement must be entered into by "eligible
participants," which include the following, provided the participants' total
assets exceed established levels: a bank or trust company, savings association
or credit union, insurance company, investment company subject to regulation
under the Investment Company Act of 1940, commodity pool, corporation,
partnership, proprietorship, organization, trust or other entity, employee
benefit plan, governmental entity, broker-dealer, futures commission merchant,
natural person, or regulated foreign person. To be eligible, natural persons
and most other entities must have total assets exceeding $10 million; commodity
pools and employees benefit plans must have assets exceeding $5 million. In
addition, an eligible swap transaction must meet three conditions. First, the
swap agreement may not be part of a fungible class of agreements that are
standardized as to their material economic terms. Second, the creditworthiness
of parties with actual or potential obligations under the swap agreement must
be a material consideration in entering into or determining the terms of the
swap agreement, including pricing, cost or credit enhancement terms. Third,
swap agreements may not be entered into and traded on or through a multilateral
transaction execution facility.
Foreign Currency Exchange-Related Securities
Foreign currency warrants. Foreign currency warrants such as Currency
Exchange Warrants ("CEWs") are warrants that entitle the holder to receive from
the issuer an amount of cash (generally, for warrants issued in the United
States, in U.S. Dollars) that is calculated pursuant to a predetermined formula
and based on the exchange rate between a specified foreign currency and the
U.S. Dollar as of the exercise date of the warrant. Foreign currency warrants
generally are exercisable upon their issuance and expire as of a specified date
and time. Foreign currency warrants have been issued in connection with U.S.
Dollar-denominated debt offerings by major corporate issuers in an attempt to
reduce the foreign currency exchange risk that, from the point of view of
prospective purchasers of the securities, is inherent in the international
fixed-income marketplace. Foreign currency warrants may be used to reduce the
foreign exchange risk assumed by purchasers of a security by, for example,
providing for a supplemental payment in the event the U.S. Dollar depreciates
against the value of a major foreign currency such as the Japanese Yen or
German Deutschemark. The formula used to determine the amount payable upon
exercise of a foreign currency warrant may make the warrant worthless unless
the applicable foreign currency exchange rate moves in a particular direction
(e.g., unless the U.S. Dollar appreciates or depreciates against the particular
foreign currency to which the warrant is linked or indexed). Foreign currency
warrants are severable from the debt obligations with which they may be
offered, and may be listed on exchanges. Foreign currency warrants may be
exercisable only in certain minimum amounts, and an investor wishing to
exercise warrants who possesses less than the minimum number required for
exercise may be required either to sell the warrants or to purchase additional
warrants, thereby incurring additional transaction costs. Upon exercise of
warrants, there may be a delay between the time the holder gives instructions
to exercise and the time the exchange rate relating to exercise is determined,
thereby affecting both the market and cash settlement values of the warrants
being exercised. The expiration date of the warrants may be accelerated if the
warrants should be delisted from an exchange or if their trading should be
suspended permanently, which would result in the loss of any remaining "time
value" of the warrants (i.e., the difference between the current market value
and the exercise value of the warrants), and, if the warrants were
"out-of-the-money," in a total loss of the purchase price of the warrants.
Warrants are generally unsecured obligations of their issuers and are not
standardized foreign currency options issued by the OCC. Unlike foreign
currency options issued by OCC, the terms of foreign exchange warrants
generally will not be amended in the event of governmental or regulatory
actions affecting exchange rates or in the event of the imposition of other
regulatory controls affecting the international currency markets. The initial
public offering price of foreign currency warrants is generally considerably in
excess of the price that a commercial user of foreign currencies might pay in
the interbank market for a comparable option involving significantly larger
amounts of foreign currencies. Foreign currency warrants are subject to
significant foreign exchange risk, including risks arising from complex
political or economic factors.
Principal exchange rate linked securities. Principal exchange rate linked
securities (or "PERLS") are debt obligations the principal on which is payable
at maturity in an amount that may vary based on the exchange rate between the
U.S. Dollar and
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a particular foreign currency at or about that time. The return on "standard"
principal exchange rate linked securities is enhanced if the foreign currency
to which the security is linked appreciates against the U.S. Dollar, and is
adversely affected by increases in the foreign exchange value of the U.S.
Dollar; "reverse" PERLS are like the "standard" securities, except that their
return is enhanced by increases in the value of the U.S. Dollar and adversely
impacted by increases in the value of foreign currency. Interest payments on
the securities are generally made in U.S. Dollars at rates that reflect the
degree of foreign currency risk assumed or given up by the purchaser of the
notes (i.e., at relatively higher interest rates if the purchaser has assumed
some of the foreign exchange risk, or relatively lower interest rates if the
issuer has assumed some of the foreign exchange risk, based on the expectations
of the current market). PERLS may in limited cases be subject to acceleration
of maturity (generally, not without the consent of the holders of the
securities), which may have an adverse impact on the value of the principal
payment to be made at maturity.
Performance indexed paper. Performance indexed paper (or "PIPs") is U.S.
Dollar-denominated commercial paper the yield of which is linked to certain
foreign exchange rate movements. The yield to the investor on performance
indexed paper is established at maturity as a function of spot exchange rates
between the U.S. Dollar and a designated currency as of or about that time
(generally, the index maturity two days prior to maturity). The yield to the
investor will be within a range stipulated at the time of purchase of the
obligation, generally with a guaranteed minimum rate of return that is below,
and a potential maximum rate of return that is above, market yields on U.S.
Dollar-denominated commercial paper, with both the minimum and maximum rates of
return on the investment corresponding to the minimum and maximum values of the
spot exchange rate two business days prior to maturity.
Warrants to Purchase Securities
The Funds may invest in or acquire warrants to purchase equity or fixed
income securities. Bonds with warrants attached to purchase equity securities
have many characteristics of convertible bonds and their prices may, to some
degree, reflect the performance of the underlying stock. Bonds also may be
issued with warrants attached to purchase additional fixed income securities at
the same coupon rate. A decline in interest rates would permit a Fund to buy
additional bonds at the favorable rate or to sell the warrants at a profit. If
interest rates rise, the warrants would generally expire with no value.
A Fund will not invest more than 5% of its net assets, valued at the lower
of cost or market, in warrants to purchase securities. Included within that
amount, but not to exceed 2% of the Fund's net assets, may be warrants that are
not listed on the New York Stock Exchange or American Stock Exchange. Warrants
acquired in units or attached to securities will be deemed to be without value
for purposes of this restriction.
Participation Interests
The Phoenix-Seneca Bond Fund may purchase from banks participation
interests in all or part of specific holdings of debt obligations. Each
participation interest is backed by an irrevocable letter of credit or
guarantee of the selling bank that the Investment Adviser has determined meets
the prescribed quality standards of each Fund. Thus, even if the credit of the
issuer of the debt obligation does not meet the quality standards of the Fund,
the credit of the selling bank will.
Restricted and Illiquid Securities
Each Fund may invest up to 15% of its total assets in "illiquid
investments," including "restricted securities" (i.e., securities that would be
required to be registered prior to distribution to the public), securities that
are not readily marketable, repurchase agreements maturing in more than seven
days and privately issued stripped mortgage-backed securities.
Certain "restricted" securities may be resold to qualified institutional
buyers without restriction pursuant to Rule 144A under the Securities Act of
1933. If a sufficient dealer or institutional trading market exists for such a
security, it may not be considered "illiquid." The Trustees have adopted
guidelines and delegated to the Investment Adviser the daily function of
determining and monitoring the liquidity of restricted securities and
determining whether a Rule 144A security restricted security should be
considered "illiquid." The Trustees, however, retain oversight and are
ultimately responsible for the determinations. Please see the non- fundamental
investment restrictions for further limitations regarding the Funds'
investments in restricted and illiquid securities.
Short Sales
The Funds may sell securities short as part of their overall portfolio
management strategies involving the use of derivative instruments and to offset
potential declines in long positions in similar securities. A short sale is a
transaction in which a Fund sells a security it does not own or have the right
to acquire (or that it owns but does not wish to deliver) in anticipation that
the market price of that security will decline.
When a Fund makes a short sale, the broker-dealer through which the short
sale is made must borrow the security sold short and deliver it to the party
purchasing the security. The Fund is required to make a margin deposit in
connection with such short sales; the Fund may have to pay a fee to borrow
particular securities and will often be obligated to pay over any dividends and
accrued interest on borrowed securities.
If the price of the security sold short increases between the time of the
short sale and the time the Fund covers its short position, the Fund will incur
a loss; conversely, if the price declines, the Fund will realize a capital
gain. Any gain will be decreased, and
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any loss increased, by the transaction costs described above. The successful
use of short selling may be adversely affected by imperfect correlation between
movements in the price of the security sold short and the securities being
hedged.
To the extent a Fund sells securities short, it will provide collateral to
the broker-dealer and (except in the case of short sales "against the box")
will maintain additional asset coverage in the form of cash, U.S. Government
securities or High-Grade Debt Securities with its custodian in a segregated
account in an amount at least equal to the difference between the current
market value of the securities sold short and any amounts required to be
deposited as collateral with the selling broker (not including the proceeds of
the short sale). The Funds do not intend to enter into short sales (other than
short sales "against the box") if immediately after such sales the aggregate of
the value of all collateral plus the amount in such segregated account exceeds
one- third of the value of the Fund's net assets. This percentage may be varied
by action of the Trustees. A short sale is "against the box" to the extent the
Fund contemporaneously owns, or has the right to obtain at no added cost,
securities identical to those sold short.
Loans of Portfolio Securities
Each Fund may seek to increase its income by lending portfolio securities.
Under present regulatory policies, such loans may be made to financial
institutions, such as broker-dealers, and must be collateralized continuously
with cash, cash equivalents, irrevocable letters of credit, or U.S. Government
securities maintained on a current basis at an amount at least equal to the
market value of the securities lent. For the duration of a loan, the Fund would
receive the equivalent of the interest or dividends paid by the issuer on the
securities lent and would also receive compensation from the investment of the
collateral. The Fund would not have the right to vote any securities having
voting rights during the existence of the loan, but the Fund could call the
loan in anticipation of an important vote to be taken among holders of the
securities or of the giving or withholding of their consent on a material
matter affecting the investment. As with other extensions of credit, there are
risks of delay in recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. However, the loans would be made
only to firms considered by the Investment Adviser to be qualified, and when,
in the judgment of the Investment Adviser, the consideration that can be earned
currently from securities loans of this type justifies the attendant risk. The
value of the securities lent may not exceed one-third of the value of the total
assets of the Fund.
A Fund may pay reasonable negotiated fees to the Custodian in connection
with loaned securities as long as such fees are pursuant to a contract approved
by the Trustees.
INVESTMENT RESTRICTIONS
Each Fund has adopted the following fundamental investment restrictions
which may not be changed without approval of a majority of the applicable
Fund's outstanding voting securities. Under the 1940 Act, and as used in the
Prospectus and this Statement of Additional Information, a "majority of the
outstanding voting securities" requires the approval of the lesser of (1) the
holders of 67% or more of the shares of a Fund represented at a meeting of the
holders if more than 50% of the outstanding shares of the Fund are present in
person or by proxy or (2) the holders of more than 50% of the outstanding
shares of the Fund.
A Fund may not:
(1) Issue senior securities, except as permitted by paragraphs 3, 6, and 7
below. For purposes of this restriction, the issuance of shares of beneficial
interest in multiple classes or series, the purchase or sale of options,
futures contracts, forward commitments and reverse repurchase agreements
entered into in accordance with the Fund's investment policies or within the
meaning of paragraph 3 below, are not deemed to be senior securities.
(2) Purchase securities on margin (but the Funds may obtain such
short-term credits as may be necessary for the clearance of transactions);
provided that the deposit or payment of initial or variation margin in
connection with options or futures contracts is not considered the purchase of
securities on margin.
(3) Borrow money, except that a Fund may borrow from banks or enter into
reverse repurchase agreements or dollar rolls up to one-third of the value of
its total assets (calculated when the loan is made) to take advantage of
investment opportunities and may pledge up to one-third of the value of its
total assets to secure such borrowings. Each Fund is also authorized to borrow
an additional 5% of its total assets without regard to the foregoing
limitations for temporary purposes such as the clearance of transactions and
share redemptions. For purposes of this investment restriction, short sales,
the purchase or sale of securities on a "when-issued," delayed delivery or
forward commitment basis, the purchase or sale of options, futures contracts,
and options on futures contracts, securities or indices and collateral
arrangements with respect thereto shall not constitute borrowing.
(4) Act as an underwriter with respect to the securities of other issuers,
except to the extent that in connection with the disposition of portfolio
securities, the Fund may be deemed to be an underwriter for purposes of the
1933 Act; provided, however, that the Fund may invest all or part of its
investable assets in an open-end investment company with substantially the same
investment objectives, policies and restrictions as the Fund.
(5) Purchase or sell real estate except that the Fund may (i) acquire or
lease office space for its own use, (ii) invest in securities of issuers that
invest in real estate or interests therein, (iii) invest in securities that are
secured by real estate or interests therein, (iv) purchase and sell
mortgage-related securities and (v) hold and sell real estate acquired by the
Fund as a result of the ownership of securities.
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(6) Invest in commodities, except that the Fund may purchase and sell
options on securities, securities indices and currency, futures contracts on
securities, securities indices and currency and options on such futures,
forward foreign currency exchange contracts (including, foreign currency
warrants, principal exchange rated linked securities, and performance indexed
paper), forward commitments, securities index put or call warrants and
repurchase agreements entered into in accordance with the Fund's investment
policies, subject to restrictions as may be set forth elsewhere in the
Prospectus or this Statement of Additional Information.
(7) Make loans, except that the Fund may (1) lend portfolio securities in
accordance with the Fund's investment policies up to one-third of the Fund's
total assets taken at market value, (2) enter into repurchase agreements, and
(3) purchase all or a portion of an issue of debt securities, bank loan
participation interests, bank certificates of deposit, bankers' acceptances,
debentures or other securities, whether or not the purchase is made upon the
original issuance of the securities.
(8) For each Fund other than the Phoenix-Seneca Real Estate Securities
Fund, purchase the securities of issuers conducting their principal activity in
a single industry if, immediately after such purchase, the value of its
investments in such industry would exceed 25% of its total assets taken at
market value at the time of such investment (except investments in obligations
of the U.S. Government or any of its agencies, instrumentalities or
authorities); provided, however, that the Fund may invest all or part of its
investable assets in an open-end investment company with substantially the same
investment objectives, policies and restrictions as the Fund.
(9) For each Fund other than the Phoenix-Seneca Real Estate Securities
Fund, as to 75% of its total assets, purchase securities of an issuer (other
than the U.S. Government, its agencies, instrumentalities or authorities or
repurchase agreements collateralized by U.S. Government securities and other
investment companies), if:
(1) such purchase would cause more than 5% of the Fund's total assets taken
at market value to be invested in the securities of such issuer; or
(2) such purchase would at the time result in more than 10% of the
outstanding voting securities of such issuer being held by the Fund;
provided, however, that a Fund may, subject to restrictions imposed by the
1940 Act and applicable state laws, invest all or part of its investable
assets in an open-end investment company with substantially the same
investment objectives, policies and restrictions as the Fund. Because it
is a "non-diversified" fund within the meaning of the 1940 Act,
Phoenix-Seneca Real Estate Securities Fund will not be limited in the
proportion of its assets it may invest in the securities of any single
issuer.
For purposes of the above fundamental investment restrictions, the
Investment Adviser generally classifies issuers by industry in accordance with
classifications set forth in the Standard & Poor's Bond Guide. In the absence
of such classification or if the Investment Adviser determines in good faith
based on its own information that the economic characteristics affecting a
particular issuer make it more appropriate considered to be engaged in a
different industry, the Investment Adviser may classify an issuer according to
its own sources.
The Trust has undertaken with a state securities commission that it will
interpret the provisions of investment restriction number 5. to prohibit
investment by the Funds in real estate limited partnerships that are not
publicly traded. To the extent that undertaking is no longer required by the
state securities commission, the Trust may interpret that restriction
differently.
The following restrictions are designated as non-fundamental and may be
changed by the Trustees without the approval of shareholders.
A Fund may not:
(1) Pledge, mortgage or hypothecate its assets, except to secure permitted
borrowings and then only if such pledging, mortgaging or hypothecating does not
exceed one-third of the Fund's total assets taken at market value. Collateral
arrangements with respect to margin, option and other risk management and
when-issued and forward commitment transactions are not deemed to be pledges or
other encumbrances for purposes of this restriction.
(2) Participate on a joint or joint-and-several basis in any securities
trading account. The "bunching" of orders for the sale or purchase of
marketable portfolio securities with other accounts under the management of the
Investment Adviser or any subadviser to save commissions or to average prices
among them is not deemed to result in a joint securities trading account.
(3) Purchase or retain securities of an issuer if one or more of the
Trustees or officers of the Trust or principals or officers of the Investment
Adviser, any subadviser or any investment management subsidiary of the
Investment Adviser individually owns beneficially more than 0.5% and together
own beneficially more than 5% of the securities of such issuer.
(4) Purchase a security of other investment companies, except when the
purchase is part of a plan of merger, consolidation, reorganization or
acquisition or except where such purchase would not result in (i) more than 10%
of the Fund's assets being invested in securities of other investment
companies, (ii) more than 3% of the total outstanding voting securities of any
one such investment company being held by the Fund or (iii) more than 5% of the
Fund's assets being invested in any one such investment
13
<PAGE>
company; provided, however, that the Fund may invest all of its investable
assets in an open-end investment company with substantially the same investment
objectives, policies and restrictions as the Fund.
(5) Invest in securities that are illiquid if, as a result, more than 15%
of its net assets would consist of such securities, including repurchase
agreements maturing in more than seven days, securities that are not readily
marketable, and restricted securities not eligible for resale pursuant to Rule
144A under the 1933 Act; provided, however, that the Fund may invest all or
part of its investable assets in an open-end investment company with
substantially the same investment objectives, policies and restrictions as the
Fund.
(6) Purchase warrants of any issuer, if, as a result of such purchase,
more than 2% of the value of the Fund's total assets would be invested in
warrants that are not listed on the NYSE or American Stock Exchange or more
than 5% of the total assets of the Fund, valued at the lower of cost or current
market value, would be invested in warrants generally, whether or not so
listed. Warrants acquired by the Fund in units with or attached to debt
securities shall be deemed to be without value.
(7) Purchase interests in oil, gas, or other mineral exploration programs
or mineral leases; however, this policy will not prohibit the acquisition of
securities of companies engaged in the production or transmission of oil, gas
or other minerals.
(8) Invest for the purpose of exercising control over or management of any
company; provided that the Fund may do so where it is deemed advisable to
protect or enhance the value of an existing investment; and provided further,
that the Fund may invest all or part of its investable assets in an open-end
investment company with substantially the same investment objectives, policies
and restrictions as the Fund.
(9) Write (sell) options that are not "covered" as described elsewhere in
this Statement of Additional Information or write puts on securities if the
aggregate value of the obligations underlying the puts exceeds 50% of the
Fund's net assets.
(10) Buy and sell puts and calls on securities, stock index futures or
options on stock index futures or financial futures or options on financial
futures if (i) the aggregate premiums paid on all such options which are held
at any time exceed 20% of the Fund's aggregate net assets and (ii) the
aggregate margin deposits required on all such futures or options thereon held
at any time exceed 5% of the Fund's total assets.
(11) Purchase puts, calls, straddles, spreads, or any combination thereof
if by reason thereof, the value of its aggregate investment in such classes of
securities (other than protective puts) will exceed 5% of its net assets.
(12) Make short sales of securities or maintain a short position, unless
at all times when a short position is open, the Fund owns an equal amount of
the securities or securities convertible into or exchangeable for, without
payment of any further consideration, securities of the same issue as, and
equal in amount to, the securities sold short.
Each Fund may, notwithstanding any other fundamental or non-fundamental
investment restriction or policy, invest all of its assets in the securities of
a single open-end investment company with substantially the same fundamental
investment objectives, restrictions and policies as the Fund.
Except as to the 300% asset coverage required by fundamental restriction
number 3, if a percentage restriction on investment or utilization of assets as
set forth above is adhered to at the time an investment is made, a later change
in percentage resulting from changes in the values of a Fund's assets will not
be considered a violation of the restriction. Notwithstanding the foregoing, if
a Fund's investment in illiquid securities exceeds 15% of its net assets,
whether through a change in values, net assets, or otherwise, the Fund will
take appropriate steps to protect liquidity, including the orderly liquidation
of illiquid securities in a manner consistent with the realization of the
maximum value of those assets.
Pursuant to a restriction imposed by a state securities commission, the
Investment Adviser waives its fee on all assets of any Fund invested in shares
of other open-end investment management companies pursuant to investment
restriction d., above.
In order to permit the sale of shares of the Funds in certain states, the
Trustees may, in their sole discretion, adopt restrictions on investment policy
more restrictive than those described above. Should the Trustees determine that
any such more restrictive policy is no longer in the best interest of a Fund
and its shareholders, the Fund may cease offering shares in the state involved
and the Trustees may revoke such restrictive policy. Moreover, if the states
involved shall no longer require any such restrictive policy, the Trustees may,
in their sole discretion, revoke such policy.
14
<PAGE>
CALCULATION OF THE FUNDS' PERFORMANCE
Total Return
The average annual total return on Shares of each class of each Fund is
determined for a particular period by calculating the actual dollar amount of
the investment return on a $1,000 investment in Shares of that class of the
Fund made at the net asset value of such shares at the beginning of the period,
and then calculating the annual compounded rate of return that would produce
that amount. Total return for a period of one year is equal to the actual
return of shares of that class of the Fund during that period. The following
formula describes the calculation:
ERV = P(1+T)(n)
Where:
<TABLE>
<S> <C> <C>
P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 investment made at the beginning
of the indicated period.
</TABLE>
This calculation assumes that (i) all dividends and distributions are
reinvested at net asset value on the reinvestment dates during the period and
(ii) all recurring fees are included for applicable periods.
Each Fund may illustrate in advertisements and sales literature the
average annual total return and cumulative total return for several time
periods throughout the Fund's life based on an assumed initial investment of
$1,000. Any such cumulative total return for a Fund will assume the
reinvestment of all income dividends and capital gains distributions for the
indicated periods and will include all recurring fees.
The average annual total return for the one year period ended September
30, 1997 were as follows:
<TABLE>
<CAPTION>
Class A Class X
--------- --------
<S> <C> <C>
Phoenix-Seneca Growth Fund 26.51% 27.27%
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund 11.25% 11.39%
Phoenix-Seneca Bond Fund N/A 11.26%
Phoenix-Seneca Real Estate Securities Fund 34.54% 35.44%
</TABLE>
The average annual total returns for the period from commencement of
investment operations through September 30, 1997 were as follows:
<TABLE>
<CAPTION>
Class A Class X
--------- --------
<S> <C> <C>
Phoenix-Seneca Growth Fund 41.58% 42.85%
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund 38.23% 38.58%
Phoenix-Seneca Bond Fund N/A 9.83%
Phoenix-Seneca Real Estate Securities Fund 30.15% 31.16%
</TABLE>
%
Yield
The 30-day yield quotation as to a class of shares of the Phoenix-Seneca
Bond Fund and the Phoenix-Seneca Real Estate Securities Fund may be computed by
dividing the net investment income for the period as to shares of that class by
the net asset value of each share of that class on the last day of the period,
according to the following formula:
YIELD = 2[(a-b + 1)(6)-1]
cd
Where:
<TABLE>
<S> <C> <C>
a = dividends and interest earned during the period.
b = net expenses accrued for the period.
c = the average daily number of shares of the class outstanding during the period that
were entitled to receive dividends.
d = the maximum offering price per share of the class (net asset value per share) on the
last day of the period.
</TABLE>
15
<PAGE>
Return for a Fund is not fixed or guaranteed and will fluctuate from time
to time, unlike bank deposits or other investments which pay a fixed yield or
return for a stated period of time, and do not provide a basis for determining
future returns. Return is a function of portfolio quality, composition,
maturity and market conditions as well as the expenses allocated to each class
of each Fund. The return of a class may not be comparable to other investment
alternatives because of differences in the foregoing variables and differences
in the methods used to value portfolio securities, compute expenses and
calculate return.
The yields for the 30-day period ended September 30, 1997 were as follows:
<TABLE>
<CAPTION>
Class A Class X
--------- --------
<S> <C> <C>
Phoenix-Seneca Bond Fund N/A 5.81%
Phoenix-Seneca Real Estate Securities Fund 0.87% 2.25%
</TABLE>
Other Quotations, Comparisons, and General Information
From time to time, in advertisements, in sales literature, or in reports
to shareholders, the past performance of a Fund may be illustrated and/or
compared with that of other mutual funds with similar investment objectives,
and to stock or other relevant indices. For example, total return of a Fund's
classes may be compared to averages or rankings prepared by Lipper Analytical
Services, Inc., a widely recognized independent service that monitors mutual
fund performance; the Lehman Brothers Government/ Corporate Index, an
unmanaged index of consisting of a mixture of government and corporate bonds
rated within "investment grade" categories by S&P or Moody's; the Morgan
Stanley Europe, Australia, Far East Index ("EAFE"), an unmanaged index of
international stock markets, the S&P Mid-Cap Index, an unmanaged index of
common stocks; the S&P 500 Index, an unmanaged index of common stocks; the
Russell 2000 Index (the "Russell 2000"), an unmanaged index of common stocks;
the Russell 3000 Index (the "Russell 3000"), an unmanaged index of common
stocks; or the Dow Jones Industrial Average, an unmanaged index of common
stocks of 30 industrial companies listed on the NYSE. The performance of the
Phoenix-Seneca Real Estate Securities Fund may be compared to the Wilshire Real
Estate Securities Index, an unmanaged index consisting of publicly-traded REITs
and real estate operating companies.
The S&P 500 Index is an unmanaged index of 500 common stocks traded on the
NYSE, American Stock Exchange and the Nasdaq National Market. The S&P 500
represents approximately 70% of the total domestic U.S. equity market
capitalization. The S&P Mid-Cap Index is an unmanaged index of common stocks of
400 companies with mid-size market capitalizations--$300 million to $5 billion.
The S&P 500 and the S&P Mid-Cap Indices are market value-weighted indices
(shares outstanding times stock price) in which each company's influence on the
respective index is directly proportional to its market value. The companies in
the S&P 500 Index and the S&P Mid-Cap Index are selected from four major
industry sectors: industrials, utilities, financials and transportation. The
500 companies chosen for the S&P 500 Index are not the 500 largest companies in
terms of market value. Rather, the companies chosen by S&P for inclusion in the
S&P 500 tend to be leaders in important industries within the U.S. economy. The
Russell 2000 is an unmanaged index of 2000 common stocks of small
capitalization companies. The Russell 2000 is composed of the 2000 smallest
companies with respect to capitalization in the Russell 3000 and represents
approximately 70% of the Russell 3000 total market capitalization. The Russell
3000 is an unmanaged index of 3000 common stocks of large United States
companies with market capitalizations ranging from approximately $60 million to
$80 billion. The Russell 3000 represents approximately 98% of the United States
equity market. The Wilshire Real Estate Securities Index is an unmanaged,
market-capitalization-weighted index consisting of publicly-traded REITs and
real estate operating companies. It excludes healthcare and other
"special-purpose" REITs. It is rebalanced monthly and reconstituted quarterly.
In addition, the performance of the classes of a Fund may be compared to
alternative investment or savings vehicles and/or to indexes or indicators of
economic activity, e.g., inflation or interest rates. Performance rankings and
listings reported in newspapers or national business and financial
publications, such as Barron's, Business Week, Consumer's Digest, Consumer
Reports, Financial World, Forbes, Fortune, Investors Business Daily,
Kiplinger's Personal Finance Magazine, Money Magazine, the New York Times,
Smart Money, USA Today, U.S. News and World Report, The Wall Street Journal and
Worth may also be cited (if a Fund is listed in such a publication) or used for
comparison, as well as performance listings and rankings from various other
sources, including Bloomberg Financial Systems, CDA/Wiesenberger Investment
Companies Service, Donoghue's Mutual Fund Almanac, Investment Company Data,
Inc., Johnson's Charts, Kanon Bloch Carre & Co., Micropal, Inc., Morningstar,
Inc., Schabacker Investment Management and Towers Data Systems.
In addition, from time to time, quotations from articles from financial
publications, such as those listed above, may be used in advertisements, in
sales literature or in reports to shareholders of the Funds.
The Trust may also present, from time to time, historical information
depicting the value of a hypothetical account in one or more classes of a Fund
since the Fund's inception.
In presenting investment results, the Trust may also include references to
certain financial planning concepts, including (a) an investor's need to
evaluate his financial assets and obligations to determine how much to invest;
(b) his need to analyze the objectives of various investments to determine
where and when to invest; and (c) his need to analyze his time frame for future
capital needs to determine how to invest. The investor controls these three
factors, all of which affect the use of investments in building assets. The
Investment Adviser's agreement to limit each Fund's operating expenses will
increase investment performance.
16
<PAGE>
ADVISORY AND ADMINISTRATIVE SERVICES
Investment Adviser
Overall responsibility for the management and supervision of the Trust and
the Funds rests with the Trustees of Phoenix-Seneca Funds (the "Trustees").
PIC's services under its Investment Management Agreement and PEPCO's services
under the Administrative Services Agreement with the Trust are subject to the
direction of the Trustees. Seneca's services under the Subadvisory Agreement
are subject to the direction of both the Trustees and PIC.
Phoenix Investment Counsel, Inc. ("PIC") is the investment adviser for the
Phoenix-Seneca Funds pursuant to an Investment Advisory Agreement. PIC is
located at 56 Prospect Street, Hartford, Connecticut 06115-0480. PIC was
originally organized in 1932 as John P. Chase, Inc. In addition to the
Phoenix-Seneca Funds, PIC also serves as investment adviser to other entities
including Phoenix Duff & Phelps Institutional Mutual Funds (except Enhanced
Reserves Portfolio and Real Estate Equity Securities Portfolio), Phoenix Series
Fund, Phoenix Multi-Portfolio Fund (all portfolios other than the Real Estate
Securities Portfolio), Phoenix Strategic Allocation Fund, Inc., Phoenix
Strategic Equity Series Fund (all funds except Phoenix Equity Opportunities
Fund), Phoenix Equity Series Fund, Phoenix Investment Trust 97 and The Phoenix
Edge Series Fund (all series other than the Real Estate Securities Series and
Aberdeen New Asia Series) and as subadviser to the SunAmerica Series Trust,
among other investment advisory clients. As of December 31, 1996, PIC had
approximately $18.2 billion in assets under management.
All of the outstanding stock of PIC is owned by Phoenix Equity Planning
Corporation ("PEPCO"), a subsidiary of Phoenix Duff & Phelps Corporation.
Phoenix Home Life is a majority shareholder of Phoenix Duff & Phelps
Corporation. Phoenix Home Life is in the business of writing ordinary and group
life and health insurance and annuities. Its principal offices are located at
One American Row, Hartford, Connecticut 06115. Phoenix Duff & Phelps
Corporation is a New York Stock Exchange traded company that provides various
financial advisory services to institutional investors, corporations and
individuals through operating subsidiaries.
The Funds' Investment Subadviser is Seneca Capital Management, LLC
("Seneca"). Its principal offices are located at 909 Montgomery Street, San
Francisco, California 94133. Under a Subadvisory Agreement with PIC and the
Trust, Seneca's duties to each Fund include: (1) supervising and managing the
investments of that Fund and directing the purchase and sale of its
investments; and (2) ensuring that investments follow the investment objective,
strategies, and policies of that Fund and comply with government regulations.
Seneca has approximately 40 full-time employees and acts as investment adviser
or manager for approximately $3.25 billion of institutional and private
investment accounts.
Pursuant to the Management Agreement, the Investment Adviser supervises
and assists in the management of the assets of each Fund and furnishes each
Fund with research, statistical and advisory services. Pursuant to the
Subadvisor Agreement, PIC has delegated the responsibility for making
investment decisions for the Funds and selecting brokers and dealers to execute
transactions for each Fund. In managing the assets of the Funds, the Investment
Adviser/Subadviser furnishes continuously an investment program for each Fund
consistent with the investment objectives and policies of that Fund. More
specifically, the Investment Adviser/Subadviser determines from time to time
what securities shall be purchased for the Fund, what securities shall be held
or sold by the Fund and what portion of the Fund's assets shall be held
uninvested as cash, subject always to the provisions of the Trust's Agreement
and Declaration of Trust, By-Laws and its registration statement under the 1940
Act and under the 1933 Act covering the Trust's shares, as filed with the SEC,
and to the investment objectives, policies and restrictions of the Fund, as
each of the same shall be from time to time in effect, and subject, further, to
such policies and instructions as the Trustees of the Trust may from time to
time establish.
For its investment advisory services under the Management Agreement, the
Investment Adviser receives a fee, payable monthly, from Phoenix-Seneca Growth
Fund equal to 0.70% per annum of the Fund's average daily net assets, from
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund equal to 0.80% per annum of the Fund's
average daily net assets, from Phoenix-Seneca Bond Fund equal to 0.50% per
annum of such Fund's average daily net assets, and from Phoenix-Seneca Real
Estate Securities Fund equal to 0.85% per annum of such Fund's average daily
net assets. The Investment Adviser pays the Investment Subadviser a fee of
0.35% for the Phoenix-Seneca Growth Fund, 0.40% for the Phoenix-Seneca Mid-Cap
"EDGE"(SM) Fund, 0.25% for the Phoenix-Seneca Bond Fund, and 0.425% for the
Phoenix-Seneca Real Estate Securities Fund.
For the period ended September 30, 1997, the former Investment Manager,
GMG/Seneca Capital Management, LLC, earned investment management fees of
$200,056, $89,157, $34,294 and $164,147 for services rendered pursuant to the
Management Agreement to Phoenix-Seneca Growth Fund, Phoenix-Seneca Mid-Cap
"EDGE"(SM) Fund, Phoenix-Seneca Bond Fund and Phoenix-Seneca Real Estate
Securities Fund, respectively.
The management fees are accrued daily and will be prorated with respect to
any Fund if the Investment Adviser shall not have acted as that Fund's
investment adviser during any entire monthly period. The Investment Management
Agreement provides that if the operating expenses of a Fund in any year,
excluding taxes, brokerage commissions, interest, dividends paid on securities
sold short and extraordinary legal fees and expenses, exceed the expense limits
set by state securities law administrators in states
17
<PAGE>
in which that Fund's shares are sold, the amount payable to the Investment
Adviser will be reduced (but not below zero) by the amount of such excess.
Recent federal legislation preempts states' abilities in most circumstances to
impose such expense limits. Each Fund will reimburse the Investment Adviser for
fees foregone or other expenses paid by the Investment Adviser in order to
comply with any expense limitation imposed by state laws in later years in
which operating expenses for the Fund are less than such expense limitations
for such year. No interest, carrying or finance charge will be paid by a Fund
as to the amounts representing fees foregone or other expenses paid. In
addition, no Fund will pay any unreimbursed amounts to the Investment Adviser
upon termination of its Investment Management Agreement.
