As filed with the Securities and Exchange Commission on May 20, 1998
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
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 5 [X]
and/or
REGISTRATION STATEMENT
Under the
INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 5 [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)
SANDRA J. WESTHOFF
Chief Operating Officer, Seneca Capital Management LLC
909 Montgomery Street, San Francisco, California 94133
(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)(1)
|_| on ______ or at such later date as the Commission shall order
pursuant to paragraph (a)(3)
|_| 75 days after filing pursuant to paragraph (a)(2)
|_| on pursuant to paragraph (a)(2) 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.
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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
FORM N-1A
<TABLE>
<CAPTION>
N-1A Location in
Item No. Item Registration Statement
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<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
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; 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 Trustees and Officers
16. Investment Advisory and Other Services Advisory and Administrative Services; Custodian;
Transfer Agent; Independent Accountants
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;
Redemption of 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' Performance
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>
P H O E N I X
S E N E C A
Prospectus July 1, 1998
[bullet] PHOENIX-SENECA
GROWTH FUND
[bullet] PHOENIX-SENECA
MID-CAP "EDGE"(SM) FUND
[bullet] PHOENIX-SENECA
BOND FUND
[bullet] PHOENIX-SENECA
REAL ESTATE SECURITIES
FUND
[PHOENIX LOGO] PHOENIX
INVESTMENT PARTNERS
<PAGE>
PHOENIX-SENECA GROWTH FUND
PHOENIX-SENECA MID-CAP "EDGE"(SM) FUND
PHOENIX-SENECA BOND FUND
PHOENIX-SENECA REAL ESTATE SECURITIES FUND
PROSPECTUS
July 1, 1998
Phoenix-Seneca Growth Fund seeks capital appreciation primarily through
investments in equity securities of companies that, in the Subadviser'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 Subadviser'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, Subadviser 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 ("SAI"), dated July 1, 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.
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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.
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CUSTOMER SERVICE: (800) 243-1574
MARKETING: (800) 243-4361
TELEPHONE ORDERS: (800) 367-5877
TELECOMMUNICATION DEVICE (TTY): (800) 243-1926
<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
INVESTMENT PRACTICES AND RISK CONSIDERATIONS .......... 13
DISTRIBUTION PLANS .................................... 17
HOW TO BUY SHARES ..................................... 18
INVESTOR ACCOUNT SERVICES ............................. 21
HOW TO REDEEM SHARES .................................. 23
NET ASSET VALUE ....................................... 24
PORTFOLIO TRANSACTIONS ................................ 24
DIVIDENDS AND CAPITAL GAINS ........................... 25
INCOME TAX CONSIDERATIONS ............................. 25
ADVISER, SUBADVISER AND ADMINISTRATOR ................. 25
GENERAL INFORMATION ................................... 27
</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 Investment Partners, Ltd. (previously
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 the "Distributor"), serves
as national distributor of the Funds' shares. See "Distribution Plans" and the
SAI. 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 three of the
four classes of each of the Funds. Pursuant to the distribution plan adopted for
Class A Shares, Class B Shares and Class C Shares, the Funds pay the Distributor
0.25% of the average daily net assets of each Class for furnishing shareholder
services and, pursuant to the distribution plans adopted for Class B Shares and
Class C Shares, the Funds reimburse the Distributor up to a maximum annual rate
of 0.75% of the average daily net assets of each such Class 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 and others at a price equal to
their net asset value per share. Each Fund also offers three 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) or (ii) on a contingent
deferred basis (Class B Shares and Class C Shares).
Class X Shares are offered primarily to institutional investors such as
pension and profit sharing plans, other employee benefit trusts, investment
advisers, endowments, foundations and corporations and others who purchase in
the minimum amounts described below, at the next determined net asset value
after receipt of the order by State Street Bank and Trust Company ("State Street
Bank") or an authorized agent.
Class A Shares are offered to the public at the next determined net asset
value after receipt of the order by State Street Bank, or an authorized agent,
plus a sales charge. The maximum initial sales charge is 4.75% of the offering
price on single purchases of less than $50,000. The sales charge is 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, or an authorized
agent, 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 or Class C
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, and the minimum subsequent investment is $10,000. See "How to Buy
Shares."
Redemption of Shares
Class X and A 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 or an authorized agent. 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. Redemptions (including by exchanges) of any
Class of Shares held less than 90 days will be subject to a 1% Early Withdrawal
Fee. This fee is paid to the Funds and is intended to protect long-term
investors from the cost of frequent investments and redemptions by short-term
investors. See "How to Redeem Shares."
Risk Factors
There can be no assurances that a Fund will achieve its investment
objectives. 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 a shareholder is
expected to incur. The expenses below are for the fiscal year ended September
30, 1997, restated to reflect current fees and expense limitations.
<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 Dividends None None
Deferred Sales Load (as a percentage of original purchase price or None None
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 Operating Expenses (After Expense Reimbursement)(4) 0.55% 0.90%
----- -----
Total Fund Operating Expense (After Expense Reimbursement)(4) 1.25% 1.85%
===== =====
<CAPTION>
Phoenix-Seneca Growth Fund
--------------------------------------------
Class B Class C
Shares Shares
------ ------
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None None
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load (as a percentage of original purchase price or 5% during the first 1% during the
redemption proceeds, as applicable) year, decreasing 1% first year
annually to 2%
during the fourth
and fifth years;
decreasing to 0%
after the fifth year
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) 1.00% 1.00%
Other Operating Expenses (After Expense Reimbursement)(4) 0.90% 0.90%
---- ----
Total Fund Operating Expense (After Expense Reimbursement)(4) 2.60% 2.60%
==== ====
</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 Dividends None None
Deferred Sales Load (as a percentage of original purchase price or None None
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 Operating Expenses (After Expense Reimbursement)(5) 1.30% 1.65%
----- -----
Total Fund Operating Expenses (After Expense Reimbursement)(5) 2.10% 2.70%
===== =====
<CAPTION>
Phoenix-Seneca Mid-Cap "EDGE"(sm) Fund
--------------------------------------------
Class B Class C
Shares Shares
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None None
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load (as a percentage of original purchase price or 5% during the first 1% during the
redemption proceeds, as applicable) year, decreasing 1% first year
annually to 2%
during the fourth
and fifth years;
decreasing to 0%
after the fifth year
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) 1.00% 1.00%
Other Operating Expenses (After Expense Reimbursement)(5) 1.65% 1.65%
---- ----
Total Fund Operating Expenses (After Expense Reimbursement)(5) 3.45% 3.45%
==== ====
</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 "How to Redeem 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 or 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 and the Administrator have agreed to reimburse the Growth
Fund's operating expenses for the amount by which the operating expenses
of Class X Shares, Class A Shares, Class B Shares and Class C Shares
exceed 1.25%, 1.85%, 2.60% and 2.60%, respectively, of the average net
assets through the fiscal year ending September 30, 1998. Other Operating
Expenses for Class X, Class A, Class B and Class C Shares are estimated to
be 0.50%, 0.94%, 1.09% and 3.73%, respectively, and Total Fund Operating
Expenses for Class X, Class A, Class B and Class C Shares are estimated to
be 1.20%, 1.89%, 2.79% and 5.43%, respectively, absent such reimbursement
for the fiscal year ending September 30, 1998. Actual Other Operating
Expenses absent reimbursement for Class X and Class A Shares were 0.82%
and 1.68%, respectively, and Total Fund Operating Expenses were 1.52% and
2.63%, respectively, for the year ended September 30, 1997.
(5) The Adviser and the Administrator have agreed to reimburse the Mid-Cap
"EDGE"(SM) Fund's operating expenses for the amount by which the operating
expenses of Class X Shares, Class A Shares, Class B Shares and Class C
Shares exceed 2.10%, 2.70%, 3.45% and 3.45%, respectively, of the average
net assets through the fiscal year ending September 30, 1998. Other
Operating Expenses for Class X, Class A, Class B and Class C Shares are
estimated to be 1.45%, 2.44%, 2.81% and 4.46%, respectively, and Total
Fund Operating Expenses for Class X, Class A, Class B and Class C Shares
are estimated to be 2.25%, 3.49%, 4.61% and 6.26%, respectively, absent
such reimbursement for the fiscal year ending September 30, 1998. Actual
Other Operating Expenses absent reimbursement for Class X and Class A
Shares were 1.97% and 3.27%, respectively, and Total Fund Operating
Expenses were 2.77% and 4.32%, respectively, for the year ended September
30, 1997.
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 Dividends None None
Deferred Sales Load (as a percentage of original purchase price or None None
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 Operating Expenses (After Expense Reimbursement)(4) 1.35% 1.70%
----- -----
Total Fund Operating Expenses (After Expense Reimbursement)(4) 1.85% 2.45%
===== =====
<CAPTION>
Phoenix-Seneca Bond Fund
--------------------------------------------
Class B Class C
Shares Shares
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None None
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load (as a percentage of original purchase price or 5% during the first 1% during the
redemption proceeds, as applicable) year, decreasing 1% first year
annually to 2%
during the fourth
and fifth years;
decreasing to 0%
after the fifth year
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) 1.00% 1.00%
Other Operating Expenses (After Expense Reimbursement)(4) 1.62% 1.70%
---- ----
Total Fund Operating Expenses (After Expense Reimbursement)(4) 3.12% 3.20%
==== ====
</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 Dividends None None
Deferred Sales Load (as a percentage of original purchase price or None None
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 Operating Expenses (After Expense Reimbursement)(5) 1.14% 1.95%
----- -----
Total Fund Operating Expenses (After Expense Reimbursement)(5) 1.99% 3.05%
===== =====
<CAPTION>
Phoenix-Seneca Real Estate Securities Fund
--------------------------------------------
Class B Class C
Shares Shares
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None None
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load (as a percentage of original purchase price or 5% during the first 1% during the
redemption proceeds, as applicable) year, decreasing 1% first year
annually to 2%
during the fourth
and fifth years;
decreasing to 0%
after the fifth year
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) 1.00% 1.00%
Other Operating Expenses (After Expense Reimbursement)(5) 1.95% 1.95%
---- ----
Total Fund Operating Expenses (After Expense Reimbursement)(5) 3.80% 3.80%
==== ====
</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 "How to Redeem Shares."
(2) As of the date of this Prospectus, only the Class X Shares of the Bond Fund
and the Class X and Class A Shares of the Real Estate Securities Fund had
commenced operations. The percentages indicated for the other classes are
estimates and actual expenses may be more or 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 and the Administrator have agreed to reimburse the Bond Fund's
operating expenses for the amount by which the operating expenses of Class
X, Class A Shares, Class B Shares, and Class C Shares exceed 1.85%, 2.45%,
3.20% and 3.20%, respectively, of the average net assets through the
fiscal year ending September 30, 1998. Other Operating Expenses for Class
X, Class A, Class B and Class C Shares are estimated to be 1.28%, 2.61%,
1.62% and 4.26%, respectively, and Total Fund Operating Expenses for Class
X, Class A, Class B and Class C Shares are estimated to be 1.78%, 3.36%,
3.12% and 5.76%, respectively, absent such reimbursement for the fiscal
year ending September 30, 1998. Actual Other Operating Expenses absent
reimbursement for Class X Shares were 2.91% and Total Fund Operating
Expenses were 3.41% for the year ended September 30, 1997.
(5) The Adviser and the Administrator have agreed to reimburse the Real Estate
Securities Fund's operating expenses for the amount by which the operating
expenses of Class X, Class A Shares, Class B Shares and Class C Shares
exceed 2.35%, 3.05%, 3.80% and 3.80%, respectively, of the average net
assets through the fiscal year ending September 30, 1998. Other Operating
Expenses for Class X, Class A, Class B and Class C Shares are estimated to
be 0.59%, 1.47%, 1.95% and 3.80%, respectively, and Total Fund Operating
Expenses for Class X, Class A, Class B and Class C Shares are estimated to
be 1.44%, 2.57%, 3.80% and 5.65%, respectively, absent such reimbursement
for the fiscal year ending September 30, 1998. Actual Other Operating
Expenses absent reimbursement for Class A Shares were 2.69% and Total Fund
Operating Expenses were 3.79% for the year ended September 30, 1997.
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 13 40 69 151
Class A Shares 65 103 143 254
Class B Shares 66 101 138 275
Class C Shares 36 81 138 293
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
Class X Shares 21 66 113 243
Class A Shares 74 127 184 336
Class B Shares 75 126 179 356
Class C Shares 45 106 179 373
Phoenix-Seneca Bond Fund
Class X Shares 19 58 100 217
Class A Shares 71 120 172 313
Class B Shares 72 119 167 333
Class C Shares 42 99 167 350
Phoenix-Seneca Real Estate Securities Fund
Class X Shares 20 62 107 232
Class A Shares 77 137 200 368
Class B Shares 70 113 158 315
Class C Shares 48 116 196 404
</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 13 40 69 151
Class A Shares 65 103 143 254
Class B Shares 26 81 138 275
Class C Shares 26 81 138 293
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
Class X Shares 21 66 113 243
Class A Shares 74 127 184 336
Class B Shares 35 106 179 356
Class C Shares 35 106 179 373
Phoenix-Seneca Bond Fund
Class X Shares 19 58 100 217
Class A Shares 71 120 172 313
Class B Shares 32 99 167 333
Class C Shares 32 99 167 350
Phoenix-Seneca Real Estate Securities Fund
Class X Shares 20 62 107 232
Class A Shares 77 137 200 368
Class B Shares 30 93 158 315
Class C Shares 38 116 196 404
</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. Actual
returns may be higher or lower than 5%. See "Management" 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 auditors, whose report thereon appears in the
Trust's Annual Report. The financial statements and financial highlights are
incorporated by reference into the SAI. 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 (Loss)(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
(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 (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 adviser. If the
investment adviser 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 adviser.
(3) Annualized.
(4) If the investment adviser 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 (Loss)(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 ................................. 1.21%(3) 2.91% 1.65%(3)
Ratio of Operating Expenses to Average
Net Assets(4) .............................. 39.23%(3) 3.79% 73.01%(3)
Ratio of Net Investment Income (Loss) to
Average Net Assets ......................... 6.46%(3) 1.37% 4.61%(3)
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 (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.
** As of December 26, 1996, the Bond Administrative Shares merged with the Bond
Institutional Shares.
(1) Net investment income (loss) is after waiver of certain fees and
reimbursement of certain expenses by the investment adviser. If the
investment adviser 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 adviser.
(3) Annualized.
(4) If the investment adviser 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), and the deduction of the maximum initial sales
charge in the case of Class A Shares and the maximum deferred sales charge
applicable to a complete redemption 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 400 Index, Dow Jones
Industrial Average, Europe Australia Far East Index (EAFE), Consumer Price
Index, Lehman Brothers Government/Corporate Bond Index, Lehman Brothers T-Bond
Index and the Wilshire Real Estate Securities 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 investment 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 each Class of 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 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").
The Adviser. 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 will provide assistance on the general operations of the Funds,
including compliance support, preparation of documents and advice of PIC's
general counsel to the extent permitted by law and applicable standards of
professional responsibility. PIC will also furnish, at its own expense, the
office facilities and personnel necessary to perform its obligations under the
Investment Advisory Agreement. 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, Core Equity
Portfolio and Real Estate Equity Securities Portfolio), Phoenix
9
<PAGE>
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, 1997, PIC had
approximately $20.5 billion in assets under management.
All of the outstanding stock of PIC is owned by Phoenix Equity Planning
Corporation ("PEPCO"), a subsidiary of Phoenix Investment Partners, Ltd.
("PXP"). Phoenix Home Life is a majority shareholder of PXP and 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. PXP is a New York Stock Exchange traded company that provides various
financial advisory services to institutional investors, corporations and
individuals through operating subsidiaries.
