As filed with the Securities and Exchange Commission on November , 1998
Registration No. 333-5039
File No. 811-7643
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
Under the
SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 3 [X]
and/or
REGISTRATION STATEMENT
Under the
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 5 [X]
(Check appropriate box or boxes)
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Phoenix-Aberdeen Series Fund
(Exact Name of Registrant as Specified in Charter)
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101 Munson Street, Greenfield, Massachusetts 01301
(Address of Principal Executive Offices) (Zip Code)
(800) 243-1574
(Registrant's Telephone Number, including Area Code)
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Thomas N. Steenburg
Vice President, Counsel and Secretary
Phoenix Investment Partners, Ltd.
56 Prospect Street
Hartford, Connecticut 06115-0479
(name and address of Agent for Service)
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It is proposed that this filing will become effective (check
appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on November 27, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on ________________ pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on ________________ pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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<PAGE>
PHOENIX-ABERDEEN SERIES FUND
Cross Reference Sheet
Pursuant to Rule 495
Under the Securities Act of 1933
PART A
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
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<S> <C> <C>
1. Cover Page .................................... Cover Page
2. Synopsis ...................................... Fund Expenses
3. Financial Highlights .......................... Financial Highlights
4. General Description of Registrant ............. Cover Page, Introduction, Investment Objectives
and Policies, Investment Techniques and Related
Risks, Investment Restrictions, and Additional
Information
5. Management of the Fund ........................ Fund Expenses and Management of the Fund
6. Capital Stock and Other Securities ............ Distribution Plans, How to Buy Shares, Investor
Account Services, Dividends, Distributions and
Taxes, and Additional Information
7. Purchase of Securities Being Offered .......... Fund Expenses, Distribution Plans, How to Buy
Shares and Net Asset Value
8. Redemption or Repurchase ...................... Fund Expenses and How to Redeem Shares
9. Pending Legal Proceedings ..................... Not Applicable
</TABLE>
PART B
<TABLE>
<CAPTION>
Form N-1A Item SAI Caption
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<S> <C> <C>
10. Cover Page ...................................... Cover Page
11. Table of Contents ............................... Table of Contents
12. General Information and History ................. The Trust
13. Investment Objective and Policies ............... Investment Objectives and Policies and
Investment Restrictions
14. Management of the Fund .......................... Trustees and Officers
15. Control Persons and Principal Holders of
Securities ...................................... Trustees and Officers
16. Investment Advisory and Other Services .......... Services of the Adviser, Distribution Plans and
Other Information
17. Brokerage Allocation ............................ Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities .............. The Fund
19. Purchase, Redemption and Pricing of Securities
Being Offered ................................... Net Asset Value, How to Buy Shares, Alternative
Purchase Arrangements, Investor Account
Services, Redemption of Shares, and Dividends,
Distributions and Taxes
20. Tax Status ...................................... Dividends, Distributions and Taxes
21. Underwriters .................................... The Distributor
22. Calculation of Performance Data ................. Performance Information
23. Financial Statements ............................ Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of the Registration Statement.
<PAGE>
[COVER]
PHOENIX
ABERDEEN
Prospectus November 27, 1998
PHOENIX-ABERDEEN
NEW ASIA FUND
PHOENIX-ABERDEEN
GLOBAL SMALL CAP FUND
[PHOENIX INVESTMENTS PARTNERS LOGO]
<PAGE>
PHOENIX-ABERDEEN NEW ASIA FUND
PHOENIX-ABERDEEN GLOBAL SMALL CAP FUND
101 Munson Street
Greenfield, MA 01301
PROSPECTUS
November 27, 1998
Phoenix-Aberdeen New Asia Fund (the "New Asia Fund") seeks as its
investment objective long term capital appreciation. It is intended that this
Series will invest primarily in a diversified portfolio of equity securities of
issuers located in at least three different countries throughout Asia other
than Japan.
Phoenix-Aberdeen Global Small Cap Fund (the "Global Fund") seeks as its
investment objective long-term capital appreciation. It is intended that this
Series will invest primarily in a globally diversified portfolio of equity
securities of small and medium sized companies.
Phoenix-Aberdeen Series Fund (the "Trust") is an open-end management
investment company whose shares are offered in two series (each a "Fund" and
collectively the "Funds"). Each series generally operates as a separate fund
with its own investment objective and policies designed to meet specific
investment goals. There can be no assurance that any series will achieve its
investment objectives.
This Prospectus sets forth concisely the information about the Funds that
a prospective investor should know before investing. No dealer, salesperson or
other person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, and, if given
or made, such other information or representations must not be relied upon as
having been authorized by the Funds, Adviser, or Distributor. This Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any
of the securities offered hereby in any state in which, or to any person whom,
it is unlawful to make such offer. Neither the delivery of this Prospectus nor
any sale hereunder shall, under any circumstances, create any implication that
information herein is correct at any time subsequent to its date. Investors
should read and retain this Prospectus for future reference. Additional
information about the Funds is contained in the Statement of Additional
Information dated November 27, 1998 which has been filed with the Securities
and Exchange Commission (the "Commission") and is available at no charge by
calling (800) 243-4361 or by writing to Phoenix Equity Planning Corporation, at
100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200.
The Statement of Additional Information is incorporated herein by reference.
The Commission maintains a Web site (http://www.sec.gov) that contains
this Prospectus, the Statement of Additional Information, material incorporated
by reference, and other information regarding registrants that file
electronically with the Commission.
Shares of the Trust are not deposits or obligations of, or guaranteed or
endorsed by, any bank, credit union or affiliated entity and are not federally
insured or otherwise protected by the Federal Deposit Insurance Corporation
(FDIC), the Federal Reserve Board or any other agency and involve investment
risk including the possible loss of principal.
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LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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CUSTOMER SERVICE: (800) 243-1574
MARKETING: (800) 243-4361
TELEPHONE ORDERS: (800) 367-5877
TELECOMMUNICATION DEVICE (TTY): (800) 243-1926
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
INTRODUCTION ..................................... 2
FUND EXPENSES .................................... 3
FINANCIAL HIGHLIGHTS ............................. 5
PERFORMANCE INFORMATION .......................... 6
INVESTMENT OBJECTIVES AND POLICIES ............... 7
INVESTMENT TECHNIQUES AND RELATED RISKS .......... 9
INVESTMENT RESTRICTIONS .......................... 12
MANAGEMENT OF THE FUNDS .......................... 12
DISTRIBUTION PLANS ............................... 14
HOW TO BUY SHARES ................................ 15
INVESTOR ACCOUNT SERVICES ........................ 20
NET ASSET VALUE .................................. 21
HOW TO REDEEM SHARES ............................. 22
DIVIDENDS, DISTRIBUTIONS AND TAXES ............... 23
ADDITIONAL INFORMATION ........................... 23
</TABLE>
INTRODUCTION
This Prospectus describes the shares offered by and the operations of
Phoenix-Aberdeen Series Fund (the "Trust"). The Trust is an open-end management
investment company established as a business trust under the laws of the
Commonwealth of Massachusetts by an Agreement and Declaration of Trust dated
May 31, 1996 (the "Declaration of Trust"). Shares of the Trust are divided into
two series, each a "Fund" and collectively the "Funds." Each Fund has a
different investment objective and invests primarily in certain types of
securities, as described on the cover page of this Prospectus, and is designed
to meet different investment needs.
Investment Adviser
The Fund is managed by Phoenix-Aberdeen International Advisors, LLC (the
"Adviser"). The Adviser is a joint venture between PM Holdings, Inc., a direct
subsidiary of Phoenix Home Life Mutual Insurance Company ("Phoenix Home Life"),
and Aberdeen Fund Managers, Inc., a wholly-owned subsidiary of Aberdeen Asset
Management PLC (previously known as Aberdeen Trust plc). The Adviser is
entitled to a monthly management fee at an annual rate of 0.85% of the average
aggregate daily net asset values of the New Asia Fund and Global Fund. See
"Management of the Fund" for a description of the Investment Advisory
Agreement, management fees and the Adviser's undertaking to reimburse the Fund
for certain expenses.
Distributor and Distribution Plans
Phoenix Equity Planning Corporation ("Equity Planning" or "Distributor"),
serves as national distributor of the Funds' shares. See "Distribution Plans"
and the Statement of Additional Information. Equity Planning also acts as
financial agent of the Funds and as such receives a fee. See "The Financial
Agent." Equity Planning also serves as the Funds' transfer agent. See "The
Custodian and Transfer Agent."
The Fund has adopted distribution plans pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, (the "1940 Act") for all classes of
each Fund. Pursuant to each of the distribution plans, an amount equal to 0.25%
annually of the average daily net assets of Class A and Class B Shares of each
Fund shall be paid to Equity Planning for furnishing shareholder services
("Service Fee"). Pursuant to the Class B distribution plan, amounts not
exceeding 0.75% annually of the average daily net assets of Class B Shares of
each Fund may be reimbursed to Equity Planning to finance the distribution of
Class B Shares. See "Distribution Plans."