The Investment Adviser has voluntarily agreed to reimburse the Funds'
operating expenses (excluding Management Fees and Rule 12b-1 Fees) through
September 30, 1998 to prevent total operating expenses from exceeding, on an
annualized basis, the following:
<TABLE>
<CAPTION>
Fund Class X Class A Class B Class C Class M
<S> <C> <C> <C> <C> <C>
Growth Fund 1.25% 1.85% 2.60% 2.60% 2.10%
Mid-Cap "EDGE"(SM) Fund 2.10% 2.70% 3.45% 3.45% 2.95%
Bond Fund 1.85% 2.45% 3.20% 3.20% 2.70%
Real Estate Securities Fund 2.35% 3.05% 3.80% 3.80% 3.30%
</TABLE>
The Investment Adviser may discontinue or modify any such waivers or
reimbursements it may provide in the future at its discretion.
Under the Investment Management Agreement, the Trust, on behalf of each
Fund, agrees (i) not to hold the Investment Adviser or any of its officers or
employees liable for, and (ii) to indemnify or insure the Manager and its
officers and employees ("Indemnified Parties") against, any costs and
liabilities the Indemnified Parties may incur as a result of any claim against
the Indemnified Parties in the good faith exercise of their powers under the
Investment Management Agreement or arising out of an act or omission of the
Trust's custodian of assets, or of any broker or agent selected by the
Investment Adviser in a commercially reasonable manner, excepting matters as to
which the Indemnified Parties shall be finally adjudged to have been guilty of
willful misfeasance, bad faith, gross negligence, reckless disregard of duty or
breach of fiduciary duty (all as used in the 1940 Act).
The Investment Management Agreement may be modified or amended only with
the approval of the holders of a majority of the applicable Fund's outstanding
shares and by a vote of the majority of the Independent Trustees. Unless
terminated, the Investment Management Agreement continues in full force and
effect for two years after its date of execution, and for successive periods of
one year thereafter, but only as long as each such continuance after the end of
the initial two year period is approved annually by a majority vote of the
Trustees or by a vote of the holders of a majority of the out standing shares
of the applicable Fund, but in either event it also must be approved by a vote
of a majority of the Independent Trustees, cast in person at a meeting called
for the purpose of voting on such approval. The Investment Management Agreement
may be terminated without penalty by either party upon 60 days' written notice
and automatically terminates in the event of its assignment.
Officers and Trustees of the Trust who are also principals in and
employees of GMG/Seneca may receive indirect compensation by reason of
investment advisory fees paid by the Trust to GMG/Seneca in its capacity as the
Subadviser.
[Gail P. Seneca, President and Trustee of the Trust, Sandra J. Westhoff,
Treasurer and Trustee of the Trust, and Ronald K. Jacks, Secretary of the
Trust, are each an "affiliated person" of the Trust (as defined in the 1940
Act). Gail P. Seneca, as the sole "Managing Member," Chief Investment Officer,
and an owner of more than 5% of the equity of Seneca is an "affiliated person"
of Seneca. Sandra J. Westhoff, as Chief Administrative Officer of Seneca, and
Ronald K. Jacks, as a Portfolio Manager of Seneca, are each an "affiliated
person" of Seneca.]
In the management of the Trust and their other accounts, Seneca and its
affiliates allocate investment opportunities to all accounts for which they
are, in the Subadviser's judgment, appropriate, subject to the availability of
cash in any particular account and the final decision of the individual or
individuals in charge of such accounts. Where market supply is inadequate for a
distribution to all such accounts, securities are generally allocated in
proportion to net assets. In some cases this procedure may have an adverse
effect on the price or volume of the security as far as the Funds are
concerned. However, it is the judgment of the Trustees that the desirability of
continuing the Trust's advisory arrangements with the Investment Adviser
outweighs any disadvantages that may result from contemporaneous transactions.
See "Portfolio Brokerage."
In an attempt to avoid any potential conflict with portfolio transactions
for the Funds, the Investment Adviser, Subadviser and the Trust, on behalf of
each Fund, have adopted restrictions on personal securities trading by
personnel of the Investment Adviser, Subadviser and their affiliates. These
restrictions include: pre-clearance of all personal securities transactions and
a prohibition of purchasing initial public offerings of securities.
In the event neither the Investment Adviser or Subadviser nor any of their
affiliates acts as investment adviser to the Trust, the name of the Trust will
be changed to one that does not contain the names "Phoenix" and "Seneca" or
otherwise suggest an affiliation with the Investment Adviser or Subadviser.
18
<PAGE>
Administrator
PEPCO, in its capacity as Administrator of each Fund, is responsible for
providing administrative services for each Fund under an administration
agreement (the "Administration Agreement"). PEPCO and the Trust have also
entered into an agreement (the "Sub-Administration Agreement") with State
Street Bank and Trust Company under which State Street provides most of these
services. In the Sub-Administration Agreement, the Trust has agreed to
guarantee the obligation of PEPCO to compensate State Street. The services to
be rendered under the Administration Agreement include for each Fund, (a)
overseeing the determination and publication of each Fund's net asset value,
(b) overseeing the maintenance by the Custodian of certain books and records of
the Funds as required by Rule 31a-1(b) under the 1940 Act, (c) preparing each
Fund's tax returns, (d) preparing financial information for each Fund's
semiannual and annual reports, proxy statements, and other communications to
shareholders, (e) preparing each Fund's periodic financial reports on Form
N-SAR and financial information required for the Fund's filings with the SEC,
(f) providing periodic testing of each Fund's portfolio to assist in compliance
with the requirements of the Code for qualification as a registered investment
company and with the 1940 Act and prospectus limitations on investments, (g)
filing annual and semiannual reports with appropriate regulatory agencies, (h)
preparing and filing with the SEC Rule 24f-2 notices, and (i) preparing and
filing state registrations of the Trust's securities.
For its services under the Administration Agreement, PEPCO is entitled to
receive a fee (the "Administrative Services Fee") from each Fund based on the
average net assets of the Fund. The Administrative Services Fee will be payable
monthly and will equal, on an annualized basis, the sum of (i) .08% of the
first $125 million average net assets, plus (ii) .06% of the next $125 million
average net assets, plus (iii) .04% of the average net assets above $250
million. In addition, for performing Blue Sky and other administrative services
PEPCO is entitled to receive from each Fund an annual fee equal to $2,500 for
each class of shares in such Fund. During each year, each Fund will be
obligated to pay a minimum Administrative Services Fee of $55,000. If the Trust
terminates the Administration Agreement prior to the third anniversary of the
date that the Trust first accepts money for investment, the Trust is obligated
to pay to PEPCO a termination fee equal to certain amounts by which PEPCO was
required to waive its Administrative Services Fee under the terms of the
Administration Agreement. For the period ended September 30, 1997, GMG/Seneca
earned Administrative Services Fees of $57,514, $56,326, $55,433 and $57,899
for services rendered pursuant to the Administration Agreement to
Phoenix-Seneca Growth Fund, Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund,
Phoenix-Seneca Bond Fund and Phoenix-Seneca Real Estate Securities Fund,
respectively.
The above fees may be changed by the Trustees without shareholder
approval.
Each Fund bears all expenses of its own operation (subject to the expense
limitations described above), which expenses include: (i) fees and expenses of
any investment adviser or administrator of the Fund; (ii) organization expenses
of the Trust; (iii) fees and expenses incurred by the Fund in connection with
membership in investment company organizations; (iv) brokers' commissions; (v)
payment for portfolio pricing services to a pricing agent, if any; (vi) legal,
accounting or auditing expenses; (vii) interest, insurance premiums, taxes or
governmental fees; (viii) fees and expenses of the transfer agent of the Funds;
(ix) the cost of preparing stock certificates or any other expenses, including,
without limitation, clerical expenses of issue, redemption or repurchase of
shares of the Fund; (x) the expenses of and fees for registering or qualifying
shares of the Funds for sale and of maintaining the registration of the Funds;
(xi) a portion of the fees and expenses of Trustees who are not affiliated with
the Investment Adviser or Subadviser; (xii) the cost of preparing and
distributing reports and notices to existing shareholders, the SEC and other
regulatory authorities; (xiii) fees or disbursements of custodians of the
Funds' assets, including expenses incurred in the performance of any
obligations enumerated by the Agreement and Declaration of Trust or By-Laws of
the Trust insofar as they govern agreements with any such custodian; (xiv)
costs in connection with annual or special meetings of shareholders, including
proxy material preparation, printing and mailing; (xv) litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Funds' business; and (xvi) distribution fees and service
fees applicable to each class of shares.
The Funds' Management and Administration Agreements each provide that the
Investment Advisor/Subadviser and PEPCO may render similar services to others
so long as the services provided thereunder are not impaired thereby.
The Distributor
PEPCO also acts as the Distributor for the Funds and as such will conduct
a continuous offering pursuant to a "best efforts" arrangement requiring it to
take and pay for only such securities as may be sold to the public. PEPCO is an
indirect wholly-owned subsidiary of Phoenix Home Life Mutual Insurance Company
and an affiliate of the Adviser. Shares of the Funds may be purchased through
investment dealers who have sales agreements with the Distributor. During the
previous fiscal years, purchasers of shares of the Funds did not pay any sales
charges.
The Underwriting Agreement may be terminated at any time on not more than
60 days written notice, without payment of a penalty, by the Distributor, by
vote of a majority of the outstanding voting securities of the Funds, or by
vote of a majority of the Funds' Trustees who are not "interested persons" of
the Funds and who have no direct or indirect financial interest in the
operation of the Distribution Plans or in any related agreements. The
Underwriting Agreement will terminate automatically in the event of its
assignment.
19
<PAGE>
Dealers with whom the Distributio has entered into sales agreements
receive sales charges in accordance with the commission table set forth in the
Prospectus. The Distributor may from time to time pay, from its own resources
or pursuant to the Plans of Distribution described below, a bonus or other
incentive to dealers (other than the Distributor) which employ a registered
representative who sells a minimum dollar amount of the shares of the Funds
during a specific period of time. Such bonus or other incentive may take the
form of payment for travel expenses, including lodging, incurred in connection
with trips taken by qualifying registered representatives and members of their
families to places within or without the United States or other bonuses such as
gift certificates or the cash equivalent of such bonuses. The Distributor may,
from time to time, reallow the entire portion of the sales charge which it
normally retains to individual selling dealers. However, such additional
reallowance generally will be made only when the selling dealer commits to
substantial marketing support such as internal wholesaling through dedicated
personnel, internal communications and mass mailings.
Plans of Distribution
The Funds have adopted separate distribution plans under Rule 12b-1 of the
1940 Act for each class of shares of the Funds other than Class X (the "Class A
Plan," the "Class B Plan," the "Class C Plan," the "Class M Plan" and
collectively the "Plans"). The Plans permit the Funds to pay the Distributor
for furnishing shareholder services and to reimburse the Distributor for
expenses incurred in connection with activities intended to promote the sale of
shares of each class of shares of the Funds.
Pursuant to the Plans, the Funds pay the Distributor 0.25% annually of the
average daily net assets of the Funds' Class A, Class B, Class C and Class M
Shares and reimburse the Distributor monthly for actual expenses of the
Distributor up to 0.75% annually of the average daily net assets of the Funds'
Class B and Class C Shares, and up to 0.25% annually of the average daily net
assets of the Funds' Class M Shares.
Expenditures under the Plans shall consist of: (i) commissions to sales
personnel for selling shares of the Funds (including underwriting fees and
financing expenses incurred in connection with the sale of Class B Shares; (ii)
compensation, sales incentives and payments to sales, marketing and service
personnel; (iii) payments to broker-dealers and other financial institutions
which have entered into agreements with the Distributor in the form of the
Dealer Agreement for Phoenix Funds for services rendered in connection with the
sale and distribution of shares of the Funds; (iv) payment of expenses incurred
in sales and promotional activities, including advertising expenditures related
to the Funds; (v) the costs of preparing and distributing promotional
materials; (vi) the cost of printing the Funds' Prospectus and Statement of
Additional Information for distribution to potential investors; and (vii) such
other similar services that the Trustees of theTrust determine are reasonably
calculated to result in the sale of shares of the Funds.
Expenses not reimbursed during any year, because of the limitations on
reimbursements, may be carried over and paid in future years when actual
expenses are less than the respective limits under each Plan. If a
reimbursement appears probable, it will be accounted for as a current expense
of the Funds regardless of the time period over which the reimbursement may
actually be paid by the Funds. If the Plans are terminated in accordance with
their terms, the obligations of the Funds to make payments to the Distributor
pursuant to the Plans, including payments for expenses carried over from
previous years, will cease and the Funds will not be required to make any
payments past the date on which the Plans terminate.
In order to receive payments under the Plans, participants must meet such
qualifications to be established in the sole discretion of the Distributor,
such as services to the Funds' shareholders; or services providing the Funds
with more efficient methods of offering shares to coherent groups of clients,
members or prospects of a participant; or services permitting bulking of
purchases or sales, or transmission of such purchases or sales by computerized
tape or other electronic equipment; or other processing.
On a quarterly basis, the Funds' Trustees review a report on expenditures
under the Plans and the purposes for which expenditures were made. The Trustees
conduct an additional, more extensive review annually in determining whether
the Plans will be continued. By its terms, continuation of the Plans from year
to year is contingent on annual approval by a majority of the Funds' Trustees
and by a majority of the Trustees who are not "interested persons" (as defined
in the 1940 Act) and who have no direct or indirect financial interest in the
operation of the Plans or any related agreements (the "Plan Trustees"). The
Plans provides that they may not be amended to increase materially the costs
which the Funds may bear pursuant to the Plans without approval of the
shareholders of that class of the Funds and that other material amendments to
the Plans must be approved by a majority of the Plan Trustees by vote cast in
person at a meeting called for the purpose of considering such amendments. The
Plans further provide that while they are in effect, the selection and
nomination of Trustees who are not "interested persons" shall be committed to
the discretion of the Trustees who are not "interested persons." The Plans may
be terminated at any time by vote of the Plan Trustees or a majority of the
outstanding shares of the relevant class of the Funds.
The National Association of Securities Dealers, Inc. ("NASD"), regard
certain distribution fees as asset-based sales charges subject to NASD sales
load limits. The NASD's maximum sales charge rule may require the Trustees to
suspend distribution fees or amend the Plans.
20
<PAGE>
For the fiscal year ended September 30, 1997, the Funds paid to Seneca
Distributors, the Former Distributor, [$313.73] pursuant to the then current
Distribution Agreement. As of September 30, 1997, the Funds had accrued
expenses of [$568] pursuant to the then current Distribution Agreement. During
the last fiscal year, the Former Distributors expended the amounts indicated
below in connection with the distribution of the Funds' shares:
<TABLE>
<S> <C>
Advertising: [$80,532.78]
Printing and mailing of Prospectuses: [$90,000.00]
Other (includes development of certain
graphics as well as establishment of Internet
capabilities): [$27,000.00]
</TABLE>
TRUSTEES AND OFFICERS
The Trustees have responsibility for management of the business of the
Trust. The executive officers of the Trust are responsible for its day to day
operation. Set forth below is certain information concerning the Trustees and
officers.
<TABLE>
<CAPTION>
Name and Title Address Age Principal Occupations During Past Five Years
- ------------------------ --------------------------- ----- ---------------------------------------------------------
<S> <C> <C> <C>
Gail P. Seneca,* 909 Montgomery Street 42 Ms. Seneca has been President and a Trustee of the Trust
President, and Trustee San Francisco, CA 94133 since February 1996. Since July 1, 1996, she has been
the Managing Member of GMG/Seneca. Since November
1989, she has been Chief Investment Officer and a
managing general partner of GMG/Seneca Capital
Management, L.P.
Sandra J. Westhoff,* 909 Montgomery Street 36 Ms. Westhoff has been Treasurer and a Trustee of the
Treasurer and Trustee San Francisco, CA 94133 Trust since February 1996. From September 1994 to
present, she has been Chief Administrative Officer of
GMG/Seneca Capital Management, L.P., and, since July
1, 1996, Chief Administrative Officer of GMG/Seneca.
From 1989 to 1994, she was Director of Finance for the
San Francisco Newspaper Agency.
Ronald K. Jacks,* 909 Montgomery Street 30 Mr. Jacks has been Secretary of the Trust since February
Secretary San Francisco, CA 94133 1996. He served as a Trustee of the Trust from February
1996 through June 1997. From July 1990 to present he
has been a Portfolio Manager of GMG/Seneca Capital
Management, L.P., and since July 1, 1996, a Portfolio
Manager of GMG/Seneca.
Mary Ann Cusenza,** 2109 Santa Cruz Avenue, 39 Ms. Cusenza has been a Trustee of the Trust since
Trustee Menlo Park, CA 94025 February 1996. She joined Apple Computer, Inc. in
1985 and was a Vice President and Treasurer of Apple
Computer, Inc. from 1992 until February 1996.
Melinda Ellis Evers,** c/o Ellis Partners, 35 Ms. Evers has been a Trustee of the Trust since February
Trustee 351 California Street, 1996. She is a founding partner of Ellis Partners, Inc.,
Suite 1150, a real estate investment firm, established in 1993. From
San Francisco, CA 94104 1991 to 1993 she attended Stanford University's
Graduate School of Business. From 1984 to 1991, she
was a Portfolio Manager with Grubb & Ellis Realty
Advisers.
Paul E. Erdman,** 1817 Lytton Springs Road, 63 Mr. Erdman has been a Trustee of the Trust since
Trustee Healdsburg, CA 95448 February 1996. He is an economist and novelist, and,
since 1979, has served on the Board of Advisors of The
University of Georgetown School of Foreign Service.
</TABLE>
* "Interested persons" within the meaning of the 1940 Act.
** Each of the Independent Trustees is a trustee of each of the other Seneca
Funds and a member of the Trust's Audit Committee.
21
<PAGE>
Compensation of Trustees and Officers
The Funds pay no compensation to its officers or Trustees affiliated with
the Investment Adviser/Subadviser. Each Trustee of the Trust who is not an
"interested person" of the Trust receives a fee of $2,500 for each regular,
quarterly meeting of the Board of Trustees attended and is reimbursed for
expenses incurred in connection with such attendance. For services to the Funds
during the last fiscal year, the Trustees received an aggregate of $32,524.
The following table sets forth the estimated compensation to be paid to
the Trust's Trustees for the next fiscal year.
<TABLE>
<CAPTION>
Pension or Total
Aggregate Retirement Benefits Compensation
Compensation Accrued as Part from Trust and
Name of Trustee from the Trust of Trust's Expenses Funds in Complex
- --------------------- ---------------- --------------------- -----------------
<S> <C> <C> <C>
Gail P. Seneca $ 0 -- $ 0
Sandra J. Westhoff $ 0 -- $ 0
Mary Ann Cusenza $10,000 -- $10,000
Melinda Ellis Evers $10,000 -- $10,000
Paul E. Erdman $10,000 -- $10,000
</TABLE>
Principal Shareholders
The following table sets forth information as of September 30, 1997 with
respect to each person who owns of record or is known by the registrant to own
of record or beneficially 5% or more of any class of the registrant's
outstanding equity securities:
<TABLE>
<CAPTION>
Name of Name of Number of Percent
Shareholder Fund Shares of Class
- ----------------------------------- -------------------------------- ------------- ---------
<S> <C> <C> <C>
Charles Schwab & Company Growth Class A 281,604.222 76.23%
101 Montgomery Street Growth Class X 299,247.838 14.43%
San Francisco, CA 94104 Mid-Cap "EDGE"(SM) Class A 37,795.333 25.76%
Mid-Cap "EDGE"(SM) Class X 67,027.014 11.76%
Bond Class X 172,910.655 20.53%
Real Estate Securities Class A 107,410.287 49.87%
BT Alex. Brown Incorporated Mid-Cap "EDGE"(SM) Class X 164,303.862 28.82%
PO Box 1346 Bond Class X 165,143.400 19.61%
Baltimore, MD 21203 Real Estate Securities Class X 196,435.506 10.33%
State Street Bank & Trust Co Mid-Cap "EDGE"(SM) Class A 8,426.111 5.74%
C/F Thomas A Silberman IRA
270 Euclid Ave.
Winnetka, IL 60093
WPO/NCC Investors LLC Mid-Cap "EDGE"(SM) Class A 8,909.48 6.07%
3000 Sand Hill Rd Ste 3-290
Menlo Park, CA 94025
Susan R. Mintz Real Estate Securities Class A 16,240.544 7.54%
1750 Saint Charles Ave. Apt 610
New Orleans, LA 70130
NFSC FEBO Real Estate Securities Class A 13,102.573 6.08%
Donald J Riskind TTEE
Donald J Riskind Trust U/A 8/3/94
5855 N Kolb Rd Apt 8212
Tucson, AZ 85750
Roxanne B Chapman Growth Class X 105,420.496 5.08%
David S Wang Co TTEES
MacDonald Family Foundation
PO Box 64788
Los Angeles, CA 90064
RAS CRT Growth Class X 143,678.161 6.93%
DTD 9-15-94
c/o K&E Management LTD
400 S El Camino Real Ste 1289
San Mateo, CA 94402
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Name of Name of Number of Percent
Shareholder Fund Shares of Class
- ------------------------------------ -------------------------------- ------------- ---------
<S> <C> <C> <C>
Tenderloin Neighborhood Dev Corp Bond Class X 54,947.833 6.52%
201 Eddy St
San Francisco, CA 94102
Eileen Feather Tr Bond Class X 64,758.189 7.69%
U/A 11-13-86
John V Feather Trust
PO Box 737
Pebble Beach, CA 93953
Builders of the Adytum Bond Class X 54,042.473 6.42%
5101 N Figueroa St
Los Angeles, CA 90042
Pacific Bank Cust Real Estate Securities Class X 296,166.192 15.58%
Blair Walker Stratford TTEE
Blair Walker Stratford 1994 Fam Tr
ATTN Ginger Bradley
100 Montgomery St
San Francisco, CA 94104
Pacific Bank Cust Real Estate Securities Class X 263,852.517 13.88%
Walker Security Investments LLC
ATTN Ginger Bradley
100 Montgomery St
San Francisco, CA 94194
</TABLE>
As of the September 30, 1997, the Trustees and officers of the Trust as a
group beneficially owned (i.e., had voting or investing power with respect to)
shares of the Funds as follows: [791 shares of Phoenix-Seneca Growth Fund;
14,550 shares of Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund; and 11,543 of shares of
Phoenix-Seneca Real Estate Securities Fund. The shares owned by the Trustees
and officers were of the Class X only.]
NET ASSET VALUE
(See "Net Asset Value" in the Prospectus.)
Under the 1940 Act, the Trustees are responsible for determining in good
faith the fair value of securities of the Funds. The net asset value per share
of each class of each Fund is determined once daily, Monday through Friday as
of the close of regular trading on the NYSE (normally 4:00 P.M. New York City
time) on each day the Trust is "open for business" (as defined in the
Prospectus) in which there is a sufficient degree of trading in that Fund's
portfolio securities that the current net asset value of that Fund's shares
might be materially affected. A Fund need not determine its net asset value on
any day during which its shares were not tendered for redemption and the Trust
did not receive any order to purchase or sell shares of that Fund. In
accordance with procedures approved by the Trustees, the net asset value per
share of each class of each Fund is calculated by determining the value of the
net assets attributable to each class of that Fund and dividing by the number
of outstanding shares of that class. The NYSE is not open for trading on
weekends or on New Year's Day (January 1), Martin Luther King Day, Presidents'
Day (the third Monday in February), Good Friday, Memorial Day (the last Monday
in May), Independence Day (July 4), Labor Day (the first Monday in September),
Thanksgiving Day (the fourth Thursday in November) and Christmas Day (December
25).
The public offering price per share of a class of a Fund is the net asset
value per share of that class of that Fund next determined after receipt of an
order. Orders for shares that have been received by the Trust or the Transfer
Agent before the close of regular trading of the NYSE are confirmed at the
offering price effective at the close of regular trading of the NYSE on that
day, while orders received subsequent to the close of regular trading of the
NYSE will be confirmed at the offering price effective at the close of regular
trading of the NYSE on the next day on which the net asset value is calculated.
Bonds and other fixed-income securities (other than short-term obligations
but including listed issues) in a Fund's portfolio are valued on the basis of
valuations furnished by a pricing service that uses both dealer-supplied
valuations and electronic data processing techniques that take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon quoted
prices or exchange or over-the-counter prices, when such valuations are
believed to reflect the fair value of such securities.
In determining the net asset value, unlisted securities for which market
quotations are available are valued at the last reported sales price or, if no
sales reported or such pricing is not provided, the mean between the most
recent bid and asked prices. Securities,
23
<PAGE>
options on securities, futures contracts and options thereon that are listed or
admitted to trading on a national exchange, are valued at their last sale on
such exchange prior to the time of determining net asset value; or if no sales
are reported on such exchange on that day, at the mean between the most recent
bid and asked price. Securities listed on more than one exchange shall be
valued on the exchange the security is most extensively traded. Quotations of
foreign securities in foreign currency will be converted to U.S. Dollar
equivalents using foreign exchange quotations received from independent
dealers. Short-term investments having a maturity of 60 days or less will be
valued at amortized cost, when the Trustees determines that amortized cost is
their fair market value. Certain debt securities for which daily market
quotations are not available may be valued, pursuant to guidelines established
by the Trustees, with reference to fixed income securities whose prices are
more readily obtainable and whose durations are comparable to the securities
being valued. Subject to the foregoing, other securities for which market
quotations are not readily available will be valued at fair value as determined
in good faith by the Trustees.
For purposes of determining the net asset value of the Funds' shares,
options transactions will be treated as follows: When a Fund sells an option,
an amount equal to the premium received by that Fund will be included in that
Fund's accounts as an asset and a deferred liability will be created in the
amount of the option. The amount of the liability will be marked to the market
to reflect the current market value of the option. If the option expires or if
that Fund enters into a closing purchase transaction, that Fund will realize a
gain (or a loss if the cost of the closing purchase exceeds the premium
received), and the related liability will be extinguished. If a call option
contract sold by a Fund is exercised, that Fund will realize the gain or loss
from the sale of the underlying security and the sale proceeds will be
increased by the premium originally received.
HOW TO BUY SHARES
The minimum initial investment is $500 and the minimum subsequent
investment is $25. However, both the minimum initial and subsequent investment
amounts are $25 for investments pursuant to the "Investo-Matic" plan, a bank
draft investing program administered by Distributor, or pursuant to the
Systematic Exchange privilege or for an individual retirement account (IRA). In
addition, there are no subsequent investment minimum amounts in connection with
the reinvestment of dividend or capital gain distributions. Completed
applications for the purchase of shares should be mailed to: Phoenix Funds, c/o
State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301.
ALTERNATIVE PURCHASE ARRANGEMENTS
Shares may be purchased from investment dealers at a price equal to their
net asset value per share, plus a sales charge which, at the election of the
purchaser, may be imposed either (i) at the time of the purchase (the "initial
sales charge alternative") or (ii) on a contingent deferred basis (the
"deferred sales charge alternative"). Orders received by dealers prior to the
close of trading on the New York Stock Exchange are confirmed at the offering
price effective at that time, provided the order is received by the Distributor
prior to its close of business.
The alternative purchase arrangements permit an investor to choose the
method of purchasing shares that is more beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, whether
the investor wishes to receive distributions in cash or to reinvest them in
additional shares of the Funds, and other circumstances. Investors should
consider whether, during the anticipated life of their investment in the Trust,
the accumulated continuing distribution services fee and contingent deferred
sales charges on Class B or C Shares would be less than the initial sales
charge and accumulated distribution services fee on Class A or M Shares
purchased at the same time.
Dividends paid by the Funds, if any, with respect to each Class of Shares
will be calculated in the same manner at the same time on the same day, except
that fees such as higher distribution services fee and any incremental transfer
agency costs relating to each Class of Shares will be borne exclusively by that
class. See "Dividends, Distributions and Taxes."
Class A Shares
Class A Shares incur a sales charge when they are purchased and enjoy the
benefit of not being subject to any sales charge when they are redeemed. Class
A Shares are subject to an ongoing distribution services fee at an annual rate
of 0.25% of the Trust's aggregate average daily net assets attributable to the
Class A Shares. In addition, certain purchases of Class A Shares qualify for
reduced initial sales charges. See the Funds' current Prospectus for additional
information.
Class B Shares
Class B Shares do not incur a sales charge when they are purchased, but
they are subject to a sales charge if they are redeemed within five years of
purchase. The deferred sales charge may be waived in connection with certain
qualifying redemptions. See the Funds' current Prospectus for additional
information.
Class B Shares are subject to an ongoing distribution services fee at an
annual rate of up to 1.00% of the Fund's aggregate average daily net assets
attributable to the Class B Shares. Class B Shares enjoy the benefit of
permitting all of the investor's dollars to work from the time the investment
is made. The higher ongoing distribution services fee paid by Class B Shares
will cause such shares to have a higher expense ratio and to pay lower
dividends, to the extent any dividends are paid, than those related
24
<PAGE>
to Class A Shares. Class B Shares will automatically convert to Class A Shares
eight years after the end of the calendar month in which the shareholder's
order to purchase was accepted, in the circumstances and subject to the
qualifications described in the Funds' Prospectus. The purpose of the
conversion feature is to relieve the holders of the Class B Shares that have
been outstanding for a period of time sufficient for the adviser and the
Distributor to have been compensated for distribution expenses related to the
Class B Shares from most of the burden of such distribution related expenses.
Class B Shares include all shares purchased pursuant to the deferred sales
charge alternative which have been outstanding for less than the period ending
eight years after the end of the month in which the shares were issued. At the
end of this period, Class B Shares will automatically convert to Class A Shares
and will no longer be subject to the higher distribution services fee. Such
conversion will be on the basis of the relative net asset value of the two
classes without the imposition of any sales load, fee or other charge.
For purposes of conversion to Class A Shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B Shares
in a shareholder's Trust account will be considered to be held in a separate
sub-account. Each time any Class B Shares in the shareholder's Trust account
(other than those in the sub-account) convert to Class A, an equal pro rata
portion of the Class B Share dividends in the sub-account will also convert to
Class A Shares.
Class C Shares
Class C Shares are purchased without an initial sales charge but are
subject to a deferred sales charge if redeemed within one year of purchase. The
deferred sales charge may be waived in connection with certain qualifying
redemptions. Shares issued in conjunction with the automatic reinvestment of
income distributions and capital gain distributions are not subject to any
sales charges. Class C Shares are subject to an ongoing distribution services
fee of up to 1.00% of the Funds' aggregate average daily net assets
attributable to Class C Shares. See the Funds' current Prospectus for more
information.
Class M Shares
Class M Shares incur a sales charge at the time of purchase but are not
subject to any sales charge when redeemed. Certain purchases of Class M Shares
may qualify for reduced initial sales charges as described in the Funds'
Prospectus. Class M Shares are subject to an ongoing distribution services fee
of up to 0.50% of the Funds' aggregate average daily net assets attributable to
Class M Shares.
INVESTOR ACCOUNT SERVICES
The Funds offer combination purchase privileges, letters of intent,
accumulation plans, withdrawal plans and reinvestment and exchange privileges
as described in the Funds' current Prospectus. Certain privileges may not be
available in connection with all classes. In most cases, changes to account
services may be accomplished over the phone. Inquiries regarding policies and
procedures relating to shareholder account services should be directed to
Shareholder Services at (800) 243-1574.
Exchanges. Under certain circumstances, shares of any Phoenix Fund may be
exchanged for shares of the same Class of another Phoenix Fund on the basis of
the relative net asset values per share at the time of the exchange. Exchanges
are subject to the minimum initial investment requirement of the designated
Fund, Series, or Portfolio, except if made in connection with the Systematic
Exchange privilege. Shareholders may exchange shares held in book-entry form
for an equivalent number (value) of the same class of shares of any other
Phoenix Fund, if currently offered. On exchanges with share classes that carry
a contingent deferred sales charge, the CDSC schedule of the original shares
purchased continues to apply. The exchange of shares is treated as a sale and
purchase for federal income tax purposes (see also "Dividends, Distributions
and Taxes").
Systematic Exchanges. If the conditions above have been met, you or your
broker may, by telephone or written notice, elect to have shares exchanged for
the same class of shares of another Phoenix Fund automatically on a monthly,
quarterly, semi-annual or annual basis or may cancel this privilege at any
time. If you maintain an account balance of at least $5,000, or $2,000 for tax
qualified retirement benefit plans (calculated on the basis of the net asset
value of the shares held in a single account), you may direct that shares be
automatically exchanged at predetermined intervals for shares of the same class
of another Phoenix Fund. This requirement does not apply to Phoenix "Self
Security" program participants. Systematic exchanges will be executed upon the
close of business on the 10th day of each month or the next succeeding business
day. Systematic exchange forms are available from the Distributor. Exchanges
will be based upon each Fund's net asset value per share next computed after
the close of business on the 10th day of each month (or next succeeding
business day), without sales charge.
Dividend Reinvestment Across Accounts. If you maintain an account balance
of at least $5,000, or $2,000 for tax qualified retirement benefit plans
(calculated on the basis of the net asset value of the shares held in a single
account), you may direct that any dividends and distributions paid with respect
to shares in that account be automatically reinvested in a single account of
one of the other Phoenix Fund at net asset value. You should obtain a current
prospectus and consider the objectives and policies of each Fund carefully
before directing dividends and distributions to another Fund. Reinvestment
election forms and prospectuses are available from Equity Planning.
Distributions may also be mailed to a second payee and/or address. Requests for
directing distributions to an alternate payee must be made in writing with a
signature guarantee of the registered owner(s). To be effective
25
<PAGE>
with respect to a particular dividend or distribution, notification of the new
distribution option must be received by the Transfer Agent at least three days
prior to the record date of such dividend or distribution. If all shares in
your account are repurchased or redeemed or transferred between the record date
and the payment date of a dividend or distribution, you will receive cash for
the dividend or distribution regardless of the distribution option selected.
REDEMPTION OF SHARES
Under the 1940 Act, payment for shares redeemed must ordinarily be made
within seven days after tender. The right to redeem shares may be suspended and
payment therefor postponed during periods when the New York Stock Exchange is
closed, other than customary weekend and holiday closings, or if permitted by
rules of the Securities and Exchange Commission, during periods when trading on
the Exchange is restricted or during any emergency which makes it impracticable
for the Fund to dispose of its securities or to determine fairly the value of
its net assets or during any other period permitted by order of the Securities
and Exchange Commission for the protection of investors. Furthermore, the
Transfer Agent will not mail redemption proceeds until checks received for
shares purchased have cleared, which may take up to 15 days or more. See the
Funds' current Prospectus for further information.