The Subadviser. 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 been (with its predecessor, GMG/Seneca LP) an investment adviser
since 1989 and is a California limited liability company. As of December 31,
1997, Seneca managed in excess of $4.4 billion in assets for institutions and
individuals. On July 17, 1997, PXP purchased a 74.9% interest in Seneca.
Seneca's senior management owns the remaining 25.1% interest.
The Administrator. PEPCO has assumed an Administration 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 Commission and (6) providing the personnel
and all necessary office equipment to perform the foregoing services. PEPCO has
assumed a Sub-Administration Agreement with State Street Bank pursuant to which
State Street Bank will perform substantially all of those services.
For more information about the Adviser, Subadviser, Administrator and their
functions, see "Adviser, Subadviser and Administrator."
The Custodian and Transfer Agent. The custodian of the assets of the Trust
is Investors Fiduciary Trust Company at 801 Pennsylvania 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.
PEPCO acts as transfer agent for the Trust (the "Transfer Agent") for which
it is paid $19.25 for daily dividend shareholder accounts and $14.95 for
non-daily dividend shareholder accounts plus out-of-pocket expenses, subject to
a minimum annual fee per Class of Shares of $18,000. The Transfer Agent is
authorized to engage sub-agents to perform certain shareholder servicing
functions from time to time. PEPCO has retained State Street Bank as subagent
and PEPCO will pay State Street's fee.
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 400 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 Subadviser 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
10
<PAGE>
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 Subadviser
seeks companies that, among other 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 400 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 Subadviser 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 Subadviser
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 Subadviser 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
Subadviser 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 Subadviser 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
11
<PAGE>
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 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 Baa3 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
Subadviser.
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 Subadviser'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 Subadviser 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.
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This Fund does not make direct investments in real estate. However, because
it may invest in debt securities of issuers 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 historical portfolio turnover rates of each Fund are shown in the
Financial Highlights tables that appear 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.
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 any
assets, including equity securities and non-investment grade debt, so long as
the assets are liquid, unencumbered and marked to market daily ("liquid
assets"), 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 B3
by Moody's or unrated securities whose quality the Subadviser determines to be
lower than those ratings. "Investment grade" refers to securities rated BBB- or
better by S&P or Baa3 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 Subadviser 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 Seneca Bond Fund's 35% limit on
below-investment-grade debt unless the Subadviser 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 liquid assets 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. 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 liquid assets 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 Subadviser 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.
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
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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, Swaps 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 (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 Subadviser'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 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
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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 Subadviser 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 total outstanding voting 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."
Impact of the Year 2000 Issue. The Year 2000 issue is the result of
computer programs being written using two digits rather than four to define the
applicable year. There is the possibility that some or all of a company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000.
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The cost of modifying computer programs to become Year 2000 compliant may impact
the financial performance and market price of companies whose securities are
held by the Funds.
The Trustees have directed management to ensure that the systems used by
service providers (including PXP) in support of the Funds operations be assessed
and brought into Year 2000 compliance. Based upon preliminary assessments, PXP
has determined that it will be required to modify or replace portions of its
software so that its computer systems will properly utilize dates beyond
December 31, 1999. Since many of the core systems of PXP companies are
investment related, PXP management believes that the majority of these systems
are already Year 2000 compliant. PXP believes that with modifications to
existing software and conversions to new software, the Year 2000 issue will be
mitigated. It is anticipated that such modifications and conversions will be
completed on a timely basis. It is not known at this time if there could be a
material impact on the operations of PXP companies or the Funds if such
modifications and conversions are not completed timely.
PXP will utilize both internal and external resources to reprogram, or
replace, and test the software for Year 2000 modifications. Certain systems are
already in the process of being converted due to previous initiatives and it is
expected that all core systems will be remediated by December 31, 1998 and
tested by June 1999. The total cost to become Year 2000 compliant is not an
expense of the Funds and is not expected to have a material impact on the
operating results of PXP.
DISTRIBUTION PLANS
The offices of PEPCO, the national distributor of the Funds' shares, are
located at 100 Bright Meadow Boulevard, P.O. Box 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 an underwriting agreement under which
PEPCO has agreed to use its best efforts to find purchasers for Fund shares. The
Funds have granted PEPCO the exclusive right to purchase from the Funds and
resell, as principal, shares needed to fill unconditional orders for Fund
shares. PEPCO may sell Fund shares through its registered representatives or
through securities dealers with whom it has sales agreements. PEPCO may also
sell Fund shares pursuant to sales agreements entered into with banks or
bank-affiliated securities brokers who, acting as agent for their customers,
place orders for Fund 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," and collectively
the "Plans"). A 12b-1 fee paid by one Fund may be used to finance distribution
of the shares of another Fund 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 and Class C
Shares for furnishing shareholder services (the "Service Fee"), 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 for expenses
incurred in connection with the sale and promotion of Fund shares.
The Service Fee 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 be in addition to sales
charges on Fund shares which are reallowed to such firms.
Expenditures incurred under the Plans for sale and promotion 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; (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 SAI 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.
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.
17
<PAGE>
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 Plan Trustees. 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 each Fund.
The NASD regards 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 any or all of the
Plans.
HOW TO BUY SHARES
How do you invest?
You may open a fund account for Class A, Class B or Class C shares with an
initial investment of $500. This amount is reduced to $25 for investments made
under the "Investo-Matic" plan by 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 for Class A, Class B or Class C shares
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, 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, or an
authorized agent, receives your order. In most cases, in order to receive that
day's public offering price, your order must be received before the close of
trading on the New York Stock Exchange (normally 4:00 PM eastern time). See "Net
Asset Value." Shares purchased will be recorded electronically in book-entry
form by the Transfer Agent. No share certificates are available.
The Trust reserves the right, in its sole discretion, to suspend the
offering of shares of any class of any Fund or to reject purchase orders when,
in the judgment of management, such suspension or rejection is in the best
interests of the Trust; to waive the minimum initial investment for certain
investors; and to redeem shares if information provided in the application
proves to be incorrect in any material manner (e.g., in a manner such as to
render the shareholder ineligible to purchase shares).
What are the classes and how do they differ?
Each Fund presently offers investors four 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. The minimum subsequent investment for Class X is $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 and C 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 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 B and 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.
18
<PAGE>
What arrangement is best for you?
The alternative purchase arrangements permit 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 Shares
The public offering price of Class A Shares is the net asset value plus a
sales charge that varies depending on the size of any "person's" purchase (see
"How To Obtain Reduced Initial Sales Charges--Class A Shares: Combination
Purchase Privilege"). Shares issued based on the automatic reinvestment of
income dividends or capital gains distributions are not subject to any sales
charges. The sales charge is divided between your investment dealer and the
Distributor as shown in the following table.
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>
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>
CDSC 1% 0%
</TABLE>
Dealer Concessions
In addition to the dealer discount on purchases of Class A 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.
How To Obtain Reduced Initial Sales Charges--
Class A Shares
Investors choosing Class A 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
Shares: (1) any trustee, director
19
<PAGE>
or officer of the Phoenix Funds, 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 (an "Affiliated Phoenix Fund"); (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 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
purchase 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 Funds, 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
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; (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); or (20) investors who purchase
shares through mutual fund supermarkets and other sponsors or similar strategic
arrangements provided that such investors owned shares purchased through such
supermarkets or strategic arrangements on July 1, 1998, and continue to own such
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.
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
20
<PAGE>
the number of your restricted shares needed to make up the deficiency in sales
charges received. The Distributor will redeem restricted Class A 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 701/2 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 Fund or
any other Affiliated Phoenix Fund qualified plan into a Phoenix-Seneca Fund 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 purchased. 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 and service 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 and service fees 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 Funds mail 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' 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 Funds 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 that the proceeds are undeliverable.
Additional shares will be
21
<PAGE>
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 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 Shares
investor since a sales charge will be paid by the investor on the purchase of
Class A Shares at the same time as other shares are being redeemed. For this
reason, investors in Class A 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, Roth 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 (excluding exchanges made through the systematic exchange privilege as
described in the SAI); 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 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 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
22
<PAGE>
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).
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, or an authorized agent. 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. Redemptions (including by
exchanges) of any Class of Shares held less than 90 days will be subject to a 1%
Early Withdrawal Fee. This fee is paid to the Funds and is intended to protect
long-term investors from the cost of frequent investments and redemptions by
short-term investors. 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, by executors, administrators, trustees,
custodians, guardians, or by 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 Transfer Agent 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>
[Graphic of telephone] 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
[Graphic of envelope] 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
</TABLE>
<TABLE>
<S> <C>
[bullet] Phoenix-Seneca Bond Fund only
[Graphic of hand] By Check
[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 severe 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 below.
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
and C 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 Tax Status" in the SAI 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
23
<PAGE>
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 been in existence for at least one year and 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.
Redemption in Kind
To the extent consistent with state and federal law, the Funds may make
payment of the redemption price either in cash or in kind. However, each Fund
has elected to pay in cash all requests for redemption by any shareholder of
record, limited in respect to each shareholder during any 90 day period to the
lesser of $250,000 or 1% of the net asset value of the Fund at the beginning of
such period. This election has been made pursuant to Rule 18f-1 under the 1940
Act and is irrevocable while the Rule is in effect unless the Securities and
Exchange Commission, by order, permits the withdrawal thereof. In case of a
redemption in kind, securities delivered in payment for shares would be readily
marketable and valued at the same value assigned to them in computing the net
asset value per share of the Fund. A shareholder receiving such securities would
incur brokerage costs when he sold the securities.
NET ASSET VALUE
The net asset value per share of each Fund is determined as of the close of
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.
PORTFOLIO TRANSACTIONS
Pursuant to the Subadvisory Agreement, the 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 Subadviser seeks the best price and execution of the Funds' orders.
Commission rates are a component of the Subadviser's analysis of price. Factors
the 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 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 Subadviser. As a result,
a Fund may pay higher commission rates to such brokers than the lowest available
when the Subadviser believes 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 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 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.
Some securities considered for investment by the Funds may also be
appropriate for other clients served by the Subadviser or its affiliates,
including accounts in which the Subadviser or persons associated with the
Subadviser are investors, such as investment partnerships of which the
Subadviser or such associated persons is the general partner. If a purchase or
sale of securities consistent with the
24
<PAGE>
investment policies of a Fund and one or more of these clients served by the
Subadviser 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 Subadviser.
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 dividends paid in cash and capital
Reinvested gains 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.
ADVISER, SUBADVISER
AND ADMINISTRATOR
Advisory Services. As 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 Subadvisory Agreement. Seneca (including its predecessor,
GMG/Seneca Capital Management, L.P. ("GMG/Seneca")) has been an investment
adviser since 1989, managing equity and fixed-income securities portfolios
primarily for institutions and
25
<PAGE>
individuals. Seneca is owned by certain of its employees, including Gail P.
Seneca, and Phoenix Investment Partners, Ltd.
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. Since January 1998,
Ms. Seneca has also served as Co-Manager of Phoenix Equity Opportunities Series
of Phoenix Strategic Equity Series Fund. Ms. Seneca has been the Chief Executive
and Investment Officer of Seneca or GMG/Seneca since November 1989. From October
1987 until October 1989, she was Senior Vice President of the Asset Management
Division of Wells Fargo Bank and from October 1983 to September 1987, she was
Investment Strategist and Portfolio Manager for Chase Lincoln Bank, heading the
fixed income division.
Richard D. Little is the other team leader for the Phoenix-Seneca Growth
Fund and the Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund. Since January 1998, Mr.
Little has served as Co-Manager of Phoenix Equity Opportunities Series of
Phoenix Strategic Equity Series Fund. Mr. Little has been Director of Equities
with Seneca or GMG/Seneca since December 1989. Before he joined GMG/Seneca, Mr.
Little held positions as an analyst, board member, and regional manager with
Smith Barney, NatWest Securities, and Montgomery Securities.
Charles B. Dicke is the other team leader for the Phoenix-Seneca Bond Fund.
He has been a Fixed-Income Portfolio Manager with Seneca or GMG/Seneca since
October 1991. Before joining GMG/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 or GMG/Seneca since
February 1996. Before joining GMG/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 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 Adviser pays the 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 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 Administration Agreement, PEPCO is
responsible for the day-to-day administrative functions of the Trust. PEPCO has
assumed a Sub-Administration Agreement with State Street Bank pursuant to which
State Street Bank performs most of those functions. Among other things, State
Street Bank 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 Class of Shares
pays PEPCO a monthly fee based on (a) the average net assets of each Fund at the
following incremental annual rates:
<TABLE>
<S> <C> <C>
first $125 million .08%;
next $125 million .06%;
greater than $250 million .04%;
</TABLE>
(b) a minimum fee of $55,000 for each Fund; and (c) an annual fee of $5,000 for
each Class of Shares beyond one, as well as all out-of-pocket expenses.
In the future, PEPCO intends to propose to the Trust that the
Administration Agreement and the Sub-Administration Agreement be terminated and
that PEPCO enter into a new administration agreement with the Trust and new
subadministration agreement with another third party service provider. Under
these new agreements, PEPCO would appoint the third party provider to perform
certain fund accounting services for the Trust and assume direct responsibility
for the other administrative services currently provided under the
Sub-Administration Agreement. PEPCO has undertaken to pay any termination fee
payable to Seneca or State Street upon termination of the Administration
Agreement and the Sub-Administration Agreement.
Investors Fiduciary Trust Company, an affiliate of State Street Bank
("IFTC"), currently acts as the custodian of the Funds' investment portfolios
and their agent to perform certain investment accounting and recordkeeping
functions. In the future, PEPCO intends to propose to the Trust that the
investment accounting and recordkeeping services currently performed by IFTC be
performed by the third party provider under the new subadministration agreement
described above. IFTC would continue to act as the custodian of the Trust.
26
<PAGE>
PEPCO has undertaken to pay any termination fee payable to IFTC upon termination
of the investment accounting and recordkeeping services provided by IFTC.
For its services under the new administration agreement, PEPCO would
receive approximately $90,000 per Class of Shares and would be responsible for
paying the third party. PEPCO has advised the Trust that the fees to be charged
to the Trust under the new administration agreement for all services currently
provided under the Administration Agreement and for the investment accounting
and recordkeeping services currently provided by IFTC would be no more than, and
are expected to be less than, the fees presently charged.
Expense Waiver. The Adviser and the Administrator 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 Adviser and the Administrator have 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 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.
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 four Classes of Shares, Class X Shares (formerly known as
Institutional Shares), Class A Shares (formerly known as Administrative Shares),
Class B Shares and Class C 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 B and Class C Shares have
varying fees and expenses relating to the way in which they are distributed and
the services provided to their Class. 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.
Expenses. The Trust bears all costs of its operations. Certain expenses
directly attributable to a Fund or a Class of Shares may be charged to that Fund
or Class; other expenses are allocated among all the Funds. Class A, Class B,
and Class C 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,
and Class C 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, and Class C 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 Adviser, the Subadviser or the
Distributor is 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>
Standard &
Investment Grade 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>
BACKUP WITHHOLDING INFORMATION
Step 1. Please make sure that the social security number or taxpayer
identification number (TIN) which appears on the Application complies
with the following guidelines:
<TABLE>
<CAPTION>
Account Type Give Social Security Number or Tax Identification Number of:
<S> <C>
Individual Individual
Joint (or Joint Tenant) Owner who will be paying tax
Uniform Gifts to Minors Minor
Legal Guardian Ward, Minor or Incompetent
Sole Proprietor Owner of Business (also provide owner's name)
Trust, Estate, Pension Plan Trust Trust, Estate, Pension Plan Trust (not personal TIN of fiduciary)
Corporation, Partnership,
Other Organization Corporation, Partnership, Other Organization
Broker/Nominee Broker/Nominee
</TABLE>
Step 2. If you do not have a TIN, you must obtain Form SS-5 (Application for
Social Security Number) or Form SS-4 (Application for Employer
Identification Number) from your local Social Security or IRS office and
apply for one. Write "Applied For" in the space on the application.