Purchase of Shares
Each Fund currently offers two classes of shares which 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 Shares") or (ii) on a contingent deferred basis ("Class B Shares").
Completed applications for the purchase of shares should be mailed to the
Phoenix Funds, c/o State Street Bank and Trust Company, P.O. Box 8301, Boston,
MA 02266-8301.
Class A Shares are offered to the public at the next determined net asset
value after receipt of the order by State Street Bank and Trust Company ("State
Street Bank"), plus a maximum sales charge of 4.75% of the offering price
(4.99% of the amount invested) on single purchases of less than $50,000. The
sales charge for Class A Shares is reduced on a graduated scale on single
purchases of $50,000 or more and subject to other conditions stated below. See
"How to Buy Shares," "How to Obtain Reduced Sales Charges--Class A Shares" and
"Net Asset Value."
Class B Shares are offered to the public at the next determined net asset
value after receipt of an order by State Street Bank with no sales charge.
Class B Shares are subject to a sales charge if they are redeemed within five
years of purchase. See "How to Buy Shares" and "Deferred Sales Charge
Alternative--Class B Shares."
Shares of each class represent an identical interest in the investment
portfolio of that Series and have the same rights, except that Class B Shares
bear the cost of higher distribution
2
<PAGE>
fees and certain other expenses resulting from the deferred sales charge
arrangements, which cause Class B Shares to have a higher expense ratio and to
pay lower dividends than Class A Shares. See "How to Buy Shares."
Minimum Initial and Subsequent Investments
The minimum initial investment is $500 ($25 if using the bank draft
investing program designated "Investo-Matic") and the minimum subsequent
investment is $25. Exceptions to the minimum and subsequent investment amounts
are available under specific circumstances. See "How to Buy Shares."
Redemption of Shares
Class A Shares may be redeemed at any time at the net asset value per
share next computed after receipt of a redemption request by State Street Bank.
Class B shareholders redeeming shares within five years of the date of purchase
will normally be assessed a contingent deferred sales charge. See "How to
Redeem Shares."
Risk Factors
There can be no assurance that a Fund will achieve its investment
objectives. Special risks may be presented by the particular types of
securities in which the Funds may invest. As a result of each Fund's investment
in securities of foreign issuers, and, in particular, issuers located in
specific areas of the globe, each Fund's assets may be highly susceptible to
economic, political and currency changes affecting securities of such issuers.
The securities markets of emerging market countries in which certain issuers
may be located are substantially smaller, less developed, less liquid, and more
volatile than the securities markets of the United States and other more
developed countries. The risk factors relevant to investment in each Fund
should be reviewed and are set forth in the "Investment Objectives and
Policies" and "Investment Techniques and Related Risks" sections of this
Prospectus and Statement of Additional Information.
FUND EXPENSES
The following table illustrates all expenses and fees that a shareholder
will incur. The expenses and fees set forth in the table were for the fiscal
year ended July 31, 1998.
<TABLE>
<CAPTION>
New Asia Fund Global Fund
-------------------------------------- --------------------------------------
Class A Shares Class B Shares Class A Shares Class B Shares
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a 4.75% None 4.75% None
percentage of offering price)
Maximum Sales Load Imposed on Reinvested None None None None
Dividends
Deferred Sales Load (as a percentage of original None 5% during the None 5% during the
purchase price or redemption proceeds, as first year, first year,
applicable) decreasing 1% decreasing 1%
annually to 2% annually to 2%
during the fourth during the fourth
and fifth years; and fifth years;
dropping to 0% dropping to 0%
after the fifth year after the fifth year
Redemption Fee None None None None
Exchange Fee None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets):
Management Fees 0.85% 0.85% 0.85% 0.85%
12b-1 Fees (a) 0.25% 1.00% 0.25% 1.00%
Other Operating Expenses
(After Reimbursement) 1.00%(b) 1.00%(b) 1.00%(c) 1.00%(c)
------ ---- ------ ----
Total Fund Operating Expenses
(After Expense Reimbursement) 2.10% 2.85% 2.10% 2.85%
====== ==== ====== ====
</TABLE>
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(a) "12b-1 Fees" represent an asset based sales charge that, for a
long-term shareholder, may be higher than the economic equivalent of the
maximum front-end sales charge permitted by the National Association of
Securities Dealers, Inc. ("NASD"). Rule 12b-1 Fees as stated include a Service
Fee. See "Distribution Plans."
(b) The Adviser has agreed to reimburse the New Asia Fund's Class A Shares
and Class B Shares for the amount, if any, by which Other Operating Expenses
for the fiscal year ended July 31, 1999 exceed 1.00% of average net assets of
such Fund. Other Operating Expenses absent expense reimbursement would have
been 2.42% and 2.42% for Class A Shares and Class B Shares, respectively, of
average net assets. Total Fund Operating Expenses would have been 3.52% and
4.27% for Class A Shares and Class B Shares, respectively, absent such
reimbursement.
(c) The Adviser has agreed to reimburse the Global Fund's Class A Shares
and Class B Shares for the amount, if any, by which Other Operating Expenses
for the fiscal year ended July 31, 1999 exceed 1.00% of average net assets of
such Fund. Other Operating Expenses absent expense reimbursement would have
been 1.27% and 1.27% for Class A Shares and Class B Shares, respectively, of
average net assets. Total Fund Operating Expenses would have been 2.37% and
3.12% for Class A Shares and Class B Shares, respectively, absent such
reimbursement.
3
<PAGE>
<TABLE>
<CAPTION>
Example* New Asia Series Global Series
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1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
An investor would pay the following
expenses on a hypothetical $1,000
investment assuming (i) a 5% annual
return and (ii) redemption at the
end of each time period:
Class A Shares $68 $110 $155 $279 $68 $110 $155 $279
Class B Shares $69 $108 $150 $300 $69 $108 $150 $300
An investor would pay the following
expenses on the same $1,000 investment
assuming no redemption at the end of
each time period:
Class A Shares $68 $110 $155 $279 $68 $110 $155 $279
Class B Shares $29 $ 88 $150 $300 $29 $ 88 $150 $300
</TABLE>
*The purpose of the table above is to help the investor understand the
various costs and expenses that the investor will bear directly or indirectly.
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown. Class B
Share figures assume conversion to Class A Shares after eight years. See
"Management of the Fund," "Distribution Plans" and "How to Buy Shares."
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following table sets forth certain financial information for the
Funds. The financial information has been audited by PricewaterhouseCoopers
LLP, independent accountants. Financial statements and notes thereto are
incorporated by reference in the Statement of Additional Information. The
Statement of Additional Information and the Funds' most recent Annual Report
(containing the Report of Independent Accountants and additional information
relating to Fund performance) are available at no charge upon request by
calling (800) 243-4361.
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
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NEW ASIA FUND
<TABLE>
<CAPTION>
Class A Class B
-------------------------------- -------------------------------
From Inception From Inception
Year Ended 9/4/96 to Year Ended 9/4/96 to
7/31/98 7/31/97 7/31/98 7/31/97
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............. $ 10.44 $ 10.00 $ 10.39 $ 10.00
Income from investment operations (7)
Net investment income (loss) .................... 0.06(4)(5) 0.09(4)(5) (0.01) (4)(6) 0.01(4)(6)
Net realized and unrealized gain (loss) ......... (4.75) 0.41 (4.73) 0.43
---------- ---------- ------- -----------
Total from investment operations ............... (4.69) 0.50 (4.72) 0.44
---------- ---------- ------- -----------
Less distributions
Dividends from net investment income ............ (0.10) (0.06) (0.09) (0.05)
In excess of net investment income .............. (0.20) -- (0.18) --
---------- ---------- ------- -----------
Total distributions ............................ (0.30) (0.06) (0.27) (0.05)
---------- ---------- ------- -----------
Change in net asset value ........................ (4.99) 0.44 (4.99) 0.39
---------- ---------- ------- -----------
Net asset value, end of period ................... $ 5.45 $ 10.44 $ 5.40 $ 10.39
========== ========== ======= ===========
Total return(1) .................................. (45.29)% 4.98%(3) (45.83)% 4.37%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) ............ $ 6,352 $13,355 $ 2,756 $ 6,416
Ratio to average net assets of:
Operating expenses .............................. 2.10% 2.10%(2) 2.85% 2.85%(2)
Net investment income ........................... 0.89% 0.95%(2) 0.18% 0.06%(2)
Portfolio turnover ............................... 44% 9%(3) 44% 9%(3)
</TABLE>
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(1) Maximum sales charges are not reflected in the total return calculation.
(2) Annualized
(3) Not annualized
(4) Computed using average shares outstanding.
(5) Includes reimbursement of operating expenses by investment adviser of $0.10
and $0.15, respectively.
(6) Includes reimbursement of operating expenses by investment adviser of $0.10
and $0.15, respectively.
