As filed with the Securities and Exchange Commission on January 24, 2000
File No. 33-65137
File No. 811-7455
================================================================================
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM N-1A
REGISTRATION STATEMENT
Under the
SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [X]
and/or
REGISTRATION STATEMENT
Under the
INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 9 [X]
(Check appropriate box or boxes)
-------------
PHOENIX-SENECA FUNDS
(Exact Name of Registrant as Specified in Charter)
-------------
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. MONTICELLI
Chief Operating Officer, Seneca Capital Management LLC
909 Montgomery Street, San Francisco, California 94133
(Name and Address of Agent for Service)
Copy to:
Pamela S. Sinofsky
Assistant Vice President
and Compliance Officer
Phoenix Investment Partners, Ltd.
56 Prospect Street
Hartford, Connecticut 06115-0479
-------------
It is proposed that this filing will become
effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[X] on January 28, 2000 pursuant to paragraph (b)
[ ] 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.
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
PHOENIX-SENECA FUNDS
Cross Reference Sheet Pursuant to Rule 404
PART A
Information Required in Prospectus
<TABLE>
<CAPTION>
Item Number Form N-1A, Part A Prospectus Caption
----------------------------- ------------------
<S> <C> <C>
1. Front and Back Cover Pages ............................... Cover Page, Back Cover Page
2. Risk/Return Summary: Investments, Risks, Performance...... Investment Risk and Return Summary
3. Risk Return Summary: Fee Table ........................... Fund Expenses
4. Investment Objectives, Principal Investment Strategies, Investment Risk and Return Summary; Investment
and Related Risks ........................................ Strategies; Risks Related to Investment Strategies
5. Management's Discussion of Fund Performance .............. Performance Tables
6. Management, Organization, and Capital Structure .......... Management of the Fund
7. Shareholder Information .................................. Pricing of Fund Shares; Sales Charges; Your Account;
How to Buy Shares; How to Sell Shares; Things to
Know When Selling Shares; Account Policies; Investor
Services; Tax Status of Distributions
8. Distribution Arrangements ................................ Sales Charges
9. Financial Highlights Information ......................... Financial Highlights
</TABLE>
PART B
Information Required in Statement of Additional Information
<TABLE>
<CAPTION>
Item Number Form N-1A, Part B Statement of Additional Information Caption
- ----------------------------- -------------------------------------------
<S> <C> <C>
10. Cover Page and Table of Contents ......................... Cover Page, Table of Contents
11. Fund History ............................................. The Trust
12. Description of the Fund and Its Investment Risks ......... Investment Objectives and Policies; Investment
Restrictions
13. Management of the Fund ................................... Management of the Trust
14. Control Persons and Principal Holders of Securities ...... Management of the Trust
15. Investment Advisory and Other Services ................... Advisory and Administrative Services; The Distributor;
Distribution Plans; Other Information
16. Brokerage Allocation and Other Practices ................. Portfolio Brokerage; Portfolio Turnover
17. Capital Stock and Other Securities ....................... Other Information
18. Purchase, Redemption, and Pricing of Shares .............. Net Asset Value; How to Buy Shares; Investor Account
Services; How to Redeem Shares
19. Taxation of the Fund ..................................... Dividends, Distributions and Taxes
20. Underwriters ............................................. The Distributor
21. Calculation of Performance Data .......................... Calculation of the Funds' Performance
22. Financial Statements ..................................... Financial Statements
</TABLE>
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of this Registration Statement.
<PAGE>
Phoenix Investment Partners
Prospectus
January 28, 2000
[SENECA LOGO]
Phoenix-Seneca
Bond Fund
Phoenix-Seneca
Growth Fund
Phoenix-Seneca
Mid-Cap "EDGE"(SM) Fund
Phoenix-Seneca
Real Estate Securities Fund
[PHOENIX
INVESTMENT PARTNERS, LTD. LOGO]
Neither the Securities and Exchange
Commission nor any state securities
commission has approved or
disapproved of these securities or
determined if this prospectus is
truthful or complete. Any representation
to the contrary is a criminal offense.
This prospectus contains important
information about the Phoenix-Seneca
Bond Fund, Phoenix-Seneca
Growth Fund, Phoenix-Seneca
Mid-Cap "EDGE"(SM) Fund, and
Phoenix-Seneca Real Estate Securities
Fund that you should know before
investing. Please read it carefully and
retain it for future reference.
<PAGE>
Table of Contents
- ----------------------------------------------------
<TABLE>
<S> <C>
Phoenix-Seneca Bond Fund
Investment Risk and Return Summary ................ 1
Fund Expenses ..................................... 4
Phoenix-Seneca Growth Fund
Investment Risk and Return Summary ................ 6
Fund Expenses ..................................... 9
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
Investment Risk and Return Summary ................ 11
Fund Expenses ..................................... 14
Phoenix-Seneca Real Estate Securities Fund
Investment Risk and Return Summary ................ 16
Fund Expenses ..................................... 19
Additional Investment Techniques ................... 21
Management of the Funds ............................ 23
Pricing of Fund Shares ............................. 26
Sales Charges ...................................... 27
Your Account ....................................... 29
How to Buy Shares .................................. 31
How to Sell Shares ................................. 31
Things You Should Know When Selling Shares ......... 32
Account Policies ................................... 33
Investor Services .................................. 34
Tax Status of Distributions ........................ 35
Financial Highlights ............................... 36
Additional Information ............................. 47
</TABLE>
> PHOENIX-
SENECA
FUNDS
<PAGE>
Phoenix-Seneca Bond Fund
Investment Risk and Return Summary
- -------------------------------------------------
Investment Objective
Phoenix-Seneca Bond Fund has an investment objective of high
total return from both current income and capital appreciation.
There is no guarantee that the fund will achieve its objective.
Principal Investment Strategies
> The fund invests in a diversified portfolio of debt
securities, primarily corporate bonds, that may be either
publicly-traded or privately-placed.
> Under normal circumstances, the fund invests at least 65% of
its assets in bonds rated Baa3 or higher by Moody's Investors
Service ("Moody's") or BBB- or higher by Standard and Poor's
Corporation ("S&P"). However, the fund may invest up to 35% of
the fund's assets in high yield securities.
> The adviser, Phoenix Investment Counsel, Inc., manages the
fund's investment program and general operation of the fund
and the subadviser, Seneca Capital Management LLC, manages the
investments of the fund. The subadviser uses a value-driven
style that focuses on issue and sector selection, measured
interest rate anticipation and trading opportunities.
> Securities selected for fund investment may be of any maturity
or duration. Normally the fund maintains a dollar-weighted
average maturity of between two and ten years and a
dollar-weighted average duration of between two and eight
years. 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
rising, the fund may lengthen its average maturity. Sales of
securities can result from anticipated changes in interest
rates, changes in the creditworthiness of issuers, or general
financial or market developments.
Temporary Defensive Strategy: When the subadviser determines that
market conditions warrant, the fund may invest without limit in
cash and cash equivalents. In such instances, the fund may not
achieve its stated objective.
Phoenix-Seneca Bond Fund 1
<PAGE>
Principal Risks
If you invest in this fund, you risk that you will lose your
investment.
General
The value of your shares and the level of income that you
receive are subject to risks associated with the types of
securities selected for fund investment, including interest rate
risk and credit risk. Neither the fund nor the adviser or
subadviser can assure you that a particular level of income will
consistently be achieved.
Interest Rate Risk
The value of your shares will be directly affected by trends in
interest rates. If interest rates rise, the value of debt
securities generally will fall. Because the fund may hold
securities with longer maturities, the net asset value of the
fund may experience greater price fluctuations in response to
changes in interest rates than funds that hold only securities
with short-term maturities. Prices of longer-term securities are
affected more by interest rate changes than prices of
shorter-term securities.
Credit Risk
Credit risk pertains to the issuer's ability to make scheduled
interest or principal payments. Generally, the lower the credit
rating of a security the greater chance that the issuer will be
unable to make such payments when due.
High Yield Fixed Income Securities
High yield securities (junk bonds) typically entail greater
price volatility and principal and interest rate risk. There is
a greater chance that an issuer will not be able to make
principal and interest payments on time. Analysis of the
creditworthiness of issuers of high yield securities may be
complex, and as a result, it may be more difficult for the
subadviser to accurately predict risk.
Impact of the Year 2000 Issue on Fund Investments
The Year 2000 issue is the result of computer programs being
written using two rather than four digits to define the
applicable year. There is the possibility that some or all of an
entity's computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the
year 2000. If an entity whose securities are held by the fund
does not "fix" its Year 2000 issue it is possible that its
operations and financial results would be hurt. Also the cost of
modifying computer programs to become Year 2000 compliant may
hurt the financial performance and market price of entities
whose securities are held by the fund.
2 Phoenix-Seneca Bond Fund
<PAGE>
Performance Tables
The bar chart and table below provide some indication of the
risks of investing in the Phoenix-Seneca Bond Fund. The bar
chart shows changes in the fund's Class X Shares performance
from year to year over the life of the fund(1). The table shows
how the fund's average annual returns for one year and for the
life of the fund compare to those of a broad-based securities
market index. The fund's past performance is not necessarily an
indication of how the fund will perform in the future.
[BAR CHART PLOT POINTS]
Phoenix-Seneca Bond Fund
Annual Return (%)
<TABLE>
<S> <C>
1997 12.83
1998 7.66
1999 1.57
</TABLE>
Calendar Year
[END PLOT POINTS]
(1) The fund's average annual returns in the chart above do not
reflect the deduction of any sales charges. The returns would
have been less than those shown if sales charges were deducted.
During the period shown in the chart above, the highest return
for a quarter was 4.23% (quarter ending December 31, 1997) and
the lowest return for a quarter was (0.19)% (quarter ending June
30, 1999).
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Life of the Fund(2)
Average Annual Total Returns -------------------------------------------------
(for the period ending 12/31/99)(1) One Year Class X Class A Class B Class C
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class X Shares 1.57% 7.55% -- -- --
- ----------------------------------------------------------------------------------------------------
Class A Shares (4.25)% -- (1.11)% -- --
- ----------------------------------------------------------------------------------------------------
Class B Shares (3.99)% -- -- (1.07)% --
- ----------------------------------------------------------------------------------------------------
Class C Shares (0.19)% -- -- -- 1.42%
- ----------------------------------------------------------------------------------------------------
Lehman Aggregate Bond Index(3) (0.83)% 5.68% 2.41% 2.41% 2.41%
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) The fund's average annual returns in the table above reflect
the deduction of the maximum sales charge for an investment in
the fund's Class A Shares and a full redemption in the fund's
Class B and Class C Shares.
(2) Class X Shares since March 8, 1996; Class A, Class B and
Class C Shares since July 1, 1998.
(3) The Lehman Aggregate Bond Index is an unmanaged index
considered to be representative of the bond market. The Index
does not reflect sales charges.
Phoenix-Seneca Bond Fund 3
<PAGE>
Fund Expenses
- ----------------------------
This table illustrates all fees and expenses that you may pay if
you buy and hold shares of the fund.
<TABLE>
<CAPTION>
Class X Class A Class B Class C
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shareholder Fees (fees paid directly from
your investment)
Maximum Sales Charge (load) Imposed on
Purchases (as a percentage of offering price) None 4.75% None None
Maximum Deferred Sales Charge (load) (as a None None 5%(b) 1%(c)
percentage of the lesser of the value redeemed or
the amount invested)
Maximum Sales Charge (load) Imposed on
Reinvested Dividends None None None None
Redemption Fee None None None None
Exchange Fee None None None None
----------------------------------------------------
Class X Class A Class B Class C
Shares Shares Shares Shares
------ ------ ------ ------
Annual Fund Operating Expenses (expenses
that are deducted from fund assets)
Management Fees 0.50% 0.50% 0.50% 0.50%
Distribution and Service (12b-1) Fees(d) None 0.25% 1.00% 1.00%
Other Expenses 0.63% 3.33% 4.17% 8.00%
---- ---- ----- -----
Total Annual Fund Operating Expenses(a) 1.13% 4.08% 5.67% 9.50%
==== ==== ===== =====
</TABLE>
----------------
(a) The fund's investment adviser has agreed to reimburse through
January 31, 2001 the Phoenix-Seneca Bond Fund's operating
expenses to the extent that such expenses exceed 0.90% for Class
X Shares, 1.15% for Class A Shares and 1.90% for Class B and
Class C Shares. Prior to July 1, 1999 the fund's investment
adviser had agreed to reimburse the fund's operating expenses to
the extent that such expenses exceeded 1.85% for Class X Shares,
2.45% for Class A Shares and 3.20% for Class B and Class C
Shares. Total Annual Fund Operating Expenses after expense
reimbursement (if applicable) were: 1.06% for Class X shares,
1.88% for Class A Shares, 2.62% for Class B Shares and 2.91% for
Class C Shares.
(b) The maximum deferred sales charge is imposed on Class B
Shares redeemed during the first year; thereafter, it decreases
1% annually to 2% during the fourth and fifth years and to 0%
after the fifth year.
(c) The maximum deferred sales charge is imposed on Class C
Shares redeemed during the first year only.
(d) Distribution and Service Fees represent an asset-based sales
charge that, for a long-term shareholder, may be higher than the
maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc. ("NASD").
Example
This example is intended to help you compare the cost of
investing in the fund with the cost of investing in other mutual
funds.
The example assumes that you invest $10,000 in the fund for the
time periods indicated and then redeem all of your shares at the
end of those periods. The example also assumes that your
investment has a 5% return each year and that the fund's
operating expenses remain the same. In the case of Class B
Shares, it is assumed that your shares are converted to Class A
after eight years. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
4 Phoenix-Seneca Bond Fund
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------
Class 1 year 3 years 5 years 10 years
- --------------------------------------------------
<S> <C> <C> <C> <C>
Class X $ 115 $ 359 $ 622 $1,375
- --------------------------------------------------
Class A $ 865 $1,657 $2,463 $4,545
- --------------------------------------------------
Class B $ 965 $1,884 $2,788 $5,197
- --------------------------------------------------
Class C $1,029 $2,662 $4,244 $7,615
- --------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
- --------------------------------------------------
Class 1 year 3 years 5 years 10 years
- --------------------------------------------------
<S> <C> <C> <C> <C>
Class B $565 $1,684 $2,788 $5,197
- --------------------------------------------------
Class C $929 $2,662 $4,244 $7,615
- --------------------------------------------------
</TABLE>
Note: Your actual expenses may be lower than those shown in the tables above
since the expense levels used to calculate the figures shown do not include the
reimbursement of expenses over certain levels by the fund's investment adviser.
Refer to the section "Management of the Funds" for information about expense
reimbursement.
Phoenix-Seneca Bond Fund 5
<PAGE>
Phoenix-Seneca Growth Fund
Investment Risk and Return Summary
- -------------------------------------------------
Investment Objective
Phoenix-Seneca Growth Fund has an investment objective of
capital appreciation. There is no guarantee that the fund will
achieve its objective.
Principal Investment Strategies
> Under normal circumstances, the fund invests at least 65% of
its total assets in common stocks of companies of any size.
> The adviser manages the fund's investment program and general
operation of the fund and the subadviser manages the
investments of the fund. The subadviser seeks growth with
controlled risk by investing in two distinct types of
companies, companies that have long and proven records of
financial success ("earnings sustainers") and companies that
are growing rapidly and that the subadviser believes have the
potential to exceed earnings expectations ("earnings
surprisers"). Earnings sustainers are generally large,
well-known companies that have established histories of
profitability and/or dividend payment. Earnings surprisers are
generally small and mid-cap companies. Using statistical
modeling and analysis that evaluates a stock's earnings
strength, quality and sustainability, as well as the
management of the issuer and the stock's valuation,
approximately 30 to 50 securities are selected for the fund's
portfolio.
> Stocks are generally sold if earnings reports disappoint, if
valuation levels reach the top of their historic level or if
earnings momentum peaks.
Temporary Defensive Strategy: When the subadviser determines that
market conditions warrant, the fund may invest without limit in
cash and cash equivalents. In such instances, the fund may not
achieve its stated objective.
6 Phoenix-Seneca Growth Fund
<PAGE>
Principal Risks
If you invest in this fund, you risk that you may lose your
investment.
General
The value of the fund's investments that supports your share
value can decrease as well as increase. If between the time you
purchase shares and the time you sell shares the value of the
fund's investments decreases, you will lose money.
Conditions affecting the overall economy, specific industries or
companies in which the fund invests can be worse than expected
and investments may fail to perform as the adviser expects. As a
result, the value of your shares may decrease.
Small Capitalizations
Companies with small capitalizations are often companies with a
limited operating history or companies in industries that have
recently emerged due to cultural, economic, regulatory or
technological developments. Such developments can have a
significant impact or negative effect on small capitalization
companies and their stock performance and can make investment
returns highly volatile. Product lines are often less
diversified and subject to competitive threats. Smaller
capitalization stocks are subject to varying patterns of trading
volume and may, at times, be difficult to sell.
Growth Stocks
Because growth stocks typically make little or no dividend
payments to shareholders, return is based on a stock's capital
appreciation, making return more dependent on market increases
and decreases. Growth stocks are therefore more volatile than
non-growth stocks to market changes.
Limited Number of Investments
Conditions which negatively affect securities in the portfolio
will have a greater impact on the fund as compared to a fund
that holds a greater number of security positions. In addition,
the fund may be more sensitive to changes in the market value of
a single issuer in its portfolio and therefore the value of your
shares may be more volatile.
Impact of the Year 2000 Issue on Fund Investments
The Year 2000 issue is the result of computer programs being
written using two rather than four digits to define the
applicable year. There is the possibility that some or all of an
entity's computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the
year 2000. If an entity whose securities are held by the fund
does not "fix" its Year 2000 issue it is possible that its
operations and financial results would be hurt. Also the cost of
modifying computer programs to become Year 2000 compliant may
hurt the financial performance and market price of entities
whose securities are held by the fund.
Phoenix-Seneca Growth Fund 7
<PAGE>
Performance Tables
The bar chart and table below provide some indication of the
risks of investing in the Phoenix-Seneca Growth Fund. The bar
chart shows changes in the fund's Class A Shares performance
from year to year over the life of the fund(1). The table shows
how the fund's average annual returns for one year and for the
life of the fund compare to those of a broad-based securities
market index. The fund's past performance is not necessarily an
indication of how the fund will perform in the future.
[BAR CHART PLOT POINTS]
Phoenix-Seneca Growth Fund
Annual Return (%)
<TABLE>
<S> <C>
1997 27.87
1998 28.80
1999 38.91
</TABLE>
Calendar Year
[END PLOT POINTS]
(1) The fund's average annual returns in the chart above do not
reflect the deduction of any sales charges. The returns would
have been less than those shown if sales charges were deducted.
During the period shown in the chart above, the highest return
for a quarter was 27.55% (quarter ending December 31, 1999) and
the lowest return for a quarter was (12.35)% (quarter ending
September 30, 1998).
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Life of the Fund(2)
Average Annual Total Returns ---------------------------------------------
(for the period ending 12/31/99)(1) One Year Class X Class A Class B Class C
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class X Shares 39.26% 35.66% -- -- --
- ------------------------------------------------------------------------------------------------
Class A Shares 32.31% -- 33.15% -- --
- ------------------------------------------------------------------------------------------------
Class B Shares 33.28% -- -- 24.81% --
- ------------------------------------------------------------------------------------------------
Class C Shares 37.20% -- -- -- 27.09%
- ------------------------------------------------------------------------------------------------
S&P 500 Stock Index(3) 21.14% 26.86% 26.86% 19.57% 19.57%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) The fund's average annual returns in the table above reflect
the deduction of the maximum sales charge for an investment in
the fund's Class A Shares and a full redemption of the fund's
Class B and Class C Shares.
(2) Class X and Class A Shares since March 8, 1996; Class B and
Class C Shares since July 1, 1998.
(3) The S&P 500 Stock Index is an unmanaged but commonly used
measure of common stock total return performance. The S&P's
performance does not reflect sales charges.
8 Phoenix-Seneca Growth Fund
<PAGE>
Fund Expenses
- -------------------------------
This table illustrates all fees and expenses that you may pay if you buy and
hold shares of the fund.
<TABLE>
<CAPTION>
Class X Class A Class B Class C
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shareholder Fees (fees paid directly from your
investment)
Maximum Sales Charge (load) Imposed on Purchases
(as a percentage of offering price) None 4.75% None None
Maximum Deferred Sales Charge (load) (as a None None 5%(b) 1%(c)
percentage of the lesser of the value redeemed or the
amount invested)
Maximum Sales Charge (load) Imposed on Reinvested
Dividends None None None None
Redemption Fee None None None None
Exchange Fee None None None None
--------------------------------------------------
Class X Class A Class B Class C
Shares Shares Shares Shares
------ ------ ------ ------
Annual Fund Operating Expenses (expenses
that are deducted from fund assets)
Management Fees 0.70% 0.70% 0.70% 0.70%
Distribution and Service (12b-1) Fees(d) None 0.25% 1.00% 1.00%
Other Expenses 0.46% 0.49% 1.76% 3.97%
---- ---- ----- -----
Total Annual Fund Operating Expenses(a) 1.16% 1.44% 3.46% 5.67%
==== ==== ===== =====
</TABLE>
----------------
(a) The fund's investment adviser has agreed to reimburse through
January 31, 2001 the Phoenix-Seneca Growth Fund's operating
expenses to the extent that such expenses exceed 1.25% for Class
X Shares, 1.85% for Class A Shares and 2.60% for Class B and
Class C Shares. Total Annual Fund Operating Expenses after
expense reimbursement (if applicable) were: 1.16% for Class X
Shares, 1.44% for Class A Shares, 2.60% for Class B Shares and
2.60% for Class C Shares.
(b) The maximum deferred sales charge is imposed on Class B
Shares redeemed during the first year; thereafter, it decreases
1% annually to 2% during the fourth and fifth years and to 0%
after the fifth year.
(c) The maximum deferred sales charge is imposed on Class C
Shares redeemed during the first year only.
(d) Distribution and Service Fees represent an asset-based sales
charge that, for a long-term shareholder, may be higher than the
maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc. ("NASD").
Example
This example is intended to help you compare the cost of
investing in the fund with the cost of investing in other mutual
funds.
The example assumes that you invest $10,000 in the fund for the
time periods indicated and then redeem all of your shares at the
end of those periods. The example also assumes that your
investment has a 5% return each year and that the fund's
operating expenses remain the same. In the case of Class B
Shares, it is assumed that your shares are converted to Class A
after eight years. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
Phoenix-Seneca Growth Fund 9
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------
Class 1 year 3 years 5 years 10 years
- --------------------------------------------------
<S> <C> <C> <C> <C>
Class X $118 $ 368 $ 638 $1,409
- --------------------------------------------------
Class A $615 $ 909 $1,225 $2,117
- --------------------------------------------------
Class B $749 $1,262 $1,798 $3,282
- --------------------------------------------------
Class C $665 $1,684 $2,788 $5,484
- --------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
- --------------------------------------------------
Class 1 year 3 years 5 years 10 years
- --------------------------------------------------
<S> <C> <C> <C> <C>
Class B $349 $1,062 $1,798 $3,282
- --------------------------------------------------
Class C $565 $1,684 $2,788 $5,484
- --------------------------------------------------
</TABLE>
Note: Your actual expenses may be lower than those shown in the tables above
since the expense levels used to calculate the figures shown do not include the
reimbursement of expenses over certain levels by the fund's investment adviser.
Refer to the section "Management of the Fund" for information about expense
reimbursement.
10 Phoenix-Seneca Growth Fund
<PAGE>
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
Investment Risk and Return Summary
- -------------------------------------------------
Investment Objective
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund has an investment
objective of capital appreciation. There is no guarantee that
the fund will achieve its objective.
Principal Investment Strategies
> Under normal circumstances, the fund invests at least 65% of
its total assets in common stocks of companies with market
capitalizations between $500 million and $10 billion. The fund
may at times have significant investments in companies with
higher or lower market capitalizations.
> The adviser manages the fund's investment program and general
operation of the fund and the subadviser manages the
investments of the fund. The subadviser seeks stocks that it
projects will have earnings growth rates at substantially
higher levels than the market and that will have major
earnings acceleration. Using statistical modeling and analysis
that evaluates a stock's earnings strength, quality and
sustainability, as well as the management of the issuer and
the stock's valuation, approximately 30 to 50 securities are
selected for the fund's portfolio.
> Stocks are generally sold if earnings reports disappoint, if
valuation levels reach the top of their historic level or if
earnings momentum peaks.
> To enable the fund to invest effectively in companies with
small to medium market capitalizations, the fund will not
offer shares to the public when the net assets of the fund
exceed $500 million dollars. This limit is subject to change.
Temporary Defensive Strategy: When the subadviser determines that
market conditions warrant, the fund may invest without limit in
cash and cash equivalents. In such instances, the fund may not
achieve its stated objective.
Principal Risks
If you invest in this fund, you risk that you may lose your
investment.
General
The value of the fund's investments that supports your share
value can decrease as well as increase. If between the time you
purchase shares and the time you sell shares the value of the
fund's investments decreases, you will lose money.
Conditions affecting the overall economy, specific industries or
companies in which the fund invests can be worse than expected
and investments may fail to perform as the adviser expects. As a
result, the value of your shares may decrease.
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund 11
<PAGE>
Small Capitalizations
Companies with small capitalizations are often companies with a
limited operating history or companies in industries that have
recently emerged due to cultural, economic, regulatory or
technological developments. Such developments can have a
significant impact or negative effect on small capitalization
companies and their stock performance and can make investment
returns highly volatile. Product lines are often less
diversified and subject to competitive threats. Smaller
capitalization stocks are subject to varying patterns of trading
volume and may, at times, be difficult to sell.
Limited Number of Investments
Conditions which negatively affect securities in the portfolio
will have a greater impact on the fund as compared to a fund
that holds a greater number of security positions. In addition,
the fund may be more sensitive to changes in the market value of
a single issuer in its portfolio and therefore the value of your
shares may be more volatile.
Impact of the Year 2000 Issue on Fund Investments
The Year 2000 issue is the result of computer programs being
written using two rather than four digits to define the
applicable year. There is the possibility that some or all of an
entity's computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the
year 2000. If an entity whose securities are held by the fund
does not "fix" its Year 2000 issue it is possible that its
operations and financial results would be hurt. Also the cost of
modifying computer programs to become Year 2000 compliant may
hurt the financial performance and market price of entities
whose securities are held by the fund.
12 Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
<PAGE>
Performance Tables
The bar chart and table below provide some indication of the
risks of investing in the Phoenix Mid-Cap "EDGE"(SM) Fund. The
bar chart shows changes in the fund's Class A Shares performance
from year to year over the life of the fund(1). The table shows
how the fund's average annual returns for one year and for the
life of the fund compare to those of a broad-based securities
market index. The fund's past performance is not necessarily an
indication of how the fund will perform in the future.
[BAR CHART PLOT POINTS]
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
Annual Return (%)
<TABLE>
<S> <C>
1997 16.22
1998 29.21
1999 44.58
</TABLE>
Calendar Year
[END PLOT POINTS]
(1) The fund's average annual returns in the chart above do not
reflect the deduction of any sales charges. The returns would
have been less than those shown if sales charges were deducted.
During the period shown in the chart above, the highest return
for a quarter was 44.83% (quarter ending December 31, 1999) and
the lowest return for a quarter was (19.35)% (quarter ending
September 30, 1998).
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Life of the Fund(2)
Average Annual Total Returns ---------------------------------------------
(for the period ending 12/31/99)(1) One Year Class X Class A Class B Class C
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class X Shares 45.26% 34.27% -- -- --
- ------------------------------------------------------------------------------------------------
Class A Shares 37.71% -- 32.02% -- --
- ------------------------------------------------------------------------------------------------
Class B Shares 39.11% -- -- 29.51% --
- ------------------------------------------------------------------------------------------------
Class C Shares 43.12% -- -- -- 31.80%
- ------------------------------------------------------------------------------------------------
S&P MidCap 400 Index(3) 14.72% 21.22% 21.22% 15.31% 15.31%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) The fund's average annual returns in the table above reflect
the deduction of the maximum sales charge for an investment in
the fund's Class A Shares and a full redemption of the fund's
Class B and Class C Shares.
(2) Class X and Class A Shares since March 8, 1996; Class B and
Class C Shares since July 1, 1998.
(3) The S&P MidCap 400 Index is a capitalization-weighted index
that measures the performance of the mid range sector of the U.S.
stock market where the median capitalization is approximately
$700 million. The S&P MidCap 400 Index does not reflect sales
charges.
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund 13
<PAGE>
Fund Expenses
- ----------------------------
This table illustrates all fees and expenses that you may pay if
you buy and hold shares of the fund.
<TABLE>
<CAPTION>
Class X Class A Class B Class C
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shareholder Fees (fees paid directly from
your investment)
Maximum Sales Charge (load) Imposed on
Purchases (as a percentage of offering price) None 4.75% None None
Maximum Deferred Sales Charge (load) (as a None None 5%(b) 1%(c)
percentage of the lesser of the value redeemed or
the amount invested)
Maximum Sales Charge (load) Imposed on
Reinvested Dividends None None None None
Redemption Fee None None None None
Exchange Fee None None None None
-----------------------------------------------------
Class X Class A Class B Class C
Shares Shares Shares Shares
------ ------ ------ ------
Annual Fund Operating Expenses (expenses
that are deducted from fund assets)
Management Fees 0.80% 0.80% 0.80% 0.80%
Distribution and Service (12b-1) Fees(d) None 0.25% 1.00% 1.00%
Other Expenses 1.16% 1.46% 4.53% 7.23%
---- ---- ----- -----
Total Annual Fund Operating Expenses(a) 1.96% 2.51% 6.33% 9.03%
==== ==== ===== =====
</TABLE>
----------------
(a) The fund's investment adviser has agreed to reimburse through
January 31, 2001 the Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund's
operating expenses to the extent that such expenses exceed 1.15%
for Class X Shares, 1.40% for Class A Shares and 2.15% for Class
B and Class C Shares. Prior to January 28, 2000, the fund's
investment adviser had agreed to reimburse the fund's operating
expenses to the extent that such expenses exceeded 2.10% for
Class X Shares, 2.70% for Class A Shares and 3.45% for Class B
and Class C Shares. Total Annual Fund Operating Expenses, after
expense reimbursement (if applicable), were: 1.96% for Class X
Shares, 2.51% for Class A Shares, 3.45% for Class B Shares and
3.45% for Class C Shares.
(b) The maximum deferred sales charge is imposed on Class B
Shares redeemed during the first year; thereafter, it decreases
1% annually to 2% during the fourth and fifth years and to 0%
after the fifth year.
(c) The maximum deferred sales charge is imposed on Class C
Shares redeemed during the first year only.
(d) Distribution and Service Fees represent an asset based sales
charge that, for a long-term shareholder, may be higher than the
maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc. ("NASD").
Example
This example is intended to help you compare the cost of
investing in the fund with the cost of investing in other mutual
funds.
The example assumes that you invest $10,000 in the fund for the
time periods indicated and then redeem all of your shares at the
end of those periods. The example also assumes that your
investment has a 5% return each year and that the fund's
operating expenses remain the same. In the case of Class B
Shares, it is assumed that your shares are converted to Class A
after eight years. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
14 Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------
Class 1 year 3 years 5 years 10 years
- --------------------------------------------------
<S> <C> <C> <C> <C>
Class X $ 199 $ 615 $1,057 $2,285
- --------------------------------------------------
Class A $ 717 $1,219 $1,747 $3,186
- --------------------------------------------------
Class B $1,029 $2,061 $3,061 $5,265
- --------------------------------------------------
Class C $ 985 $2,549 $4,082 $7,404
- --------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
- --------------------------------------------------
Class 1 year 3 years 5 years 10 years
- --------------------------------------------------
<S> <C> <C> <C> <C>
Class B $629 $1,861 $3,061 $5,265
- --------------------------------------------------
Class C $885 $2,549 $4,082 $7,404
- --------------------------------------------------
</TABLE>
Note: Your actual expenses may be lower than those shown in the tables above
since the expense levels used to calculate the figures shown do not include the
reimbursement of expenses over certain levels by the fund's investment adviser.
Refer to the section "Management of the Fund" for information about expense
reimbursement.
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund 15
<PAGE>
Phoenix-Seneca Real Estate Securities Fund
Investment Risk and Return Summary
- -------------------------------------------------
Investment Objective
Phoenix-Seneca Real Estate Securities Fund has an investment
objective of high total return in both current income and
long-term capital appreciation. There is no guarantee that the
fund will achieve its objective.
Principal Investment Strategies
> Under normal circumstances, the fund invests at least 65% of
its total assets in equity and debt securities of issuers that
are principally engaged in real estate or related industry
businesses in the United States. An issuer is considered
principally engaged in such business if at least 50% of the
issuer's assets or income is attributable to ownership,
construction, management or sale of real estate in the United
States or to products or services related to the real estate
industry. The fund may concentrate its assets in real estate
related industries. The fund, however, does not make direct
investments in real estate.
> The adviser is responsible for managing the fund's investment
program and the general operation of the fund and the
subadviser manages the investments of the fund. The fund
focuses its investments in common stocks of REITs but may
invest in debt securities of REITs as well as common stocks of
issuers. Generally REITs are publicly-traded companies that
manage portfolios of real estate to earn profits for
shareholders through investments in commercial and residential
real estate. Equity REITs own real estate directly. Mortgage
REITs make short-term construction or real estate development
loans or invest in long-term mortgages or mortgage pools.
> The fund may invest up to 35% of its assets in equity and debt
securities outside the real estate industry or related
businesses.
Temporary Defensive Strategy: When the subadviser determines that
market conditions warrant, the fund may invest without limit in
cash and cash equivalents. In such instances, the fund may not
achieve its stated objective.
Principal Risks
If you invest in this fund, you risk that you may lose your
investment.
General
The value of the fund's investments that supports your share
value can decrease as well as increase. If between the time you
purchase shares and the time you sell shares the value of the
fund's investments decreases, you will lose money.
Conditions affecting the overall economy, the real estate
industry and specific companies in which the fund invests can be
worse than expected and investments may fail to perform as the
adviser expects. As a result, the value of your shares may
decrease.