Step 3. If you are one of the entities listed below, you are exempt from backup
withholding.
[bullet] A corporation
[bullet] Financial institution
[bullet] Section 501(a) exempt organization (IRA, Corporate Retirement
Plan, 403(b), Keogh)
[bullet] United States or any agency or instrumentality thereof
[bullet] A State, the District of Columbia, a possession of the United
States, or any subdivision or instrumentality thereof
[bullet] International organization or any agency or instrumentality
thereof
[bullet] Registered dealer in securities or commodities registered in
the U.S. or a possession of the U.S.
[bullet] Real estate investment trust
[bullet] Common trust fund operated by a bank under section 584(a)
[bullet] An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1)
[bullet] Regulated Investment Company
If you are in doubt as to whether you are exempt, please contact the Internal
Revenue Service.
Step 4.IRS Penalties--If you do not supply us with your TIN, you will be
subject to an IRS $50 penalty unless your failure is due to reasonable
cause and not willful neglect. If you fail to report interest, dividend
or patronage dividend income on your federal income tax return, you will
be treated as negligent and subject to an IRS 5% penalty tax on any
resulting underpayment of tax unless there is clear and convincing
evidence to the contrary. If you falsify information on this form or
make any other false statement resulting in no backup withholding on an
account which should be subject to a backup withholding, you may be
subject to an IRS $500 penalty and certain criminal penalties including
fines and imprisonment.
- -----------
This Prospectus sets forth concisely the information about the Phoenix-Seneca
Funds (the "Trust") which you should know before investing. Please read it
carefully and retain it for future reference.
The Trust has filed with the Securities and Exchange Commission a Statement of
Additional Information, dated July 1, 1998. The Statement contains more detailed
information about the Trust and is incorporated into this Prospectus by
reference. You may obtain a free copy of the Statement by writing the Trust c/o
Phoenix Equity Planning Corporation, 100 Bright Meadow, P.O. Box 2200, Enfield,
Connecticut 06083-2200.
Financial information relating to the Trust is contained in the Annual Report to
Shareholders for the year ended September 30, 1997 and is incorporated into the
Statement of Additional Information by reference.
[Recyle logo] Printed on recycled paper using soybean ink
<PAGE>
Phoenix-Seneca Funds BULK RATE MAIL
PO Box 2200 U.S. POSTAGE
Enfield CT 06083-2200 PAID
SPRINGFIELD, MA
PERMIT NO. 444
[PHOENIX LOGO] PHOENIX
INVESTMENT PARTNERS
PXP 2069 (7/98)
<PAGE>
PHOENIX-SENECA FUNDS
PART B
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
July 1, 1998
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the prospectus of the Funds, dated July 1, 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 Corporation
("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>
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PAGE
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<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 .................................. 24
HOW TO BUY SHARES ................................ 24
ALTERNATIVE PURCHASE ARRANGEMENTS ................ 25
INVESTOR ACCOUNT SERVICES ........................ 26
REDEMPTION OF SHARES ............................. 26
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS .......... 27
PORTFOLIO BROKERAGE .............................. 29
PORTFOLIO TURNOVER ............................... 30
ORGANIZATION ..................................... 31
CUSTODIAN ........................................ 32
TRANSFER AGENT ................................... 32
INDEPENDENT ACCOUNTANTS .......................... 32
FINANCIAL STATEMENTS ............................. 32
APPENDIX ......................................... 32
GLOSSARY ......................................... 33
</TABLE>
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders: (800) 367-5877
Telecommunications Device (TTY)-(800) 243-1926
PXP 2069B (7/98)
<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 four Classes of
Shares: Class X, Class A, Class B and Class C. Class X Shares are offered to
institutional investors, such as pension and profit sharing plans, employee
benefit trusts, endowments, foundations, and corporations, and others who
purchase in certain minimum amounts. The three additional Classes of Shares 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 purchase (Class A) or (ii) on a contingent deferred basis (Class B and Class
C).
The Trust (formerly called the "Seneca Funds") was renamed the
Phoenix-Seneca Funds in connection with the effectiveness of new investment
advisory agreements with Phoenix Investment Counsel, Inc. ("PIC") and Seneca
Capital Management LLC ("Seneca"). At the same time, the Seneca Growth Fund was
renamed the Phoenix-Seneca Growth Fund, the Seneca Mid-Cap "EDGE"(SM) Fund was
renamed the Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund, the Seneca Bond Fund was
renamed the Phoenix-Seneca Bond Fund and the Seneca Real Estate Securities Fund
was renamed the Phoenix-Seneca Real Estate Securities Fund.
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
Subadviser 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 Subadviser'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
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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 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.
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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.
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
Subadviser 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
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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.
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.
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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 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 Subadviser 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.
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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 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 Subadviser 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 with any assets, including equity
securities and non-investment grade debt so long as the assets are liquid,
unencumbered and marked to market daily ("liquid assets"), 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
Subadviser 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 with
liquid assets in a segregated account. 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
Subadviser 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
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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 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 liquid assets 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 Subadviser 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 Subadviser 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
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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.
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 liquid assets 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
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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 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 Subadviser
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 Subadviser 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 Subadviser 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.
Gains and losses on investments in options and futures depend on the
Subadviser's ability to predict correctly the direction of stock prices,
interest rates and other economic factors. 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"
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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 of a segregated account
consisting of liquid assets 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 Subadviser'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 Subadviser 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 (the "1940 Act"), 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
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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 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 Subadviser 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 Subadviser 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.
11
<PAGE>
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 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 liquid assets 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 Subadviser to be qualified, and when, in the judgment of the
Subadviser, 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.
12
<PAGE>
(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.
(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
Subadviser 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 Subadviser determines in good faith based on its
own information that the economic characteristics affecting a particular issuer
make it more appropriate to be engaged in a different industry, the Subadviser
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.
13
<PAGE>
(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 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 (4), 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:
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.
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 returns for the one year period ended September
30, 1997 were as follows:
<TABLE>
<CAPTION>
Class A Class X
Shares Shares
----------- -----------
<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
Shares Shares
----------- -----------
<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:
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.
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 Shares Class X Shares
---------------- ---------------
<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 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 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
Adviser's and Administrator'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 Advisory Agreement and PEPCO's services
under its Administration 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, Core Equity 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 Growth and Income Fund of 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, 1997, PIC had approximately $20.5 billion
in assets under management.
All of the outstanding stock of PIC is owned by Phoenix Equity Planning
Corporation ("PEPCO"), a subsidiary of Phoenix Investment Partners, Ltd.
(previously Phoenix Duff & Phelps Corporation). Phoenix Home Life is a majority
shareholder of Phoenix Investment Partners, Ltd. 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 Investment Partners, Ltd. is a New York Stock Exchange traded
company that provides various financial advisory services to institutional
investors, corporations and individuals through operating subsidiaries.
Pursuant to the Investment Advisory Agreement, the Adviser: (a) supervises
and assists in the management of the assets of each Fund, furnishes each Fund
with research, statistical and advisory services and provides regular reports to
the Trustees; (b) provides advice and assistance with the operations of the
Trust, compliance support, preparation of the Trust's registration statements,
proxy materials and other documents and advice and assistance of the Adviser's
General Counsel; and (c) furnishes office facilities, personnel necessary to
provide advisory services to the Funds, personnel to serve without salaries as
officers or agents of the Trust and compensation and expenses of any Trustees
who are also full-time employees of the Adviser or any of its affiliates.
Pursuant to the Subadvisory Agreement, PIC has delegated to Seneca the
responsibility for making investment decisions for the Funds and selecting
brokers and dealers to execute transactions for each Fund.
The Funds' 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 $4.4 billion of institutional and private investment accounts.
In managing the assets of the Funds, the Subadviser furnishes continuously
an investment program for each Fund consistent with the investment objectives
and policies of that Fund. More specifically, the 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. To carry out such determinations, the Subadviser places
orders for the investment and reinvestment of each Fund's assets (see "Portfolio
Brokerage").
For its investment advisory services under the Investment Advisory
Agreement, the Adviser receives a fee, payable monthly, from Phoenix-Seneca
Growth Fund equal to 0.70% per annum of such Fund's average daily net assets,
from Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund equal to 0.80% per annum of such
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 Adviser pays the 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, respectively, of such Fund's average daily net assets.
For the period ended September 30, 1997, Seneca and the former investment
manager, GMG/Seneca Capital Management, L.P. ("GMG/Seneca"), earned investment
management fees of $200,056, $89,157, $34,294 and $164,147 for services rendered
to Phoenix-Seneca Growth Fund, Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund,
Phoenix-Seneca Bond Fund and Phoenix-Seneca Real
17
<PAGE>
Estate Securities Fund, respectively. For the fiscal year ended September
30, 1997, Seneca and GMG/Seneca reimbursed $5,174 for the Phoenix-Seneca Growth
Fund, $135,798 for the Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund, $126,387 for the
Phoenix-Seneca Bond Fund and $16,628 for the Phoenix-Seneca Real Estate
Securities Fund.
For the period ended September 30, 1996, Seneca and GMG/Seneca earned
investment management fees of $30,334, $18,471, $6,283, and $1,630 for services
rendered to Phoenix-Seneca Growth Fund, Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund,
Phoenix-Seneca Bond Fund and Phoenix-Seneca Real Estate Securities Fund,
respectively. Each of these fees was waived in its entirety by Seneca and
GMG/Seneca.
The management fees are accrued daily and will be prorated with respect to
any Fund if the Adviser shall not have acted as that Fund's investment adviser
during any entire monthly period. The Investment Advisory Agreement provides
that if the operating expenses of a Fund in any year, excluding taxes, brokerage
commissions, interest, and extraordinary expenses, exceed the expense limits set
by state securities law administrators in states in which that Fund's shares are
sold, the Adviser will reimburse the amount of such excess. Recent federal
legislation preempts states' abilities in most circumstances to impose such
expense limits.
The Adviser and the Administrator have voluntarily agreed to reimburse the
Funds' operating expenses 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
- ----------------------------- --------- --------- --------- ----------
<S> <C> <C> <C> <C>
Growth Fund 1.25% 1.85% 2.60% 2.60%
Mid-Cap "EDGE"(SM) Fund 2.10% 2.70% 3.45% 3.45%
Bond Fund 1.85% 2.45% 3.20% 3.20%
Real Estate Securities Fund 2.35% 3.05% 3.80% 3.80%
</TABLE>
The Adviser and the Administrator may discontinue or modify any such waivers or
reimbursements it may provide in the future at its discretion.
Under the Investment Advisory Agreement, PIC is not liable to the Trust or
any shareholder for any error of judgment or mistake of law or any loss suffered
by the Trust or any shareholder in connection with the Investment Advisory
Agreement, except a loss resulting from PIC's willful misfeasance, bad faith,
gross negligence or reckless disregard of duty. Under the Subadvisory Agreement,
Seneca is not liable for actions taken in its best professional judgment, in
good faith and believed by it to be authorized, provided such actions are not in
breach of the Funds' investment objectives, policies and restrictions or the
result of willful misfeasance, bad faith, gross negligence or breach of duty or
obligations.
The Investment Advisory 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 Trustees who are not "interested
persons" (as defined in the 1940 Act) (the "Independent Trustees"). The
Subadvisory Agreement may be amended at any time by written agreement among the
Subadviser, the Adviser and the Trust, except that any changes to the duties of
and fees payable to the Subadviser will also be subject to the approval of the
Trustees and a majority of the applicable Fund's outstanding shares. Unless
terminated, the Investment Advisory Agreement and the Subadvisory Agreement
continue in full force and effect until June 30, 2000, and for successive
periods of one year thereafter, but only as long as each such continuance is
approved annually by a majority vote of the Trustees or by a vote of the holders
of a majority of the outstanding 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 Advisory Agreement and the Subadvisory Agreement may be
terminated without penalty by any party upon 60 days' written notice and
automatically terminates in the event of its assignment. In the event of
termination, or at the request of PIC, the Trust and the Funds will eliminate
all reference to "Phoenix" from their names. Upon such request, PIC has agreed
to submit the question of continuing the Investment Advisory Agreement to a vote
of the shareholders of the Trust. In the event of termination, or at the request
of Seneca, the Trust and the Funds will eliminate all references to "Seneca"
from their names. Upon such request, Seneca has agreed to submit the question of
continuing the Subadvisory Agreement to a vote of the shareholders of the Trust.
Gail P. Seneca, President and Trustee of the Trust, Sandra J. Westhoff,
Treasurer of the Trust, and Thomas N. Steenburg, Secretary of the Trust, are
each an "affiliated person" of the Trust (as defined in the 1940 Act). Gail P.
Seneca, as Chief Executive and Investment Officer and owner of more than 5% of
the equity of Seneca, and Sandra J. Westhoff, as Chief Operating Officer of
Seneca, are each an "affiliated person" of Seneca. Thomas N. Steenburg, as Vice
President, Secretary and Counsel of PIC and Secretary, General Counsel and
Compliance Officer of Seneca, is an "affiliated person" of PIC and Seneca.
In the management of the Trust and their other accounts, the Subadviser
allocates 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
18
<PAGE>
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. See also "Portfolio
Brokerage."
In an attempt to avoid any potential conflict with portfolio transactions
for the Funds, the Adviser, Subadviser and the Trust, on behalf of each Fund,
have adopted restrictions on personal securities trading by personnel of the
Adviser, Subadviser and their affiliates. These restrictions include:
pre-clearance of all personal securities transactions and a prohibition on
purchasing initial public offerings of securities.
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 has assumed an agreement (the
"Sub-Administration Agreement") with State Street Bank and Trust Company ("State
Street") under which State Street provides these services for the same fees. 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. During
each year, each Fund will be obligated to pay a minimum Administrative Services
Fee of $55,000. In addition, for performing Blue Sky and other administrative
services PEPCO is entitled to receive from each Fund an annual fee equal to
$5,000 for each Class of Shares in such Fund. If the Trust terminates the
Administration Agreement prior to March 1999, the Trust is obligated to pay a
termination fee in the amount of $105,000 as of May 8, 1998.
In the future, PEPCO intends to propose to the Trust that the
Administration Agreement and the Sub-Administration Agreement be terminated and
that PEPCO enter into a new administration agreement with the Trust and new
subadministration agreement with another third party service provider. Under
these new agreements, PEPCO would appoint the third party provider to perform
certain fund accounting services for the Trust and assume direct responsibility
for the other administrative services currently provided under the
Sub-Administration Agreement. PEPCO has undertaken to pay any termination fee
payable to Seneca or State Street upon termination of the Administration
Agreement and the Sub-Administration Agreement.
Investors Fiduciary Trust Company, an affiliate of State Street ("IFTC"),
currently acts as the custodian of the Funds' investment portfolios and their
agent to perform certain investment accounting and recordkeeping functions. In
the future, PEPCO intends to propose to the Trust that the investment accounting
and recordkeeping services currently performed by IFTC be performed by the third
party provider under the new subadministration agreement described above. IFTC
would continue to act as the custodian of the Trust. PEPCO has undertaken to pay
any termination fee payable to IFTC upon termination of the investment
accounting and recordkeeping services provided by IFTC.
For its services under the new administration agreement, PEPCO would
receive approximately $90,000 per Class of Shares and would be responsible for
paying the third party. PEPCO has advised the Trust that the fees to be charged
to the Trust under the new administration agreement for all services currently
provided under the Administration Agreement and for the investment accounting
and recordkeeping services currently provided by IFTC would be no more than, and
are expected to be less than, the fees presently charged.
For the period ended September 30, 1997, Seneca earned 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. For the period ended September 30, 1996, Seneca
earned fees of $35,122, $34,955, $35,001 and $34,976 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. Each of these fees in
1996 was waived in its entirety by Seneca.