(7) Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from
anticipated results depending on the time of share purchases and
redemptions.
5
<PAGE>
GLOBAL SMALL CAP FUND
<TABLE>
<CAPTION>
Class A Class B
------------------------------- ------------------------------
From Inception From Inception
Year Ended 9/4/96 to Year Ended 9/4/96 to
7/31/98 7/31/97 7/31/98 7/31/97
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .......... $ 11.08 $ 10.00 $ 11.00 $ 10.00
Income from investment operations
Net investment income (loss) ................. (0.7)(4)(5) (0.03)(4)(5) (0.14)(4)(6) (0.10)(4)(6)
Net realized and unrealized gain ............. 0.14 1.11 0.14 1.10
------- -------- ------- --------
Total from investment operations ............ 0.07 1.08 -- 1.00
------- -------- ------- --------
Less distributions
Dividends from net realized gains ............ (0.89) -- (0.89) --
In excess of net investment income ........... (0.15) -- (0.11) --
------- -------- ------- --------
Total distributions ......................... (1.04) -- (1.00) --
------- -------- ------- --------
Change in net asset value ..................... (0.97) 1.08 (1.00) 1.00
------- -------- ------- --------
Net asset value, end of period ................ $ 10.11 $ 11.08 $ 10.00 $ 11.00
======= ======== ======= ========
Total return(1) ............................... 1.86% 10.80%(3) 1.12% 10.00%(3)
Ratios/supplemental data:
Net assets, end of period (thousands) ......... $17,781 $23,874 $12,123 $ 17,658
Ratio to average net assets of:
Operating expenses ........................... 2.10% 2.10%(2) 2.85% 2.85% (2)
Net investment income (loss) ................. (0.65)% (0.32%)(2) (1.40)% (1.07%)(2)
Portfolio turnover ............................ 212% 162%(3) 212% 162%(3)
</TABLE>
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(1) Maximum sales charges are not reflected in the total return calculation.
(2) Annualized
(3) Not annualized
(4) Computed using average shares outstanding.
(5) Includes reimbursement of operating expenses by investment adviser of $0.03
and $0.05, respectively.
(6) Includes reimbursement of operating expenses by investment adviser of $0.03
and $0.05, respectively.
------------------------
PERFORMANCE INFORMATION
Each Fund may, from time to time, include its performance history in
advertisements, sales literature or reports to current or prospective
shareholders. Both yield and total return are computed separately for Class A
Shares and Class B Shares of a Fund in accordance with formulas specified by
the Securities and Exchange Commission. Yield and total return are based on a
Fund's past performance only and are not an indication of future performance.
Performance information about each Fund is based on that Fund's past
performance only and is not an indication of future performance. Performance
information may be expressed as yield of any Fund or Class thereof, and as
total return of any Fund or Class thereof.
The yield of each Fund will be computed by dividing the Fund's net
investment income over a 30-day period by an average value of invested assets
(using the average number of shares entitled to receive dividends and the
maximum offering price per share at the end of the period), all in accordance
with applicable regulatory requirements. Such amount will be compounded for six
months and then annualized for a twelve- month period to derive the Fund's
yield.
Standardized quotations of average annual total return for Class A and
Class B Shares of each Fund will be expressed in terms of the average annual
compounded rate of return of a hypothetical investment in either Class A or
Class B Shares of each Fund over a period of 1, 5, and 10 years (or up to the
life of the class of shares). Standardized total return quotations reflect the
deduction of a proportional share of each Class' expenses (on an annual basis),
deduction of the maximum initial sales load in the case of Class A Shares or
the maximum contingent deferred sales charge applicable to a complete
redemption of the investment in the case of Class B Shares, and assume that all
dividends and distributions on Class A and Class B Shares are reinvested when
paid. It is expected that the performance of Class A Shares will be better than
that of Class B Shares as a result of lower distribution fees and certain
incrementally lower expenses paid by Class A Shares. Each Fund may also quote
supplementally a rate of total return over different periods of time by means
of aggregate, average, and year-by-year or other types of total return figures.
Each Fund may also advertise performance relative to certain performance
rankings and indices compiled by independent organizations. Each Fund may
include the ranking of these performance figures relative to such figures for
groups of mutual funds having similar investment objectives as categorized by
ranking services such as Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Weisenberger Financial Services, Inc., and Morningstar,
Inc. Additionally, each Fund may compare a Fund's performance results to other
investment or savings vehicles (such as certificates of deposit) and may refer
to results published in various publications such as Forbes, Fortune, Money,
Barron's, Investor's Business Daily, The Wall Street Journal, The New
6
<PAGE>
York Times, USA Today, Registered Representative, Financial Planning, Mutual
Funds, Mutual Fund Market News, Financial Times, Investment Adviser, Investment
Week, Money Observer, The International Herald Tribune and other newspapers and
periodicals. Each Fund may also refer to results broadcast on television (such
as CNBC and CNN) and on the radio, as well as electronically (such as via the
Internet). Each Fund may from time to time illustrate the benefits of tax
deferral by comparing taxable investments to investments made through
tax-deferred retirement plans. The total return may also be used to compare the
performance of a Fund with certain widely acknowledged outside standards or
indices for market performance, such as the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500 Index"), Dow Jones Industrial Average, Europe
Australia Far East Index (EAFE), Consumer Price Index, FT/S&P-Actuaries' World
Indicies (medium-small components), Morgan Stanley Capital International
("MSCI") Developed Market Indices and MSCI AC Asia Pacific (excluding Japan)
Index.
Advertisements, sales literature and other communications may contain
information about a Fund or the Adviser's current investment strategies and
management style. Current strategies and style may change to respond to a
changing market and economic conditions. From time to time, a Fund may discuss
specific portfolio holdings or industries in such communications. To illustrate
components of overall performance, a Fund may separate its cumulative and
average annual returns into income results and capital gains or losses; or cite
separately as a return figure the equity or bond portion of a Fund's portfolio;
or compare a Fund's equity or bond return figure to well-known indices of
market performance including but not limited to: the S&P 500 Index, Dow Jones
Industrial Average, CS First Boston High Yield Index, MSCI Developed Market
Indices and AC Asia Pacific (excluding Japan) Index, FT/S&P-Actuaries' World
Indicies (medium-small components) and Solomon Brothers Corporate and
Government Bond Indices.
Performance information for a Fund reflects only the performance of a
hypothetical investment in Class A or Class B Shares of a Fund during the
particular time period on which the calculations are based. Performance
information should be considered in light of a particular Fund's investment
objectives and policies, characteristics and qualities of the Fund, and the
market conditions during the given time period, and should not be considered as
a representation of what may be achieved in the future. For a description of
the methods used to determine total return, see the Statement of Additional
Information.
The Trust's Annual Report, available upon request and without charge,
contains a discussion of the performance of each Fund and a comparison of that
performance to a securities market index.
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has a different investment objective and is designed to meet
different investment needs. The differences in objectives and policies between
the Funds can be expected to affect the investment return of each Fund and the
degree of market and financial risk to which each Fund is subject. The
investment objective of each Fund is a fundamental policy which may not be
changed without the approval of a vote of a majority of the outstanding shares
of that Fund. Since certain risks are inherent in the ownership of any
security, there can be no assurance that any Fund will achieve its investment
objective. The investment policies of each Fund will also affect the rate of
portfolio turnover. A high rate of portfolio turnover generally involves
correspondingly greater brokerage commissions, which are paid directly by the
Fund.
New Asia Fund
The investment objective of the New Asia Fund is to provide long term
capital appreciation. It is intended that this Fund will achieve its objective
by investing under normal market conditions at least 65% of its total assets in
a diversified portfolio of common stocks, convertible securities and preferred
stocks of issuers organized and principally operating (i.e., companies which
derive a significant proportion (at least 50%) of their revenues or profits
from goods produced or sold, investments made, or services performed in such
Asian countries or which have at least 50% of their assets situated in such
countries) in countries throughout Asia (excluding Japan) and whose principal
securities are actively traded on recognized stock exchanges of such countries.
The Fund does not intend to invest in securities which are traded in markets in
Japan or in countries organized under the laws of Japan.
The Fund will invest in countries having more established markets in
regions of Asian countries. The Asian countries to be represented in the Fund
will ordinarily consist of three or more of the following countries: China
(including Hong Kong), India, Indonesia, South Korea, Malaysia, Pakistan, the
Philippines, Singapore, Sri Lanka, Taiwan and Thailand. From time to time the
Fund may invest in South Pacific nations such as Australia and New Zealand.