Redemptions by Class B and C shareholders will be subject to the
applicable deferred sales charge, if any.
Each shareholder account in the Funds which has been in existence for at
least one year and has a value of less than $200 may be redeemed upon the
giving of not less than 30 days written notice to the shareholder mailed to the
address of record. During the 30 day period the shareholder has the right to
add to the account to bring its value to $200 or more. See the Funds' current
Prospectus for more information.
Telephone Redemptions
Shareholders may redeem up to $50,000 worth of their shares by telephone.
See the Funds' current Prospectus for additional information.
Reinvestment Privilege
Shareholders who may have overlooked features of their investment at the
time they redeemed have a privilege of reinvestment of their investment at net
asset value. See the Funds' current Prospectus for more information and
conditions attached to this privilege.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
Each Fund within the Trust is separate for investment and accounting
purposes and is treated as a separate entity for federal income tax purposes.
A regulated investment company qualifying under Subchapter M of the Code
is not subject to federal income tax on distributed amounts to the extent that
it distributes annually its taxable and, if any, tax-exempt net investment
income and net realized capital gains in accordance with the timing
requirements of the Code. For each taxable year, each Fund intends to qualify
as a regulated investment company under Subchapter M of the Code.
Qualification of a Fund for treatment as a regulated investment company
under the Code requires, among other things, that (a) at least 90% of a Fund's
annual gross income, without offset for losses from the sale or other
disposition of stock or securities or other transactions, be derived from
interest, payments with respect to securities loans, dividends and gains from
the sale or other disposition of stock or securities or foreign currencies, or
other income (including but not limited to gains from options, futures, or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies; (b) the Fund distribute at least annually to
its shareholders as dividends at least 90% of its taxable and tax-exempt net
investment income, the excess of net short-term capital gain over net long-term
capital loss earned in each year and any other net income (except for the
excess, if any, of net long-term capital gain over net short-term capital loss,
which need not be distributed in order for the Fund to be treated as a
regulated investment company but such amount is taxed to the Fund if it is not
distributed); and (c) the Fund diversify its assets so that, at the close of
each quarter of its taxable year, (i) at least 50% of the fair market value of
its total (gross) assets is comprised of cash, cash items, U.S. Government
securities, securities of other regulated investment companies and other
securities limited in respect of any one issuer to no more than 5% of the fair
market value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer and (ii) no more than 25% of the fair market value of
its total assets is invested in the securities of any one issuer (other than
U.S. Government securities and securities of other regulated investment
companies) or of two or more issuers controlled by the Fund and engaged in the
same, similar, or related trades or businesses.
Under certain state tax laws, each Fund must also comply with the
"short-short" test to qualify for treatment as a RIC for state tax purposes.
Under the "short-short" test the Fund must derive less than 30% of its gross
income each taxable year as gains (without deduction for losses) from the sale
or other disposition of securities for less than three months. If in any
taxable year each Fund does not qualify as a regulated investment company, all
of its taxable income will be taxed at corporate rates. In addition, if in any
tax year a Fund does not qualify as a RIC for state tax purposes, a capital
gain dividend may not retain its character in the hands of the shareholder for
state tax purposes.
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Each Fund is subject to a 4% nondeductible federal excise tax on amounts
required to be but not distributed, as determined under a prescribed formula.
The formula requires that a Fund distribute (or be deemed to have distributed)
to shareholders during a calendar year at least 98% of the Fund's ordinary
income (not including tax-exempt interest) for the calendar year, at least 98%
of the excess of its capital gains over the capital losses realized during the
one-year period ending October 31 during such year, as well as any income or
gain (as so computed) from the prior calendar year that was not distributed for
such year and on which the Fund paid no federal income tax. Each Fund has
distribution policies that should generally enable it to avoid liability for
this tax.
Net investment income for each Fund is the Fund's investment income less
its expenses. Dividends from taxable net investment income and the excess, if
any, of net short-term capital gain over net long-term capital loss of a Fund
are treated under the Code as ordinary income, and dividends from net long-term
capital gain in excess of net short- term capital loss ("capital gain
dividends") are treated under the Code as long-term capital gain, for federal
income tax purposes. These dividends are paid after taking into account, and
reducing the distribution to the extent of, any available capital loss
carryforwards. Distributions from a Fund's current or accumulated earnings and
profits, as computed for Federal income tax purposes, will be treated as
described above whether taken in shares or in cash. Certain distributions
received in January may be treated as if paid by a Fund and received by a
shareholder on December 31 of the prior year.
Dividends, including capital gain dividends, paid by a Fund shortly after
a shareholder's purchase of shares have the effect of reducing the net asset
value per share of his shares by the amount per share of the dividend
distribution. Although such dividends are, in effect, a partial return of the
shareholder's purchase price to the shareholder, they may be characterized as
ordinary income or capital gain as described above.
Equity options (including options on stock and options on narrow-based
stock indices) and over-the-counter options on debt securities written or
purchased by a Fund are subject to tax the character of which will be
determined under Section 1234 of the Code. In general, no loss is recognized by
a Fund upon payment of a premium in connection with the purchase of a put or
call option. The character of any gain or loss recognized (i.e., long-term or
short-term) will generally depend, in the case of a lapse or sale of such
option, on the Fund's holding period for such option, and in the case of an
exercise of a put option, on the Fund's holding period for the underlying
security. The purchase of a put option may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of the
underlying stock or security or a substantially identical stock or security in
the Fund's portfolio. The exercise of a call option purchased by a Fund is not
a taxable transaction for the Fund. If a Fund writes a put or call option, no
gain is recognized upon its receipt of a premium. If such option lapses or is
closed out, any gain or loss is treated as a short-term capital gain or loss.
If a call option is exercised, whether the gain or loss is long- term or
short-term depends on the holding period of the underlying stock or security.
The exercise of a put option written by a Fund is not a taxable transaction for
the Fund.
All futures contracts and foreign currency contracts entered into by a
Fund and all listed nonequity options written or purchased by a Fund (including
options on debt securities, options on futures contracts, options on securities
indices and options on broad-based stock indices) are governed by Section 1256
of the Code. Absent a tax election to the contrary, gain or loss attributable
to the lapse, exercise or closing out of any such position are treated as 60%
long-term and 40% short-term capital gain or loss, and on the last trading day
of a Fund's taxable year, all outstanding Section 1256 positions are marked to
market (i.e., treated as if such positions were closed out at their closing
price on such day), and any resulting gain or loss recognized as 60% is
long-term and 40% short-term capital gain or loss. Under certain circumstances,
entry into a futures contract to sell a security may constitute a short sale
for federal income tax purposes, causing an adjustment in the holding period of
the underlying security or a substantially identical security in a Fund's
portfolio.
Because options, futures and currency activities of a Fund may increase
the amount of gains from the sale of securities or investments held or treated
as held for less than three months, the Funds may limit these transactions in
order to comply with the 30% limitation described above.
Positions of a Fund which consist of at least one stock and at least one
stock option or other position with respect to a related security which
substantially diminishes the Fund's risk of loss with respect to such stock
could be treated as a "straddle" which is governed by Section 1092 of the Code,
the operation of which may cause deferral of losses, adjustments in the holding
periods of stock or securities and conversion of short- term capital losses
into long-term capital losses. An exception to these straddle rules exists for
any "qualified covered call options" on stock written by a Fund.
Positions of a Fund which consist of at least one debt security not
governed by Section 1256 and at least one futures or currency contract or
listed nonequity option governed by Section 1256 which substantially diminishes
the Fund's risk of loss with respect to such debt security are treated as a
"mixed straddle." Although mixed straddles are subject to the straddle rules of
Section 1092 of the Code, certain tax elections exist for them which reduce or
eliminate the operation of these rules. Each Fund will monitor these
transactions and may make certain tax elections in order to mitigate the
operation of these rules and prevent disqualification of the Fund as a
regulated investment company for federal income tax purposes.
These special tax rules applicable to options, futures and currency
transactions could affect the amount, timing and character of a Fund's income
or loss and hence of its distributions to shareholders by causing holding
period adjustments, converting short- term capital losses into long-term
capital losses, and accelerating a Fund's income or deferring its losses.
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A Fund's investment in zero coupon securities or other securities having
original issue discount (or market discount, if the Fund elects to include
market discount in income currently) will generally cause it to realize income
prior to the receipt of cash payments with respect to these securities. The
mark to market rules described above may also require a Fund to recognize gains
without a concurrent receipt of cash. In such case, a Fund will not be able to
purchase additional income producing securities with the cash generated by the
sale of such securities but will be required to use such cash to make such
required distributions, and its current portfolio income may ultimately be
reduced accordingly. In order to distribute this income or gains, maintain its
qualification as a regulated investment company, and avoid federal income or
excise taxes, the Fund may be required to liquidate portfolio securities that
it might otherwise have continued to hold.
The Funds may be subject to foreign withholding or other foreign taxes
with respect to income (possibly including, in some cases, capital gains)
derived from foreign securities. These taxes may be reduced or eliminated under
the terms of applicable tax treaties. However, the Funds will not be eligible
to pass through to shareholders any foreign tax credits or deductions for
foreign taxes paid by the Funds that are not thus reduced or eliminated.
Certain foreign exchange gains and losses realized by the Funds with respect to
such securities or related currency transactions will generally be treated as
ordinary income and losses. Certain uses of foreign currency and investments by
the Funds in certain "passive foreign investment companies" may be limited in
order to avoid adverse tax consequences for the Funds (or an election, if
available, may be made with respect to such investments).
Different tax treatment, including a penalty on certain distributions,
excess contributions or other transactions is accorded to accounts maintained
as IRAs or other retirement plans. Investors should consult their tax advisers
for more information.
Redemptions, including exchanges, of shares may give rise to recognized
gains or losses, except as to those investors subject to tax provisions that do
not require them to recognize such gains or losses. All or a portion of a loss
realized upon the redemption of shares may be disallowed under "wash sale"
rules to the extent shares are purchased (including shares acquired by means of
reinvested dividends) within a 61-day period beginning 30 days before and
ending 30 days after such redemption. Any loss realized upon a shareholder's
sale, redemption or other disposition of shares with a tax holding period of
six months or less will be treated as a long-term capital loss to the extent of
any distribution of long-term capital gains with respect to such shares.
The Trust is organized as a Delaware business trust, and neither the Trust
nor the Funds are subject to any corporate excise or franchise tax in the State
of Delaware, nor are they liable for Delaware income taxes provided that each
Fund qualifies as a regulated investment company for federal income tax
purposes and satisfies certain income source requirements of Delaware law.
The foregoing discussion of U.S. federal income tax law does not address
the special tax rules applicable to certain classes of investors, such as
insurance companies. Each shareholder who is not a U.S. person should consider
the U.S. and foreign tax consequences of ownership of shares of the Funds,
including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 30% (or at a lower rate under an applicable income
tax treaty) on Fund distributions treated as ordinary dividends.
This discussion of the federal income tax treatment of the Funds and their
distributions is based on the federal income tax law in effect as of the date
of this Statement of Additional Information. Shareholders should consult their
tax advisers about the application of the provisions of tax law described in
this statement of additional information and about the possible application of
state, local and foreign taxes in light of their particular tax situations.
PORTFOLIO BROKERAGE
(See "Portfolio Transactions" in the Prospectus.)
It is the general policy of the Trust not to employ any broker in the
purchase or sale of securities for a Fund's portfolio unless the Trust believes
that the broker will obtain the best results for the Fund, taking into
consideration such relevant factors as price, the ability of the broker to
effect the transaction and the broker's facilities, reliability and financial
responsibility. Commission rates, being a component of price, are considered
together with such factors. Subject to the foregoing, where transactions are
effected on securities exchanges, the Trust may employ GMG Securities as a
broker. The Trust is not obligated to deal with any broker or group of brokers
in the execution of transactions in portfolio securities.
In selecting brokers to effect transactions on securities exchanges, the
Trust considers the factors set forth in the first paragraph under this heading
and any investment products or services provided by such brokers, subject to
the criteria of Section 28(e) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Section 28(e) specifies that a person with
investment discretion shall not be "deemed to have acted unlawfully or to have
breached a fiduciary duty" solely because such person has caused the account to
pay a higher commission than the lowest rate available. To obtain the benefit
of Section 28(e), the person so exercising investment discretion must make a
good faith determination that the commissions paid are "reasonable in relation
to the value of the brokerage and research services provided viewed in terms of
either that particular transaction or his overall responsibilities with respect
to the accounts as to which he exercises investment discretion." Accordingly,
if the Trust determines in good faith that the amount of commissions charged by
a broker is reasonable in relation to the value of the brokerage and research
products and services provided by such broker, the Trust may pay commissions to
such broker in an amount greater than the amount
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another firm might charge. Research products and services provided to the Trust
include research reports on particular industries and companies, economic
surveys and analyses, recommendations as to specific securities and other
products or services (e.g., quotation equipment and computer related costs and
expenses) providing lawful and appropriate assistance to GMG/Seneca and its
affiliates in the performance their decision-making responsibilities.
Each year, the Investment Adviser will consider the amount and nature of
the research products and services provided by other brokers as well as the
extent to which such products and services are relied upon, and attempt to
allocate a portion of the brokerage business of their clients, such as the
Trust, on the basis of such considerations. In addition, brokers sometimes
suggest a level of business they would like to receive in return for the
various services the provide. Actual brokerage business received by any broker
may be less than the suggested allocations, but can (and often does) exceed the
suggestions, because total brokerage is allocated on the basis of all the
considerations described above. In no instance is a broker excluded from
receiving business because it has not been identified as providing research
services. As permitted by Section 28(e), the investment information received
from other brokers may be used by GMG/Seneca (and its subsidiaries) in
servicing all its accounts and not all such information may be used by
GMG/Seneca, in its capacity as the Investment Adviser, in connection with the
Trust. Nonetheless, the Trust believes that such investment information
provides the Trust with benefits by supplementing the research otherwise
available to the Trust.
GMG Securities may act as broker for the Funds on exchange transactions,
subject to the general policy of the Trust set forth above. Further, because of
its relationship to GMG/Seneca, the Trust has decided to treat GMG Securities
as if it were an "affiliated person" of GMG/Seneca and will apply certain
procedures adopted by the Trustees. Commissions (if any) paid to GMG Securities
must be at least as favorable as those believed to be contemporaneously charged
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange. A transaction will
not be placed with GMG Securities if a Fund would have to pay a commission rate
less favorable than GMG Securities contemporaneous charges for comparable
transactions for its other most favored, but unaffiliated, customers except for
any customers of GMG Securities determined by a majority of the Independent
Trustees not to be comparable to the Funds. With regard to comparable
customers, in isolated situations, subject to the approval of a majority of the
Independent Trustees, exceptions may be made.
The commission rate on all exchange orders is subject to negotiation.
Section 17(e) of the 1940 Act limits to "the usual and customary broker's
commission" the amount that can be paid by the Trust to an affiliated person
acting as broker in connection with transactions effected on a securities
exchange. The Trustees, including a majority of the Independent Trustees, have
adopted procedures designed to comply with the requirements of Section 17(e) of
the 1940 Act and Rule 17e-1 thereunder to ensure a broker's commission that is
"reasonable and fair compared to the commission, fee or other remuneration
received by other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period of time . . . ." Rule 17e-1 also requires the Trustees,
including a majority of the Independent Trustees, to adopt procedures
reasonably designed to provide that the commission paid is consistent with the
above standard, review those procedures at least annually to determine that
they continue to be appropriate and determine at least quarterly that
transactions have been effected in compliance with those procedures. The
Trustees of the Trust, including a majority of the Independent Trustees, have
adopted procedures designed to comply with the requirements of Rule 17e-1.
Section 11(a) of the Exchange Act provides that a member firm of a
national securities exchange may not effect transactions on such exchange for
the account of an investment company of which the member firm or its affiliate
is the investment adviser unless certain conditions are met. These conditions
require that the investment company authorize the practice and that the
investment company receive from the member firm at least annually a statement
of all commissions paid in connection with such transactions. Any transactions,
GMG Securities effects on any exchange of which it is a member on behalf of the
Funds will be effected in compliance with these conditions.
If GMG Securities effects any transactions on behalf of a Fund, it will
furnish to the Trust at least quarterly a statement setting forth the total
amount of all compensation retained by GMG Securities or any associated person
of GMG Securities in connection with such transactions and the Trustees of the
Trust will review and approve all the Trust's portfolio transactions and the
compensation received by GMG Securities in connection therewith.
GMG Securities does not knowingly participate in commissions paid by the
Trust to other brokers or dealers and does not seek or knowingly receive any
reciprocal business as the result of the payment of such commissions. In the
event GMG Securities at any time learns that it has knowingly received
reciprocal business, it will so inform the Trustees.
To the extent that GMG Securities receives brokerage commissions on Trust
portfolio transactions, officers and Trustees of the Trust who have an equity
ownership interest in GMG Securities may receive indirect compensation from the
Trust through their participation in such brokerage commissions.
In certain instances there may be securities that are suitable for a
Fund's portfolio as well as for that of another Fund or one or more of the
other clients of the Investment Adviser. Investment decisions for a Fund and
for the Investment Adviser's other clients are made with a view to achieving
their respective investment objectives. It may develop that a particular
security is bought or sold for only one client even though it might be held by,
or bought or sold for, other clients. Likewise, a particular security
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may be bought for one or more clients when one or more other clients are
selling that same security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives
of more than one client. When two or more clients are simultaneously engaged in
the purchase or sale of the same security, the securities are allocated among
clients in a manner believed to be equitable to each. It is recognized that in
some cases this system could have a detrimental effect on the price or volume
of the security in a particular transaction as far as a Fund is concerned. The
Trust believes that over time its ability to participate in volume transactions
will produce better executions for the Funds. When appropriate, orders for the
account of the Funds are combined with orders for other investment companies or
other clients advised by the Investment Adviser, including accounts (such as
investment limited partnerships) in which the Investment Adviser or affiliated
or associated persons of the Investment Adviser are investors or have a
financial interest, in order to obtain a more favorable commission rate. When
the same security is purchased for a Fund and one or more other funds or other
clients on the same day, each party pays the average price and commissions paid
are allocated in direct proportion to the number of shares purchased.
It is possible that situations may arise in which legal and regulatory
considerations would preclude certain trading for the Funds' accounts by reason
of activities of GMG Securities or its affiliates. The U.S. Government and debt
securities in which the Funds invest are traded primarily in the
over-the-counter market. Transactions in the over-the-counter market are
generally principal transactions with dealers and the costs of such
transactions involve dealer spreads rather than brokerage commissions. With
respect to over-the-counter transactions, the Trust, where possible, deals
directly with the dealers who make a market in the securities involved except
in those circumstances where better prices and execution are available
elsewhere. Under the 1940 Act, persons affiliated with the Trust are prohibited
from dealing with the Trust as a principal in the purchase and sale of
securities. Since transactions in the over-the-counter market usually involve
transactions with dealers acting as principal for their own account, affiliated
persons of the Trust may not serve as the Trust's dealer in connection with
such transactions. However, affiliated persons of the Trust may serve as its
broker in transactions conducted on an exchange or over-the-counter
transactions conducted on an agency basis. On occasion, certain market
instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
For the fiscal year ended September 30, 1997, the Funds paid brokerage
commissions of $212,912.
PORTFOLIO TURNOVER
See "Investment Practices and Risk Considerations--Portfolio Turnover" in
the Prospectus.
The annual portfolio turnover rate of a Fund is calculated by dividing the
lesser of the purchase or sales of a Fund's portfolio securities for the year
by the monthly average of the value of the portfolio securities owned by that
Fund during the year. The monthly average is calculated by totalling the values
of the portfolio securities as of the beginning and end of the first month of
the year and as of the end of the succeeding 11 months and dividing the sum by
13. In determining portfolio turnover, securities (including options) that have
maturities at the time of acquisition of one year or less ("short-term
securities"), are excluded. A turnover rate of 100% would occur if all of a
Fund's portfolio securities (other than short-term securities) were replaced
once in a period of one year. It should be noted that if a Fund were to write a
substantial number of options which are exercised, the portfolio turnover rate
of that Fund would increase. Increased portfolio turnover results in increased
brokerage costs that the Trust must pay and the possibility of more short-term
gains that may increase the difficulty of qualifying as a regulated investment
company.
To the extent their portfolios are traded for short-term market
considerations and turnover exceeds 100%, the Funds' annual turnover rate could
be higher than most mutual funds. None of the Funds will engage in short-term
trading to an extent that would disqualify them as regulated investment
companies under Subchapter M of the Code.
ORGANIZATION
(See "Management" and "General Information" in the Prospectus.)
As a Delaware business trust, the Trust's operations are governed by its
Agreement and Declaration of Trust dated December 18, 1995 (the "Declaration of
Trust"). A copy of the Trust's Certificate of Trust, also dated December 18,
1995, is on file with the Office of the Secretary of State of the State of
Delaware. Upon the initial purchase of shares, the shareholder agrees to be
bound by the Trust's Declaration of Trust, as amended from time to time.
Generally, Delaware business trust shareholders are not personally liable for
obligations of the Delaware business trust under Delaware law. The Delaware
Business Trust Act (the "Delaware Act") provides that a shareholder of a
Delaware business trust shall be entitled to the same limitation of liability
extended to shareholders of private for-profit corporations. The Trust's
Declaration of Trust expressly provides that the Trust has been organized under
the Delaware Act and that the Declaration of Trust is to be governed by
Delaware law. It is nevertheless possible that a Delaware business trust, such
as the Trust, might become a party to an action in another state whose courts
refused to apply Delaware law, in which case the Trust's shareholders could be
subject to personal liability.
To guard against this risk, the Declaration of Trust (i) contains an
express disclaimer of shareholder liability for acts or obligations of the
Trust and provides that notice of such disclaimer may be given in each
agreement, obligation and instrument entered into
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or executed by the Trust or its Trustees, (ii) provides for the indemnification
out of Trust property of any shareholders held personally liable for any
obligations of the Trust or any series of the Trust and (iii) provides that the
Trust shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Trust and satisfy any judgment
thereon. Thus, the risk of a Trust shareholder incurring financial loss beyond
his or her investment because of shareholder liability is limited to
circumstances in which all of the following factors are present: (1) a court
refused to apply Delaware law; (2) the liability arose under tort law or, if
not, no contractual limitation of liability was in effect; and (3) the Trust
itself would be unable to meet its obligations. In the light of Delaware law,
the nature of the Trust's business and the nature of its assets, the risk of
personal liability to a Fund shareholder is remote.
The Declaration of Trust further provides that the Trust shall indemnify
each of its Trustees and officers against liabilities and expenses reasonably
incurred by them, in connection with, or arising out of, any action, suit or
proceeding, threatened against or otherwise involving such Trustee or officer,
directly or indirectly, by reason of being or having been a Trustee or officer
of the Trust. The Declaration of Trust does not authorize the Trust to
indemnify any Trustee or officer against any liability to which he or she would
otherwise be subject by reason of or for willful misfeasance, bad faith, gross
negligence or reckless disregard of such person's duties.
Under the Declaration of Trust, the Trust is not required to hold annual
meetings to elect Trustees or for other purposes. It is not anticipated that
the Trust will hold shareholders' meetings unless required by law or the
Declaration of Trust. The Trust will be required to hold a meeting to elect
Trustees to fill any existing vacancies on the Board if, at any time, fewer
than a majority of the Trustees have been elected by the shareholders of the
Trust. The Board is required to call a meeting for the purpose of considering
the removal of persons serving as Trustee if requested in writing to do so by
the holders of not less than 10% of the outstanding shares of the Trust.
Shares of the Trust do not entitle their holders to cumulative voting
rights, so that the holders of more than 50% of the outstanding shares of the
Trust may elect all of the Trustees, in which case the holders of the remaining
shares would not be able to elect any Trustees. As determined by the Trustees,
shareholders are entitled to one vote for each dollar of net asset value
(number of shares held times the net asset value of the applicable class of the
applicable Fund).
Pursuant to the Declaration of Trust, the Trustees may create additional
funds by establishing additional series of shares in the Trust. The
establishment of additional series would not affect the interests of current
shareholders in the existing four Funds. As of the date of this Statement of
Additional Information, the Trustees have not determined to establish another
series of shares in the Trust.
Pursuant to the Declaration of Trust, the Trustees may establish and issue
multiple classes of shares for each Fund. As of the date of this Statement of
Additional Information, the Trustees have authorized the issuance of five
classes of shares for each series, designated Class X, Class A, Class B, Class
C and Class M Shares. See "General Information" in the Prospectus for a
detailed description of the respective rights of the classes of shares. The
Trustees do not have any plan to establish additional classes of shares for any
Fund.
Each share of each class of a Fund is entitled to such dividends and
distributions out of the income earned on the assets belonging to that Fund
which are attributable to such class as are declared in the discretion of the
Trustees. In the event of the liquidation or dissolution of the Trust, shares
of each class of each Fund are entitled to receive their proportionate share of
the assets which are attributable to such class of such Fund and which are
available for distribution as the Trustees in their sole discretion may
determine. Shareholders are not entitled to any preemptive, conversion or
subscription rights. All shares, when issued, will be fully paid and
non-assessable by the Trust.
Subject to shareholder approval (if then required), the Trustees may
authorize each Fund to invest all or part of its investable assets in a single
open-end investment company that has substantially the same investment
objectives, policies and restrictions as the Fund. As of the date of this
Statement of Additional Information, the Trustees do not have any plan to
authorize any Fund to so invest its assets.
"Phoenix-Seneca Funds" is the designation of the Trust for the time being
under the Declaration of Trust, and all persons dealing with a Fund must look
solely to the property of that Fund for the enforcement of any claims against
that Fund as neither the Trustees, officers, agents nor shareholders assume any
personal liability for obligations entered into on behalf of a Fund or the
Trust. No Fund is liable for the obligations of any other Fund. Since the Funds
use combined prospectuses, however, it is possible that one Fund might become
liable for a misstatement or omission in its prospectus regarding the other
Fund with which its disclosure is combined. The Trustees have considered this
factor in approving the use of the combined prospectuses.
CUSTODIAN
The Custodian for the Trust is Investors Fiduciary Trust Company at 127
West 10th Street, Kansas City, Missouri, 64105. In this capacity, the Custodian
performs all accounting services, holds the assets of the Trust and is
responsible for calculating the net asset value per share.
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TRANSFER AGENT
Phoenix Equity Planning Corporation acts as transfer agent for the Trust
and may enter into agreements with subagents to perform certain functions
including: processing purchases, transfers and redemptions of shares; dividend
disbursing agent; maintaining records and handling correspondence with respect
to shareholder accounts.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, 50 Fremont Street, Suite 3100, San Francisco,
California, 94105, are the independent auditors for the Trust. Professional
services performed by Deloitte & Touche LLP include audits of the financial
statements of the Trust, consultation on financial, accounting and reporting
matters, review and consultation regarding various filings with the SEC and
attendance at the meetings of the Audit Committee and Board of Trustees. The
independent auditors also perform other professional services for the Trust
including preparation of income tax returns of the Funds.
FINANCIAL STATEMENTS
The Funds' financial statements as of and for the period ending September
30, 1997 are included in the Funds' annual report and are incorporated herein
by reference. The annual report must precede or accompany this Statement of
Additional Information.
APPENDIX
Description of Bond Ratings Moody's Investors Service, Inc.
Aaa--Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa--Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group the comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A--Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds that are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's also provides credit ratings for preferred stocks. Preferred stock
occupies a junior position to bonds within a particular capital structure and
that these securities are rated within the universe of preferred stocks.
aaa--An issue that is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
aa--An issue that is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance that earnings
and asset protection will remain relatively well maintained in the foreseeable
future.
a--An issue that is rated "a" is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the
"aaa" and "aa" classifications, earnings and asset protections are,
nevertheless, expected to be maintained at adequate levels.
baa--An issue that is rated "baa" is considered to be a medium grade
preferred stock, neither highly protected nor poorly secured. Earnings and
asset protection appear adequate at present but may be questionable over any
great length of time.
Moody's ratings for municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG). This distinction is in recognition
of the differences between short-term and long-term credit risk. Loans bearing
the designation MIG 1 are of the best quality, enjoying strong protection by
establishing cash flows of funds for their servicing or by established and
broad-based access to the market for refinancing, or both. Loans bearing the
designation MIG 2 are of high quality, with margins of protection ample
although not so large as in the preceding group. A short term issue having a
demand feature (i.e. payment relying on external liquidity and usually payable
on demand rather than fixed maturity dates) is differentiated by Moody's with
the use of the Symbol VMIG, instead of MIG.
32
<PAGE>
Moody's also provides credit ratings for tax-exempt commercial paper.
These are promissory obligations (1) not having an original maturity in excess
of nine months, and (2) backed by commercial banks. Notes bearing the
designation P-1 have a superior capacity for repayment. Notes bearing the
designation P-2 have a strong capacity for repayment.
Standard & Poor's Corporation
AAA--Bonds rated AAA have the higher rating assigned by Standard & Poor's
Corporation. Capacity to pay interest and repay principal is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A--Bonds rated A have a very strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
S&P's top ratings for municipal notes issued after July 29, 1984 are SP-1
and SP-2. The designation SP-1 indicates a very strong capacity to pay
principal and interest. A "+" is added for those issues determined to possess
overwhelming safety characteristics. An "SP-2" designation indicates a
satisfactory capacity to pay principal and interest.
Commercial paper rated A-2 or better by S&P is described as having a very
strong degree of safety regarding timeliness and capacity to repay.
Additionally, as a precondition for receiving an S&P commercial paper rating, a
bank credit line and/or liquid assets must be present to cover the amount of
commercial paper outstanding at all times.
The Moody's Prime-2 rating and above indicates a strong capacity for
repayment of short-term promissory obligations.
GLOSSARY
Commercial Paper: Short-term promissory notes of large corporations with
excellent credit ratings issued to finance their current operations.
Certificates of Deposit: Negotiable certificates representing a commercial
bank's obligations to repay funds deposited with it, earning specified rates of
interest over given periods.
Bankers' Acceptances: Negotiable obligations of a bank to pay a draft
which has been drawn on it by a customer. These obligations are backed by large
banks and usually are backed by goods in international trade.
Time Deposits: Non-negotiable deposits in a banking institution earning a
specified interest rate over a given period of time.
Corporate Obligations: Bonds and notes issued by corporations and other
business organizations in order to finance their long-term credit needs.
33
<PAGE>
SENECA FUNDS
SENECA GROWTH FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
- ------------------------------------------------- ------ -----------
<S> <C> <C> <C>
COMMON STOCKS -- 98.2%
AEROSPACE -- (1.3%)
United Technologies Corporation.............. 6,590 $ 533,790
----------
AIRLINES -- (1.6%)
UAL Corporation (1).......................... 7,470 632,149
----------
CHEMICALS -- (2.9%)
Air Products & Chemicals, Incorporated....... 13,980 1,159,466
----------
COMPUTERS -- (4.7%)
Compaq Computer Corporation (1).............. 14,490 1,083,127
International Business Machines
Corporation................................ 7,500 794,531
----------
1,877,658
----------
COMPUTER SOFTWARE & SERVICES -- (6.4%)
HBO & Company................................ 21,240 801,810
J.D. Edwards & Company....................... 2,500 83,750
Microsoft Corporation (1).................... 5,550 734,334
Oracle Corporation (1)....................... 25,725 937,355
----------
2,557,249
----------
CONSUMER DURABLE -- MOTOR VEHICLE
PARTS -- (2.4%)
Eaton Corporation............................ 10,250 946,844
----------
CONSUMER NON-DURABLE -- (1.9%)
Colgate-Palmolive Company.................... 10,860 756,806
----------
DRUGS & HEALTH CARE -- (7.8%)
Eli Lilly & Company.......................... 10,360 1,250,323
McKesson Corporation......................... 9,330 951,077
Warner Lambert Company....................... 6,990 943,213
----------
3,144,613
----------
ELECTRICAL EQUIPMENT -- (5.1%)
General Electric Company..................... 18,260 1,242,821
Westinghouse Electric Corporation............ 30,310 820,264
----------
2,063,085
----------
</TABLE>
See notes to financial statements.
5
<PAGE>
SENECA FUNDS
SENECA GROWTH FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
(CONTINUED)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
- ------------------------------------------------- ------ -----------
<S> <C> <C> <C>
COMMON STOCKS (CONTINUED)
ELECTRONICS -- (6.8%)
ASM Lithography Holding NV (1)............... 3,570 $ 352,537
KLA-Tencor Corporation (1)................... 13,390 904,662
Maxim Integrated Products, Incorporated
(1)........................................ 10,080 720,090
Texas Instruments, Incorporated.............. 5,580 753,998
----------
2,731,287
----------
FINANCIAL SERVICES -- (14.6%)
American Express Company..................... 14,170 1,160,169
BankAmerica Corporation...................... 16,290 1,194,261
Federal National Mortgage Association........ 12,500 587,500
First Union Corporation...................... 17,000 851,063
H.F. Ahmanson & Company...................... 6,940 394,279
Household International, Incorporated........ 10,770 1,219,029
Merrill Lynch & Company...................... 5,710 423,611
----------
5,829,912
----------
FOOD & BEVERAGES -- (4.7%)
Hershey Foods Corporation.................... 19,330 1,092,145
PepsiCo, Incorporated........................ 19,730 800,298
----------
1,892,443
----------
INSURANCE -- (2.9%)
Travelers Group, Incorporated................ 17,280 1,179,360
----------
LEISURE -- (2.5%)
The Walt Disney Company...................... 12,530 1,010,231
----------
MANUFACTURING -- (1.5%)
Illinois Tool Works, Incorporated............ 11,790 588,763
----------
NEWSPAPER -- (1.4%)
New York Times Company Class A............... 10,820 568,050
----------
OIL -- (6.7%)
Mobil Corporation............................ 16,960 1,255,040
Royal Dutch Petroleum Company................ 18,700 1,037,850
Tosco Corporation............................ 11,810 411,136
----------
2,704,026
----------
</TABLE>
See notes to financial statements.
6
<PAGE>
SENECA FUNDS
SENECA GROWTH FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
(CONCLUDED)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
- ------------------------------------------------- ------ -----------
<S> <C> <C> <C>
COMMON STOCKS (CONTINUED)
PAPER -- (2.1%)
Union Camp Corporation....................... 13,290 $ 819,827
----------
PETROLEUM SERVICES -- (6.9%)
Helmerich & Payne, Incorporated.............. 11,510 920,800
Nabors Industries, Incorporated (1).......... 4,050 157,697
Santa Fe International Corporation (1)....... 11,920 554,280
Schlumberger Limited......................... 13,520 1,138,215
----------
2,770,992
----------
RETAIL TRADE -- (7.9%)
Dayton Hudson Corporation.................... 16,950 1,015,941
Dillard Department Stores.................... 23,160 1,014,697
TJX Companies, Incorporated.................. 37,220 1,137,536
----------
3,168,174
----------
TELECOMMUNICATIONS -- (6.1%)
AT&T Corporation............................. 26,800 1,187,575
Bell Atlantic Corporation.................... 7,860 632,239
BellSouth Corporation........................ 13,040 603,100
----------
2,422,914
----------
TOTAL COMMON STOCKS (COST $33,732,177)........... 39,357,639
----------
SHORT TERM INVESTMENT -- 2.0%
REPURCHASE AGREEMENT (Cost $820,482)
State Street Bank and Trust Company, 4.250%,
to be repurchased at $820,579 on 10/01/97
(collateralized by $830,000 par value U.S.