16 Phoenix-Seneca Real Estate Securities Fund
<PAGE>
Non-Diversification
The fund is a non-diversified investment company which means that
it is not limited in the proportion of assets that it may invest
in the securities of any one issuer. Diversifying a fund's
portfolio can reduce the risks of investing. As a non-diversified
investment company, the fund may be subject to greater risk since
it can invest a greater proportion of its assets in the
securities of a small number of issuers. If the fund takes
concentrated positions in a small number of issuers, changes in
the price of those securities may cause the fund's return to
fluctuate more than that of a diversified investment company.
Industry Concentration
The fund concentrates its investments in the real estate
industry. Securities of companies in other industries may provide
greater investment return in certain market conditions as
compared to companies in the real estate industry. Moreover,
conditions which negatively impact the real estate industry will
have a greater impact on this fund as compared to a fund which
does not concentrate in one industry.
The value of investments in issuers that hold real estate may be
affected by changes in the values of real properties owned by the
issuers. Likewise, investments in businesses related to the real
estate industry may also be affected by the value of real estate
generally or in particular geographical areas in which the
businesses operated. A decline in real estate value may have a
negative impact on the value of your shares.
Interest rates also can be a significant factor for issuers that
hold real estate and those 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 constructions.
REIT Securities
REIT securities often are not diversified and may only finance a
limited number of projects or properties, which may subject REITs
to abrupt and large price movements. REITs are heavily dependent
on cash flow from properties and, at times, the market price of a
REIT's securities may be less than the value of investments in
real estate which may result in a lower price when the fund sells
its shares in the REIT. REITs may trade less frequently and in
lower volume than securities of other larger companies which may
also contribute to REIT securities losing value. REITs are more
dependent on the skills of their management and are often heavily
dependent on cash flow from properties.
Impact of the Year 2000 Issue on Fund Investments
The Year 2000 issue is the result of computer programs being
written using two rather than four digits to define the
applicable year. There is the possibility that some or all of an
entity's computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year
2000. If an entity whose securities are held by the fund does not
"fix" its Year 2000 issue it is possible that its operations and
financial results would be hurt. Also the cost of modifying
computer programs to become Year 2000 compliant may hurt the
financial performance and market price of entities whose
securities are held by the fund.
Phoenix-Seneca Real Estate Securities Fund 17
<PAGE>
Performance Tables
The bar chart and table below provide some indication of the
risks of investing in the Phoenix-Seneca Real Estate Securities
Fund. The bar chart shows changes in the fund's Class A Shares
performance from year to year over the life of the fund.(1) The
table shows how the fund's average annual returns for one year
and for the life of the fund compare to those of a broad-based
securities market index. The fund's past performance is not
necessarily an indication of how the fund will perform in the
future.
[BAR CHART PLOT POINTS]
Phoenix-Seneca Real Estate Securities Fund
Annual Return (%)
<TABLE>
<S> <C>
1997 17.62
1998 -20.63
1999 -4.33
</TABLE>
Calendar Year
[END PLOT POINTS]
(1) The fund's average annual returns in the chart above do not
reflect the deduction of any sales charges. The returns would
have been less than those shown if sales charges were deducted.
During the period shown in the chart above, the highest return
for a quarter was 11.63% (quarter ending June 30, 1999) and the
lowest return for a quarter was (12.35)% (quarter ending
September 30, 1998).
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Life of the Fund(2)
Average Annual Total Returns
(for the period ending 12/31/99)(1) One Year Class X Class A Class B Class C
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class X Shares (3.14)% 4.01% -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Class A Shares (8.88)% -- 1.53% -- --
- ---------------------------------------------------------------------------------------------------------------------
Class B Shares (8.74)% -- -- (15.90)% --
- ---------------------------------------------------------------------------------------------------------------------
Class C Shares (5.09)% -- -- -- 13.84%
- ---------------------------------------------------------------------------------------------------------------------
The Wilshire Real Estate Securities Index(3) (2.49)% 7.07%(4) 7.07%(4) 10.00% 10.00%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The fund's average annual returns in the table above reflect
the deduction of the maximum sales charge for an investment in
the fund's Class A Shares.
(2) Class X and Class A Shares since March 12, 1996; Class B and
Class C Shares since July 1, 1998.
(3) The Wilshire Real Estate Securities Index is a market
capitalization-weighted index comprised of publicly traded real
estate investment trusts (REITs) and real estate operating
companies. The Wilshire REIT Index does not reflect sales
charges.
(4) The Wilshire Real Estate Securities Index does not compute
daily index numbers. Index performance is from March 31, 1996 .
18 Phoenix-Seneca Real Estate Securities Fund
<PAGE>
Fund Expenses
- ----------------------------
This table illustrates all fees and expenses that you may pay if
you buy and hold shares of the fund.
<TABLE>
<CAPTION>
Class X Class A Class B Class C
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shareholder Fees (fees paid directly from
your investment)
Maximum Sales Charge (load) Imposed on
Purchases (as a percentage of offering price) None 4.75% None None
Maximum Deferred Sales Charge (load) (as a None None 5%(b) 1%(c)
percentage of the lesser of the value redeemed or
the amount invested)
Maximum Sales Charge (load) Imposed on
Reinvested Dividends None None None None
Redemption Fee None None None None
Exchange Fee None None None None
-----------------------------------------------------
Class X Class A Class B Class C
Shares Shares Shares Shares
------ ------ ------ ------
Annual Fund Operating Expenses (expenses
that are deducted from fund assets)
Management Fees 0.85% 0.85% 0.85% 0.85%
Distribution and Service (12b-1) Fees (d) None 0.25% 1.00% 1.00%
Other Expenses 0.81% 3.17% 16.65% 18.10%
---- ---- ----- -----
Total Annual Fund Operating Expenses(a) 1.66% 4.27% 18.50% 19.95%
==== ==== ===== =====
</TABLE>
----------------
(a) The fund's investment adviser has agreed to reimburse through
January 31, 2001 the Phoenix-Seneca Real Estate Securities Fund's
operating expenses to the extent that such expenses exceed 2.35%
for Class X Shares, 3.05% for Class A Shares and 3.80% for Class
B and Class C Shares. Total Annual Fund Operating Expenses after
expense reimbursement (if applicable), were: 1.66% for Class X
Shares, 3.05% for Class A Shares, 3.80% for Class B Shares and
3.80% for Class C Shares.
(b) The maximum deferred sales charge is imposed on Class B
Shares redeemed during the first year; thereafter, it decreases
1% annually to 2% during the fourth and fifth years and to 0%
after the fifth year.
(c) The maximum deferred sales charge is imposed on Class C
Shares redeemed during the first year only.
(d) Distribution and Service Fees represent an asset based sales
charge that, for a long-term shareholder, may be higher than the
maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc. ("NASD").
Example
This example is intended to help you compare the cost of
investing in the fund with the cost of investing in other mutual
funds.
The example assumes that you invest $10,000 in the fund for the
time periods indicated and then redeem all of your shares at the
end of those periods. The example also assumes that your
investment has a 5% return each year and that the fund's
operating expenses remain the same. In the case of Class B
Shares, it is assumed that your shares are converted to Class A
after eight years. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
Phoenix-Seneca Real Estate Securities Fund 19
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------
Class 1 year 3 years 5 years 10 years
- --------------------------------------------------
<S> <C> <C> <C> <C>
Class X $ 169 $ 523 $ 902 $1,965
- --------------------------------------------------
Class A $ 883 $1,709 $2,546 $4,694
- --------------------------------------------------
Class B $2,125 $4,708 $6,590 $9,043
- --------------------------------------------------
Class C $1,946 $4,751 $6,852 $9,902
- --------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
- --------------------------------------------------
Class 1 year 3 years 5 years 10 years
- --------------------------------------------------
<S> <C> <C> <C> <C>
Class B $1,725 $4,508 $6,590 $9,043
- --------------------------------------------------
Class C $1,846 $4,751 $6,852 $9,902
- --------------------------------------------------
</TABLE>
Note: Your actual expenses may be lower than those shown in the
tables above since the expense levels used to calculate the
figures shown do not include the reimbursement of expenses over
certain levels by the fund's investment adviser. Refer to the
section "Management of the Fund" for information about expense
reimbursement.
20 Phoenix-Seneca Real Estate Securities Fund
<PAGE>
Additional Investment Techniques
- -----------------------------------------------
In addition to the Principal Investment Strategies and Risks, the
funds may engage in the following investment techniques:
Unrated Securities
The funds may invest in unrated securities. Unrated securities
may not be lower in quality than rated securities but due to
their perceived risk they may not have as broad a market as rated
securities. Analysis of unrated securities is more complex than
for rated securities, making it more difficult for the subadviser
to accurately predict risk.
High Yield Fixed Income Securities
Each fund may invest up to 35% of its net assets in high yield
securities. A fund will invest in securities that are rated
higher than B- by S&P or B3 by Moody's, or if unrated are judged
by the subadviser to be of similar quality. High yield securities
(junk bonds) typically entail greater price volatility and
principal and interest rate risk. There is a greater chance that
an issuer will not be able to make principal and interest
payments on time. Analysis of the creditworthiness of issuers of
high yield securities may be complex, and as a result, it may be
more difficult for the subadviser to accurately predict risk.
Variable Rate, Floating Rate or Variable Amount Securities
The funds may invest in variable rate, floating rate, or variable
amount securities which are generally short-term, unsecured
fluctuating, interest-bearing notes of private issuers.
Mortgage-Backed and Asset-Backed Securities
The funds may invest in mortgage-backed and other asset-backed
securities, including pass-through type securities and
Collateralized Mortgage Obligations (CMOs). It is difficult to
predict cash flows from mortgage-backed and asset-backed
securities due to the variability of prepayments. Prepayments
also tend to limit price gains when interest rates drop and
exaggerate price declines when interest rates rise. In the event
of high prepayments, a fund may be required to invest proceeds at
lower interest rates than if such prepayment had not occurred.
Foreign Investing
The funds may invest in securities of foreign (non-U.S.) issuers,
including foreign debt securities. Foreign equity investments are
generally limited to securities traded on U.S. exchanges or in
the NASDAQ Stock Market and American Depository Receipts (ADRs).
Investments in non-U.S. securities involve additional risks and
conditions including differences in accounting standards,
generally higher commission rates, differences in transaction
settlement systems, political instability, and the possibility of
confiscatory or expropriation taxes all of which may negatively
impact the funds. Dividends and other income payable on foreign
securities may also be subject to foreign taxes.
Phoenix-Seneca Funds 21
<PAGE>
Some foreign investments may be made in currencies other than
U.S. dollars that will fluctuate in value as a result of changes
in the currency exchange rate. In addition, foreign markets and
currencies may not perform as well as U.S. markets.
Mutual Fund Investing
Each fund may invest up to 10% of its total assets in shares of
other mutual funds. Assets invested in other mutual funds incur a
layering of expenses including operating costs, advisory fees and
administrative fees that you, as a shareholder in the funds,
indirectly bear.
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 related options. The funds may also enter
into swap agreements relating to interest rates, foreign
currencies, and securities indices and forward foreign currency
contracts. 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
technique. If the subadviser fails to correctly predict these
changes, the funds can lose money. Derivatives transactions may
be less liquid than other securities and the counterparty to such
transaction may not perform as expected. In addition, futures and
options involve market risk in excess of their value.
Illiquid Securities
Each fund may invest up to 15% of its net assets in illiquid
securities. The inability of the funds to dispose of such
securities in a timely manner and at a fair price at a time when
it might be necessary or advantageous to do so may harm the
funds.
Securities Lending
Each fund may loan portfolio securities with a value up to
one-third of its total assets to increase investment returns. If
the borrower is unwilling or unable to return the borrowed
securities when due, the fund can suffer losses.
Borrowing
Each fund may obtain fixed interest rate loans from banks in
amounts up to one-third the value of its net assets and invest
the loan proceeds in other assets. If the securities purchased
with such borrowed money decrease in value or do not increase
enough to cover interest and other borrowing costs, the funds
will suffer greater losses than if no borrowing took place.
Repurchase Agreements
The funds may invest in repurchase agreements. Default or
insolvency of the other party presents a risk to the funds.
22 Phoenix-Seneca Funds
<PAGE>
Portfolio Turnover Rate
The rate of portfolio turnover generally is not important in
making investment decisions; therefore, the funds may experience
a high portfolio turnover rate. High portfolio turnover rates may
increase costs to the funds, may negatively affect fund
performance, and may increase capital gains distributions,
resulting in greater tax liability to you.
The subadviser may buy other types of securities or employ other
portfolio management techniques on behalf of each fund. Please
refer to the Statement of Additional Information for more
detailed information about these and other investment techniques
of the fund.
Management of the Funds
- --------------------------------------
The Advisers
Phoenix Investment Counsel, Inc. ("Phoenix") is the investment
adviser to each of the funds and is located at 56 Prospect
Street, Hartford, CT 06115. Phoenix also acts as the investment
adviser for 14 other mutual funds, as subadviser to three mutual
funds and as adviser to institutional clients. As of December 31,
1999, Phoenix had $25.7 billion in assets under management.
Phoenix has acted as an investment adviser for over sixty years.
Seneca Capital Management LLC ("Seneca") is the investment
subadviser to each of the funds and is located at 909 Montgomery
Street, San Francisco, California 94133. Seneca acts as a
subadviser to six other mutual funds and acts as investment
adviser to institutions and individuals. As of December 31, 1999,
Seneca had $9.2 billion in assets under management. Seneca has
been (with its predecessor, GMG/Seneca Capital Management LP) an
investment adviser since 1989.
Subject to the direction of the funds' Board of Trustees, Phoenix
is responsible for managing the funds' investment program and the
general operations of the funds. Seneca, as subadviser, is
responsible for day-to-day management of the funds' portfolios.
Seneca manages each fund's assets to conform with the investment
policies as described in this prospectus.
Each fund pays Phoenix a monthly investment management fee that
is accrued daily against the value of that fund's net assets at
the following rates:
Phoenix-Seneca Funds 23
<PAGE>
<TABLE>
<S> <C>
- -------------------------------------
Bond Fund 0.50%
- -------------------------------------
Growth Fund 0.70%
- -------------------------------------
Mid-Cap "EDGE"(SM) Fund 0.80%
- -------------------------------------
Real Estate Securities Fund 0.85%
- -------------------------------------
</TABLE>
Phoenix pays Seneca a subadvisory fee at the following rates:
<TABLE>
<S> <C>
- --------------------------------------
Bond Fund 0.25%
- --------------------------------------
Growth Fund 0.35%
- --------------------------------------
Mid-Cap "EDGE"(SM) Fund 0.40%
- --------------------------------------
Real Estate Securities Fund 0.425%
- --------------------------------------
</TABLE>
The adviser has voluntarily agreed to assume total operating expenses of each
fund excluding interest, taxes, brokerage fees, commissions and extraordinary
expenses, until January 31, 2001, to the extent that such expenses exceed the
following percentages of the average annual net asset values for the fund:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Class X Class A Class B Class C
Shares Shares Shares Shares
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bond Fund 0.90% 1.15% 1.90% 1.90%
- -----------------------------------------------------------------------
Growth Fund 1.25% 1.85% 2.60% 2.60%
- -----------------------------------------------------------------------
Mid-Cap "EDGE"(SM) Fund 1.15% 1.40% 2.15% 2.15%
- -----------------------------------------------------------------------
Real Estate Securities Fund 2.35% 3.05% 3.80% 3.80%
- -----------------------------------------------------------------------
</TABLE>
During the fund's last fiscal year, the fund paid total management fees of
$931,643. The ratio of management fees to average net assets for the fiscal year
ended September 30, 1999 was 0.50% for the Bond Fund, 0.70% for the Growth Fund,
0.80% for the Mid-Cap "EDGE"(SM) Fund and 0.85% for the Real Estate Securities
Fund.
Portfolio Management
Investment and trading decisions for each fund are made by a team of managers
and analysts headed by one or more 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. Ms. Seneca is a team leader for each of the funds. Ms. Seneca
also serves as Co-Manager of Phoenix-Seneca Equity Opportunities Fund and
Phoenix-Seneca Strategic Theme Fund of Phoenix Strategic Equity Series Fund,
Phoenix-Seneca Mid Cap Fund of Phoenix Multi-Portfolio Fund, and Phoenix Duff &
Phelps Institutional Growth Stock
24 Phoenix-Seneca Funds
<PAGE>
Portfolio of Phoenix Duff & Phelps Institutional Mutual Funds.
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. Mr. Little is a Portfolio Manager for the
Phoenix-Seneca Growth Fund and the Phoenix-Seneca Mid-Cap
"EDGE"(SM) Fund. Mr. Little also serves as Co-Manager of
Phoenix-Seneca Equity Opportunities Fund and Phoenix-Seneca
Strategic Theme Fund of Phoenix Strategic Equity Series Fund,
Phoenix-Seneca Mid Cap Fund of Phoenix Multi-Portfolio Fund, and
Phoenix Duff & Phelps Institutional Growth Stock Portfolio of
Phoenix Duff & Phelps Institutional Mutual Funds. He has been
Director of Equities with Seneca or GMG/Seneca since December
1989. Before joining GMG/Seneca, Mr. Little held positions as an
analyst, board member, and regional manager with Smith Barney,
NatWest Securities, and Montgomery Securities.
Ronald K. Jacks. Mr. Jacks is a Portfolio Manager for the
Phoenix-Seneca Growth Fund and the Phoenix-Seneca Mid-Cap
"EDGE"(SM) Fund. Mr. Jacks also serves as Co-Manager of Phoenix-
Seneca Equity Opportunities Fund and Phoenix-Seneca Strategic
Theme Fund of Phoenix Strategic Equity Series Fund,
Phoenix-Seneca Mid Cap Fund of Phoenix Multi-Portfolio Fund, and
Phoenix Duff & Phelps Institutional Growth Stock Portfolio of
Phoenix Duff & Phelps Institutional Mutual Funds. He was
Secretary of the Phoenix-Seneca Funds from February 1996 through
February 1998 and was a Trustee of Seneca Funds from February
1996 through June 1997. Mr. Jacks has been a Portfolio Manager
with Seneca or GMG/Seneca since July 1990.
Charles B. Dicke. Mr. Dicke is a 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. Mr. Shapiro is a 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.
Phoenix-Seneca Funds 25
<PAGE>
Pricing of Fund Shares
- -------------------------------------
How is the Share Price determined?
Each fund calculates a share price for each class of its shares.
The share price is based on the net assets of the fund and the
number of outstanding shares. In general, each fund calculates
net asset value by:
o adding the values of all securities and other assets of the
fund,
o subtracting liabilities, and
o dividing by the total number of outstanding shares of the
fund.
Asset Value: The funds' investments are valued at market value.
If market quotations are not available, the funds determine a
"fair value" for an investment according to rules and procedures
approved by the Trustees. 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 mean between the most recent high
bid and the most recent low asked quotation. Short-term
investments having a remaining maturity of sixty days or less are
valued at amortized cost, which the Trustees have determined
approximates market value.
Liabilities: Class specific expenses, distribution fees, service
fees and other liabilities are deducted from the assets of each
class. Expenses and liabilities that are not class specific (such
as management fees) are allocated to each class in proportion to
each class' net assets, except where an alternative allocation
can be more fairly made.
Net Asset Value: The liability allocated to a class plus any
other expenses are deducted from the proportionate interest of
such class in the assets of the fund. The resulting amount for
each class is then divided by the number of shares outstanding of
that class to produce each class' net asset value per share.
The net asset value per share of each class of each fund is
determined on days when the New York Stock Exchange (the "NYSE")
is open for trading as of the close of trading (normally 4:00 PM
eastern time). A fund will not calculate its net asset values per
share on days when the NYSE is closed for trading. If a fund
holds securities that are traded on foreign exchanges that trade
on weekends or other holidays when the funds do not price their
shares, the net asset value of the fund's shares may change on
days when shareholders will not be able to purchase or redeem the
fund's shares.
26 Phoenix-Seneca Funds
<PAGE>
At what price are shares purchased?
All investments received by the funds' authorized agents prior to
the close of regular trading on the NYSE (normally 4:00 PM
eastern time) will be executed based on that day's net asset
value. Shares credited to your account from the reinvestment of
fund distributions will be in full and fractional shares that are
purchased at the closing net asset value on the next business day
on which the fund's net asset value is calculated following the
dividend record date.
Sales Charges
- ----------------------------
What are the classes and how do they differ?
Each fund presently offers four classes of shares that have
different sales and distribution charges (see "Fund Expenses"
previously in this prospectus). For certain classes of shares,
the funds have adopted distribution and service plans allowed
under Rule 12b-1 of the Investment Company Act of 1940 that
authorize the funds to pay distribution and service fees for the
sale of their shares and for services provided to shareholders.
What arrangement is best for you?
The different classes permit you to choose the method of
purchasing shares that is most beneficial to you. In choosing a
class, consider the amount of your investment, the length of time
you expect to hold the shares, whether you decide to receive
distributions in cash or to reinvest them in additional shares,
and any other personal circumstances. Depending upon these
considerations, the accumulated distribution and service fees and
contingent deferred sales charges of one class may be more or
less than the initial sales charge and accumulated distribution
and service fees of another class of shares bought at the same
time. Because distribution and service fees are paid out of a
fund's assets on an ongoing basis, over time these fees will
increase the cost of your investment and may cost you more than
paying other types of sales charges.
Class X 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. If you are eligible to
purchase and do purchase Class X Shares, you will pay no sales
charge at any time. There are no distribution and services fees
applicable to Class X Shares. For additional information about
purchasing Class X Shares, please contact Customer Service by
calling (800) 243-1574.
Class A Shares. If you purchase 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 redeemed. Class A
Shares have lower distribution and service fees (0.25%) and pay
higher dividends than Class B and C Shares.
Phoenix-Seneca Funds 27
<PAGE>
Class B Shares. If you purchase 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" below.
This charge declines to 0% over a period of 5 years and may be
waived under certain conditions. Class B shares have higher
distribution and service fees (1.00%) and pay lower dividends
than Class A Shares. Class B Shares automatically convert to
Class A Shares eight years after purchase. Purchases of Class B
Shares may be inappropriate for any investor who may qualify for
reduced sales charges of Class A Shares and anyone who is over 85
years of age. The underwriter may decline purchases in such
situations.
Class C Shares. If you purchase 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%. See "Deferred Sales Charge
Alternative--Class B and C Shares" below. Class C Shares have the
same distribution and service fees (1.00%) and pay comparable
dividends as Class B Shares. Class C Shares do not convert to any
other class of shares of the fund.
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
your purchase (see "Class A Shares--Reduced Initial Sales
Charges: Combination Purchase Privilege" in the Statement of
Additional Information). Shares purchased 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 fund's underwriter
(Phoenix Equity Planning Corporation or "PEPCO").
Sales Charge you may pay to purchase Class A Shares
<TABLE>
<CAPTION>
Sales Charge as
a percentage of
----------------------
Amount of Net
Transaction Offering Amount
at Offering Price Price Invested
- --------------------------------------------------------
<S> <C> <C>
Under $50,000 4.75% 4.99%
$50,000 but under $100,000 4.50 4.71
$100,000 but under $250,000 3.50 3.63
$250,000 but under $500,000 3.00 3.09
$500,000 but under $1,000,000 2.00 2.04
$1,000,000 or more 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 ("CDSC")
at the rates listed below. The sales 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 or on shares purchased
through the reinvestment of income dividends or capital gains
distributions. To minimize the sales charge, shares not subject
to
28 Phoenix-Seneca Funds
<PAGE>
any charge will be redeemed first, followed by shares held the
longest time. To calculate the amount of shares owned and time
period held, all Class B Shares purchased in any month are
considered purchased on the last day of the preceding month, and
all Class C Shares are considered purchased on the trade date.
Deferred Sales Charge you may pay to sell Class B Shares
Year 1 2 3 4 5 6+
----------------------------------------------------------------
CDSC 5% 4% 3% 2% 2% 0%
Deferred Sales Charge you may pay to sell Class C Shares
Year 1 2+
----------------------------------------------------------------
CDSC 1% 0%
Your Account
- ---------------------------
Opening an Account
Your financial advisor can assist you with your initial purchase
as well as all phases of your investment program. If you are
opening an account by yourself, please follow the instructions
outlined below. These procedures do not apply to purchases of
Class X Shares.
Step 1.
Your first choice will be the initial amount you intend to
invest.
Minimum initial investments:
o $25 for individual retirement accounts, or accounts that use
the systematic exchange privilege, or accounts that use the
Investo-Matic program (see below for more information on the
Investo-Matic program).
o There is no initial dollar requirement for defined
contribution plans, profit-sharing plans, or employee benefit
plans. There is also no minimum for reinvesting dividends and
capital gains into another account.
o $500 for all other accounts.
Minimum additional investments:
o $25 for any account.
Phoenix-Seneca Funds 29
<PAGE>
o There is no minimum for defined contribution plans,
profit-sharing plans, or employee benefit plans. There is also
no minimum for reinvesting dividends and capital gains into an
existing account.
Step 2.
Your second choice will be what class of shares to buy. The funds
offer three classes of shares for individual investors. Each has
different sales and distribution charges. Because all future
investments in your account will be made in the share class you
choose when you open your account, you should make your decision
carefully. Your financial advisor can help you pick the share
class that makes the most sense for your situation.
Step 3.
Your next choice will be how you want to receive any dividends
and capital gain distributions. Your options are:
o Receive both dividends and capital gain distributions in
additional shares;
o Receive dividends in additional shares and capital gain
distributions in cash;
o Receive dividends in cash and capital gain distributions in
additional shares; or
o Receive both dividends and capital gain distributions in cash.
No interest will be paid on uncashed distribution checks.
30 Phoenix-Seneca Funds
<PAGE>
How to Buy Shares
- --------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
To Open An Account
(Class A, Class B and Class C Shares)
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Through a financial advisor Contact your advisor. Some advisors may charge a fee.
- -----------------------------------------------------------------------------------------------------------
Complete a New Account Application and send it with a check payable
Through the mail to the fund. Mail them to: State Street Bank, P.O. Box 8301, Boston,
MA 02266-8301.
- -----------------------------------------------------------------------------------------------------------
By Federal Funds wire Call us at (800) 243-1574 (press 1, then 0).
- -----------------------------------------------------------------------------------------------------------
Complete a New Account Application and send it with a check payable
Through express delivery to the fund. Send them to: Boston Financial Data Services, Attn:
Phoenix Funds, 66 Brooks Drive, Braintree, MA 02184.
- -----------------------------------------------------------------------------------------------------------
Complete the appropriate section on the application and send it with your
By Investo-Matic initial investment payable to the fund. Mail them to: State Street Bank,
P.O. Box 8301, Boston, MA 02266-8301.
- -----------------------------------------------------------------------------------------------------------
By telephone exchange Call us at (800) 243-1574 (press 1, then 0).
- -----------------------------------------------------------------------------------------------------------
</TABLE>
How to Sell 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
by the funds' Transfer Agent 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.
Subject to certain restrictions, shares may be redeemed by
telephone or in writing. In addition, shares may be sold through
securities dealers, brokers or agents who may charge customary
commissions or fees for their services. The funds do not charge
any redemption fees. Payment for shares redeemed is made within
seven days; however, 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.
Phoenix-Seneca Funds 31
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
To Sell Shares
(Class A, Class B and Class C Shares)
- -------------------------------------------------------------------------------------------------------
<S> <C>
Through a financial advisor Contact your advisor. Some advisors may charge a fee.
- -------------------------------------------------------------------------------------------------------
Send a letter of instruction and any share certificates (if you hold
certificate shares) to: State Street Bank, P.O. Box 8301, Boston, MA
Through the mail 02266-8301. Be sure to include the registered owner's name, fund and
account number, number of shares or dollar value you wish to sell.
- -------------------------------------------------------------------------------------------------------
Send a letter of instruction and any share certificates (if you hold
certificate shares) to: Boston Financial Data Services, Attn: Phoenix
Through express delivery Funds, 66 Brooks Drive, Braintree, MA 02184. Be sure to include the
registered owner's name, fund and account number.
- -------------------------------------------------------------------------------------------------------
For sales up to $50,000, requests can be made by calling
By telephone (800) 243-1574.
- -------------------------------------------------------------------------------------------------------
By telephone exchange Call us at (800) 243-1574 (press 1, then 0).
- -------------------------------------------------------------------------------------------------------
</TABLE>
Things You Should Know When Selling Shares
- ---------------------------------------------------------
You may realize a taxable gain or loss (for federal income tax
purposes) if you redeem shares of the funds. Each fund reserves
the right to pay large redemptions "in-kind" (in securities owned
by the fund rather than in cash). Large redemptions are those
over $250,000 or 1% of the fund's net assets. Additional
documentation will be required for redemptions by organizations,
fiduciaries, or retirement plans, or if redemption is requested
by anyone but the shareholder(s) of record. Transfers between
broker-dealer "street" accounts are governed by the accepting
broker-dealer. Questions regarding this type of transfer should
be directed to your financial advisor. Redemption requests will
not be honored until all required documents in proper form have
been received. To avoid delay in redemption or transfer,
shareholders having questions about specific requirements should
contact the funds' Transfer Agent at (800) 243-1574.
Redemptions by Mail
> If you are selling shares held individually, jointly, or as
custodian under the Uniform Gifts to Minors Act or Uniform
Transfers to Minors Act.
Send a clear letter of instructions if all of these apply:
o The proceeds do not exceed $50,000.
o The proceeds are payable to the registered owner at the
address on record.
Send a clear letter of instructions with a signature guarantee
when any of these apply:
32 Phoenix-Seneca Funds
<PAGE>
o You are selling more than $50,000 worth of shares.
o The name or address on the account has changed within the
last 60 days.
o You want the proceeds to go to a different name or address
than on the account.
> If you are selling shares held in a corporate or fiduciary
account, please contact the funds' Transfer Agent at (800)
243-1574.
If required, the signature guarantee on your request must be made
by an eligible guarantor institution as defined by the funds'
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.
Selling Shares by Telephone
The Transfer Agent will use reasonable procedures to confirm that
telephone instructions are genuine. Address and bank account
information are verified, redemption instructions are taped, and
all redemptions are confirmed in writing.
The individual investor bears the risk from instructions given by
an unauthorized third party that the Transfer Agent reasonably
believed to be genuine.
The Transfer Agent may modify or terminate the telephone
redemption privilege at any time with 60 days notice to
shareholders.
During times of drastic economic or market changes, telephone
redemptions may be difficult to make or temporarily suspended.
Account Policies
- -------------------------------
Account Reinstatement Privilege
For 180 days after you sell your Class A, B, or C Shares, you can
purchase Class A Shares of any fund at net asset value, with no
sales charge, by reinvesting all or part of your proceeds, but
not more. Send your written request to State Street Bank, P.O.
Box 8301, Boston, MA 02266-8301. You can call us at (800)
243-1574 for more information.
Please remember, a redemption and reinvestment are considered to
be a sale and purchase for tax-reporting purposes. Class B
shareholders who have had the contingent deferred sales charge
waived because they are in the Systematic Withdrawal Program are
not eligible for this reinstatement privilege.
Phoenix-Seneca Funds 33
<PAGE>
Redemption of Small Accounts
Due to the high cost of maintaining small accounts, if your
account balance is less than $200, you may receive a notice
requesting you to bring the balance up to $200 within 60 days. If
you do not, the shares in the account will be sold at net asset
value, and a check will be mailed to the address of record.
Exchange Privileges
You should read the prospectus carefully before deciding to make
an exchange. You can obtain a prospectus from your financial
advisor or by calling us at (800) 243-4361 or accessing our Web
site at www.phoenixinvestments.com.
o You may exchange shares for another fund in the same class of
shares; e.g., Class A for Class A.
o Exchanges may be made by phone (800) 243-1574 or by mail
(State Street Bank, P.O. Box 8301, Boston, MA 02266-8301).
o The amount of the exchange must be equal to or greater than
the minimum initial investment required.
o The exchange of shares is treated as a sale and purchase for
federal income tax purposes.
o Because excessive trading can hurt fund performance and harm
other shareholders, the funds reserve the right to temporarily
or permanently end exchange privileges or reject an order from
anyone who appears to be attempting to time the market,
including investors who request more than one exchange in any
30-day period. The funds' underwriter has entered into
agreements with certain market timing firms permitting them to
exchange by telephone. These privileges are limited, and the
funds' distributor has the right to reject or suspend them.
Retirement Plans
Shares of the funds may be used as investments under the
following qualified prototype retirement plans: traditional IRA,
rollover IRA, SIMPLE IRA, Roth IRA, 401(k) plans, profit-sharing,
money purchase plans, and 403(b) plans. For more information,
call (800) 243-4361.
Investor Services
- --------------------------------
Investo-Matic is a systematic investment plan that allows you to
have a specified amount automatically deducted from your checking
or savings account and then deposited into your mutual fund
account. Just complete the Investo-Matic Section on the
application and include a voided check.
Systematic Exchange allows you to automatically move money from
one Phoenix Fund to another on a monthly, quarterly, semiannual
or annual basis. Shares of one Phoenix Fund will be exchanged
34 Phoenix-Seneca Funds
<PAGE>
for shares of the same class of another fund at the interval you
select. To sign up, just complete the Systematic Exchange Section
on the application.
Telephone Exchange lets you exchange shares of one fund for the
same class of shares in another fund, using our customer service
telephone service. See the Telephone Exchange Section on the
application.
Systematic Withdrawal Program allows you to periodically redeem a
portion of your account on a predetermined monthly, quarterly,
semiannual, or annual basis. Sufficient shares will be redeemed
on the 15th of the month at the closing net asset value so that
the payment is made about the 20th of the month. The program also
provides for redemptions on or about the 10th, 15th, or 25th with
proceeds directed through Automated Clearing House (ACH) to your
bank. The minimum withdrawal is $25, and minimum account balance
requirements continue. Shareholders in the program must own fund
shares worth at least $5,000.
Tax Status of Distributions
- ------------------------------------------
The funds plan to make distributions from net investment income
at intervals stated on the table below, and to distribute net
realized capital gains, if any, at least annually.
<TABLE>
<CAPTION>
- ----------------------------------------------
Fund Dividend Paid
- ----------------------------------------------
<S> <C>
Bond Fund Monthly
- ----------------------------------------------
Growth Fund Annually
- ----------------------------------------------
Mid-Cap "EDGE"(SM) Fund Annually
- ----------------------------------------------
Real Estate Securities Fund Quarterly
- ----------------------------------------------
</TABLE>
Distributions of short-term capital gains and net investment
income are taxable to shareholders as ordinary income. Long-term
capital gains, if any, distributed to shareholders and which are
designated by a fund as capital gains distributions, are taxable
to shareholders as long-term capital gain distributions
regardless of the length of time you have owned your shares.