There is no requirement that the Fund, at any given time, invest in any one
particular country or in all of the countries listed above or in any other
Asian countries or other developing markets that are open to foreign
investment. In determining the appropriate distribution of investments among
various countries and geographic regions, the Adviser ordinarily will consider
the following factors: prospects for relative economic growth among Asian
countries; expected levels of inflation; relative price levels of the various
capital markets; governmental policies influencing business conditions; the
outlook for currency relationships and the range of individual investment
opportunities available to the international investor. Shareholders should be
aware that the Fund may make investments in developing or emerging market
countries, which involve exposure to economic structures that are generally
less diverse and mature than in the United States, and to political systems
which may be less stable. A developing country can be considered to be a
country which is in the initial stages of its industrialization cycle. In the
past, markets of developing countries have been more volatile than the markets
of developed countries; however, such markets often have provided higher rates
of return to investors.
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In certain countries, investments may only be made by investing in other
investment companies that, in turn, are authorized to invest in the securities
that are issued in such countries. The Fund may therefore invest in the
securities of other investment companies subject to the limitations contained
in the 1940 Act (see "Investment Restrictions" in the Statement of Additional
Information). Shareholders should recognize that a Fund's purchase of the
securities of other investment companies (and closed-end companies) results in
the layering of expenses such that shareholders indirectly bear a proportionate
part of the expenses for such investment companies including operating costs,
and investment advisory and administrative fees.
The Fund may establish and maintain reserves of up to 100% of its assets
for temporary defensive purposes under abnormal market or economic conditions.
The Fund's reserves may be invested in domestic as well as foreign short-term
money market instruments including, but not limited to, government obligations,
certificates of deposit, bankers' acceptances, time deposits, commercial paper,
short-term corporate debt securities and repurchase agreements. When the Fund's
assets are held in cash or cash equivalents, it is not investing in securities
intended to meet the Fund's investment objective.
Risk Considerations
There are substantial and different risks involved which should be
carefully considered by any investor considering foreign investments. For
example, there is generally less publicly available information about foreign
countries than is available about companies in the United States. Foreign
companies are generally not subject to uniform audit and financial reporting
standards, practices and requirements comparable to those in the United States.
Foreign securities involve currency risks. Exchange rates are determined
by forces of supply and demand in the foreign exchange markets, and these
forces are in turn affected by a range of economic, political, financial,
governmental and other factors. Exchange rate fluctuations can affect the
Fund's net asset value and dividends either positively or negatively depending
upon whether foreign currencies are appreciating or depreciating in value
relative to the U.S. dollar. Exchange rates fluctuate over both the short and
long term. The U.S. dollar value of a foreign security tends to decrease when
the value of the dollar rises against the foreign currency in which the
security is denominated and tends to increase when the value of the dollar
falls against such currency. Fluctuations in exchange rates may also affect the
earning power and asset value of the foreign entity issuing the security.
Dividend and interest payments may be returned to the country of origin, based
on the exchange rate at the time of disbursement, and restrictions on capital
flows may be imposed. Losses and other expenses may be incurred in converting
between various currencies in connection with purchases and sales of foreign
securities.
Foreign stock markets are generally not as developed or efficient as those
in the United States. In most foreign markets volume and liquidity are less
than in the United States and, at times, volatility of price can be greater
than that in the United States. Fixed commissions on foreign stock exchanges
are generally higher than the negotiated commission on United States exchanges.
There is generally less government supervision and regulation of foreign stock
exchanges, brokers and companies than in the United States. There is also the
possibility of adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets, political or social instability, or diplomatic developments which
could adversely affect investments, assets or securities transactions of the
Fund in some foreign countries. See "Foreign Securities" and Statement of
Additional Information.
For many foreign securities, there are U.S. dollar- denominated American
Depositary Receipts ("ADRs"), which are traded in the United States on
exchanges or over the counter and are sponsored and issued by domestic banks.
ADRs represent the right to receive securities of foreign issuers deposited in
a domestic bank or a correspondent bank. ADRs do not eliminate all the risk
inherent in investing in the securities for foreign issuers. However, by
investing in ADRs rather than directly in foreign issuers' stock, the Fund can
avoid currency risks during the settlement period for either purchases or
sales. In general, there is a large, liquid market in the United States for
many ADRs. The information available for ADRs is subject to accounting,
auditing and financial reporting standards of the domestic market or exchange
on which they are traded, which standards are more uniform and more exacting
than those to which many foreign issuers may be subject. The Fund may also
invest in ADRs which are not sponsored by domestic banks and present the risks
of foreign investments noted above. The Fund may also invest in European
Depositary Receipts ("EDRs"), which are receipts evidencing an arrangement with
a European bank similar to that for ADRs and are designed for use in the
European securities markets. EDRs are not necessarily denominated in the
currency of the underlying security.
Global Fund
The investment objective of the Global Fund is long-term capital
appreciation. It is intended that this Fund will achieve its objective by
investing at least 65% of its total assets in a globally diversified portfolio
of equity securities of small and medium sized companies.
Companies are selected on the basis of the Adviser's assessment of their
long-term potential to grow rapidly through a variety of factors including the
expansion of existing product lines, introduction of new products, geographic
expansion, market share gains, improved operating efficiency, unexploited
themes, or acquisitions. The Adviser seeks those small to medium companies
which can show significant and sustained increases in earnings over an extended
period of time. It is presently intended that the total market capitalization
of companies considered for investment shall be approximately US $750 million
or less at the time of acquisition. A strong financial structure and strong
fundamental prospects will be sought, but given the limited
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operating history of smaller companies, in certain situations some of the above
factors will not be available or remain to be proven. Full development of these
companies frequently takes time and, for this reason, the Fund should be
considered as a long-term investment and not as a vehicle for seeking short-term
profits.
Under normal circumstances, business activities in a number of different
foreign countries will be represented in the Fund's investments. Under normal
circumstances, at least 65% of the Fund's net assets will be invested in three
different countries. The Fund may, from time to time, have more than 25% of its
assets invested in any major industrial or developed country which in the view
of the Adviser poses no unique investment risk. The Fund may purchase
securities of companies, wherever organized, which have their principal
activities and interests outside the United States. The Fund may also invest
its reserves in domestic short-term money-market instruments. In determining
the appropriate distribution of investments among various countries and
geographic regions, the Adviser ordinarily will consider the following factors:
prospects for relative economic growth among foreign countries; expected levels
of inflation; relative price levels of the various capital markets;
governmental policies influencing business conditions; the outlook for currency
relationships and the range of individual investment opportunities available to
the international investor.
The Fund may invest in stocks of all types and any variety of industries.
The Fund will not concentrate its investments in specific industries in amounts
greater than 25% of its assets in any particular "industry" without shareholder
approval. During adverse economic or market conditions, any part of the Fund's
assets may be held in cash or money market instruments including U.S.
Government obligations maturing within one year from the date of purchase when
the Adviser deems a temporary defensive position to be prudent. When the Fund's
assets are held in cash or cash equivalents, it is not investing in securities
intended to meet the Fund's investment objective.
Risk Considerations
Many of the risks associated with investments in foreign issuers are
described above. Smaller capitalization companies are often companies with
limited operating history as a public company or companies within industries
which have recently emerged due to cultural, economic, regulatory or
technological developments. Given the limited operating history and rapidly
changing fundamental prospects, investment returns from smaller capitalization
companies are highly volatile. Smaller companies may at times find their
ability to raise capital impaired by their size or lack of operating history.
Product lines are often less diversified and subject to competitive threats.
Smaller capitalization stocks are subject to varying patterns of trading volume
creating points in time when the securities are illiquid.
Other factors influencing the performance and volatility of small
capitalization stocks include industry developments within major markets, major
economic trends and developments and general market movements in both the
equity and fixed income markets. Investment in equity securities of foreign
small capitalization companies may involve special risks, particularly from
political and economic developments abroad and differences between foreign and
U.S. regulatory systems. Foreign small capitalization companies may be less
liquid and their prices more volatile than comparable domestic securities
issuers.
Additional discussion regarding risks involved in investing in each Fund
are described in the "Investment Techniques and Related Risks" section below.
INVESTMENT TECHNIQUES AND RELATED RISKS
Foreign Securities. Each Fund may purchase foreign securities, including
emerging market securities and those issued by foreign branches of U.S. banks.
A Fund may invest in a broad range of foreign securities including equity, debt
and convertible securities and foreign government securities. In connection
with investments in foreign securities, each Fund may enter into forward
foreign currency exchange contracts for the purpose of protecting against
losses resulting from fluctuations in exchange rates between the U.S. dollar
and a particular foreign currency denominating a security which the Fund holds
or intends to acquire. The Funds will not speculate in forward foreign currency
exchange contracts.
Investing in the securities of foreign companies 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, political instability which could
affect U.S. investments in foreign countries, difficulty in invoking legal
process abroad and potential restrictions on the flow of international capital.
Additionally, dividends payable on foreign securities may be subject to foreign
taxes withheld prior to distribution. 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. Many of the foreign securities held by the Funds will not be
registered with the Securities and Exchange Commission and many of the issuers
of foreign securities will not be subject to the Commission's reporting
requirements. Accordingly, there may be less publicly available information
about the securities and about the foreign company or government issuing them
than is available about a domestic company or government entity. Moreover,
individual foreign economies may compare favorably or unfavorably with the
United States economy with respect to such factors as rate of growth, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payment positions. Economic trends in foreign countries may be difficult to
assess.