Treasury Note 6.25% due 08/31/02, with a
value of $841,413)......................... 820,482
----------
TOTAL INVESTMENTS -- (COST $34,552,659*)......... 100.2% 40,178,121
OTHER ASSETS LESS LIABILITIES.................... (0.2)% (71,806)
---- ----------
NET ASSETS....................................... 100.0% $40,106,315
==== ==========
</TABLE>
(1) Non-income producing security.
* At September 30, 1997, the aggregate cost of investment in securities and
short term investments for income tax purposes was $34,575,275. Net
unrealized appreciation aggregated $5,602,846 of which $5,633,373 related to
appreciated investment securities and $30,527 related to depreciated
investment securities.
See notes to financial statements.
7
<PAGE>
SENECA FUNDS
SENECA MID-CAP "EDGE"(SM) FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
- -------------------------------------------------- ------ -----------
<S> <C> <C> <C>
COMMON STOCKS -- 97.4%
ADVERTISING SERVICES -- (2.9%)
Outdoor Systems, Incorporated (1)............. 13,240 $ 347,550
----------
AIRLINES -- (2.0%)
US Airways Group, Incorporated (1)............ 5,600 231,700
----------
AEROSPACE & DEFENSE -- (4.0%)
Armor Holdings, Incorporated (1).............. 9,190 117,173
Precision Castparts Corporation............... 5,390 350,350
----------
467,523
----------
APPAREL MANUFACTURER -- (8.3%)
Jones Apparel Group, Incorporated (1)......... 4,100 221,400
Kellwood Company.............................. 6,540 231,761
The Men's Wearhouse, Incorporated (1)......... 6,660 248,085
Wolverine World Wide, Incorporated............ 11,000 277,750
----------
978,996
----------
BROADCASTING -- (1.3%)
Jacor Communications, Incorporated (1)........ 3,380 149,354
----------
BUSINESS SERVICES -- (1.3%)
Inacom Corporation (1)........................ 3,970 147,634
----------
COMPUTER SOFTWARE & SERVICES -- (21.1%)
Computer Horizon Corporation (1).............. 6,560 237,800
Compuware Corporation......................... 4,430 268,015
Electronics for Imaging, Incorporated (1)..... 6,030 307,530
HBO & Company................................. 7,600 286,900
HNC Software, Incorporated (1)................ 6,050 240,487
Oracle Corporation (1)........................ 7,410 270,002
PeopleSoft, Incorporated (1).................. 4,780 285,605
Saville Systems Ireland plc ADR (1)........... 4,130 290,132
Wind River Systems (1)........................ 7,250 299,062
----------
2,485,533
----------
CONSUMER NON-DURABLE -- (2.1%)
Fort James Corporation........................ 5,440 249,220
----------
</TABLE>
See notes to financial statements.
8
<PAGE>
SENECA FUNDS
SENECA MID-CAP "EDGE"(SM) FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
(CONTINUED)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
- -------------------------------------------------- ------ -----------
<S> <C> <C> <C>
COMMON STOCKS (CONTINUED)
DRUGS & HEALTHCARE -- (3.2%)
McKesson Corporation.......................... 3,700 $ 377,169
----------
ELECTRICAL EQUIPMENT -- (2.0%)
Westinghouse Electric Corporation............. 8,520 230,573
----------
ELECTRONICS -- (11.6%)
Applied Materials, Incorporated (1)........... 3,550 338,138
ASM Lithography Holding NV (1)................ 1,210 119,487
KLA-Tencor Corporation (1).................... 4,670 315,517
Lattice Semiconductor Corporation (1)......... 1,660 108,108
Micrel, Incorporated (1)...................... 5,680 240,335
Maxim Integrated Products, Incorporated (1)... 3,440 245,745
----------
1,367,330
----------
FINANCIAL SERVICES -- (11.7%)
CMAC Investment Corporation................... 6,190 331,939
Comerica, Incorporated........................ 3,650 288,122
E*Trade Group, Incorporated (1)............... 4,980 234,060
Household International, Incorporated......... 2,430 275,046
Morgan Stanley Dean Witter Discover &
Company..................................... 4,760 257,337
----------
1,386,504
----------
FOOD & BEVERAGES -- (2.5%)
Interstate Bakeries Corporation............... 4,340 297,561
----------
HOUSEHOLD PRODUCTS -- (1.0%)
Windmere Durable Holdings, Incorporated....... 5,020 119,539
----------
INSURANCE -- (3.9%)
SunAmerica, Incorporated...................... 4,155 162,824
Travelers Property Casualty Corporation Class
A........................................... 7,320 296,460
----------
459,284
----------
MEDICAL PRODUCTS -- (0.9%)
Nitinol Medical Technologies, Incorporated
(1)......................................... 7,850 111,862
----------
OFFICE FURNISHINGS -- (1.8%)
Knoll, Incorporated (1)....................... 6,480 217,080
----------
</TABLE>
See notes to financial statements.
9
<PAGE>
SENECA FUNDS
SENECA MID-CAP "EDGE"(SM) FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
(CONCLUDED)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
- -------------------------------------------------- ------ -----------
<S> <C> <C> <C>
COMMON STOCKS (CONTINUED)
OIL & GAS -- (0.9%)
Tosco Corporation............................. 3,200 $ 111,400
----------
OIL EQUIPMENT & SERVICES -- (9.4%)
Camco International, Incorporated............. 3,210 223,897
Diamond Offshore Drilling, Incorporated....... 4,320 238,410
EVI, Incorporated (1)......................... 5,130 328,320
Patterson Energy, Incorporated (1)............ 6,040 316,345
----------
1,106,972
----------
RETAIL TRADE -- (4.5%)
Proffitt's, Incorporated (1).................. 3,880 229,890
TJX Companies, Incorporated................... 10,030 306,542
----------
536,432
----------
TELECOMMUNICATIONS -- (1.0%)
RSL Communications, Ltd. Class A (1).......... 5,360 117,920
----------
TOTAL COMMON STOCKS (COST $10,109,745)............ 11,497,136
----------
SHORT TERM INVESTMENT -- 5.2%
REPURCHASE AGREEMENT (Cost $617,321)
State Street Bank and Trust Company, 4.25%,
to be repurchased at $617,394 on 10/01/97
(collateralized by $625,000 par value U.S.
Treasury Note 6.25% due 08/31/02, with a
value of $633,594).......................... 617,321
----------
TOTAL INVESTMENTS (COST $10,727,066*)............. 102.6% 12,114,457
OTHER ASSETS LESS LIABILITIES..................... (2.6)% (304,758)
---- ----------
NET ASSETS........................................ 100.0% $11,809,699
==== ==========
</TABLE>
(1) Non-income producing security.
* At September 30, 1997, the aggregate cost of investment in securities and
short term investments for income tax purposes was $10,731,140. Net
unrealized appreciation aggregated $1,383,317, of which $1,393,988, related
to appreciated investment securities and $10,671, related to depreciated
investment securities.
See notes to financial statements.
10
<PAGE>
SENECA FUNDS
SENECA BOND FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
- ------------------------------ -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS -- 85.7%
AIRLINES -- (5.1%)
Alaska Airlines,
Incorporated (2)........ 9.500% 04/12/2010 $121,979 $ 133,986
Delta Air Lines,
Incorporated............ 10.060% 01/02/2016 65,000 79,834
United Airlines,
Incorporated (2)........ 10.110% 02/19/2006 23,107 26,148
United Airlines,
Incorporated (2)........ 9.760% 05/27/2006 93,012 104,750
United Airlines,
Incorporated (2)........ 9.020% 04/19/2012 94,462 107,083
--------
451,801
--------
APPAREL -- (1.7%)
Ann Taylor,
Incorporated............ 8.750% 06/15/2000 150,000 149,625
--------
ASSET BACKED -- (2.5%)
General Electric Capital
Mortgage Services,
Incorporated, Series
1994-21, Class B1 (2)... 6.500% 08/25/2009 34,225 33,287
General Motors Acceptance
Corporation Series
1994-A, Class A......... 6.300% 06/15/1999 30,547 30,598
Olympic Automobile
Receivable Trust Series
1996-B.................. 6.900% 02/15/2004 120,000 121,939
Standard Credit Card
Master Trust I, Series
1993-2, Class A......... 5.950% 10/07/2004 40,000 39,050
--------
224,874
--------
BROADCASTING -- (6.2%)
Chancellor Broadcasting
Corporation............. 9.375% 10/01/2004 75,000 78,563
Chancellor Broadcasting
Corporation............. 8.750% 06/15/2007 100,000 102,750
</TABLE>
See notes to financial statements.
11
<PAGE>
SENECA FUNDS
SENECA BOND FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
(CONTINUED)
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
- ------------------------------ -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
BROADCASTING (CONTINUED)
Commodore Media,
Incorporated............ 7.500% 05/01/2003 $150,000 $ 165,375
Jacor, Incorporated....... 10.125% 06/15/2006 100,000 109,500
SFX Broadcasting,
Incorporated............ 10.750% 05/15/2006 85,000 93,606
--------
549,794
--------
COMMUNICATION SERVICES -- (2.3%)
PanAmStat Corporation..... 9.750% 08/01/2000 200,000 209,000
--------
DRUGS & HEALTH CARE -- (2.0%)
Abbey Healthcare Group.... 9.500% 11/01/2002 175,000 182,437
--------
DEFENSE -- (1.1%)
Tracor, Incorporated...... 8.500% 03/01/2007 100,000 103,000
--------
ENERGY -- (7.3%)
El Paso Tenneco........... 9.140% 12/31/2001 300,000 300,000
SFP Pipeline Holdings..... 11.160% 08/15/2010 275,000 353,493
--------
653,493
--------
FINANCE & BANKING -- (17.6%)
BankAmerica............... 8.070% 12/31/2026 400,000 416,079
Countrywide Capital,
Incorporated............ 8.000% 12/15/2026 200,000 205,950
Countrywide Funding....... 5.900% 04/22/1999 30,000 29,948
Dollar Financial Group.... 10.875% 11/15/2006 150,000 162,000
Donaldson Lufkin &
Jenrette................ 6.875% 11/01/2005 50,000 50,101
First Republic Bancorp.... 7.750% 09/15/2012 100,000 99,383
Lehman ABS Corporation
(2)..................... 8.145% 11/02/2007 83,040 82,209
Lehman Brothers
Holdings................ 8.800% 03/01/2015 80,000 92,756
Socgen Real Estate........ 7.640% 12/29/2049 150,000 152,510
Wells Fargo Capital A..... 8.125% 12/01/2026 100,000 103,155
Wells Fargo Capital B..... 7.950% 12/01/2026 125,000 125,451
Williams Scotsman,
Incorporated............ 9.875% 06/01/2007 50,000 51,250
--------
1,570,792
--------
</TABLE>
See notes to financial statements.
12
<PAGE>
SENECA FUNDS
SENECA BOND FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
(CONTINUED)
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
- ------------------------------ -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
GROCERY STORES -- (1.3%)
Smith's Food & Drug
Centers, Incorporated... 8.640% 07/02/2012 $100,000 $ 108,500
Vons Company,
Incorporated............ 8.375% 10/01/1999 10,000 10,062
--------
118,562
--------
HOTELS -- (11.5%)
Bally Park Place
Funding................. 9.250% 03/15/2004 100,000 107,000
Caesars World............. 8.875% 08/15/2002 350,000 363,125
Casino America............ 11.500% 11/15/2001 75,000 78,341
HMH Properties............ 8.875% 07/15/2007 150,000 154,686
John Q. Hammons Hotels.... 8.875% 02/15/2004 130,000 131,950
John Q. Hammons Hotels.... 9.750% 10/01/2005 100,000 104,875
Wyndham Hotel
Corporation............. 10.500% 05/15/2006 75,000 85,500
--------
1,025,477
--------
INDUSTRIAL -- (0.3%)
MVE, Incorporated......... 12.500% 02/15/2002 30,000 31,500
--------
INSURANCE -- (2.8%)
Terra Nova Holdings....... 7.200% 08/15/2007 250,000 252,427
--------
MANAGEMENT SERVICES -- (1.8%)
Blount, Incorporated...... 9.000% 06/15/2003 150,000 157,500
--------
MANUFACTURING -- (0.2%)
Hawk Corporation.......... 10.250% 12/01/2003 15,000 16,012
--------
MULTIMEDIA -- (3.6%)
Cablevision Industries
Corporation............. 9.250% 04/01/2008 90,000 97,396
News Corporation
Limited................. 0.000% 06/15/1999 200,000 180,000
Time Warner,
Incorporated............ 9.125% 01/15/2013 35,000 40,166
--------
317,562
--------
NEWSPAPER -- (0.9%)
Garden State Newspapers... 8.750% 10/01/2009 75,000 75,938
--------
OFFICE SUPPLIES -- (0.9%)
Corporate Express,
Incorporated............ 9.125% 03/15/2004 75,000 76,875
--------
</TABLE>
See notes to financial statements.
13
<PAGE>
SENECA FUNDS
SENECA BOND FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
(CONTINUED)
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
- ------------------------------ -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
OIL -- (5.7%)
Falcon Holding Group
L.P..................... 11.000% 09/15/2003 $200,000 $ 208,500
Noble Drilling
Corporation............. 9.125% 07/01/2006 90,000 97,650
Trico Marine Services..... 8.500% 08/01/2005 200,000 203,250
--------
509,400
--------
REAL ESTATE -- (7.1%)
ERP Operating Limited
Partnership............. 7.570% 08/15/2026 150,000 157,375
Property Trust America.... 6.875% 02/15/2008 5,000 4,939
Security Capital Pacific
Trust................... 7.900% 02/15/2016 200,000 201,239
Washington REIT........... 7.125% 08/13/2003 110,000 112,127
Weingarten Realty......... 6.880% 06/25/2027 150,000 154,928
--------
630,608
--------
THEATERS -- (3.8%)
AMC Entertainment
Incorporated............ 9.500% 03/15/2009 100,000 102,250
Plitt Theaters,
Incorporated............ 10.875% 06/15/2004 75,000 79,688
United Artists Theatre
Circuit, Incorporated
Sr. Secured Notes,
Series B................ 11.500% 05/01/2002 150,000 158,250
--------
340,188
--------
TOTAL CORPORATE BONDS (COST $7,430,664)............. 7,646,865
--------
U.S. GOVERNMENT AGENCIES -- 7.5%
COLLATERALIZED MORTGAGE OBLIGATIONS -- (6.2%)
Federal Home Loan Mortgage
Corporation, REMIC,
Series 151, Class E
(2)..................... 9.000% 09/15/2020 24,124 24,470
Federal Home Loan Mortgage
Corporation, REMIC,
Series 1032, Class E
(2)..................... 8.750% 12/15/2020 31,973 33,093
Federal Home Loan Mortgage
Corporation, REMIC,
Series 1142, Class H.... 7.950% 12/15/2020 300,000 308,092
</TABLE>
See notes to financial statements.
14
<PAGE>
SENECA FUNDS
SENECA BOND FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
(CONTINUED)
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
- ------------------------------ -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCIES -- (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal National Mortgage
Association, REMIC, Series
1989-80, Class E (2)...... 9.000% 09/25/2018 $ 71,067 $ 72,996
Federal National Mortgage
Association, REMIC, Series
1990-4, Class G (2)....... 8.750% 05/25/2017 76,415 78,759
Federal National Mortgage
Association, REMIC, Series
1993-179,
Class S, I.O.............. 3.031% 10/25/2023 655,169 32,349
--------
549,759
--------
MORTGAGE-BACKED PASS-THROUGH SECURITY -- (0.3%)
Government National Mortgage
Association, Pool #408215
(2)....................... 7.000% 02/15/2026 23,501 23,523
--------
U.S. TREASURY STRIPS -- (1.0%)
U.S. Treasury Strips........ 0.000% 08/15/2020 400,000 90,384
--------
TOTAL U.S. GOVERNMENT AGENCIES (COST $661,679)............... 663,666
--------
FOREIGN BONDS -- 0.3% (COST $22,147)
Republic of Brazil........ 6.500% 01/01/2001 23,550 23,397
--------
<CAPTION>
SHARES
---------
<S> <C> <C> <C> <C> <C>
PREFERRED STOCK -- 3.9% (COST $331,250)
Microsoft Corporation,
Pfd Series A.................................. 4,000 350,750
--------
WARRANTS -- 0.0% (COST $0)
MVE, Incorporated............................... 30 0
--------
TOTAL INVESTMENTS IN SECURITIES (COST $8,445,740).............. 8,684,678
--------
</TABLE>
See notes to financial statements.
15
<PAGE>
SENECA FUNDS
SENECA BOND FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
(CONCLUDED)
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
- ------------------------------ -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
SHORT TERM INVESTMENTS -- 1.1%
U.S. GOVERNMENT AGENCIES (Cost $100,000)
Federal Home Loan Bank,
Discount Note........... 5.920% 10/01/1997 $100,000 $ 100,000
----------
TOTAL INVESTMENTS -- (COST $8,545,740*)............. 98.5% 8,784,678
OTHER ASSETS LESS LIABILITIES....................... 1.5% 137,483
----- ----------
NET ASSETS.......................................... 100.0% $8,922,161
===== =========
</TABLE>
(2) Subject to principal paydowns as a result of prepayments or refinancings of
the underlying mortgage instruments. As a result, the average life may be
substantially less than the original maturity.
* At September 30, 1997, the aggregate cost of investment in securities and
short term investments for income tax purposes was $8,555,857. Net
unrealized appreciation aggregated $228,821, of which $245,550 related to
appreciated investment securities and $16,729 related to depreciated
investment securities.
See notes to financial statements.
16
<PAGE>
SENECA FUNDS
SENECA REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
- ------------------------------------------------ ------ -----------
<S> <C> <C> <C>
COMMON STOCKS -- 93.0%
BUILDING -- MANUFACTURED HOUSING -- (1.2%)
Oakwood Homes Corporation................... 13,000 $ 368,875
-----------
HOTELS AND RESTAURANTS -- (4.3%)
Circus Circus Entertainment (1)............. 27,400 690,138
Host Marriott Corporation (1)............... 29,000 659,750
-----------
1,349,888
-----------
REAL ESTATE DEVELOPMENT -- (3.1%)
Catellus Development Corporation (1)........ 46,400 962,800
-----------
REAL ESTATE INVESTMENT TRUSTS -- (84.4%)
Ambassador Apartments, Incorporated......... 6,100 145,256
American General Hospitality Corporation.... 23,000 669,875
Apartment Investment and Management Company
Class A................................... 17,470 631,104
Arden Realty Group, Incorporated............ 10,000 313,750
Avalon Properties, Incorporated............. 16,500 490,875
Bedford Property Investors, Incorporated.... 37,100 816,200
Berkshire Realty Company, Incorporated...... 28,500 349,125
Boston Properties, Incorporated (1)......... 28,000 918,750
Burnham Pacific Properties.................. 12,000 177,750
Cali Realty Corporation..................... 25,300 1,053,113
Centerpoint Properties...................... 13,700 497,481
Cornerstone Properties, Incorporated........ 26,100 499,162
Developers Diversified Realty Corporation... 12,200 488,000
Equity Office Properties Trust.............. 15,000 509,062
Equity Residential Properties Trust......... 31,200 1,702,350
Essex Property Trust, Incorporated.......... 4,000 139,250
Evans Withycombe Residential,
Incorporated.............................. 20,000 540,000
Felcor Suite Hotels, Incorporated........... 20,275 832,542
First Industrial Realty Trust,
Incorporated.............................. 27,500 935,000
General Growth Properties................... 12,400 458,800
Glenborough Realty Trust, Incorporated...... 2,500 69,219
Irvine Apartment Communities,
Incorporated.............................. 13,436 448,426
Liberty Property Trust...................... 30,550 822,941
Manufactured Home Communities............... 27,700 720,200
</TABLE>
See notes to financial statements.
17
<PAGE>
SENECA FUNDS
SENECA REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
(CONTINUED)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
- ------------------------------------------------ ------ -----------
<S> <C> <C> <C>
COMMON STOCKS (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Merry Land & Investment Trust Company,
Incorporated.............................. 2,300 $ 50,744
Pacific Gulf Properties, Incorporated....... 37,050 879,937
Patriot American Hospitality,
Incorporated.............................. 38,859 1,238,631
Prentiss Properties Trust................... 33,400 964,425
Redwood Trust, Incorporated................. 32,300 981,112
SL Green Realty Trust (1)................... 15,000 388,125
Security Capital Atlantic, Incorporated..... 33,525 750,122
Security Capital Pacific Trust.............. 26,971 633,818
Simon Debartolo Group, Incorporated......... 24,615 812,295
Sovran Self Storage, Incorporated........... 9,000 283,500
Speiker Properties, Incorporated............ 27,000 1,095,188
Sunstone Hotel Investors, Incorporated...... 46,900 826,613
The Macerich Company........................ 27,500 794,062
Thornburg Mortgage Asset Association........ 29,700 623,700
TriNet Corporate Realty Trust,
Incorporated.............................. 25,500 895,688
Urban Shopping Centers, Incorporated........ 32,500 1,040,000
----------
26,486,191
----------
TOTAL COMMON STOCKS (Cost $25,279,736).......... 29,167,754
----------
WARRANTS -- 0.1% (Cost $30,639)
Security Capital Group, Expire 9/98......... 3,804 29,244
----------
TOTAL INVESTMENTS IN SECURITIES (COST
$25,310,375).................................... 29,196,998
----------
SHORT TERM INVESTMENT -- 5.6%
REPURCHASE AGREEMENT (Cost $1,760,547)
State Street Bank and Trust Company, 4.25%,
to be repurchased at $1,760,755 on
10/01/97 (collateralized by $1,775,000 par
value U.S. Treasury Note 6.25% due
08/31/02, with a value of $1,799,406)..... 1,760,547
----------
</TABLE>
See notes to financial statements.
18
<PAGE>
SENECA FUNDS
SENECA REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
(CONCLUDED)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE VALUE
- ------------------------------------------------ -----------
<S> <C> <C> <C>
TOTAL INVESTMENTS -- (COST $27,070,922*)........ 98.7% $30,957,545
OTHER ASSETS LESS LIABILITIES................... 1.3% 410,902
----- -----------
NET ASSETS...................................... 100.0% $31,368,447
===== ==========
</TABLE>
(1) Non-income producing security.
* At September 30, 1997, the aggregate cost of investment in securities and
short term investments for income tax purposes was $27,095,742. Net
unrealized appreciation aggregated $3,861,803, of which $4,495,936 related
to appreciated investment securities and $634,133 related to depreciated
investment securities.
See notes to financial statements.
19
<PAGE>
SENECA FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
MID-CAP REAL ESTATE
GROWTH "EDGE"(SM) BOND SECURITIES
FUND FUND FUND FUND
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value (Note
2)..................................... $39,357,639 $11,497,136 $8,684,678 $29,196,998
Short Term Investments................... 820,482 617,321 100,000 1,760,547
Cash..................................... -- 37,578 2,367 --
Dividends and interest receivable........ 46,943 4,302 149,805 162,628
Receivable for securities sold........... 613,516 1,101,816 -- 471,960
Receivable for Fund shares sold.......... 8,094 -- 70,500 178,000
Deferred organization costs (Note 5)..... 33,859 33,994 33,859 33,859
Other assets............................. 445 224 113 43,026
Due from Investment Manager (Note 3)..... 10,285 -- -- 67
----------- ----------- ---------- -----------
TOTAL ASSETS........................... 40,891,263 13,292,371 9,041,322 31,847,085
----------- ----------- ---------- -----------
LIABILITIES
Due to Investment Manager (Note 3)....... -- 12,023 12,157 --
Payable for securities purchased......... 710,160 1,426,486 74,561 314,755
Payable for Fund shares redeemed......... 1,071 -- -- 91,632
Trustees fees payable (Note 3)........... 3,753 3,753 3,753 3,753
Distribution fees payable (Note 3)....... 3,643 1,405 -- 1,807
Dividends payable........................ -- -- 1,110 2,097
Other accrued expenses................... 66,321 39,005 27,580 64,594
----------- ----------- ---------- -----------
TOTAL LIABILITIES...................... 784,948 1,482,672 119,161 478,638
----------- ----------- ---------- -----------
NET ASSETS............................. $40,106,315 $11,809,699 $8,922,161 $31,368,447
=========== =========== ========== ===========
NET ASSETS
Capital paid-in.......................... $32,095,920 $ 9,193,888 $8,569,263 $26,235,633
Undistributed net investment income...... 28,234 -- 4,453 23,407
Accumulated net realized gain on
investments............................ 2,356,699 1,228,420 109,507 1,222,784
Net unrealized appreciation of
investments............................ 5,625,462 1,387,391 238,938 3,886,623
----------- ----------- ---------- -----------
NET ASSETS............................. $40,106,315 $11,809,699 $8,922,161 $31,368,447
=========== =========== ========== ===========
INVESTMENTS IN SECURITIES, AT COST....... $34,552,659 $10,727,066 $8,545,740 $27,070,922
INSTITUTIONAL SHARES:
Net assets............................. $34,092,888 $ 9,390,224 $8,922,161 $28,192,515
Total shares outstanding............... 2,074,597 570,101 852,565 1,915,934
Net asset value, offering and redemption
price per Institutional share.......... $ 16.43 $ 16.47 $ 10.47 $ 14.71
=========== =========== ========== ===========
ADMINISTRATIVE SHARES:
Net assets............................. $ 6,013,427 $ 2,419,475 $ -- $ 3,175,932
Total shares outstanding............... 369,418 146,739 -- 216,409
Net asset value, offering and redemption
price per Administrative share......... $ 16.28 $ 16.49 $ -- $ 14.68
=========== =========== ========== ===========
</TABLE>
See notes to financial statements.
20
<PAGE>
SENECA FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
MID-CAP REAL ESTATE
GROWTH "EDGE"(SM) BOND SECURITIES
FUND FUND FUND FUND
---------- ---------- --------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends (a)................. $ 405,505 $ 35,305 $ 4,307 $ 742,196
Interest...................... 119,808 50,505 530,318 99,995
---------- ---------- --------- ----------
TOTAL INCOME................ 525,313 85,810 534,625 842,191
---------- ---------- --------- ----------
EXPENSES
Management fee (Note 3)....... 200,056 89,157 34,294 164,147
Administrative fee (Note 3)... 57,514 56,326 55,433 57,899
Transfer agent fees........... 53,404 52,094 21,342 43,373
Custodian fees................ 47,040 40,605 33,210 42,888
Distribution fees (Note 3).... 8,465 5,652 154 4,688
Registration and filing
fees........................ 24,233 17,969 14,397 24,384
Audit fees.................... 12,874 12,839 11,374 11,374
Legal fees.................... 18,389 18,366 18,384 18,384
Trustees fees................. 8,131 8,131 8,131 8,131
Amortization of organization
expenses (Note 5)........... 30,545 30,545 30,545 30,545
Other......................... 12,104 12,230 4,374 12,556
---------- ---------- --------- ----------
Expenses before waiver and
reimbursement............... 472,755 343,914 231,638 418,369
Fees waived and expenses
reimbursed by Investment
Manager (Note 3)............ (5,174) (135,798) (126,387) (16,628)
---------- ---------- --------- ----------
TOTAL EXPENSES.............. 467,581 208,116 105,251 401,741
---------- ---------- --------- ----------
NET INVESTMENT INCOME
(LOSS).................... 57,732 (122,306) 429,374 440,450
---------- ---------- --------- ----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on
investments................. 2,408,148 1,355,512 111,291 1,229,877
Change in net unrealized
appreciation of
investments................. 5,006,042 369,616 189,346 3,822,456
---------- ---------- --------- ----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS....... 7,414,190 1,725,128 300,637 5,052,333
---------- ---------- --------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS..... $7,471,922 $1,602,822 $ 730,011 $5,492,783
========== ========== ========= ==========
(a) Net of foreign withholding
taxes of: .................. $ 1,524 $ -- $ -- $ --
========== ========== ========= ==========
</TABLE>
See notes to financial statements.
21
<PAGE>
SENECA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MID-CAP
GROWTH FUND "EDGE"(SM) FUND
----------------------------- -----------------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996* 1997 1996*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
From operations:
Net investment income
(loss).................... $ 57,732 $ 32,326 $ (122,306) $ 4,615
Net realized gain on
investments............... 2,408,148 965,464 1,355,512 77,414
Change in net unrealized
appreciation of
investments............... 5,006,042 619,419 369,616 1,017,775
----------- ----------- ----------- ----------
Net increase in net assets
resulting from
operations................ 7,471,922 1,617,209 1,602,822 1,099,804
Dividends and Distributions
to shareholder from Net
investment income:
Administrative Shares..... (3) -- (7) --
Institutional Shares...... (99,739) -- (22,426) --
Net realized gains:
Administrative Shares..... (19,063) -- (12,053) --
Institutional Shares...... (997,531) -- (89,792) --
----------- ----------- ----------- ----------
Total Dividends and
Distributions............... (1,116,336) -- (124,278) --
Net increase from Fund share
transactions (Note 6)....... 20,364,803 11,743,717 1,548,006 7,658,345
----------- ----------- ----------- ----------
TOTAL INCREASE............ 26,720,389 13,360,926 3,026,550 8,758,149
Net Assets
Beginning of period......... 13,385,926 25,000 8,783,149 25,000
----------- ----------- ----------- ----------
End of period (a)........... $40,106,315 $13,385,926 $11,809,699 $ 8,783,149
=========== =========== =========== ==========
(a) Including undistributed
net investment income..... $ 28,234 $ 50,611 $ -- $ 22,765
</TABLE>
* The Growth, Mid-Cap "EDGE"(SM), Bond, and Real Estate Securities Funds
commenced investment operations on March 8, 1996, March 8, 1996, March 7,
1996, and March 12, 1996, respectively.
See notes to financial statements.
22
<PAGE>
SENECA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
REAL ESTATE
BOND FUND SECURITIES FUND
---------------------------- ----------------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996* 1997 1996*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
From operations:
Net investment income.... $ 429,374 $ 93,149 $ 440,450 $ 8,501
Net realized gain (loss)
on investments......... 111,291 13,694 1,229,877 (2,568)
Change in net unrealized
appreciation of
investments............ 189,346 49,605 3,822,456 64,166
---------- ---------- ----------- ----------
Net increase in net
assets resulting from
operations............. 730,011 156,448 5,492,783 70,099
Dividends and Distributions
to shareholder from Net
investment income:
Administrative
Shares............... (2,145) (1,994) (29,699) (1,227)
Institutional Shares... (462,401) (90,013) (425,038) (7,178)
Net realized gains:
Administrative
Shares............... (672) -- (194) --
Institutional Shares... (13,922) -- (4,331) --
---------- ---------- ----------- ----------
Total Dividends and
Distributions............ (479,140) (92,007) (459,262) (8,405)
Net increase from Fund
share transactions (Note
6)....................... 4,548,696 4,033,153 25,039,363 1,208,869
---------- ---------- ----------- ----------
TOTAL INCREASE......... 4,799,567 4,097,594 30,072,884 1,270,563
Net Assets
Beginning of period...... 4,122,594 25,000 1,295,563 25,000
---------- ---------- ----------- ----------
End of period (a)........ $ 8,922,161 $ 4,122,594 $31,368,447 $ 1,295,563
========== ========== =========== ==========
(a) Including undistributed
net investment
income................. $ 4,453 $ 19,427 $ 23,407 $ 18,381
</TABLE>
* The Growth, Mid-Cap "EDGE"(SM), Bond, and Real Estate Securities Funds
commenced investment operations on March 8, 1996, March 8, 1996, March 7,
1996, and March 12, 1996, respectively.
See notes to financial statements.
23
<PAGE>
SENECA FUNDS -- INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MID-CAP
GROWTH FUND "EDGE"(SM) FUND
---------------------------- ----------------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996* 1997 1996*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF
PERIOD.......................... $ 13.74 $ 10.00 $ 14.97 $ 10.00
---------- ----------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income (Loss)
(1)........................... 0.03 0.03 (0.17) 0.01
Net Realized and Unrealized Gain
on Investments................ 3.50 3.71 1.84 4.96
---------- ----------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS.................... 3.53 3.74 1.67 4.97
---------- ----------- ---------- ----------
Distributions to Shareholders
from Net Investment Income...... (0.07) -- (0.07) --
Net Realized Gains.............. (0.77) -- (0.10) --
---------- ----------- ---------- ----------
Total Distribution.............. (0.84) -- (0.17) --
---------- ----------- ---------- ----------
NET ASSET VALUE AT END OF
PERIOD.......................... $ 16.43 $ 13.74 $ 16.47 $ 14.97
========== =========== ========== ==========
TOTAL RETURN (2)................. 27.27% 37.40% 11.39% 49.70%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period..... $34,092,888 $12,919,525 $ 9,390,224 $ 7,427,656
Ratio of Operating Expenses to
Average Net Assets............ 1.52% 0.81%(3) 1.74% 0.90%(3)
Ratio of Operating Expenses to
Average Net Assets (4)........ 1.52% 3.49%(3) 2.77% 5.73%(3)
Ratio of Net Investment Income
(Loss) to Average Net
Assets........................ 0.31% 0.76%(3) (0.97)% 0.27%(3)
Portfolio Turnover Rate......... 145.69% 87.66% 283.60% 72.34%
Average Commission Rate (5)..... $ 0.0595 $ 0.0598 $ 0.0580 $ 0.0595
</TABLE>
* The Growth, Mid-Cap "EDGE"(SM), Bond, and Real Estate Securities Funds
commenced investment operations on March 8, 1996, March 8, 1996, March 7,
1996, and March 12, 1996, respectively.
(1) Net investment income/loss is after waiver of certain fees and reimbursement
of certain expenses by the Investment Manager (see Note 3 to the financial
statements). If the Investment Manager had not waived fees and reimbursed
expenses, net investment income (loss) per share would have been as follows
for the year ended September 30, 1997 and the period ended September 30,
1996, respectively: $0.03 and $(0.09) for the Growth Fund; $(0.33) and
$(0.19) for the Mid-Cap "Edge"(SM) Fund.
(2) Total return represents total return for the period indicated. The total
return would have been lower if certain fees and expenses had not been
waived or reimbursed by the Investment Manager.
(3) Annualized.
(4) If the Investment Manager had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been as
indicated.
(5) The average commission paid is applicable for the Funds that invest greater
than 10% of average net assets in equity securities transactions on which
commissions are charged.