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
19
<PAGE>
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 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' Investment Advisory, Subadvisory and Administration Agreements
each provide that the Adviser, 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 and an affiliate of the
Adviser and Subadviser. Shares of the Funds may be purchased through investment
dealers who have sales agreements with the Distributor.
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 appropriate Class of outstanding voting securities of
the Funds, or by vote of a majority of the Funds' Trustees who are not parties
to the Underwriting Agreement or "interested persons" of any party 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.
Dealers with whom the Distributor has entered into sales agreements receive
sales charges in accordance with the commission table set forth in the
Prospectus. During the previous fiscal years, purchasers of shares of the Funds
did not pay any sales charges. 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" 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 and Class C Shares for
furnishing shareholder services and reimburse the Distributor monthly for actual
distribution related expenses of the Distributor up to 0.75% annually of the
average daily net assets of the Funds' Class B and Class C Shares.
Expenditures under the Plans for sale and promotion 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); (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 the Trust 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
20
<PAGE>
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 provide 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.
For the fiscal year ended September 30, 1997, the Funds paid to Genesis
Merchant Group Securities, LLC ("GMG Securities"), (one of the Trust's former
distributors), $13,453 pursuant to the former distribution agreement. As of
September 30, 1997, the Funds had accrued expenses of $4,506 pursuant to the
distribution agreement. During the last fiscal year, GMG Securities expended the
amounts indicated below in connection with the distribution of the Funds'
shares:
<TABLE>
<S> <C>
Advertising: $26,000
Printing and mailing of Prospectuses: $83,000
Other: $28,000
</TABLE>
TRUSTEES AND OFFICERS
The Trustees have responsibility for management of the business of the
Trust. The 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 45 Ms. Seneca has been President and a Trustee of the Trust
President and Trustee San Francisco, CA 94133 since February 1996. Since January 1998, she has
served as Vice President of National Securities &
Research Corporation, an affiliate of PIC and PEPCO.
Since July 1, 1996, she has been President and Chief
Executive and Investment Officer of Seneca. Since
November 1989, she has been Chief Executive and
Investment Officer and a managing general partner of
GMG/Seneca.
Sandra J. Westhoff,* 909 Montgomery Street 39 Ms. Westhoff has been Treasurer of the Trust since
Treasurer San Francisco, CA 94133 February 1996. She also served as a Trustee of the Trust
from February 1996 to February 1998. From September
1994 to present, she has been Chief Administrative
Officer of GMG/Seneca, and, since July 1, 1996, Chief
Operating Officer of Seneca. From 1989 to 1994, she was
Director of Finance for the San Francisco Newspaper
Agency.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Name and Title Address Age Principal Occupations During Past Five Years
- ------------------------ ------------------------- ----- -----------------------------------------------------------
<S> <C> <C> <C>
Thomas N. Steenburg,* 56 Prospect Street 49 Mr. Steenburg has been Secretary of the Trust since March,
Secretary Hartford, CT 06115 1998. He has also held the following positions: Secretary,
General Counsel and Compliance Officer of Seneca since
June 1997; Vice President, Secretary and Counsel of PIC,
National Securities & Research Corporation, Phoenix
Investment Partners, Ltd. and PEPCO since November
1995, Duff & Phelps Investment Management Co. since
January 1996 and Roger Engemann & Associates, Inc.
since March 1998; Vice President--Compliance of
Phoenix-Aberdeen International Advisers, LLC since May
1996; Assistant Secretary, Phoenix Funds since November
1995, Phoenix Duff & Phelps Institutional Mutual Funds
since February 1996 and Phoenix-Aberdeen Series Fund
since August 1996; and Counsel, Phoenix Home Life
Mutual Insurance Company from October 1991 through
November 1995.
Mary Ann Cusenza,** 909 Montgomery Street 41 Ms. Cusenza has been a Trustee of the Trust since
Trustee San Francisco, CA 94133 February 1996. She is currently a private investor. From
October 1996 to May 1998, she was Vice President and
Chief Financial Officer of Tularik Inc., a biotechnology
company. 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,** 909 Montgomery Street 37 Ms. Evers has been a Trustee of the Trust since February
Trustee San Francisco, CA 94133 1996. She is a founder and Vice President of Ellis
Partners, Inc., a real estate investment firm, established
in 1993.
Paul E. Erdman,** 909 Montgomery Street 65 Mr. Erdman has been a Trustee of the Trust since
Trustee San Francisco, CA 94133 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.
** Member of the Trust's Audit Committee.
Compensation of Trustees and Officers
The Funds pay no compensation to its officers or Trustees affiliated with
the Adviser or Subadviser. Each Trustee of the Trust who is not an "interested
person" of the Trust ("Independent Trustee") 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. Effective July 1,
1997, the Independent Trustees were entitled to an additional $2,500 quarterly
retainer.
The following table sets forth the compensation paid to the Trustees during
the fiscal year ended September 30, 1997.
<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
Mary Ann Cusenza $10,000 -- $10,000
Melinda Ellis Evers $10,000 -- $10,000
Paul E. Erdman $10,000 -- $10,000
</TABLE>
For services to the Funds and expenses during the last fiscal year, the
Trustees received an aggregate of $32,524.
Officers and Trustees of the Trust who are also principals in and
employees of PIC or Seneca may receive indirect compensation by reason of
investment advisory fees paid by the Trust to PIC in its capacity as the
Adviser.
22
<PAGE>
Principal Shareholders
The following table sets forth information as of April 24, 1998 with
respect to each person who owns of record or is known by the Trust to own of
record or beneficially 5% or more of any class of the Trust's outstanding equity
securities:
<TABLE>
<CAPTION>
Name of Name of Number of Percent
Shareholder Fund and Class Shares(1) of Class
- --------------------------------------------- --------------------------------------- ---------------- -----------
<S> <C> <C> <C>
Charles Schwab & Company(2) Growth Class A Shares 119,273.716 53.84%
101 Montgomery Street Growth Class X Shares 311,672.178 14.86%
San Francisco, CA 94104 Mid-Cap "EDGE"(SM) Class A Share 43,831.327 22.87%
Mid-Cap "EDGE"(SM) Class X Shares 71,274.948 11.76%
Bond Class X Shares 200,629.984 23.48%
Real Estate Securities Class A Shares 76,150.484 42.62%
BT Alex. Brown Incorporated(2) Mid-Cap "EDGE"(SM) Class X Shares 135,902.226 22.43%
PO Box 1346 Bond Class X Shares 122,348.713 14.32%
Baltimore, MD 21203 Real Estate Securities Class X Shares 209,144.319 10.65%
State Street Bank & Trust Co. Mid-Cap "EDGE"(SM) Class A Shares 9,626.156 5.02%
C/F Thomas A Silberman IRA Growth Class A Shares 16,280.336 7.35%
270 Euclid Ave.
Winnetka, IL 60093
WPO/NCC Investors LLC Mid-Cap "EDGE"(SM) Class A Shares 10,178.367 5.31%
3000 Sand Hill Rd Ste 3-290
Menlo Park, CA 94025
Susan R. Mintz Real Estate Securities Class A Shares 17,204.513 9.63%
1750 Saint Charles Ave. Apt 610
New Orleans, LA 70130
NFSC FEBO Real Estate Securities Class A Shares 13,880.285 7.77%
Donald J Riskind TTEE
Donald J Riskind Trust U/A 8/3/94
5855 N Kolb Rd Apt 8212
Tucson, AZ 85750
Robert A. Swanson TTEE Growth Class X Shares 154,203.125 7.35%
Robert A. Swanson Charitable Remainder Trust
DTD 9-15-94
c/o K&E Management Ltd
400 S El Camino Real Ste 1289
San Mateo, CA 94402
Tenderloin Neighborhood Dev Corp Bond Class X Shares 66,986.973 7.84%
201 Eddy St
San Francisco, CA 94102
Builders of the Adytum Bond Class X Shares 72,249.398 8.46%
5101 N Figueroa St
Los Angeles, CA 90042
Pacific Bank Cust Real Estate Securities Class X Shares 315,327.293 16.06%
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 Shares 280,923.015 14.31%
Walker Security Investments LLC
ATTN Ginger Bradley
100 Montgomery St
San Francisco, CA 94194
</TABLE>
---------------
(1) Unless otherwise indicated, represents shares owned of record and
beneficially.
(2) Shares owned of record.
23
<PAGE>
As of April 30, 1998, 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: 7,698.305 shares of Phoenix-Seneca Growth Fund;
10,291.536 shares of Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund; and 29,315.110
shares of Phoenix-Seneca Real Estate Securities Fund. The shares owned by the
Trustees and officers were of 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 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). 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, Jr. Day (the Monday following Martin Luther King, Jr.'s birthday),
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 are reported or such pricing is not provided, the mean between the most
recent bid and asked prices. Securities, 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
determine 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 for Class A, Class B and Class C Shares. 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. The minimum initial investment for Class X Shares is
$250,000, and the minimum subsequent investment for Class X Shares is $10,000.
Completed applications for the purchase of shares should be mailed to:
Phoenix-Seneca Funds, c/o State Street Bank and Trust Company, P.O. Box 8301,
Boston, MA 02266-8301.
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The Trust has authorized one or more brokers to accept on its behalf
purchase and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Trust's behalf.
The Trust will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Customer orders will be priced at the Funds' net asset values next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
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"). Each Fund also 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. 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 and services fees and contingent
deferred sales charges on Class B or C Shares would be less than the initial
sales charge and accumulated distribution and services fees on Class A 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 and service fees relating to each Class of
Shares will be borne exclusively by that class. See "Dividends, Distributions
and Tax Status."
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 ongoing service fees 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 ongoing distribution and service fees 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 and service fees 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 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 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 and service fees. 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, Class B Shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B Shares
in a shareholder's 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, a pro rata portion of
the Class B Shares 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
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charges. Class C Shares are subject to ongoing distribution and services fees
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 X Shares
Class X Shares are offered without any sales charges to institutional
investors, such as pension and profit sharing plans, other employee benefit
trusts, investment advisers, endowments, foundations and corporations, and
others who pruchase the minimum amounts.
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-Seneca Fund
may be exchanged for shares of the same Class of another Phoenix-Seneca Fund or
any other Affiliated 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 described
below. Shareholders may exchange shares held in book-entry form for an
equivalent number (value) of the same class of shares of any other Affiliated
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 "Dividends, Distributions and Tax
Status").
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 Affililated 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 Affiliated 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 Affiliated Phoenix Funds 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 the Transfer
Agent. 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
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 a 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.
The Trust has authorized one or more brokers to accept on its behalf
purchase and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Trust's behalf.
The Trust will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Customer orders will be priced at the Funds' net asset values next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
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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.
By Check (Phoenix-Seneca Bond Fund Only)
Any shareholder of this Fund may elect to redeem shares held in his account
by check. Checks will be sent to an investor upon receipt by the Transfer Agent
of a completed application and signature card (attached to the application). If
the signature card accompanies an individual's initial account application, the
signature guarantee section of the form may be disregarded. However, the Trust
reserves the right to require that all signatures be guaranteed prior to the
establishment of a check writing service account. When an authorization form is
submitted after receipt of the initial account application, all signatures must
be guaranteed regardless of account value.
Checks may be drawn payable to any person in an amount of not less than
$500, provided that immediately after the payment of the redemption proceeds the
balance in the shareholder's account is $500 or more.
When a check is presented to the Transfer Agent for payment, a sufficient
number of full and fractional shares in the shareholder's account will be
redeemed to cover the amount of the check. The number of shares to be redeemed
will be determined on the date the check is received by the Transfer Agent.
Presently there is no charge to the shareholder for the check writing service,
but this may be changed or modified in the future upon two weeks written notice
to shareholders. Checks drawn from Class B and Class C accounts are subject to
the applicable deferred sales charge, if any.
The checkwriting procedure for redemption enables a shareholder to receive
income accruing on the shares to be redeemed until such time as the check is
presented to the Transfer Agent for payment. Inasmuch as canceled checks are
returned to shareholders monthly, no confirmation statement is issued at the
time of redemption.
Shareholders utilizing withdrawal checks will be subject to the Transfer
Agent's rules governing checking accounts. A shareholder should make sure that
there are sufficient shares in his account to cover the amount of any check
drawn. If insufficient shares are in the account and the check is presented to
the Transfer Agent on a banking day on which the Trust does not redeem shares
(for example, a day on which the New York Stock Exchange is closed), or if the
check is presented against redemption proceeds of an investment made by check
which has not been in the account for at least fifteen calendar days, the check
may be returned marked "Non-sufficient Funds" and no shares will be redeemed. A
shareholder may not close his account by a withdrawal check because the exact
value of the account will not be known until after the check is received by the
Transfer Agent.
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. If in any taxable year a Fund
does not qualify as a regulated investment company, all of its taxable income
will be taxed at corporate rates.
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,
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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.
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.
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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.
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. 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
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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 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 the Subadviser and
its affiliates in the performance their decision-making responsibilities.
Each year, the Subadviser 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 they
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 the
Investment Adviser (and its affiliates) in servicing all its accounts and not
all such information may be used by the Subadviser, in its capacity as the
Subadviser, 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.
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 Subadviser. Investment decisions for a Fund and for the
Subadviser'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 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
Subadviser, including accounts (such as investment limited partnerships) in
which the Investment Adviser or affiliated or associated persons of the
Subadviser 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.
For the fiscal years ended September 30, 1996 and 1997, the Funds paid
brokerage commissions of $31,875 and $212,930, respectively. The increase in
brokerage commissions paid by the Funds was due to the significant growth in
assets during the 1997 fiscal year. Brokerage commissions of $29,607 paid during
the fiscal year ended September 30, 1997 were paid on portfolio transactions
aggregating $16,039,033 and were executed by broker-dealers who provided
research and other statistical and factual information.
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.
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. The portfolio turnover during the Funds' first
fiscal year (1996) was somewhat
30
<PAGE>
lower than what may be considered normal as the Funds were accumulating assets
and experienced few investor redemptions. During the 1997 fiscal year, the Funds
experienced rapid growth in assets which increased the Funds' portfolio turnover
ratios. In addition, market volatility in the equity markets produced increased
trading opportunities for the Phoenix-Seneca Growth and Phoenix-Seneca Mid-Cap
"EDGE"(SM) Funds.
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 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 four
Classes of Shares for each series, designated Class X, Class A, Class B and
Class C Shares. See "General Information" in the Prospectus for a detailed
description of the respective rights of the Classes of Shares.
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
31
<PAGE>
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 801
Pennsylvania 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.
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. PEPCO has retained State Street as subagent and PEPCO
will pay State Street's fee.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110, are
the independent accountants for the Trust. Professional services performed by
Price Waterhouse 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 Trustees. Deloitte & Touche LLP were the
independent accountants for the Trust prior to 1998.
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 CERTAIN 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.
32
<PAGE>
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.
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>
PART C--OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Part A: Financial Highlights
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 for the year ended September 30, 1997: Financial
Statements, Notes to Financial Statements and Independent Auditors'
Report on the foregoing.
(b) Exhibits:
1. (a) Agreement and Declaration of Trust.(1)
(b) Certificate of Trust.(1)
2. By-Laws.(1)
3. None.
4. Instruments defining shareholder rights incorporated by reference to
Exhibits 1 and 2 above.
5. (a) Form of Investment Advisory 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. (a) Form of Underwriting Agreement between the Registrant and Phoenix
Equity Planning Corporation ("PEPCO").
(b) Form of Sales Agreement between PEPCO and dealers.
(c) Form of Supplement to Phoenix Family of Funds Sales Agreement.
(d) Form of Financial Institution Sales Contract for the Phoenix Family
of Funds.