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Particular risks are posed by investments in third world countries or
so-called "emerging markets." These securities may be especially volatile based
on relative economic, political and market conditions present in these
countries. These and other relevant conditions vary widely between emerging
market countries. For instance, certain emerging market countries are either
comparatively undeveloped or are in the process of becoming developed and may
consequently be economically based on a relatively few or closely
interdependent industries. A high proportion of the shares of many emerging
market issuers may also be held by a limited number of large investors trading
significant blocks of securities. While the Funds will strive to be sensitive
to publicized reversals of economic conditions, political unrest and adverse
changes in trading status, unanticipated political and social developments may
affect the values of a Fund's investments in such countries and the
availability of additional investments in such countries.
The economies of developing countries generally are heavily dependent upon
international trade and, accordingly, have been and may continue to be
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been and may
continue to be adversely affected by economic conditions in the countries with
which they trade.
The Funds may use a foreign custodian in connection with its purchases of
foreign securities and may maintain cash and cash equivalents in the care of a
foreign custodian. The amount of cash or cash equivalents maintained in the
care of eligible foreign custodians will be limited to an amount reasonably
necessary to effect each Fund's foreign securities transactions. The use of a
foreign custodian invokes considerations which are not ordinarily associated
with domestic custodians. These considerations include the possibility of
expropriation, restricted access to books and records of the foreign custodian,
inability to recover assets that are lost while under the control of the
foreign custodian, and the impact of political, social or diplomatic
developments.
Each Fund will calculate its net asset value and complete orders to
purchase, exchange or redeem shares only on a Monday-Friday basis (excluding
holidays on which the New York Stock Exchange is closed). Foreign securities in
which the Funds may invest may be primarily listed on foreign stock exchanges
which may trade on other days (such as Saturdays). As a result, the net asset
value of a Fund's portfolio may be affected by such trading on days when a
shareholder has no access to the Fund. See "Net Asset Value."
Financial Futures and Related Options. Each Fund may enter into financial
contracts and related options as a hedge against anticipated changes in the
market value of their portfolio securities or securities which they intend to
purchase or in the exchange rate of foreign currencies. Hedging is the
initiation of an offsetting position in the futures market which is intended to
minimize the risk associated with a position's underlying securities in the
cash market. Investment techniques related to financial futures and options are
summarized below and are described more fully in the Statement of Additional
Information.
Financial futures contracts consist of interest rate futures contracts,
foreign currency futures contracts and securities index futures contracts. An
interest rate futures contract obligates the seller of the contract to deliver,
and the purchaser to take delivery of, the interest rate securities called for
in the contract at a specified future time and at a specified price. A foreign
currency futures contract obligates the seller of the contract to deliver, the
purchaser to take delivery of, the foreign currency called for in the contract
at a specified future time and at a specified price. See "Foreign Currency
Transactions." A securities index assigns relative values to the securities
included in the index, and the index fluctuates with changes in the market
values of the securities so included. A securities index futures contract is a
bilateral agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value at the close of the last trading day of the
contract and the price at which the futures contract is originally struck. An
option on a financial futures contract gives the purchaser the right to assume
a position in the contract (a long position if the option is a call and a short
position if the option is a put) at a specific exercise price at any time
during the period of the option.
Each Fund may purchase and sell financial futures contracts which are
traded on a recognized exchange or board of trade and may purchase exchange- or
board-traded put and call options on financial futures contracts and may enter
into financial futures contracts on foreign currencies. A Fund will engage in
transactions in financial futures contracts and related options only for
hedging purposes and not for speculation. In addition, a Fund will not purchase
or sell any financial futures contract or related option if, immediately
thereafter, the sum of the cash or other assets committed with respect to the
Fund's existing futures and related options positions and the premiums paid for
related options would exceed 5% of the market value of the Fund's total assets.
At the time of purchase of a futures contract or a call option on a futures
contract, any asset, including equity securities and non-investment grade debt
so long as the asset is liquid, unencumbered and marked to market daily equal
to the market value of the futures contract minus the Fund's initial margin
deposit with respect thereto, will be deposited in a pledged account with the
Trust's custodian bank to collateralize fully the position and thereby ensure
that it is not leveraged. The extent to which a Fund may enter into financial
futures contracts and related options may also be limited by requirements of
the Internal Revenue Code for qualification as a regulated investment company.
Engaging in transactions in financial futures contracts involves certain
risks, such as the possibility of an imperfect correlation between futures
market prices and cash market prices and the possibility that the Adviser could
be incorrect in its expectations as to the direction or extent of various
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interest rate movements or foreign currency exchange rates, in which case a
Fund's return might have been greater had hedging not taken place. There is
also the risk that a liquid secondary market may not exist, and the loss from
investing in futures contracts is potentially unlimited because the Fund may be
unable to close its position. The risk in purchasing an option on a financial
futures contract is that a Fund will lose the premium it paid. Also, there may
be circumstances when the purchase of an option on a financial futures contract
would result in a loss to a Fund while the purchase or sale of the contract
would not have resulted in a loss.
Foreign Currency Transactions. The value of the assets of a Fund as
measured in United States dollars may be affected favorably or unfavorably by
changes in foreign currency exchange rates and exchange control regulations,
and each Fund may incur costs in connection with conversions between various
currencies. Each Fund will conduct its foreign currency exchange transactions
either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through forward contracts to purchase or sell
foreign currencies. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are traded
directly between currency traders (usually large commercial banks and their
customers). At the time of the purchase of a forward foreign currency exchange
contract, any asset, including equity securities and non-investment grade debt
so long as the asset is liquid, unencumbered and marked to market daily equal
to the market value of the contract, minus the Fund's initial margin deposit
with respect thereto, will be deposited in a pledged account with the Fund's
custodian bank to collateralize fully the position and thereby ensure that it
is not leveraged.
When a Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may want to establish the United States
dollar cost or proceeds, as the case may be. By entering into a forward
contract in United States dollars for the purchase or sale of the amount of
foreign currency involved in the underlying security transaction, a Fund is
able to protect itself against a possible loss between trade and settlement
dates resulting from an adverse change in the relationship between the United
States dollar and such foreign currency. However, this tends to limit potential
gains which might result from a positive change in such currency relationships.
A Fund utilizing this investment technique may also hedge its foreign currency
exchange rate risk by engaging in currency financial futures and options
transactions.
When the Adviser believes that the currency of a particular foreign
country may suffer a substantial decline against the United States dollar, it
may enter into a forward contract to sell an amount of foreign currency
approximating the value of some or all of a Fund's portfolio securities
denominated in such foreign currency. The forecasting of short-term currency
market movement is extremely difficult and whether such a short-term hedging
strategy will be successful is highly uncertain.
It is impossible to forecast with precision the market value of portfolio
securities at the expiration of a contract. Accordingly, it may be necessary
for a Fund utilizing this investment technique to purchase additional currency
on the spot market (and bear the expense of such purchase) if the market value
of the security is less than the amount of foreign currency the Fund is
obligated to deliver when a decision is made to sell the security and make
delivery of the foreign currency in settlement of a forward contract.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security if its market value
exceeds the amount of foreign currency the Fund is obligated to deliver.
If a Fund utilizing this investment technique retains the portfolio
security and engages in an offsetting transaction, the Fund will incur a gain
or a loss (as described below) to the extent that there has been movement in
forward contract prices. If a Fund engages in an offsetting transaction, it may
subsequently enter into a new forward contract to sell the foreign currency.
Should forward prices decline during the period between the Fund's entering
into a forward contract for the sale of a foreign currency and the date it
enters into an offsetting contract for the purchase of the foreign currency,
the Fund would realize gains to the extent the price of the currency it has
agreed to sell exceeds the price of the currency it has agreed to purchase.
Should forward prices increase, the Fund would suffer a loss to the extent the
price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell. Although such contracts tend to minimize the
risk of loss due to a decline in the value of the hedged currency, they also
tend to limit any potential gain which might result should the value of such
currency increase. A Fund will have to convert its holdings of foreign
currencies into United States dollars from time to time. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference (the "spread") between the prices at which they are
buying and selling various currencies.
Repurchase Agreements. Each Fund may invest in repurchase agreements,
either for temporary defensive purposes necessitated by adverse market
conditions or to generate income from its excess cash balances, provided that
no more than 15% of a Fund's net assets may be invested in the aggregate in
repurchase agreements having maturities of more than seven days and in all
other illiquid securities. A repurchase agreement is an agreement under which
the Fund acquires a money market instrument (generally a security issued by the
U.S. Government or an agency thereof, a banker's acceptance or a certificate of
deposit) from a commercial bank, a broker or a dealer, subject to resale to the
seller at an agreed upon price and date (normally the next business day). The
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resale price reflects an agreed upon interest rate effective for the period the
instrument is held by the Fund and is unrelated to the interest rate on the
underlying instrument. A repurchase agreement acquired by a Fund will always be
fully collateralized by the underlying instrument, which will be marked to
market every business day. The underlying instrument will be held for the
Fund's account by the Trust's custodian bank until repurchased. The use of
repurchase agreements involves certain risks such as default by or the
insolvency of the other party to the repurchase agreement. Repurchase
agreements will be entered into only with commercial banks, brokers and dealers
considered by the Fund to be creditworthy.