See notes to financial statements.
24
<PAGE>
SENECA FUNDS -- INSTITUTIONAL SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
REAL ESTATE
BOND FUND SECURITIES FUND
------------------------------ ------------------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996* 1997 1996*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD... $ 10.09 $ 10.00 $ 11.10 $ 10.00
--------- --------- ---------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (1)............... 0.62 0.31 0.13 0.13
Net Realized and Unrealized Gain on
Investments........................... 0.47 0.08 3.77 1.10
--------- --------- ---------- ---------
TOTAL FROM INVESTMENT OPERATIONS........ 1.09 0.39 3.90 1.23
--------- --------- ---------- ---------
Distributions to Shareholders from
Net Investment Income................... (0.69) (0.30) (0.28) (0.13)
Net Realized Gains...................... (0.02) -- (0.01) --
--------- --------- ---------- ---------
Total Distribution...................... (0.71) (0.30) (0.29) (0.13)
--------- --------- ---------- ---------
NET ASSET VALUE AT END OF PERIOD......... $ 10.47 $ 10.09 $ 14.71 $ 11.10
========= ========= ========== =========
TOTAL RETURN (2)......................... 11.26% 4.02% 35.44% 12.39%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period............. $ 8,922,161 $ 3,926,664 $28,192,515 $ 1,073,080
Ratio of Operating Expenses to Average
Net Assets............................ 1.53% 0.56%(3) 1.99% 1.00%(3)
Ratio of Operating Expenses to Average
Net Assets (4)........................ 3.41% 9.31%(3) 1.99% 53.04%(3)
Ratio of Net Investment Income to
Average Net Assets.................... 6.31% 7.54%(3) 2.38% 4.39%(3)
Portfolio Turnover Rate................. 99.68% 52.82% 75.68% 30.70%
Average Commission Rate (5)............. N/A N/A $ 0.0559 $ 0.0564
</TABLE>
* The Growth, Mid-Cap "EDGE"(SM), Bond, and Real Estate Securities Funds
commenced investment operations on March 8, 1996, March 8, 1996, March 7,
1996, and March 12, 1996, respectively.
(1) Net investment income is after waiver of certain fees and reimbursement of
certain expenses by the Investment Manager (see Note 3 to the financial
statements). If the Investment Manager had not waived fees and reimbursed
expenses, net investment income (loss) per share would have been as follows
for the year ended September 30, 1997 and the period ended September 30,
1996, respectively: $0.47 and $(0.05) for the Bond Fund; $0.13 and $(1.45)
for the Real Estate Securities Fund.
(2) Total return represents total return for the period indicated. The total
return would have been lower if certain fees and expenses had not been
waived or reimbursed by the Investment Manager.
(3) Annualized.
(4) If the Investment Manager had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been as
indicated.
(5) The average commission paid is applicable for the Funds that invest greater
than 10% of average net assets in equity securities transactions on which
commissions are charged.
See notes to financial statements.
25
<PAGE>
SENECA FUNDS -- ADMINISTRATIVE SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MID-CAP
GROWTH FUND "EDGE"(SM) FUND
---------------------------- ----------------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996* 1997 1996*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF
PERIOD........................... $ 13.63 $ 10.00 $ 14.94 $ 10.00
---------- -------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment (Loss) (1)........ (0.08) -- (0.25) (0.01)
Net Realized and Unrealized Gain
on Investments................. 3.50 3.63 1.90 4.95
---------- -------- ---------- ----------
TOTAL FROM INVESTMENT
OPERATIONS..................... 3.42 3.63 1.65 4.94
---------- -------- ---------- ----------
Distributions to Shareholders from
Net Investment Income............ -- -- -- --
Net Realized Gains............... (0.77) -- (0.10) --
---------- -------- ---------- ----------
Total Distribution............... (0.77) -- (0.10) --
---------- -------- ---------- ----------
NET ASSET VALUE AT END OF
PERIOD........................... $ 16.28 $ 13.63 $ 16.49 $ 14.94
========== ======== ========== ==========
TOTAL RETURN (2).................. 26.51% 36.30% 11.25% 49.30%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period...... $ 6,013,427 $ 466,401 $ 2,419,475 $ 1,355,493
Ratio of Operating Expenses to
Average Net Assets............. 2.48% 1.46%(3) 2.37% 1.55%(3)
Ratio of Operating Expenses to
Average Net Assets (4)......... 2.63% 14.01%(3) 4.32% 9.73%(3)
Ratio of Net Investment Income
(Loss) to Average Net Assets... (0.62)% 0.16%(3) (1.60)% (0.46)%(3)
Portfolio Turnover Rate.......... 145.69% 87.66% 283.60% 72.34%
Average Commission Rate (5)...... $ 0.0595 $ 0.0598 $ 0.0580 $ 0.0595
</TABLE>
* The Growth, Mid-Cap "EDGE"(SM), Bond, and Real Estate Securities Funds
commenced investment operations on March 8, 1996, March 8, 1996, March 7,
1996, and March 12, 1996, respectively.
(1) Net investment loss is after waiver of certain fees and reimbursement of
certain expenses by the Investment Manager (see Note 3 to the financial
statements). If the Investment Manager had not waived fees and reimbursed
expenses, net investment income/loss per share would have been as follows
for the year ended September, 1997 and the period ended September 30, 1996,
respectively: $(0.09) and $(0.34) for the Growth Fund; $(0.55) and $(0.20)
for Mid-Cap "EDGE"(SM) Fund.
(2) Total return represents total return for the period indicated. The total
return would have been lower if certain fees and expenses had not been
waived or reimbursed by the Investment Manager.
(3) Annualized.
(4) If the Investment Manager had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been as
indicated.
(5) The average commission paid is applicable for the Funds that invest greater
than 10% of average net assets in equity securities transactions on which
commissions are charged.
See notes to financial statements.
26
<PAGE>
SENECA FUNDS -- ADMINISTRATIVE SHARES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
REAL ESTATE
BOND FUND SECURITIES FUND
------------- -----------------------------
PERIOD YEAR PERIOD
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996* 1997 1996*
------------- ------------- -------------
<S> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD....... $ 10.00 $ 11.08 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (1)................... 0.29 0.03 0.13
Net Realized and Unrealized Gain on
Investments............................... 0.09 3.78 1.08
-------- ---------- --------
TOTAL FROM INVESTMENT OPERATIONS............ 0.38 3.81 1.21
-------- ---------- --------
Distributions to Shareholders from Net
investment income........................... (0.29) (0.20) (0.13)
Net realized gains.......................... -- (0.01) --
-------- ---------- --------
Total distribution.......................... (0.29) (0.21) (0.13)
-------- ---------- --------
NET ASSET VALUE AT END OF PERIOD............. $ 10.09 $ 14.68 $ 11.08
======== ========== ========
TOTAL RETURN (2)............................. 3.86% 34.54% 12.22%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period................. $ 195,930 $ 3,175,932 $ 222,483
Ratio of Operating Expenses to Average Net
Assets (3)................................ 1.21%(3) 2.91% 1.65%(3)
Ratio of Operating Expenses to Average Net
Assets (3)(4)............................. 39.23% 3.79% 73.01%
Ratio of Net Investment Income to Average
Net Assets (3)............................ 6.46% 1.37% 4.61%
Portfolio Turnover Rate..................... 52.82% 75.68% 30.70%
Average Commission Rate (5)................. N/A $ 0.0559 $ 0.0564
</TABLE>
* The Growth, Mid-Cap "EDGE"(SM), Bond, and Real Estate Securities Funds
commenced investment operations on March 8, 1996, March 8, 1996, March 7,
1996, and March 12, 1996, respectively.
** As of December 26, 1996, the Bond Administrative Shares merged with Bond
Institutional Shares.
(1) Net investment income is after waiver of certain fees and reimbursement of
certain expenses by the Investment Manager (see Note 3 to the financial
statements). If the Investment Manager had not waived fees and reimbursed
expenses, net investment income/loss per share would have been as follows
for the year ended September 30, 1997 and the period ended September 30,
1996, respectively: $(0.04) and $(1.96) for the Real Estate Securities Fund
and $(1.41) for the Bond Fund for the period ended September 30, 1996.
(2) Total return represents total return for the period indicated. The total
return would have been lower if certain fees and expenses had not been
waived or reimbursed by the Investment Manager.
(3) Annualized.
(4) If the Investment Manager had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been as
indicated.
(5) The average commission paid is applicable for the Funds that invest greater
than 10% of average net assets in equity securities transactions on which
commissions are charged.
See notes to financial statements.
27
<PAGE>
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 1 -- ORGANIZATION
Seneca Funds (the "Trust") is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The Trust was
organized as a Delaware business trust on December 18, 1995 and was declared
effective as of March 1, 1996. The Trust consists of four series: Seneca Growth
Fund, Seneca Mid-Cap "EDGE"(SM) Fund, Seneca Bond Fund and Seneca Real Estate
Securities Fund (individually, the "Fund," and collectively, the "Funds.") The
Board of Trustees has authorized each Fund to issue two classes of common
shares: Administrative Shares and Institutional Shares. As of December 26, 1996,
the Bond Administrative Shares merged with the Bond Institutional Shares in a
tax free transaction.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS: Equity securities traded on a national securities
exchange are valued at their last sales price on the exchange on which they are
traded most extensively; or if no sales are reported, at the mean between the
most recent high bid and the most recent low asked quotations (the "Calculated
Mean") on such exchange. Securities traded on the National Association of
Securities Dealers Automated Quotation ("Nasdaq") system will be valued at the
most recent sales price reported on such system on the valuation date or, if
there are no sales reported, the Calculated Mean based on quotations reported on
Nasdaq. Securities not quoted on Nasdaq but traded in an over-the-counter market
will be valued at the most recent sale price if the sales price for any sales of
the security on the valuation date are reported on such market or, if there are
no such sales, the Calculated Mean based on quotations reported on such market.
In each case, if there is no Calculated Mean, the value shall be the most recent
bid quotation on the relevant market. Fixed income securities, other than those
having a maturity of 60 days or less, are valued on the basis of quotes obtained
from brokers or pricing services. Short-term investments having a maturity of 60
days or less will be valued at amortized cost. If, in the Investment Manager's
opinion, the fair market value of an investment cannot be determined pursuant to
the foregoing procedures,
28
<PAGE>
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(CONTINUED)
the value will be an amount that, in the opinion of the Trustees, represents the
fair market value determined based on all available information.
REPURCHASE AGREEMENTS: Each Fund may enter into repurchase agreements. In a
repurchase agreement, a Fund buys a security and the seller simultaneously
agrees to repurchase the security on a specified future date at an agreed upon
price. Because the security constitutes collateral for the repurchase
obligation, a repurchase agreement can be considered a collateralized loan.
Securities pledged as collateral for the repurchase agreement are held by the
Fund's Custodian until maturity date of the repurchase agreement. The Fund's
risk is the ability of the seller to pay the agreed-upon price on delivery date.
The Trustees have established criteria to evaluate the creditworthiness of
parties with whom the Funds may enter into repurchase agreements. The Funds
limit the repurchase agreements to securities issued by the United States
Government, its agencies, and its instrumentalities. The market value of the
underlying security throughout the term of the agreement will always equal or
exceed the agreed-upon repurchase price.
SECURITY TRANSACTIONS, INVESTMENT INCOME and EXPENSES: Investment security
transactions are recorded as of trade date. Realized gains and losses on
investment security sales are determined on the basis of identified cost.
Dividend income is recorded on the ex-dividend date. Interest income and
expenses are recorded daily on an accrual basis. Fund expenses not directly
attributable to a specific fund are allocated evenly among all funds. Fund
expenses that are not related to the distribution of shares of a particular
class or to services provided specifically to a particular class are allocated
between the classes on the basis of relative average daily net assets of each
class. Expenses that relate to the distribution or services provided to a
particular class are allocated to that class. Investment income and realized and
unrealized gains/losses are allocated between the classes on the basis of net
assets of each class.
DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income on shares of
the Seneca Bond Fund are determined at the
29
<PAGE>
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(CONTINUED)
class level and are declared and paid monthly. Dividends from net investment
income on shares of the Seneca Real Estate Securities Fund are determined at the
class level and are declared and paid quarterly. Dividends from net investment
income on shares of the Seneca Growth Fund and Seneca Mid-Cap "EDGE"(SM) Fund
are determined at the class level and are declared and paid annually. Each Fund
distributes net realized capital gains, if any, at least annually.
For the year ended September 30, 1997, the Funds identified permanent
differences in each fund's organization costs resulting from differing book and
tax accounting methods. Adjusting for this difference resulted in a $19,314
decrease in each fund's paid-in capital and a corresponding increase in the
fund's undistributed net investment income.
FEDERAL INCOME TAXES: Each Fund intends to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended, by
distributing to shareholders substantially all of its taxable income. Therefore,
no Federal income or excise tax provision is required. Income and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for market discount, losses deferred due
to wash sales and excise tax regulations.
Income and capital gain distribution requirements are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatment for organizational
expenses. Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to capital paid-in. Undistributed
net investment income and accumulated net realized gain (loss) may include
temporary book and tax basis differences which will reverse in a subsequent
period.
ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the
30
<PAGE>
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(CONTINUED)
reported amounts of income and expenses during the reporting period. Actual
results could differ from these estimates.
NOTE 3 -- AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
The Trust has an Investment Management Agreement with GMG/Seneca Capital
Management LP ("GMG/Seneca"), under which GMG/Seneca manages the investments of
each Fund. For its services, GMG/Seneca receives a fee from each Fund at an
annual percentage of the average daily net assets of each Fund. Such investment
management fees are 0.70%, 0.80%, 0.50%, and 0.85% for the Growth Fund, Mid-Cap
"EDGE"(SM) Fund, Bond Fund, and Real Estate Securities Fund, respectively.
On July 17, 1997, GMG/Seneca Capital Management LLC transferred its rights and
obligations as investment manager of the Funds to GMG/Seneca, which was at that
time owned by the same persons as then owned Seneca Capital Management LLC.
The Trust has a Distribution and Services Agreement (the "Agreement") with
Genesis Merchant Group Securities LLC ("GMG Securities"),and Seneca Distributors
LLC ("Seneca Distributors"), affiliates of GMG/Seneca, under which GMG
Securities and Seneca Distributors serve as the distributors and principal
underwriters of each Fund's shares. Pursuant to the Agreement, GMG Securities
and Seneca Distributors receive an aggregate fee from each Fund at an annual
rate of 0.25% of the average daily net assets attributable to the Administrative
Shares of each Fund.
The Trust has an Administrative Services Agreement with GMG/Seneca pursuant to
which GMG/Seneca is responsible for the day-to-day administrative functions of
the Trust. For these services, GMG/Seneca receives a fee from each Fund at an
annual rate of 0.08% of the first $125 million, 0.06% of the next $125 million,
and 0.04% thereafter, subject to certain minimums which GMG/Seneca has agreed to
waive through September 30, 1997. GMG/Seneca has entered
31
<PAGE>
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(CONTINUED)
into an agreement with State Street Bank & Trust Company ("State Street") to
provide most of the administrative functions for the Trust.
GMG/Seneca had agreed to voluntarily waive its Management and Administrative
fees and reimburse other operating expenses of each Fund (other than certain
extraordinary or non-recurring expenses) until the earlier of September 30, 1997
or such time as the Trust's aggregate assets exceeded $60 million, to the extent
necessary to prevent the expenses for each Fund and class from exceeding the
following percentages of average daily net assets:
<TABLE>
<CAPTION>
ADMINISTRATIVE INSTITUTIONAL
FUND CLASS CLASS
- ------------------------------------------- -------------- -------------
<S> <C> <C>
Seneca Growth Fund......................... 1.50% 0.85%
Seneca Mid-Cap "EDGE"(SM) Fund............. 1.60% 0.95%
Seneca Bond Fund........................... 1.30% 0.65%
Seneca Real Estate Fund.................... 1.70% 1.05%
</TABLE>
These percentages were in effect from October 1, 1996 through January 31, 1997
at which time the aggregate assets of the Trust exceeded $60 million. From
February 1, 1997 to September 30, 1997, GMG/Seneca had agreed to voluntarily
waive its Management and Administrative fees and reimburse other operating
expenses of each Fund to the extent necessary to prevent the expenses for each
Fund and class from exceeding the following percentages of average daily net
assets:
<TABLE>
<CAPTION>
ADMINISTRATIVE INSTITUTIONAL
FUND CLASS CLASS
- ------------------------------------------- -------------- -------------
<S> <C> <C>
Seneca Growth Fund......................... 2.55% 1.95%
Seneca Mid-Cap "EDGE"(SM) Fund............. 2.70% 2.10%
Seneca Bond Fund........................... -- 1.85%
Seneca Real Estate Fund.................... 3.05% 2.35%
</TABLE>
32
<PAGE>
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(CONTINUED)
For the year ended September 30, 1997, GMG/Seneca waived and reimbursed expenses
as follows:
<TABLE>
<CAPTION>
MANAGEMENT
FEES ADMINISTRATIVE EXPENSES
FUND WAIVED FEES WAIVED REIMBURSED TOTAL
- ---------------------- ---------- -------------- ---------- --------
<S> <C> <C> <C> <C>
Seneca Growth......... $ -- $ -- $ 5,174 $ 5,174
Seneca Mid-Cap
"EDGE"(SM).......... -- -- 135,798 135,798
Seneca Bond........... -- -- 126,387 126,387
Seneca Real Estate.... -- -- 16,628 16,628
</TABLE>
Each Trustee of the Trust who is not an interested person receives a fee of
$2,500 for each regular, quarterly meeting attended and is reimbursed for
expenses incurred in connection with such attendance. Effective July 1, 1997
each Trustee of the Trust who is not an interested person receives a quarterly
retainer of $2,500.
NOTE 4 -- INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investments, excluding short
term securities, for the Trust, for the year ended September 30, 1997 were as
follows:
<TABLE>
<CAPTION>
NON- NON-
GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT
FUND PURCHASES PURCHASES SALES SALES
- --------------------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Seneca Growth........ $57,312,920 $ -- $37,141,324 $ --
Seneca Mid-Cap
"EDGE"(SM)......... 30,288,698 -- 28,370,414 --
Seneca Bond.......... 10,268,362 991,816 5,962,571 499,998
Seneca Real Estate
Securities......... 35,097,333 921,957 11,746,897 1,091,535
</TABLE>
NOTE 5 -- ORGANIZATION COSTS
The Trust bears all costs in connection with its organization. The organization
costs are amortized on a straight-line basis over a period of sixty months from
the commencement of investment operations. The costs associated with state
registration of shares will be amortized on a straight-line basis over a period
of twelve months. If any of the initial shares are redeemed before the end of
the amortization period, the
33
<PAGE>
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(CONTINUED)
proceeds of the redemption will be reduced by the pro rata share of unamortized
organization and state registration costs.
NOTE 6 -- CAPITAL STOCK TRANSACTIONS
Capital stock transactions for the period from commencement of investment
operations through September 30, 1997 are as follows:
GROWTH FUND (1)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
----------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ------- -----------
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES
Shares sold............ 1,193,698 $16,740,404 944,161 $11,381,266
Shares issued upon
reinvestment of
dividends............ 83,095 1,095,100 -- --
Shares redeemed........ (142,301) (2,144,300) (5,306) (70,645)
--------- ----------- ------- -----------
Net increase........... 1,134,492 $15,691,204 938,855 $11,310,621
========= =========== ======= ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
---------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
------- ----------- ------- ---------
<S> <C> <C> <C> <C>
ADMINISTRATIVE SHARES
Shares sold........... 410,550 $ 5,770,465 55,186 $ 721,427
Shares issued upon
reinvestment of
dividends........... 1,364 17,844 -- --
Shares redeemed....... (76,718) (1,114,710) (22,214) (288,331)
------- ----------- ------- --------
Net increase.......... 335,196 $ 4,673,599 32,972 $ 433,096
======= =========== ======= ========
</TABLE>
(1) Fund commenced investment operations on March 8, 1996.
34
<PAGE>
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(CONTINUED)
NOTE 6 -- CAPITAL STOCK TRANSACTIONS (CONTINUED)
MID-CAP "EDGE"(SM) FUND (1)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
---------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- ------- ----------
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES
Shares sold............. 403,926 $ 5,517,592 509,221 $6,613,122
Shares issued upon
reinvestment of
dividends............. 7,844 109,284 -- --
Shares redeemed......... (337,764) (4,917,052) (14,376) (188,718)
-------- ---------- ------- ----------
Net increase............ 74,006 $ 709,824 494,845 $6,424,404
======== ========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
---------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- ------- ----------
<S> <C> <C> <C> <C>
ADMINISTRATIVE SHARES
Shares sold............. 291,421 $ 4,064,517 104,231 $1,422,572
Shares issued upon
reinvestment of
dividends............. 851 11,875 -- --
Shares redeemed......... (236,289) (3,238,210) (14,725) (188,631)
--------- ----------- ------- -----------
Net increase............ 55,983 $ 838,182 89,506 $1,233,941
========= =========== ======= ===========
</TABLE>
35
<PAGE>
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(CONTINUED)
NOTE 6 -- CAPITAL STOCK TRANSACTIONS (CONTINUED)
BOND FUND (2)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
---------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- ------- ----------
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES
Shares sold............. 496,127 $ 5,079,683 385,776 $3,831,086
Shares merged (3)....... 23,704 250,425 -- --
Shares issued upon
reinvestment of
dividends............. 45,088 460,532 8,635 85,975
Shares redeemed......... (101,560) (1,048,447) (6,454) (64,905)
--------- ----------- ------- -----------
Net increase............ 463,359 $ 4,742,193 387,957 $3,852,156
========= =========== ======= ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
-------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
------- --------- ------ --------
<S> <C> <C> <C> <C>
ADMINISTRATIVE SHARES
Shares sold............ 7,990 $ 82,034 18,065 $179,966
Shares issued upon
reinvestment of
dividends............ 140 1,437 104 1,031
Shares merged (3)...... (24,954) (250,425) -- --
Shares redeemed........ (2,595) (26,543) -- --
----------- -------
-------- ----------
- -
Net
increase/(decrease)... $(193,497) 18,169
(19,419) $180,997
=========== =======
========= ===========
</TABLE>
(1) Fund commenced investment operations on March 8, 1996.
(2) Fund commenced investment operations on March 7, 1996.
(3) As of December 26, 1996, the Bond Administrative Shares merged with Bond
Institutional Shares in a tax free transaction.
36
<PAGE>
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(CONTINUED)
NOTE 6 -- CAPITAL STOCK TRANSACTIONS (CONTINUED)
REAL ESTATE SECURITIES FUND (4)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
----------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ------ ----------
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES
Shares sold............ 2,618,177 $ 32,751,944 94,875 $1,001,801
Shares issued upon
reinvestment of
dividends............ 31,702 424,162 583 6,370
Shares redeemed........ (830,654) (10,635,920) -- --
--------- ----------- ------- -----------
Net increase........... 1,819,225 $ 22,540,186 95,458 $1,008,171
========= =========== ======= ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
--------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- ------ --------
<S> <C> <C> <C> <C>
ADMINISTRATIVE SHARES
Shares sold............ 262,586 $3,366,423 18,779 $200,099
Shares issued upon
reinvestment of
dividends............ 2,082 27,973 56 599
Shares redeemed........ (68,344) (895,219) -- --
------- ---------- ------ --------
Net increase........... 196,324 $2,499,177 18,835 $200,698
======= ========== ====== ========
</TABLE>
(4) Fund commenced investment operations on March 12, 1996.
NOTE 7 -- SHARES OF BENEFICIAL INTEREST
At September 30, 1997, certain shareholders were record owners of more than 10%
of total outstanding shares of the following Funds:
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OF
NAME OF PORTFOLIO SHAREHOLDERS SHARES OWNED
- ---------------------------------------- ------------ ------------
<S> <C> <C>
Growth Fund............................. 2 24%
Bond Fund............................... 1 10%
Real Estate Securities Fund............. 2 26%
</TABLE>
37
<PAGE>
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(CONTINUED)
NOTE 8 -- SUBSEQUENT EVENTS
On June 18, 1997, GMG/Seneca entered into an agreement with Phoenix Duff &
Phelps Corporation ("Phoenix") for the sale of a majority of the partnership
interest in GMG/Seneca to Phoenix. Closing of the purchase is conditioned upon
approval of the shareholders of the Seneca Funds of the "change in control" that
would result. Management expects that a proxy statement will be prepared and
distributed to the shareholders by mid-December, 1997, and that the meeting to
consider approval would be held in late January, 1998. The close of the sale
would follow shortly after approval of the change in control. At that time the
name of the Funds would change to "Phoenix-Seneca Funds".
On October 15, 1997, the Trustees approved the appointment of Phoenix Equity
Planning Corporation as transfer agent of the Seneca Funds.
NOTE 9 -- TAX INFORMATION (UNAUDITED)
For the fiscal year ended September 30, 1997, 19.32% and 2.97% of all dividends
paid to Shareholders of the Seneca Growth and Mid-Cap "EDGE"(SM) Funds
respectively, qualified for the Dividends Received Deduction for eligible
corporate investors. Shareholders should refer to Form 1099 when preparing their
tax returns to determine the appropriate tax treatment for the distributions
they received from the respective Fund(s) in the fiscal year 1997.
For the fiscal year ended September 30, 1997, ordinary income distributions to
the Institutional Shares of the Seneca Mid-Cap "EDGE"(SM) Fund of $24,431 were
redesignated as realized gain distributions.
38
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and the Shareholders of Seneca Funds:
We have, audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Seneca Growth Fund, Seneca Mid-Cap
"EDGE"(SM) Fund, Seneca Bond Fund, and Seneca Real Estate Securities Funds
(collectively the "Funds"), comprising Seneca Funds as of September 30, 1997,
and the related statements of operations for the year then ended, and the
statements of changes in net assets, and the financial highlights for the year
ended September 30, 1997 and for the periods ended September 30, 1996. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at
September 30, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Funds as of
September 30, 1997, the results of their operations, the changes in their net
assets, and their financial highlights for the respective stated periods then
ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
November 5, 1997
<PAGE>
PART C--OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Part A: Financial Highlights for the period ending September 30, 1997
Part B: For each of the Phoenix-Seneca Growth Fund, the Phoenix-Seneca Mid-Cap
EDGE(SM) Fund, the Phoenix-Seneca Bond Fund and the Phoenix-Seneca Real
Estate Securities Fund, the following are incorporated by reference to
the Annual Report to Shareholders of such Funds: Schedule of Investments
as of September 30, 1997; Statements of Assets and Liabilities as of
September 30, 1997; Statements of Operations for the year ended
September 30, 1997; Financial Highlights for a Share Outstanding
Throughout the Period Ended September 2, 1997; Notes to Financial
Statements; and Independent Auditors' Report on the foregoing.
(b) Exhibits:
1. (a) Agreement and Declaration of Trust.*
(b) Certificate of Trust.*
2. By-Laws.*
3. None.
4. Instruments defining shareholder rights incorporated by reference to
Exhibits 1 and 2 above.
5. (a) Form of Investment Management Agreement (the "Investment Management
Agreement") between the Registrant, on behalf of Phoenix-Seneca Growth
Fund, Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund, Phoenix-Seneca Bond Fund,
and Phoenix-Seneca Real Estate Securities Fund, on the one hand, and
Phoenix Investment Counsel, Inc. ("PIC") on the other.
(b) Form of Subadvisory Agreement between PIC and Seneca Capital Management
LLC ("Seneca").
6. Form of Underwriting Agreement between the Registrant and Phoenix Equity
Planning Corporation ("PEPCO").
7. None.
8. Form of Custody and Investment Accounting Agreement (the "Custody
Agreement") between the Registrant and Investors Fiduciary Trust Company
("IFTC").**
9. (a) Form of Transfer Agency and Service Agreement (the "Transfer Agency
Agreement") between the Registrant and PEPCO.
(b) Form of Administration Agreement (the "Administration Agreement")
between the Registrant, on behalf of Phoenix-Seneca Growth Fund,
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund, Phoenix-Seneca Bond Fund, and
Phoenix-Seneca Real Estate Securities Fund, on the one hand, and
GMG/Seneca on the other.****
(c) Form of Sub-Administration Agreement (the "Sub-Administration
Agreement") between the Registrant, GMG/Seneca and State Street Bank
and Trust Company.****
10. Opinion and consent of Morris, Nichols, Arsht & Tunnell.***
11. Consent of Deloitte & Touche LLP, Independent Public Accountants.
12. None.
13. Form of Share Purchase Agreement between Registrant and GMG/Seneca Capital
Management, L.P. (the "Share Purchase Agreement").***
14. Model IRA Plan.****
15. (a) Form of Distribution Plan Pursuant to Rule 12b-1 for Class A Shares
(b) Form of Distribution Plan Pursuant to Rule 12b-1 for Class B Shares
(c) Form of Distribution Plan Pursuant to Rule 12b-1 for Class C Shares
(d) Form of Distribution Plan Pursuant to Rule 12b-1 for Class M Shares
16. Schedule for computation of each performance quotation provided in
response to Item 22****
17. Financial Data Schedules
C-1
<PAGE>
18. Form of Amended and Restated Rule 18f-3 Plan.
19. Powers of Attorney for Sandra J. Westhoff, Ronald K. Jacks, Melinda Ellis
Evers, Paul E. Erdman, Mary Ann Cusenza and Victor Guinasso.***
* Incorporated by reference to Registrant's Registration Statement on Form
N-1A dated December 18, 1995.
** Incorporated by reference to pre-effective Amendment No. 1 to Registrant's
Registration Statement dated February 13, 1996.
*** Incororated by reference to pre-effective Amendment No. 2 to Registrant's
Registration statement dated February 29, 1996.
**** Incorporated by reference by Registrant to Post-Effective Amendment No. 1
by Registrant's Registration Statement dated October 30, 1996.
Item 25. Persons Controlled By or Under Common Control With Registrant.
None.
Item 26. Number of Holders of Securities.
<TABLE>
<CAPTION>
Number of
Record Holders as
Title of Class of October 31, 1997
- ------------------------------------------- --------------------
<S> <C>
Phoenix-Seneca Growth Fund
Class X 149
Class A 117
Class B 0
Class C 0
Class M 0
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
Class X 104
Class A 170
Class B 0
Class C 0
Class M 0
Phoenix-Seneca Bond Fund
Class X 69
Class A 0
Class B 0
Class C 0
Class M 0
Phoenix-Seneca Real Estate Securities Fund
Class X 97
Class A 101
Class B 0
Class C 0
Class M 0
</TABLE>
Item 27. Indemnification
The Agreement and Declaration of Trust dated December 18, 1995 and the
By-Laws of the Registrant provide that no trustee or officer will be
indemnified against any liability to which the Registrant would otherwise be
subject by reason of or for willful misfeasance, bad faith, gross negligence or
reckless disregard of such person's duties. The Investment Management Agreement
(Section 12), Distribution Agreement (Section 6), Custody Agreement (Section 5)
and Transfer Agency Agreement (Section 6) each provides that the Trust will
indemnify the other party (or parties, as the case may be) to the agreement for
losses arising from such party's good faith exercise of its duties under the
applicable agreement, provided, however, that the Trust will not indemnify such
other party (or parties) in the case of willful misfeasance, bad faith, gross
negligence or reckless disregard of such person's duties under the applicable
agreement.
Insofar as indemnification for liability arising under the Securities Act
of 1933, as amended (the "Act"), may be available to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
C-2
<PAGE>
Item 28. Business and Other Connections of Investment Advisers.
All of the information required by this item is set forth in the Form ADV,
as currently amended, of PIC and Seneca (SEC File Nos. 801-5995 (PIC) and
801-51559 (Seneca)), which is incorporated herein by reference.
Item 29. Principal Underwriter.
(a) PEPCO also serves as the principal underwriter for the following other
registrants:
Phoenix Series Fund, Phoenix Strategic Allocation Fund, Inc., Phoenix Duff
& Phelps Institutional Mutual Funds, Phoenix Multi-Sector Fixed Income Fund,
Inc., Phoenix Multi-Sector Short Term Bond Fund, Phoenix Multi-Portfolio Fund,
Phoenix California Tax Exempt Bonds, Inc., Phoenix Income and Growth Fund,
Phoenix Worldwide Opportunities Fund, Phoenix Strategic Equity Series Fund,
Phoenix-Aberdeen Series Fund, Phoenix Equity Series Fund, Phoenix-Engemann
Funds, Phoenix Investment Trust 97, Phoenix Home Life Variable Universal Life
Account, Phoenix Home Life Variable Accumulation Account, PHL Variable
Accumulation Account, Phoenix Life and Annuity Variable Universal Life Account
and PHL Variable Separate Account MVA1.
(b) Directors, Officers and Partners
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Position and Offices
Business Address with Distributor with Registrant
- ------------------------- ----------------------------- ---------------------
<S> <C> <C>
Michael E. Haylon Director None
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
Philip R. McLoughlin Director and President None
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
David R. Pepin Director and Executive None
56 Prospect Street Vice President
P.O. Box 150480
Hartford, CT 06115-0480
Leonard J. Saltiel Managing Director, None
56 Prospect Street Infrastructure/Operations
P.O. Box 150480
Hartford, CT 06115-0480
William R. Moyer Senior Vice President, None
100 Bright Meadow Blvd. Finance, and Treasurer
P.O. Box 2200
Enfield, CT 06083-2200
G. Jeffrey Bohne Vice President, Transfer None
101 Munson Street Agent Operations
Greenfield, MA 01301
Nancy G. Curtiss Vice President, Fund None
56 Prospect Street Accounting
P.O. Box 150480
Hartford, CT 06115-0480
Thomas N. Steenburg Vice President, Counsel and Secretary
56 Prospect Street Secretary
P.O. Box 150480
Hartford, CT 06115-0480
</TABLE>
(c) To the best of the Registrant's knowledge, no commissions or other
compensation was received by any principal underwriter who is not an affiliated
person of the Registrant or an affiliated person of such affiliated person,
directly or indirectly, from the Registrant during the Registrant's last fiscal
year.
C-3
<PAGE>
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules thereunder will be maintained at
the offices of (1) the Registrant at 909 Montgomery Street, Suite 500, San
Francisco, California 94133, (2) Seneca at 909 Montgomery Street, San
Francisco, California, 94133, (3) State Street Bank and Trust Company, 1776
Heritage Drive, North Quincy, Massachusetts, 02171-2197, and (4) Registrant's
Custodian and Transfer Agent, Phoenix Equity Planning Corporation, 100 Bright
Meadow Blvd., Enfield, Connecticut 06082.
Item 31. Management Services.
None.
Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes that it will furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
(d) Registrant undertakes that it will, if requested to do so by the holders
of at least 10% of its outstanding shares, call a meeting of shareholders
for the purpose of voting upon the question of removal of a trustee or
trustees and will assist in communications among shareholders as required
by Section 16(c) of the 1940 Act.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of San Francisco, and the State of California on
the 26th day of November, 1997.