7. None.
8. Form of Custody and Investment Accounting Agreement (the "Custody
Agreement") between the Registrant and Investors Fiduciary Trust Company
("IFTC").(2)
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 Seneca Growth Fund, Seneca
Mid-Cap "EDGE"(SM) Fund, Seneca Bond Fund, and Seneca Real Estate
Securities Fund, on the one hand, and Seneca on the other.(4)
(c) Form of Sub-Administration Agreement (the "Sub-Administration
Agreement") between the Registrant, Seneca and State Street Bank and
Trust Company.(4)
10. Opinion and consent of Morris, Nichols, Arsht & Tunnell.(3)
11. Consents of Price Waterhouse LLP and Deloitte & Touche LLP, Independent
Public Accountants.
12. None.
13. Form of Share Purchase Agreement (the "Share Purchase Agreement")
between Registrant and GMG/Seneca Capital Management, L.P.(3)
14. Model IRA Plan.(3)
15. (a) Form of Amended and Restated 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
16. Schedule for computation of each performance quotation provided in
response to Item 22.(4)
C-1
<PAGE>
17. Financial Data Schedules
18. Form of Second Amended and Restated Rule 18f-3 Plan.
19. Powers of Attorney for Sandra J. Westhoff, Melinda Ellis Evers, Paul E.
Erdman and Mary Ann Cusenza.(3)
-----------
(1) Incorporated by reference to Registrant's Registration Statement on Form
N-1A dated December 18, 1995.
(2) Incorporated by reference to Pre-effective Amendment No. 1 to
Registrant's Registration Statement dated February 13, 1996.
(3) Incorporated by reference to Pre-effective Amendment No. 2 to
Registrant's Registration Statement dated February 29, 1996.
(4) Incorporated by reference by Registrant to Post-Effective Amendment No.
1 to Registrant's Registration Statement dated October 31, 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 April 30, 1998
- ------------------------------------------- ------------------
<S> <C>
Phoenix-Seneca Growth Fund
Class X 154
Class A 133
Class B 0
Class C 0
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
Class X 116
Class A 197
Class B 0
Class C 0
Phoenix-Seneca Bond Fund
Class X 76
Class A 0
Class B 0
Class C 0
Phoenix-Seneca Real Estate Securities Fund
Class X 111
Class A 87
Class B 0
Class C 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 Administration Agreement and
Sub-Administration Agreement (Section 8), Underwriting Agreement (Section 8),
Custody Agreement (Section 5) and Transfer Agency and Service Agreement (Article
6) each provides that the Trust will indemnify the other party (or parties, as
the case may be) to the agreement for certain losses.
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
C-2
<PAGE>
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.
Item 28. Business and Other Connections of Investment Adviser.
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
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, at 1776
Heritage Drive, North Quincy, Massachusetts, 02171-2197, (4) Registrant's
Transfer Agent, Phoenix Equity Planning Corporation, at 100 Bright Meadow Blvd.,
Enfield, Connecticut 06082, and (5) Registrant's Custodian, Investors Fiduciary
Trust Company, at 801 Pennsylvania Street, Kansas City, Missouri 64105.
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
20th day of May, 1998.
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 May 20, 1998
- ---------------------------- (Chief Executive Officer)
Gail P. Seneca
* Treasurer May 20, 1998
- ---------------------------- (Chief Financial Officer
Sandra J. Westhoff and Accounting Officer)
* Trustee May 20, 1998
- ----------------------------
Mary Ann Cusenza
* Trustee May 20, 1998
- ----------------------------
Paul E. Erdman
* Trustee May 20, 1998
- ----------------------------
Melinda Ellis Evers
*By: /s/ GAIL P. SENECA
------------------------
Gail P. Seneca as
Attorney-in-fact
</TABLE>
C-5
EXHIBIT 5(a)
PHOENIX-SENECA FUNDS
INVESTMENT ADVISORY AGREEMENT
<PAGE>
PHOENIX-SENECA FUNDS
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT made effective as of the ___ day of February, 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;
<PAGE>
-2-
(iii) Implementation of the investment program for
each Series including the purchase and sale
of securities; and
(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
<PAGE>
-3-
(e) Any subadviser recommended by the Adviser and
appointed to act on behalf of the Trust.
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.
<PAGE>
-4-
(b) Compensation shall accrue immediately upon the
effective date of this Agreement.
(c) If there is termination of this Agreement during a
month, each Series' fee for that month shall be
proportionately computed upon the average of the daily
net asset values of such Series for such partial period
in such month.
(d) The Adviser agrees to reimburse the Trust for the
amount, if any, by which the total operating and
management expenses for any Series (including the
Adviser's compensation, pursuant to this paragraph, but
excluding taxes, interest, costs of portfolio
acquisitions and dispositions and extraordinary
expenses), for any "fiscal year" exceed the level of
expenses which such Series 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.
<PAGE>
-5-
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 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 until June
30, 2000, 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
<PAGE>
-6-
the outstanding voting securities" of any other Series of the Trust affected
thereby and (b) that this Agreement has not been approved by the holders of a
"vote of a majority of the outstanding voting securities" of the Trust, unless
either such additional approval shall be required by any other applicable law or
otherwise.
<PAGE>
-7-
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>
-8-
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
EXHIBIT 5(b)
PHOENIX-SENECA FUNDS
SUBADVISORY AGREEMENT
<PAGE>
PHOENIX-SENECA FUNDS
SUBADVISORY AGREEMENT
February , 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
subadviser 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 or the Trust, for the following:
<PAGE>
2
(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 "best
execution" on the particular transaction and determines in good faith
that the commission cost is reasonable in relation to the value of the
brokerage and research services (as defined in Section 28(e)(3) of the
Securities Exchange Act of 1934) provided by such broker or dealer to
the Subadviser, viewed in terms of either that
<PAGE>
3
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.
<PAGE>
4
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.
13. Seneca Name. 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
<PAGE>
5
"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.
14. 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 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.
15. Effective Date; Term. This Agreement shall become effective on the date
set forth on the first page of this Agreement. Unless terminated as
hereinafter provided, this Agreement shall remain in full force and
effect until June 30, 2000, and thereafter only so long as its
continuance has been specifically approved at least annually by the
Trustees in accordance with Section 15(a) of the Act, and by the
majority vote of the disinterested Trustees in accordance with the
requirements of Section 15(c) thereof.
16. Termination. This Agreement may be terminated by any party, without
penalty, immediately upon written notice to the other parties in the
event of a breach of any provision thereof by a party so notified, or
otherwise, upon 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.
17. Applicable Law. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter
enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of
the State of Delaware.
18. Severability. If any term or condition of this Agreement shall be
invalid or unenforceable to any extent or in any application, then the
remainder of this Agreement shall not be affected thereby, and each and
every term and condition of this Agreement shall be valid and enforced
to the fullest extent permitted by law.
<PAGE>
6
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.
<PAGE>
- --------------------------------------
* 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.
EXHIBIT 6(a)
UNDERWRITING AGREEMENT
<PAGE>
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(c);
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);
1
<PAGE>
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;
e) in connection with the reinvestment by Fund shareholders of
dividend and capital gains distributions; or
f) pursuant to any applicable reinstatement privilege or as
otherwise provided in the then current registration statement
of the Fund.
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
2
<PAGE>
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.
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 fee under the terms and conditions set forth in the Fund's
distribution plan adopted under Rule 12b-1 under the Act, as the plan may be
amended from time to time (the "12b-1 Plan") and subject to any further
limitations on such fees as the Trustees may impose. The Underwriter may also
receive from the Fund a service fee under the 12b-1 Plan 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,
3
<PAGE>
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.
13. In performing its services pursuant to this Agreement, the Underwriter shall
comply with all applicable laws, rules and regulations, including, without
limitation, all rules and regulations made or adopted by the SEC or by any
securities association registered under the Exchange Act, and the securities
laws of those states in which Shares are sold.
14. The Underwriter shall prepare and deliver reports to the Treasurer of the
Fund on a regular, at least quarterly basis, showing the expenses incurred
pursuant to this Agreement and pursuant to the 12b-1 Plan, and the purposes
therefor, as well as any supplemental reports the Trustees from time to time may
reasonably request. The Underwriter also agrees to furnish such information as
is reasonably necessary to assist the Trustees in evaluating any distribution
plan affecting any Class, or any proposed amendment thereto.
15. The Fund agrees to pay the following expenses:
a) the cost of mailing any 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
4
<PAGE>
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.
16. 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, Banks or 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.
17. 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 17 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 contingent deferred sales charge will be imposed shall be
determined in accordance with, and in the manner set forth in, the Fund's
prospectus.
18. 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
5
<PAGE>
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 or its affiliate 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 or affiliate 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.
19. 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 or based upon
a) any wrongful act by the Underwriter or any of its employees or
representatives, or
b) 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 made in reliance upon information furnished or
confirmed in writing to the Fund by the Underwriter.
20. 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;
6
<PAGE>
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.
21. 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 who are not parties to this Agreement or Interested Persons of any such
party and have no direct or indirect financial interest in the operation of the
12b-1 Plan or in any related agreement ("Disinterested 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. 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.
22. Subject to prior termination as provided in paragraph 21, 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 Disinterested
Trustees, cast in person at a meeting of the Trustees called for the purpose of
voting on such approval.
23. 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. Without limiting the generality of
the foregoing, neither the Underwriter 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.
24. 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 extent
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.
7
<PAGE>
PHOENIX-SENECA FUNDS
By:
-------------------------------
PHOENIX EQUITY PLANNING CORPORATION
By:
-------------------------------
8
EXHIBIT 6(b)
SALES AGREEMENT
<PAGE>
[logo]PHOENIX Phoenix Funds
DUFF&PHELPS Sales Agreement
- - ------------------------------------------------------------------------------
PHOENIX EQUITY PLANNING CORPORATION
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, Connecticut 06083-2200
Dealer Name:
Address:
Phoenix Equity Planning Corporation ("PEPCO", "we", "us", or "our") invites you
to participate in the sale and distribution of shares of registered investment
companies (which shall collectively be referred to hereinafter as the "Funds")
for which we are national distributor or principal underwriter, and which may be
listed in Annex A hereto which such Annex may be amended by us from time to
time. Upon acceptance of this agreement by PEPCO, you may offer and sell shares
of each of the Funds (hereafter "Shares") subject, however, to the terms and
conditions hereof including our right to suspend or cease the sale of such
shares. For the purposes hereof, the above referenced dealer shall be referred
to as "you".
1. You understand and agree that in all sales of Shares to the public, you
shall act as dealer for your own account. All purchase orders and
applications are subject to acceptance or rejection by us in our sole
discretion and are effective only upon confirmation by us. Each purchase
will be deemed to have been consummated in our principal office subject to
our acceptance and effective only upon confirmation to you by us.
2. You agree that all purchases of Shares by you shall be made only for the
purpose of covering purchase orders already received from your customers
(who may be any person other than a securities dealer or broker) or for
your own bona-fide investment.
3. You shall offer and sell Shares pursuant to this agreement for the purpose
of covering purchase orders of your customers, to the extent applicable,
(a) at the current public offering price ("Offering Price") for Class A
Shares or (b) at the Net Asset Value for Class B shares as set forth in the
current prospectus of each of the funds. The offer and sale of Class B
Shares by you is subject to Annex B hereto, "Compliance Standards for the
Sale of the Phoenix Funds Under Their Alternative Purchase Arrangements".
4. You shall pay us for Shares purchased within three (3) business days of the
date of our confirmation to you of such purchase or within such time as
required by applicable rule or law. The purchase price shall be (a) the
Offering Price, less only the applicable dealer discount (Dealer Discount)
for Class A Shares, if applicable, or (b) the Net Asset Value, less only
the applicable sales commission (Sales Commission) for Class B Shares, if
applicable, as set forth in the current prospectus at the time the purchase
is received by us. We have the right, without notice, to cancel any order
for which payment of good and sufficient funds has not been received by us
as provided in this paragraph, in which case you may be held responsible
for any loss suffered resulting from your failure to make payment as
aforesaid.
5. You understand and agree that any Dealer Discount, Sales Commission or fee
is subject to change from time to time without prior notice. Any orders
placed after the effective date of any such change shall be subject to the
Dealer Discount or Sales Commission in effect at the time such order is
received by us.
6. You understand and agree that Shares purchased by you under this Agreement
will not be delivered until payment of good and sufficient funds has been
received by us. Delivery of Shares will be made by credit to a shareholder
open account unless delivery of certificates is specified in the purchase
order. In order to avoid unnecessary delay, it is understood that, at your
request, any Shares resold by you to one of your customers will be
delivered (whether by credit to a shareholder open account or by delivery
of certificates) in the name of your customer.
<PAGE>
7. You understand that on all purchases of Shares to which the terms of this
Agreement are applicable by a shareholder for whom you are dealer of
record, we will pay you an amount equal to the Dealer Discount, Sales
Commission or fees which would have been paid to you with respect to such
Shares if such Shares had been purchased through you. You understand and
agree that the dealer of record for this purpose shall be the dealer
through whom such shareholder most recently purchased Shares of such fund,
unless the shareholder or you have instructed us otherwise. You understand
that all amounts payable to you under this paragraph and currently payable
under this agreement will be paid as of the end of the month unless
specified otherwise for the total amount of Shares to which this paragraph
is applicable but may be paid more frequently as we may determine in our
discretion. Your request for Dealer Discount or Sales Commission reclaims
will be considered if adequate verification and documentation of the
purchase in question is supplied to us, and the reclaim is requested within
three years of such purchase.
8. We appoint the transfer agent (or identified sub-transfer agent) for each
of the Funds as our agent to execute the purchase transaction of Shares and
to confirm such purchases to your customers on your behalf, and you
guarantee the legal capacity of your customers so purchasing such Shares.
You further understand that if a customer's account is established without
the customer signing the application form, you hereby represent that the
instructions relating to the registration and shareholder options selected
(whether on the application form, in some other document or orally) are in
accordance with the customer's instructions and you agree to indemnify the
Funds, the transfer agent (or identified sub-transfer agent) and us for any
loss or liability resulting from acting upon such instructions.
9. Upon the purchase of Class A Shares pursuant to a Letter of Intent, you
will promptly return to us any excess of the Dealer Discount previously
allowed or paid to you over that allowable in respect to such larger
purchases.
10. Unless at the time of transmitting a purchase order you advise us to the
contrary, we may consider that the investor owns no other Shares and may
further assume that the investor is not entitled to any lower sales charge
than that accorded to a single transaction in the amount of the purchase
order, as set forth in the current prospectus.
11. You understand and agree that if any Shares purchased by you under the
terms of this Agreement are, within seven (7) business days after the date
of our confirmation to you of the original purchase order for such Shares,
repurchased by us as agent for such fund or are tendered to such fund for
redemption, you shall forfeit the right to, and shall promptly pay over to
us the amount of any Dealer Discount or Sales Commission allowed to you
with respect to such Shares. We will notify you of such repurchase or
redemption within ten (10) days of the date upon which certificates are
delivered to us or to such fund or the date upon which the holder of Shares
held in a shareholder open account places or causes to be placed with us or
with such fund an order to have such shares repurchased or redeemed.
12. You agree that, in the case of any repurchase of any Shares made more than
seven (7) business days after confirmation by us of any purchase of such
Shares, except in the case of Shares purchased from you by us for your own
bona fide investment, you will act only as agent for the holders of such
Shares and will place the orders for repurchase only with us. It is
understood that you may charge the holder of such Shares a fair commission
for handling the transaction.
13. Our obligations to you under this Agreement are subject to all the
provisions of the respective distribution agreements entered into between
us and each of the Funds. You understand and agree that in performing your
services under this agreement you are acting in the capacity of an
independent contractor, and we are in no way responsible for the manner of
your performance or for any of your acts or omissions in connection
therewith. Nothing in the Agreement shall be construed to constitute you or
any of your agents, employees, or representatives as our agent, partner or
employee, or the agent, partner of employee of any of the Funds.