Unless you elect to receive distributions in cash, dividends and
capital gain distributions are paid in additional shares. All
distributions, cash or additional shares, are subject to federal
income tax and may be subject to state, local and other taxes.
Phoenix-Seneca Funds 35
<PAGE>
Financial Highlights
- -----------------------------------
These tables are intended to help you understand the funds'
financial performance since inception. Certain information
reflects financial results for a single fund share. The total
returns in the tables represent the rate that an investor would
have earned or lost on an investment in the fund (assuming
reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP,
independent accountants. The report of PricewaterhouseCoopers
LLP, together with the funds' financial statements, are included
in the funds' most recent Annual Report, which is available upon
request.
Phoenix-Seneca Bond Fund
<TABLE>
<CAPTION>
Class X
--------------------------------------------------------------
From Inception
Year Ended September 30, 3/7/96 to
1999 1998 1997 9/30/96
------- ------- ------ --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.68 $10.47 $10.09 $10.00
Income from investment operations:
Net investment income 0.69(1)(6) 0.56 0.62(1) 0.31(1)
Net realized and unrealized gain (loss) (0.31) 0.40 0.47 0.08
------- ------- ------ ------
Total from investment operations 0.38 0.96 1.09 0.39
------- ------- ------ ------
Less Distributions:
Dividends from net investment income (0.62) (0.57) (0.69) (0.30)
Dividends from net realized gains (0.09) (0.18) (0.02) --
------- ------- ------ ------
Total distributions (0.71) (0.75) (0.71) (0.30)
------- ------- ------ ------
Change in net asset value (0.33) 0.21 0.38 0.09
------- ------- ------ ------
Net asset value, end of period $10.35 $ 10.68 $10.47 $10.09
======= ======= ====== ======
Total return(2) 3.51% 9.44% 11.26% 4.02%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) $34,853 $26,455 $8,922 $3,927
Ratio to average net assets of:
Operating expenses 1.06%(5)(7) 1.66% 1.53%(5) 0.56%(3)(5)
Net investment income 6.60% 5.92% 6.31% 7.54%(3)
Portfolio turnover 95% 112% 99.68% 52.82%(4)
</TABLE>
----------------
(1) Net investment income 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 $0.69, $0.47 and $(0.05) for the years ended September
30, 1999 and September 30, 1997 and the period ended
September 30, 1996, respectively.
(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) Not annualized.
(5) If the investment adviser had not waived fees and reimbursed
expenses, the ratio of operating expenses to average net
assets would have been 1.13%, 3.41% and 9.31% for the years
ended September 30, 1999 and September 30, 1997 and the
period ended September 30, 1996, respectively.
(6) Computed using average shares outstanding.
(7) For the year ended September 30, 1999, the ratio of operating
expenses to average net assets excludes the effect of expense
offsets for custodian fees; if expense offsets were included,
the ratio would not significantly differ.
36 Phoenix-Seneca Funds
<PAGE>
Financial Highlights (continued)
- -----------------------------------------------
Phoenix-Seneca Bond Fund
<TABLE>
<CAPTION>
Class A
---------------------------
From
Year Inception
Ended 7/1/98 to
9/30/99 9/30/98
------- ---------
<S> <C> <C>
Net asset value, beginning of period $10.68 $10.79
Income from investment operations:
Net investment income 0.59(1)(10) 0.13(1)(10)
Net realized and unrealized gain (loss) (0.33) (0.07)
------ ------
Total from investment operations 0.26 0.06
------ ------
Less Distributions:
Dividends from net investment income (0.56) (0.17)
Dividends from net realized gains (0.09) --
------ ------
Total distributions (0.65) (0.17)
------ ------
Change in net asset value (0.39) (0.11)
------ ------
Net asset value, end of period $10.29 $10.68
====== ======
Total return(4) 2.46% 0.53%(6)
Ratios/supplemental data:
Net assets, end of period (thousands) $2,732 $348
Ratio to average net assets of:
Operating expenses 1.88%(7)(11) 2.45%(5)(7)
Net investment income 5.80% 5.17%(5)
Portfolio turnover 95% 112%(6)
<CAPTION>
Class B Class C
------------------------- ---------------------------
From From
Year Inception Year Inception
Ended 7/1/98 to Ended 7/1/98 to
9/30/99 9/30/98 9/30/99 9/30/98
------ --------- ------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.67 $10.79 $10.67 $10.79
Income from investment operations:
Net investment income 0.52(2)(10) 0.11(2)(10) 0.49(3)(10) 0.10(3)(10)
Net realized and unrealized gain (loss) (0.33) (0.08) (0.30) (0.07)
------ ------ ------ ------
Total from investment operations 0.19 0.03 0.19 0.03
------ ------ ------ ------
Less Distributions:
Dividends from net investment income (0.50) (0.15) (0.50) (0.15)
Dividends from net realized gains (0.09) -- (0.09) --
------ ------ ------ ------
Total distributions (0.59) (0.15) (0.59) (0.15)
------ ------ ------ ------
Change in net asset value (0.40) (0.12) (0.40) (0.12)
------ ------ ------ ------
Net asset value, end of period $10.27 $10.67 $10.27 $10.67
====== ====== ====== ======
Total return(4) 1.67% 0.28%(6) 1.66% 0.28%(6)
Ratios/supplemental data:
Net assets, end of period (thousands) $1,593 $ 234 $444 $439
Ratio to average net assets of:
Operating expenses 2.62%(8)(11) 3.20%(5)(8) 2.19%(9)(11) 3.20%(5)(9)
Net investment income 5.09% 4.42%(5) 4.71% 4.27%(5)
Portfolio turnover 95% 112%(6) 95% 112%(6)
</TABLE>
----------------
(1) Net investment income 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 $0.36 and $(0.03) for the periods ended September 30,
1999 and September 30, 1998, respectively.
(2) Net investment income 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 $0.21 and $(0.21) for the periods ended September 30,
1999 and September 30, 1998, respectively.
(3) Net investment income 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 $(0.20) and $(0.08) for the periods ended September 30,
1999 and September 30, 1998, respectively.
(4) 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.
(5) Annualized.
(6) Not annualized.
(7) If the investment adviser had not waived fees and reimbursed
expenses, the ratio of operating expenses to average net
assets would have been 4.08% and 8.99% for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(8) If the investment adviser had not waived fees and reimbursed
expenses, the ratio of operating expenses to average net
assets would have been 5.67% and 15.79% for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(9) If the investment adviser had not waived fees and reimbursed
expenses, the ratio of operating expenses to average net
assets would have been 9.50% and 11.22% for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(10) Computed using average shares outstanding.
(11) For the year ended September 30, 1999, the ratio of operating
expenses to average net assets excludes the effect of expense
offsets for custodian fees; if expense offsets were included,
the ratio would not significantly differ.
Phoenix-Seneca Funds 37
<PAGE>
Financial Highlights (continued)
- -----------------------------------------------
Phoenix-Seneca Growth Fund
<TABLE>
<CAPTION>
Class X
-----------------------------------------------------------------
From Inception
Year Ended September 30, 3/8/96 to
1999 1998 1997 9/30/96
------- ------- ------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $16.46 $16.43 $13.74 $10.00
Income from investment
operations:
Net investment income (loss) (0.04)(1) 0.00(1) 0.03(2) 0.03(2)
Net realized and unrealized gain 5.11 1.28 3.50 3.71
------- ------- ------- -------
Total from investment
operations 5.07 1.28 3.53 3.74
------- ------- ------- -------
Less Distributions:
Dividends from net investment income -- (0.02) (0.07) --
Dividends from net realized gains (1.61) (1.23) (0.77) --
------- ------- ------- -------
Total distributions (1.61) (1.25) (0.84) --
------- ------- ------- -------
Change in net asset value 3.46 0.03 2.69 3.74
------- ------- ------- -------
Net asset value, end of period $19.92 $16.46 $16.43 $13.74
======= ======= ======= =======
Total return(3) 32.19% 8.48% 27.27% 37.40%(5)
Ratios/supplemental data:
Net assets, end of period (thousands) $35,695 $30,713 $34,093 $12,920
Ratio to average net assets of:
Operating expenses 1.16% 1.14% 1.52%(6) 0.81%(4)(6)
Net investment income (loss) (0.20)% 0.02% 0.31% 0.76%(4)
Portfolio turnover 169% 166% 145.69% 87.66%(5)
</TABLE>
----------------
(1) Computed using average shares outstanding.
(2) 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 $0.03 and $(0.09) for the year ended
September 30, 1997 and the period ended September 30, 1996,
respectively.
(3) 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.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed
expenses, the ratio of operating expenses to average net
assets would have been 1.52% and 3.49% for the year ended
September 30, 1997 and the period ended September 30, 1996,
respectively.
38 Phoenix-Seneca Funds
<PAGE>
Financial Highlights (continued)
- -----------------------------------------------
Phoenix-Seneca Growth Fund
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------
From Inception
Year Ended September 30, 3/8/96 to
1999 1998 1997 9/30/96
------- ------- ------ --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $16.23 $16.28 $13.63 $10.00
Income from investment
operations:
Net investment income (loss) (0.09)(1) (0.06)(1) (0.08)(2) --(2)
Net realized and unrealized gain 5.04 1.24 3.50 3.63
------- ------- ------ ------
Total from investment
operations 4.95 1.18 3.42 3.63
------- ------- ------ ------
Less Distributions:
Dividends from net investment income -- -- -- --
Dividends from net realized gains (1.61) (1.23) (0.77) --
------- ------- ------ ------
Total distributions (1.61) (1.23) (0.77) --
------- ------- ------ ------
Change in net asset value 3.34 (0.05) 2.65 3.63
------- ------- ------ ------
Net asset value, end of period $19.57 $16.23 $16.28 $13.63
======= ======= ====== ======
Total return(3) 31.89% 7.93% 26.51% 36.30%(5)
Ratios/supplemental data:
Net assets, end of period (thousands) $31,001 $17,364 $6,013 $466
Ratio to average net assets of:
Operating expenses 1.44% 1.55% 2.48%(6) 1.46%(4)(6)
Net investment income (loss) (0.49)% (0.36)% (0.62)% 0.16%(4)
Portfolio turnover 169% 166% 145.69% 87.66%(5)
</TABLE>
----------------
(1) Computed using average shares outstanding.
(2) 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 $(0.09) and $(0.34) for the year ended
September 30, 1997 and the period ended September 30, 1996,
respectively.
(3) 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.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed
expenses, the ratio of operating expenses to average net
assets would have been 2.63% and 14.01% for the year ended
September 30, 1997 and the period ended September 30, 1996,
respectively.
Phoenix-Seneca Funds 39
<PAGE>
Financial Highlights (continued)
- -----------------------------------------------
Phoenix-Seneca Growth Fund
<TABLE>
<CAPTION>
Class B Class C
---------------------------- -------------------------------
Year From Inception Year From Inception
Ended 7/1/98 to Ended 7/1/98 to
9/30/99 9/30/98 9/30/99 9/30/98
------ -------------- ------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $16.19 $18.71 $16.18 $18.71
Income from investment operations:
Net investment income (loss) (0.31)(1)(8) (0.04)(1)(8) (0.32)(2)(8) (0.06)(2)(8)
Net realized and unrealized gain (loss) 5.01 (2.48) 5.00 (2.47)
------ ------ ------ ------
Total from investment operations 4.70 (2.52) 4.68 (2.53)
------ ------ ------ ------
Less Distributions:
Dividends from net investment income -- -- -- --
Dividends from net realized gains (1.61) -- (1.61) --
------ ------ ------ ------
Total distributions (1.61) -- (1.61) --
------ ------ ------ ------
Change in net asset value 3.09 (2.52) 3.07 (2.53)
------ ------ ------ ------
Net asset value, end of period $19.28 $16.19 $19.25 $16.18
====== ====== ====== ======
Total return(3) 30.31% (13.47)%(5) 30.20% (13.52)%(5)
Ratios/supplemental data:
Net assets, end of period (thousands) $4,395 $519 $1,833 $126
Ratio to average net assets of:
Operating expenses 2.60%(6) 2.60%(4)(6) 2.60%(7) 2.60%(4)(7)
Net investment income (loss) (1.66)% (1.12)%(4) (1.66)% (1.39)%(4)
Portfolio turnover 169% 166%(5) 169% 166%(5)
</TABLE>
----------------
(1) Net investment income 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 $(0.47) and $(0.36) for the periods ended September 30,
1999 and September 30, 1998, respectively.
(2) Net investment income 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 $(0.90) and $(0.79) for the periods ended September 30,
1999 and September 30, 1998, respectively.
(3) 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.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed
expenses, the ratio of operating expenses to average net
assets would have been 3.46% and 12.48% for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(7) If the investment adviser had not waived fees and reimbursed
expenses, the ratio of operating expenses to average net
assets would have been 5.67% and 20.24% for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(8) Computed using average shares outstanding.
40 Phoenix-Seneca Funds
<PAGE>
Financial Highlights (continued)
- -----------------------------------------------
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
<TABLE>
<CAPTION>
Class X
----------------------------------------------------------------
From Inception
Year Ended September 30, 3/8/96 to
1999 1998 1997 9/30/96
------- ------ ------ --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $13.81 $16.47 $14.97 $10.00
Income from investment
operations:
Net investment income (loss) (0.21)(1) (0.23)(1)(2) (0.17)(2) 0.01(2)
Net realized and unrealized gain (loss) 4.72 (0.58) 1.84 4.96
------- ------ ------ ------
Total from investment
operations 4.51 (0.81) 1.67 4.97
------- ------ ------ ------
Less Distributions:
Dividends from net investment income -- -- (0.07) --
Dividends from net realized gains (0.54) (1.85) (0.10) --
------- ------ ------ ------
Total distributions (0.54) (1.85) (0.17) --
------- ------ ------ ------
Change in net asset value 3.97 (2.66) 1.50 4.97
------- ------ ------ ------
Net asset value, end of period $17.78 $13.81 $16.47 $14.97
======= ====== ====== ======
Total return(3) 33.02% (4.22)% 11.39% 49.70%(5)
Ratios/supplemental data:
Net assets, end of period (thousands) $10,640 $8,940 $9,390 $7,428
Ratio to average net assets of:
Operating expenses 1.96% 2.10%(6) 1.74%(6) 0.90%(4)(6)
Net investment income (loss) (1.27)% (1.49)% (0.97)% 0.27%(4)
Portfolio turnover 192% 206% 283.60% 72.34%(5)
</TABLE>
----------------
(1) Computed using average shares outstanding.
(2) 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 $(0.27), $(0.33) and $(0.19) for the years
ended September 30, 1998 and 1997 and the period ended
September 30, 1996, respectively.
(3) 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.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed
expenses, the ratio of operating expenses to average net
assets would have been 2.38%, 2.77% and 5.73% for the years
ended September 30, 1998 and 1997 and the period ended
September 30, 1996, respectively.
Phoenix-Seneca Funds 41
<PAGE>
Financial Highlights (continued)
- -----------------------------------------------
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------
From Inception
Year Ended September 30, 3/8/96 to
1999 1998 1997 9/30/96
------ ------ ------ --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $13.75 $16.49 $14.94 $10.00
Income from investment
operations:
Net investment income (loss) (0.31)(1) (0.30)(1)(2) (0.25)(2) (0.01)(2)
Net realized and unrealized gain (loss) 4.70 (0.59) 1.90 4.95
------ ------ ------ ------
Total from investment
operations 4.39 (0.89) 1.65 4.94
------ ------ ------ ------
Less Distributions:
Dividends from net investment income -- -- -- --
Dividends from net realized gains (0.54) (1.85) (0.10) --
------ ------ ------ ------
Total distributions (0.54) (1.85) (0.10) --
------ ------ ------ ------
Change in net asset value 3.85 (2.74) 1.55 4.94
------ ------ ------ ------
Net asset value, end of period $17.60 $13.75 $16.49 $14.94
====== ====== ====== ======
Total return(3) 32.27% (4.74)% 11.25% 49.30%(5)
Ratios/supplemental data:
Net assets, end of period (thousands) $6,457 $3,666 $2,419 $1,355
Ratio to average net assets of:
Operating expenses 2.51% 2.70%(6) 2.37%(6) 1.55%(4)(6)
Net investment income (loss) (1.81)% (1.95)% (1.60)% (0.46)%(4)
Portfolio turnover 192% 206% 283.60% 72.34%(5)
</TABLE>
----------------
(1) Computed using average shares outstanding.
(2) 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 $(0.31), $(0.55) and $(0.20) for the years
ended September 30, 1998 and 1997 and the period ended
September 30, 1996, respectively.
(3) 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.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed
expenses, the ratio of operating expenses to average net
assets would have been 2.74%, 4.32% and 9.73% for the years
ended September 30, 1998 and 1997 and the period ended
September 30, 1996, respectively.
42 Phoenix-Seneca Funds
<PAGE>
Financial Highlights (continued)
- -----------------------------------------------
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund
<TABLE>
<CAPTION>
Class B Class C
--------------------------- ---------------------------
Year From Inception Year From Inception
Ended 7/1/98 to Ended 7/1/98 to
9/30/99 9/30/98 9/30/99 9/30/98
------- -------------- ------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $13.73 $17.15 $13.72 $17.15
Income from investment operations:
Net investment income (loss) (0.47)(1)(2) (0.09)(1)(2) (0.47)(1)(3) (0.09)(1)(3)
Net realized and unrealized gain (loss) 4.69 (3.33) 4.69 (3.34)
------ ------ ------ ------
Total from investment operations 4.22 (3.42) 4.22 (3.43)
------ ------ ------ ------
Less Distributions:
Dividends from net investment income -- -- -- --
Dividends from net realized gains (0.54) -- (0.54) --
------ ------ ------ ------
Total distributions (0.54) -- (0.54) --
------ ------ ------ ------
Change in net asset value 3.68 (3.42) 3.68 (3.43)
------ ------ ------ ------
Net asset value, end of period $17.14 $13.73 $17.40 $13.72
====== ====== ====== ======
Total return(4) 31.05% (19.94)%(6) 31.07% (20.00)%(6)
Ratios/supplemental data:
Net assets, end of period (thousands) $1,676 $145 $975 $103
Ratio to average net assets of:
Operating expenses 3.45%(7) 3.45%(5)(7) 3.45%(8) 3.45%(5)(8)
Net investment income (loss) (2.78)% (2.45)%(5) (2.78)% (2.44)%(5)
Portfolio turnover 192% 206%(6) 192% 206%(6)
</TABLE>
----------------
(1) Computed using average shares outstanding.
(2) Net investment income 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 $(0.96) and $(0.69) for the periods ended September 30,
1999 and September 30, 1998, respectively.
(3) Net investment income 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 $(1.40) and $(0.77) for the periods ended September 30,
1999 and September 30, 1998, respectively.
(4) 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.
(5) Annualized.
(6) Not annualized.
(7) If the investment adviser had not waived fees and reimbursed
expenses, the ratio of operating expenses to average net
assets would have been 6.33% and 20.80% for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(8) If the investment adviser had not waived fees and reimbursed
expenses, the ratio of operating expenses to average net
assets would have been 9.03% and 21.14% for the periods ended
September 30, 1999 and September 30, 1998, respectively.
Phoenix-Seneca Funds 43
<PAGE>
Financial Highlights (continued)
- -----------------------------------------------
Phoenix-Seneca Real Estate Securities Fund
<TABLE>
<CAPTION>
Class X
-------------------------------------------------------------
From Inception
Year Ended September 30, 3/12/96 to
1999 1998 1997 9/30/96
------- ------- ------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.11 $14.71 $11.10 $10.00
Income from investment
operations:
Net investment income (loss) 0.47(6) 0.54 0.13(1) 0.13(1)
Net realized and unrealized gain (loss) (1.20) (3.10) 3.77 1.10
------- ------- ------- ------
Total from investment
operations (0.73) (2.56) 3.90 1.23
------- ------- ------- ------
Less Distributions:
Dividends from net investment income (0.44) (0.46) (0.28) (0.13)
Dividends from net realized gains (0.25) (0.58) (0.01) --
------- ------- ------- ------
Total distributions (0.69) (1.04) (0.29) (0.13)
------- ------- ------- ------
Change in net asset value (1.42) (3.60) 3.61 1.10
------- ------- ------- ------
Net asset value, end of period $9.69 $11.11 $14.71 $11.10
======= ======= ======= ======
Total return(2) (6.66)% (18.33)% 35.44% 12.39%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) $17,346 $21,794 $28,193 $1,073
Ratio to average net assets of:
Operating expenses 1.66% 1.47% 1.99%(5) 1.00%(3)(5)
Net investment income (loss) 4.50% 4.14% 2.38% 4.39%(3)
Portfolio turnover 5% 53% 75.68% 30.70%(4)
</TABLE>
----------------
(1) Net investment income 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 $0.13 and $(1.45) for the year ended September 30, 1997
and the period ended September 30, 1996, respectively.
(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) Not annualized.
(5) If the investment adviser had not waived fees and reimbursed
expenses, the ratio of operating expenses to average net
assets would have been 1.99% and 53.04% for the year ended
September 30, 1997 and the period ended September 30, 1996,
respectively.
(6) Computed using average shares outstanding.
44 Phoenix-Seneca Funds
<PAGE>
Financial Highlights (continued)
- -----------------------------------------------
Phoenix-Seneca Real Estate Securities Fund
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------
From Inception
Year Ended September 30, 3/12/96 to
1999 1998 1997 9/30/96
------ ------ ------ --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.00 $14.68 $11.08 $10.00
Income from investment
operations:
Net investment income (loss) 0.32(1)(6) 0.35 0.03(1) 0.13(1)
Net realized and unrealized gain (loss) (1.19) (3.08) 3.78 1.08
------ ------ ------ ------
Total from investment
operations (0.87) (2.73) 3.81 1.21
------ ------ ------ ------
Less Distributions:
Dividends from net investment income (0.34) (0.37) (0.20) (0.13)
Dividends from net realized gains (0.25) (0.58) (0.01) --
------ ------ ------ ------
Total distributions (0.59) (0.95) (0.21) (0.13)
------ ------ ------ ------
Change in net asset value (1.46) (3.68) 3.60 1.08
------ ------ ------ ------
Net asset value, end of period $ 9.54 $11.00 $14.68 $11.08
====== ====== ====== ======
Total return(2) (7.97)% (19.52)% 34.54% 12.22%(4)
Ratios/supplemental data:
Net assets, end of period (thousands) $919 $1,357 $3,176 $222
Ratio to average net assets of:
Operating expenses 3.05%(5) 2.76% 2.91%(5) 1.65%(3)(5)
Net investment income (loss) 3.13% 2.45% 1.37% 4.61%(3)
Portfolio turnover 5% 53% 75.68% 30.70%(4)
</TABLE>
----------------
(1) Net investment income 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 $0.20, $(0.04) and $(1.96) for the years ended September
30, 1999 and 1997 and the period ended September 30, 1996,
respectively.
(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) Not annualized.
(5) If the investment adviser had not waived fees and reimbursed
expenses, the ratio of operating expenses to average net
assets would have been 4.27%, 3.79% and 73.01% for the years
ended September 30, 1999 and 1997 and the period ended
September 30, 1996, respectively.
(6) Computed using average shares outstanding.
Phoenix-Seneca Funds 45
<PAGE>
Financial Highlights (continued)
- -----------------------------------------------
Phoenix-Seneca Real Estate Securities Fund
<TABLE>
<CAPTION>
Class B Class C
-------------------------- ---------------------------
Year From Inception Year From Inception
Ended 7/1/98 to Ended 7/1/98 to
9/30/99 9/30/98 9/30/99 9/30/98
------- -------------- ------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.01 $12.58 $11.01 $12.58
Income from investment operations:
Net investment income (loss) 0.29(1)(8) 0.07(1) 0.29(2)(8) 0.07(2)
Net realized and unrealized gain (loss) (1.22) (1.58) (1.22) (1.58)
------ ------ ------ ------
Total from investment operations (0.93) (1.51) (0.93) (1.51)
------ ------ ------ ------
Less Distributions:
Dividends from net investment income (0.28) (0.06) (0.28) (0.06)
Dividends from net realized gains (0.25) -- (0.25) --
------ ------ ------ ------
Total distributions (0.53) (0.06) (0.53) (0.06)
------ ------ ------ ------
Change in net asset value (1.46) (1.57) (1.46) (1.57)
------ ------ ------ ------
Net asset value, end of period $ 9.55 $11.01 $ 9.55 $11.01
====== ====== ====== ======
Total return(3) (8.59)% (11.97)%(5) (8.58)% (11.97)%(5)
Ratios/supplemental data:
Net assets, end of period (thousands) $197 $91 $200 $88
Ratio to average net assets of:
Operating expenses 3.80%(6) 3.80%(4)(6) 3.80%(7) 3.80%(4)(7)
Net investment income (loss) 2.79% 2.50%(4) 2.80% 2.44%(4)
Portfolio turnover 5% 53%(5) 5% 53%(5)
</TABLE>
----------------
(1) Net investment income 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 $(1.23) and $(0.46) for the periods ended September 30,
1999 and September 30, 1998, respectively.
(2) Net investment income 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 $(1.39) and $(0.48) for the periods ended September 30,
1999 and September 30, 1998, respectively.
(3) 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.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed
expenses, the ratio of operating expenses to average net
assets would have been 18.50% and 22.08% for the periods
ended September 30, 1999 and September 30, 1998,
respectively.
(7) If the investment adviser had not waived fees and reimbursed
expenses, the ratio of operating expenses to average net
assets would have been 19.95% and 22.93% for the periods
ended September 30, 1999 and September 30, 1998,
respectively.
(8) Computed using average shares outstanding.
46 Phoenix-Seneca Funds
<PAGE>
Additional Information
- -------------------------------------
Statement of Additional Information
The funds have filed a Statement of Additional Information about the funds,
dated January 28, 2000 with the Securities and Exchange Commission. The
Statement contains more detailed information about the funds. It is
incorporated into this prospectus by reference and is legally part of the
prospectus. You may obtain a free copy of the Statement:
o by writing to Phoenix Equity Planning Corporation, 100 Bright Meadow
Blvd., P.O. Box 2200, Enfield, Connecticut 06083-2200 or
o by calling (800) 243-4361.
You may also obtain information about the funds from the Securities and
Exchange Commission:
o through its internet site (http://www.sec.gov),
o by visiting its Public Reference Room in Washington, DC or
o by writing to its Public Reference Section, Washington, DC 20549-6009
(a fee may be charged).
Information about the operation of the Public Reference Room may be
obtained by calling (800) SEC-0330.
Shareholder Reports
The funds semiannually mail to shareholders detailed reports containing
information about each fund's investments. The funds' Annual Report
contains a detailed discussion of the market conditions and investment
strategies that significantly affected the funds' performance from October
1 through September 30. You may request a free copy of the funds' Annual
and Semiannual Reports:
o by writing to Phoenix Equity Planning Corporation, 100 Bright Meadow
Blvd., P.O. Box 2200, Enfield, Connecticut 06083-2200 or
o by calling (800) 243-4361.
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders: (800) 367-5877
Telecommunication Device (TTY): (800) 243-1926
SEC File Nos. 33-65137 and 811-7455
[Recycle logo] Printed on recycled paper using soybean ink
Phoenix-Seneca Funds 47
<PAGE>
Phoenix Equity Planning Corporation --------------
PO Box 2200 PRSRT STD
Enfield CT 06083-2200 U.S. Postage
PAID
Andrew
Associates
--------------
[PHOENIX
INVESTMENT PARTNERS, LTD. LOGO]
<PAGE>
PHOENIX-SENECA FUNDS
PART B
PHOENIX-SENECA BOND FUND
PHOENIX-SENECA GROWTH FUND
PHOENIX-SENECA MID-CAP "EDGE"(SM) FUND
PHOENIX-SENECA REAL ESTATE SECURITIES FUND
(each a "Fund" and collectively, the "Funds")
Statement of Additional Information
January 28, 2000
This Statement of Additional Information is not a prospectus, but expands
upon and supplements the information contained in the current prospectus of the
Phoenix-Seneca Funds (the "Trust"), dated January 28, 2000, and should be read
in conjunction with it. The Trust's prospectus may be obtained by calling
Phoenix Equity Planning Corporation ("Equity Planning") at (800) 243-4361 or by
writing to Equity Planning at 100 Bright Meadow Boulevard, Enfield, Connecticut
06083-2200.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
The Trust ........................................ 1
Investment Objectives and Policies ............... 1
Investment Restrictions .......................... 12
Calculation of the Funds' Performance ............ 15
Advisory Services ................................ 17
The Distributor .................................. 19
Distribution Plans ............................... 20
Net Asset Value .................................. 21
How To Buy Shares ................................ 22
Alternative Purchase Arrangements ................ 22
Investor Account Services ........................ 25
How To Redeem Shares ............................. 26
Dividends, Distributions and Tax Status .......... 28
Portfolio Brokerage .............................. 30
Portfolio Turnover ............................... 31
Management of the Trust .......................... 31
Other Information ................................ 38
Appendix ......................................... 40
Glossary ......................................... 41
</TABLE>
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders: (800) 367-5877
Telecommunications Device (TTY)-(800) 243-1926
PXP 2069B (1/99)
<PAGE>
THE TRUST
The Trust is an open-end management company which was organized under
Delaware law in 1995 as a business trust. The Trust consists of four separate
Funds: the Phoenix-Seneca Bond Fund; the Phoenix-Seneca Growth Fund; the
Phoenix-Seneca Mid-Cap "EDGE"(SM) 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 Bond Fund was
renamed the Phoenix-Seneca Bond Fund, 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 and the Seneca Real Estate Securities
Fund was renamed the Phoenix-Seneca Real Estate Securities Fund.
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. 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
1
<PAGE>
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.
2
<PAGE>
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
3
<PAGE>
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.
4
<PAGE>
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 issued by OCC, the terms of foreign
exchange warrants generally will not be amended in the event of governmental or
regulatory
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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:
n
ERV = P(1+T)
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, 1999 were as follows:
<TABLE>
<CAPTION>
Class X Class A Class B Class C
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Phoenix-Seneca Bond Fund 3.51% (2.41)% (2.18)% 1.66%
Phoenix-Seneca Growth Fund 32.19% 25.62% 26.31% 30.20%
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund 33.02% 25.99% 27.05% 31.07%
Phoenix-Seneca Real Estate Securities Fund (6.66)% (12.34)% (12.06)% 8.58%
</TABLE>
The average annual total returns for the period from commencement of
investment operations through September 30, 1999 were as follows:
<TABLE>
<CAPTION>
Class X Class A Class B Class C
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Phoenix-Seneca Bond Fund 7.92% (1.51)% (1.48)% 1.56%
Phoenix-Seneca Growth Fund 29.42% 26.90% 6.95% 9.96%
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund 23.54% 21.35% 0.73% 3.87%
Phoenix-Seneca Real Estate Securities Fund 4.33% 1.74% (18.51)% (15.96)%
</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:
6
YIELD = 2[(a-b + 1) -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>
The yields for the 30-day period ended September 30, 1999 were as follows:
<TABLE>
<CAPTION>
Class X Shares Class A Shares Class B Shares Class C Shares
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Phoenix-Seneca Bond Fund 6.76% 6.22% 5.75% 5.77%
Phoenix-Seneca Real Estate Securities Fund 5.83% 4.73% 4.20% 4.31%
</TABLE>
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.
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 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").
Phoenix Investment Counsel, Inc. ("PIC") is the investment adviser for the
Phoenix-Seneca Funds pursuant to an Investment Advisory Agreement. 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. The Funds' Subadviser is Seneca Capital Management, LLC ("Seneca").
Its principal offices are located at 909 Montgomery Street, San Francisco,
California 94133. Seneca's services under the Subadvisory Agreement are subject
to the direction of both the Trustees and PIC.
PIC is located at 56 Prospect Street, Hartford, Connecticut 06115-0480. PIC
was originally organized in 1932 as John P. Chase, Inc. As of December 31, 1999,
PIC had approximately $25.7 billion in assets under management. All of the
outstanding stock of PIC is owned by Phoenix Equity Planning Corporation
("PEPCO" or "Equity Planning") which acts as Distributor and Financial Agent for
the Trust and is a subsidiary of Phoenix Investment Partners, Ltd. ("PXP").
Phoenix Home Life is a majority shareholder of PXP. Phoenix Home Life is in the
business of writing ordinary and group life and health insurance and annuities.
Equity Planning, a mutual fund distributor, acts as the national distributor of
the Trust's shares and as Financial Agent of the Trust. The principal office of
Phoenix Home Life is located at One American Row, Hartford, Connecticut, 06115.
The principal office of Equity Planning is located at 100 Bright Meadow
Boulevard, Enfield, Connecticut, 06082.
Phoenix Investment Partners, Ltd. is a publicly traded independent
registered advisory firm and has served investors for over 70 years. It manages
approximately $64.6 billion in assets (as of December 31, 1999) through its
investment partners: Aberdeen Fund Managers, Inc. (Aberdeen) in Aberdeen,
London, Singapore and Fort Lauderdale; Duff & Phelps Investment Management Co.
(Duff & Phelps) in Chicago and Cleveland; Roger Engemann & Associates, Inc.
(Engemann) in Pasadena; Seneca Capital Management LLC (Seneca) in San Francisco;
and Phoenix Investment Counsel, Inc. (Goodwin, Hollister and Oakhurst divisions)
in Hartford, Sarasota, and Scotts Valley, CA, respectively.
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.
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
$9.2 billion of institutional and private investment accounts as of December 31,
1999.
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 fiscal year ended September 30, 1999, PIC earned investment
management fees of $164,083, $443,317, $142,594, and $181,649 for services to
Phoenix-Seneca Bond Fund, Phoenix-Seneca Growth Fund, Phoenix-Seneca Mid-Cap
"EDGE"(SM) Fund and Phoenix-Seneca Real Estate Securities Fund, respectively.
For the fiscal year ended September 30, 1999, PIC reimbursed $99,399, $49,249,
$51,919 and $63,940 for the Phoenix-Seneca Bond Fund, Phoenix-Seneca Growth
Fund, Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund and Phoenix-Seneca Real Estate
Securities Fund, respectively.