SENECA FUNDS
By: /s/GAIL P. SENECA
----------------------------------
Gail P. Seneca
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-1A has been signed below by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------ -------------------------- ------------------
<S> <C> <C>
/s/ GAIL P. SENECA Trustee and President November 26, 1997
- ----------------------------
(Chief Executive Officer)
Gail P. Seneca
* Trustee and Treasurer November 26, 1997
- ----------------------------
(Chief Financial Officer
Sandra J. Westhoff
and Accounting Officer)
* Trustee November 26, 1997
- ----------------------------
Mary Ann Cusenza
* Trustee November 26, 1997
- ----------------------------
Paul E. Erdman
* Trustee November 26, 1997
- ----------------------------
Melinda Ellis Evers
*By: /s/ GAIL P. SENECA
------------------------
Gail P. Seneca as
Attorney-in-fact
</TABLE>
S-1(c)
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
5(a). Investment Management Agreement
5(b). Subadvisory Agreement
6. Underwriting Agreement
9(a). Transfer Agency and Service Agreement
15(a). Distribution Plan for Class A Shares
15(b). Distribution Plan for Class B Shares
15(c) Distribution Plan for Class C Shares
15(d). Distribution Plan for Class M Shares
17. Financial Data Schedules
18. Amended and Restated 18f-3 Plan
PHOENIX-SENECA FUNDS
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT made effective as of the ___ day of January, 1998 by and
between PHOENIX-SENECA FUNDS, a Delaware business trust having an office and
principal place of business located at 909 Montgomery Street, San Francisco,
California 94133 (the "Trust") and PHOENIX INVESTMENT COUNSEL, INC., a
Massachusetts corporation having an office and principal place of business
located at 56 Prospect Street, Hartford, Connecticut 06115 (the "Adviser").
WITNESSETH THAT:
1. The Trust hereby appoints the Adviser to act as investment adviser to
the Trust on behalf of the following series of the Trust established and
designated by the Trustees on or before the date hereof, namely the
Phoenix-Seneca Growth Fund, the Phoenix-Seneca Mid-Cap "EDGE(sm)" Fund, the
Phoenix-Seneca Bond Fund, and the Phoenix-Seneca Real Estate Securities Fund
(the "Existing Series"), for the period and on the terms set forth herein. The
Adviser accepts such appointment and agrees to render the services described in
this Agreement for the compensation herein provided.
2. In the event that the Trustees desire to retain the Adviser to render
investment advisory services hereunder with respect to one or more additional
series ("Additional Series"), the Trust shall notify the Adviser in writing. If
the Adviser is willing to render such services, it shall notify the Trust in
writing, whereupon such Additional Series shall become subject to the terms and
conditions of this Agreement.
3. The Adviser shall furnish continuously an investment program for the
Existing Series and any Additional Series which may become subject to the terms
and conditions set forth herein (sometimes collectively referred to as the
"Series") and shall manage the investment and reinvestment of the assets of each
Series, subject at all times to the supervision of the Trustees.
4. (a) With respect to managing the investment and reinvestment of the
Series' assets, the Adviser shall provide, at its own expense:
(i) Investment research, advice and supervision;
(ii) An investment program for each Series consistent with its
investment objectives;
(iii) Implementation of the investment program for each Series
including the purchase and sale of securities; and
<PAGE>
(iv) Regular reports to the Trustees on the implementation of
each Series' investment program.
(b) The Adviser shall also provide, at its own expense:
(i) Advice and assistance on the general operations of the
Trust;
(ii) Compliance support for Trust operations;
(iii) Preparation of registration statements, amendments to
registration statements, proxy materials and other Trust
documents, to the extent required by law or directed by the
Trustees; and
(iv) Advice and assistance of Adviser's General Counsel to the
extent permitted by law and by applicable standards of
professional responsibility.
5. The Adviser shall, for all purposes herein, be deemed to be an
independent contractor.
6. The Adviser shall furnish at its own expense, or pay the expenses of
the Trust, for the following:
(a) Office facilities, including office space, furniture and
equipment;
(b) Personnel necessary to perform the functions required to manage
the investment and reinvestment of each Series' assets (including
those required for research, statistical and investment work),
and to fulfill the other functions of the Adviser hereunder;
(c) Personnel to serve without salaries from the Trust as officers or
agents of the Trust. The Adviser need not provide personnel to
perform, or pay the expenses of the Trust for, services
customarily performed for an open-end management investment
company by its national distributor, custodian, financial agent,
transfer agent, auditors and legal counsel; and
(d) Compensation and expenses, if any, of the Trustees who are also
full-time employees of the Adviser or any of its affiliates; and
(e) Any subadviser recommended by the Adviser and appointed to act on
behalf of the Trust.
<PAGE>
-3-
7. All costs and expenses not specifically referred to herein as payable
by the Adviser shall be paid by the Trust. Such expenses shall include, but
shall not be limited to, all expenses (other than those specifically referred to
as being borne by the Adviser) incurred in the operation of the Trust and any
public offering of its shares, including, among others, interest, taxes,
brokerage fees and commissions, fees of Trustees who are not employees of the
Adviser or any of its affiliates, expenses of Trustees' and shareholders'
meetings including the cost of printing and mailing proxies, insurance premiums
for fidelity and other coverage, expenses of repurchase and redemption of
shares, expenses of issue and sale of shares (to the extent not borne by its
national distributor under its agreement with the Trust), expenses of printing
and mailing stock certificates representing shares of the Trust, association
membership dues, charges of custodians, transfer agents, dividend disbursing
agents and financial agents, and bookkeeping, auditing and legal expenses. The
Trust will also pay the fees and bear the expense of registering and maintaining
the registration of the Trust and its shares with the Securities and Exchange
Commission and registering or qualifying its shares under state or other
securities laws and the expense of preparing and mailing prospectuses and
reports to shareholders. Additionally, if authorized by the Trustees, the Trust
shall pay for extraordinary expenses and expenses of a non-recurring nature
which may include, but not be limited to, the reasonable and proportionate cost
of any reorganization or acquisition of assets and the cost of legal proceedings
to which the Trust is a party.
8. For providing the services and assuming the expenses outlined herein,
the Trust agrees that the Adviser shall be compensated as follows:
(a) Within ten days after the end of each month, the Trust shall pay
the Adviser a monthly fee with respect to each Series at the
following annual rates:
Phoenix-Seneca Growth Fund 0.70%
Phoenix-Seneca Mid-Cap "EDGE(sm)" Fund 0.80%
Phoenix-Seneca Bond Fund 0.50%
Phoenix-Seneca Real Estate Securities Fund 0.75%
The amounts payable to the Adviser with respect to each Series
shall be based upon the average of the values of the net assets
of such Series as of the close of business each day, computed in
accordance with the Trust's then current registration statement.
(b) Compensation shall accrue immediately upon the effective date of
this Agreement.
<PAGE>
-4-
(c) If there is termination of this Agreement during a month, each
Series' fee for that month shall be proportionately computed upon
the average of the daily net asset values of such Series for such
partial period in such month.
(d) The Adviser agrees to reimburse the Trust for the amount, if any,
by which the total operating and management expenses for any
Series (including the Adviser's compensation, pursuant to this
paragraph, but excluding taxes, interest, costs of portfolio
acquisitions and dispositions and extraordinary expenses), for
any "fiscal year" exceed the level of expenses which such Series
is permitted to bear under the most restrictive expense
limitation (which is not waived by the state) imposed on open-end
investment companies by any state in which shares of such Series
are then qualified. Such reimbursement, if any, will be made by
the Adviser to the Trust within five days after the end of each
month. For the purpose of this subparagraph (d), the term "fiscal
year" shall include the portion of the then current fiscal year
which shall have elapsed at the date of termination of this
Agreement.
9. As to one or more of the Series, the Adviser may enter into one or
more agreements with a subadviser in which the Adviser delegates to the
subadviser the performance of any or all of the services specified herein;
provided that (a) each such agreement imposes on the subadviser all the duties
and conditions to which the Adviser is subject with respect to the covered
services; (b) each agreement meets the requirements of the Investment Company
Act of 1940, as amended (the "1940 Act") and the rules thereunder; and (c) the
Adviser shall not enter into a subadvisory agreement unless it is approved by
the Trustees and the shareholders of the affected Series, if required under the
1940 Act, prior to implementation. The Adviser shall evaluate and recommend any
such subadviser and shall remain responsible for the day-to-day management of
the Series.
10. The services of the Adviser to the Trust are not to be deemed
exclusive, the Adviser being free to render services to others and to engage in
other activities. Without relieving the Adviser of its duties hereunder and
subject to the prior approval of the Trustees and subject further to compliance
with applicable provisions of the 1940 Act, the Adviser may appoint one or more
agents to perform any of the functions and services which are to be provided
under the terms of this Agreement upon such terms and conditions as may be
mutually agreed upon among the Trust, the Adviser and any such agent.
11. The Adviser shall not be liable to the Trust or to any shareholder
of the Trust for any error of judgment or mistake of law or for any loss
suffered by the Trust or by any shareholder of the Trust in connection with the
matters to which this Agreement relates, except a
<PAGE>
-5-
loss resulting from willful misfeasance, bad faith, gross negligence or reckless
disregard on the part of the Adviser in the performance of its duties hereunder
(provided that the foregoing shall not be construed to protect the Adviser from
liability under the 1940 Act, other federal or state securities law or common
law).
12. It is understood that:
(a) Trustees, officers, employees, agents and shareholders of the
Trust are or may be "interested persons" of the Adviser as
directors, officers, stockholders or otherwise;
(b) Directors, officers, employees, agents and stockholders of the
Adviser are or may be "interested persons" of the Trust as
Trustees, officers, shareholders or otherwise; and
(c) The existence of any such dual interest shall not affect the
validity hereof or of any transactions hereunder.
13. This Agreement shall become effective with respect to the Existing
Series as of the date stated above (the "Contract Date") and with respect to any
Additional Series, on the date specified in the notice to the Trust from the
Adviser in accordance with paragraph 2 hereof that the Adviser is willing to
serve as Adviser with respect to such Additional Series. Unless terminated as
herein provided, this Agreement shall remain in full force and effect for a
period of two years following the Contract Date, and, with respect to each
Additional Series, until the next anniversary of the Contract Date following the
date on which such Additional Series became subject to the terms and conditions
of this Agreement and shall continue in full force and effect for periods of one
year thereafter with respect to each Series so long as (a) such continuance with
respect to any such Series is approved at least annually by either the Trustees
or by a "vote of the majority of the outstanding voting securities" of such
Series and (b) the terms and any renewal of this Agreement with respect to any
such Series have been approved by a vote of a majority of the Trustees who are
not parties to this Agreement or "interested persons" of any such party cast in
person at a meeting called for the purpose of voting on such approval.
Any approval of this Agreement by a vote of the holders of a "majority
of the outstanding voting securities" of any Series shall be effective to
continue this Agreement with respect to such Series notwithstanding (a) that
this Agreement has not been approved by a "vote of a majority of the outstanding
<PAGE>
-6-
voting securities" of any other Series of the Trust affected thereby and (b)
that this Agreement has not been approved by the holders of a "vote of a
majority of the outstanding voting securities" of the Trust, unless either such
additional approval shall be required by any other applicable law or otherwise.
14. The Trust may terminate this Agreement with respect to the Trust or
to any Series upon 60 days' written notice to the Adviser at any time, without
the payment of any penalty, by vote of the Trustees or, as to each Series, by a
"vote of the majority of the outstanding voting securities" of such Series. The
Adviser may terminate this Agreement upon 60 days' written notice to the Trust,
without the payment of any penalty. This Agreement shall immediately terminate
in the event of its "assignment".
15. The terms "majority of the outstanding voting securities",
"interested persons" and "assignment", when used herein, shall have the
respective meanings in the 1940 Act.
16. The Adviser hereby grants the Trust a non-exclusive license to use
"Phoenix" in its name and its business and warrants that it has the right to
grant such a license. In the event of termination of this Agreement, or at the
request of the Adviser, the Trust will eliminate all reference to "Phoenix" from
its name, and will not thereafter transact business in a name using the word
"Phoenix" in any form or combination whatsoever, or otherwise use the word
"Phoenix" as part of its name. The Trust will thereafter in all prospectuses,
advertising materials, letterheads, and other material designed to be read by
investors and prospective investors delete from its name the word "Phoenix" or
any approximation thereof. If the Adviser chooses to withdraw the Trust's right
to use the word "Phoenix", it agrees to submit the question of continuing this
Agreement to a vote of the Trust's shareholders at the time of such withdrawal.
17. Reference is hereby made to the Agreement and Declaration of Trust
dated December 18, 1995 establishing the Trust, to the Trust's Certificate of
Trust, also dated December 18, 1995, which is on file with the Office of the
Secretary of State of the State of Delaware, and to any and all amendments
thereto. The name Phoenix-Seneca Funds refers to the Trustees under said
Agreement and Declaration of Trust, as Trustees and not personally, and no
Trustee, shareholder, officer, agent or employee of the Trust shall be held to
any personal liability in connection with the affairs of the Trust; only the
trust estate under said Agreement and Declaration of Trust is liable. Without
limiting the generality of the foregoing, neither the Adviser nor any of its
officers, directors, partners, shareholders or employees shall, under any
circumstances, have recourse or cause or willingly permit recourse to be had
directly or indirectly to any personal, statutory, or other liability of any
shareholder, Trustee, officer, agent or employee of the Trust or of any
successor of the Trust, whether such liability now exists or is hereafter
incurred for claims against the trust estate.
<PAGE>
-7-
18. This Agreement shall be construed and the rights and obligations of
the parties hereunder enforced in accordance with the laws of the State of
Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
PHOENIX-SENECA FUNDS
By:__________________________________
Gail P. Seneca
President
PHOENIX INVESTMENT COUNSEL, INC.
By:__________________________________
Michael E. Haylon
President
PHOENIX-SENECA FUNDS
SUBADVISORY AGREEMENT
January , 1998
Seneca Capital Management LLC
909 Montgomery Street
San Francisco, California 94133
RE: Subadvisory Agreement
Ladies and Gentlemen:
Phoenix-Seneca Funds (the "Trust") is a diversified open-end investment company
of the series type registered under the Investment Company Act of 1940 (the
"Act"), and is subject to the rules and regulations promulgated thereunder. The
shares of the Trust are offered or may be offered in several series, including
the Phoenix-Seneca Growth Fund, the Phoenix-Seneca Mid-Cap "EDGE(sm)" Fund, the
Phoenix-Seneca Bond Fund, and the Phoenix-Seneca Real Estate Securities Fund
(collectively sometimes hereafter referred to as the "Series").
Phoenix Investment Counsel, Inc. (the "Adviser") evaluates and recommends
subadvisers for the Series and is responsible for the day-to-day management of
the Series.
1. Employment as a Subadviser. The Adviser, being duly authorized, hereby
employs Seneca Capital Management LLC (the "Subadviser") as a discretionary
series adviser to invest and reinvest the assets of the Series on the terms
and conditions set forth herein. The services of the Subadviser hereunder
are not to be deemed exclusive; the Subadviser may render services to
others and engage in other activities which do not conflict in any material
manner in the Subadviser's performance hereunder.
2. Acceptance of Employment; Standard of Performance. The Subadviser accepts
its employment as a subadviser of the Series and agrees to use its best
professional judgment to make investment decisions for the Series in
accordance with the provisions of this Agreement.
3. Services of Subadviser. The Subadviser shall provide the services set forth
herein and in Schedule A attached hereto and made a part hereof. In
providing management services to the Series, the Subadviser shall be
subject to the investment objectives, policies and restrictions of the
Trust as they apply to the Series and as set forth in the Trust's then
current Prospectus and Statement of Additional Information (as the same may
be modified from time to time), and to the Trust's Agreement and
Declaration of Trust and By-Laws, to the investment and other restrictions
set forth in the Act, the Securities Act of 1933 and the Internal Revenue
Code and the rules and regulations thereunder, and to the supervision and
control of the Trustees of the Trust (the "Trustees"). The Subadviser shall
not, without the Trust's prior approval, effect any transactions which
would cause the Series at the time of the transaction to be out of
compliance with any of such restrictions or policies.
4. Expenses. The Subadviser shall furnish at its own expense, or pay the
expenses of the Adviser of the Trust, for the following:
(a) Office facilities, including office space, furniture and equipment
utilized by its employees, in the fulfillment of Subadviser's
responsibilities hereunder;
(b) Personnel necessary to perform the functions required to manage the
investment and reinvestment of each Series' assets (including those
required for research, statistical and investment work), and to
fulfill the other functions of the Subadviser hereunder;
(c) Personnel to serve without salaries from the Trust as officers or
agents of the Trust. The Subadviser need not provide personnel to
perform, or pay the expenses of the Trust for, services customarily
performed for an open-end management investment company by its
national distributor, custodian, financial agent, transfer agent,
auditors and legal counsel; and
(d) Compensation and expenses, if any, of the Trustees who are also
full-time employees of the Subadviser.
5. Transaction Procedures. All transactions for the Series will be consummated
by payment to, or delivery by, the Custodian(s) from time to time
designated by the Trust (the "Custodian"), or such depositories or agents
as may be designated by the Custodian pursuant to its agreement with the
Trust (the "Custodian Agreement"), of all cash and/or securities due to or
from the Series. The Subadviser shall not have possession or custody of
such cash and/or securities or any responsibility or liability with respect
to such custody. The Subadviser shall advise the Custodian and confirm in
writing to the Trust all investment orders for the Series placed by it with
brokers and dealers at the time and in the manner set forth in the
Custodian Agreement and in Schedule B hereto (as amended from time to
time). The Trust shall issue to the Custodian such instructions as may be
appropriate in connection with the settlement of any transaction initiated
by the Subadviser. The Trust shall be responsible for all custodial
arrangements and the payment of all custodial charges and fees, and, upon
giving proper instructions to the Custodian, the Subadviser shall have no
responsibility or liability with respect to custodial arrangements or the
acts, omissions or other conduct of the Custodian.
6. Allocation of Brokerage. The Subadviser shall have authority and discretion
to select brokers and dealers to execute Series transactions initiated by
the Subadviser, and to select the markets on or in which the transactions
will be executed.
A. In placing orders for the sale and purchase of Series securities for
the Trust, the Subadviser's primary responsibility shall be to seek
the best execution of orders at the most favorable prices. However,
this responsibility shall not obligate the Subadviser to solicit
competitive bids for each transaction or to seek the lowest available
commission cost to the Trust, so long as the Subadviser reasonably
believes that the broker or dealer selected by it can be expected to
obtain a "best execution" market price on the particular transaction
and determines in good faith that the commission cost is reasonable in
relation to the value of the brokerage and research services (as
defined in Section 28(e)(3) of the Securities Exchange Act of 1934)
provided by such broker or dealer to the Subadviser, viewed in terms
of either that particular transaction or of the Subadviser's overall
responsibilities with respect to its clients, including the Trust, as
to which the Subadviser exercises investment discretion,
notwithstanding that the Trust may not be the direct or exclusive
beneficiary of any such services or that another broker may be willing
to charge the Trust a lower commission on the particular transaction.
B. Subject to the requirements of paragraph A above, the Adviser shall
have the right to require that transactions giving rise to brokerage
commissions, in an amount to be agreed upon by the Adviser and the
Subadviser, shall be executed by brokers and dealers that provide
brokerage or research services to the Trust or that will be of value
to the Trust in the management of its assets, which services and
relationship may, but need not, be of direct or exclusive benefit to
the Series. In addition, subject to paragraph A above, the applicable
Conduct Rules of the National Association of Securities Dealers, Inc.
and other applicable law, the Trust shall have the right to request
that transactions be executed by brokers and dealers by or through
whom sales of shares of the Trust are made.
C. The Subadviser shall not execute any transactions for the Series with
a broker or dealer that is an "affiliated person" (as defined in the
Act) of the Trust, the Subadviser or the Adviser without the prior
written approval of the Trust.
7. Proxies. The Subadviser as the Trust's authorized agent, will vote all
proxies solicited by or with respect to the issuers of securities in which
assets of the Series may be invested.
8. Fees for Services. The compensation of the Subadviser for its services
under this Agreement shall be calculated and paid by the Adviser in
accordance with the attached Schedule C. Pursuant to the Investment
Advisory Agreement between the Trust and the Adviser, the Adviser is solely
responsible for the payment of fees to the Subadviser.
9. Limitation of Liability. The Subadviser shall not be liable for any action
taken, omitted or suffered to be taken by it in its best professional
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with specific directions or instructions from the Trust,
provided, however, that such acts or omissions shall not have constituted a
breach of the investment objectives, policies and restrictions applicable
to the Series and that such acts or omissions shall not have resulted from
the Subadviser's willful misfeasance, bad faith or gross negligence, a
violation of the standard of care established by and applicable to the
Subadviser in its actions under this Agreement or a breach of its duty or
of its obligations hereunder (provided, however, that the foregoing shall
not be construed to protect the Subadviser from liability under the Act,
other federal or state securities laws or common law).
10. Confidentiality. Subject to the duty of the Subadviser and the Trust to
comply with applicable law, including any demand of any regulatory or
taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Series and the actions of
the Subadviser and the Trust in respect thereof.
11. Assignment. This Agreement shall terminate automatically in the event of
its assignment, as that term is defined in Section 2(a)(4) of the Act. The
Subadviser shall notify the Trust in writing sufficiently in advance of any
proposed change of control, as defined in Section 2(a)(9) of the Act, as
will enable the Trust to consider whether an assignment as defined in
Section 2(a)(4) of the Act will occur and to take the steps it deems
necessary.
12. Representations, Warranties and Agreements of the Subadviser. The
Subadviser represents, warrants and agrees that:
A. It is registered as an "investment adviser" under the Investment
Advisers Act of 1940 ("Advisers Act").
B. It will maintain, keep current and preserve on behalf of the Trust, in
the manner required or permitted by the Act and the Rules thereunder,
the records identified in Schedule D (as amended from time to time).
The Subadviser agrees that such records are the property of the Trust,
and will be surrendered to the Trust or to Adviser as agent of the
Trust promptly upon request of either.
C. It has a written code of ethics complying with the requirements of
Rule 17j-l under the Act and will provide the Trust and Adviser with a
copy of the code of ethics and evidence of its adoption. Subadviser
acknowledges receipt of the written code of ethics adopted by and on
behalf of the Trust (the "Code of Ethics"). Within 10 days of the end
of each calendar quarter while this Agreement is in effect, a duly
authorized compliance officer of the Subadviser shall certify to the
Trust and to Adviser that the Subadviser has complied with the
requirements of Rule 17j-l during the previous calendar quarter and
that there has been no violation of its code of ethics, or the Code of
Ethics, or if such a violation has occurred, that appropriate action
was taken in response to such violation. The Subadviser shall permit
the Trust and Adviser to examine the reports required to be made by
the Subadviser under Rule 17j-l(c)(1) and this subparagraph.
D. Reference is hereby made to the Agreement and Declaration of Trust
dated December 18, 1995 establishing the Trust, to the Trust's
Certificate of Trust, also dated December 18, 1995, which is on file
with the Office of the Secretary of State of the State of Delaware,
and to any and all amendments thereto. The name Phoenix-Seneca Funds
refers to the Trustees under said Agreement and Declaration of Trust,
as Trustees and not personally, and no Trustee, shareholder, officer,
agent or employee of the Trust shall be held to any personal liability
in connection with the affairs of the Trust; only the trust estate
under said Agreement and Declaration of Trust is liable. Without
limiting the generality of the foregoing, neither the Subadviser nor
any of its officers, directors, partners, shareholders or employees
shall, under any circumstances, have recourse or cause or willingly
permit recourse to be had directly or indirectly to any personal,
statutory, or other liability of any shareholder, Trustee, officer,
agent or employee of the Trust or of any successor of the Trust,
whether such liability now exists or is hereafter incurred for claims
against the trust estate.
The Subadviser hereby grants the Trust a non-exclusive license to use
"Seneca" in its name and its business and warrants that it has the
right to grant such a license. In the event of termination of this
Agreement, or at the request of the Subadviser, the Trust will
eliminate all reference to "Seneca" from its name, and will not
thereafter transact business in a name using the word "Seneca" in any
form or combination whatsoever, or otherwise use the word " Seneca" as
part of its name. The Trust will thereafter in all prospectuses,
advertising materials, letterheads, and other material designed to be
read by investors and prospective investors delete from its name the
word " Seneca" or any approximation thereof. If the Subadviser chooses
to withdraw the Trust's right to use the word "Seneca", it agrees to
submit the question of continuing this Agreement to a vote of the
Trust's shareholders at the time of such withdrawal.
13. Amendment. This Agreement may be amended at any time, but only by written
agreement among the Subadviser, the Adviser and the Trust, which amendment,
other than amendments to Schedules A, B, and D, is subject to the approval
of the Trustees and the Shareholders of the Fund as and to the extent
required by the Act.
14. Effective Date; Term. This Agreement shall become effective on the date set
forth on the first page of this Agreement, and shall continue in effect
thereafter only so long as its continuance has been specifically approved
at least annually by the Trustees in accordance with Section 15(a) of the
Act, and by the majority vote of the disinterested Trustees in accordance
with the requirements of Section 15(c) thereof.
15. Termination. This Agreement may be terminated by any party, without
penalty, immediately upon written notice to the other parties in the event
of a breach of any provision thereof by a party so notified, or otherwise,
upon sixty (60) days' written notice to the other parties, but any such
termination shall not affect the status, obligations or liabilities of any
party hereto to the other parties.
16. Applicable Law. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter enacted,
as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the
Commonwealth of Delaware.
17. Severability. If any term or condition of this Agreement shall be invalid
or unenforceable to any extent or in any application, then the remainder of
this Agreement shall not be affected thereby, and each and every term and
condition of this Agreement shall be valid and enforced to the fullest
extent permitted by law.
<PAGE>
PHOENIX-SENECA FUNDS
By:
----------------------
Gail P. Seneca
President
PHOENIX INVESTMENT COUNSEL, INC.
By:
-----------------------
Michael E. Haylon
President
ACCEPTED:
SENECA CAPITAL MANAGEMENT LLC
By:
--------------------------
Gail P. Seneca
President
SCHEDULES: A. Subadviser Functions
B. Operational Procedures
C. Fee Schedule
D. Record Keeping Requirements
<PAGE>
SCHEDULE A
----------
SUBADVISER FUNCTIONS
With respect to managing the investment and reinvestment of each
Series' assets, the Subadviser shall provide, at its own expense:
(a) An investment program for the Series consistent with its investment
objectives based upon the development, review and adjustment of
buy/sell strategies approved from time to time by the Trustees and the
Adviser;
(b) Implementation of the investment program for the Series;
(c) Quarterly reports, in form and substance acceptable to the Adviser and
the Trustees, with respect to: i) compliance with the Code of Ethics
and the Subadviser's code of ethics; ii) compliance with procedures
adopted from time to time by the Trustees of the Trust relative to
securities eligible for resale under Rule 144A under the Securities
Act of 1933; iii) diversification of Series assets in accordance with
the then prevailing Prospectus and Statement of Additional Information
pertaining to the Series and governing laws; iv) compliance with
governing restrictions relating to the fair valuation of securities
for which market quotations are not readily available or considered
"illiquid" for the purposes of complying with the Series' limitation
on acquisition of illiquid securities; v) the implementation of the
Series' investment program, including, without limitation, analysis of
Series performance; and, vi) any and all other reports reasonably
requested by the Adviser or the Trustees;
(d) Attendance by appropriate representatives of the Subadviser at
meetings requested by the Adviser or Trustees at such time(s) and
location(s) as reasonably requested by the Adviser or Trustees; and
(e) Participation, overall assistance and support in marketing the Series,
including, without limitation, meetings with pension fund
representatives, broker/dealers who have a sales agreement with the
Trust's Distributor, and other parties requested by the Adviser or the
Trustees.
<PAGE>
SCHEDULE B
----------
OPERATIONAL PROCEDURES
In order to minimize operational problems, it will be necessary for a flow of
information to be supplied to Investors Fiduciary Trust Company, currently the
custodian for the Trust, or any other person serving as custodian for the Trust
(the "Custodian").
The Subadviser must furnish the Custodian with daily information as to executed
trades, or, if no trades are executed, with a report to that effect, no later
than 5 p.m. (Eastern Standard time) on the day of the trade (confirmation
received from broker). The necessary information can be sent via facsimile
machine to the Custodian. Information provided to the Custodian shall include
the following:
1. Purchase or sale;
2. Security name;
3. CUSIP number (if applicable);
4. Number of shares and sales price per share;
5. Executing broker;
6. Settlement agent;
7. Trade date;
8. Settlement date;
9. Aggregate commission or if a net trade;
10. Interest purchased or sold from interest bearing security;
11. Other fees;
12. Net proceeds of the transaction;
13. Exchange where trade was executed; and
14. Identified tax lot (if applicable).
When opening accounts with brokers for, and in the name of, the Trust, the
account must be a cash account. No margin accounts are to be maintained in the
name of the Trust. Delivery instructions are as specified by the Custodian. The
Custodian will supply the Subadviser daily with a cash availability report. This
will normally be done by telex so that the Subadviser will know the amount
available for investment purposes.
<PAGE>
SCHEDULE C
----------
SUBADVISORY FEE
For services provided to the Trust, the Adviser will pay to the
Subadviser, on or before the 12th day of each month, a fee, payable in arrears,
at the following annual rates:
Phoenix-Seneca Growth Fund 0.35%
Phoenix-Seneca Mid-Cap "EDGE(sm)" Fund 0.40%
Phoenix-Seneca Bond Fund 0.25%
Phoenix-Seneca Real Estate Securities Fund 0.375%
The fees shall be prorated for any month during which this Agreement
is in effect for only a portion of the month. In computing the fee to be paid to
the Subadviser, the net asset value of the Fund and each Series shall be valued
as set forth in the then current registration statement of the Fund.
<PAGE>
SCHEDULE D
----------
RECORDS TO BE MAINTAINED BY THE SUBADVISER
1. (Rule 31a-1(b)(5)) A record of each brokerage order, and all series
purchases and sales, given by the Subadviser on behalf of the Trust
for, or in connection with, the purchase or sale of securities, whether
executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modifications or
cancellations thereof; C. The time of entry or cancellation; D. The
price at which executed; E. The time of receipt of a report of
execution; and F. The name of the person who placed the order on behalf
of the Trust.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within
ten (10) days after the end of the quarter, showing specifically the
basis or bases upon which the allocation of orders for the purchase and
sale of securities to named brokers or dealers was effected, and the
division of brokerage commissions or other compensation on such
purchase and sale orders. Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Trust by brokers or
dealers.
(ii) The supplying of services or benefits by brokers or
dealers to:
(a) The Trust,
(b) The Adviser,
(c) The Subadviser, and
(d) Any person other than the foregoing.
(iii) Any other consideration other than the technical
qualifications of the brokers and dealers as such.
B. Shall show the nature of the services or benefits made available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The name of the person responsible for making the
determination of such allocation and such division of
brokerage commissions or other compensation.
3. (Rule 31a-(b)(10)) A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the
purchase or sale of securities. Where an authorization is made by a
committee or group, a record shall be kept of the names of its members
who participate in the authorization. There shall be retained as part
of this record: any memorandum, recommendation or instruction
supporting or authorizing the purchase or sale of securities and such
other information as is appropriate to support the authorization.*
4. (Rule 31a-1(f)) Such accounts, books and other documents as are
required to be maintained by registered investment advisers by rule
adopted under Section 204 of the Investment Advisers Act of 1940, to
the extent such records are necessary or appropriate to record the
Subadviser's transactions for the Trust.
- --------------------------------------
* Such information might include: current financial information, annual and
quarterly reports, press releases, reports by analysts and from brokerage firms
(including their recommendation; i.e., buy, sell, hold) or any internal reports
or Subadviser review.
Ex 99.B6
UNDERWRITING AGREEMENT
THIS AGREEMENT made as of this ______ day of _________________, 1998,
by and between the PHOENIX-SENECA FUNDS, a Delaware business trust having a
place of business located at 909 Montgomery Street, San Francisco, California
94133 (the "Fund") and Phoenix Equity Planning Corporation, a Connecticut
corporation having a place of business located at 100 Bright Meadow Boulevard,
Enfield, Connecticut (the "Underwriter").
WITNESSETH THAT:
1. The Fund hereby grants to the Underwriter the right to purchase shares of
beneficial interest of each class of each series of the Fund established and
designated as of the date hereof and of any additional series and classes
thereof which the Board of Directors or Board of Trustees, as applicable
("Trustees") may establish and designate during the term of this Agreement
(called the "Series" and "Classes", respectively) and to resell shares of
various Classes, as applicable, of each Series (collectively called the
"Shares") as principal and not as agent. The Underwriter accepts such
appointment and agrees to render the services described in this Agreement for
the compensation herein provided.
2. The Underwriter's right to purchase Shares shall be exclusive except that
the terms of this Agreement shall not apply to Shares issued or transferred:
a) pursuant to an offer of exchange exempted under Section 22(d) of
the Investment Company Act of 1940, as amended (the "Act") by
reason of the fact that said offer is permitted by Section 11 of
the Act, including any offer made pursuant to clause (1) or (2) of
Section 11(b);
b) upon the sale to a registered unit investment trust which is the
issuer of periodic payment plan certificates the net proceeds of
which are invested in redeemable securities;
c) pursuant to an offer made solely to all registered holders of
Shares, or all registered holders of Shares of any Series,
proportionate to their holdings or proportionate to any cash
distribution made to them by the Fund (subject to appropriate
qualifications designed solely to avoid issuance of fractional
securities);
d) in connection with any merger or consolidation of the Fund or of
any Series with any other investment company or the acquisition by
the Fund, by purchase or otherwise, of any other investment
company;
1
<PAGE>
e) pursuant to sales exempted from Section 22(d) of the Act, by rule
or regulation or order of the Securities and Exchange Commission
as provided in the then current registration statement of the
Fund; or
f) in connection with the reinvestment by Fund shareholders of
dividend and capital gains distributions.
3. The "Net Asset Value" and the "Public Offering Price" of the Shares as
referred to in this Agreement shall be computed in accordance with the
provisions of the then current registration statement of the Fund. The
Underwriter shall be notified promptly by the Fund of such computations.
4. The Underwriter has and shall enter into written sales agreements with
broker/dealers ("dealers") and with banks as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, as amended, (Exchange Act) that are not
required to register as a broker/dealer under the Exchange Act or the
regulations thereunder ("Banks"). Such sales agreements shall provide that
dealers or Banks shall use their best efforts to promote the sale of Shares.
Such sales agreements shall include such terms and conditions as Underwriter may
determine not inconsistent with this Agreement; provided, however, that such
sales agreements shall specify a) that the dealer is registered as a
broker/dealer under the Exchange Act and a member of the National Association of
Securities Dealers, Inc. or, in the alternative, that the Bank is exempt from
broker/dealer registration under the Exchange Act; and b) that such dealers and
Banks agree that they will comply with all applicable state, and federal laws
and the rules and regulations of applicable regulatory agencies.