In connection with the sale and distribution of shares of Phoenix Funds,
you agree to indemnify and hold us and our affiliates, employees, and/or
officers harmless from any damage or expense as a result of (a) the
negligence, misconduct or wrongful act by you or any employee,
representative, or agent of yours and/or (b) any actual or alleged
violation of any securities laws, regulations or orders. Any indebtedness
or obligation of yours to us whether arising hereunder or otherwise, and
any liabilities incurred or moneys paid by us to any person as a result of
any misrepresentation, wrongful or unauthorized act or omission, negligence
of, or failure of you or your employees, representatives or agents to
comply with the Sales Agreement, shall be set off against any compensation
payable under this agreement. Any differential between such expenses and
compensation payable hereunder shall be payable to us upon demand. The
terms of this provision shall not be impaired by the termination of this
agreement.
In connection with the sale and distribution of shares of Phoenix Funds, we
agree to indemnify and hold you, harmless from any damage or expense on
account of the gross and willful negligence, misconduct or wrongful act of
us or any employee, representative, or agent of ours which arises out of or
is based upon any untrue statement or alleged untrue statement of material
fact, or the omission or alleged omission of a material fact in: (i) any
registration statement, including any prospectus or any post-effective
amendment thereto; or (ii) any material prepared and/or supplied by us for
use in conjunction with the offer or sale of Phoenix Funds; or (iii) any
state registration or other document filed in any state or jurisdiction in
order to qualify any Fund under the securities laws of such state or
jurisdiction. The terms of this provision shall not be impaired by the
termination of this agreement.
<PAGE>
14. We will supply you with reasonable quantities of the current prospectus,
periodic reports to shareholders, and sales materials for each of the
Funds. You agree not to use any other advertising or sales material
relating to the sale of shares of any of the Funds unless such other
advertising or sales material is pre-approved in writing by us.
15. You agree to offer and sell Shares only in accordance with the terms and
conditions of the then current prospectus of each of the Funds and subject
to the provisions of this Agreement, and you will make no representations
not contained in any such prospectus or any authorized supplemental sales
material supplied by us. You agree to use your best efforts in the
development and promotion of sales of the Shares covered by this Agreement,
and agree to be responsible for the proper instruction, training and
supervision of all sales representatives employed by you in order that such
Shares will be offered in accordance with the terms and conditions of this
Agreement and all applicable laws, rules and regulations. All expenses
incurred by you in connection with your activities under this Agreement
shall be borne by you. In consideration for the extension of the right to
exercise telephone exchange and redemption privileges to you and your
registered representatives, you agree to bear the risk of any loss
resulting from any unauthorized telephone exchange or redemption
instructions from you or your registered representatives. In the event we
determine to refund any amounts paid by any investor by reason of such
violation on your part, you shall forfeit the right to, and pay over to us,
the amount of any Dealer Discount or Sales Commission allowed to you with
respect to the transaction for which the refund is made.
16. You represent that you are properly registered as a broker or dealer under
the Securities and Exchange Act of 1934 and are member of the National
Association of Securities Dealers, Inc. (NASD) and agree to maintain
membership in the NASD or in the alternative, that you are a foreign dealer
not eligible for membership in the NASD. You agree to notify us promptly of
any change, termination or suspension of the foregoing status. You agree to
abide by all the rules and regulations of the NASD including Section 26 of
Article III of the Rules of Fair Practice, which is incorporated herein by
reference as if set forth in full. You further agree to comply with all
applicable state and Federal laws and the rules and regulations of
applicable regulatory agencies. You further agree that you will not sell,
or offer for sale, Shares in any jurisdiction in which such Shares have not
been duly registered or qualified for sale. You agree to promptly notify us
with respect to (a) the initiation and disposition of any formal
disciplinary action by the NASD or any other agency or instrumentality
having jurisdiction with respect to the subject matter hereof against you
or any of your employees or agents; (b) the issuance of any form of
deficiency notice by the NASD or any such agency regarding your training,
supervision or sales practices; and (c) the effectuation of any consensual
order with respect thereto.
17. Either party may terminate this agreement for any reason by written or
electronic notice to the other party which termination shall become
effective fifteen (15) days after the date of mailing or electronically
transmitting such notice to the other party. We may also terminate this
agreement for cause or as a result of a violation by you, as determined by
us in our discretion, of any of the provisions of this Agreement, said
termination to be effective on the date of mailing written or transmitting
electronic notice to you of the same. Without limiting the generality of
the foregoing, your own expulsion from the NASD will automatically
terminate this Agreement without notice. Your suspension from the NASD or
violation of applicable state or Federal laws or rules and regulations of
applicable regulatory agencies will terminate this Agreement effective upon
the date of our mailing written notice or transmitting electronic notice to
you of such termination. Our failure to terminate this Agreement for any
cause shall not constitute a waiver of our right to so terminate at a later
date.
18. All communications and notices to you or us shall be sent to the addresses
set forth at the beginning of this Agreement or to such other address as
may be specified in writing from time to time.
19. This agreement shall become effective upon the date of its acceptance by us
as set forth herein. This agreement may be amended by PEPCO from time to
time. This Agreement and all rights and obligations of the parties
hereunder shall be governed by and construed under the laws of the State of
Connecticut. This agreement is not assignable or transferable, except that
we may assign or transfer this agreement to any successor distributor of
the Shares described herein.
ACCEPTED ON BEHALF OF ACCEPTED ON BEHALF OF
PHOENIX EQUITY PLANNING DEALER FIRM:
CORPORATION:
Date ______________________________ Date __________________________________
By /s/ John F. Sharry By
________________________________ ____________________________________
Print Name John F. Sharry Print Name
_________________________ ____________________________
Managing Director, Retail Sales
Print Title _______________________ Print Title ___________________________
NASD CRD Number _______________________
<PAGE>
[LOGO]PHOENIX AMENDED ANNEX A, DEALER AGREEMENT WITH
DUFF&PHELPS PHOENIX EQUITY PLANNING CORPORATION, FEBRUARY 27, 1998
================================================================================
I. PHOENIX FAMILY OF FUNDS
- --------------------------------------------------------------------------------
PHOENIX SERIES FUND
Balanced Fund Series
Convertible Fund Series
Growth Fund Series
Aggressive Growth Fund Series
High Yield Fund Series
Money Market Fund Series
U.S. Government Securities Fund Series
PHOENIX-ABERDEEN SERIES FUND
Aberdeen New Asia Fund
Aberdeen Global Small Cap Fund
PHOENIX MULTI-PORTFOLIO FUND
Tax-Exempt Bond Portfolio
Mid Cap Portfolio
International Portfolio
Real Estate Securities Portfolio
Emerging Markets Bond Portfolio
Strategic Income Fund
PHOENIX STRATEGIC EQUITY SERIES FUND
Equity Opportunities Fund
Strategic Theme Fund
Small Cap Fund
PHOENIX EQUITY SERIES FUND
Core Equity Fund
Growth and Income Fund
PHOENIX CALIFORNIA TAX EXEMPT BONDS, INC.
PHOENIX MULTI-SECTOR FIXED INCOME FUND, INC.
PHOENIX MULTI-SECTOR SHORT TERM BOND FUND
PHOENIX WORLDWIDE OPPORTUNITIES FUND
PHOENIX STRATEGIC ALLOCATION FUND, INC.
PHOENIX INCOME AND GROWTH FUND
PHOENIX VALUE EQUITY FUND
PHOENIX SMALL CAP VALUE FUND
PHOENIX-ENGEMANN FUNDS
Balanced Return Fund
Global Growth Fund
Growth Fund
Nifty Fifty Fund
Small & Mid-Cap Growth Fund
Value 25 Fund
- --------------------------------------------------------------------------------
Equity Planning may sponsor, to all qualifying dealers, on a non-discriminatory
basis, sales contests, training and educational meetings and provide to all
qualifying broker/dealers, from its own profits and resources, additional
compensation in the form of trips, merchandise or expense reimbursement. Brokers
or dealers other than Equity Planning may also make customary additional charges
for their services in effecting purchases, if they notify the Fund of their
intention to do so. Applicable waivers of Class A sales loads and Class B
contingent deferred sales charges are described in the prospectus.
================================================================================
CLASS A SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A SHARES (EXCEPT MULTI-SECTOR SHORT TERM MULTI-SECTOR SHORT TERM
BOND FUND & MONEY MARKET) BOND FUND CLASS A SHARES
DEALER DISCOUNT DEALER DISCOUNT
SALES CHARGE OR AGENCY FEE SALES CHARGE OR AGENCY FEE
AMOUNT OF AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
TRANSACTION OFFERING PRICE OFFERING PRICE OFFERING PRICE OFFERING PRICE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 4.75% 4.25% 2.25% 2.00%
- ---------------------------------------------------------------------------------------------------------------------------------
$50,000 but under $100,000 4.50 4.00 1.25 1.00
- ---------------------------------------------------------------------------------------------------------------------------------
$100,000 but under $250,000 3.50 3.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------------------
$250,000 but under $500,000 3.00 2.75 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------------------
$500,000 but under $1,000,000 2.00 1.75 0.75 0.75
- ---------------------------------------------------------------------------------------------------------------------------------
$1,000,000 or more None None None None
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Shares of the Money Market Series are offered to the public at their constant
net asset value of $1.00 per share with no sales charge on Class A shares.
$1 MILLION NAV SALES FINDERS FEE: In connection with Class A Share purchases of
$1,000,000 or more (or subsequent purchases in any amount), Equity Planning may
pay broker/dealers, from its own profits and resources, a percentage of the net
asset value of shares sold (excluding Money Market shares) as set forth in the
table below. If part or all of such investment, is subsequently redeemed within
one year of the investment date, the broker/dealer will refund to Equity
Planning any such amounts paid with respect to the investment.
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PURCHASE AMOUNT $1,000,000 to $3,000,000 $3,000,001 to $6,000,000 $6,000,001 or more
- ---------------------------------------------------------------------------------------------------------------------------------
PAYMENT TO BROKER/DEALERS 1% 0.50 of 1% 0.25 of 1%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
CLASS A SHARES
- --------------------------------------------------------------------------------
TRAIL: Equity Planning intends to pay a quarterly fee to qualifying
broker/dealer firms at the equivalent of 0.25% annually, based on the average
daily net asset value of Class A shares sold by such broker/dealers (except
Money Market Series) and remaining outstanding on the Funds' books during the
period in which the fee is calculated. Dealers must have an aggregate value of
$50,000 or more in one Fund to qualify for payment in that Fund.
<PAGE>
================================================================================
CLASS B SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B SHARES
(EXCEPT MULTI-SECTOR SHORT TERM BOND FUND) MULTI-SECTOR SHORT TERM BOND FUND CLASS B
<S> <C>
Sales Commission 4.00% Sales Commission 2.00%
</TABLE>
Broker/Dealer firms maintaining house/omnibus accounts, upon redemption of a
customer account within the time frames specified below, shall forward to Equity
Planning the indicated contingent deferred sales charge.
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE CONTINGENT DEFERRED CONTINGENT DEFERRED
SALES CHARGES SALES CHARGES
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
First 5.00% 2.00%
- -----------------------------------------------------------------------------------------------------------------------------
Second 4.00 1.50
- -----------------------------------------------------------------------------------------------------------------------------
Third 3.00 1.00
- -----------------------------------------------------------------------------------------------------------------------------
Fourth and Fifth 2.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------
Sixth 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
TRAIL: Equity Planning intends to pay a quarterly fee to qualifying
broker/dealer firms at the equivalent of 0.25% annually, based on the average
daily net asset value of shares sold by such broker/dealers (except Money Market
Series) and remaining outstanding on the Funds' books during the period in which
the fee is calculated, commencing one year after the investment date. Dealers
must have an aggregate value of $50,000 or more in one Fund to qualify for
payment in that Fund.
================================================================================
CLASS C SHARES - MULTI-SECTOR SHORT TERM BOND FUND ONLY
- --------------------------------------------------------------------------------
TRAIL: Equity Planning intends to pay a quarterly fee to qualifying
broker/dealer firms at the equivalent of 0.50% annually, based on the average
daily net asset value of shares sold by such broker/dealers and remaining
outstanding on the Funds' books during the period in which the fee is
calculated. Dealers must have an aggregate value of $50,000 or more in the Fund
to qualify for payment.
FINDERS FEE:
In connection with Class C Share purchases of $250,000 or more (or subsequent
purchases in any amount), Equity Planning may pay broker-dealers,
from its own resources, on amount equal to 0.50% of purchases above $250,000
but under $3 million plus 0.25% on purchases in excess of $3 million.
If all or part of the investment is subsequently redeemed, except for exchanges
or purchases of other Phoenix funds, within one year of the investment date, the
broker-dealer will refund to the Distributor such amount paid with respect to
the investment.
================================================================================
CLASS C SHARES - AVAILABLE ONLY FOR THE FUNDS LISTED BELOW:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CORE EQUITY FUND PHOENIX-ENGEMANN GLOBAL GROWTH FUND PHOENIX-ENGEMANN SMALL & MID-CAP
EMERGING MARKETS BOND PORTFOLIO MULTI-SECTOR FIXED INCOME FUND GROWTH FUND
(EFFECTIVE 3-27-98) STRATEGIC INCOME FUND VALUE EQUITY FUND
GROWTH AND INCOME FUND (EFFECTIVE 3-27-98) SMALL CAP VALUE FUND
HIGH YIELD FUND SERIES STRATEGIC THEME FUND PHOENIX-ENGEMANN BALANCED RETURN FUND
(EFFECTIVE 2-27-98) PHOENIX-ENGEMANN NIFTY FIFTY FUND PHOENIX-ENGEMANN VALUE 25 FUND
PHOENIX-ENGEMANN GROWTH FUND
</TABLE>
Sales Commission: 1%. Contingent deferred sales charge: 1% for one year from the
date of each purchase. Broker/Dealer firms maintaining house/omnibus accounts,
upon redemption of a customer account within one year of purchase date, shall
forward to Equity Planning the indicated contingent deferred sales charge.
TRAIL AND SERVICE FEE: Equity Planning intends to pay a fee after the first year
to qualifying broker/dealer firms at the equivalent of 0.75% annually, and a
Service Fee at the equivalent of 0.25% annually, based on the average daily net
asset value of shares sold by such broker/dealers and remaining outstanding on
the Funds' books during the period in which the fee is calculated. Dealers must
have an aggregate value of $50,000 or more in the Fund to qualify for payment.
<PAGE>
================================================================================
CLASS M SHARES - AVAILABLE ONLY FOR THE FUNDS LISTED BELOW:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CORE EQUITY FUND MULTI-SECTOR FIXED INCOME FUND VALUE EQUITY FUND
GROWTH AND INCOME FUND STRATEGIC THEME FUND SMALL CAP VALUE FUND
PHOENIX-ENGEMANN GROWTH FUND PHOENIX-ENGEMANN NIFTY FIFTY FUND PHOENIX-ENGEMANN BALANCED RETURN FUND
PHOENIX-ENGEMANN GLOBAL GROWTH FUND PHOENIX-ENGEMANN SMALL & MID-CAP PHOENIX-ENGEMANN VALUE 25 FUND
GROWTH FUND
</TABLE>
<TABLE>
<CAPTION>
DEALER DISCOUNT
SALES CHARGE OR AGENCY FEE
AMOUNT OF AS PERCENTAGE OF AS PERCENTAGE OF
OFFERING PRICE OFFERING PRICE OFFERING PRICE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Less than $50,000 3.50% 3.00%
- ------------------------------------------------------------------------------------------------------------------
$50,000 but under $100,000 2.50 2.00
- ------------------------------------------------------------------------------------------------------------------
$100,000 but under $250,000 1.50 1.00
- ------------------------------------------------------------------------------------------------------------------
$250,000 but under $500,000 1.00 1.00
- ------------------------------------------------------------------------------------------------------------------
$500,000 but under $1,000,000 None None
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
TRAIL: Equity Planning intends to pay a quarterly fee to qualifying
broker/dealer firms at the equivalent of 0.50% annually, based on the average
daily net asset value of shares sold by such broker/dealers and remaining
outstanding on the Funds' books during the period in which the fee is
calculated. Dealers must have an aggregate value of $50,000 or more in the Fund
to qualify for payment.