17
<PAGE>
For the fiscal year ended September 30, 1998, PIC and Seneca earned
investment management fees of $69,747, $307,240, $100,384 and $242,177 for
services to Phoenix-Seneca Bond Fund, Phoenix-Seneca Growth Fund, Phoenix-Seneca
Mid-Cap "EDGE"(SM) Fund and Phoenix-Seneca Real Estate Securities Fund,
respectively. For the fiscal year ended September 30, 1998, PIC, and Seneca in
its former capacity of investment adviser, reimbursed $12,142, $8,845, $36,648
and $8,695 for the Phoenix-Seneca Bond Fund, Phoenix-Seneca Growth Fund,
Phoenix-Seneca Mid-Cap "EDGE"(SM) Fund and Phoenix-Seneca Real Estate Securities
Fund, respectively.
For the fiscal year 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 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.
The Adviser and the Administrator have voluntarily agreed to reimburse the
Funds' operating expenses through January 31, 2001 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>
Bond Fund 0.90% 1.15% 1.90% 1.90%
Growth Fund 1.25% 1.85% 2.60% 2.60%
Mid-Cap "EDGE"(SM) Fund 1.15% 1.40% 2.15% 2.15%
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. Monticelli,
Treasurer of the Trust, Robert A. Driessen, Vice President and Assistant
Secretary 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 President, Chief Executive and Investment Officer and owner of more
than 5% of the equity of Seneca, Robert A. Driessen, as Chief Compliance
Officer, and Sandra J. Monticelli, as Chief Operating Officer of Seneca, are
each an "affiliated person" of Seneca. Thomas N. Steenburg, as Senior Vice
President of PIC is an "affiliated person" of PIC, Robert A. Driessen, as Vice
President, Compliance, of PIC, is an "affiliated person" of PIC.
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 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."
18
<PAGE>
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.
Each Fund bears all expenses of its own operation (subject to the expense
limitations described above), which expenses include: (i) fees and expenses of
any investment adviser or administrator of the Fund; (ii) organization expenses
of the Trust; (iii) fees and expenses incurred by the Fund in connection with
membership in investment company organizations; (iv) brokers' commissions; (v)
payment for portfolio pricing services to a pricing agent, if any; (vi) legal,
accounting or auditing expenses; (vii) interest, insurance premiums, taxes or
governmental fees; (viii) fees and expenses of the transfer agent of the Funds;
(ix) the cost of preparing stock certificates or any other expenses, including,
without limitation, clerical expenses of issue, redemption or repurchase of
shares of the Fund; (x) the expenses of and fees for registering or qualifying
shares of the Funds for sale and of maintaining the registration of the Funds;
(xi) a portion of the fees and expenses of Trustees who are not affiliated with
the 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 and Subadvisory Agreements each provide that
the Adviser and Subadviser 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.
For its services under the Underwriting Agreement, PEPCO receives sales
charges on transactions in Trust shares and retains such charges less the
portion thereof allowed to its registered representatives and to securities
dealers and securities brokers with whom it has sales agreements. In addition,
PEPCO may receive payments from the Trust pursuant to the Distribution Plans
described below. For the fiscal years ended September 30, 1998 and 1999,
purchasers of shares of the Funds paid aggregate sales charges of $14,891 and
$145,925, respectively, of which the distributor received net commissions of
$1,566 and $23,685 for its services, respectively, the balance being paid to
dealers. For the fiscal year ended September 30, 1999, the distributor received
net commissions of $16,238 for Class A Shares and deferred sales charges of
$7,447 for Class B and C Shares.
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 Consessions
Dealers with whom the Distributor has entered into sales agreements receive
a discount or commission as set forth below.
<TABLE>
<CAPTION>
Dealer Discount
Sales Charge Sales Charge or Agency Fee
Amount of Transaction as Percentage as Percentage as Percentage of
at Offering Price of Offering Price of Amount Invested Offering Price
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $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>
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. This sales commission will not be paid to
dealers for sales of Class B or Class C Shares purchased by 401(k) participants
of the Merrill Lynch Daily K Plan due to a waiver of the CDSC for these Plan
participants' purchases. 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.
19
<PAGE>
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. Such fees are in addition
to the sales commissions referenced above and may be based upon the amount of
sales of fund shares by a dealer; the provision of assistance in marketing of
fund shares; access to sales personnel and information dissemination services,
provision of recordkeeping and administrative services to qualified employee
benefit plans; and other criteria as established by the Distributor. Depending
on the nature of the services, these fees may be paid either from the Funds
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
training and educational meetings and provide additional compensation to
qualifying dealers in the form of trips, merchandise or expense reimbursements;
(b) from time to time pay special incentive and retention fees to qualified
wholesalers, registered financial institutions and third party marketers; (c)
pay broker/dealers an amount equal to 1% of the first $3 million of Class A
Share purchases by an account held in the name of a qualified employee benefit
plan with at least 100 eligible employees, 0.50% on the next $3 million, plus
0.25% on the amount in excess of $6 million; and (d) excluding purchases as
described in (c) above, pay broker/dealers an amount equal to 1% of the amount
of Class A Shares sold above $1 million but under $3 million, 0.50% on the next
$3 million, plus 0.25% on the amount in excess of $6 million. If part or all of
such investment, including investments by qualified employee benefit plans, is
subsequently redeemed within one year of the investment date, the broker-dealer
will refund to the Distributor such amounts paid with respect to the investment.
In addition, the Distributor may pay the entire applicable sales charge on
purchases of Class A Shares to selected dealers and agents. Any dealer who
receives more than 90% of a sales charge may be deemed to be an "underwriter"
under the Securities Act of 1933. Equity Planning reserves the right to
discontinue or alter such fee payment plans at any time.
Administrative Services
Equity Planning also acts as administrative agent of the Trust and as such
performs administrative, bookkeeping and pricing functions for the Funds. For
its services, Equity Planning will be paid a fee equal to the sum of (1) the
documented cost of fund accounting and related services provided by PFPC Inc.,
as subagent, plus (2) the documented cost to Equity Planning to provide
financial reporting and tax services and to oversee the subagent's performance.
The current fee schedule of PFPC Inc. is based upon the average of the aggregate
daily net asset values of each Fund, at the following incremental annual rates.
<TABLE>
<S> <C>
First $200 million .085%
$200 million to $400 million .05%
$400 million to $600 million .03%
$600 million to $800 million .02%
$800 million to $1 billion .015%
Greater than $1 billion .0125%
</TABLE>
Percentage rates are applied to the aggregate daily net asset values of the
Funds. PFPC Inc. also charges minimum fees and additional fees for each
additional class of fund shares. Equity Planning retains PFPC Inc. as subagent
for each of the funds for which Equity Panning serves as administrative agent.
PFPC Inc. agreed to a modified fee structure and waived certain charges. Because
PFPC Inc.'s arrangement would have favored smaller funds over larger funds,
Equity Planning reallocates PFPC Inc.'s overall asset-based charges among all
funds for which it serves as administrative agent on the basis of the relative
net assets of each fund. As a result, the PFPC Inc. charges to the Funds are
expected to be slightly less than the amount that would be found through direct
application of the table illustrated above. For administrative services during
the fiscal year ended September 30, 1999, PEPCO received $258,753.
DISTRIBUTION PLANS
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 require the Funds to pay the Distributor for furnishing shareholder
services and to permit the Funds 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.
20
<PAGE>
From the Service Fee the Distributor expects to pay a quarterly fee to
qualifying broker/dealer firms, as compensation for providing personal services
and/or the maintenance of shareholder accounts, with respect to shares sold by
such firms. This fee will not exceed on an annual basis 0.25% of the average
annual net asset value of such shares, and will be in addition to sales charges
on Fund shares which are re-allowed to such firms. To the extent that the entire
amount of the Service Fee is not paid to such firms, the balance will serve as
compensation for personal and account maintenance services furnished by the
Distributor.
From its own resources or pursuant to the Plan, and subject to the dealers'
prior approval, the Distributor may provide additional compensation to
registered representatives of dealers in the form of travel expenses, meals, and
lodging associated with training and educational meetings sponsored by the
Distributor. The Distributor may also provide gifts amounting in value to less
than $100, and occasional meals or entertainment, to registered representatives
of dealers. Any such travel expenses, meals, lodging, gifts or entertainment
paid will not be preconditioned upon the registered representatives' or dealers'
achievement of a sales target. The Distributor may, from time to time, reallow
the entire portion of the sales charge on Class A shares 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.
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. 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.
For the fiscal year ended September 30, 1999 the Funds paid Rule 12b-1 Fees
in the amount of $148,159, of which the Distributor received $121,864, W.S.
Griffith & Co., an affiliate, received $1,637 and unaffiliated broker-dealers
received $24,658. The Rule 12b-1 payments were used for compensation to dealers,
$235,030; and printing and mailing of prospectuses to other than current
shareholders, $14,630. The Distributor's expenses from selling and servicing
Class B Shares may be more than the payments received from contingent deferred
sales charges collected on redeemed shares and from the Funds under the Class B
Plan. Those expenses may be carried over and paid in future years. At September
30, 1999, the end of the last Plan year, the Distributor had incurred
unreimbursed expenses under the Class B Plan of $151,199 (equal to 0.13% of the
Funds' net assets) which have been carried over into the present Class B Plan
year.
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.
NET ASSET VALUE
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 the following observed national holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
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
21
<PAGE>
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.
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.
22
<PAGE>
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.
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.
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
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.
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 purchase the minimum amounts.
Class A Shares--Reduced Initial Sales Charges
Investors choosing Class A Shares may be entitled to reduced sales charges.
The 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 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
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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) 401(k) participants
in the Merrill Lynch Daily K Plan (the "Plan") if the Plan has at least $3
million in assets or 500 or more eligible employees; (20) 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 (20) may be charged a fee by the
broker, agent or financial intermediary for purchasing shares); or (21)
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 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
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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.
Class B and C Shares--How To Obtain Reduced Deferred Sales Charges
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)
from the Merrill Lynch Daily K Plan ("Plan") invested in Class B Shares, on
which such shares the Distributor has not paid the dealer the Class B sales
commission; (f) based on the exercise of exchange privileges among Class B and C
Shares of the Phoenix-Seneca Funds or any other Affiliated Phoenix Fund; (g)
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 (h) 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 offer 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 Affiliated 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
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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.
Invest-by-Phone
This expedited investment service allows a shareholder to make an
investment in an account by requesting a transfer of funds from the balance of
their bank account. Once a request is phoned in, Equity Planning will initiate
the transaction by wiring a request for monies to the shareholder's commercial
bank, savings bank or credit union via Automated Clearing House (ACH). The
shareholder's bank, which must be an ACH member, will in turn forward the monies
to Equity Planning for credit to the shareholder's account. ACH is a computer
based clearing and settlement operation established for the exchange of
electronic transactions among participating depository institutions.
To establish this service, please complete an Invest-by-Phone Application
and attach a voided check if applicable. Upon Equity Planning's acceptance of
the authorization form (usually within two weeks) shareholders may call toll
free (800) 367-5877 prior to 3:00 p.m. (New York time) to place their purchase
request. Instructions as to the account number and amount to be invested must be
communicated to Equity Planning. Equity Planning will then contact the
shareholder's bank via ACH with appropriate instructions. The purchase is
normally credited to the shareholder's account the day following receipt of the
verbal instructions. The Fund may delay the mailing of a check for redemption
proceeds of Fund shares purchased with a check or via Invest-by-Phone service
until the Fund has assured itself that good payment has been collected for the
purchase of the shares, which may take up to 15 days. The Fund and Equity
Planning reserve the right to modify or terminate the Invest-by-Phone service
for any reason or to institute charges for maintaining an Invest-by-Phone
account.
Systematic Withdrawal Program. The Systematic Withdrawal Program allows you
to periodically redeem a portion of your account on a predetermined monthly,
quarterly, semiannual or annual basis. A sufficient number of full and
fractional shares will be redeemed so that the designated payment is made on or
about the 20th day of the month. Shares are tendered for redemption by the
Transfer Agent, as agent for the shareowner, on or about the 15th of the month
at the closing net asset value on the date of redemption. The Systematic
Withdrawal Program also provides for redemptions to be tendered on or about the
10th, 15th or 25th of the month with proceeds to be directed through Automated
Clearing House (ACH) to your bank account. In addition to the limitations stated
below, withdrawals may not be less than $25 and minimum account balance
requirements shall continue to apply.
Shareholders participating in the Systematic Withdrawal Program must own
shares of a Series 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.
HOW TO REDEEM 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. Redemptions by
Class B and C shareholders will be subject to the applicable deferred sales
charge, if any.
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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.
Redemption of Small Accounts
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.
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, the Funds
have 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
Investment Company Act of 1940 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 selling the securities.
Account Reinstatement 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.
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.
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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, 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
28
<PAGE>
as if such positions were closed out at their closing price on such day), and
any resulting gain or loss recognized as 60% is long-term and 40% short-term
capital gain or loss. Under certain circumstances, entry into a futures contract
to sell a security may constitute a short sale for federal income tax purposes,
causing an adjustment in the holding period of the underlying security or a
substantially identical security in a Fund's portfolio.
Because options, futures and currency activities of a Fund may increase the
amount of gains from the sale of securities or investments held or treated as
held for less than three months, the Funds may limit these transactions in order
to comply with the 30% limitation described above.
Positions of a Fund which consist of at least one stock and at least one
stock option or other position with respect to a related security which
substantially diminishes the Fund's risk of loss with respect to such stock
could be treated as a "straddle" which is governed by Section 1092 of the Code,
the operation of which may cause deferral of losses, adjustments in the holding
periods of stock or securities and conversion of short-term capital losses into
long-term capital losses. An exception to these straddle rules exists for any
"qualified covered call options" on stock written by a Fund.
Positions of a Fund which consist of at least one debt security not
governed by Section 1256 and at least one futures or currency contract or listed
nonequity option governed by Section 1256 which substantially diminishes the
Fund's risk of loss with respect to such debt security are treated as a "mixed
straddle." Although mixed straddles are subject to the straddle rules of Section
1092 of the Code, certain tax elections exist for them which reduce or eliminate
the operation of these rules. Each Fund will monitor these transactions and may
make certain tax elections in order to mitigate the operation of these rules and
prevent disqualification of the Fund as a regulated investment company for
federal income tax purposes.
These special tax rules applicable to options, futures and currency
transactions could affect the amount, timing and character of a Fund's income or
loss and hence of its distributions to shareholders by causing holding period
adjustments, converting short-term capital losses into long-term capital
losses, and accelerating a Fund's income or deferring its losses.
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
29
<PAGE>
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
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 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.
The Adviser may use its broker/dealer affiliates, or other firms that sell
shares of the Funds, to buy and sell securities for the Funds, provided they
have the execution capability and that their commission rates are comparable to
those of other unaffiliated broker/dealers. Directors of PXP Securities Corp. or
its affiliates receive indirect benefits from the Funds as a result of its usual
and customary brokerage commissions that PXP Securities Corp. may receive for
acting as broker to the Funds in the purchase and sale of portfolio securities.
The investment advisory agreement does not provide for a reduction of the
advisory fee by any portion of the brokerage fees generated by portfolio
transactions of the Funds that PXP Securities Corp. may receive.
For the fiscal years ended September 30, 1997, 1998 and 1999, the Funds
paid brokerage commissions of $212,930, $214,000, and $260,147, respectively.
In the fiscal year ended September 30, 1999, no brokerage commissions were paid
to the Distributor for this transaction.
30
<PAGE>
PORTFOLIO TURNOVER
The Funds pay brokerage commissions for purchases and sales of portfolio
securities. A high rate of portfolio turnover generally involves a
correspondingly greater amount of brokerage commissions and other costs which
must be borne directly by a Fund and thus indirectly by its shareholders. It
may also result in the realization of larger amounts of short-term capital
gains, which are taxable to shareholders as ordinary income. If such rate of
turnover exceeds 100%, the Funds will pay more in brokerage commissions than
would be the case if they had lower portfolio turnover rates. Historical
turnover rates can be found under the heading "Financial Highlights" located
the Trust's Prospectus.
MANAGEMENT OF THE TRUST
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.
Trustees and Officers
<TABLE>
<CAPTION>
Name and Title Address Age Principal Occupations During Past Five Years
-------------- ------- --- --------------------------------------------
<S> <C> <C> <C>
Mary Ann Cusenza,** 909 Montgomery Street 42 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.
Harry Dalzell-Payne 330 East 39th Street 70 Mr. Dalzell-Payne has been a Trustee of the Trust since
Trustee Apartment 29G 1998. He has served as a Trustee/Director of the Phoenix
New York, NY 10016 Funds since 1983 and of Phoenix-Aberdeen Series Fund
and Phoenix Duff & Phelps Institutional Mutual Funds
since 1996. He has also served as a Director of Duff &
Phelps Utilities Tax Free Income Inc. and Duff & Phelps
Utility and Corporate Bond Trust Inc. since 1995.
Previously, he served as Director of Farragut Mortgage
Co., Inc. from 1991 to 1994. Formerly, he was a Major
General of the British Army.
Norman W. Douglass 72 Spring Lane 66 Mr. Douglass has been a Trustee of the Trust since 1998.
Trustee West Hartford, CT 06107 He is a seasoned investment manager with over 38 years
of investment experience. Most recently he was
Investment Advisor at Crossroads Investment Advisors,
L.P., from 1994 to 1998. From 1967 to 1993, he was an
investment manager with Phoenix Home Life Mutual
Insurance Company, where he was head of fixed income
operations for fifteen years.
Paul E. Erdman,** 909 Montgomery Street 66 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.
Melinda Ellis Evers,** 909 Montgomery Street 38 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 B. Fay, Jr. 909 Montgomery Street 80 Mr. Fay has been a Trustee of the Trust since 1999. He
Trustee San Francisco, CA 94133 is President of the Fay Improvement Company (since
1975). He has been a Director of First American
Financial Corporation since 1969, Vestaur Securities,
Inc. since 1972 and Compensation Resource Group,
Inc., since 1985. Mr. Fay has serves as a Trustee of the
Odell Foundation for the past 25 years.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Name and Title Address Age Principal Occupations During Past Five Years
-------------- ------- --- --------------------------------------------
<S> <C> <C> <C>
Philip R. McLoughlin 56 Prospect Street 53 He also holds or has held the following positions:
Trustee Hartford, CT 06115 Chairman (1997-present), Director (1995-present), Vice
Chairman (1995-1997) and Chief Executive Officer
(1995-present), Phoenix Investment Partners, Ltd.
Director (1994-present) and Executive Vice President,
Investments (1988-present), Phoenix Home Life Mutual
Insurance Company. Director/Trustee and President,
Phoenix Funds (1989-present). Trustee and President,
Phoenix-Aberdeen Series Fund and Phoenix Duff &
Phelps Institutional Mutual Funds (1996-present).
Director, Duff & Phelps Utilties Tax-Free Income Inc.
(1995-present) and Duff & Phelps Utility and Corporate
Bond Trust Inc. (1995-present). Director (1983-present)
and Chairman (1995-present), Phoenix Investment
Counsel, Inc. Director (1984-present) and President
(1990-present), Phoenix Equity Planning Corporation.
Director, Phoenix Realty Group, Inc. (1994-present),
Phoenix Realty Advisors, Inc. (1987-present), Phoenix
Realty Investors, Inc. (1994-present), Phoenix Realty
Securities, Inc. (1994-present), PXRE Corporation
(Delaware) (1985-present), and World Trust Fund
(1991-present). Director and Executive Vice President,
Phoenix Life and Annuity Company (1996-present).
Director and Executive Vice President, PHL Variable
Insurance Company (1995-present). Director, Phoenix
Charter Oak Trust Company (1996-present). Director
and Vice President, PM Holdings, Inc. (1985-present).
Director (1992-present) and President (1992-1994),
W.S. Griffith & Co., Inc. Director, PHL Associates, Inc.
(1995-present).
Gail P. Seneca,* 909 Montgomery Street 46 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.
Robert A. Driessen 56 Prospect Street 52 Mr. Driessen has been Vice President and Assistant
Vice President Hartford, CT 06115 Secretary of the Trust since 1999. He also holds or has
held the following positions: Vice President,
Compliance, Phoenix Investment Partners, Ltd. (since
1999); Vice President, Phoenix Funds, Phoenix-
Aberdeen Series Fund, Phoenix-Duff & Phelps
Institutional Mutual Funds (since 1999); Vice President,
Risk Management Liaison, Bank of America (1996-
1999); Vice President, Securities Compliance, The
Prudential Insurance Company of America (1993-
1996); Branch Chief/Financial Analyst, Securities and
Exchange Commission, Division of Investment
Management (1972-1993).
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Name and Title Address Age Principal Occupations During Past Five Years
-------------- ------- --- --------------------------------------------
<S> <C> <C> <C>
Sandra J. Monticelli,* 909 Montgomery Street 40 Ms. Monticelli 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.
Thomas N. Steenburg,* 55 East Monroe Street 50 Mr. Steenburg has been Secretary of the Trust since March,
Secretary Chicago, IL 60603 1998. He also holds or has held the following positions:
Senior Vice President (since 1999), Vice President and
Counsel (1995-1999) of Phoenix Investment Partners, Ltd;
Chairman and Chief Executive Officer (2000-present),
Executive Vice President (1999), Vice President and
Counsel (1996-1999), Duff & Phelps Investment
Management Co.; Secretary (since 1997), General Counsel
and Compliance Officer (1997-1999) of Seneca; Vice
President, Secretary and Counsel of PIC, National
Securities & Research Corporation since 1995, PEPCO
since November 1995, 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.
</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 quarterly retainer of
$2,500 and 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.
33
<PAGE>
The following table sets forth the compensation paid to the Trustees during the
fiscal year ended September 30, 1999.
<TABLE>
<CAPTION>
Total
Pension or Compensation
Aggregate Retirement Benefits from Trust and
Compensation Accrued as Part Fund Complex
Name of Trustee from the Trust of Trust's Expenses (14 Funds)
- ---------------------- ---------------- --------------------- ---------------
<S> <C> <C> <C>
Gail P. Seneca $ 0 -- $ 0
Mary Ann Cusenza $20,000 -- $20,000
Harry Dalzell-Payne $20,000 -- $73,750
Norman W. Douglass $20,000 -- $20,000
Melinda Ellis Evers $20,000 -- $20,000
Paul E. Erdman $20,000 -- $20,000
Paul B. Fay, Jr. $ 5,000 -- $ 5,000
Philip R. McLoughlin $ 0 -- $ 0
</TABLE>
For services to the Funds and expenses during the last fiscal year, the
Trustees received an aggregate of $105,000.
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.
Principal Shareholders
The following table sets forth information as of January 14, 2000 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>
Bank of New York Cust FBO Growth Fund Class A Shares 502,978.2910 27.70%
Amer Fed of Mus & Employer Pen Fund -
Amivest Corp Dis Inv Mngr
1 Wall St., Fl. 2
New York, NY 10005-2501
Bank of New York Cust Annuity FU of Growth Fund Class A Shares 139,463.4060 7.68%
Local One IATSE
Amivest Corp. Disc Invt Mgr 717
Master Tr/Cust Dept
ATTN: W. Biempi
1 Wall St., 7th Flr.
New York, NY 10005-2500
BT Alex Brown, Inc. Mid-Cap "EDGE"(SM) Class X Shares 80,500.9900 13.05%
FBO 761-00796-21
P.O. Box 1346
Baltimore, MD 21203-1346
BT Alex Brown, Inc. Real Estate Securities Class X Shares 102,436.1910 6.49%
FBO 761-00939-11
P.O. Box 1346
Baltimore, MD 21203-1346
BT Alex Brown, Inc. Real Estate Securities Class X Shares 82,238.7750 5.40%
FBO 761-00591-10
P.O. Box 1346
Baltimore, MD 21203-1346
DB Alex Brown, LLC Bond Fund Class X Shares 175,742.0870 5.11%
FBO 761-01048-17
P.O. Box 1346
Baltimore, MD 21203-1346
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Name of Name of Number of Percent
Shareholder Fund and Class Shares(1) of Class
- ----------- -------------- --------- --------
<S> <C> <C> <C>
Donaldson Lufkin Jenrette Securities Bond Fund Class A Shares 16,688.3250 5.17%
Corp., Inc. Bond Fund Class C Shares 7,099.7910 6.26%
P.O. Box 2052 Mid-Cap "EDGE"(SM) Fund Class B Shares 25,224.6510 17.18%
Jersey City, NJ 07303-2052 Real Estate Securities Class C Shares 3,561.0290 16.54%
First National Bank of Onaga Cus' Real Estate Securities Class A Shares 12,842.3990 13.04%
FBO Darrell D Vore IRA
P.O. Box 420
301 Leonard St. P.O. Box 420
Onaga, KS 66521-420
MLPF&S for the sole benefit of its customers Bond Fund Class B Shares 13,561.1790 5.20%
ATTN: Fund Administration Bond Fund Class C Shares 6,089.7610 5.37%
4800 Deer Lake Dr., E., 3rd Flr. Growth Fund Class B Shares 47,952.0620 13.20%
Jacksonville, FL 32246-6484 Growth Fund Class C Shares 26,725.9680 8.76%
Mid-Cap "EDGE"(SM) Class A Shares 253,588.0310 35.84%
Mid-Cap "EDGE"(SM) Class B Shares 28,682.8550 19.47%
Mid-Cap "EDGE"(SM) Class C Shares 61,192.7220 39.44%
Susan R. Mintz Real Estate Securities Class A Shares 19,123.5930 19.41%
3000 Saint Charles Ave., Apt. 415
New Orleans, LA 70115-4473
NFSC FEBO #APW-777242 Bond Fund Class C Shares 9,100.1920 8.02%
John S. Hinmon
Harriet H. Hinmon
P.O. Box 838
Edwards, CO 81632-0838
NFSC FEBO #179-684260 Growth Fund Class A Shares 99,983.2440 5.51%
Amalg Bank of NY Cust
UFCW LCL 50 Pension Plan
Amivest Corp. Disc. Invt. Mngr.
11-15 Union Sq.
New York, NY 10459-2792
Pacific Bank Cust Real Estate Securities Class X Shares 355,714.6580 22.55%
Blair Walker Stratford, TTEE
Blair Walker Stratford 1994 Family Trust
ATTN: Ginger Bradley
100 Montgomery St.
San Francisco, CA 94104-4397
Pacific Bank Cust Real Estate Securities Class X Shares 316,903.8560 20.09%
Walker Security Investments, LLC
ATTN: Ginger Bradley
100 Montgomery St.
San Francisco, CA 94104-4397
PaineWebber for the Benefit of Bond Fund Class C Shares 34,285.6520 30.23%
Youth Tennis Foundation of
North California
Pier 23
San Francisco, CA 94111-1136
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Name of Name of Number of Percent
Shareholder Fund and Class Shares(1) of Class
- ----------- -------------- --------- --------
<S> <C> <C> <C>
Phoenix Equity Planning Corp. Bond Fund Class C Shares 10,253.9320 9.04%
ATTN: Corporate Accounting Dept. Real Estate Securities Class B Shares 8,621.1660 65.35%
c/o Gene Charon, Controller Real Estate Securities Class C Shares 8,621.5660 40.05%
100 Bright Meadow Blvd.
Enfield, CT 06082-1957
Phoenix Home Life Bond Fund Class X Shares 1,568,253.7770 45.64%
ATTN: Pam Levesque
56 Prospect St.
Hartford, CT 06103-2818
Resources Trust Company TTEE Real Estate Securities Class C Shares 3,838.8780 17.83%
FBO Harvey H. Bohman IRA
P.O. Box 5900
Denver, CO 80217-5900
Resources Trust Company TTEE Real Estate Securities Class C Shares 2,128.3370 9.89%
FBO Fred O'Dell IRA
P.O. Box 5900
Denver, CO 80217-5900
Resources Trust Company TTEE Real Estate Securities Class C Shares 1,748.0990 8.12%
FBO Bertha Vasquez IRA
P.O. Box 5900
Denver, CO 80217-5900
Resources Trust Company TTEE Real Estate Securities Class C Shares 1,429.7080 6.64%
FBO Gail B. Nestlerode IRA
P.O. Box 5900
Denver, CO 80217-5900
Charles Schwab & Co., Inc. Bond Fund Class X Shares 343,557.6220 10.00%
Reinvest Account Growth Fund Class X Shares 115,629.0890 6.35%
ATTN: Mutual Fund Dept. Mid-Cap "EDGE"(SM) Class X Shares 45,820.7970 7.43%
101 Montgomery St.
San Francisco, CA 94104-4122
Charles Schwab & Co., Inc. Mid-Cap "EDGE"(SM) Class A Shares 45,646.4100 6.45%
Special Custody Acct. for the Exclusive Real Estate Securities Class A Shares 25,109.2880 25.49%
Benefit of our Customers
ATTN: Mutual Fund Operations
101 Montgomery St.
San Francisco, CA 94104-4122
State Street Bank & Trust Co. Bond Fund Class A Shares 33,406.8290 10.34%
Custodian for the IRA rollover of
Eugene J. Glaser
784 Park Ave #15C
New York, NY 10021-3553
State Street Bank & Trust Co. Bond Fund Class B Shares 36,182.5320 13.87%
Custodian for the IRA of
Harold C. Patterson
6298 Breckenridge Road
Lake Worth, FL 33467-6821
State Street Bank & Trust Co. Real Estate Securities Class A Shares 7,010.7160 7.12%
Custodian for the IRA of
Nancy W. Silberman
270 Euclid Ave.
Winnetka, IL 60093-3605
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Name of Name of Number of Percent
Shareholder Fund and Class Shares(1) of Class
- ----------- -------------- --------- --------
<S> <C> <C> <C>
Robert A. Swanson, TTEE Growth Fund Class X Shares 188,040.2390 10.33%
Robert A. Swanson Charitable Remainder
Trust
c/o K & E Management Ltd.
400 S. El Camino Real, Ste. 1289
San Mateo, CA 94402-1704
Robert A. Swanson Tr Growth Fund Class X Shares 92,070.8660 5.06%
1993 Annuity Trust
C/O K & E Management LTD
400 S FL Camino Real Estate 1288
San Mateo, CA 94402-1703
</TABLE>
As of January 14, 2000, the Trustees and officers of the Trust as a group
owned less than 1% of the Funds outstanding shares.
OTHER INFORMATION
Capital Stock and Organization
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).
37
<PAGE>
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.
Each share of each class of a Fund is entitled to such dividends and
distributions out of the income earned on the assets belonging to that Fund
which are attributable to such class as are declared in the discretion of the
Trustees. In the event of the liquidation or dissolution of the Trust, shares of
each class of each Fund are entitled to receive their proportionate share of the
assets which are attributable to such class of such Fund and which are available
for distribution as the Trustees in their sole discretion may determine.
Shareholders are not entitled to any preemptive, conversion or subscription
rights. All shares, when issued, will be fully paid and non-assessable by the
Trust.
Subject to shareholder approval (if then required), the Trustees may
authorize each Fund to invest all or part of its investable assets in a single
open-end investment company that has substantially the same investment
objectives, policies and restrictions as the Fund. As of the date of this
Statement of Additional Information, the Trustees do not have any plan to
authorize any Fund to so invest its assets.
"Phoenix-Seneca Funds" is the designation of the Trust for the time being
under the Declaration of Trust, and all persons dealing with a Fund must look
solely to the property of that Fund for the enforcement of any claims against
that Fund as neither the Trustees, officers, agents nor shareholders assume any
personal liability for obligations entered into on behalf of a Fund or the
Trust. No Fund is liable for the obligations of any other Fund. Since the Funds
use combined prospectuses, however, it is possible that one Fund might become
liable for a misstatement or omission in its prospectus regarding the other Fund
with which its disclosure is combined. The Trustees have considered this factor
in approving the use of the combined prospectuses.
Custodian
The Custodian for the Trust is Investors Fiduciary Trust Company at 801
Pennsylvania Street, Kansas City, Missouri, 64105. In this capacity, the
Custodian holds the assets of the Trust.
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
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts
02110, are the independent accountants for the Trust. Professional services
performed by PricewaterhouseCoopers 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.
Financial Statements
The Funds' financial statements for the fiscal years ended September 30,
1999 included in the Funds' 1999 Annual Report are incorporated herein by
reference.
38
<PAGE>
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.
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.
39
<PAGE>
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.