Lending Portfolio Securities. Each Fund may lend its securities to
brokers, dealers and financial institutions provided that the market value of
the securities subject to any such loans does not exceed 25% of the value of
the total assets (taken at market value) of such Fund; and receive, as
collateral, cash or cash equivalents which at all times while the loan is
outstanding, will be maintained in amounts equal to at least 102% of the
current market value of the loaned securities. Any cash collateral will be
invested in short-term securities. All fees or charges earned from securities
lending will inure to the benefit of the Fund. A Fund will have the right to
regain record ownership of loaned securities within six business days and to
exercise beneficial rights such as voting rights and subscription rights. While
a securities loan is outstanding, the Fund will receive amounts equal to any
interest or other distributions with respect to the loaned securities. Any
agreement to lend securities shall provide that borrowers are obligated to
return the identical securities or their equivalent at termination of the loan
and, that the Fund shall have the right to retain any collateral or use the
same to purchase equivalent securities should the borrower fail to return
securities as required. As with any extension of credit there are risks of
delay in recovery of the loaned securities and, in some cases, loss of rights
in the collateral should the borrower of the securities fail financially.
However, loans of portfolio securities will be made only to firms considered by
the Trust to be creditworthy and when the Adviser believes the consideration to
be earned justifies the attendant risks.
Warrants and Stock Rights. A Fund may invest up to 5% of its net assets in
warrants or stock rights valued at the lower of cost or market, but no more
than 2% of its net assets may be invested in warrants or stock rights not
listed on the New York Stock Exchange or American Stock Exchange.
Illiquid Securities. Subject to limitations under governing law, a Fund
may invest up to 15% of its net assets (taken at market value at the time of
the investment) in "illiquid securities." For this purpose, illiquid securities
include securities the disposition of which is subject to legal or contractual
restrictions on resale; certain restricted securities salable among qualified
institutional buyers without restriction pursuant to Rule 144A under the
Securities Act of 1933 not determined by the Adviser to be liquid under
guidelines adopted by the Board of Trustees of the Fund. Liquidity relates to
the ability of a Fund to sell a security in a timely manner at a price which
reflects the value of that security. Although it is generally the Funds' policy
to hold securities until their maturity, the relative illiquidity of some of
the Funds' portfo- lio securities may adversely affect the ability of a Fund to
dispose of such securities in a timely manner and at a fair price at times when
it might be necessary or advantageous for the Fund to liquidate portfolio
securities. The market for less liquid securities tends to be more volatile
than the market for more liquid securities, and market values of relatively
illiquid securities may be more susceptible to change as a result of adverse
publicity and investor perceptions than are the market values of more liquid
securities.
INVESTMENT RESTRICTIONS
The investment restrictions to which the Funds are subject, together with
the investment objectives of each Fund, are fundamental policies of each Fund
which may not be changed without the approval of the Fund's shareholders. A
detailed description of each Fund's investment restrictions is contained in the
Statement of Additional Information.
MANAGEMENT OF THE FUNDS
The Trust is an open-end, management investment company, also known as a
mutual fund. The Board of Trustees ("Trustees") supervises the business affairs
and investments of the Trust, which is managed on a daily basis by the Trust's
investment adviser. The Trust was organized as a Massachusetts business trust
on May 31, 1996.
The Adviser
The Trust's investment adviser is Phoenix-Aberdeen International Advisors,
LLC (the "Adviser"), which is a Delaware limited liability company formed in
1996 and having a place of business located at One American Row, Hartford,
Connecticut 06102. The Adviser is jointly owned and managed by PM Holdings,
Inc., a direct subsidiary of Phoenix Home Life Mutual Insurance Company
("Phoenix Home Life"), and Aberdeen Fund Managers, Inc., a wholly-owned
subsidiary of Aberdeen Asset Management PLC. As of September 30, 1998, the
Adviser had assets under management of $38 million.
Phoenix Home Life was founded in 1851 and is in the business of writing
individual and group life and health insurance and annuities. Phoenix Home Life
principal offices are located in Hartford, Connecticut. Its affiliate, Phoenix
Investment Partners, Ltd. ("PXP"), a New York Stock Exchange traded company,
provides various financial advisory services to institutional investors,
corporations and individuals through its operating subsidiaries. As of
September 30, 1998, PXP, and its advisory subsidiaries, had approximately $48
billion in assets under management.
Aberdeen Asset Management PLC was founded in 1983 and through subsidiaries
operating from offices in Aberdeen, Scotland; London, England; Singapore and
Fort Lauderdale, Florida, provides investment management services to unit and
investment trusts, segregated pension funds and other
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institutional and private portfolios. As of September 30, 1998, Aberdeen Asset
Management PLC, and its advisory subsidiaries, had approximately $22.3 billion
in assets under management.
The Adviser continuously furnishes an investment program for each Fund and
manages the investment and reinvestment of the assets of each Fund subject at
all times to the supervision of the Trustees. The Adviser, at its expense,
furnishes to the Trust adequate office space and facilities and certain
administrative services, including the services of any member of its staff who
serves as an officer or trustee of the Trust. Based upon the diverse range of
portfolio holdings contemplated and the expertise available through certain
affiliates, the Adviser has engaged Phoenix Investment Counsel, Inc. ("PIC")
and Aberdeen Fund Managers, Inc. as sub-advisers. PIC is an indirect subsidiary
of PXP and its principal offices are located at 56 Prospect Street, Hartford,
Connecticut 06115. Aberdeen Fund Managers, Inc. is a direct subsidiary of
Aberdeen Asset Management PLC, and co-owner of the Adviser. Its principal
offices are located at 1 Financial Plaza, Suite 2210, Nations Bank Tower, Fort
Lauderdale, Florida 33394.
As compensation for its services to each Fund, the Adviser is entitled to
a fee, payable monthly, at an annual rate of 0.85% of the average daily net
assets of each Fund. The Investment Advisory Agreement with the Trust provides
that the Adviser will reimburse the Trust for the amount, if any, by which the
total operating expenses of any Fund (including the Adviser's compensation, but
excluding interest, taxes, brokerage fees and commissions and extraordinary
expenses) for any fiscal year exceed the level of expenses which such Fund is
permitted to bear under the most restrictive expense limitation (which has not
been waived) imposed on mutual funds by any state in which shares of the Fund
are then qualified for sale. For providing cash management and other services
to each Fund, as needed, the Adviser pays a monthly fee to PIC equivalent to
0.15% of the average aggregate daily net asset value of each Fund. For
providing advisory services with respect to the Funds' assets allocated from
time to time by the Adviser, the Adviser pays a fee to PIC equivalent to 0.40%
of the average daily net asset value of the assets of each Fund so allocated.
For implementing certain portfolio transactions and providing research and
other services to each Fund, the Adviser also pays a monthly subadvisory fee to
Aberdeen Fund Managers, Inc. equivalent to 0.40% of the average aggregate daily
net asset value of the New Asia Fund and 0.40% of the average daily net asset
value of such assets of the Global Fund allocated to it by the Adviser for
management. For assistance in implementing certain portfolio transactions,
providing research and other services to each Fund with regard to investments
in particular geographic areas, the Aberdeen Fund Managers Inc. shall engage
the services of its affiliates Aberdeen Fund Managers Ltd. and Aberdeen Asset
Management Asia Ltd. for which such entities shall be paid a fee by Aberdeen
Fund Managers Inc. The total advisory fee of 0.85% of the average daily net
assets of each Fund is greater than that for other types of mutual funds;
however, the Trustees have determined that it is similar to fees charged by
other mutual funds whose investments are similar to those of each Fund. The
ratio of the management fees to average net assets for the fiscal year ended
July 31, 1998 was 0.85% for each Fund. Total management fees paid by the Funds
for the year ended July 31, 1998 were $407,786.
The Portfolio Managers
New Asia Fund
Mr. Hugh Young is the portfolio manager of the New Asia Fund and as such
is primarily responsible for the day-to-day management of the portfolio. Mr.
Young has been employed as an investment director for Aberdeen Asset Management
Asia Ltd. since 1988. He is also Senior Vice President and portfolio manager
for the Aberdeen New Asia Series of the Phoenix Edge Series Fund.
Global Fund
The Global Fund is managed by an investment committee which is primarily
responsible for the day-to-day management of the portfolio.