5. Each day the Underwriter shall have the right to purchase from the Fund, as
principal, the amount of Shares needed to fill unconditional orders for such
Shares received by the Underwriter from dealers, Banks, or investors, but no
more than the Shares needed, at a price equal to the Net Asset Value of the
Shares. Any purchase of Shares by the Underwriter under this Agreement shall be
subject to reasonable adjustment for clerical errors, delays and errors of
transmission and cancellation of orders.
6. With respect to transactions other than with dealers or Banks, the
Underwriter will sell Shares only at the Public Offering Price then in effect,
except to the extent that sales at less than the Public Offering Price may be
allowed by the Act, any rule or regulation promulgated thereunder or by order of
the Securities and Exchange Commission, provided, however, that any such sales
at less than the Public Offering Price shall be consistent with the terms of the
then current registration statement of the Fund. The Underwriter will sell at
Net Asset Value Shares of any Classes which are offered by the then current
registration statement or prospectus of the Fund for sale at such Net Asset
Value or at Net Asset Value with a contingent deferred sales charge ("CDSC
Shares"). The Underwriter shall receive from the Fund all contingent deferred
sales charges applied on redemptions of CDSC Shares.
2
<PAGE>
7. Sales at a discount from the Public Offering Price shall be made in
accordance with the terms and conditions of the terms of the current
registration statement of the Fund allowing such discounts. Such discounts shall
not exceed the difference between the Net Asset Value and the Public Offering
Price; however, the Underwriter may offer compensation in excess of the
difference between the Net Asset Value and the Public Offering Price, at its
discretion and from its own profits and resources, and only as described in the
current registration statement of the Fund. With respect to sales of CDSC
Shares, the Underwriter, in accordance with the terms of the current
registration statement of the Fund, shall pay dealers a commission on such sales
from its profits and resources.
8. As reimbursement for expenditures made in connection with providing certain
distribution-related services, the Underwriter may receive from the Fund a
distribution service fee under the terms and conditions set forth in the Fund's
distribution plan adopted under Rule 12b-1 under the Investment Company Act of
1940, as amended, as the plan may be amended from time to time and subject to
any further limitations on such fees as the Trustees may impose. The Underwriter
may receive from the Fund a service fee to be retained by the Underwriter as
compensation for providing services to shareholders of the Fund or to be paid to
dealers and Banks for providing services to their clients who are also
shareholders of the Fund.
9. The Fund shall furnish the Underwriter with copies of its organizational
documents, as amended from time to time. The Fund shall also furnish the
Underwriter with any other documents of the Fund which will assist the
Underwriter in the performance of its duties hereunder.
10. The Underwriter agrees to use its best efforts (in states where it may
lawfully do so) to obtain from investors unconditional orders for Shares
authorized for issue by the Fund and registered under applicable Federal
securities laws, and, so long as it does so, nothing herein contained shall
prevent the Underwriter from entering into similar arrangements with other
registered investment companies. The Underwriter may, in the exercise of its
discretion, refuse to accept orders for Shares from any person.
11. Upon receipt by the Fund of a purchase order from the Underwriter,
accompanied by proper delivery instructions, the Fund shall, as promptly as
practicable thereafter, cause evidence of ownership of Shares to be delivered as
indicated in such purchase order. Payment for such Shares shall be made by the
Underwriter to the Fund in a manner acceptable to the Fund, provided that the
Underwriter shall pay for such Shares no later than the third business day after
the Underwriter shall have contracted to purchase such shares.
12. In connection with offering for sale and selling Shares, the Fund
authorizes the Underwriter to give only such information and to make only such
statements or representations as are contained in the then current registration
statement of the Fund. The Underwriter shall be responsible for the approval and
filing of sales material as required under SEC and NASD regulations.
3
<PAGE>
13. The Fund agrees to pay the following expenses:
a) the cost of mailing stock certificates representing Shares;
b) fees and expenses (including legal expenses) of registering and
maintaining registrations of the Fund and of each Series and Class
with the Securities and Exchange Commission including the
preparation and printing of registration statements and
prospectuses for filing with said Commission;
c) fees and expenses (including legal expenses) incurred in
registering and qualifying Shares for sale with any state
regulatory agency and fees and expenses of maintaining, renewing,
increasing or amending such registrations and qualifications;
d) the expense of any issue or transfer taxes upon the sale of Shares
to the Underwriter by the Fund;
e) the cost of preparing and distributing reports and notices to
shareholders. ; and
f) fees and expenses of the transfer agent, including the cost of
preparing and mailing notices to shareholders pertaining to
transactions with respect to such shareholders accounts.
14. The Underwriter agrees to pay the following expenses:
a) all expenses of printing prospectuses and statements of additional
information used in connection with the sale of Shares and
printing and preparing all other sales literature;
b) all fees and expenses in connection with the qualification of the
Underwriter as a dealer in the various states and countries;
c) the expense of any stock transfer tax required in connection with
the sale of Shares by the Underwriter as principal to dealers or
to investors; and
d) all other expenses in connection with offering for sale and the
sale of Shares which have not been herein specifically allocated
to the Fund.
15. The Fund hereby appoints the Underwriter its agent to receive requests to
accept the Fund's offer to repurchase Shares upon such terms and conditions as
may be described in the Fund's then current registration statement. The agency
granted in this paragraph 15 is terminable at the discretion of the Fund. As
compensation for acting as such agent and as part of the consideration for
acting as underwriter, Underwriter shall receive from the Fund all contingent
deferred sales charges imposed upon the redemption of Shares. Whether and to
what extent a
4
<PAGE>
contingent deferred sales charge will be imposed shall be determined in
accordance with, and in the manner set forth in, the Fund's prospectus.
16. The Fund agrees to indemnify and hold harmless the Underwriter, its
officers and directors and each person, if any, who controls the Underwriter
within the meaning of section 15 of the Securities Act of 1933, as amended,
against any losses, claims, damages, liabilities and expenses (including the
cost of any legal fees incurred in connection therewith) which the Underwriter,
its officers, directors or any such controlling person may incur under said Act,
under any other statute, at common law or otherwise, arising out of or based
upon
a) any untrue statement or alleged untrue statement of a material
fact contained in the Fund's registration statement or prospectus
(including amendments and supplements thereto), or
b) any omission or alleged omission to state a material fact required
to be stated in the Fund's registration statement or prospectus or
necessary to make the statements in either not misleading,
provided, however, that insofar as losses, claims, damages,
liabilities or expenses arise out of or are based upon any such
untrue statement or omission or alleged untrue statement or
omission made in reliance and in conformity with information
furnished to the Fund by the Underwriter for use in the Fund's
registration statement or prospectus, such indemnification is not
applicable. In no case shall the Fund indemnify the Underwriter or
its controlling persons as to any amounts incurred for any
liability arising out of or based upon any action for which the
Underwriter, its officers and directors or any controlling person
would otherwise be subject to liability by reason of willful
misfeasance, bad faith, or gross negligence in the performance of
its duties or by reason of the reckless disregard of its
obligations and duties under this Agreement.
17. The Underwriter agrees to indemnify and hold harmless the Fund, its officers
and trustees and each person, if any, who controls the Fund within the meaning
of Section 15 of the Securities Act of 1933, as amended, against any losses,
claims, damages, liabilities and expenses (including the cost of any legal fees
incurred in connection therewith) which the Fund, its officers, trustees or any
such controlling person may incur under said Act, under any other statute, at
common law or otherwise arising out of the acquisition of any shares by any
person which
a) may be based upon any wrongful act by the Underwriter or any of
its employees or representatives, or
b) may be based upon any untrue statement or alleged untrue statement
of a material fact contained in the Fund's registration statement,
prospectus (including amendments and supplements thereto) or sales
material, or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission
was
5
<PAGE>
made in reliance upon information furnished or confirmed in writing
to the Fund by the Underwriter.
18. It is understood that:
a) trustees, officers, employees, agents and shareholders of the Fund
are or may be interested persons, as that term is defined in the
Act ("Interested Persons"), of the Underwriter as directors,
officers, stockholders or otherwise;
b) directors, officers, employees, agents and stockholders of the
Underwriter are or may be Interested Persons of the Fund as
trustees, officers, shareholders or otherwise;
c) the Underwriter may be an Interested Person of the Fund as
shareholder or otherwise; and
d) the existence of any such dual interest shall not offset the
validity hereof or of any transactions hereunder.
19. The Fund may terminate this Agreement by 60 days written notice to the
Underwriter at any time, without the payment of any penalty, by vote of the
Trustees or by a vote of a majority of the outstanding voting securities, as
that term is defined in the Act, of the Fund. The Underwriter may terminate this
Agreement by 60 days written notice to the Fund, without the payment of any
penalty. This Agreement shall immediately terminate in the event of its
assignment, as that term is defined in the Act.
20. Subject to prior termination as provided in paragraph 19, this Agreement
shall continue in force for one year from the date of execution and from year to
year thereafter so long as the continuance after such one year period shall be
specifically approved at least annually by vote of the Trustees, or by a vote of
a majority of the appropriate class of outstanding voting securities, as that
term is defined in the Act, of the Fund. Additionally, each annual renewal of
this Agreement must be approved by the vote of a majority of the Trustees who
are not parties to the Agreement or Interested Persons of any such party, cast
in person at a meeting of the Trustees called for the purpose of voting on such
approval.
21. Reference is hereby made to the Agreement and Declaration of Trust dated
December 18, 1995 establishing the Fund, to the Fund's Certificate of Trust,
also dated December 18, 1995, which is on file with the Office of the Secretary
of State of the State of Delaware, and to any and all amendments thereto. The
name Phoenix-Seneca Funds refers to the Trustees under said Declaration of
Trust, as Trustees and not personally, and no Trustee, shareholder, officer,
agent or employee of the Fund shall be held to any personal liability in
connection with the affairs of the Fund; only the trust estate under said
Agreement and Declaration of Trust is liable.
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<PAGE>
Without limiting the generality of the foregoing, neither the Subadviser nor any
of its officers, directors, partners, shareholders or employees shall, under any
circumstances, have recourse or cause or willingly permit recourse to be had
directly or indirectly to any personal, statutory, or other liability of any
shareholder, Trustee, officer, agent or employee of the Fund or of any successor
of the Fund, whether such liability now exists or is hereafter incurred for
claims against the trust estate.
22. This Agreement shall become effective upon the date first set forth above.
This Agreement shall be governed by the laws of the State of Connecticut and
shall be binding on the successors and assigns of the parties to the extend
permitted by law.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above.
PHOENIX-SENECA FUNDS
By:_________________________________
PHOENIX EQUITY PLANNING CORPORATION
By:_________________________________
7
<PAGE>
Ex. 99.B9.A
TRANSFER AGENCY AND SERVICE AGREEMENT
between
SENECA FUNDS
and
PHOENIX EQUITY PLANNING CORPORATION
<PAGE>
AGREEMENT made as of the 18th day of October, 1997, by and between the
SENECA FUNDS, a Delaware business trust, having its principal office and place
of business at 909 Montgomery Street, San Francisco, California 94133
(hereinafter the "Fund"), and PHOENIX EQUITY PLANNING CORPORATION, a Connecticut
corporation with an office and principal place of business located at 100 Bright
Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200 (hereinafter
the "Transfer Agent").
W I T N E S S E T H:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets (each such series, together with all other series subsequently
established by the Fund and made subject to this Agreement in accordance with
Article 10, being herein referred to as a "Portfolio", and collectively as the
"Portfolios"); and
WHEREAS, the Fund on behalf of the Portfolios desires to appoint Transfer
Agent as its transfer agent, dividend disbursing agent and agent in connection
with certain other activities, and Transfer Agent desires to accept such
appointment; and
WHEREAS, the parties wish to set forth herein their mutual understandings
and agreements.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency whereof being hereby acknowledged and affirmed, the parties hereto
agree as follows:
Article 1 Terms of Appointment; Duties of Transfer Agent
1.01 Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints Transfer Agent to act as, and Transfer Agent
agrees to act as, transfer agent for the authorized and issued shares of
beneficial interest of the Fund ("Shares"), dividend disbursing agent and agent
in connection with any accumulation, open-account or similar plans provided to
the shareholders of the Fund ("Shareholders") as set out in the currently
effective registration statement of the Fund (the prospectus and statement of
additional information portions of such registration statement being referred to
as the "Prospectus"), including, without limitation, any periodic investment
plan or periodic withdrawal program.
1.02 Transfer Agent agrees that it will perform the following services
pursuant to this Agreement:
(a) In accordance with procedures established from time to time by
agreement between the Fund and Transfer Agent, Transfer Agent shall:
i) Receive for acceptance orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to
the Custodian appointed from time to time by the Trustees of the
Fund (which entity or entities, as the case may be, shall be
referred to as the "Custodian");
ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
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<PAGE>
iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor to
the Custodian;
iv) In respect to the transactions in items (i), (ii) and (iii) above,
execute transactions directly with broker-dealers authorized by
the Fund who shall thereby be deemed to be acting on behalf of the
Fund;
v) At the appropriate time as and when it receives moneys paid to it
by any Custodian with respect to any redemption, pay over or cause
to be paid over in the appropriate manner such moneys as
instructed by the redeeming Shareholders;
vi) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
vii) Prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of each applicable Portfolio;
viii) Issue replacement certificates for those certificates alleged to
have been lost, stolen or destroyed upon receipt by the Transfer
Agent of indemnification satisfactory to the Transfer Agent and
the Fund, provided that the Transfer Agent, at its option, may
issue replacement certificates in place of mutilated stock
certificates upon presentation thereof and without such indemnity;
ix) Maintain records of account for and advise each Portfolio and
its respective Shareholders as to the foregoing; and
x) Record the issuance of Shares and maintain pursuant to Rule
17Ad-10(e) under the Securities Exchange Act of 1934, a record of
the total number of Shares which are authorized, issued and
outstanding based upon data provided to it by each Portfolio. The
Transfer Agent shall also provide on a regular basis to each
Portfolio the total number of Shares which are authorized, issued
and outstanding and, except as otherwise provided in this
Agreement, shall have no obligation, when recording the issuance
of Shares, to monitor the issuance of such Shares or to take
cognizance of any laws relating to the issue or sale of such
Shares, which functions shall be the sole responsibility of the
Fund or its agents other than Transfer Agent acting pursuant to
this Agreement.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a), Transfer Agent shall: (i) perform all of the customary
services of a transfer agent, dividend disbursing agent and, as relevant, agent
in connection with accumulation, open-account or similar plans (including
without limitation any periodic investment plan or periodic withdrawal program),
including, but not limited to, maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing proxies, receiving and tabulating proxies,
mailing Shareholder reports and Prospectuses to current Shareholders,
withholding taxes on U.S. resident and non-resident alien accounts, preparing
and filing U.S. Treasury Department Forms 1099 and other appropriate forms
required with respect to dividends and distributions by federal and State taxing
authorities for all Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and redemptions of
Shares and other confirmable transactions in Shareholder accounts, preparing and
mailing activity statements for Shareholders, and providing Shareholder account
information; (ii) provide a system which will enable the Fund to monitor the
total number of Shares sold in each State; and (iii) open and maintain one or
more non-interest bearing deposit accounts as agent for the Fund, with such
financial
2
<PAGE>
institution(s) as may be designated by it or by the Fund in writing (such
accounts, however, to be in the name of Transfer Agent and subject only to its
draft or order), into which accounts the moneys received for the account of the
Fund and moneys for payment of dividends, distributions, redemptions or other
disbursements provided for hereunder will be deposited, and against which
checks, drafts and payment orders will be drawn.
(c) In addition, the Fund or its agent shall (i) identify to Transfer
Agent inwriting those transactions and assets to be treated as exempt from blue
sky reporting for each State, (ii) as to each Portfolio, identify to Transfer
Agent those States in which shares of that Portfolio have not been registered or
qualified for sale or in which a limited number of such shares have been so
registered or qualified, stating the number of such shares; (iii) promptly
advise Transfer Agent as to the suspension, termination, or withdrawal of any
such registration or qualification in any State or any change in the number of
shares so registered or qualified in any state; and (iv) verify the
establishment of transactions for each State on the system prior to activation
and thereafter monitor the daily activity for each State. The responsibility of
Transfer Agent for the Fund's blue sky State registration status is solely
limited to the initial establishment of transactions subject to blue sky
compliance by the Fund, the reporting of such transactions to the Fund as
provided above, and the establishment of instructions sufficient to prevent the
execution of orders to purchase shares in certain States specified by the Fund
or its agent, subject to override upon the express authorization of the Fund or
its agent.
(d) Procedures as to who shall provide certain of the services in
Article 1 may be established from time to time by agreement between the Fund and
Transfer Agent. Unless so established the Transfer Agent shall provide each of
such services.
(e) The Transfer Agent shall provide additional services on behalf of
the Fund (e.g., escheatment services) which may be agreed upon in writing
between the Fund and the Transfer Agent.
Article 2 Fees and Expenses
2.01 In consideration of the services provided by the Transfer Agent
pursuant to this Agreement, the Fund agrees on behalf of each of the Portfolios
to pay Transfer Agent an annual maintenance fee for each Shareholder account as
set forth in Schedule A attached hereto and made a part hereof. Annual
maintenance fees and out-of-pocket expenses and advances identified under
Section 2.02 below may be changed from time to time subject to mutual written
agreement between the Fund and Transfer Agent. Nothing herein shall preclude the
assignment of all or any portion of the foregoing fees and expense
reimbursements to any sub-agent contracted with by Transfer Agent.
2.02 In addition to the fee paid under Section 2.01 above, the Fund
agrees on behalf of each of the Portfolios to reimburse Transfer Agent for
out-of-pocket expenses or advances reasonably incurred by Transfer Agent in
performing its duties hereunder for the items set out in Schedule A attached
hereto. In addition, any other expenses incurred by Transfer Agent at the
request or with the consent of any Portfolio, will be reimbursed by the
Portfolio requesting the same.
2.03 The Fund agrees on behalf of each of the Portfolios to pay all
fees and reimbursable expenses within five days following the mailing of the
respective billing notice. The above fees will be charged against the Fund's
Custodian checking account five (5) days after the invoice is transmitted to the
Fund. Postage for mailing of dividends, proxies, Fund reports and other mailings
to all Shareholder accounts shall be advanced to Transfer Agent at least seven
(7) days prior to the mailing date of such materials.
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<PAGE>
Article 3 Representations and Warranties of Transfer Agent
The Transfer Agent represents and warrants to the Fund that:
3.01 It is a corporation organized and existing and in good standing
under the laws of the State of Connecticut and is duly qualified to carry on its
business therein, in the State of California, and in the Commonwealth of
Massachusetts.
3.02 It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
3.03 All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement.
3.04 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
3.05 It is and shall continue to be a duly registered transfer agent
pursuant to Section 17A(c)(2) of the Securities Exchange Act of 1934, and shall
perform its obligations under this Agreement in compliance with applicable law.
Article 4 Representations and Warranties of Fund
The Fund represents and warrants to Transfer Agent that:
4.01 All proceedings required under its Agreement and Declaration of
Trust to enter into and perform this Agreement have been undertaken.
4.02 It is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended.
4.03 A registration statement under the Securities Act of 1933, as
amended, is currently effective for each of the Portfolios of the Fund and will
remain effective, and appropriate state securities law filings have been made
and will continue to be made, with respect to all Shares being offered for sale.
Article 5 Data Access and Proprietary Information
5.01 The Fund acknowledges that certain data bases, computer programs,
screen formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Transfer Agent as part of the Fund's
ability to access certain Fund-related data ("Customer Data") maintained by the
Transfer Agent on data bases under the control and ownership of the Transfer
Agent or other third party ("Data Access Services") constitute copyrighted,
trade secret, or other proprietary information (collectively, "Proprietary
Information") of substantial value to the Transfer Agent or other third party.
In no event shall Proprietary Information be deemed Customer Data. The Fund
agrees to treat all Proprietary Information as proprietary to the Transfer Agent
and further agrees that it shall not divulge any Proprietary Information to any
person or organization except as may be provided hereunder. Without limiting the
foregoing, the Fund agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be agreed to
by the parties hereto and solely in accordance with the Transfer
Agent's applicable user documentation;
4
<PAGE>
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of
the Proprietary Information, and if such access is inadvertently
obtained, to inform the Transfer Agent in a timely manner of such
fact and dispose of such information in accordance with the
Transfer Agent's instructions;
(d) to refrain from causing or allowing third-party data acquired
hereunder from being retransmitted to any other computer facility
or other location, except with the prior written consent of the
Transfer Agent;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties; and
(f) to honor all reasonable written requests made by the Transfer
Agent to protect at the Transfer Agent's expense the rights of the
Transfer Agent in Proprietary Information at common law, under
federal copyright law and under other federal or state law.
Each party shall take reasonable efforts to advise its employees of
their obligations pursuant to this Article 5. The obligations of this Article
shall survive any earlier termination of this Agreement.
5.02 If the Fund notifies the Transfer Agent that any of the Data Access
Services do not operate in material compliance with the most recently issued
user documentation for such services, the Transfer Agent shall endeavor in a
timely manner to correct such failure. Organizations from which the Transfer
Agent may obtain certain data included in the Data Access Services are solely
responsible for the contents of such data and the Fund agrees to make no claim
against the Transfer Agent arising out of the contents of such third-party data,
including, but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND
ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH
ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE TRANSFER AGENT EXPRESSLY
DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
5.03 If the transactions available to the Fund include the ability to
originate electronic instructions to the Transfer Agent in order to (i) effect
the transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information, then in such event the Transfer Agent shall be
entitled to rely on the validity and authenticity of such instruction without
undertaking any further inquiry as long as such instruction is undertaken in
conformity with security procedures agreed to by the parties hereto from time to
time.
Article 6 Indemnification
6.01 The Transfer Agent shall not be responsible for, and the Fund on
behalf of the applicable Portfolio shall indemnify and hold Transfer Agent, and
its agents and subcontractors harmless from and against, any and all losses,
damages, costs, charges, reasonable counsel fees, payments, expenses and
liability arising out of or attributable to:
(a) All actions of Transfer Agent or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that
such actions are taken in good faith and without negligence or
willful misconduct.
5
<PAGE>
(b) The breach of any representation or warranty of the Fund
hereunder.
(c) The reliance on or use by the Transfer Agent or its agents or
subcontractors of information, records and documents which (i) are
received by Transfer Agent or its agents or subcontractors, and
(ii) have been prepared, maintained or performed by the Fund or
any other person or firm on behalf of the Fund including but not
limited to any previous transfer agent or registrar.
(d) The reliance on, or the carrying out by Transfer Agent or its
agents or subcontractors of any instructions or requests of the
Fund.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws
or regulations of any State that such Shares be registered in such
State or in violation of any stop order or other determination or
ruling by any federal agency or any State with respect to the
offer or sale of such Shares in such State, except to the extent
Transfer Agent has breached any of its obligations hereunder.
6.02 At any time the Transfer Agent may apply to any officer of the
Fund for instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by Transfer Agent
under this Agreement, and Transfer Agent and its agents or subcontractors shall
not be liable and shall be indemnified by the Fund on behalf of the applicable
Portfolio for any action taken or omitted by it in reliance upon such
instructions or in good faith, reasonable reliance upon the opinion of such
counsel. The Transfer Agent, its agents and subcontractors shall be protected
and indemnified in acting upon any paper or document furnished by or on behalf
of the Fund, reasonably believed to be genuine and to have been signed by the
proper person or persons, or in good faith, reasonable reliance on any
instruction, information, data, records or documents provided Transfer Agent or
its agents or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to have notice
of any change of authority of any person, until receipt of written notice
thereof from the Fund. Transfer Agent, its agents and subcontractors shall also
be protected and indemnified in recognizing stock certificates which are
reasonably believed to bear the proper manual or facsimile signatures of the
officers of the Fund, and the proper countersignature of any former transfer
agent or registrar, or of a co-transfer agent or co-registrar.
6.03 The Fund shall not be responsible for, and Transfer Agent shall
indemnify and hold the Fund and each of its Portfolios harmless from and
against, any and all losses, damages, costs, charges (including reasonable
attorneys fees), payments, expenses and liabilities arising out of or
attributable to:
(a) The costs and expenses of termination of the Transfer Agency and
Service Agreement by and between the Fund and Investors Fiduciary
Trust Company dated as of February 29, 1996;
(b) The bad faith, negligence or willful misconduct of Transfer Agent
or its agents or subcontractors in taking any action pursuant to
this Agreement;
(c) The breach of any representation or warranty of Transfer Agent
hereunder; and
(d) The costs and expenses of reestablishing the transfer agent and
other services provided by Transfer Agent hereunder in the event
of the Fund's termination of this Agreement pursuant to Section
9.02(f) hereof.
6.04 In order that the indemnification provisions contained in this
Article 6 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party
6
<PAGE>
advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
6.05 Transfer Agent hereby expressly acknowledges that recourse against
the Fund, if any, shall be subject to those limitations provided by governing
law and the Agreement and Declaration of Trust of the Fund, as applicable, and
agrees that obligations assumed by the Fund hereunder shall be limited in all
cases to the applicable Portfolio and its respective assets. Transfer Agent
shall not seek satisfaction of any such obligation from the shareholders or any
shareholder of the Fund, nor shall the Transfer Agent seek satisfaction of any
obligations from the Trustees or any individual Trustee of the Fund.
Article 7 Standard of Care
7.01 The Transfer Agent shall at all times act in good faith and agrees
to use its best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are caused by
its negligence, bad faith, or willful misconduct or that of its employees, or
breach of this Agreement.
Article 8 Covenants
8.01 The Fund on behalf of each of the Portfolios shall promptly furnish
to Transfer Agent the following:
(a) A certified copy of the resolution of its Trustees authorizing the
appointment of Transfer Agent and the execution and delivery of
this Agreement.
(b) A copy of the Declaration of Trust and By-Laws, if any, of the
Fund and all amendments thereto.
8.02 The Transfer Agent hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Fund for safekeeping of
stock certificates, check forms and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
8.03 The Transfer Agent shall keep records relating to the services to
be performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, Transfer Agent agrees that all such records prepared
or maintained by Transfer Agent relating to the services to be performed by
Transfer Agent hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and Rules, and
will be surrendered promptly to the Fund upon and in accordance with its
request.
8.04 The parties agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or received
pursuant to the negotiation or the carrying out of this Agreement shall remain
confidential, and shall not be voluntarily disclosed to any other person, except
as may be required by law.
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<PAGE>
8.05 In case of any requests or demands for the inspection of the
Shareholder records, Transfer Agent will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. Transfer Agent reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel that it
may be held liable for the failure to exhibit the Shareholder records to such
person.
Article 9 Termination
9.01 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
9.02 This Agreement may be terminated by the Fund as soon as practicable
after the occurrence at any time of any of the following events:
(a) any interruption or cessation of operations by Transfer Agent or
its permitted assigns that materially interferes with the business
operations of the Fund;
(b) the bankruptcy of Transfer Agent or its permitted assigns or the
appointment of a receiver for Transfer Agent or its permitted
assigns;
(c) any merger, consolidation, or sale of substantially all of the
assets of Transfer Agent or its permitted assigns;
(d) failure by Transfer Agent or its permitted assigns to perform its
duties in accordance with this Agreement, which failure may, in
the judgment of the Fund's Trustees, materially and adversely
affect the business operations of the Fund and which failure
continues for thirty (30) days after written notice by the Fund;
(e) revocation, suspension or termination of the registration of
Transfer Agent or its permitted assigns as a transfer agent under
the Securities Exchange Act of 1934; or
(f) failure of the Fund and its shareholders to approve the
acquisition of control of the Fund's manager by Phoenix Duff &
Phelps Corporation and the principal contracts associated
therewith on or before January 31, 1998.
9.03 Should the Fund exercise its right to terminate under Section
9.01, all out-of-pocket expenses associated with the movement of records and
material will be borne by the Fund on behalf of the applicable Portfolio(s).
8
<PAGE>
Article 10 Additional Portfolios
10.01 In the event that the Fund establishes one or more series of
Shares in addition to those in existence on the date of execution hereof with
respect to which it desires to have Transfer Agent render services as transfer
agent under the terms hereof, it shall so notify Transfer Agent in writing,
and if Transfer Agent agrees in writing to provide such services, such series
of Shares shall become a Portfolio hereunder.
Article 11 Assignment
11.01 Except as provided in Section 11.03 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
11.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
11.03 The Transfer Agent may, without further consent on the part of the
Fund, subcontract for the performance hereof with Boston Financial Data
Services, Inc., ("BFDS") provided, however, that Transfer Agent shall be as
fully responsible to the Fund for the acts and omissions of BFDS as it is for
its own acts and omissions.
Article 12 Amendment
12.01 This Agreement may be amended or modified only by a written
agreement executed by the parties and authorized or approved by a resolution of
the Trustees of the Fund.
Article 13 Connecticut Law to Apply
13.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of Connecticut.
Article 14 Force Majeure
14.01 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes; provided, however, that such party shall make reasonable efforts to
remove such causes as soon as practicable to the extent reasonably possible for
such party to do so.
Article 15 Consequential Damages
15.01 Neither party to this Agreement shall be liable to the other party
for consequential damages arising out of any provision of this Agreement or any
act or failure to act hereunder.
Article 16 Merger of Agreement
16.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
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<PAGE>
16.02 This Agreement shall not be merged with or construed in
conjunction with any other current or future agreement between the Fund and
Phoenix Equity Planning Corporation, each and all of which agreements shall at
all times remain separate and distinct.
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<PAGE>
Article 17 Survival of Terms
17.01 The provisions of Section 5.01, Article 6 and Section 9.02 shall
survive the termination of this Agreement.
Article 18 Counterparts
18.01 This Agreement may be executed by the parties hereto in any
number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
Article 19 Notices
19.01 Notices, requests, instructions and other writings addressed to a
party at the address set forth above, or at such other address as such party may
have designated to the other in writing, shall be deemed to have been properly
given to such party hereunder.
Article 20 Waiver
20.01 The failure of either party to insist upon the performance of any
of the terms or conditions of this Agreement or to enforce any rights resulting
from the breach of any of the terms or conditions of this Agreement, including
payment of damages, shall not be construed as a continuing or permanent waiver
of any such terms, conditions, rights or privileges, but the same shall continue
and remain in full force and effect as if no such forbearance or waiver had
occurred. No waiver, release or discharge of any party's rights hereunder shall
be effective unless contained in a written instrument signed by the party sought
to be charged.
Article 21 Invalidity
21.01 If any provision of this Agreement shall be determined to be
invalid or unenforceable, the remaining provisions of this Agreement shall
remain enforceable to the fullest extent permitted by applicable law.
Article 22 Other Agreements
22.01 The parties hereto acknowledge that Transfer Agent or its
affiliates may enter into one or more other agreements with the Fund pursuant to
which it or them provide services, and undertake obligations, not described
herein. Except as specifically provided herein, neither the execution or
delivery of, nor the performance or failure to perform under, nor any provision
of, this Agreement shall in any manner affect the rights, obligations, or
liabilities of either party hereto in any capacity other than the capacity(ies)
specifically contemplated by this Agreement, including under any such other
agreements.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
SENECA FUNDS
By:________________________________________
Name:
Title:
PHOENIX EQUITY PLANNING CORPORATION
By:_______________________________________
Name: Thomas N. Steenburg
Title: Vice President and Counsel
ATTEST:
By:____________________________
Name:
Title:
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<PAGE>
Schedule A
Fee Schedule
Annual Maintenance Fees shall be based on the following formula:
AMF[subscript]Fund[end subscript] = BAMF x SA
where, AMF[subscript]Fund[end subscript] refers to the aggregate Annual
Maintenance Fee levied against each respective Portfolio,
BAMF refers to the Base Annual Maintenance Fee levied against each
respective Portfolio for each shareholder account, as more particularly
described below, at the basic annual per account rate of $14.95, and
SA refers to the number of Shareholder Accounts subject to the terms of
this Agreement and any and all sub-transfer agent agreements which
presently or hereafter may be entered into by the Transfer Agent. For the
purpose of computing the foregoing, the Transfer Agent will ascertain the
number of Shareholders of each Portfolio regardless of whether any such
Shares are held in accordance with any pooled or omnibus accounts or
arrangement managed or controlled by any entity, broker/dealer or
sub-transfer agent.
Minimum Fee:
(a) Until such time as a Post-effective Amendment shall have
been filed and become effective that adds Class A, B, C
and/or M shares to one or more Portfolios, $15,000.00 per
year for each Administrative Class of Shares and $12,000
per year for each Institutional Class of Shares; and
thereafter
(b) $18,000 per year for each and every Class of Shares,
including Administrative and Institutional Classes
Other Fees
Omnibus Accounts, Per Transaction $2.50
Closed Accounts, per Account, per month $0.20
Check writing Fees:
Privilege set-up $5.00
Per Cleared Check $1.00
IRA Administration Fee $15.00 per shareholder
Out-of-Pocket Expenses
Out-of-pocket expenses include, but are not limited to reasonable expenses for:
confirmation production, postage, forms, telephone, microfilm, microfiche,
stationary and supplies, such stationery and supplies to be billed as .1122% of
postage costs.
senecata.fin
PHOENIX-SENECA FUNDS
(the "Fund")
CLASS A SHARES
DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
The Fund and Phoenix Equity Planning Corporation (the "Distributor"), a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into a Distribution Agreement pursuant to which the Distributor will act as
principal underwriter of each class of shares of the Fund for sale to the
permissible purchasers. The Trustees of the Fund have determined to adopt this
Distribution Plan (the "Plan"), in accordance with the requirements of Section
12b-1 of the Investment Company Act of 1940, as amended (the "Act") with respect
to Class A shares of the Fund and have determined that there is a reasonable
likelihood that the Plan will benefit the Fund and its Class A shareholders.
2. Rule 12b-1 Fees
The Fund shall pay the Distributor, at the end of each month, an amount on
an annual basis equal to 0.25% of the average daily value of the net assets of
the Fund=s Class A shares, as compensation for providing personal service to
shareholders, including assistance in connection with inquiries relating to
shareholder accounts, and for maintaining shareholder accounts (the AService
Fee@).
Amounts paid or payable by the Fund under this Plan or any agreement with
any person or entity relating to the implementation of this Plan ("related
agreement") shall only be used to pay for, or reimburse payment for, the
distribution expenditures described in the preceding paragraph and shall, given
all surrounding circumstances, represent charges within the range of what would
have been negotiated at arm's length as payment for the specific sales or
promotional services and activities to be financed hereunder and any related
agreement, as determined by the Trustees of the Fund, in the exercise of
reasonable business judgment, in light of fiduciary duties under state law and
Sections 36(a) and (b) of the Act and based upon appropriate business estimates
and projections.