================================================================================
II. A. PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
- --------------------------------------------------------------------------------
Balanced Portfolio Growth Stock Portfolio
Enhanced Reserves Portfolio Money Market Portfolio
Managed Bond Portfolio U.S. Government Securities Portfolio
FINDER'S FEE: Equity Planning may pay broker/dealers, from its own profits and
resources, a percentage of the net asset value of Class X and Class Y shares
sold as set forth in the table below. If part of any investment is subsequently
redeemed within one year of the investment date, the broker/dealer will refund
to Equity Planning any such amounts paid with respect to the investment.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PURCHASE AMOUNT 0 to $5,000,000 $5,000,001 to $10,000,000 $10,000,001 or more
- ------------------------------------------------------------------------------------------------------------------------------------
PAYMENT TO BROKER/DEALERS 0.50% 0.25% 0.10%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TRAIL: (Class Y shares only): Equity Planning intends to pay broker/dealers a
quarterly service fee at the equivalent of 0.25% annually, based on the average
daily net asset value of Class Y shares sold by such broker/dealers and
remaining outstanding on the Funds' books during the period in which the fee is
calculated, subject to future amendment or termination.
================================================================================
II. B. PHOENIX DUFF & PHELPS INSTITUTIONAL MUTUAL FUNDS
- --------------------------------------------------------------------------------
Phoenix Real Estate Equity Securities Portfolio
TRAIL: (Class Y shares only): Equity Planning intends to pay broker/dealers a
quarterly service fee at the equivalent of 0.25% annually, based on the average
daily net asset value of Class Y shares sold by such broker/dealers and
remaining outstanding on the Funds' books during the period in which the fee is
calculated, subject to future amendment or termination.
<PAGE>
PDP80A (2-98) Distributed by Phoenix Equity Planning Corporation,
Enfield, CT, 06083
<PAGE>
[logo]PHOENIX Annex B To Dealer Agreement With
DUFF&PHELPS Phoenix Equity Planning Corporation
- --------------------------------------------------------------------------------
Compliance Standards for
the Sale of the Phoenix Funds
Under Their Alternative Purchase Arrangements
As national distributor or principal underwriter of the Phoenix Funds, which
offer their shares on both a front-end and deferred sales charge basis, Phoenix
Equity Planning Corporation ("PEPCO") has established the following compliance
standards which set forth the basis upon which shares of the Phoenix Funds may
be sold. These standards are designed for those broker/dealers ("dealers") that
distribute shares of the Phoenix Funds and for each dealer's financial
advisors/registered representatives.
As shares of the Phoenix Funds are offered with two different sales arrangements
for sales and distribution fees, it is important for an investor not only to
choose a mutual fund that best suits his investment objectives, but also to
choose the sales financing method which best suits his particular situation. To
assist investors in these decisions and to ensure proper supervision of mutual
fund purchase recommendations, we are instituting the following compliance
standards to which dealers must adhere when selling shares of the Phoenix Funds:
1. Any purchase of a Phoenix Fund for less than $250,000 may be either of
shares subject to a front-end load (Class A shares) or subject to deferred
sales charge (Class B shares).
2. Any purchase of a Phoenix Fund by an unallocated qualified employer
sponsored plan for less than $1,000,000 may be either of shares subject to
a front-end load (Class A shares) or subject to deferred sales charge
(Class B shares). Class B shares sold to allocated qualified employer
sponsored plans will be limited to a maximum total value of $250,000 per
participant.
3. Any purchase of a Phoenix Fund for $250,000 or more (except as noted above)
or which qualifies under the terms of the prospectus for net asset value
purchase of Class A shares should be for Class A shares.
General Guidelines
These are instances where one financing method may be more advantageous to an
investor than the other. Class A shares are subject to a lower distribution fee
and, accordingly, pay correspondingly higher dividends per share. However,
because initial sales charges are deducted at the time of purchase, such
investors would not have all of their funds invested initially and, therefore,
would initially own fewer shares. Investors not qualifying for reduced initial
sales charges who expect to maintain their investment for an extended period of
time might consider purchasing Class A Shares because the accumulated continuing
distribution charges on Class B Shares may exceed the initial sales charge on
Class A Shares during the life of the investment.
Again, however, such investors must weigh this consideration against the fact
that, because of such initial sales charge, not all of their funds will be
invested initially. However, other investors might determine that it would be
more advantageous to purchase Class B Shares to have all of their funds invested
initially, although remaining subject to higher continuing distribution charges
and, for a five-year period, being subject to a contingent deferred sales charge
(three years for Asset Reserve).
A National Association of Securities Dealers rule specifically prohibits
"breakpoint sales" of front-end load shares. A "breakpoint sale" is a sale to
the client of an amount of front-end load (Class A) shares just below the amount
which would be subject to the next breakpoint on the fund's sales charge
schedule. Because the deferred sales charge on Class B shares is reduced by 1%
for each year the shares are held, a redemption of Class B shares just before an
"anniversary date" is in some ways analogous to a breakpoint sale. A client
might wish to redeem just before an anniversary date for tax or other reasons,
and a client who chose to wait would continue to be at market risk.
Nevertheless, investment executives should inform clients intending to redeem
Class B shares near an anniversary date that, if the redemption were delayed,
the deferred sales charge would be reduced.
Responsibilities of Branch Office Manager (or other appropriate reviewing
officer).
A dealer's branch manger or other appropriate reviewing officer ("the Reviewing
Officer") must ensure that the financial advisor/registered representative has
advised the client of the available financing methods offered by the Phoenix
Funds, and the impact of choosing one method over another. In certain instances,
it may be appropriate for the Reviewing Officer to discuss the purchase directly
with the client. The reviewing officer should review purchases for Class A or
Class B shares given the relevant facts and circumstances, including but not
limited to: (a) the specific purchase order dollar amount; (b) the length of
time the investor expects to hold his shares; and (c) any other relevant
circumstances, such as the availability of purchases under letters of intent or
pursuant to rights of accumulation and distribution requirements. The foregoing
guidelines, as well as the examples cited above, should assist the Reviewing
Officer in reviewing and supervising purchase recommendations and orders.
Effectiveness
These compliance guidelines are effective immediately with respect to any order
for shares of those Phoenix Funds which offer their shares pursuant to the
alternative purchase arrangement.
Questions relating to these compliance guidelines should be directed by the
dealer to its national mutual fund sales and market group or its legal
department or compliance director. PEPCO will advise dealers in writing of any
future changes in these guidelines.
PEP80B 11/95
EXHIBIT 6(c)
SUPPLEMENT TO PHOENIX FAMILY OF FUNDS
SALES AGREEMENT
<PAGE>
PHOENIX EQUITY PLANNING CORPORATION
SUPPLEMENT TO PHOENIX FAMILY OF FUNDS
SALES AGREEMENT
It is hereby agreed that this AGREEMENT, dated this __________ day
of __________, 19__, between ________________________________________ ("Dealer")
and Phoenix Equity Planning Corporation ("Distributor"), supplements and amends
the Sales Agreement between Dealer and Distributor dated by Distributor
_______________________ 19__ ("Sales Agreement').
WHEREAS, Dealer wishes to use shares of the Funds in a fee-based
program made available by Dealer to clients of Dealer (the "Fee-Based Program");
WHEREAS, Dealer wishes to afford its fee-based clients the
opportunity to qualify for the ability to purchase shares of the Funds at net
asset value; and
WHEREAS, Distributor is willing to allow Dealer to purchase shares
of the Funds for clients in the Fee-Based Program subject to the provisions of
this agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by both parties, Dealer
and Distributor hereby agree as follows:
1. Dealer may sell shares of any Funds made available by
Distributor, from time to time, at net asset value to bona fide clients of
Dealer for use solely in their Fee-Based Program. Dealer will earn no concession
or commission on any such sale.
2. Distributor, after consulting Dealer, will determine, from time
to time, which Funds it will make available to Dealer for use in the Fee-Based
Program. Dealer will comply with all provisions of the Prospectus and Statement
of Additional Information of each Fund.
1
<PAGE>
3. All shares made available to Dealer under the Fee-Based Program
must be purchased by Dealer for the benefit of Dealer's clients participating in
its Fee-Based Program under which Dealer provides portfolio management and other
services to such clients for a fee. Such fee to be paid in connection with
investment in the Funds shall at all times be at a level acceptable to
Distributor. Dealer acknowledges that it has sent the Distributor the current
fee schedule for the Fee-Based Program and Dealer agrees to notify Distributor
at least thirty (30) days in advance in writing of any amendment to such fee
schedule. The current fee schedule is attached. Dealer shall not prepare, use or
distribute brochures, written materials or advertising in any form that refers
to sales of the Funds as no-load or at net asset value except, in the case of
brochures, it may refer to the Funds as available at net asset value under the
Fee-Based Program if the fees and expenses of the Fee-Based Program are given at
least equal prominence. Notwithstanding the foregoing, in connection with
explaining the fees and expenses of the Fee-Based Program, representatives of
Dealer may describe to customers the option of purchasing Fund shares through
the Fee-Based Program at net asset value.
4. Distributor warrants that all necessary disclosures regarding
the sale of shares at net asset value will be set forth in the Prospectus and
Statement of Additional Information of the Funds available under this Agreement.
5. Dealer may maintain either an omnibus account(s) solely for the
clients of its Fee-Based program or may maintain separate accounts for each
client of its Fee-Based Program with the Fund's transfer agent. If an omnibus
account(s) is maintained, Dealer shall be solely responsible for meeting all
legal obligations with respect to each beneficial owner including, but not
limited to, the delivery of proxies, annual and semi-annual reports and other
materials.
6. This Agreement shall be governed and interpreted in accordance
with the laws of the State of Connecticut. This Agreement shall not relieve
Dealer or Distributor from any obligations either may have under any other
agreements between them (except with respect to the payment of service fees),
including but not limited to the Sales Agreement, which is incorporated by
reference herein and shall control in case of any conflict with this Agreement.
7. Distributor is not endorsing, recommending or otherwise involved
in providing any investment product or advisory service of Dealer (including but
not limited to the Fee-Based Program). Distributor is merely affording Dealer
the opportunity to use shares of the Funds distributed by Distributor as an
investment medium for the Fee-Based Program.
8. This Agreement is not exclusive and may be terminated by either
party upon sixty (60) days prior written notice to the other party. It shall
terminate automatically upon termination of the Sales Agreement between the
parties. This Agreement may be amended only by a written instrument, signed by
both parties.
IN WITNESS WHEREOF, this Agreement has been executed as of the date set
forth above by a duly authorized officer of each party.
2
<PAGE>
PHOENIX EQUITY PLANNING CORPORATION
By: _______________________________________
John F. Sharry
Managing Director, Retail Sales
Dealer: _____________________________
By: _________________________________
Name: _______________________________
Title: ______________________________
Address: ____________________________
____________________________
____________________________
Phone: ______________________________
Phoenix Equity Planning Corporation
100 Bright Meadow Boulevard
P O Box 2200
Enfield, CT 06083-2200
(230) 253-1000
3
EXHIBIT 6(d)
FINANCIAL INSTITUTION SALES CONTRACT
FOR THE PHOENIX FAMILY OF FUNDS
<PAGE>
FINANCIAL INSTITUTION SALES CONTRACT
FOR THE PHOENIX FAMILY OF FUNDS
Between: and
PHOENIX EQUITY PLANNING CORPORATION
Distributor of: The Phoenix Family of Funds
100 Bright Meadow Blvd.
P.O. Box 2200
Enfield, CT 06083-2200
As distributor of The Phoenix Family of Funds (the "Funds"), we agree that you
may make available to your customers, under an agency relationship with your
customers, shares of beneficial interest issued by the Funds (the "Shares"),
subject to any limitation imposed by the Funds and to confirmation by us of each
transaction. By your acceptance hereof, you agree to all of the following terms
and conditions:
I. Offering Prices and Fees
The public offering price at which you may make Shares available to your
customers is the net asset value thereof, as computed from time to time, plus
any applicable sales charge described in the then current prospectus of the
applicable Fund. In the case of purchases by you, as agent for your customers,
of shares sold with a sales charge, you will receive an agency fee consisting of
a portion of the public offering price, determined on the same basis as the
"dealer discount" described in the then current Prospectus of the Funds, and
such other compensation to dealers as may be described therein, which shall be
payable to you at the same time and on the same basis as the same is paid to
such dealers, consistent with applicable law, rules and regulations. In
determining the amount of any agency fee payable to you hereunder, we reserve
the right to revise the agency fee referred to herein upon written notice to
you. We will furnish you upon request with the public offering prices for the
Shares and you agree to quote such prices in connection with any Shares made
available by you as agent for your customers. Each purchase of Shares by your
customers is made subject to confirmation by us at the public offering price
next computed after receipt of the order. There is no sales charge or agency fee
to you on the reinvestment of dividends and distributions.
II. Manner of Making Shares Available for Purchase
We will, upon request, deliver to you a copy of each Fund's then current
Prospectus and will provide you with such number of copies of each Fund's
current Prospectus, Statement of Additional Information and shareholder reports
and of supplementary sales materials prepared by us, as you may reasonably
request. It shall be your obligation to ensure that all such information and
materials are distributed to your customers who own Shares in accordance with
securities and/or banking law and regulations and any other applicable
regulations. Neither you nor any other person is authorized to give any
information or make any representations other than those contained in such
prospectuses, Statements of Additional Information and shareholder reports or in
such supplemental sales materials. You shall not furnish or cause to be
furnished to any person, display or publish any information or materials
relating to any Fund (including, without limitation, promotional materials and
sales literature, advertisements, press releases, announcements, statements,
posters, signs or similar material), except such information and materials as
may be furnished to you by us or the Fund, and such other information and
materials as may be approved in writing by us. We reserve the right to reject
any purchases for any accounts which we reasonably determine are not made in
accordance with the terms of the applicable Fund Prospectus and the provisions
of this Agreement.
You hereby agree:
(i) to not purchase any Shares as agent for any customer, unless you
deliver or cause to be delivered to such customer, at or prior to the
time of such purchase, a copy of the then-current Prospectus of the
applicable Fund unless such customer has acknowledged receipt of the
Prospectus of such Fund. You hereby represent that you understand your
obligation to deliver a prospectus to customers who purchase Shares
pursuant to federal securities laws and you have taken all necessary
steps to comply with such prospectus delivery requirements;
PEP 613 12-92
<PAGE>
(ii) to transmit to us promptly upon receipt any and all orders received by
you, it being understood that no conditional orders will be accepted;
(iii) to obtain from each customer for whom you act as agent for the
purchase of Shares any taxpayer identification number certification
and backup withholding information required under the Internal Revenue
Code, as amended from time to time (the "Code"), and the regulations
set forth thereunder, or other sections of the Code which may become
applicable and to provide us or our designee with timely written
notice of any failure to obtain such taxpayer identification number
certification or information in order to enable the implementation of
any required backup withholding in accordance with the Code and the
regulations thereunder;
(iv) to pay to us the offering price, less any agency fee to which you are
entitled, within five (5) business days of our confirmation of your
customer's order, or such shorter time as may be required by law. You
may, subject to our approval, remit the total public offering price to
us, and we will return to you your agency fee. If such payment is not
received within said time period, we reserve the right, without prior
notice, to cancel the sale, or at our option to return the Shares to
the issuer for redemption or repurchase. In the latter case, we shall
have the right to hold you responsible for any loss resulting to us.