40
<PAGE>
Phoenix-Seneca Bond Fund
INVESTMENTS AT SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES--2.7%
U.S. TREASURY BONDS--1.1%
U.S. Treasury Bonds 5.25%, 11/15/28..... Aaa $ 510 $ 441,633
U.S. TREASURY NOTES--1.6%
U.S. Treasury Notes 4.75%, 2/15/04...... Aaa 450 431,438
U.S. Treasury Notes 6.50%, 10/15/06..... Aaa 200 204,505
-----------
635,943
-----------
- - --------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(IDENTIFIED COST $1,087,835) 1,077,576
- - --------------------------------------------------------------------------
AGENCY MORTGAGE-BACKED SECURITIES--10.8%
Fannie Mae 8.75%, 5/25/17............... Aaa 12 12,443
Fannie Mae 6.50%, 12/1/28............... Aaa 384 367,908
Fannie Mae 6.50%, 8/1/29................ Aaa 1,009 967,022
Fannie Mae W.I. 7%, 10/15/29............ Aaa 1,150 1,129,875
Fannie Mae Strip I.O. 3.156%,
10/25/23(c)............................. Aaa 222 5,896
Freddie Mac 8.75%, 12/15/20............. Aaa 5 5,509
Freddie Mac 7%, 7/15/23................. Aaa 769 731,790
Freddie Mac 6%, 10/15/27................ Aaa 1,125 1,045,102
GNMA 7%, 2/15/26........................ Aaa 16 16,197
- - --------------------------------------------------------------------------
TOTAL AGENCY MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $4,338,864) 4,281,742
- - --------------------------------------------------------------------------
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
AGENCY NON MORTGAGE-BACKED
SECURITIES--2.7%
Fannie Mae 6.50%, 8/15/04............... Aaa $1,050 $ 1,055,104
- - --------------------------------------------------------------------------
TOTAL AGENCY NON MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $1,059,912) 1,055,104
- - --------------------------------------------------------------------------
ASSET-BACKED SECURITIES--3.8%
Olympic Automobile Receivables Trust
96-B, CTFS 6.90%, 2/15/04............... Aaa 76 76,847
Olympic Automobile Receivables Trust
96-C, A5 7%, 3/15/04.................... Aaa 400 403,955
Olympic Automobile Receivables Trust
96-D, A5 6.25%, 11/15/04(e)............. Aaa 1,000 1,000,195
Standard Credit Card Master Trust 1
93-2, A 5.95%, 9/7/03................... Aaa 40 39,066
- - --------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $1,523,019) 1,520,063
- - --------------------------------------------------------------------------
CORPORATE BONDS--64.8%
AIR FREIGHT--1.2%
Federal Express Corp. Series 98-1A
6.72%, 1/15/22.......................... Aa 499 467,031
</TABLE>
See Notes to Financial Statements 5
<PAGE>
Phoenix-Seneca Bond Fund
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
AIRLINES--2.5%
Alaska Airlines, Inc. Series A 9.50%,
4/12/10................................. Baa $ 114 $ 120,779
Alaska Airlines, Inc. Series D 9.50%,
4/12/12................................. Baa 452 482,945
Delta Air Lines, Inc. Series B2 10.06%,
1/2/16.................................. Baa 65 73,976
United Airlines, Inc. Series 91-B
10.11%, 2/19/06......................... Baa 18 19,239
United Airlines, Inc. Series 91-E 9.76%,
5/27/06................................. Baa 86 92,181
United Airlines, Inc. Series 95-A1
9.02%, 4/19/12.......................... Baa 181 189,344
-----------
978,464
-----------
BANKS (MAJOR REGIONAL)--2.4%
First Republic Bancorp 7.75%, 9/15/12... BB(d) 300 269,262
Wells Fargo Capital I 7.96%, 12/15/26... Aa 700 681,534
-----------
950,796
-----------
BANKS (MONEY CENTER)--1.0%
BankAmerica Corp. Institutional Series A
144A 8.07%, 12/31/26(b)................. Aa 400 392,072
BROADCASTING (TELEVISION, RADIO & CABLE)--5.5%
Chancellor Media Corp. 9.375%,
10/1/04................................. B 75 76,875
Falcon Holding Group L.P. 8.375%,
4/15/10................................. B 500 495,000
Fox/Liberty Networks LLC 0%,
8/15/07(c).............................. Ba 1,180 929,250
Jacor Communications, Inc. 10.125%,
6/15/06................................. B 100 107,500
Jones Intercable, Inc. 9.625%,
3/15/02................................. Baa 300 316,500
SFX Broadcasting Corp. Series B 10.75%,
5/15/06................................. B 56 61,180
Turner Broadcasting System, Inc. 8.40%,
2/1/24.................................. Baa 200 201,987
-----------
2,188,292
-----------
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
CONSUMER (JEWELRY, NOVELTIES & GIFTS)--0.1%
Finlay Fine Jewelry Corp. 8.375%,
5/1/08.................................. Ba $ 40 $ 38,650
ELECTRONICS (SEMICONDUCTORS)--1.9%
SCG Holdings & Semiconductor Co. 144A
12%, 8/1/09(b).......................... B 750 768,750
ENTERTAINMENT--2.8%
AMC Entertainment, Inc. 9.50%,
3/15/09................................. B 100 83,500
Royal Caribbean Cruises Ltd. 7.50%,
10/15/27................................ Baa 100 90,527
Time Warner, Inc. 9.125%, 1/15/13....... Baa 65 73,448
Time Warner, Inc. 6.85%, 1/15/26........ Baa 620 623,100
United Artists Theatre Circuit, Inc.
Series 95-A 9.30%, 7/1/15............... B 327 222,211
-----------
1,092,786
-----------
FINANCIAL (DIVERSIFIED)--1.3%
Countrywide Capital I 8%, 12/15/26...... A 200 185,028
Dollar Financial Group, Inc. Series A
10.875%, 11/15/06....................... B 75 74,625
Market Hub Partners Finance, Inc. 8.25%,
3/1/08.................................. Ba 250 243,125
-----------
502,778
-----------
HEALTH CARE (HOSPITAL MANAGEMENT)--1.0%
Universal Health Services, Inc. 8.75%,
8/15/05................................. Ba 400 414,048
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--0.7%
Dade International, Inc. Series B
11.125%, 5/1/06......................... B 260 275,600
HEALTH CARE (SPECIALIZED SERVICES)--1.2%
HEALTHSOUTH Corp. 9.50%, 4/1/01(e)...... Ba 500 484,881
HOMEBUILDING--2.8%
Lennar Corp. 7.625%, 3/1/09............. Ba 800 740,000
Toll Corp. 8%, 5/1/09................... Ba 400 381,500
-----------
1,121,500
-----------
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Bond Fund
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
INVESTMENT BANKING/BROKERAGE--2.1%
Donaldson, Lufkin & Jenrette, Inc.
6.875%, 11/1/05......................... A $ 50 $ 48,958
Donaldson, Lufkin & Jenrette, Inc.
6.50%, 6/1/08........................... A 200 187,278
Lehman Brothers Holdings, Inc. Series F
7%, 5/15/03............................. A 500 497,500
Lehman Brothers Holdings, Inc. 8.80%,
3/1/15.................................. A 80 83,417
-----------
817,153
-----------
LODGING-HOTELS--1.4%
Hammons (John Q.) Hotels, Inc. 8.875%,
2/15/04................................. B 530 479,650
Hammons (John Q.) Hotels, Inc. 9.75%,
10/1/05................................. B 100 92,000
-----------
571,650
-----------
MACHINERY (DIVERSIFIED)--1.3%
Better Minerals & Aggregates 144A 13%,
9/15/09(b).............................. B 500 501,250
MANUFACTURING (DIVERSIFIED)--0.0%
Hawk Corp. 10.25%, 12/1/03.............. Ba 10 10,150
MANUFACTURING (SPECIALIZED)--1.3%
Advanced Glassfiber Yarns 9.875%,
1/15/09................................. B 300 275,250
BGF Industries, Inc. Series B 10.25%,
1/15/09................................. B 300 258,750
-----------
534,000
-----------
OFFICE EQUIPMENT & SUPPLIES--1.9%
CEX Holdings, Inc. Series B 9.625%,
6/1/08.................................. B 700 752,500
OIL & GAS (REFINING & MARKETING)--0.8%
El Paso Tenneco RACERS 97-C-1-2 144A
9.14%, 12/31/01(b)...................... NR 300 316,500
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
PAPER & FOREST PRODUCTS--0.1%
Container Corporation of America Series
A 11.25%, 5/1/04........................ B $ 40 $ 41,400
PHOTOGRAPHY/IMAGING--0.4%
Imax Corp. 7.875%, 12/1/05.............. Ba 150 139,875
PUBLISHING (NEWSPAPERS)--0.8%
Garden State Newspapers, Inc. Series B
8.75%, 10/1/09.......................... B 325 299,000
RAILROADS--1.5%
Railworks Corp. 11.5%, 4/15/09.......... B 600 600,000
REITS--4.5%
ERP Operating L.P. 7.57%, 8/15/26....... A 170 166,495
Evans Withycomb Residential, Inc. 7.50%,
4/15/04................................. A 100 101,496
First Industrial L.P. 7.15%, 5/15/27.... Baa 500 494,309
Property Trust of America 6.875%,
2/15/08................................. Baa 5 4,779
Regency Centers L.P. 7.4%, 4/1/04....... Baa 500 488,750
Security Capital Pacific Trust 7.375%,
10/15/06................................ Baa 100 94,552
Security Capital Pacific Trust 7.90%,
2/15/16................................. Baa 200 185,760
Washington Real Estate Investment Trust
7.125%, 8/13/03......................... Baa 110 109,252
Weingarten Realty Investors Series A
6.88%, 6/25/27.......................... A 150 144,050
-----------
1,789,443
-----------
RESTAURANTS--1.5%
CKE Restaurants, Inc. 4.25%, 3/15/04.... B 500 325,000
Foodmaker, Inc. Series B 9.75%,
11/1/03................................. BB(d) 250 255,625
-----------
580,625
-----------
RETAIL (DISCOUNTERS)--0.9%
AMES Department Stores 10%, 4/15/06..... B 350 340,375
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Phoenix-Seneca Bond Fund
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
RETAIL (FOOD CHAINS)--2.9%
Kroger Co. 6%, 7/1/00(c)................ Baa $ 275 $ 274,422
Meyer (Fred), Inc. Series 94-A2 8.64%,
7/2/12.................................. BBB(d) 100 105,500
Stater Brothers Holdings, Inc. 144A
10.75%, 08/15/06(b)..................... B 750 767,812
-----------
1,147,734
-----------
RETAIL (GENERAL MERCHANDISE)--3.3%
K Mart Funding Corp. Series F 8.80%,
7/1/10.................................. Ba 500 487,604
Wal-Mart Stores, Inc. Series A-2 8.85%,
1/2/15.................................. Aa 750 838,500
-----------
1,326,104
-----------
SERVICES (ADVERTISING/MARKETING)--0.9%
Outdoor Systems, Inc. 8.875%, 6/15/07... B 350 357,875
SERVICES (COMMERCIAL & CONSUMER)--5.6%
Coinmach Laundry Corp. Series D 11.75%,
11/15/05................................ B 255 274,762
Group Maintenance America Corp. 9.75%,
1/15/09................................. B 300 288,000
Loomis Fargo & Co. 10%, 1/15/04......... B 300 297,000
Protection One Alarm Monitoring, Inc.
7.375%, 8/15/05......................... Ba 500 392,500
SC International Services, Inc. 9.25%,
9/1/07.................................. B 190 187,625
United Rentals, Inc. Series B 9.50%,
6/1/08.................................. B 250 247,500
United Rentals, Inc. Series B 8.80%,
8/15/08................................. B 500 475,000
Williams Scotsman, Inc. 9.875%,
6/1/07.................................. B 50 47,625
-----------
2,210,012
-----------
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
TELECOMMUNICATIONS (CELLULAR/WIRELESS)--3.7%
Orion Network Systems 0%, 1/15/07(c).... B $ 90 $ 41,850
Sprint Spectrum L.P. 0%, 8/15/06(c)..... Baa 1,530 1,415,250
-----------
1,457,100
-----------
TELECOMMUNICATIONS (LONG DISTANCE)--0.5%
Qwest Communications International Corp.
0%, 10/15/07(c)......................... Ba 275 213,469
TEXTILES (APPAREL)--2.2%
Levi Strauss & Co. 144A 7%,
11/1/06(b).............................. Ba 1,000 861,250
WASTE MANAGEMENT--1.8%
Waste Management, Inc. 6.125%,
7/15/01(c)(e)........................... Ba 750 719,435
WATER UTILITIES--1.0%
Marlin Water Trust 144A 7.09%,
12/15/01(b)............................. Baa 405 400,950
- - --------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $26,637,442) 25,663,498
- - --------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED
SECURITIES--6.5%
DLJ Commercial Mortgage Corp. 98-CG1,
A1A 6.11%, 12/10/07..................... AAA(d) 924 894,405
GE Capital Mortgage Services, Inc.
94-21, B1 6.50% 8/25/09................. A 29 28,531
GMAC Commercial Mortgage Securities,
Inc. 98-C2, A2 6.42%, 8/15/08........... Aaa 1,178 1,116,367
Lehman ABS Corp. 94-C2, A 144A 8.145%,
11/2/07(b).............................. BBB(d) 70 68,450
Morgan Stanley Capital I, 98-WF1, A2
6.55%, 12/15/07(c)...................... NR 485 466,572
- - --------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $2,601,623) 2,574,325
- - --------------------------------------------------------------------------
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Bond Fund
<TABLE>
<CAPTION>
MOODY'S PAR
RATING VALUE
(Unaudited) (000) VALUE
----------- ------ -----------
<S> <C> <C> <C>
FOREIGN CORPORATE BONDS--5.6%
FRANCE--1.5%
Societe General Real Estate LLC Series A
144A 7.64%, 12/29/49(b)(c).............. A $ 650 $ 600,927
MEXICO--2.4%
Pemex Finance Ltd. 144A 6.30%,
5/15/10(b).............................. Aaa 500 475,000
Pemex Finance Ltd. 144A 9.15%,
11/15/18(b)............................. Baa 500 468,750
-----------
943,750
-----------
UNITED KINGDOM--1.7%
Abbey National PLC 7.35%, 10/29/49(c)... Aa 100 95,711
Credit Suisse Group 144A 7.90%,
5/29/49(b)(c)........................... A 350 333,375
Terra Nova (U.K.) Holdings 7.20%,
8/15/07................................. Baa 250 240,100
-----------
669,186
-----------
- - --------------------------------------------------------------------------
TOTAL FOREIGN CORPORATE BONDS
(IDENTIFIED COST $2,373,514) 2,213,863
- - --------------------------------------------------------------------------
<CAPTION>
SHARES
------
PREFERRED STOCKS--0.7%
<S> <C> <C> <C>
BANKS (MAJOR REGIONAL)--0.7%
First Republic Bank Series A 144A
10.50%(b)............................... 300 296,250
- - --------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(IDENTIFIED COST $300,000) 296,250
- - --------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS--2.7%
COMPUTERS (SOFTWARE & SERVICES)--2.3%
Microsoft Corp. Series A Cv. Pfd.
2.75%................................... 9,250 931,359
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C> <C>
REITS--0.2%
Equity Office Properties Trust Series B
Cv. Pfd. 144A 5.25%(b).................. 2,000 $ 77,750
SERVICES (COMMERCIAL & CONSUMER)--0.2%
United Rentals, Inc. Cv. Pfd. 144A
6.50%(b)................................ 2,000 72,750
- - --------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST $1,030,000) 1,081,859
- - --------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--100.3%
(IDENTIFIED COST $40,952,209) 39,764,280
- - --------------------------------------------------------------------------
<CAPTION>
PAR
VALUE
(000)
------
SHORT-TERM OBLIGATIONS--4.7%
<S> <C> <C> <C>
FEDERAL AGENCY SECURITIES--4.3%
FMC 5.20%, 10/1/99...................... $1,700 1,700,000
REPURCHASE AGREEMENT--0.4%
State Street Bank & Trust Co. repurchase
agreement 4.25% dated 9/30/99 due
10/1/99, repurchase price $158,019
collateralized by U.S. Treasury Bond
7.875%, 11/15/07, market value
$162,469................................ 158 158,000
- - --------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $1,858,000) 1,858,000
- - --------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS--105.0%
(IDENTIFIED COST $42,810,209) 41,622,280(a)
Cash and receivables, less liabilities--(5.0%) (2,000,405)
--------------------
NET ASSETS--100.0% $ 39,621,875
====================
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $326,554 and gross
depreciation of $1,514,483 for federal income tax purposes. At
September 30, 1999, the aggregate cost of securities for federal income tax
purposes was $42,810,209.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
1999, these securities amounted to a value of $6,401,836 or 16.2% of net
assets.
(c) Variable or step coupon security; interest rate shown reflects the rate
currently in affect.
(d) As rated by Standard & Poor's, Fitch or Duff & Phelps.
(e) All or a portion segregated as collateral.
See Notes to Financial Statements
9
<PAGE>
Phoenix-Seneca Bond Fund
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $42,810,209) $41,622,280
Cash 712
Receivables
Investment securities sold 1,109,570
Interest 639,535
Fund shares sold 75,201
Receivable from adviser 34,766
Deferred organization expenses 13,527
Prepaid expenses 1,057
-----------
Total assets 43,496,648
-----------
LIABILITIES
Payables
Investment securities purchased 3,792,714
Fund shares repurchased 1,159
Transfer agent fee 12,352
Financial agent fee 6,475
Distribution fee 5,810
Trustees' fee 776
Accrued expenses 55,487
-----------
Total liabilities 3,874,773
-----------
NET ASSETS $39,621,875
===========
NET ASSETS CONSIST OF:
Capital paid in on shares of
beneficial interest $40,317,078
Undistributed net investment income 211,548
Accumulated net realized gain 281,178
Net unrealized depreciation (1,187,929)
-----------
NET ASSETS $39,621,875
===========
CLASS X
Shares of beneficial interest
outstanding, $1 par value,
unlimited authorization
(Net Assets $34,852,599) 3,368,711
Net asset value and offering price
per share $10.35
CLASS A
Shares of beneficial interest
outstanding, $1 par value,
unlimited authorization
(Net Assets $2,732,094) 265,475
Net asset value per share $10.29
Offering price per share
$10.29/(1-4.75%) $10.80
CLASS B
Shares of beneficial interest
outstanding, $1 par value,
unlimited authorization
(Net Assets $1,593,343) 155,212
Net asset value and offering price
per share $10.27
CLASS C
Shares of beneficial interest
outstanding, $1 par value,
unlimited authorization
(Net Assets $443,839) 43,236
Net asset value and offering price
per share $10.27
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest $ 2,467,528
Dividends 45,110
-----------
Total investment income 2,512,638
-----------
EXPENSES
Investment advisory fee 164,083
Distribution fee, Class A 2,715
Distribution fee, Class B 8,348
Distribution fee, Class C 4,007
Financial agent fee 63,648
Transfer agent 78,647
Registration 47,193
Trustees 25,636
Professional 21,422
Printing 17,498
Custodian 15,114
Amortization of deferred
organization expenses 10,658
Miscellaneous 18,310
-----------
Total expenses 477,279
Less expenses borne by
investment adviser (99,399)
Custodian fees paid indirectly (1,778)
-----------
Net expenses 376,102
-----------
NET INVESTMENT INCOME 2,136,536
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on securities 286,567
Net change in unrealized
appreciation (depreciation) on
investments (1,374,017)
-----------
NET LOSS ON INVESTMENTS (1,087,450)
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 1,049,086
===========
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Bond Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/99 9/30/98
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 2,136,536 $ 815,720
Net realized gain (loss) 286,567 272,954
Net change in unrealized appreciation (depreciation) (1,374,017) (52,850)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 1,049,086 1,035,824
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class X (1,783,876) (816,277)
Net investment income, Class A (62,282) (4,720)
Net investment income, Class B (41,217) (2,101)
Net investment income, Class C (19,340) (3,926)
Net realized gains, Class X (237,256) (157,929)
Net realized gains, Class A (6,691) --
Net realized gains, Class B (3,366) --
Net realized gains, Class C (4,337) --
----------- -----------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (2,158,365) (984,953)
----------- -----------
FROM SHARE TRANSACTIONS
CLASS X
Proceeds from sales of shares (936,038 and 1,869,631
shares, respectively) 9,870,220 20,104,967
Net asset value of shares issued from reinvestment of
distributions
(188,148 and 89,132 shares, respectively) 1,984,360 952,261
Cost of shares repurchased (232,292 and 334,511 shares,
respectively) (2,442,507) (3,582,416)
----------- -----------
Total 9,412,073 17,474,812
----------- -----------
CLASS A
Proceeds from sales of shares (302,053 and 48,090 shares,
respectively) 3,154,123 515,460
Net asset value of shares issued from reinvestment of
distributions
(5,398 and 388 shares, respectively) 56,422 4,147
Cost of shares repurchased (74,593 and 15,861 shares,
respectively) (783,486) (168,344)
----------- -----------
Total 2,427,059 351,263
----------- -----------
CLASS B
Proceeds from sales of shares (167,067 and 23,658 shares,
respectively) 1,753,608 253,821
Net asset value of shares issued from reinvestment of
distributions
(1,944 and 135 shares, respectively) 20,300 1,443
Cost of shares repurchased (35,679 and 1,913 shares,
respectively) (375,271) (20,509)
----------- -----------
Total 1,398,637 234,755
----------- -----------
CLASS C
Proceeds from sales of shares (50,510 and 40,951 shares,
respectively) 529,791 439,691
Net asset value of shares issued from reinvestment of
distributions
(1,056 and 183 shares, respectively) 11,082 1,951
Cost of shares repurchased (49,464 and 0 shares,
respectively) (522,992) --
----------- -----------
Total 17,881 441,642
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 13,255,650 18,502,472
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS 12,146,371 18,553,343
NET ASSETS
Beginning of period 27,475,504 8,922,161
----------- -----------
END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF
$211,548 AND ($11,789), RESPECTIVELY] $39,621,875 $27,475,504
=========== ===========
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Phoenix-Seneca Bond Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS X
--------------------------------------------------
FROM
YEAR ENDED SEPTEMBER 30, INCEPTION
------------------------------- 3/7/96 TO
1999 1998 1997 9/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.68 $ 10.47 $ 10.09 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.69(1)(6) 0.56 0.62(1) 0.31(1)
Net realized and unrealized gain
(loss) (0.31) 0.40 0.47 0.08
------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS 0.38 0.96 1.09 0.39
------- ------- ------- ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.62) (0.57) (0.69) (0.30)
Dividends from net realized gains (0.09) (0.18) (0.02) --
------- ------- ------- ------
TOTAL DISTRIBUTIONS (0.71) (0.75) (0.71) (0.30)
------- ------- ------- ------
Change in net asset value (0.33) 0.21 0.38 0.09
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 10.35 $ 10.68 $ 10.47 $10.09
======= ======= ======= ======
Total return(2) 3.51% 9.44% 11.26% 4.02%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $34,853 $26,455 $ 8,922 $3,927
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.06%(5)(7) 1.66% 1.53%(5) 0.56%(3)(5)
Net investment income (loss) 6.60% 5.92% 6.31% 7.54%(3)
Portfolio turnover 95% 112% 99.68% 52.82%(4)
</TABLE>
(1) Net investment income 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 $0.69, $0.47 and $(0.05) for the years ended
September 30, 1999 and September 30, 1997 and the period ended September
30, 1996, respectively.
(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) Not annualized.
(5) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 1.13% and
3.41% and 9.31% for the years ended September 30, 1999 and September 30,
1997 and the period ended September 30, 1996, respectively.
(6) Computed using average shares outstanding.
(7) For the year ended September 30, 1999, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
12
See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Bond Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------- ------------------------------
FROM FROM
YEAR INCEPTION YEAR INCEPTION
ENDED 7/1/98 TO ENDED 7/1/98 TO
9/30/99 9/30/98 9/30/99 9/30/98
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $10.68 $10.79 $10.67 $10.79
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.59(1)(10) 0.13(1)(10) 0.52(2)(10) 0.11(2)(10)
Net realized and
unrealized gain
(loss) (0.33) (0.07) (0.33) (0.08)
------ ------ ------ ------
TOTAL FROM
INVESTMENT
OPERATIONS 0.26 0.06 0.19 0.03
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.56) (0.17) (0.50) (0.15)
Dividends from net
realized gains (0.09) -- (0.09) --
------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.65) (0.17) (0.59) (0.15)
------ ------ ------ ------
Change in net asset value (0.39) (0.11) (0.40) (0.12)
------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $10.29 $10.68 $10.27 $10.67
====== ====== ====== ======
Total return(4) 2.46% 0.53%(6) 1.67% 0.28%(6)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $2,732 $ 348 $1,593 $ 234
RATIO TO AVERAGE NET
ASSETS OF:
Operating expenses 1.88%(7)(11) 2.45%(5)(7) 2.62%(8)(11) 3.20%(5)(8)
Net investment income
(loss) 5.80% 5.17%(5) 5.09% 4.42%(5)
Portfolio turnover 95% 112%(6) 95% 112%(6)
<CAPTION>
CLASS C
---------------------------
FROM
YEAR INCEPTION
ENDED 7/1/98 TO
9/30/99 9/30/98
<S> <C> <C>
Net asset value,
beginning of period $10.67 $10.79
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss) 0.49(3)(10) 0.10(3)(10)
Net realized and
unrealized gain
(loss) (0.30) (0.07)
------ ------
TOTAL FROM
INVESTMENT
OPERATIONS 0.19 0.03
------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income (0.50) (0.15)
Dividends from net
realized gains (0.09) --
------ ------
TOTAL DISTRIBUTIONS (0.59) (0.15)
------ ------
Change in net asset value (0.40) (0.12)
------ ------
NET ASSET VALUE, END OF
PERIOD $10.27 $10.67
====== ======
Total return(4) 1.66% 0.28%(6)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $ 444 $ 439
RATIO TO AVERAGE NET
ASSETS OF:
Operating expenses 2.91%(9)(11) 3.20%(5)(9)
Net investment income
(loss) 4.71% 4.27%(5)
Portfolio turnover 95% 112%(6)
</TABLE>
(1) Net investment income 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 $0.36 and $(0.03) for the periods ended September 30,
1999 and September 30, 1998, respectively.
(2) Net investment income 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 $0.21 and $(0.21) for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(3) Net investment income 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 $(0.20) and $(0.08) for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(4) 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.
(5) Annualized.
(6) Not annualized.
(7) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 4.08% and
8.99% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
(8) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 5.67% and
15.79% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
(9) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 9.50% and
11.22% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
(10) Computed using average shares outstanding.
(11) For the year ended September 30, 1999, the ratio of operating expenses to
average net assets excludes the effect of expense offsets for custodian
fees; if expense offsets were included, the ratio would not significantly
differ.
See Notes to Financial Statements
13
<PAGE>
Phoenix-Seneca Growth Fund
INVESTMENTS AT SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C> <C>
COMMON STOCKS--85.8%
ALUMINUM--3.5%
Alcoa, Inc.............................. 40,660 $ 2,523,461
BANKS (MAJOR REGIONAL)--3.0%
Mellon Bank Corp........................ 64,410 2,173,838
BROADCASTING (TELEVISION, RADIO & CABLE)--3.3%
AMFM, Inc.(b)........................... 39,590 2,410,041
CHEMICALS--2.1%
Dow Chemical Co......................... 13,210 1,500,986
COMMUNICATIONS EQUIPMENT--6.2%
General Motors Corp. Class H(b)......... 34,540 1,977,415
Motorola, Inc........................... 28,770 2,531,760
-----------
4,509,175
-----------
COMPUTERS (HARDWARE)--6.0%
International Business Machines Corp.... 11,590 1,406,736
Sun Microsystems, Inc.(b)............... 32,000 2,976,000
-----------
4,382,736
-----------
COMPUTERS (NETWORKING)--3.0%
Cisco Systems, Inc.(b).................. 29,140 1,997,911
Internap Network Services Corp.(b)...... 4,040 180,285
-----------
2,178,196
-----------
COMPUTERS (SOFTWARE & SERVICES)--4.2%
Microsoft Corp.(b)...................... 33,740 3,055,579
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C> <C>
ELECTRICAL EQUIPMENT--3.6%
General Electric Co..................... 22,060 $ 2,615,489
ELECTRONICS (SEMICONDUCTORS)--1.3%
Intel Corp.............................. 13,200 980,925
FINANCIAL (DIVERSIFIED)--7.2%
Citigroup, Inc.......................... 61,930 2,724,920
Morgan Stanley Dean Witter & Co......... 28,450 2,537,384
-----------
5,262,304
-----------
FOODS--1.8%
General Mills, Inc...................... 16,480 1,336,940
HEALTH CARE (DIVERSIFIED)--5.9%
Bristol-Myers Squibb Co................. 37,940 2,560,950
Johnson & Johnson....................... 18,940 1,740,113
-----------
4,301,063
-----------
HOUSEHOLD FURNISHINGS & APPLIANCES--1.2%
Whirlpool Corp.......................... 13,990 913,722
HOUSEHOLD PRODUCTS (NON-DURABLE)--2.4%
Procter & Gamble Co. (The).............. 18,540 1,738,125
MANUFACTURING (DIVERSIFIED)--4.2%
Tyco International Ltd.................. 29,610 3,057,233
OIL & GAS (DRILLING & EQUIPMENT)--6.4%
Baker Hughes, Inc....................... 74,100 2,148,900
Halliburton Co.......................... 60,870 2,495,670
-----------
4,644,570
-----------
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Growth Fund
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C> <C>
OIL (INTERNATIONAL INTEGRATED)--3.1%
Texaco, Inc............................. 36,350 $ 2,294,594
RETAIL (COMPUTERS & ELECTRONICS)--3.1%
Tandy Corp.............................. 43,750 2,261,328
RETAIL (GENERAL MERCHANDISE)--1.9%
Wal-Mart Stores, Inc.................... 29,900 1,422,119
RETAIL (SPECIALTY-APPAREL)--2.4%
TJX Companies, Inc. (The)............... 62,290 1,748,013
SERVICES (ADVERTISING/MARKETING)--3.8%
Outdoor Systems, Inc.(b)................ 76,590 2,738,093
TELECOMMUNICATIONS (LONG DISTANCE)--3.2%
MCI WorldCom, Inc.(b)................... 32,950 2,368,281
TELEPHONE--3.0%
Bell Atlantic Corp...................... 32,190 2,166,789
- - ------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $52,029,496) 62,583,600
- - ------------------------------------------------------------------
FOREIGN COMMON STOCKS--9.7%
COMMUNICATIONS EQUIPMENT--6.9%
Nokia Oyj Sponsored ADR (Finland)....... 25,850 2,321,653
Nortel Networks Corp. (Canada).......... 52,730 2,689,230
-----------
5,010,883
-----------
ELECTRONICS (SEMICONDUCTORS)--2.8%
STMicroelectronics N.V. (Netherlands)... 27,300 2,020,200
- - ------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(IDENTIFIED COST $6,778,972) 7,031,083
- - ------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--95.5%
(IDENTIFIED COST $58,808,468) 69,614,683
- - ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000) VALUE
------- -----------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--7.6%
REPURCHASE AGREEMENT--7.6%
State Street Bank & Trust Co. repurchase
agreement, 4.25%, dated 9/30/99 due
10/1/99, repurchase price $5,545,655
collateralized by U.S. Treasury Note
5.50%, 3/31/00, market value
$5,657,063.............................. $ 5,545 $ 5,545,000
- - ------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $5,545,000) 5,545,000
- - ------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS--103.1%
(IDENTIFIED COST $64,353,468) 75,159,683(a)
Cash and receivables, less liabilities--(3.1%) (2,236,353)
--------------------
NET ASSETS--100.0% $ 72,923,330
====================
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $12,536,684 and gross
depreciation of $1,844,747 for federal income tax purposes. At
September 30, 1999, the aggregate cost of securities for federal income tax
purposes was $64,467,746.
(b) Non-income producing.
See Notes to Financial Statements
17
<PAGE>
Phoenix-Seneca Growth Fund
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $64,353,468) $75,159,683
Cash 898
Receivables
Fund shares sold 158,602
Dividends and interest 35,815
Deferred organization expenses 13,527
Prepaid expenses 3,669
-----------
Total assets 75,372,194
-----------
LIABILITIES
Payables
Investment securities purchased 2,292,003
Fund shares repurchased 7,910
Distribution fee 32,748
Transfer agent fee 13,453
Investment advisory fee 13,450
Financial agent fee 5,852
Trustees' fee 856
Accrued expenses 82,592
-----------
Total liabilities 2,448,864
-----------
NET ASSETS $72,923,330
===========
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial
interest $55,020,063
Accumulated net realized gain 7,097,052
Net unrealized appreciation 10,806,215
-----------
NET ASSETS $72,923,330
===========
CLASS X
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$35,694,595) 1,791,537
Net asset value and offering price per share $19.92
CLASS A
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$31,000,738) 1,584,310
Net asset value per share $19.57
Offering price per share $19.57/(1-4.75%) $20.55
CLASS B
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$4,394,693) 227,897
Net asset value and offering price per share $19.28
CLASS C
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$1,833,304) 95,222
Net asset value and offering price per share $19.25
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 465,256
Interest 141,205
-----------
Total investment income 606,461
-----------
EXPENSES
Investment advisory fee 443,317
Distribution fee, Class A 66,526
Distribution fee, Class B 24,197
Distribution fee, Class C 9,293
Financial agent fee 85,097
Transfer agent 88,614
Registration 53,567
Printing 40,695
Trustees 25,716
Professional 23,412
Custodian 12,443
Amortization of deferred
organization expenses 10,658
Miscellaneous 23,541
-----------
Total expenses 907,076
Less expenses borne by
investment adviser (49,249)
-----------
Net expenses 857,827
-----------
NET INVESTMENT LOSS (251,366)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on securities 7,420,446
Net change in unrealized
appreciation (depreciation) on
investments 8,897,166
-----------
NET GAIN ON INVESTMENTS 16,317,612
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $16,066,246
===========
</TABLE>
18 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Growth Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/99 9/30/98
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (251,366) $ (23,589)
Net realized gain (loss) 7,420,446 5,786,850
Net change in unrealized appreciation (depreciation) 8,897,166 (3,716,413)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 16,066,246 2,046,848
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class X -- (28,234)
Net realized gains, Class X (2,678,808) (2,638,126)
Net realized gains, Class A (2,257,410) (456,891)
Net realized gains, Class B (125,950) --
Net realized gains, Class C (32,675) --
----------- -----------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (5,094,843) (3,123,251)
----------- -----------
FROM SHARE TRANSACTIONS
CLASS X
Proceeds from sales of shares (191,178 and 285,390 shares,
respectively) 3,657,324 4,884,932
Net asset value of shares issued from reinvestment of
distributions
(152,656 and 175,598 shares, respectively) 2,665,381 2,655,713
Cost of shares repurchased (417,927 and 669,955 shares,
respectively) (7,626,080) (11,501,669)
----------- -----------
Total (1,303,375) (3,961,024)
----------- -----------
CLASS A
Proceeds from sales of shares (713,052 and 903,203 shares,
respectively) 12,978,542 16,095,224
Net asset value of shares issued from reinvestment of
distributions
(130,999 and 30,397 shares, respectively) 2,250,565 454,436
Cost of shares repurchased (329,410 and 233,349 shares,
respectively) (5,879,689) (3,581,463)
----------- -----------
Total 9,349,418 12,968,197
----------- -----------
CLASS B
Proceeds from sales of shares (209,861 and 32,039 shares,
respectively) 3,860,313 544,661
Net asset value of shares issued from reinvestment of
distributions
(5,386 and 0 shares, respectively) 92,053 --
Cost of shares repurchased (19,389 and 0 shares,
respectively) (368,688) --
----------- -----------
Total 3,583,678 544,661
----------- -----------
CLASS C
Proceeds from sales of shares (88,996 and 7,802 shares,
respectively) 1,633,483 139,674
Net asset value of shares issued from reinvestment of
distributions
(1,890 and 0 shares, respectively) 32,392 --
Cost of shares repurchased (3,466 and 0 shares,
respectively) (65,089) --
----------- -----------
Total 1,600,786 139,674
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 13,230,507 9,691,508
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS 24,201,910 8,615,105
NET ASSETS
Beginning of period 48,721,420 40,106,315
----------- -----------
END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF
$0 AND $0, RESPECTIVELY] $72,923,330 $48,721,420
=========== ===========
</TABLE>
See Notes to Financial Statements 19
<PAGE>
Phoenix-Seneca Growth Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS X
----------------------------------------------------
FROM
YEAR ENDED SEPTEMBER 30 INCEPTION
------------------------------------ 3/8/96 TO
1999 1998 1997 9/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.46 $ 16.43 $ 13.74 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.04)(1) 0.00(1) 0.03(2) 0.03(2)
Net realized and unrealized gain (loss) 5.11 1.28 3.50 3.71
------- ------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS 5.07 1.28 3.53 3.74
------- ------- -------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income -- (0.02) (0.07) --
Dividends from net realized gains (1.61) (1.23) (0.77) --
------- ------- -------- -------
TOTAL DISTRIBUTIONS (1.61) (1.25) (0.84) --
------- ------- -------- -------
Change in net asset value 3.46 0.03 2.69 3.74
------- ------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 19.92 $ 16.46 $ 16.43 $ 13.74
======= ======= ======== =======
Total return(3) 32.19 % 8.48% 27.27% 37.40%(5)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $35,695 $30,713 $34,093 $12,920
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.16 % 1.14% 1.52%(6) 0.81%(4)(6)
Net investment income (loss) (0.20)% 0.02% 0.31% 0.76%(4)
Portfolio turnover 169 % 166% 145.69% 87.66%(5)
</TABLE>
(1) Computed using average shares outstanding.