The Financial Agent and Administrator
Phoenix Equity Planning Corporation ("Equity Planning") serves as
financial agent of the Trust and, as such, performs bookkeeping and pricing
services and certain other functions for the Trust. For its services as
financial agent, 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 to the financial agent, plus (2) the documented cost to the
financial agent to provide financial reporting and 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 aggregate daily net asset values of each Fund.
Certain minimum fees and fee waivers may apply. For its services during the
Trust's fiscal year ended July 31, 1998, Equity Planning received $150,620 or
0.31% of average net assets.
PXP serves as administrator for the Trust, and, as such, facilitates and
provides administrative services for the Trust. As compensation, under an
Administration Agreement, PXP receives a fee, computed daily and payable
monthly, at the annual rate of 0.15% of the average daily net assets of the
Trust. For its services during the Trust's last fiscal year ended July 31,
1998, PXP received $72,064.
The Custodian and Transfer Agent
The custodian of the assets of the Trust is Brown Brothers Harriman & Co.,
40 Water Street, Boston, Massachusetts 02109. The Trust has authorized the
custodian to appoint one or more subcustodians for the assets of the Trust held
outside the United States. The securities and other assets of each Fund are
held by the Custodian or any subcustodian(s) separate from the securities and
assets of each other Fund.
Pursuant to a Transfer Agency and Service Agreement with the Trust, Equity
Planning acts as transfer agent for the Trust (the "Transfer Agent") for which
it is paid $17.95 plus out-of-
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<PAGE>
pocket expenses for each designated shareholder account. The Transfer Agent is
authorized to engage sub-agents to perform certain shareholder servicing
functions from time to time for which such agents shall be paid a fee by the
Transfer Agent.
Brokerage Commissions
Although the Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD") prohibit its members from seeking orders for the
execution of investment company portfolio transactions on the basis of their
sales of investment company shares, under such Rules, sales of investment
company shares may be considered in selecting brokers to effect portfolio
transactions. Accordingly, some portfolio transactions are, subject to such
Rules and to obtaining best prices and executions, effected through dealers
(excluding Equity Planning) who sell shares of the Trust.
DISTRIBUTION PLANS
Equity Planning is the national distributor of the Funds' shares. Equity
Planning is an indirect, majority-owned subsidiary of Phoenix Home Life. The
offices of Equity Planning are located at 100 Bright Meadow Boulevard, P.O. Box
2200, Enfield, Connecticut 06083-2200. Philip R. McLoughlin is a Trustee and
President of the Trust and a director and officer of Equity Planning. Michael
E. Haylon and William R. Moyer, directors of Equity Planning, are officers of
the Trust; Mr. Moyer is also an officer of Equity Planning. G. Jeffrey Bohne,
Nancy G. Curtiss, William E. Keen, III, Leonard J. Saltiel, John F. Sharry and
Thomas N. Steenburg are officers of the Trust and officers of Equity Planning.
Equity Planning and the Trust have entered into distribution agreements
under which Equity Planning has agreed to use its best efforts to find
purchasers for Trust shares sold subject to an initial sales charge and those
sold subject to a contingent deferred sales charge. The Trust has granted
Equity Planning the exclusive right to purchase from the Trust and resell, as
principal, shares needed to fill unconditional orders for Trust shares. Equity
Planning may sell Trust shares through its registered representatives or
through securities dealers with whom it has sales agreements. Equity Planning
may also sell Trust shares pursuant to sales agreements entered into with banks
or bank affiliated securities brokers who, acting as agent for their customers,
place orders for Trust shares with Equity Planning. Although the Glass-Steagall
Act prohibits banks and bank affiliates from engaging in the business of
underwriting, distributing or selling securities (including mutual fund
shares), banking regulators have not indicated that such institutions are
prohibited from purchasing mutual fund shares upon the order and for the
account of their customers. If, because of changes in law or regulations, or
because of new interpretations of existing law, it is determined that agency
transactions of banks or bank affiliated securities brokers are not permitted
under the Glass-Steagall Act, the Trustees will consider what action, if any,
is appropriate. It is not anticipated that termination of sales agreements with
banks or bank affiliated securities brokers would result in a loss to their
customers or a change in the net asset value per share of a Fund.
The sale of a Fund's shares through a bank or a securities broker
affiliated with a bank is not expected to preclude the Fund from borrowing from
such bank or from availing itself of custodial or transfer agency services
offered by such bank.
The Trustees have adopted separate distribution plans under Rule 12b-1 of
the 1940 Act for each Fund and each class of shares of each Fund of the Trust
(the "Class A Plans," "Class B Plans" and collectively the "Plans"). The Plans
authorize a Fund to reimburse Equity Planning for expenses in connection with
the sale and promotion of such Fund's shares and to pay for the furnishing of
shareholder services. A 12b-1 fee paid by one Fund may be used to finance
distribution of the Shares of another Fund based on the number of shareholder
accounts within the Funds. Pursuant to the Class B Plans, a Fund is authorized
to reimburse Equity Planning monthly for actual expenses of Equity Planning up
to 0.75% annually for the average daily net assets of each Fund's Class B
Shares. In addition, under the Plans the Funds will pay Equity Planning 0.25%
annually of the average daily net assets of the Funds for providing services to
shareholders, including assistance in connection with inquiries related to
shareholder accounts (the "Service Fee").
Expenditures incurred under the Plans may consist of: (i) commissions to
sales personnel for selling shares of the Trust (including underwriting
commissions and finance charges related to the payment of commissions for sales
of Class B Shares); (ii) compensation, sales incentives and payments to sales,
marketing and service personnel; (iii) payments to broker-dealers and other
financial institutions which have entered into agreements with the Distributor
for services rendered in connection with the sale and distribution of shares of
the Trust; (iv) payment of expenses incurred in sales and promotional
activities including advertising expenditures related to the Trust; (v) the
costs of preparing and distributing promotional materials; (vi) the costs of
printing the Trust's Prospectus and Statement of Additional Information for
distribution to potential investors; and (vii) such other similar services that
the Trustees determine are reasonably calculated to result in the sale of
shares of the Trust. 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 Trust shares which are reallowed 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.
In order to receive payments under the Plans, participants must meet such
qualifications as are to be established in the sole discretion of the
Distributor, such as services to the Trust's shareholders; or services
providing the Trust with more efficient methods of offering shares to groups of
clients, members or prospects of a participant; or services permitting
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<PAGE>
bulking of purchases or sales, or transmissions of such purchases or sales by
computerized tape or other electronic equipment; or other batch processing.
For the fiscal year ended July 31, 1998, the Trust paid the Distributor
$72,073 under the Class A Plan and $192,045 under the Class B Plan. The fees
were used to compensate broker-dealers for servicing shareholder's accounts,
including $11,119 paid to W.S. Griffith & Co., Inc., an affiliate, compensating
sales personnel and reimbursing the Distributor for commission expenses and
expenses related to preparation of the marketing material. 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 Plans. Those expenses may be
carried over and paid in future years. At July 31, 1998, the end of the last
Plan year, the Distributor had incurred unreimbursed expenses under the Class B
Plans of $1,045,850 (equal to 2.68% of the Trust's net assets) which have been
carried over into the present Class B Plan year.
On a quarterly basis, the Trustees review a report on expenditures under
each Plan and the purposes for which expenditures were made. The Trustees
conduct an additional more extensive review annually in determining whether
each Plan will be continued. By its terms, continuation of each Plan from year
to year is contingent on annual approval by a majority of the Trustees and by a
majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) and who have no direct or indirect financial interest in the
operation of either Plan or any related agreements (the "Plan Directors"). Each
Plan provides that it may not be amended to increase materially the costs which
the Trust may bear without approval of the applicable class of shareholders of
the Trust and that other material amendments must be approved by a majority of
the Plan Trustees by vote cast in person at a meeting called for the purpose of
considering such amendments. Each Plan further provides that while it is in
effect, the selection and nomination of Trustees who are not "interested
persons" shall be committed to the discretion of the Trustees who are not
"interested persons." Each Plan may be terminated at any time by vote of a
majority of the Plan Trustees or a majority of the applicable class of
outstanding shares of the Trust.
The Trustees have concluded that there is a reasonable likelihood that the
Plans will benefit the Funds and all classes of shareholders.
The NASD regards certain distribution fees as asset-based sales charges
subject to NASD sales load limits. The NASD's maximum sales charge rule may
require the Trustees to suspend distribution fees or amend either or both
Plans.
HOW TO BUY SHARES
To purchase shares of any Fund, the minimum initial investment is $500 and
the minimum subsequent investment is $25. However, both the minimum initial and
subsequent investment amounts are $25 for investments pursuant to the
"Investo-Matic" plan, a bank draft investing program administered by Equity
Planning, or pursuant to the Systematic Exchange privilege. Shares issued will
be electronically recorded in book entry form. Completed applications for the
purchase of shares should be mailed to Phoenix Funds, c/o State Street Bank and
Trust Company, P.O. Box 8301, Boston, MA 02266-8301.