Should payment be made by local bank check, liquidation of Shares may
be delayed pending clearance of your check; and
(v) to offer and sell Shares, and execute telephone transactions only in
accordance with the terms and conditions of the then current
prospectuses of the relevant Funds and to make no representations not
contained in any such prospectus or in any authorized supplemental
material supplied to you. In addition, in consideration for the
extension of the right to exercise telephone transaction privileges,
you acknowledge that neither the Funds nor the Transfer Agent nor
Equity Planning will be liable for any loss, injury or damage incurred
as a result of acting upon, nor will they be responsible for the
authenticity of, any telephone instructions, and you agree to
indemnify and hold harmless the Funds, Equity Planning and the
Transfer Agent against any loss, injury or damage resulting from any
unauthorized telephone transaction instruction from you or your
representatives. (Telephone instructions will be recorded on tape).
Unless otherwise mutually agreed in writing or except as provided below, each
transaction placed by you shall be promptly confirmed by us in writing to you,
and shall be confirmed to the customer promptly upon receipt by us of
instructions from you as to such customer. In the case of a purchase order by
customer's application, each transaction shall be promptly confirmed in writing
directly to the customer and a copy of each confirmation shall be sent
simultaneously to you. You understand that in the case of an Omnibus Account we
shall send a confirmation to you as the shareholder of record only. We reserve
the right, at our discretion and without notice, to suspend the sale of Shares
or withdraw entirely the sale of Shares of any or all of the Funds. All orders
are subject to acceptance or rejection by us in our sole discretion, and by the
Funds in their sole discretion. The procedure stated herein relating to the
pricing and handling of orders shall be subject to instructions which we may
forward to you from time to time.
III. Compliance With Law
You hereby represent that you are either (1) a "bank" as defined in Section
3(a)(6) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and at the time of each transaction in shares of the Funds, are not required to
register as a broker-dealer under the Exchange Act or regulations thereunder; or
(2) registered as a broker-dealer under the Exchange Act, a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD") and
affiliated with a bank.
(i) If you are a bank, not required to register as a broker-dealer under
the Exchange Act, you further represent and warrant to us that with
respect to any sales in the United States, you will use your best
efforts to ensure that any purchase of Shares by your customers
constitutes a suitable investment for such customers. You shall not
effect any transaction in, or induce any purchase or sale of, any
Shares by means of any manipulative deceptive or other fraudulent
device or contrivance and shall otherwise deal equitable and fairly
with your customers with respect to transactions in Shares of a Fund.
-2-
<PAGE>
(ii) If you are a NASD member broker-dealer affiliated with a bank and
registered under the Exchange Act, you further represent and warrant
to us that with respect to any sales in the United States, you agree
to abide by all of the applicable laws, rules and regulations
including applicable provisions of the Securities Act of 1933 as
amended, and the applicable rules and regulations of the NASD,
including, without limitation, its Rules of Fair Practice, and the
applicable rules and regulations of any jurisdiction in which you make
Shares available for sale to your customers. You agree not to make
available for sale to your customers the Shares in any jurisdiction in
which the Shares are not qualified for sale or in which you are not
qualified as a broker-dealer. We shall have no obligation or
responsibility as to your right to make Shares of any Fund available
to your customers in any jurisdiction. You agree to notify us
immediately in the event of (a) your expulsion or suspension from the
NASD or your becoming subject to any enforcement action by the
Securities and Exchange Commission, NASD, or any other self-regulatory
organization, or (b) your violation of any applicable federal or state
law, rule or regulation including, but not limited to, those of the
SEC, NASD, or other self-regulatory organization, arising out of or in
connection with this Agreement, or which may otherwise affect in any
material way your ability to act in accordance with the terms of this
Agreement.
You shall not make Shares of any Fund available to your customers, including
your fiduciary customers, except in compliance with all federal and state laws
and rules and regulations of regulatory agencies or authorities applicable to
you, or any of your affiliates engaging in such activity, which may affect your
business practices. You confirm that you are not in violation of any banking law
or regulations to which you are subject. You agree to hold us and the Funds
harmless and indemnify us in the event that you or any of your representatives
should violate any law, rule or regulation or any provisions of this Agreement.
In the event that we determine to refund any amounts paid by a customer in
connection with any such violation on your part, you shall forfeit the right to
the amount of any agency fee allowed by us with respect to the transaction for
which the refund is made. All expenses which you incur in connection with your
activities under this Agreement shall be borne by you.
IV. Relationship With Customer
With respect to any and all transactions in the Shares of any Fund pursuant to
this Agreement, it is understood and agreed in each case that: (i) you shall be
acting solely as agent for the account of your customer; (ii) each transaction
shall be initiated solely upon the order of your customer; (iii) we shall
execute transactions only upon receiving instructions from you acting as agent
for your customer or upon receiving instructions directly from your customer;
(iv) as between you and your customer, your customer will have full beneficial
ownership of all Shares; and (v) each transaction shall be for the account of
your customer and not for your account.
Subject to the foregoing, however, you may maintain record ownership of such
customers' Shares in an "Omnibus Account" or an account registered in your name
or the name of your nominee, for the benefit of such customers. You understand
that such Shares must be held in a separate account for each shareholder of such
Funds. You represent and warrant to us that you will have full right, power and
authority to effect transactions (including, without limitation, any purchases
and redemptions) in Shares on behalf of all customer accounts provided by you.
V. Relationship With Financial Institutions
Your obligations to us under this Agreement are subject to all the provisions of
the respective distribution agreements entered into between us and each of the
Funds. You understand and agree that in performing your services under this
Agreement you are acting in the capacity of an independent contractor, and we
are in no way responsible for the manner of your performance or for any of your
acts or omissions in connection therewith. It is further understood that neither
this Agreement nor the performance of the services of the respective parties
hereunder shall be considered to constitute an exclusive arrangement, or to
create a partnership, association or joint venture between you and us. In making
available Shares of the Funds under this Agreement, nothing herein shall be
construed to constitute you or any of your agents, employees or representatives
as our agent or employee, or as an agent or employee of the Funds, and you shall
not make any representations to the contrary. As distributor of the Funds, we
shall have full authority to take such action as we may deem advisable in
respect of all matters pertaining to the distribution of the Shares. We shall
not be under any obligation to you, except for obligations expressly assumed by
us in this Agreement.
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<PAGE>
VI. Termination
Either party hereto may terminate this Agreement, without cause, upon ten days'
written notice to the other party. We may terminate this Agreement for cause
upon the violation by you of any of the provisions hereof, such termination to
become effective on the date such notice of termination is mailed to you. If you
are registered as a broker-dealer and affiliated with a bank, this Agreement
shall terminate automatically if either Party ceases to be a member of the NASD.
VII. Assignability
This Agreement is not assignable or transferable, except that we may assign or
transfer this Agreement to any successor distributor of the Funds.
VIII. Miscellaneous
(i) All communications mailed to us should be sent to the above address.
Any notice to you shall be duly given if mailed or delivered to you at
the address specified by you below.
(ii) This Agreement constitutes the entire agreement and understanding
between the parties and supersedes any and all prior agreements
between the parties.
(iii) This Agreement and the rights and obligations of the parties hereunder
shall be governed by and construed under the laws of the State of
Connecticut.
Very truly yours,
PHOENIX EQUITY PLANNING CORPORATION
By _________________________________________
Authorized Signature
____________________________________________
Name and Title
We accept and agree to the foregoing Agreement as of the date set forth below
Financial Institution: __________________________________
By _________________________________________
Authorized Signature, Title
____________________________________________
____________________________________________
Address
(NASD CRD # if applicable _________________ )
Date: ______________________________________
Please return the signed copy of this Sales Contract to Phoenix Equity Planning
Corporation at the above address.
EXHIBIT 9(a)
TRANSFER AGENCY AND SERVICE AGREEMENT
<PAGE>
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.
3
<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).
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<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.
9
<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.
10
<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.
11
<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:
12
<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.
EXHIBIT 11
INDEPENDENT AUDITORS' CONSENT
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the reference to us under the heading "Independent
Accountants" in the Statement of Additional Information constituting part of
this Post-Effective Amendment No. 5 to the registration statement on Form N-1A
for the Phoenix-Seneca Funds.
/s/ PRICE WATERHOUSE LLP
--------------------
Boston, Massachusetts
May 20, 1998
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 5, to Registration Statement No. 33-65137 of Seneca Funds on Form N-1A of
our report dated November 5, 1997, appearing in the Statement of Additional
Information, and to the reference to us under the headings "Financial
Highlights" in the Prospectus and "Independent Accountants" in the Statement of
Additional Information, which are part of such Registration Statement.
/s/ Deloitte & Touche LLP
Kansas City, Missouri
May 19, 1998
EXHIBIT 15(a)
CLASS A SHARES
AMENDED AND RESTATED DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
<PAGE>
PHOENIX-SENECA FUNDS
(the "Fund")
CLASS A SHARES
AMENDED AND RESTATED DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
under the
INVESTMENT COMPANY ACT OF 1940
1. Introduction
The Fund and Phoenix Equity Planning Corporation (the "Underwriter"), a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into an Underwriting Agreement pursuant to which the Underwriter 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 Rule
12b-1 under the Investment Company Act of 1940, as amended (the "Act") with
respect to Class A shares of each portfolio ("Portfolio") 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 Portfolio shall pay the Underwriter, 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 Portfolio'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
"Service Fee").
Amounts paid or payable by the Portfolio 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 services
and activities to be financed hereunder and any related agreement.
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 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
<PAGE>
regarding the amounts expended under this Plan and the purposes for which such
expenditures were made.
4. Required Approval
This Plan, together with the Underwriting 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 has been approved by
a vote of at least a majority of the outstanding voting Class A shares of each
Portfolio (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 each
Portfolio 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 each Portfolio 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 each Portfolio 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 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. Without limiting
the generality of the foregoing, neither the Underwriter 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.
EXHIBIT 15(b)
CLASS B SHARES
DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
<PAGE>
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 "Underwriter"), a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into an Underwriting Agreement pursuant to which the Underwriter 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 Rule
12b-1 under the Investment Company Act of 1940, as amended (the "Act") with
respect to Class B shares of each Portfolio ("Portfolio") 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 Portfolio shall reimburse the Underwriter, 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 Portfolio'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 the Underwriter subsequent to
the effectiveness of this Plan, in connection with the sale and promotion of the
Class B shares of the Portfolio and the furnishing of services to Class B
shareholders of the Portfolio. Such expenditures shall consist of: (i)
commissions to sales personnel for selling Class B shares of the Portfolio
(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
Underwriter for services rendered in connection with the sale and distribution
of Class B shares of the Portfolio; (iv) payment of expenses incurred in sales
and promotional activities, including advertising expenditures related to the
Class B shares of the Portfolio; (v) the costs of preparing and distributing
promotional materials; (vi) the cost of printing the Portfolio'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 Portfolio.
The Portfolio shall also pay the Underwriter, 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 Portfolio's Class B shares, as compensation for providing personal
service to shareholders, including assistance in connection
<PAGE>
with inquiries relating to shareholder accounts, and for maintaining shareholder
accounts (the "Service Fee").
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 Portfolio 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 services
and activities to be financed hereunder and any related agreement. Distribution
expenses not reimbursed during any year because of the limitation on
reimbursements for such expenses may be carried over and paid in future years
when actual expenses are less than the annual limit. In the event of the
termination of this Plan the Portfolio's obligation to pay any current or
unreimbursed expense balance shall terminate.
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 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 the
Underwriting 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 any Portfolio of the Fund
until it has been approved by a vote of at least a majority of the outstanding
voting Class B shares of each Portfolio (as such phrase is defined in the Act).
<PAGE>
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 each
Portfolio 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 B shares of each Portfolio 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 each Portfolio 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.
<PAGE>
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 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. Without limiting
the generality of the foregoing, neither the Underwriter 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.
EXHIBIT 15(c)
CLASS C SHARES
DISTRIBUTION PLAN
PURSUANT TO RULE 12b-1
<PAGE>
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 "Underwriter"), a
broker-dealer registered under the Securities Exchange Act of 1934, have entered
into an Underwriting Agreement pursuant to which the Underwriter 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 Rule
12b-1 under the Investment Company Act of 1940, as amended (the "Act") with
respect to Class C shares of each Portfolio ("Portfolio") 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 Portfolio shall reimburse the Underwriter, 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 Portfolio'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 the Underwriter subsequent to
the effectiveness of this Plan, in connection with the sale and promotion of the
Class C shares of the Portfolio and the furnishing of services to Class C
shareholders of the Portfolio. Such expenditures shall consist of: (i)
commissions to sales personnel for selling Class C shares of the Portfolio
(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
Underwriter for services rendered in connection with the sale and distribution
of Class C shares of the Portfolio; (iv) payment of expenses incurred in sales
and promotional activities, including advertising expenditures related to the
Class C shares of the Portfolio; (v) the costs of preparing and distributing
promotional materials; (vi) the cost of printing the Portfolio'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 Portfolio.
The Portfolio shall also pay the Underwriter, 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 Portfolio's Class C shares, as compensation for providing personal
service to shareholders, including assistance in connection
<PAGE>
with inquiries relating to shareholder accounts, and for maintaining shareholder
accounts (the "Service Fee").
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 Portfolio 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 services
and activities to be financed hereunder and any related agreement. Distribution
expenses not reimbursed during any year because of the limitation on
reimbursements for such expenses may be carried over and paid in future years
when actual expenses are less than the annual limit. In the event of the
termination of this Plan the Portfolio's obligation to pay any current or
unreimbursed expense balance shall terminate.
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 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 the
Underwriting 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 any Portfolio of the Fund
until it has been approved by a vote of at least a majority of the outstanding
voting Class C shares of each Portfolio (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
<PAGE>
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 each Portfolio 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 each Portfolio 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 each Portfolio 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 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. Without limiting
the generality of the foregoing, neither the Underwriter 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.
EXHIBIT 18
SECOND AMENDED AND RESTATED
PLAN PURSUANT TO RULE 18f-3
<PAGE>
PHOENIX-SENECA FUNDS
(the "Funds")
SECOND 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 those classes.
Upon the 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 (each a "Multi-Class Portfolio" and
collectively the "Multi-Class Portfolios") shall offer four classes of shares:
Class X, Class A, Class B, and Class C. 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 such class differ from the interests of
any other class. In addition, Class X, Class A, Class B, and Class C 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, other than Class X, containing
substantially the following terms:
i. Each of Class A, Class B, and Class C shares of each
Multi-Class Portfolio shall pay to Phoenix Equity Planning Corporation (the
"Underwriter") 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, and Class C
shares.
<PAGE>
-2-
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 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 such 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 such Multi-Class Portfolio's Class C
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 ("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) (ii) and (iii) above of this paragraph ("12b-1
Expenses") 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 the
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 amended ("Code"). The difference between the
Class Expenses (other
<PAGE>
-3-
than 12b-1 Expenses), allocated to each share of a class during a year and the
Class Expenses (other than 12b-1 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.
The investment advisor to the Fund ("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.
Underwriter 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,
or in another portfolio of an open-end investment company managed by the
Investment Advisor or an affiliate of the Investment Advisor that permits
corresponding exchanges, 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>
-4-
Portfolio reserves the right to temporarily or permanently terminate exchange
privileges, impose conditions upon the exercise 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 class, 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 Trustees of the Funds, including a majority of the Independent
Trustees, at a meeting held on November 14, 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 by the Investment Advisor and Underwriter which
was reasonably necessary to evaluate the Plan.
b. Approval of Amendments
The Plan may not be amended materially unless the 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 finding
shall be based on information required by the Trustees and furnished to them by
the Investment Advisor or Underwriter that is reasonably necessary to evaluate
the proposed amendment.
c. Periodic Review
The Trustees 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>
-5-
4. Contracts
Any agreement related to the multi-class system shall require the
parties thereto to furnish to the 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 Second Amended and Restated Plan, having been reviewed and approved
by the Trustees and the Independent Trustees, shall take effect as of the
effective date of the Funds' post-effective amendment that adds Class B and
Class C Shares.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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