(2) 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 $0.03 and $(0.09) for the
year ended September 30, 1997 and the period ended September 30, 1996,
respectively.
(3) 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.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 1.52% and
3.49% for the year ended September 30, 1997 and the period ended
September 30, 1996, respectively.
20 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Growth Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------
FROM
YEAR ENDED SEPTEMBER 30 INCEPTION
---------------------------------- 3/8/96 TO
1999 1998 1997 9/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.23 $ 16.28 $13.63 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.09)(1) (0.06)(1) (0.08)(2) --(2)
Net realized and unrealized gain 5.04 1.24 3.50 3.63
------- ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 4.95 1.18 3.42 3.63
------- ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- --
Dividends from net realized gains (1.61) (1.23) (0.77) --
------- ------- ------ ------
TOTAL DISTRIBUTIONS (1.61) (1.23) (0.77) --
------- ------- ------ ------
Change in net asset value 3.34 (0.05) 2.65 3.63
------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 19.57 $ 16.23 $16.28 $13.63
======= ======= ====== ======
Total return(3) 31.89 % 7.93 % 26.51 % 36.30%(5)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $31,001 $17,364 $6,013 $466
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.44 % 1.55 % 2.48 %(6) 1.46%(4)(6)
Net investment income (loss) (0.49)% (0.36)% (0.62)% 0.16%(4)
Portfolio turnover 169 % 166 % 145.69 % 87.66%(5)
</TABLE>
(1) Computed using average shares outstanding.
(2) 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 $(0.09) and $(0.34) for
the year ended September 30, 1997 and the period ended September 30, 1996,
respectively.
(3) 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.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 2.63% and
14.01% for the year ended September 30, 1997 and the period ended
September 30, 1996, respectively.
See Notes to Financial Statements 21
<PAGE>
Phoenix-Seneca Growth Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------ ------------------------------
FROM FROM
YEAR INCEPTION YEAR INCEPTION
ENDED 7/1/98 TO ENDED 7/1/98 TO
9/30/99 9/30/98 9/30/99 9/30/98
<S> <C> <C> <C> <C>
Net asset value, beginning of period $16.19 $18.71 $16.18 $18.71
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.31)(1)(8) (0.04)(1)(8) (0.32)(2)(8) (0.06)(2)(8)
Net realized and unrealized gain (loss) 5.01 (2.48) 5.00 (2.47)
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 4.70 (2.52) 4.68 (2.53)
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- --
Dividends from net realized gains (1.61) -- (1.61) --
------ ------ ------ ------
TOTAL DISTRIBUTIONS (1.61) -- (1.61) --
------ ------ ------ ------
Change in net asset value 3.09 (2.52) 3.07 (2.53)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $19.28 $16.19 $19.25 $16.18
====== ====== ====== ======
Total return(3) 30.31 % (13.47)%(5) 30.20 % (13.52)%(5)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $4,395 $519 $1,833 $126
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.60 %(6) 2.60 %(4)(6) 2.60 %(7) 2.60%(4)(7)
Net investment income (loss) (1.66)% (1.12)%(4) (1.66)% (1.39)%(4)
Portfolio turnover 169 % 166 %(5) 169 % 166 %(5)
</TABLE>
(1) Net investment income 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 $(0.47) and $(0.36) for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(2) Net investment income 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 $(0.90) and $(0.79) for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(3) 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.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 3.46% and
12.48% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
(7) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 5.67% and
20.24% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
(8) Computed using average shares outstanding.
22 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Mid-Cap "EDGE"-SM- Fund
INVESTMENTS AT SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
COMMON STOCKS--95.0%
AUTO PARTS & EQUIPMENT--2.3%
Lear Corp.(b)................. 13,100 $ 460,956
BANKS (MAJOR REGIONAL)--2.7%
Comerica, Inc................. 10,505 531,816
BANKS (REGIONAL)--3.8%
UnionBanCal Corp.............. 20,500 743,125
BROADCASTING (TELEVISION, RADIO & CABLE)--6.1%
AMFM, Inc.(b)................. 10,660 648,927
EchoStar Communications
Corp.(b)...................... 6,240 566,670
-----------
1,215,597
-----------
CHEMICALS (SPECIALTY)--1.5%
Hercules, Inc................. 10,310 295,124
COMMUNICATIONS EQUIPMENT--7.0%
American Tower Corp. Class
A(b).......................... 23,850 466,566
Comverse Technology,
Inc.(b)....................... 9,795 923,791
-----------
1,390,357
-----------
COMPUTERS (HARDWARE)--4.2%
Copper Mountain Networks,
Inc.(b)....................... 4,460 390,807
Paradyne Networks, Inc.(b).... 15,770 441,560
-----------
832,367
-----------
COMPUTERS (SOFTWARE & SERVICES)--4.5%
VERITAS Software Corp.(b)..... 11,690 887,709
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
ELECTRICAL EQUIPMENT--4.7%
SPX Corp.(b).................. 7,540 $ 684,255
Universal Electronics,
Inc.(b)....................... 10,750 248,594
-----------
932,849
-----------
ELECTRONICS (SEMICONDUCTORS)--19.2%
Applied Micro Circuits
Corp.(b)...................... 9,520 542,640
LSI Logic Corp.(b)............ 10,100 520,150
PMC-Sierra, Inc.(b)........... 7,940 734,450
RF Micro Devices, Inc.(b)..... 14,520 664,290
SDL, Inc.(b).................. 7,250 553,266
Xilinx, Inc.(b)............... 11,790 772,613
-----------
3,787,409
-----------
EQUIPMENT (SEMICONDUCTOR)--3.8%
KLA-Tencor Corp.(b)........... 11,530 749,450
GAMING, LOTTERY & PARI-MUTUEL COMPANIES--0.5%
Park Place Entertainment
Corp.(b)...................... 7,600 95,000
MANUFACTURING (DIVERSIFIED)--2.0%
Yankee Candle Co., Inc.
(The)(b)...................... 20,650 398,803
OIL & GAS (DRILLING & EQUIPMENT)--7.4%
Nabors Industries, Inc.(b).... 27,590 689,750
Weatherford International,
Inc.(b)....................... 23,880 764,160
-----------
1,453,910
-----------
PAPER & FOREST PRODUCTS--4.7%
Mead Corp. (The).............. 12,250 421,094
</TABLE>
See Notes to Financial Statements 25
<PAGE>
Phoenix-Seneca Mid-Cap "EDGE"-SM- Fund
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C> <C>
PAPER & FOREST PRODUCTS--CONTINUED
Smurfit-Stone Container
Corp.(b)...................... 23,300 $ 503,863
-----------
924,957
-----------
RETAIL (COMPUTERS & ELECTRONICS)--6.8%
Best Buy Co., Inc.(b)......... 7,430 461,124
Tandy Corp.................... 17,200 889,025
-----------
1,350,149
-----------
RETAIL (SPECIALTY-APPAREL)--5.8%
Abercrombie & Fitch Co. Class
A(b).......................... 16,910 575,997
TJX Companies, Inc. (The)..... 20,290 569,388
-----------
1,145,385
-----------
SERVICES (ADVERTISING/MARKETING)--3.2%
Outdoor Systems, Inc.(b)...... 17,485 625,089
SERVICES (COMMERCIAL & CONSUMER)--2.1%
Crown Castle International
Corp.(b)...................... 22,220 415,931
SERVICES (DATA PROCESSING)--2.7%
Concord EFS, Inc.(b).......... 25,890 533,981
- - ---------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $16,579,214) 18,769,964
- - ---------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--95.0%
(IDENTIFIED COST $16,579,214) 18,769,964
- - ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000) VALUE
------- ------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--10.4%
REPURCHASE AGREEMENT--10.4%
State Street Bank & Trust Co.
repurchase agreement, 4.25%,
dated 9/30/99 due 10/1/99,
repurchase price $2,052,242
collateralized by U.S.
Treasury Note 5.50%, 3/31/00,
market value $2,097,619....... $ 2,052 $ 2,052,000
- - ---------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $2,052,000) 2,052,000
- - ---------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS--105.4%
(IDENTIFIED COST $18,631,214) 20,821,964(a)
Cash and receivables, less
liabilities--(5.4%) (1,074,280)
-----------
NET ASSETS--100.0% $19,747,684
===========
</TABLE>
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities is comprised of gross appreciation of $3,283,643 and gross
depreciation of $1,093,324 for federal income tax purposes. At
September 30, 1999, the aggregate cost of securities for federal income tax
purposes was $18,631,645.
(b) Non-income producing.
26
See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Mid-Cap "EDGE"-SM- Fund
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $18,631,214) $20,821,964
Cash 14,621
Receivables
Fund shares sold 112,218
Investment securities sold 42,843
Dividends and interest 8,604
Receivable from adviser 7,917
Deferred organization expenses 13,527
Prepaid expenses 1,132
-----------
Total assets 21,022,826
-----------
LIABILITIES
Payables
Investment securities purchased 1,177,527
Fund shares repurchased 1,037
Transfer agent fee 13,298
Distribution fee 10,031
Financial agent fee 5,352
Trustees' fee 913
Accrued expenses 66,984
-----------
Total liabilities 1,275,142
-----------
NET ASSETS $19,747,684
===========
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial
interest 15,537,102
Accumulated net realized gain 2,019,832
Net unrealized appreciation 2,190,750
-----------
NET ASSETS $19,747,684
===========
CLASS X
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$10,640,039) 598,363
Net asset value and offering price per share $17.78
CLASS A
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$6,456,794) 366,822
Net asset value per share $17.60
Offering price per share $17.60/(1-4.75%) $18.48
CLASS B
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$1,675,972) 96,280
Net asset value and offering price per share $17.41
CLASS C
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$974,879) 56,027
Net asset value and offering price per share $17.40
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 66,889
Interest 56,334
----------
Total investment income 123,223
----------
EXPENSES
Investment advisory fee 142,594
Distribution fee, Class A 13,633
Distribution fee, Class B 8,493
Distribution fee, Class C 4,918
Financial agent fee 54,410
Transfer agent 85,382
Registration 44,456
Printing 29,112
Trustees 25,773
Professional 16,744
Amortization of deferred organization
expenses 10,658
Custodian 9,906
Miscellaneous 4,879
----------
Total expenses 450,958
Less expenses borne by investment
adviser (51,919)
----------
Net expenses 399,039
----------
NET INVESTMENT LOSS (275,816)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain on securities 2,299,388
Net change in unrealized appreciation
(depreciation) on investments 2,415,950
----------
NET GAIN ON INVESTMENTS 4,715,338
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $4,439,522
==========
</TABLE>
See Notes to Financial Statements 27
<PAGE>
Phoenix-Seneca Mid-Cap "EDGE"-SM- Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/99 9/30/98
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (275,816) $ (201,569)
Net realized gain (loss) 2,299,388 895,515
Net change in unrealized appreciation (depreciation) 2,415,950 (1,612,591)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 4,439,522 (918,645)
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net realized gains, Class X (355,856) (1,092,044)
Net realized gains, Class A (166,088) (289,481)
Net realized gains, Class B (11,063) --
Net realized gains, Class C (9,446) --
----------- -----------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (542,453) (1,381,525)
----------- -----------
FROM SHARE TRANSACTIONS
CLASS X
Proceeds from sales of shares (143,563 and 135,008 shares,
respectively) 2,478,919 2,127,609
Net asset value of shares issued from reinvestment of
distributions
(21,703 and 84,041 shares, respectively) 354,621 1,090,132
Cost of shares repurchased (214,035 and 142,018 shares,
respectively) (3,757,537) (2,045,120)
----------- -----------
Total (923,997) 1,172,621
----------- -----------
CLASS A
Proceeds from sales of shares (228,931 and 159,888 shares,
respectively) 3,836,768 2,538,940
Net asset value of shares issued from reinvestment of
distributions
(10,097 and 22,073 shares, respectively) 163,976 286,061
Cost of shares repurchased (138,776 and 62,130 shares,
respectively) (2,331,488) (947,854)
----------- -----------
Total 1,669,256 1,877,147
----------- -----------
CLASS B
Proceeds from sales of shares (86,897 and 10,599 shares,
respectively) 1,460,274 169,635
Net asset value of shares issued from reinvestment of
distributions
(684 and 0 shares, respectively) 11,062 --
Cost of shares repurchased (1,900 and 0 shares,
respectively) (31,603) --
----------- -----------
Total 1,439,733 169,635
----------- -----------
CLASS C
Proceeds from sales of shares (49,078 and 7,538 shares,
respectively) 821,159 125,992
Net asset value of shares issued from reinvestment of
distributions
(402 and 0 shares, respectively) 6,510 --
Cost of shares repurchased (991 and 0 shares,
respectively) (16,970) --
----------- -----------
Total 810,699 125,992
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 2,995,691 3,345,395
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS 6,892,760 1,045,225
NET ASSETS
Beginning of period 12,854,924 11,809,699
----------- -----------
END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF
$0 AND $0, RESPECTIVELY] $19,747,684 $12,854,924
=========== ===========
</TABLE>
28 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Mid-Cap "EDGE"-SM- Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS X
-----------------------------------------------------------
FROM
YEAR ENDED SEPTEMBER 30 INCEPTION
-------------------------------------------- 3/8/96 TO
1999 1998 1997 9/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.81 $ 16.47 $ 14.97 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.21)(1) (0.23)(1)(2) (0.17)(2) 0.01(2)
Net realized and unrealized gain
(loss) 4.72 (0.58) 1.84 4.96
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 4.51 (0.81) 1.67 4.97
------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- (0.07) --
Dividends from net realized gains (0.54) (1.85) (0.10) --
------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.54) (1.85) (0.17) --
------- ------- ------- -------
Change in net asset value 3.97 (2.66) 1.50 4.97
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 17.78 $ 13.81 $ 16.47 $ 14.97
======= ======= ======= =======
Total return(3) 33.02 % (4.22) % 11.39 % 49.70%(5)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $10,640 $ 8,940 $ 9,390 $ 7,428
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.96 % 2.10 %(6) 1.74 %(6) 0.90%(4)(6)
Net investment income (loss) (1.27)% (1.49)% (0.97) % 0.27%(4)
Portfolio turnover 192 % 206 % 283.60 % 72.34%(5)
</TABLE>
(1) Computed using average shares outstanding.
(2) 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 $(0.27), $(0.33) and
$(0.19) for the years ended September 30, 1998 and 1997 and the period ended
September 30, 1996, respectively.
(3) 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.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 2.38%,
2.77% and 5.73% for the years ended September 30, 1998 and 1997 and the
period ended September 30, 1996, respectively.
See Notes to Financial Statements 29
<PAGE>
Phoenix-Seneca Mid-Cap "EDGE"-SM- Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
FROM
YEAR ENDED SEPTEMBER 30 INCEPTION
-------------------------------------------- 3/8/96 TO
1999 1998 1997 9/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.75 $ 16.49 $ 14.94 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.31)(1) (0.30)(1)(2) (0.25)(2) (0.01)(2)
Net realized and unrealized gain
(loss) 4.70 (0.59) 1.90 4.95
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 4.39 (0.89) 1.65 4.94
------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- --
Dividends from net realized gains (0.54) (1.85) (0.10) --
------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.54) (1.85) (0.10) --
------- ------- ------- -------
Change in net asset value 3.85 (2.74) 1.55 4.94
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 17.60 $ 13.75 $ 16.49 $ 14.94
======= ======= ======= =======
Total return(3) 32.27 % (4.74) % 11.25 % 49.30 %(5)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $ 6,457 $ 3,666 $ 2,419 $ 1,355
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.51 % 2.70 %(6) 2.37 %(6) 1.55 %(4)(6)
Net investment income (loss) (1.81) % (1.95) % (1.60) % (0.46) %(4)
Portfolio turnover 192 % 206 % 283.60 % 72.34 %(5)
</TABLE>
(1) Computed using average shares outstanding.
(2) 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 $(0.31), $(0.55) and
$(0.20) for the years ended September 30, 1998 and 1997 and the period ended
September 30, 1996, respectively.
(3) 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.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 2.74%,
4.32% and 9.73% for the years ended September 30, 1998 and 1997 and the
period ended September 30, 1996, respectively.
30 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Mid-Cap "EDGE"-SM- Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------- ------------------------------
FROM FROM
YEAR INCEPTION YEAR INCEPTION
ENDED 7/1/98 TO ENDED 7/1/98 TO
9/30/99 9/30/98 9/30/99 9/30/98
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.73 $ 17.15 $ 13.72 $ 17.15
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.47)(1)(2) (0.09)(1)(2) (0.47)(1)(3) (0.09)(1)(3)
Net realized and unrealized gain
(loss) 4.69 (3.33) 4.69 (3.34)
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 4.22 (3.42) 4.22 (3.43)
------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- --
Dividends from net realized gains (0.54) -- (0.54) --
------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.54) -- (0.54) --
------- ------- ------- -------
Change in net asset value 3.68 (3.42) 3.68 (3.43)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 17.41 $ 13.73 $ 17.40 $ 13.72
======= ======= ======= =======
Total return(4) 31.05 % (19.94)%(6) 31.07 % (20.00)%(6)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $1,676 $145 $975 $103
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 3.45 %(7) 3.45 %(5)(7) 3.45 %(8) 3.45 %(5)(8)
Net investment income (loss) (2.78)% (2.45)%(5) (2.78)% (2.44)%(5)
Portfolio turnover 192 % 206 %(6) 192 % 206 %(6)
</TABLE>
(1) Computed using average shares outstanding.
(2) Net investment income 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 $(0.96) and $(0.69) for the periods ended September
30, 1999 and September 30, 1998, respectively.
(3) Net investment income 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 $(1.40) and $(0.77) for the periods ended September
30, 1999 and September 30, 1998, respectively.
(4) 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.
(5) Annualized.
(6) Not annualized.
(7) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 6.33% and
20.80% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
(8) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 9.03% and
21.14% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
See Notes to Financial Statements 31
<PAGE>
Phoenix-Seneca Real Estate Securities Fund
INVESTMENTS AT SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C> <C>
COMMON STOCKS--92.3%
REAL ESTATE INVESTMENT TRUSTS--90.5%
DIVERSIFIED--7.9%
Crescent Real Estate Equities Co........ 26,000 $ 468,000
Entertainment Properties Trust.......... 12,000 175,500
Pacific Gulf Properties, Inc............ 41,290 823,219
-----------
1,466,719
-----------
INDUSTRIAL/OFFICE--34.2%
INDUSTRIAL--7.0%
Bedford Property Investors, Inc......... 41,600 702,000
First Industrial Realty Trust, Inc...... 24,500 606,375
-----------
1,308,375
-----------
MIXED--2.5%
TriNet Corporate Realty Trust, Inc...... 19,500 464,344
MORTGAGE BACKED--2.7%
Northstar Financial Corp.(b)(c)......... 35,000 507,500
OFFICE--22.0%
Cornerstone Properties, Inc............. 48,500 739,625
Equity Office Properties Trust.......... 45,100 1,048,575
Mack-Cali Realty Corp................... 32,800 879,450
Prentiss Properties Trust............... 30,400 674,500
Spieker Properties, Inc................. 22,000 763,125
-----------
4,105,275
-----------
- - ------------------------------------------------------------------
TOTAL INDUSTRIAL/ OFFICE 6,385,494
- - ------------------------------------------------------------------
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C> <C>
LODGING/RESORTS--8.0%
FelCor Lodging Trust, Inc............... 37,275 $ 652,312
MeriStar Hospitality Corp............... 27,374 417,454
Starwood Hotel & Resorts Worldwide,
Inc..................................... 16,000 357,000
Sunstone Hotel Investors, Inc........... 7,510 65,713
-----------
1,492,479
-----------
RESIDENTIAL--27.4%
APARTMENTS--20.3%
Archstone Communities Trust............. 32,996 637,235
Avalonbay Communities, Inc.............. 15,750 533,531
Berkshire Realty Co., Inc............... 21,200 254,400
Equity Residential Properties Trust..... 28,200 1,194,975
Essex Property Trust, Inc............... 33,450 1,168,659
-----------
3,788,800
-----------
MANUFACTURED HOMES--7.1%
Chateau Communities, Inc................ 20,700 538,200
Manufactured Home Communities, Inc...... 33,200 776,050
-----------
1,314,250
-----------
- - ------------------------------------------------------------------
TOTAL RESIDENTIAL 5,103,050
- - ------------------------------------------------------------------
RETAIL--13.0%
REGIONAL MALLS--11.9%
Macerich Co. (The)...................... 38,400 888,000
Simon Property Group, Inc............... 20,415 458,062
Urban Shopping Centers, Inc............. 30,000 870,000
-----------
2,216,062
-----------
</TABLE>
34 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Real Estate Securities Fund
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C> <C>
STRIP CENTERS--1.1%
Developers Diversified Realty Corp...... 15,200 $ 212,800
- - ------------------------------------------------------------------
TOTAL RETAIL 2,428,862
- - ------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(IDENTIFIED COST $20,311,794) 16,876,604
- - ------------------------------------------------------------------
REAL ESTATE OPERATING COMPANIES--1.8%
DIVERSIFIED--0.2%
Catellus Development Corp.(b)........... 2,400 28,200
INDUSTRIAL/OFFICE--0.8%
Capital Trust Class A(b)................ 31,500 155,531
LODGING/RESORTS--0.8%
Wyndham International, Inc. Class
A(b).................................... 58,538 153,662
- - ------------------------------------------------------------------
TOTAL REAL ESTATE OPERATING COMPANIES
(IDENTIFIED COST $1,663,782) 337,393
- - ------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $21,975,576) 17,213,997
- - ------------------------------------------------------------------
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C> <C>
CONVERTIBLE PREFERRED STOCKS--6.1%
REAL ESTATE INVESTMENT TRUSTS--6.1%
DIVERSIFIED--2.9%
Glenborough Realty Trust, Inc. Series A
Cv. Pfd. 7.75%.......................... 32,550 $ 535,041
INDUSTRIAL/OFFICE--3.2%
MIXED--3.2%
Reckson Associates Realty Corp. Series A
Cv. Pfd. 7.625%......................... 30,000 605,625
- - ------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(IDENTIFIED COST $1,470,254) 1,140,666
- - ------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST $1,470,254) 1,140,666
- - ------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS--98.4%
(IDENTIFIED COST $23,445,830) 18,354,663(a)
Cash and receivables, less liabilities--1.6% 307,360
-----------
NET ASSETS--100.0% $18,662,023
===========
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $312,920 and gross
depreciation of $5,404,087 for federal income tax purposes. At
September 30, 1999, the aggregate cost of securities for federal income tax
purposes was $23,445,830.
(b) Non-income producing.
(c) Private Placement.
See Notes to Financial Statements
35
<PAGE>
Phoenix-Seneca Real Estate Securities Fund
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $23,445,830) $18,354,663
Receivables
Dividends and interest 206,542
Investment securities sold 178,563
Deferred organization expenses 13,527
Prepaid expenses 2,149
-----------
Total assets 18,755,444
-----------
LIABILITIES
Payables
Custodian 8,309
Fund shares repurchased 12,372
Transfer agent fee 12,008
Investment advisory fee 7,839
Financial agent fee 5,199
Distribution fee 1,681
Trustees' fee 913
Accrued expenses 45,100
-----------
Total liabilities 93,421
-----------
NET ASSETS $18,662,023
===========
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial
interest $24,193,732
Undistributed net investment income 223,188
Accumulated net realized loss (663,730)
Net unrealized depreciation (5,091,167)
-----------
NET ASSETS $18,662,023
===========
CLASS X
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$17,346,011) 1,789,967
Net asset value and offering price per share $9.69
CLASS A
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$918,535) 96,249
Net asset value per share $9.54
Offering price per share $9.54/(1-4.75%) $10.02
CLASS B
Shares of beneficial interest outstanding,
$1 par value,
unlimited authorization (Net Assets
$197,438) 20,676
Net asset value and offering price per share $9.55
CLASS C
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $200,039) 20,955
Net asset value and offering price per share $9.55
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 1,304,610
Interest 13,214
-----------
Total investment income 1,317,824
-----------
EXPENSES
Investment advisory fee 181,649
Distribution fee, Class A 2,743
Distribution fee, Class B 1,715
Distribution fee, Class C 1,571
Financial agent fee 55,598
Transfer agent 77,424
Registration 36,379
Trustees 25,773
Professional 17,224
Printing 14,720
Amortization of deferred
organization expenses 10,658
Custodian 5,358
Miscellaneous 10,670
-----------
Total expenses 441,482
Less expenses borne by
investment adviser (63,940)
-----------
Net expenses 377,542
-----------
NET INVESTMENT INCOME 940,282
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized loss on securities (655,001)
Net change in unrealized
appreciation (depreciation) on
investments (1,715,439)
-----------
NET LOSS ON INVESTMENTS (2,370,440)
-----------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $(1,430,158)
===========
</TABLE>
36 See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Real Estate Securities Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/99 9/30/98
------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 940,282 $ 1,139,214
Net realized gain (loss) (655,001) 551,625
Net change in unrealized appreciation (depreciation) (1,715,439) (7,262,351)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS (1,430,158) (5,571,512)
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class X (837,674) (927,830)
Net investment income, Class A (38,060) (63,404)
Net investment income, Class B (4,962) (523)
Net investment income, Class C (3,646) (508)
Net realized gains, Class X (499,713) (1,123,456)
Net realized gains, Class A (30,097) (124,174)
Net realized gains, Class B (4,310) --
Net realized gains, Class C (2,368) --
----------- -----------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (1,420,830) (2,239,895)
----------- -----------
FROM SHARE TRANSACTIONS
CLASS X
Proceeds from sales of shares (210,923 and 190,605 shares,
respectively) 2,123,311 2,502,892
Net asset value of shares issued from reinvestment of
distributions
(132,293 and 153,188 shares, respectively) 1,320,535 2,018,886
Cost of shares repurchased (515,264 and 297,712 shares,
respectively) (5,249,668) (3,754,823)
----------- -----------
Total (1,805,822) 766,955
----------- -----------
CLASS A
Proceeds from sales of shares (21,611 and 31,969 shares,
respectively) 225,249 436,921
Net asset value of shares issued from reinvestment of
distributions
(6,494 and 13,501 shares, respectively) 64,196 179,472
Cost of shares repurchased (55,264 and 138,471 shares,
respectively) (559,210) (1,815,501)
----------- -----------
Total (269,765) (1,199,108)
----------- -----------
CLASS B
Proceeds from sales of shares (11,520 and 8,978 shares,
respectively) 120,191 113,001
Net asset value of shares issued from reinvestment of
distributions
(933 and 47 shares, respectively) 9,271 523
Cost of shares repurchased (0 and 802 shares,
respectively) -- (9,281)
----------- -----------
Total 129,462 104,243
----------- -----------
CLASS C
Proceeds from sales of shares (12,513 and 7,932 shares,
respectively) 124,671 100,250
Net asset value of shares issued from reinvestment of
distributions
(589 and 46 shares, respectively) 5,859 506
Cost of shares repurchased (125 and 0 shares,
respectively) (1,280) --
----------- -----------
Total 129,250 100,756
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS (1,816,875) (227,154)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS (4,667,863) (8,038,561)
NET ASSETS
Beginning of period 23,329,886 31,368,447
----------- -----------
END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF
$223,188 AND $169,785, RESPECTIVELY] $18,662,023 $23,329,886
=========== ===========
</TABLE>
See Notes to Financial Statements 37
<PAGE>
Phoenix-Seneca Real Estate Securities Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS X
-------------------------------------------------------
FROM
YEAR ENDED SEPTEMBER 30, INCEPTION
--------------------------------------- 3/12/96 TO
1999 1998 1997 9/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 11.11 $ 14.71 $ 11.10 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.47(6) 0.54 0.13(1) 0.13(1)
Net realized and unrealized gain
(loss) (1.20) (3.10) 3.77 1.10
------- ------- ------- --------
TOTAL FROM INVESTMENT
OPERATIONS (0.73) (2.56) 3.90 1.23
------- ------- ------- --------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.44) (0.46) (0.28) (0.13)
Dividends from net realized gains (0.25) (0.58) (0.01) --
------- ------- ------- --------
TOTAL DISTRIBUTIONS (0.69) (1.04) (0.29) (0.13)
------- ------- ------- --------
Change in net asset value (1.42) (3.60) 3.61 1.10
------- ------- ------- --------
NET ASSET VALUE, END OF PERIOD $ 9.69 $ 11.11 $ 14.71 $ 11.10
======= ======= ======= ========
Total return(2) (6.66)% (18.33)% 35.44% 12.39%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $17,346 $21,794 $28,193 $ 1,073
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 1.66 % 1.47 % 1.99%(5) 1.00%(3)(5)
Net investment income (loss) 4.50 % 4.14 % 2.38% 4.39%(3)
Portfolio turnover 5 % 53 % 75.68% 30.70%(4)
</TABLE>
(1) Net investment income 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 $0.13 and $(1.45) for the year ended September 30,
1997 and the period ended September 30, 1996, respectively.
(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) Not annualized.
(5) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 1.99% and
53.04% for the year ended September 30, 1997 and the period ended September
30, 1996, respectively.
(6) Computed using average shares outstanding.
38
See Notes to Financial Statements
<PAGE>
Phoenix-Seneca Real Estate Securities Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------
FROM
YEAR ENDED SEPTEMBER 30, INCEPTION
--------------------------------------------- 3/12/96 TO
1999 1998 1997 9/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 11.00 $ 14.68 $ 11.08 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.32(1)(6) 0.35 0.03(1) 0.13(1)
Net realized and unrealized gain
(loss) (1.19) (3.08) 3.78 1.08
------- ------- ------- -------
TOTAL FROM INVESTMENT
OPERATIONS (0.87) (2.73) 3.81 1.21
------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment
income (0.34) (0.37) (0.20) (0.13)
Dividends from net realized gains (0.25) (0.58) (0.01) --
------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.59) (0.95) (0.21) (0.13)
------- ------- ------- -------
Change in net asset value (1.46) (3.68) 3.60 1.08
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.54 $ 11.00 $ 14.68 $ 11.08
======= ======= ======= =======
Total return(2) (7.97)% (19.52)% 34.54% 12.22%(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $ 919 $ 1,357 $ 3,176 $ 222
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 3.05 %(5) 2.76 % 2.91%(5) 1.65%(3)(5)
Net investment income (loss) 3.13 % 2.45 % 1.37% 4.61%(3)
Portfolio turnover 5 % 53 % 75.68% 30.70%(4)
</TABLE>
(1) Net investment income 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 $0.20, $(0.04) and $(1.96) for the years ended
September 30, 1999 and 1997 and the period ended September 30, 1996,
respectively.
(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) Not annualized.
(5) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 4.27%,
3.79% and 73.01% for the years ended September 30, 1999 and 1997 and the
period ended September 30, 1996, respectively.
(6) Computed using average shares outstanding.
See Notes to Financial Statements
39
<PAGE>
Phoenix-Seneca Real Estate Securities Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------ ------------------------------
FROM FROM
YEAR INCEPTION YEAR INCEPTION
ENDED 7/1/98 TO ENDED 7/1/98 TO
9/30/99 9/30/98 9/30/99 9/30/98
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $11.01 $12.58 $11.01 $12.58
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.29(1)(8) 0.07(1) 0.29(2)(8) 0.07(2)
Net realized and unrealized gain (1.22) (1.58) (1.22) (1.58)
------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS (0.93) (1.51) (0.93) (1.51)
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income (0.28) (0.06) (0.28) (0.06)
Dividends from net realized gains (0.25) -- (0.25) --
------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.53) (0.06) (0.53) (0.06)
------ ------ ------ ------
Change in net asset value (1.46) (1.57) (1.46) (1.57)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 9.55 $11.01 $ 9.55 $11.01
====== ====== ====== ======
Total return(3) (8.59)% (11.97)%(5) (8.58)% (11.97)%(5)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $197 $91 $200 $88
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 3.80 %(6) 3.80 %(4)(6) 3.80 %(7) 3.80 %(4)(7)
Net investment income (loss) 2.79 % 2.50 %(4) 2.80 % 2.44 %(4)
Portfolio turnover 5 % 53 %(5) 5 % 53 %(5)
</TABLE>
(1) Net investment income 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 $(1.23) and $(0.46) for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(2) Net investment income 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 $(1.39) and $(0.48) for the periods ended
September 30, 1999 and September 30, 1998, respectively.
(3) 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.
(4) Annualized.
(5) Not annualized.
(6) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 18.50%
and 22.08% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
(7) If the investment adviser had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 19.95%
and 22.93% for the periods ended September 30, 1999 and September 30, 1998,
respectively.
(8) Computed using average shares outstanding.