3. Reports
At least quarterly in each year this Plan remains in effect, the Fund's
Principal Accounting Officer or Treasurer, or such other person authorized to
direct the disposition of monies paid or payable by the Fund, shall prepare and
furnish to the Trustees of the Fund for their review, and the Trustees shall
review, a written report complying with the requirements of Rule 12b-l under
<PAGE>
the Act regarding the amounts expended under this Plan and the purposes for
which such expenditures were made.
4. Required Approval
This Plan shall not take effect until it, together with any related
agreement, has been approved by a vote of at least a majority of the Fund's
Trustees as well as a vote of at least a majority of the Trustees of the Fund
who are not interested persons (as defined in the Act) of the Fund and who have
no direct or indirect financial interest in the operation of this Plan or in any
related agreement (the "Disinterested Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan or any related agreement and this
Plan shall not take effect with respect to the Fund until it has been approved
by a vote of at least a majority of the outstanding voting Class A shares (as
such phrase is defined in the Act).
5. Term
This Plan shall remain in effect for one year from the date of its adoption
and may be continued thereafter if specifically approved at least annually by a
vote of at least a majority of the Trustees of the Fund as well as a majority of
the Disinterested Trustees. This Plan may be amended at any time, provided that
(a) the Plan may not be amended to increase materially the amount of the
distribution expenses provided in Paragraph 2 hereof (including the Service Fee)
without the approval of at least a majority of the outstanding voting securities
(as defined in the Act) of the Class A shares of the Fund and (b) all material
amendments to this Plan must be approved by a majority vote of the Trustees of
the Fund and of the Disinterested Trustees cast in person at a meeting called
for the purpose of such vote.
6. Selection of Disinterested Trustees
While this Plan is in effect, the selection and nomination of Trustees who
are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Disinterested Trustees then in office.
7. Related Agreements
Any related agreement shall be in writing and shall provide that (a) such
agreement shall be subject to termination, without penalty, by vote of a
majority of the outstanding voting securities (as defined in the Act) of the
Class A shares of the Fund on not more than 60 days' written notice to the other
party to the agreement and (b) such agreement shall terminate automatically in
the event of its assignment.
8. Termination
This Plan may be terminated at any time by a vote of a majority of the
Disinterested Trustees or by a vote of a majority of the outstanding voting
securities (as defined in the Act) of
<PAGE>
the Class A shares of the Fund. In the event this Plan is terminated or
otherwise discontinued, no further payments hereunder will be made hereunder.
9. Records
The Fund shall preserve copies of this Plan and any related agreements and
all reports made pursuant to Paragraph 3 hereof, and any other information,
estimates, projections and other materials that serve as a basis therefor,
considered by the Trustees of the Fund, for a period of not less than six years
from the date of this Plan, the agreement or report, as the case may be, the
first two years in an easily accessible place.
10. Non-Recourse
Reference is hereby made to the Agreement and Declaration of Trust dated
December 18, 1995 establishing the Fund, to the Fund=s Certificate of Trust,
also dated December 18, 1995, which is on file with the Office of the Secretary
of State of the State of Delaware, and to any and all amendments thereto. The
name Seneca Funds refers to the Trustees under said Declaration of Trust, as
Trustees and not personally, and no Trustee, shareholder, officer, agent or
employee of the Fund shall be held to any personal liability in connection with
the affairs of the Fund; only the trust estate under said Agreement and
Declaration of Trust is liable. Without limiting the generality of the
foregoing, neither the Adviser nor any of its officers, directors, partners,
shareholders or employees shall, under any circumstances, have recourse or cause
or willingly permit recourse to be had directly or indirectly to any personal,
statutory, or other liability of any shareholder, Trustee, officer, agent or
employee of the Fund or of any successor of the Fund, whether such liability now
exists or is hereafter incurred for claims against the trust estate.
PHOENIX-SENECA FUNDS
(the "Fund")
CLASS B SHARES
DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
The Fund and Phoenix Equity Planning Corporation (the "Distributor"), a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into a Distribution Agreement pursuant to which the Distributor will act as
principal underwriter of each class of shares of the Fund for sale to the
permissible purchasers. The Trustees of the Fund have determined to adopt this
Distribution Plan (the "Plan"), in accordance with the requirements of Section
12b-1 of the Investment Company Act of 1940, as amended (the "Act") with respect
to Class B shares of the Fund and have determined that there is a reasonable
likelihood that the Plan will benefit the Fund and its Class B shareholders.
2. Rule 12b-1 Fees
The Fund shall reimburse the Distributor, at the end of each month, up to a
maximum on an annual basis of 0.75% of the average daily value of the net assets
of the Fund's Class B shares, subject to any applicable restrictions imposed by
rules of the National Association of Securities Dealers, Inc., for distribution
expenditures incurred by Distributor subsequent to the effectiveness of this
Plan, in connection with the sale and promotion of the Class B shares of the
Fund and the furnishing of services to Class B shareholders of the Fund. Such
expenditures shall consist of: (i) commissions to sales personnel for selling
Class B shares of the Fund (including underwriting commissions and finance
charges related to the payment of commissions); (ii) compensation, sales
incentives and payments to sales, marketing and service personnel; (iii)
payments to broker-dealers and other financial institutions which have entered
into selling agreements with the Distributor for services rendered in connection
with the sale and distribution of Class B shares of the Fund; (iv) payment of
expenses incurred in sales and promotional activities, including advertising
expenditures related to the Class B shares of the Fund; (v) the costs of
preparing and distributing promotional materials; (vi) the cost of printing the
Fund's Prospectus and Statement of Additional Information for distribution to
potential investors; and (vii) such other similar services that the Trustees of
the Fund determine are reasonably calculated to result in the sale of Class B
shares of the Fund. The Fund shall also pay the Distributor, at the end of each
month, an amount on an annual basis equal to 0.25% of the average daily value of
the net assets of the Fund's Class B shares, as compensation for providing
personal service to shareholders, including assistance in connection with
inquiries relating to shareholder accounts, and for maintaining shareholder
accounts (the "Service Fee").
<PAGE>
Any reduction to amounts payable under this Plan shall first be to the
extent of the Service Fee, and then from the balance of the 12b-1 Fee.
Amounts paid or payable by the Fund under this Plan or any agreement with
any person or entity relating to the implementation of this Plan ("related
agreement") shall only be used to pay for, or reimburse payment for, the
distribution expenditures described in the preceding paragraph and shall, given
all surrounding circumstances, represent charges within the range of what would
have been negotiated at arm's length as payment for the specific sales or
promotional services and activities to be financed hereunder and any related
agreement, as determined by the Trustees of the Fund, in the exercise of
reasonable business judgment, in light of fiduciary duties under state law and
Sections 36(a) and (b) of the Act and based upon appropriate business estimates
and projections.
3. Reports
At least quarterly in each year this Plan remains in effect, the Fund's
Principal Accounting Officer or Treasurer, or such other person authorized to
direct the disposition of monies paid or payable by the Fund, shall prepare and
furnish to the Trustees of the Fund for their review, and the Trustees shall
review, a written report complying with the requirements of Rule 12b-l under the
Act regarding the amounts expended under this Plan and the purposes for which
such expenditures were made.
4. Required Approval
This Plan shall not take effect until it, together with any related
agreement, has been approved by a vote of at least a majority of the Fund's
Trustees as well as a vote of at least a majority of the Trustees of the Fund
who are not interested persons (as defined in the Act) of the Fund and who have
no direct or indirect financial interest in the operation of this Plan or in any
related agreement (the "Disinterested Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan or any related agreement and this
Plan shall not take effect with respect to the Fund until it has been approved
by a vote of at least a majority of the outstanding voting Class B shares (as
such phrase is defined in the Act).
5. Term
This Plan shall remain in effect for one year from the date of its adoption
and may be continued thereafter if specifically approved at least annually by a
vote of at least a majority of the Trustees of the Fund as well as a majority of
the Disinterested Trustees. This Plan may be amended at any time, provided that
(a) the Plan may not be amended to increase materially the amount of the
distribution expenses provided in Paragraph 2 hereof (including the Service Fee)
without the approval of at least a majority of the outstanding voting securities
(as defined in the Act) of the Class B shares of the Fund and (b) all material
amendments to this Plan must be approved by a majority vote of the Trustees of
the Fund and of the Disinterested Trustees cast in person at a meeting called
for the purpose of such vote.
<PAGE>
6. Selection of Disinterested Trustees
While this Plan is in effect, the selection and nomination of Trustees who
are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Disinterested Trustees then in office.
7. Related Agreements
Any related agreement shall be in writing and shall provide that (a) such
agreement shall be subject to termination, without penalty, by vote of a
majority of the outstanding voting securities (as defined in the Act) of the
Class B shares of the Fund on not more than 60 days' written notice to the other
party to the agreement and (b) such agreement shall terminate automatically in
the event of its assignment.
8. Termination
This Plan may be terminated at any time by a vote of a majority of the
Disinterested Trustees or by a vote of a majority of the outstanding voting
securities (as defined in the Act) of the Class B shares of the Fund. In the
event this Plan is terminated or otherwise discontinued, no further payments
hereunder will be made hereunder.
9. Records
The Fund shall preserve copies of this Plan and any related agreements and
all reports made pursuant to Paragraph 3 hereof, and any other information,
estimates, projections and other materials that serve as a basis therefor,
considered by the Trustees of the Fund, for a period of not less than six years
from the date of this Plan, the agreement or report, as the case may be, the
first two years in an easily accessible place.
10. Non-Recourse
Reference is hereby made to the Agreement and Declaration of Trust dated
December 18, 1995 establishing the Fund, to the Fund's Certificate of Trust,
also dated December 18, 1995, which is on file with the Office of the Secretary
of State of the State of Delaware, and to any and all amendments thereto. The
name Seneca Funds refers to the Trustees under said Declaration of Trust, as
Trustees and not personally, and no Trustee, shareholder, officer, agent or
employee of the Fund shall be held to any personal liability in connection with
the affairs of the Fund; only the trust estate under said Agreement and
Declaration of Trust is liable. Without limiting the generality of the
foregoing, neither the Adviser nor any of its officers, directors, partners,
shareholders or employees shall, under any circumstances, have recourse or cause
or willingly permit recourse to be had directly or indirectly to any personal,
statutory, or other liability of any shareholder, Trustee, officer, agent or
employee of the Fund or of any successor of
<PAGE>
the Fund, whether such liability now exists or is hereafter incurred for claims
against the trust estate.
PHOENIX-SENECA FUNDS
(the "Fund")
CLASS C SHARES
DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
The Fund and Phoenix Equity Planning Corporation (the "Distributor"), a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into a Distribution Agreement pursuant to which the Distributor will act as
principal underwriter of each class of shares of the Fund for sale to the
permissible purchasers. The Trustees of the Fund have determined to adopt this
Distribution Plan (the "Plan"), in accordance with the requirements of Section
12b-1 of the Investment Company Act of 1940, as amended (the "Act") with respect
to Class C shares of the Fund and have determined that there is a reasonable
likelihood that the Plan will benefit the Fund and its Class C shareholders.
2. Rule 12b-1 Fees
The Fund shall reimburse the Distributor, at the end of each month, up to a
maximum on an annual basis of 0.75% of the average daily value of the net assets
of the Fund's Class C shares, subject to any applicable restrictions imposed by
rules of the National Association of Securities Dealers, Inc., for distribution
expenditures incurred by Distributor subsequent to the effectiveness of this
Plan, in connection with the sale and promotion of the Class C shares of the
Fund and the furnishing of services to Class C shareholders of the Fund. Such
expenditures shall consist of: (i) commissions to sales personnel for selling
Class C shares of the Fund (including underwriting commissions and finance
charges related to the payment of commissions); (ii) compensation, sales
incentives and payments to sales, marketing and service personnel; (iii)
payments to broker-dealers and other financial institutions which have entered
into selling agreements with the Distributor for services rendered in connection
with the sale and distribution of Class C shares of the Fund; (iv) payment of
expenses incurred in sales and promotional activities, including advertising
expenditures related to the Class C shares of the Fund; (v) the costs of
preparing and distributing promotional materials; (vi) the cost of printing the
Fund's Prospectus and Statement of Additional Information for distribution to
potential investors; and (vii) such other similar services that the Trustees of
the Fund determine are reasonably calculated to result in the sale of Class C
shares of the Fund. The Fund shall also pay the Distributor, at the end of each
month, an amount on an annual basis equal to 0.25% of the average daily value of
the net assets of the Fund's Class C shares, as compensation for providing
personal service to shareholders, including assistance in connection with
inquiries relating to shareholder accounts, and for maintaining shareholder
accounts (the "Service Fee").
<PAGE>
Any reduction to amounts payable under this Plan shall first be to the
extent of the Service Fee, and then from the balance of the 12b-1 Fee.
Amounts paid or payable by the Fund under this Plan or any agreement with
any person or entity relating to the implementation of this Plan ("related
agreement") shall only be used to pay for, or reimburse payment for, the
distribution expenditures described in the preceding paragraph and shall, given
all surrounding circumstances, represent charges within the range of what would
have been negotiated at arm's length as payment for the specific sales or
promotional services and activities to be financed hereunder and any related
agreement, as determined by the Trustees of the Fund, in the exercise of
reasonable business judgment, in light of fiduciary duties under state law and
Sections 36(a) and (b) of the Act and based upon appropriate business estimates
and projections.
3. Reports
At least quarterly in each year this Plan remains in effect, the Fund's
Principal Accounting Officer or Treasurer, or such other person authorized to
direct the disposition of monies paid or payable by the Fund, shall prepare and
furnish to the Trustees of the Fund for their review, and the Trustees shall
review, a written report complying with the requirements of Rule 12b-l under the
Act regarding the amounts expended under this Plan and the purposes for which
such expenditures were made.
4. Required Approval
This Plan shall not take effect until it, together with any related
agreement, has been approved by a vote of at least a majority of the Fund's
Trustees as well as a vote of at least a majority of the Trustees of the Fund
who are not interested persons (as defined in the Act) of the Fund and who have
no direct or indirect financial interest in the operation of this Plan or in any
related agreement (the "Disinterested Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan or any related agreement and this
Plan shall not take effect with respect to the Fund until it has been approved
by a vote of at least a majority of the outstanding voting Class C shares (as
such phrase is defined in the Act).
5. Term
This Plan shall remain in effect for one year from the date of its adoption
and may be continued thereafter if specifically approved at least annually by a
vote of at least a majority of the Trustees of the Fund as well as a majority of
the Disinterested Trustees. This Plan may be amended at any time, provided that
(a) the Plan may not be amended to increase materially the amount of the
distribution expenses provided in Paragraph 2 hereof (including the Service Fee)
without the approval of at least a majority of the outstanding voting securities
(as defined in the Act) of the Class C shares of the Fund and (b) all material
amendments to this Plan must be approved by a majority vote of the Trustees of
the Fund and of the Disinterested Trustees cast in person at a meeting called
for the purpose of such vote.
<PAGE>
6. Selection of Disinterested Trustees
While this Plan is in effect, the selection and nomination of Trustees who
are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Disinterested Trustees then in office.
7. Related Agreements
Any related agreement shall be in writing and shall provide that (a) such
agreement shall be subject to termination, without penalty, by vote of a
majority of the outstanding voting securities (as defined in the Act) of the
Class C shares of the Fund on not more than 60 days' written notice to the other
party to the agreement and (b) such agreement shall terminate automatically in
the event of its assignment.
8. Termination
This Plan may be terminated at any time by a vote of a majority of the
Disinterested Trustees or by a vote of a majority of the outstanding voting
securities (as defined in the Act) of the Class C shares of the Fund. In the
event this Plan is terminated or otherwise discontinued, no further payments
hereunder will be made hereunder.
9. Records
The Fund shall preserve copies of this Plan and any related agreements and
all reports made pursuant to Paragraph 3 hereof, and any other information,
estimates, projections and other materials that serve as a basis therefor,
considered by the Trustees of the Fund, for a period of not less than six years
from the date of this Plan, the agreement or report, as the case may be, the
first two years in an easily accessible place.
10. Non-Recourse
Reference is hereby made to the Agreement and Declaration of Trust dated
December 18, 1995 establishing the Fund, to the Fund's Certificate of Trust,
also dated December 18, 1995, which is on file with the Office of the Secretary
of State of the State of Delaware, and to any and all amendments thereto. The
name Seneca Funds refers to the Trustees under said Declaration of Trust, as
Trustees and not personally, and no Trustee, shareholder, officer, agent or
employee of the Fund shall be held to any personal liability in connection with
the affairs of the Fund; only the trust estate under said Agreement and
Declaration of Trust is liable. Without limiting the generality of the
foregoing, neither the Adviser nor any of its officers, directors, partners,
shareholders or employees shall, under any circumstances, have recourse or cause
or willingly permit recourse to be had directly or indirectly to any personal,
statutory, or other liability of any shareholder, Trustee, officer, agent or
employee of the Fund or of any successor of
<PAGE>
the Fund, whether such liability now exists or is hereafter incurred for claims
against the trust estate.
PHOENIX-SENECA FUNDS
(the "Fund")
CLASS M SHARES
DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
The Fund and Phoenix Equity Planning Corporation (the "Distributor"), a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into a Distribution Agreement pursuant to which the Distributor will act as
principal underwriter of each class of shares of the Fund for sale to the
permissible purchasers. The Trustees of the Fund have determined to adopt this
Distribution Plan (the "Plan"), in accordance with the requirements of Section
12b-1 of the Investment Company Act of 1940, as amended (the "Act") with respect
to Class M shares of the Fund and have determined that there is a reasonable
likelihood that the Plan will benefit the Fund and its Class M shareholders.
2. Rule 12b-1 Fees
The Fund shall reimburse the Distributor, at the end of each month, up to a
maximum on an annual basis of 0.25% of the average daily value of the net assets
of the Fund's Class M shares, subject to any applicable restrictions imposed by
rules of the National Association of Securities Dealers, Inc., for distribution
expenditures incurred by Distributor subsequent to the effectiveness of this
Plan, in connection with the sale and promotion of the Class M shares of the
Fund and the furnishing of services to Class M shareholders of the Fund. Such
expenditures shall consist of: (i) commissions to sales personnel for selling
Class M shares of the Fund (including underwriting commissions and finance
charges related to the payment of commissions); (ii) compensation, sales
incentives and payments to sales, marketing and service personnel; (iii)
payments to broker-dealers and other financial institutions which have entered
into selling agreements with the Distributor for services rendered in connection
with the sale and distribution of Class M shares of the Fund; (iv) payment of
expenses incurred in sales and promotional activities, including advertising
expenditures related to the Class M shares of the Fund; (v) the costs of
preparing and distributing promotional materials; (vi) the cost of printing the
Fund's Prospectus and Statement of Additional Information for distribution to
potential investors; and (vii) such other similar services that the Trustees of
the Fund determine are reasonably calculated to result in the sale of Class M
shares of the Fund. The Fund shall also pay the Distributor, at the end of each
month, an amount on an annual basis equal to 0.25% of the average daily value of
the net assets of the Fund's Class M shares, as compensation for providing
personal service to shareholders, including assistance in connection with
inquiries relating to shareholder accounts, and for maintaining shareholder
accounts (the "Service Fee").
<PAGE>
Any reduction to amounts payable under this Plan shall first be to the
extent of the Service Fee, and then from the balance of the 12b-1 Fee.
Amounts paid or payable by the Fund under this Plan or any agreement with
any person or entity relating to the implementation of this Plan ("related
agreement") shall only be used to pay for, or reimburse payment for, the
distribution expenditures described in the preceding paragraph and shall, given
all surrounding circumstances, represent charges within the range of what would
have been negotiated at arm's length as payment for the specific sales or
promotional services and activities to be financed hereunder and any related
agreement, as determined by the Trustees of the Fund, in the exercise of
reasonable business judgment, in light of fiduciary duties under state law and
Sections 36(a) and (b) of the Act and based upon appropriate business estimates
and projections.
3. Reports
At least quarterly in each year this Plan remains in effect, the Fund's
Principal Accounting Officer or Treasurer, or such other person authorized to
direct the disposition of monies paid or payable by the Fund, shall prepare and
furnish to the Trustees of the Fund for their review, and the Trustees shall
review, a written report complying with the requirements of Rule 12b-l under the
Act regarding the amounts expended under this Plan and the purposes for which
such expenditures were made.
4. Required Approval
This Plan shall not take effect until it, together with any related
agreement, has been approved by a vote of at least a majority of the Fund's
Trustees as well as a vote of at least a majority of the Trustees of the Fund
who are not interested persons (as defined in the Act) of the Fund and who have
no direct or indirect financial interest in the operation of this Plan or in any
related agreement (the "Disinterested Trustees"), cast in person at a meeting
called for the purpose of voting on this Plan or any related agreement and this
Plan shall not take effect with respect to the Fund until it has been approved
by a vote of at least a majority of the outstanding voting Class M shares (as
such phrase is defined in the Act).
5. Term
This Plan shall remain in effect for one year from the date of its adoption
and may be continued thereafter if specifically approved at least annually by a
vote of at least a majority of the Trustees of the Fund as well as a majority of
the Disinterested Trustees. This Plan may be amended at any time, provided that
(a) the Plan may not be amended to increase materially the amount of the
distribution expenses provided in Paragraph 2 hereof (including the Service Fee)
without the approval of at least a majority of the outstanding voting securities
(as defined in the Act) of the Class M shares of the Fund and (b) all material
amendments to this Plan must be approved by a majority vote of the Trustees of
the Fund and of the Disinterested Trustees cast in person at a meeting called
for the purpose of such vote.
<PAGE>
6. Selection of Disinterested Trustees
While this Plan is in effect, the selection and nomination of Trustees who
are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Disinterested Trustees then in office.
7. Related Agreements
Any related agreement shall be in writing and shall provide that (a) such
agreement shall be subject to termination, without penalty, by vote of a
majority of the outstanding voting securities (as defined in the Act) of the
Class M shares of the Fund on not more than 60 days' written notice to the other
party to the agreement and (b) such agreement shall terminate automatically in
the event of its assignment.
8. Termination
This Plan may be terminated at any time by a vote of a majority of the
Disinterested Trustees or by a vote of a majority of the outstanding voting
securities (as defined in the Act) of the Class M shares of the Fund. In the
event this Plan is terminated or otherwise discontinued, no further payments
hereunder will be made hereunder.
9. Records
The Fund shall preserve copies of this Plan and any related agreements and
all reports made pursuant to Paragraph 3 hereof, and any other information,
estimates, projections and other materials that serve as a basis therefor,
considered by the Trustees of the Fund, for a period of not less than six years
from the date of this Plan, the agreement or report, as the case may be, the
first two years in an easily accessible place.
10. Non-Recourse
Reference is hereby made to the Agreement and Declaration of Trust dated
December 18, 1995 establishing the Fund, to the Fund's Certificate of Trust,
also dated December 18, 1995, which is on file with the Office of the Secretary
of State of the State of Delaware, and to any and all amendments thereto. The
name Seneca Funds refers to the Trustees under said Declaration of Trust, as
Trustees and not personally, and no Trustee, shareholder, officer, agent or
employee of the Fund shall be held to any personal liability in connection with
the affairs of the Fund; only the trust estate under said Agreement and
Declaration of Trust is liable. Without limiting the generality of the
foregoing, neither the Adviser nor any of its officers, directors, partners,
shareholders or employees shall, under any circumstances, have recourse or cause
or willingly permit recourse to be had directly or indirectly to any personal,
statutory, or other liability of any shareholder, Trustee, officer, agent or
employee of the Fund or of any successor of
<PAGE>
the Fund, whether such liability now exists or is hereafter incurred for claims
against the trust estate.
PHOENIX-SENECA FUNDS
(the "Funds")
AMENDED AND RESTATED
PLAN PURSUANT TO RULE 18f-3
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
Pursuant to Rule 18f-3 under the Investment Company Act of 1940, as amended
("1940 Act"), this Plan describes the multi-class system for the Funds,
including the separate classes of shares' arrangements for distribution, the
method for allocating expenses to those classes and any related conversion or
exchange privileges applicable to these classes.
Upon the original effective date of this Plan, the Funds shall offer
multiple classes of shares, as described herein, pursuant to Rule 18f-3 and this
Plan.
2. The Multi-Class Structure
Each of the portfolios of the Funds hereto shall offer five classes of
shares: Class X, Class A, Class B, Class C and Class M ("Multi-Class
Portfolios"). Shares of the Multi-Class Portfolios shall represent an equal pro
rata interest in the respective Multi-Class Portfolio and, generally, shall have
identical voting, dividend, liquidation, and other rights, preferences, powers,
restrictions, limitations, qualifications and terms and conditions, except that:
(a) each class shall have a different designation; (b) each class shall bear any
Class Expenses, as defined by Section 2(b), below; (c) each class shall have
exclusive voting rights on any matter submitted to shareholders that relates
solely to its distribution arrangement; and (d) each class shall have separate
voting rights on any matter submitted to shareholders in which the interests of
one class differ from the interests of any other class. In addition, Class X,
Class A, Class B, Class C and Class M shares shall have the features described
in Sections a, b, c and d, below.
a. Distribution Plans
The Funds have adopted Distribution Plans pursuant to Rule 12b-1 with
respect to each Multi-Class Portfolio, containing substantially the following
terms:
i. Each of Class A, Class B, Class C and Class M shares of each
Multi-Class Portfolio shall pay to Phoenix Equity Planning Corporation (the
"Distributor") for providing personal services to shareholders, including
assistance in connection with shareholder accounts, as provided in the
Distribution Plans for each such class an amount equal to 0.25% of the average
daily net assets of such Multi-Class Portfolio's Class A, Class B, Class C
and Class M shares.
ii. Class B shares of each Multi-Class Portfolio shall reimburse the
Distributor for costs and expenses incurred in connection with distribution and
marketing of
<PAGE>
shares thereof, as provided in the Class B Distribution Plan and
any supplements thereto, subject to an annual limit of 0.75% of the average
daily net assets of a Multi-Class Portfolio's Class B shares.
iii. Class C shares of each Multi-Class Portfolio shall reimburse the
Distributor for costs and expenses incurred in connection with distribution and
marketing of shares thereof, as provided in the Class C Distribution Plan and
any supplements thereto, subject to an annual limit of 0.75%, of the average
daily net assets of a Multi-Class Portfolio's Class C shares.
iv. Class M shares of each Multi-Class Portfolio shall reimburse the
Distributor for costs and expenses incurred in connection with distribution
and marketing of shares thereof, as provided in the Class M Distribution Plan
and any supplements thereto, subject to an annual limit of 0.25% of the average
daily net assets of a Multi-Class Portfolio's Class M shares.
b. Allocation of Income and Expenses
i. General.
The gross income, realized and unrealized capital gains and losses and
expenses (other than Class Expenses, as defined below) of each Multi-Class
Portfolio shall be allocated to each class on the basis of its net asset value
relative to the net asset value of the Multi-Class Portfolio. Expenses to be so
allocated include expenses of the Funds that are not attributable to a
particular Multi-Class Portfolio or class of a Multi-Class Portfolio but are
allocated to a Multi- Class Portfolio ("Fund Expenses") and expenses of a
particular Multi-Class Portfolio that are not attributable to a particular class
of that Multi-Class Portfolio ("Portfolio Expenses"). Fund Expenses include, but
are not limited to, trustees' fees, insurance costs and certain legal fees.
Portfolio Expenses include, but are not limited to, certain state registration
fees, custodial fees, advisory fees and other expenses relating to the
management of the Multi-Class Portfolio's assets.
ii. Class Expenses.
Expenses attributable to a particular class ("Class Expenses") shall be
limited to: (1) transfer agency fees; (2) stationery, printing, postage, and
delivery expenses relating to preparing and distributing shareholder reports,
prospectuses, and proxy statements; (3) state Blue Sky registration fees; (4)
SEC registration fees; (5) expenses of administrative personnel and services to
the extent related to another category of class-specific expenses; (6) trustees'
fees and expenses; (7) accounting expenses, auditors' fees, litigation expenses,
and legal fees and expenses; and (8) expenses incurred in connection with
shareholder meetings. Expenses described in subsection (a) (i) and (ii) above of
this paragraph must be allocated to the class for which they are incurred. All
other expenses described in this paragraph will be allocated as Class Expenses,
if a Fund's President and Treasurer have determined, subject to Board approval
or ratification, which of such categories of expenses will be treated as Class
Expenses, consistent with applicable legal principles under the 1940 Act and the
Internal Revenue Code of 1986, as
<PAGE>
amended ("Code"). The difference between the Class Expenses allocated to each
share of a class during a year and the Class Expenses allocated to each share of
any other class during such year shall at all times be less than .50% of the
average daily net asset value of the class of shares with the smallest average
net asset value. The afore-described description of Class Expenses and any
amendment thereto shall be subject to the continuing availability of an opinion
of counsel or a ruling from the Internal Revenue Service to the effect that any
such allocation of expenses or the assessment of higher distribution fees and
transfer agency costs on any class of shares does not result in any dividends or
distributions constituting "preferential dividends" under the Code.
In the event that a particular expense is no longer reasonably allocable by
class or to a particular class, it shall be treated as a Fund Expense or
Portfolio Expense as applicable, and in the event a Fund Expense or Portfolio
Expense becomes allocable as a Class Expense, it shall be so allocated, subject
to compliance with Rule 18f-3 and Board approval or ratification.
The initial determination of expenses that will be allocated as Class
Expenses and any subsequent changes thereto as set forth in this Plan shall be
reviewed by the Board of Trustees and approved by such Board and by a majority
of the Trustees who are not "interested persons" of the Fund, as defined in the
1940 Act ("Independent Trustees").
iii. Waivers or Reimbursements of Expenses.
Investment Advisor may waive or reimburse its management fee in whole or in
part provided that the fee is waived or reimbursed to all shares of the Fund in
proportion to the relative average daily net asset values.
Investment Advisor or a related entity who charges a fee for a Class Expense
may waive or reimburse that fee in whole or in part only if the revised fee more
accurately reflects the relative cost of providing to each Multi-Class Portfolio
the service for which the Class Expense is charged.
Distributor may waive or reimburse a Rule 12b- 1 Plan fee payment in whole
or in part.
c. Exchange Privileges
Shareholders of a Multi-Class Portfolio may exchange shares of a particular
class for shares of the same class in another Multi-Class Portfolio, at the
relative net asset values of the respective shares to be exchanged and with no
sales charge, provided the shares to be acquired in the exchange are, as may be
necessary, qualified for sale in the shareholder's state of residence and
subject to the applicable requirements, if any, as to minimum amount. Each
Multi-Class
<PAGE>
Portfolio reserves the right to temporarily or permanently terminate exchange
privileges, impose conditions upon the exercision of exchange privileges, or
reject any specific order for any dealer, shareholder or person whose
transactions seem to follow a timing pattern, including those who request more
than one exchange out of a Multi-Class Portfolio within any thirty (30) day
period. Each Multi-Class Portfolio reserves the right to terminate or modify
these exchange privileges at any time upon giving prominent notice to
shareholders at least 60 days in advance.
d. Conversion Feature
Class B Shares of a Multi-Class Portfolio will automatically convert to
Class A Shares of that portfolio, without sales charge, at the relative net
asset values of each such classes, not later than eight years from the
acquisition of the Class B Shares. The conversion of Class B Shares to Class A
Shares is subject to the continuing availability of an opinion of counsel or a
ruling from the Internal Revenue Service to the effect that the conversion of
shares does not constitute a taxable event under federal income tax law.
3. Board Review
a. Approval of Amended and Restated Plan
The Board of Trustees, including a majority of the Independent Trustees, at
a meeting held on November __, l997, approved the Amended and Restated Plan
based on a determination that the Plan, including the expense allocation, is in
the best interests of each class and Multi-Class Portfolio individually and of
the Funds. Their determination was based on their review of information
furnished to them which they deemed reasonably necessary and sufficient to
evaluate the Plan.
b. Approval of Amendments
The Plan may not be amended materially unless the Board of Trustees,
including a majority of the Independent Trustees, have found that the proposed
amendment, including any proposed related expense allocation, is in the best
interests of each class and Multi-Class Portfolio individually and of the Funds.
Such funding shall be based on information required by the Board and furnished
to them that the Board deems reasonably necessary to evaluate the proposed
amendment.
c. Periodic Review
The Board shall review reports of expense allocations and such other
information as they request at such times, or pursuant to such schedule, as they
may determine consistent with applicable legal requirements.
<PAGE>
4. Contracts
Any agreement related to the Multi-Class System shall require the parties
thereto to furnish to the Board of Trustees, upon their request, such
information as is reasonably necessary to permit the Trustees to evaluate the
Plan or any proposed amendment.
5. Effective Date
The Amended and Restated Plan, having been reviewed and approved by the
Board of Trustees and the Independent Trustees, shall take effect as of the
first day of each Fund's current fiscal year.
6. Amendments
The Plan may not be amended to modify materially its terms unless such
amendment has been approved in the manner specified in Section 3(b) of this
Plan.
AS/word/funds/miscdoc/arpf18f3.doc
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
Class A Class B Class C Class M
------- ------- ------- -------
<S> <C> <C> <C> <C>
PHOENIX CALIFORNIA TAX-EXEMPT BONDS, INC. X X __ __
PHOENIX EQUITY SERIES FUND:
PHOENIX CORE EQUITY FUND X X X X
PHOENIX GROWTH AND INCOME FUND X X X X
PHOENIX INCOME AND GROWTH FUND X X __ __
PHOENIX INVESTMENT TRUST 97:
PHOENIX SMALL CAP VALUE FUND X X X X
PHOENIX VALUE EQUITY FUND X X X X
PHOENIX MULTI-PORTFOLIO FUND:
EMERGING MARKETS BOND PORTFOLIO X X X X
INTERNATIONAL PORTFOLIO X X __ __
MID CAP PORTFOLIO X X __ __
REAL ESTATE SECURITIES PORTFOLIO X X __ __
STRATEGIC INCOME PORTFOLIO X X X X
TAX-EXEMPT BOND PORTFOLIO X X __ __
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC. X X X X
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND X X X __
PHOENIX SERIES FUND:
AGGRESSIVE GROWTH FUND SERIES X X __ __
BALANCED FUND SERIES X X __ __
CONVERTIBLE FUND SERIES X X __ __
GROWTH FUND SERIES X X __ __
HIGH YIELD FUND SERIES X X X X
MONEY MARKET FUND SERIES X X X X
U.S. GOVERNMENT SECURITIES FUND X X __ __
SERIES
</TABLE>
<PAGE>
PHOENIX STRATEGIC EQUITY SERIES FUND:
EQUITY OPPORTUNITIES FUND X X __ __
MICRO CAP FUND X X __ __
SMALL CAP FUND X X __ __
STRATEGIC THEME FUND X X X X
PHOENIX STRATEGIC ALLOCATION FUND, INC. X X __ __
PHOENIX WORLDWIDE OPPORTUNITIES FUND X X __ __
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001005020
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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