40
See Notes to Financial Statements
<PAGE>
PHOENIX-SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
The Phoenix-Seneca Funds (the "Trust") is organized as a Delaware business
trust and is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. Shares of the Trust are
divided into four series, each a "Fund" and collectively the "Funds" as follows:
Phoenix-Seneca Bond Fund, Phoenix-Seneca Growth Fund, Phoenix-Seneca Mid-Cap
"EDGE"-SM- Fund and Phoenix-Seneca Real Estate Securities Fund (formerly Seneca
Bond Fund, Seneca Growth Fund, Seneca Mid-Cap "EDGE"-SM- Fund and Seneca Real
Estate Securities Fund, respectively). Each Fund has distinct investment
objectives. Bond Fund seeks to generate a high level of current income and
capital appreciation. Growth Fund seeks to achieve long-term capital
appreciation. Mid-Cap "EDGE"-SM- Fund seeks to achieve long-term capital
appreciation by investing primarily in a diversified portfolio of equity
securities of companies with market capitalizations between $500 million and $5
billion. Real Estate Securities Fund seeks to emphasize capital appreciation and
income equally by investing primarily in marketable securities of
publicly-traded real estate investment trusts (REITS) and companies that invest
in, operate, develop and/or manage real estate located in the United States.
Each Fund offers Class X (formerly Seneca Institutional), Class A (formerly
Seneca Administrative), Class B and Class C shares. Class X shares are sold
without a sales charge. Class A shares are sold with a front-end sales charge of
up to 4.75%. Class B shares are sold with a contingent deferred sales charge
which declines from 5% to zero depending on the period of time the shares are
held. Class C shares are sold with a 1% contingent deferred sales charge if
redeemed within one year of purchase. All classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that Class A, Class B and Class C shares bear distribution
expenses and have exclusive voting rights with respect to their distribution
plans. Investment income and realized and unrealized gains/losses are allocated
among the classes on the basis of net assets of each class. Expenses that relate
to the distribution of shares or services provided to a particular class are
allocated to that class.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses.
Actual results could differ from those estimates.
A. SECURITY VALUATION:
Equity securities are valued at the last sale price, or if there had been no
sale that day, at the mean between the most recent high bid and the most recent
low asked quotations. Debt securities are valued on the basis of broker
quotations or valuations provided by a pricing service which utilizes
information with respect to recent sales, market transactions in comparable
securities, quotations from dealers and various relationships between securities
in determining value. Short-term investments having a remaining maturity of 60
days or less are valued at amortized cost which approximates market. All other
securities and assets are valued at their fair value as determined in good faith
by or under the direction of the Trustees.
B. SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are recorded on the trade date. Dividend income is
recorded on the ex-dividend date or, in the case of certain foreign securities,
as soon as the Fund is notified. Interest income is recorded on the accrual
basis. The Trust amortizes premiums and discounts using the effective interest
method. Realized gains and losses are determined on the identified cost basis.
C. INCOME TAXES:
Each Fund is treated as a separate taxable entity. It is the policy of each
Fund to comply with the requirements of the Internal Revenue Code (the "Code")
applicable to regulated investment companies, and to distribute all of its
taxable income to its shareholders. In addition, each Fund intends to distribute
an amount sufficient to avoid imposition of any excise tax under Section 4982 of
the Code. Therefore, no provision for federal income taxes or excise taxes has
been made.
D. DISTRIBUTIONS TO SHAREHOLDERS:
Distributions are recorded by each Fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences include the treatment of non-taxable dividends, market
discount, organization costs, expiring capital loss carryforwards, foreign
currency gain/loss, partnerships, operating losses and losses deferred due to
wash sales and excise tax regulations. Permanent book and tax basis differences
relating to shareholder distributions will result in reclassifications to paid
in capital.
E. FOREIGN CURRENCY TRANSLATION:
Foreign securities and other assets and liabilities are valued using the
foreign currency exchange rate effective at the end of the reporting period.
Cost of investments is translated at the currency exchange rate
41
<PAGE>
PHOENIX-SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (CONTINUED)
effective at the trade date. The gain or loss resulting from a change in
currency exchange rates between the trade and settlement dates of a portfolio
transaction is treated as a gain or loss on foreign currency. Likewise, the gain
or loss resulting from a change in currency exchange rates between the date
income is accrued and paid is treated as a gain or loss on foreign currency. The
Trust does not separate that portion of the results of operations arising from
changes in exchange rates and that portion arising from changes in the market
prices of securities.
F. FORWARD CURRENCY CONTRACTS:
Each Fund may enter into forward currency contracts in conjunction with the
planned purchase or sale of foreign denominated securities in order to hedge the
U.S. dollar cost or proceeds. Forward currency contracts involve, to varying
degrees, elements of market risk in excess of the amount recognized in the
statement of assets and liabilities. Risks arise from the possible movements in
foreign exchange rates or if the counterparty does not perform under the
contract.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any number of days from the
date of the contract agreed upon by the parties, at a price set at the time of
the contract. These contracts are traded directly between currency traders and
their customers. The contract is marked-to-market daily and the change in market
value is recorded by each Fund as an unrealized gain (or loss). When the
contract is closed or offset with the same counterparty, the Fund records a
realized gain (or loss) equal to the change in the value of the contract when it
was opened and the value at the time it was closed or offset.
G. OPTIONS:
Each Fund may write covered options or purchase options contracts for the
purpose of hedging against changes in the market value of the underlying
securities or foreign currencies.
Each Fund will realize a gain or loss upon the expiration or closing of the
option transaction. Gains and losses on written options are reported separately
in the Statement of Operations. When a written option is exercised, the proceeds
on sales or amounts paid are adjusted by the amount of premium received. Options
written are reported as a liability in the Statement of Assets and Liabilities
and subsequently marked-to-market to reflect the current value of the option.
The risk associated with written options is that the change in value of options
contracts may not correspond to the change in value of the hedged instruments.
In addition, losses may arise from changes in the value of the underlying
instruments, or if a liquid secondary market does not exist for the contracts.
Each Fund may purchase options which are included in the Funds' Schedule of
Investments and subsequently marked-to-market to reflect the current value of
the option. When a purchased option is exercised, the cost of the security is
adjusted by the amount of premium paid. The risk associated with purchased
options is limited to the premium paid.
H. ORGANIZATION EXPENSE:
In 1996, the Trust incurred organizational expenses which are amortized on a
straight line basis over a period of sixty months from the commencement of
operations. If any of the initial shares are redeemed before the end of the
amortization period, the proceeds of the redemption will be reduced by the pro
rata share of unamortized organization expenses.
I. EXPENSES:
Trust expenses not directly attributable to a specific Fund are allocated
evenly among all funds. Fund expenses that are not related to the distribution
of shares of a particular class or to services provided specifically to a
particular class are allocated among the classes on the basis of relative
average daily net assets of each class.
J. REPURCHASE AGREEMENTS:
A repurchase agreement is a transaction where a Fund acquires a security for
cash and obtains a simultaneous commitment from the seller to repurchase the
security at an agreed upon price and date. Each Fund, through its custodian,
takes possession of securities collateralizing the repurchase agreement. The
collateral is marked-to-market daily to ensure that the market value of the
underlying assets remains sufficient to protect the Fund in the event of default
by the seller. If the seller defaults and the value of the collateral declines,
or if the seller enters insolvency proceedings, realization of collateral may be
delayed or limited.
2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
Phoenix Investment Counsel, Inc, ("PIC" or the "Adviser") serves as investment
adviser to the Phoenix-Seneca Funds and Seneca Capital Management LLC ("Seneca"
or the "Subadviser") serves as investment subadviser. All of the outstanding
stock of PIC and a majority of the equity interests of Seneca are owned by
Phoenix Investment Partners Ltd. ("PXP"), an indirect, majority-owned subsidiary
of Phoenix Home Life Mutual Insurance Company ("PHL"). As compensation for
services
42
<PAGE>
PHOENIX-SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (CONTINUED)
to the Trust, the adviser receives a fee based upon the following annual rates
as a percentage of the average daily net assets of each Fund:
<TABLE>
<CAPTION>
Adviser
Fee
--------
<S> <C>
Bond Fund.................................... 0.50%
Growth Fund.................................. 0.70%
Mid-Cap "EDGE"-SM- Fund...................... 0.80%
Real Estate Securities Fund.................. 0.85%
</TABLE>
The Adviser pays the Subadviser a fee equal to one half of the Adviser fee.
Phoenix Equity Planning Corporation ("PEPCO"), a direct subsidiary of PXP,
serves as Administrator of the Trust. PEPCO received a fee for administration
services through December 31, 1998 at an annual rate of 0.08% of average daily
net assets of each Fund up to $125 million, 0.06% of average daily net assets of
$125 million to $250 million and 0.04% of average daily net assets greater than
$250 million; a minimum fee applied. Effective January 1, 1999, PEPCO receives a
financial agent fee equal to the sum of (1) the documented cost of fund
accounting and related services provided by PFPC Inc. (subagent to PEPCO), plus
(2) the documented cost to PEPCO to provide financial reporting, tax services
and oversight of the subagent's performance. The current fee schedule of PFPC
Inc. ranges from 0.085% to 0.0125% of the average daily net asset values of the
Trust. Certain minimum fees and fee waivers may apply.
The Adviser voluntarily agreed to waive or reimburse each Fund's operating
expenses until July 1, 2000, to the extent that such expenses exceed the
following percentages of average annual net assets:
<TABLE>
<CAPTION>
Class X Class A Class B Class C
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Bond Fund.................. 0.90% 1.15% 1.90% 1.90%
Growth Fund................ 1.25% 1.85% 2.60% 2.60%
Mid-Cap "EDGE"-SM- Fund.... 2.10% 2.70% 3.45% 3.45%
Real Estate Securities
Fund....................... 2.35% 3.05% 3.80% 3.80%
</TABLE>
Prior to July 1, 1999, the Adviser voluntarily agreed to waive or reimburse
the Bond Fund's operating expenses until July 1, 2000, to the extent that such
expenses exceeded the following percentages of average annual net assets: 1.85%
for Class X, 2.45% for Class A and 3.20% for Class B and Class C.
PEPCO serves as the national distributor of the Trust's shares and has advised
the Trust that it retained net selling commissions of $16,238 for Class A shares
for the year ended September 30, 1999. Deferred sales charges retained by PEPCO
for the year ended September 30, 1999 were $6,758 for Class B shares and $689
for Class C shares. In addition, each Fund pays PEPCO a distribution fee at an
annual rate of 0.25% for Class A shares and 1.00% for Class B and C shares
applied to the average daily net assets of each Fund. The distributor has
advised the Trust that of the total amount expensed for the year ended
September 30, 1999, $121,864 was retained by the Distributor, $24,658 was paid
out to unaffiliated Participants and $1,637 was paid to W.S. Griffith, an
indirect subsidiary of PHL.
PEPCO serves as the Trust's Transfer Agent with State Street Bank and Trust
Company as sub-transfer agent. For the year ended September 30, 1999, transfer
agent fees were $330,067 of which PEPCO retained $425 which is net of fees paid
to State Street.
At September 30, 1999, PHL and affiliates held Phoenix-Seneca Fund shares
which aggregated the following:
<TABLE>
<CAPTION>
Aggregate
Net Asset
Shares Value
--------- -----------
<S> <C> <C>
Bond Fund--Class X.................. 1,496,147 $15,485,121
Bond Fund--Class A.................. 9,878 101,646
Bond Fund--Class B.................. 9,816 100,810
Bond Fund--Class C.................. 9,815 100,800
Growth Fund--Class B................ 829 15,982
Growth Fund--Class C................ 5,931 114,177
Mid-Cap "EDGE"-SM- Fund--Class B.... 6,062 105,532
Mid-Cap "EDGE"-SM- Fund--Class C.... 6,062 105,479
Real Estate Securities
Fund--Class B....................... 8,345 79,697
Real Estate Securities
Fund--Class C....................... 8,346 79,700
</TABLE>
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities during the year ended September 30, 1999
(excluding U.S. Government and agency securities and short-term securities)
aggregated the following:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
Bond Fund........................ $ 26,311,365 $ 16,449,029
Growth Fund...................... 108,894,225 101,158,985
Mid-Cap "EDGE"-SM- Fund.......... 34,069,753 31,673,766
Real Estate Securities Fund...... 1,130,983 3,044,370
</TABLE>
Purchases and sales of long-term U.S. Government and agency securities during
the year ended September 30, 1999, aggregated $18,227,311 and $13,990,110,
respectively, for the Bond Fund.
4. CREDIT RISK
In countries with limited or developing markets, investments may present
greater risks than in more developed markets and the prices of such investments
may be volatile. The consequences of political, social or economic changes in
these markets may have disruptive effects on the market prices of these
investments and the income they generate, as well as a fund's ability to
repatriate such amounts.
43
<PAGE>
PHOENIX-SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (CONTINUED)
5. OTHER
As of September 30, 1999, the Funds had shareholders who each individually
owned more than 10% of total net assets, none of whom are affiliated with PHL or
PXP as follows. In addition, affiliate holdings are presented in the table
located within Note 2.
<TABLE>
<CAPTION>
Number of % of Total
shareholders net assets
------------ ------------
<S> <C> <C>
Growth Fund....................... 1 12.1 %
Real Estate Securities Fund....... 2 33.8 %
</TABLE>
6. CAPITAL LOSS CARRYOVERS
At September 30, 1999, the Real Estate Securities Fund had a capital loss
carryover of $24,701, expiring in 2007, which may be used to offset future
capital gains.
Under current tax law, capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following fiscal year.
For the year ended September 30, 1999 the Real Estate Securities Fund deferred
capital losses of $639,028.
7. RECLASS OF CAPITAL ACCOUNTS
In accordance with accounting pronouncements, the Funds have recorded
reclassifications in the capital accounts. These reclassifications have no
impact on the net asset value of each of the Funds and are designed generally to
present undistributed income and realized gains on a tax basis which is
considered to be more informative to the shareholder. As of September 30, 1999,
the Funds recorded the following reclassifications to increase (decrease) the
accounts listed below:
<TABLE>
<CAPTION>
Capital paid
Undistributed Accumulated in on shares
net investment net realized of beneficial
income gain (loss) interest
-------------- ------------ -------------
<S> <C> <C> <C>
Bond Fund................... $ (6,484) $ 17,363 $(10,879)
Growth Fund................. 251,366 (252,922) 1,556
Mid-Cap "EDGE"-SM- Fund..... 275,816 (277,372) 1,556
Real Estate Securities
Fund........................ (2,537) 980 1,557
</TABLE>
TAX INFORMATION NOTICE (UNAUDITED)
For the fiscal year ended September 30, 1999, the Funds distributed long-term
capital gain dividends as follows:
<TABLE>
<S> <C>
Bond Fund...................................... $ 182,516
Growth Fund.................................... 1,530,633
Mid-Cap "EDGE"-SM- Fund........................ 542,452
Real Estate Securities Fund.................... 535,508
</TABLE>
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by an effective Prospectus which includes information
concerning the sales charge, the Trust's record and other pertinent information.
44
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGO]
To the Trustees and Shareholders of
Phoenix-Seneca Funds
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments (except for bond ratings), and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Phoenix-Seneca Bond Fund, the Phoenix-Seneca Growth Fund, the Phoenix-Seneca
Mid-Cap "EDGE"-SM- Fund and the Phoenix-Seneca Real Estate Securities Fund
(constituting the Phoenix-Seneca Funds, hereafter referred to as the "Funds") at
September 30, 1999, and the results of each of their operations, the changes in
each of their net assets and the financial highlights for the periods indicated,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above. The financial highlights of the Funds, formerly the
Seneca Funds, for the periods ended September 30, 1997 were audited by other
independent accountants whose report dated November 5, 1997 expressed an
unqualified opinion on those statements.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
November 16, 1999
45
<PAGE>
PART C--OTHER INFORMATION
Item 23. Exhibits.
<TABLE>
<S> <C>
a.1. Agreement and Declaration of Trust.(1)
a.2. Certificate of Trust.(1)
a.3. Certificate of Amendment of Seneca Funds.(7)
b. By-Laws.(1)
c. Instruments defining shareholder rights incorporated by reference to Exhibits a.1. and a.2. above.
d.1. 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.(5)
d.2. Form of Subadvisory Agreement between PIC and Seneca Capital Management LLC ("Seneca").(5)
e.1. Form of Underwriting Agreement between the Registrant and Phoenix Equity Planning Corporation ("PEPCO").(5)
e.2. Form of Sales Agreement between PEPCO and dealers.(5)
e.3. Form of Supplement to Phoenix Family of Funds Sales Agreement.(5)
e.4. Form of Financial Institution Sales Contract for the Phoenix Family of Funds.(5)
f. None.
g.1.* Master Custodian Contract between Registrant and State Street Bank and Trust Company dated May 1, 1997.(7)
h.1. Form of Transfer Agency and Service Agreement (the "Transfer Agency Agreement") between the Registrant and
PEPCO.(5)
h.2.* Financial Agent Agreement between Registrant and Phoenix Equity Planning Corporation, dated July 1, 1998.(7)
i. Opinion and consent of Morris, Nichols, Arsht & Tunnell.(3)
j.1.* Consent of PricewaterhouseCoopers LLP, Independent Public Accountants.(7)
k. None.
l. Form of Share Purchase Agreement (the "Share Purchase Agreement") between Registrant and GMG/Seneca Capital
Management, L.P.(3)
m.1. Form of Amended and Restated Distribution Plan Pursuant to Rule 12b-1 for Class A Shares.(5)
m.2. Form of Distribution Plan Pursuant to Rule 12b-1 for Class B Shares.(5)
m.3. Form of Distribution Plan Pursuant to Rule 12b-1 for Class C Shares.(5)
n. Financial Data Schedules.
o.1. Form of Second Amended and Restated Rule 18f-3 Plan.(5)
p.1. Powers of Attorney for Sandra J. Westhoff, Melinda Ellis Evers, Paul E. Erdman and Mary Ann Cusenza.(3)
p.2. Powers of Attorney for Harry Dalzell-Payne and Norman W. Douglass.(6)
p.3.* Power of Attorney for Philip R. McLoughlin.(7)
</TABLE>
-----------
(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 to Post-Effective Amendment No. 1 to
Registrant's Registration Statement dated October 31, 1996.
(5) Incorporated by reference to Post-Effective Amendment No. 5 to
Registrant's Registration Statement filed on May 15, 1998.
(6) Incorporated by reference to Post-Effective Amendment No. 6 to
Registrant's Registration Statement filed on November 23, 1998.
(7) Filed herewith.
Item 24. Persons Controlled By or Under Common Control With the Fund.
None.
C-1
<PAGE>
Item 25. 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 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 26. 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 27. Principal Underwriter.
(a) PEPCO also serves as the principal underwriter for the following other
investment companies:
Phoenix-Aberdeen Series Fund, Phoenix-Aberdeen Worldwide Opportunities
Fund, Phoenix Duff & Phelps Institutional Mutual Funds, Phoenix-Engemann Funds,
Phoenix Equity Series Fund, Phoenix-Euclid Funds, Phoenix-Goodwin California Tax
Exempt Bonds, Inc., Phoenix-Goodwin Multi-Sector Fixed Income Fund, Inc.,
Phoenix-Goodwin Multi-Sector Short Term Bond Fund, Phoenix Investment Trust 97,
Phoenix Multi-Portfolio Fund, Phoenix-Oakhurst Income & Growth Fund,
Phoenix-Oakhurst Strategic Allocation Fund, Inc., Phoenix-Seneca Funds, Phoenix
Strategic Equity Series Fund, Phoenix Zweig Trust; 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 and executive officers of PEPCO are as follows:
<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 Trustee
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
William R. Moyer Director, Senior Vice None
100 Bright Meadow Blvd. President, Chief Financial
P.O. Box 2200 Officer and Treasurer
Enfield, CT 06083-2200
John F. Sharry President, Retail Distribution None
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Position and Offices
Business Address with Distributor with Registrant
- ---------------- ---------------- ---------------
<S> <C> <C>
G. Jeffrey Bohne Vice President, Mutual Fund None
101 Munson Street Customer Service
Greenfield, MA 01301
Nancy G. Curtiss Vice President and Treasurer, None
56 Prospect Street Fund Accounting
P.O. Box 150480
Hartford, CT 06115-0480
Thomas N. Steenburg Vice President, Counsel and Secretary
Suite 3600 Secretary
55 East Monroe St.
Chicago, IL 60603
Jacqueline M. Porter Assistant Vice President, Assistant Treasurer
56 Prospect Street Financial Reporting
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.
Item 28. 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 29. Management Services.
None.
Item 30. Undertakings.
Not applicable.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration statement under Rule 485(b)
of the Securities Act and has duly caused this amendment to the registration
statement to be signed on its behalf by the undersigned, duly authorized, in the
City of San Francisco, and the State of California on the 24th day of January,
2000.
SENECA FUNDS
By: /s/GAIL P. SENECA
----------------------------------
Gail P. Seneca
President
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed below by the following persons in
the capacities indicated on the 24th day of January, 2000.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ GAIL P. SENECA Trustee and President
---------------------------- (Chief Executive Officer)
Gail P. Seneca
/s/ SANDRA J. MONTICELLI Treasurer
---------------------------- (Chief Financial Officer
Sandra J. Monticelli and Accounting Officer)
* Trustee
----------------------------
Mary Ann Cusenza
* Trustee
----------------------------
Harry Dalzell-Payne
* Trustee
----------------------------
Norman W. Douglass
* Trustee
----------------------------
Paul E. Erdman
* Trustee
----------------------------
Melinda Ellis Evers
Trustee
----------------------------
Paul B. Fay, Jr.
* Trustee
----------------------------
Philip R. McLoughlin
*By: /s/ GAIL P. SENECA
------------------------
Gail P. Seneca as
Attorney-in-Fact
</TABLE>
S-1
Exhibit g.1
Custodian Contract
<PAGE>
CUSTODIAN CONTRACT
Between
EACH OF THE PARTIES LISTED ON APPENDIX 1
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
- ----
<S> <C>
1. Employment of Custodian and Property to be Held By It....................................................1
2. Duties of the Custodian with Respect to Property of each Fund Held
by the Custodian in the United States....................................................................2
2.1 Holding Securities..............................................................................2
2.2 Delivery of Securities..........................................................................2
2.3 Registration of Securities......................................................................4
2.4 Bank Accounts...................................................................................4
2.5 Availability of Federal Funds...................................................................5
2.6 Collection of Income............................................................................5
2.7 Payment of Fund Moneys..........................................................................5
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.............................6
2.9 Appointment of Agents...........................................................................7
2.10 Deposit of Fund Assets in U.S. Securities System................................................7
2.11 Fund Assets Held in the Custodian's Direct Paper System.........................................8
2.12 Segregated Account..............................................................................9
2.13 Ownership Certificates for Tax Purposes.........................................................9
2.14 Proxies.........................................................................................9
2.15 Communications Relating to Fund Securities.....................................................10
3. Duties of the Custodian with Respect to Property of each Fund Held Outside of the United States.........10
3.1 Appointment of Foreign Sub-Custodians..........................................................10
3.2 Assets to be Held..............................................................................10
3.3 Foreign Securities Systems.....................................................................10
3.4 Holding Securities.............................................................................11
3.5 Agreements with Foreign Banking Institutions...................................................11
3.6 Access of Independent Accountants of each Fund.................................................11
3.7 Reports by Custodian...........................................................................11
3.8 Transactions in Foreign Custody Account........................................................12
3.9 Liability of Foreign Sub-Custodians............................................................12
3.10 Liability of Custodian.........................................................................12
3.11 Reimbursement for Advances.....................................................................13
3.12 Monitoring Responsibilities....................................................................13
3.13 Branches of U.S. Banks.........................................................................13
3.14 Tax Law........................................................................................13
4. Payments for Sales or Repurchase or Redemptions of Shares of each Fund..................................14
5. Proper Instructions.....................................................................................14
6. Actions Permitted Without Express Authority.............................................................15
7. Evidence of Authority...................................................................................15
8. Duties of Custodian With Respect to the Books of Account and Calculation of Net Asset Value
and Net Income..........................................................................................15
9. Records 16
10. Opinion of Fund's Independent Accountants...............................................................16
11. Reports to Fund by Independent Public Accountants.......................................................16
12. Compensation of Custodian...............................................................................16
13. Responsibility of Custodian.............................................................................16
14. Effective Period, Termination and Amendment.............................................................18
15. Successor Custodian.....................................................................................18
16. Interpretive and Additional Provisions..................................................................19
17. Additional Funds........................................................................................19
18. Massachusetts Law to Apply..............................................................................20
19. Prior Contracts.........................................................................................20
20. Shareholder Communications..............................................................................20
21. Limitation of Liability................................................................................21
</TABLE>
<PAGE>
MASTER CUSTODIAN CONTRACT
This Contract between each fund or series of a fund listed on Appendix 1
which evidences its agreement to be bound hereby by executing a copy of this
Contract (each such fund, any and all separate series or portfolios thereof and
any additional portfolios or separate series thereof which become subject to
this Contract pursuant to Section 17 hereof, are individually hereafter referred
to as a "Fund"), and State Street Bank and Trust Company, a Massachusetts trust
company, having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, each of the Funds has previously entered into a Custodian Contract
with the Custodian;
WHEREAS, the Custodian and each of the Funds desire to replace such
existing Custodian Contracts with this Master Custodian Contract between the
Custodian and all of the Funds;
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
Each Fund hereby employs the Custodian as the custodian of the assets of
such Fund, including securities which such Fund desires to be held in places
within the United States ("domestic securities") and securities it desires to be
held outside the United States ("foreign securities") pursuant to the provisions
of such Fund's governing documents (domestic securities and foreign securities
are sometimes collectively referred to herein as "Securities"). Each Fund agrees
to deliver to the Custodian all securities and cash of such Fund, and all
payments of income, payments of principal or capital distributions received by
it with respect to all securities owned by such Fund from time to time, and the
cash consideration received by it for such new or treasury shares each class of
capital stock or beneficial interest, as applicable, of such Fund, ("Shares") as
may be issued or sold from time to time. The Custodian shall not be responsible
for any property of a Fund held or received by such Fund and not delivered to
the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Fund from time to time employ
one or more sub-custodians, located in the United States but only in accordance
with an applicable vote by the Board of the Fund, and provided that the
Custodian shall have no more or less responsibility or liability to the Fund on
account of any actions or omissions of any sub-custodian so employed than any
such sub-custodian has to the Custodian. The Fund shall approve in writing the
terms of any subcustodian agreement with a United States subcustodian. The
Custodian may employ as sub-custodian for each Fund's foreign securities the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
<PAGE>
2. Duties of the Custodian with Respect to Property of each Fund Held By the
Custodian in the United States
--------------------------------------------------------------------------
2.1 Holding Securities. The Custodian shall hold and physically segregate for
the account of each Fund all non-cash property, to be held by it in the
United States including all domestic securities owned by such Fund, other
than (a) securities which are maintained pursuant to Section 2.10 in a
clearing agency which acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the Treasury (each, a "U.S.
Securities System") and (b) commercial paper of an issuer for which State
Street Bank and Trust Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the Direct Paper System of
the Custodian (the "Direct Paper System") pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver domestic
securities owned by a Fund held by the Custodian or in a U.S. Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions from such Fund, which may be continuing instructions
when deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of such Fund and receipt
of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by such Fund;
3) In the case of a sale effected through a U.S. Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of such Fund;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of
such Fund or into the name of any nominee or nominees of the Custodian
or into the name or nominee name of any agent appointed pursuant to
Section 2.9 or into the name or nominee name of any sub-custodian
appointed pursuant to Article 1; or for exchange for a different
number of bonds, certificates or other evidence representing the same
2
<PAGE>
aggregate face amount or number of units; provided that, in any such
case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of such Fund, to the
broker or its clearing agent, against a receipt, for examination in
accordance with "street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or liability for any
loss arising from the delivery of such securities prior to receiving
payment for such securities except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions
for conversion contained in such securities, or pursuant to any
deposit agreement; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by such
Fund, but only against receipt of adequate collateral as agreed upon
from time to time by the Custodian and such Fund, which may be in the
form of cash or obligations issued by the United States government,
its agencies or instrumentalities, except that in connection with any
loans for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S. Department of
the Treasury, the Custodian will not be held liable or responsible for
the delivery of securities owned by such Fund prior to the receipt of
such collateral;
11) For delivery as security in connection with any borrowings by such
Fund requiring a pledge of assets by such Fund, but only against
receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among
such Fund, the Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of
The National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange, or of
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by such Fund;
3
<PAGE>
13) For delivery in accordance with the provisions of any agreement among
such Fund, the Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations, regarding
account deposits in connection with transactions by such Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for such Fund, for delivery to such Transfer Agent or to the
holders of shares in connection with distributions in kind, as may be
described from time to time in the currently effective prospectus and
statement of additional information of such Fund ("Prospectus"), in
satisfaction of requests by holders of Shares for repurchase or
redemption; and
15) For any other proper corporate purpose, but only upon receipt of, in
addition to Proper Instructions from such Fund, a certified copy of a
resolution of the Board or of the Executive Committee of such Fund
signed by an officer of such Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities of such Fund to be
delivered, setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of such securities shall
be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of each Fund
or in the name of any nominee of each Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to each Fund, unless
a Fund has authorized in writing the appointment of a nominee to be used in
common with other registered investment companies having the same
investment adviser as such Fund, or in the name or nominee name of any
agent appointed pursuant to Section 2.9 or in the name or nominee name of
any sub-custodian appointed pursuant to Article 1. All securities accepted
by the Custodian under the terms of this Contract shall be in "street name"
or other good delivery form. If, however, a Fund directs the Custodian to
maintain securities in "street name", the Custodian shall utilize
commercially reasonable means to timely collect income due such Fund on
such securities and to timely notify each Fund of relevant corporate
actions including, without limitation, pendency of calls, maturities,
tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Fund, subject
only to draft or order by the Custodian acting pursuant to the terms of
this Contract, and shall hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for the account of such
Fund, other than cash maintained by such Fund in a bank account established
and used
4
<PAGE>
in accordance with Rule 17f-3 under the Investment Company Act of 1940.
Funds held by the Custodian for each Fund may be deposited by it to its
credit as Custodian in the Banking Department of the Custodian or in such
other banks or trust companies as it may in its discretion deem necessary
or desirable; provided, however, that every such bank or trust company
shall be qualified to act as a custodian under the Investment Company Act
of 1940 and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall on behalf of each
applicable Fund be approved by vote of a majority of the Board of such
Fund. Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between a Fund and the
Custodian, the Custodian shall, upon the receipt of Proper Instructions
from such Fund, make federal funds available to such Fund as of specified
times agreed upon from time to time by such Fund and the Custodian in the
amount of checks received in payment for Shares of such Fund which are
deposited into such Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to Securities held hereunder to which each Fund shall be
entitled either by law or pursuant to custom in the securities business,
and shall collect on a timely basis all income and other payments with
respect to bearer securities if, on the date of payment by the issuer, such
securities are held by the Custodian or its agent thereof and shall credit
such income, as collected, to such Fund's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach and
present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest when
due on securities held hereunder. Unless otherwise agreed to by the
parties, income due each Fund on securities loaned pursuant to the
provisions of Section 2.2 (10) shall be the responsibility of the Fund. The
Custodian will have no duty or responsibility in connection therewith,
other than to provide each Fund with such information or data as may be
necessary to assist each Fund in arranging for the timely delivery to the
Custodian of the income to which each Fund is properly entitled.
2.7 Payment of Fund Moneys. Upon receipt of Proper Instructions from a Fund,
which may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of each Fund in the following
cases only:
1) Upon the purchase of Securities, options, futures contracts or options
on futures contracts for the account of such Fund but only (a) against
the delivery of such securities or evidence of title to such options,
futures contracts or options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing business in the United
States or abroad which is qualified under the Investment
5
<PAGE>
Company Act of 1940, as amended, to act as a custodian and has been
designated by the Custodian as its agent for this purpose) registered
in the name of such Fund or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for transfer; (b)
in the case of a purchase effected through a U.S. Securities System,
in accordance with the conditions set forth in Section 2.10 hereof;
(c) in the case of a purchase involving the Direct Paper System, in
accordance with the conditions set forth in Section 2.11; (d) in the
case of repurchase agreements entered into between such Fund and the
Custodian, or another bank, or a broker-dealer which is a member of
NASD, (i) against delivery of the securities either in certificate
form or through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against delivery of
the receipt evidencing purchase by such Fund of securities owned by
the Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from such Fund or (e) for
transfer to a time deposit account of such Fund in any bank, whether
domestic or foreign; such transfer may be effected prior to receipt of
a confirmation from a broker and/or the applicable bank pursuant to
Proper Instructions from such Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of Securities
owned by such Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by such Fund as set
forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by such Fund,
including but not limited to the following payments for the account of
such Fund: interest, taxes, management, accounting, transfer agent and
legal fees, and operating expenses of such Fund whether or not such
expenses are to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends on Shares of such Fund declared
pursuant to the governing documents of such Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in addition to
Proper Instructions from such Fund, a certified copy of a resolution
of the Board or of the Executive Committee of such Fund signed by an
officer of such Fund and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
6
<PAGE>
purpose to be a proper purpose, and naming the person or persons to
whom such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased. Except
as specifically stated otherwise in this Contract, in any and every case
where payment for purchase of Securities for the account of such Fund is
made by the Custodian in advance of receipt of the securities purchased in
the absence of specific Proper Instructions from such Fund to so pay in
advance, the Custodian shall be absolutely liable to such Fund for such
securities to the same extent as if the securities had been received by the
Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times, subject to
the applicable Fund's prior approval, in its discretion appoint (and may at
any time remove) any other bank or trust company which is itself qualified
under the Investment Company Act of 1940, as amended, to act as a
custodian, as its agent to carry out such of the provisions of this Article
2 as the Custodian may from time to time direct; provided, however, that
the appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.10 Deposit of Fund Assets in U.S. Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Fund in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of
the Exchange Act, which acts as a securities depository, or in the
book-entry system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as "U.S.
Securities System" in accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and regulations, if any, and
subject to the following provisions:
1) The Custodian may keep securities of each Fund in a U.S. Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the U.S. Securities System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of each Fund
which are maintained in a U.S. Securities System shall identify by
book-entry those securities belonging to each Fund;
3) The Custodian shall pay for securities purchased for the account of
each Fund upon (i) receipt of advice from the U.S. Securities System
that such securities have been transferred to the Account, and (ii)
the making of an entry on the records of the Custodian to reflect such
payment and transfer for the account of each Fund. The Custodian shall
transfer securities sold for the account of each Fund upon (i) receipt
7
<PAGE>
of advice from the U.S. Securities System that payment for such
securities has been transferred to the Account, and (ii) the making of
an entry on the records of the Custodian to reflect such transfer and
payment for the account of each Fund. Copies of all advices from the
U.S. Securities System of transfers of securities for the account of
each Fund shall identify each Fund, be maintained for each Fund by the
Custodian and be provided to each Fund at its request. Upon request,
the Custodian shall furnish each Fund confirmation of each transfer to
or from the account of each Fund in the form of a written advice or
notice and shall furnish to each Fund copies of daily transaction
sheets reflecting each day's transactions in the U.S. Securities
System for the account of each Fund.
4) The Custodian shall provide each Fund with any report obtained by the
Custodian on the U.S. Securities System's accounting system, internal
accounting control and procedures for safeguarding securities
deposited in the U.S. Securities System;
5) The Custodian shall have received from each Fund the initial
certificate required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to each Fund for the benefit of such Fund
for any loss or damage to such Fund resulting from use of the U.S.
Securities System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any of its or
their employees or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the U.S.
Securities System; at the election of the affected Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect
to any claim against the U.S. Securities System or any other person
which the Custodian may have as a consequence of any such loss or
damage if and to the extent that such Fund has not been made whole for
any such loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian may
deposit and/or maintain securities owned by each Fund in the Direct Paper
System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System will
be effected in the absence of Proper Instructions from each Fund;
2) The Custodian may keep securities of each Fund in the Direct Paper
System only if such securities are represented in an account of the
Custodian in the Direct Paper System which shall not include any
assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
8
<PAGE>
3) The records of the Custodian with respect to securities of each Fund
which are maintained in the Direct Paper System shall identify by
book-entry those securities belonging to each Fund;
4) The Custodian shall pay for securities purchased for the account of
each Fund upon the making of an entry on the records of the Custodian
to reflect such payment and transfer of securities to the account of
each Fund. The Custodian shall transfer securities sold for the
account of each Fund upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for the
account of each Fund;
5) The Custodian shall furnish each Fund confirmation of each transfer to
or from the account of each Fund, in the form of a written advice or
notice, of Direct Paper on the next business day following such
transfer and shall furnish to each Fund copies of daily transaction
sheets reflecting each day's transactions in the Direct Paper System
for the account of each Fund;
6) The Custodian shall provide each Fund with any report on its system of
internal accounting control as each Fund may reasonably request from
time to time.
2.12 Pledged Account. The Custodian shall upon receipt of Proper
Instructions from a Fund establish and maintain a pledged account or
accounts for and on behalf of such Fund, into which account or accounts
may be transferred cash and/or securities, including securities
maintained in an account by the Custodian pursuant to Section 2.10
hereof, (i) in accordance with the provisions of any agreement among
such Fund , the Custodian and a broker-dealer registered under the
Exchange Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by such Fund, (ii) for
purposes of segregating cash or government securities in connection
with options purchased, sold or written by such Fund or commodity
futures contracts or options thereon purchased or sold by such Fund,
(iii) for the purposes of compliance by such Fund with the procedures
required by Investment Company Act Release No. 10666, and subsequent
release or releases of the Securities and Exchange Commission relating
to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only, in
the case of clause (iv), upon receipt of, in addition to Proper
Instructions from such Fund, a certified copy of a resolution of the
Board or of the Executive Committee of such Fund signed by an
9
<PAGE>
officer of such Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated
account.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to securities of each Fund held by it and in connection with
transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
such Fund or a nominee of such Fund, all proxies, without indication of the
manner in which such proxies are to be voted, and shall promptly deliver to
the applicable Fund such proxies, all proxy soliciting materials and all
notices relating to such securities.
2.15 Communications Relating to Fund Securities. Subject to the provisions of
Section 2.3, the Custodian shall transmit promptly to each Fund all written
information (including, without limitation, pendency of calls and
maturities of domestic securities and expirations of rights in connection
therewith and notices of exercise of call and put options written by such
Fund and the maturity of futures contracts purchased or sold by such Fund)
received by the Custodian from issuers of the securities being held for
such Fund. With respect to tender or exchange offers, the Custodian shall
transmit promptly to each Fund all written information received by the
Custodian from issuers of the securities whose tender or exchange is sought
and from the party (or his agents) making the tender or exchange offer. If
a Fund desires to take action with respect to any tender offer, exchange
offer or any other similar transaction, such Fund shall notify the
Custodian at least three business days prior to the date on which the
Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of each Fund Held Outside
of the United States
--------------------------------------------------------------------------
3.1 Appointment of Foreign Sub-Custodians. Each Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for such Fund's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories designated
on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper
Instructions", as defined in Section 5 of this Contract, together with a
certified resolution of such Fund's Board, the Custodian and such Fund may
agree to amend Schedule A hereto from time to time to designate additional
foreign banking institutions and foreign securities depositories to act as
sub-custodian. Upon receipt of Proper Instructions, a Fund may instruct the
Custodian to cease the employment of any one or more such sub-custodians
for maintaining custody of such Fund's assets.
10
<PAGE>
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or each Fund may determine to be reasonably
necessary to effect such Fund's foreign securities transactions. The
Custodian shall identify on its books as belonging to each Fund, the
foreign securities of each Fund held by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in
writing by the Custodian and each Fund, assets of each Fund shall be
maintained in a clearing agency which acts as a securities depository or in
a book-entry system for the central handling of securities located outside
of the United States (each a "Foreign Securities System") only through
arrangements implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof (Foreign Securities Systems and
U.S. Securities Systems are collectively referred to herein as the
"Securities Systems"). Where possible, such arrangements shall include
entry into agreements containing the provisions set forth in Section 3.6
hereof.
3.4 Holding Securities. The Custodian may hold securities and other non-cash
property for all of its customers, including each Fund, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other non-cash
property of each Fund which are maintained in such account shall identify
by book-entry those securities and other non-cash property belonging to
each Fund and (ii) the Custodian shall require that securities and other
non-cash property so held by the foreign sub-custodian be held separately
from any assets of the foreign sub-custodian or of others.
3.5 Agreements with Foreign Banking Institutions. Each agreement with a foreign
banking institution shall provide that: (a) the assets of each Fund will
not be subject to any right, charge, security interest, lien or claim of
any kind in favor of the foreign banking institution or its creditors or
agents, except a claim of payment for their safe custody or administration;
(b) beneficial ownership for the assets of each Fund will be freely
transferable without the payment of money or value other than for custody
or administration; (c) adequate records will be maintained identifying the
assets as belonging to each Fund; (d) officers of or auditors employed by,
or other representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants for each
Fund, will be given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the Custodian;
and (e) assets of each Fund held by the foreign sub-custodian will be
subject only to the instructions of the Custodian or its agents. Agreements
with
11
<PAGE>
foreign banking institutions shall contain those provisions required by
subparagraph (c) of Section 17f-5 under the Investment Company Act of 1940.
3.6 Access of Independent Accountants of each Fund. Upon request of each Fund,
the Custodian will use its best efforts to arrange for the independent
accountants of each Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian insofar
as such books and records relate to the performance of such foreign banking
institution under its agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to each Fund from time to
time, as mutually agreed upon, statements in respect of the securities and
other assets of each Fund held by foreign sub-custodians, including but not
limited to an identification of entities having possession of such Fund's
securities and other assets and advices or notifications of any transfers
of securities to or from each custodial account maintained by a foreign
banking institution for the Custodian on behalf of such Fund indicating, as
to securities acquired for such Fund, the identity of the entity having
physical possession of such securities.
3.8 Transactions in Foreign Custody Account. (a) Except as otherwise provided
in paragraph (b) of this Section 3.8, the provisions of Sections 2.2 and
2.7 of this Contract shall apply, mutatis mutandis to the foreign
securities of each Fund held outside the United States by foreign
sub-custodians. (b) Notwithstanding any provision of this Contract to the
contrary, settlement and payment for securities received for the account of
each Fund and delivery of securities maintained for the account of each
Fund may be effected in accordance with the customary established
securities trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivering securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a receipt with
the expectation of receiving later payment for such securities from such
purchaser or dealer. (c) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such entity's nominee to the
same extent as set forth in Section 2.3 of this Contract, and each Fund
agrees to hold any such nominee harmless from any liability as a holder of
record of such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign sub-custodian
shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the
Custodian and each Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of a Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to
any claims against a foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent
that such Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
12
<PAGE>
3.10 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in this Contract and, regardless
of whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank as
contemplated by Section 3.13 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has otherwise exercised
reasonable care. Notwithstanding the foregoing provisions of this Section
3.10, in delegating custody duties to State Street London Ltd., the
Custodian shall not be relieved of any responsibility to each Fund for any
loss due to such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization, insurrection,
civil strife or armed hostilities) or (b) other losses (excluding a
bankruptcy or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or other losses under
circumstances where the Custodian and State Street London Ltd. have
exercised reasonable care.
3.11 Reimbursement for Advances. If, pursuant to Proper Instructions, a Fund
requires the Custodian to advance cash or securities for any purpose for
the benefit of a Fund including the purchase or sale of foreign exchange or
of contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of
this Contract, except such as may arise from events or circumstances for
which the Custodian or a sub-custodian are liable pursuant to Sections 3.9
and 3.10 above, or from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at any time
held for the account of the applicable Fund shall be security therefor and
should such Fund fail to repay the Custodian promptly, the Custodian shall
upon prior written notice be entitled to utilize available cash and to
dispose of such Fund's assets to the extent necessary to obtain
reimbursement.
3.12 Monitoring Responsibilities. The Custodian shall furnish annually to each
Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian and such other information needed
to permit the Fund to comply with Section 17f-5 under the 1940 Act. Such
information shall be similar in kind and scope to that furnished to each
Fund in connection with the initial approval of this Contract. In addition,
the Custodian will promptly inform each Fund in the event that the
Custodian learns of a material adverse change in the financial condition of
a foreign sub-custodian or any material loss of the assets of each Fund or
in the case of any foreign sub-custodian not the subject of an exemptive
order from the Securities and Exchange Commission is notified by such
foreign sub-custodian that there appears to be a substantial likelihood
that its shareholders' equity
13
<PAGE>
will decline below $200 million (U.S. dollars or the equivalent thereof) or
that its shareholders' equity has declined below $200 million (in each case
computed in accordance with generally accepted U.S. accounting principles).
3.13 Branches of U.S. Banks. (a) Except as otherwise set forth in this Contract,
the provisions hereof shall not apply where the custody of a Fund's assets
are maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment Company Act of 1940
meeting the qualification set forth in Section 26(a) of said Act. The
appointment of any such branch as a sub-custodian shall be governed by
Article 1 of this Contract. (b) Cash held for each Fund in the United
Kingdom shall be maintained in an interest bearing account established for
each Fund with the Custodian's London branch, which account shall be
subject to the direction of the Custodian, State Street London Ltd. or
both.
3.14 Tax Law. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on any Fund or the Custodian as
custodian of such Fund by the tax law of the United States of America or
any state or political subdivision thereof. It shall be the responsibility
of each Fund to notify the Custodian of the obligations imposed on each
Fund or the Custodian as custodian of each Fund by the tax law of
jurisdictions other than those mentioned in the above sentence, including
responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist each Fund with respect to any claim for
exemption or refund under the tax law of jurisdictions for which each Fund
has provided such information.
4. Payments for Sales or Repurchases or Redemptions of Shares of each Fund
-----------------------------------------------------------------------
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent of each Fund and deposit into the account of each Fund such
payments as are received for Shares of each Fund issued or sold from time to
time by each Fund. The Custodian will provide timely notification to each Fund
and the Transfer Agent of any receipt by it of payments for Shares of such Fund.
From such funds as may be available for the purpose but subject to the
limitations of each Fund's governing documents and any applicable votes of the
Board of each Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of each Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of each Fund, the Custodian shall honor checks drawn on
the
14
<PAGE>
Custodian by a holder of Shares, which checks have been furnished by such
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between each Fund and the Custodian.
5. Proper Instructions
-------------------
Proper Instructions as used throughout this Contract means a writing signed
or initialed by one or more person or persons as the Board of each Fund shall
have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. Each Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of each Fund
accompanied by a detailed description of procedures approved by the Board,
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board and the
Custodian are satisfied that such procedures afford adequate safeguards for such
Fund's assets. For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-party agreement
which requires a segregated asset account in accordance with Section 2.12.
6. Actions Permitted without Express Authority
-------------------------------------------
The Custodian may in its discretion, without express authority from each
Fund:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to
the applicable Fund;
1) surrender securities in temporary form for securities in definitive
form;
2) endorse for collection, in the name of each Fund, checks, drafts and
other negotiable instruments; and
3) in general, attend to all ministerial details in connection with the
sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of each Fund except as otherwise
directed by the Board of each Fund.
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<PAGE>
7. Evidence of Authority
---------------------
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper reasonably
believed by it to be genuine and to have been properly executed by or on behalf
of each Fund. The Custodian may receive and accept a certified copy of a vote of
the Board of each Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board pursuant to the governing documents of each Fund as described in
such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and Calculation of
Net Asset Value and Net Income
---------------------------------------------------------------------------
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of each Fund to keep the books of
account of each Fund and/or compute the net asset value per share of the
outstanding shares of each Fund or, if directed in writing to do so by each
Fund, shall itself keep such books of account and/or compute such net asset
value per share. If so directed, the Custodian shall also calculate daily the
net income of each Fund as described in each Fund's currently effective
Prospectus and shall advise each Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an officer of each
Fund to do so, shall advise the Transfer Agent periodically of the division of
such net income among its various components. The calculations of the net asset
value per share and the daily income of each Fund shall be made at the time or
times described from time to time in each Fund's currently effective Prospectus.
9. Records
-------
The Custodian shall with respect to each Fund create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of each Fund under the Investment Company
Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of each Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the applicable
Fund and employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the request of any Fund, supply such Fund with a tabulation
of securities owned by such Fund and held by the Custodian and shall, when
requested to do so by a Fund and for such compensation as shall be agreed upon
between such Fund and the Custodian, include certificate numbers in such
tabulations.
10. Opinion of Fund's Independent Accountant
----------------------------------------
The Custodian shall take all reasonable action, as each Fund may from time
to time request, to obtain from year to year favorable opinions from each Fund's
independent accountants with respect to its activities hereunder in connection
with the preparation of each Fund's Form N-1A,
16
<PAGE>
and Form N-SAR or other annual reports to the Securities and Exchange Commission
and with respect to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
--------------------------------------------------
The Custodian shall provide each Fund, at such times as each Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
each Fund to provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
12. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, determine in accordance with the fee
schedule attached hereto as Schedule B, as amended from time to time as agreed
by each Fund and the Custodian.
13. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to any Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for a Fund) on
all matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to any Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
17
<PAGE>
System or any agent or nominee of any of the foregoing, including, without
limitation, nationalization or expropriation, imposition of currency controls or
restrictions, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, acts
of war or terrorism, riots, revolutions, work stoppages, natural disasters or
other similar events or acts provided Custodian has maintained an adequate
disaster recovery plan; (ii) errors by a Fund or its investment advisor in their
instructions to the Custodian provided such instructions have been in accordance
with this Contract; (iii) the insolvency of or acts or omissions by a Securities
System; (iv) any delay or failure of any broker, agent or intermediary, central
bank or other commercially prevalent payment or clearing system to deliver to
the Custodian's sub-custodian or agent securities purchased or in the remittance
or payment made in connection with securities sold; (v) any delay or failure of
any company, corporation, or other body in charge or registering or transferring
securities in the name of the Custodian, a Fund, the Custodian's sub-custodians,
nominees or agents or any consequential losses arising out of such delay or
failure to transfer such securities including non-receipt of bonus, dividends
and rights and other accretions or benefits; (vi) delays or inability to perform
its duties due to any disorder in market infrastructure with respect to any
particular security or Securities System; and (vii) any provision of any present
or future law or regulation or order of the United States of America, or any
state thereof, or any other country, or political subdivision thereof or of any
court of competent jurisdiction.
Except as expressly provided in Section 3.9, the Custodian shall be liable
for the acts or omissions of a foreign banking institution appointed pursuant to
the provisions of Article 3 to the same extent as set forth in Article 1 hereof
with respect to sub-custodians located in the United States.
If a Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the reasonable opinion of the Custodian, result in the Custodian or its nominee
assigned to a Fund being liable for the payment of money or incurring liability
of some other form, such Fund, as a prerequisite to requiring the Custodian to
take such action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If a Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlements)
or in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of such Fund shall be security
therefor and should such Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to dispose of such
Fund's assets to the extent necessary to obtain reimbursement.
18
<PAGE>
In no event shall the Custodian be liable for indirect, special or
consequential damages.
14. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; provided, however that the
Custodian shall not with respect to each Fund act under Section 2.10 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of each Fund has approved the initial use of
a particular Securities System by each Fund, as required by Rule 17f-4 under the
Investment Company Act of 1940, as amended and that the Custodian shall not with
respect to a Fund act under Section 2.11 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary that the Board
has approved the initial use of the Direct Paper System by each Fund; provided
further, however, that a Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of its governing documents, and further provided, that a Fund may at any time by
action of its Board (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, each Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination as provided
herein.
15. Successor Custodian
-------------------
If a successor custodian for a Fund shall be appointed by the Board of such
Fund, the Custodian shall, upon termination, and upon receipt of a certified
copy of such vote, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of such
Fund then held by it hereunder and shall transfer to an account of the successor
custodian all of the securities of such Fund held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of the
applicable Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board shall have been delivered to the Custodian
on or before the date when such
19
<PAGE>
termination shall become effective, then the Custodian shall have the right to
deliver to a bank or trust company, which is a "bank" as defined in the
Investment Company Act of 1940, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities, funds and other properties held by
the Custodian on behalf of such Fund and all instruments held by the Custodian
relative thereto and all other property held by it under this Contract on behalf
of such Fund and to transfer to an account of such successor custodian all of
the securities of such Fund held in any Securities System. Thereafter, such bank
or trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of a Fund to procure the certified copy of the vote referred to above or
of the Board to appoint a successor custodian, the Custodian shall be entitled
to fair compensation for its services during such period as the Custodian
retains possession of such securities, funds and other properties and the
provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and each
Fund, may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the governing documents of any Fund. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment of
this Contract.
17. Additional Funds
----------------
In the event that any mutual funds in addition to the Funds are hereafter
established which desire to have the Custodian render services as custodian
under the terms hereof, it shall so notify the Custodian in writing, and if the
Custodian agrees in writing to provide such services, such fund shall become a
Fund hereunder, subject to the delivery by the new Fund of resolutions
authorizing the appointment of the Custodian and such other supporting or
related documentation as the Custodian may request. All references to the "Fund"
are to each of the Funds listed on Appendix 1 individually, as if this Contract
were between each such individual Fund and the Custodian.
18. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
20
<PAGE>
19. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between each of the Funds and the Custodian relating to the custody of
such Fund's assets.
20. Shareholder Communications
--------------------------
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs each Fund to indicate whether such Fund authorizes
the Custodian to provide such Fund's name, address, and share position to
requesting companies whose stock each Fund owns. If a Fund tells the Custodian
"no", the Custodian will not provide this information to requesting companies.
If a Fund tells the Custodian "yes" or do not check either "yes" or "no" below,
the Custodian is required by the rule to treat such Fund as consenting to
disclosure of this information for all securities owned by such Fund or any
funds or accounts established by each Fund. For each Fund's protection, the Rule
prohibits the requesting company from using such Fund's name and address for any
purpose other than corporate communications. Please indicate below whether each
Fund consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the name,
address, and share positions of each Fund listed on
Appendix 1.
NO [X] The Custodian is not authorized to release the
name, address, and share positions of each Fund listed
on Appendix 1.
21. Limitation of Liability.
------------------------
The execution of this Contract has been authorized by each Fund's Board.
This Contract is executed on behalf of each Fund or, in the case of a Fund
organized as a business trust, the trustees of such Fund as trustees and not
individually and the obligations of each Fund under this Contract are not
binding upon any of such Fund's trustees, officers or shareholders individually
but are binding only upon the assets and property of such Fund. A Certificate of
Trust in respect of each Fund organized as a business trust is on file with the
Secretary of the Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 1st day of May, 1997.
EACH OF THE FUNDS LISTED ON APPENDIX 1
By: /s/ Michael E. Haylon
--------------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ronald E. Logue
--------------------------
Executive Vice President
<PAGE>
APPENDIX 1
Fund Names
(as of May 1, 1997)
Phoenix California Tax Exempt Bonds, Inc.
The Phoenix Edge Series Fund
Real Estate Securities Series
Phoenix Income and Growth Fund
Phoenix Multi-Portfolio Fund
Phoenix Diversified Income Portfolio
Phoenix Emerging Markets Bond Portfolio
Phoenix Endowment Equity Portfolio
Phoenix Real Estate Securities Portfolio
Phoenix Mid Cap Portfolio
Phoenix Tax-Exempt Bond Portfolio
Phoenix Multi-Sector Fixed Income Fund, Inc.
Phoenix Multi-Sector Short Term Bond Fund
Phoenix Series Fund
Phoenix Aggressive Growth Fund Series
Phoenix Balanced Fund Series
Phoenix Convertible Fund Series
Phoenix Growth Fund Series
Phoenix High Yield Fund Series
Phoenix Money Market Series
Phoenix U.S. Government Securities Fund Series
Phoenix Strategic Allocation Fund, Inc.
Phoenix Strategic Equity Series Fund
Phoenix Equity Opportunities Fund
Phoenix Micro Cap Fund
Phoenix Small Cap Fund
Phoenix Strategic Theme Fund
Phoenix Duff & Phelps Institutional Mutual Funds
Enhanced Reserves Portfolio
Real Estate Equity Securities Portfolio
<PAGE>
Schedule A
----------
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of each Fund for use as
sub-custodians for the Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
- - ----------------------------
Fund's Authorized Officer
Date:
-------------------------
<PAGE>
[LOGO]State Street
SCHEDULE B
STATE STREET BANK AND TRUST COMPANY
Custodian Fee Schedule
Effective June 1, 1996
Phoenix Duff and Phelps Funds
- --------------------------------------------------------------------------------
I. Administration
Domestic Custody - Maintain custody of fund assets. Settle portfolio
purchases and sales. Report buy and sell fails. Determine and collect
portfolio income. Make cash disbursements and report cash transactions.
Monitor corporate actions. Report portfolio positions. The custody fee
shown below is an annual charge, billed and payable monthly, based on
average monthly net assets.
Average Monthly Net Assets Annual Fees in Basis Points
-------------------------- ---------------------------
First $3 Billion .5
Next $2 Billion .375
Thereafter .25
II. Domestic Portfolio Trades - For each line item processed
State Street Bank Repos $ 7.00
DTC or Fed Book Entry $ 6.00
New York Physical Settlements $25.00
Physical Maturities-delivery and collection fee $33.00
All other trades $16.00
III. International Custody - Maintain custody of funds assets. Settle portfolio
purchases and sales. Report buy and sell fails. Determine and collect
portfolio income. Make cash disbursements and report cash transactions in
local and base currency. Report foreign taxes. File foreign tax reclaims.
Monitor corporate actions. Report portfolio positions.
<PAGE>
[LOGO]State Street
A. Country Grouping
- - ---------------------
Group A Group B Group C Group D Group E
- - ------- ------- ------- ------- -------
Austria Australia Denmark Indonesia Argentina
Canada Belgium Finland Malaysia Bangladesh
Euroclear Hong Kong France Mexico Brazil
Germany Netherlands Ireland Portugal Chile
Japan New Zealand Italy South Korea China
Singapore Luxembourg Spain Columbia
Switzerland Norway Sri Lanka Cypress
Philippines Sweden Greece
Thailand Taiwan Hungary
United Kingdom India
Israel
Pakistan
Peru
Turkey
Uruguay
Venezuela
B. Transaction Charges
- - ------------------------
Group A Group B Group C Group D Group E
- - ------- ------- ------- ------- -------
$26 $30 $45 $60 $75
C. Holding Charges in Basis Points (Annual Fee)
- - -------------------------------------------------
Assets Group A Group B Group C Group D Group E
- - ------ ------- ------- ------- ------- -------
First $100 MM 5.0 8.0 13.0 15.0 25.0
Next $100 MM 4.0 6.0 10.0 13.0 25.0
Excess 3.0 5.0 8.0 13.0 25.0
IV. Options
Option charge for each option written or
closing contract, per issue, per broker $25.00
Option expiration charge, per issue, per broker $15.00
Option exercised charge, per issue, per broker $15.00
<PAGE>
[LOGO]State Street
V. Lending of Securities
Deliver loaned securities versus cash collateral $20.00
Deliver loaned securities versus securities collateral $30.00
Receive/deliver additional cash collateral $ 6.00
Substitutions of securities collateral $30.00
Deliver cash collateral versus receipt of loaned securities $15.00
Deliver securities collateral versus receipt of
loaned securities $25.00
Loan administration -- mark-to-market per day, per loan $ 3.00
VI. Interest Rate Futures
Transactions -- no security movement $ 8.00
VII. Coupon Bonds
Monitoring for calls and processing coupons --
for each coupon issue held -- monthly charge $ 5.00
VIII. Holdings Charge
For each issue maintained -- monthly charge $ 5.00
IX. Principal Reduction Payments Per Paydown $10.00
<PAGE>
[LOGO]State Street
X. Special Services
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, extraordinary security shipments
and the preparation of special reports will be subject to negotiation.
Fees for tax accounting/recordkeeping for options, financial futures,
and other special items will be negotiated separately.
Account Position Appraisal
--------------------------
Special appraisal by industry classification:
Monthly fee - per portfolio $50.00
XI. Out-of-Pocket Expenses
----------------------
A billing for the recovery of applicable out-of-pocket expenses will
be made as of the end of each month. Out-of-pocket expenses include,
but are not limited to the following:
Telephone
Wire Charges ($4.70 per wire in and $4.55 out)
Postage and Insurance
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer -- $8.00 Each
Transfer Fees
Sub-custodian Charges
Price Waterhouse Audit Letter
Federal Reserve Fee for Return Check items over $2,500 - $4.25
GNMA Transfer - $15 each
PTC Deposit/Withdrawal for same day turnarounds - $50.00
XII. Payment
The above fees will be charged against the fund's custodian checking
account five (5) days after the invoice is mailed to the fund's
offices.
<PAGE>
[LOGO]State Street
PHOENIX DUFF AND PHELPS FUNDS STATE STREET BANK & TRUST CO.
By /s/ Nancy G. Curtiss By /s/ Charles R. Whittemore, Jr.
------------------------------ ------------------------------
Title Treasurer Title Vice President
------------------------------ ------------------------------
Date June 13, 1997 Date June 11, 1996
------------------------------ ------------------------------
FINANCIAL AGENT AGREEMENT
THIS AGREEMENT made and concluded as of this 1st day of July, 1998 by and
between Phoenix Equity Planning Corporation, a Connecticut corporation having a
place of business located at 100 Bright Meadow Boulevard, Enfield, Connecticut
(the "Financial Agent") and each of the undersigned mutual funds (hereinafter
collectively and singularly referred to as the "Trust").
WITNESSETH THAT:
1. Financial Agent shall keep the books of the Trust and compute the daily
net asset value of shares of the Trust in accordance with instructions received
from time to time from the Board of Trustees of the Trust; which instructions
shall be certified to Financial Agent by the Trust's Secretary. Financial Agent
shall report such net asset value so determined to the Trust and shall perform
such other services as may be requested from time to time by the Trust as are
reasonably incidental to Financial Agent's duties hereunder.
2. Financial Agent shall be obligated to maintain, for the periods and in
the places required by Rule 31a-2 under the Investment Company Act of 1940, as
amended, those books and records maintained by Financial Agent. Such books and
records are the property of the Trust and shall be surrendered promptly to the
Trust upon its request. Furthermore, such books and records shall be open to
inspection and audit at reasonable times by officers and auditors of the Trust.
3. As compensation for its services hereunder during any fiscal year of the
Trust, Financial Agent shall receive, within eight days after the end of each
month, a fee as specified in Schedule A.
4. Financial Agent shall not be liable for anything done or omitted to be
done by it in the exercise of due care in discharging its duties specifically
described hereunder. Financial Agent shall be protected in acting upon any
instruction, notice, request, consent, certificate, resolution, or other
instrument or paper believed by Financial Agent to be genuine, and to have been
properly executed, and shall, unless otherwise specifically provided herein, be
entitled to receive as conclusive proof of any fact or matter required to be
ascertained by Financial Agent hereunder a certificate signed by the Secretary
of the Trust. Financial Agent shall be entitled, with respect to questions of
law relating to its duties hereunder, to advice of counsel (which may be counsel
for the Trust) and, with respect to anything done or omitted by it in good faith
hereunder in conformity with the advice of or based upon an opinion of counsel,
to be held harmless by the Trust from all claims of loss or damage. Nothing
herein shall protect Financial
<PAGE>
Agent against any liability to the Trust or to its respective shareholders to
which Financial Agent would otherwise be subject by reason of its willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties
hereunder. Except as provided in this paragraph, Financial Agent shall not be
entitled to any indemnification by the Trust.
5. Subject to prior approval of the Board of Trustees of the Trust,
Financial Agent may appoint one or more sub-financial agents to perform any of
the functions and services which are to be provided under the terms of this
Agreement upon such terms and conditions as may be mutually agreed upon by the
Trust, Financial Agent and such sub-financial agent.
6. This Agreement shall continue in effect only so long as (a) such
continuance is specifically approved at least annually by the Board of Trustees
of the Trust or by a vote of a majority of the outstanding voting securities of
the Trust, and (b) the terms and any renewal of such Agreement have been
approved by the vote of a majority of the trustees of the Trust who are not
parties to this Agreement or interested persons, as that term is defined in the
Investment Company Act of 1940, as amended, of any such party, cast in person at
a meeting called for the purpose of voting on such approval. A "majority of the
outstanding voting securities of the Trust" shall have, for all purposes of this
Agreement, the meaning provided therefor in said Investment Company Act.
7. Either party may terminate the within Agreement by tendering written
notice to the other, whereupon Financial Agent will be relieved of the duties
described herein. This Agreement shall immediately terminate in the event of its
assignment, as that term is defined in said Investment Company Act.
8. Additional funds may become party to this Agreement by notifying the
Financial Agent in writing, and if the Financial agent agrees in writing to
provide its services, such fund shall become a Trust subject to the terms of the
Agreement. Such notification shall include a revised Schedule A reflecting the
new fund(s) as added to the appropriate fund classification(s).
<PAGE>
9. This Agreement shall be construed and the rights and obligations of the
parties hereunder enforced in accordance with the laws of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the parties 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 /s/ Gail P. Seneca
---------------------
Gail P. Seneca
President
PHOENIX EQUITY PLANNING
CORPORATION
By /s/ Philip R. McLoughlin
------------------------
Philip R. McLoughlin
President
<PAGE>
SCHEDULE A
(Effective January 1, 1999)
Fee Information For Services as Financial Agent
For its services hereunder, Financial Agent shall be paid a fee equal to the sum
of (1) the documented cost of fund accounting and related services provided by
PFPC, Inc., as subagent, to Financial Agent, plus (2) the documented cost to
Financial Agent to provide financial reporting and tax services and oversight of
subagent's performance.
The current PFPC fees are attached hereto and made a part hereof.
<PAGE>
PFPC Fee Schedule
<TABLE>
<CAPTION>
- --------------------------------------
Assets Under Management Fees
- --------------------------------------
<S> <C>
$0 - $200,000,000 0.0850%
- --------------------------------------
$200 - $400,000,000 0.0500%
- --------------------------------------
$400 - $600,000,000 0.0300%
- --------------------------------------
$600 - $800,000,000 0.0200%
- --------------------------------------
$800 - $1,000,000,000 0.0150%
- --------------------------------------
> $1,000,000,000 0.0125%
- --------------------------------------
Minimum Fund Fee $84,000
- --------------------------------------
Additional Class $12,000
- --------------------------------------
</TABLE>
Existing Portfolios:
- --------------------
Asset Based Fees < $50MM WAIVED
Class Fees - WAIVED
Minimum Fund Fees - WAIVED
New Portfolios (First Year):
- ----------------------------
Asset Based Fees < $50 MM - 50% WAIVED
Class Fees < $25 MM per Class - WAIVED
Minimum Fund Fees - WAIVED
New Portfolios (There After):
- -----------------------------
Asset Based Fees < $50MM - 25% WAIVED
Class Fees < $25 MM per Class - 50% WAIVED
Minimum Fund Fees < $50 MM - 50% WAIVED
Minimum Fund Fees $50-100 MM - 25% WAIVED
Variable Unit Investment Trust Valuation and Reporting
- ------------------------------------------------------
$1,500 per Unit Investment Trust
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 8 to the Registration Statement on Form N-1A of our report dated
November 16, 1999, relating to the financial statements and financial highlights
of the Phoenix-Seneca Bond Fund, Phoenix-Seneca Growth Fund, Phoenix-Seneca
Mid-Cap "Edge" Fund and Phoenix-Seneca Real Estate Securities Fund (the
"Funds"), which appear in the September 30, 1999 Annual Report to Shareholders
of the Funds, which are also incorporated by reference into the Registration
Statement. We also consent to the references to us under the headings "Financial
Highlights" and "Independent Accountants" in such Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 21, 2000
POWER OF ATTORNEY
I, the undersigned member of the Board of Trustees of Phoenix-Seneca
Funds, hereby constitute and appoint Gail P. Seneca and Thomas N. Steenburg or
either of them as my true and lawful attorneys and agents with full power to
sign for me in the capacity indicated below, any or all Registration Statements
or amendments thereto filed with the Securities and Exchange Commission under
the securities Act of 1933 and/or the Investment Company Act of 1940 relating to
the Phoenix-Seneca Funds, and hereby ratify and confirm my signature as it may
be signed by said attorneys and agents.
I hereby further revoke any and all powers of attorney previously given
by me with respect to said Phoenix-Seneca Funds, provided that this revocation
shall not affect the exercise of such prior powers prior to the date hereof.
WITNESS my hand and seal on the date set forth below.
January 19, 2000 /s/ Philip R. McLoughlin
------------------------
Philip R. McLoughlin