For investments in connection with a pension, profit sharing or other
employee benefit plan whether or not qualified under Section 401 of the
Internal Revenue Code, including any plan established under the Self Employed
Individuals Tax Retirement Act of 1962 (HR-10) or a program providing for the
concurrent purchase of insurance using a loan secured by shares, the minimum
initial and subsequent investment amounts for any Series are waived provided
that the monthly contribution for each participant is at least $25 per month
per participant. There is a minimum initial investment of $25 for an individual
retirement account (IRA).
In addition, there are no minimum initial and subsequent investment
amounts in connection with the dividends or other distributions from units of a
limited partnership sold by or through Equity Planning to an Individual
Retirement Account (IRA), or in connection with dividends or other
distributions by a Fund under certain conditions, which have been directed to
any Fund for investment. (See the Statement of Additional Information.)
The Funds offer combination purchase privileges, letters of intent,
accumulation plans, withdrawal plans and reinvestment and exchange privileges.
Certain privileges may not be available in connection with Class B Shares.
Under certain circumstances, shares of any other Phoenix Fund may be exchanged
for shares of the same class 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 Series, Fund, or Portfolio, except if
made in connection with the Systematic Exchange privilege. Class A shareholders
may exchange shares held in book-entry form for an equivalent number (value) of
Class A Shares of any other Phoenix Fund. On Class B Share exchanges, the
contingent deferred sales charge schedule of the original shares purchased
continues to apply.
Alternative Sales Arrangements
The alternative purchase arrangement permits an investor to choose the
method of purchasing shares that is most 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 Trust, and other circumstances. Investors should
consider whether, during the anticipated life of their investment in the Trust,
the accumulated continuing distribution and services fee and contingent
deferred sales charges on Class B Shares prior to conversion would be less than
the initial sales charge and accumulated services fee on Class A Shares
purchased at the same time, and to what extent such differential would be
offset by the higher yield of Class
15
<PAGE>
A Shares. In this regard, Class A Shares will normally be more beneficial to
the investor who qualifies for certain reduced initial sales charges. For this
reason, Equity Planning intends to limit sales of Class B Shares sold to any
shareholder to a maximum total value of $250,000. Class B Shares sold to
unallocated qualified employer sponsored plans will be limited to a total value
of $1,000,000.
Class B Shares sold to allocated qualified employer sponsored plans,
including 401(k) plans, will be limited to a maximum total value of $250,000
for each participant provided such plans utilize an approved participant
tracking system. In addition, Class B Shares will not be sold to any qualified
employee benefit plan, endowment fund or foundation if, on the date of the
initial investment, the plan, fund or foundation has assets of $10,000,000 or
more or at least 200 participant employees. Class B Shares will also not be
sold to investors who have reached the age of 85 because of such persons'
expected distribution requirements.
Class A Shares are subject to a lower distribution and services fee and,
accordingly, pay correspondingly higher dividends per share. However, because
initial sales charges are deducted at the time of purchase, such investors
would not have all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced initial sales
charges who expect to maintain their investment for an extended period of time
might consider purchasing Class A Shares because the accumulated continuing
distribution charges on Class B Shares may exceed the initial sales charge on
Class A Shares during the life of the investment. Again, however, such
investors must weigh this consideration against the fact that, because of such
initial sales charge, not all their funds will be invested initially. However,
other investors might determine that it would be more advantageous to purchase
Class B Shares to have all their funds invested initially, although remaining
subject to higher continuing distribution charges and, for a five-year period,
being subject to a contingent deferred sales charge.
Initial Sales Charge Alternative--Class A Shares
The public offering price of Class A Shares is the net asset value plus a
sales charge, as set forth below. Offering prices become effective at the close
of the general trading session of the New York Stock Exchange. Orders received
by dealers prior to such time are confirmed at the offering price effective at
that time, provided the order is received by Equity Planning prior to the close
of trading on the New York Stock Exchange.
The sales charge varies with the size of the purchase and reduced charges
apply to the aggregate of purchases of the Funds made at one time by "any
person," which term includes an individual, an individual and his/her spouse
and their children under the age of 21, or a trustee or other fiduciary
purchasing shares for a single trust, estate or fiduciary account although more
than one beneficiary is involved.
Class A Shares of the Funds are offered to the public at the net asset
value next computed after the purchase order is received by State Street Bank
and Trust Company plus a maximum sales charge of 4.75% of the offering price
(4.99% of the amount invested) on single purchases of less than $50,000. The
sales charge is reduced on a graduated scale on single purchases of $50,000 or
more as shown below.
<TABLE>
<CAPTION>
Sales Charge Sales Charge
Amount of as Percentage as Percentage Dealer Discount
Transaction of Offering of Amount as Percentage of
at Offering Price Price 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>
- ------------------------
*Equity Planning will sponsor sales contests, training and educational meetings
and provide to all qualifying dealers, from its own profits and resources,
additional compensation in the form of trips, merchandise or expense
reimbursement. Brokers or dealers other than Equity Planning may also make
customary additional charges for their services in effecting purchases, if they
notify the Trust of their intention to do so. Equity Planning shall also pay
service and retention fees, from its own profits and resources, to qualified
wholesalers in connection with the sale of shares of funds within the Phoenix
family of funds, as defined by the 1940 Act (collectively, the "Phoenix Funds")
(exclusive of Class A Shares of Phoenix Money Market Series) by registered
financial institutions and third party marketers.
**In connection with Class A Share purchases by an account held in the name of
a qualified employee benefit plan with at least 100 eligible employees, Equity
Planning may pay broker/ dealers, from its own resources, an amount equal to 1%
of the first $3 million of purchases, 0.50% on the next $3 million, plus 0.25%
on the amount in excess of $6 million.
In connection with purchases of Class A Shares of $1,000,000 or more (or
subsequent purchases in any amount), excluding purchases by qualified employee
benefit plans as described above, Equity Planning may pay broker/dealers, from
its own profits and resources, a percentage of the net asset value of any
shares sold as set forth below:
<TABLE>
<CAPTION>
Purchase Amount Payment to Broker/Dealer
- ------------------------ -------------------------
<S> <C>
$1,000,000-$3,000,000 1%
$3,000,001-$6,000,000 .50 of 1%
$6,000,001 or more .25 of 1%
</TABLE>
If part or all of such an investment, including investments by qualified
employee benefit plans, is subsequently redeemed within one year of the
investment date, the broker/dealer will refund to Equity Planning any such
amounts paid with respect to the investment.
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<PAGE>
How To Obtain Reduced Sales Charges--Class A Shares
Investors choosing the initial sales charge alternative under certain
circumstances may be entitled to pay reduced sales charges. The circumstances
under which such investors may pay reduced sales charges are described below.
Qualified Purchasers. No sales charge will be imposed on sales of shares
to (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 Phoenix Investment Counsel, Inc., the Distributor or any of
their corporate affiliates (an "Affiliated Phoenix Fund"); (2) any director or
officer, or any full-time employee or sales representative (who has acted as
such for at least 90 days), of the Adviser, or of Equity Planning; (3)
registered representatives and employees of securities dealers with whom Equity
Planning 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 Equity Planning; (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, Equity
Planning and/or their corporate affiliates; (8) any employee or agent who
retires from Phoenix Home Life, Equity Planning and/or their corporate
affiliates; (9) any account held in the name of a qualified employee benefit
plan, endowment fund or foundation if, on the date of the initial investment,
the plan, fund or foundation has assets of $10,000,000 or more or at least 100
eligible employees; (10) any person with a direct rollover transfer of shares
from an established Phoenix Fund 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 if, in connection with the purchases or redemption
of the redeemed shares, the investor paid a prior sales charge provided such
investor supplies verification that the redemption occurred within 90 days of
the Phoenix Fund purchase and that a sales charge was paid; or (16) any
deferred compensation plan established for the benefit of any Phoenix Fund
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 Trust; (17) purchasers of Class A shares bought through
investment advisers 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 those purchases; (19) clients of such investment advisers or financial
planners who buy shares for their own accounts but only if their accounts are
linked to a master account of their investment adviser or financial planner on
the books and records of the broker, agent or financial intermediary with which
the Distributor has made such special arrangements (each of the investors
described in (17) through (19) may be charged a fee by the broker, agent or
financial intermediary for purchasing shares).
Shares issued pursuant to the automatic reinvestment of income dividends
or capital gains distributions are not subject to any sales charges. The Trust
receives the entire net asset value of its Class A Shares sold to investors.
Equity Planning's commission is the sales charge shown above less any
applicable discount or commission "reallowed" to selected dealers and agents.
Equity Planning will reallow discounts to selected dealers and agents in the
amounts indicated in the table above. In this regard, Equity Planning may elect
to reallow the entire sales charge to selected dealers and agents for all sales
with respect to which orders are placed with Equity Planning. A selected dealer
who receives reallowance in excess of 90% of such a sales charge may be deemed
to be an "underwriter" under the Securities Act of 1933.
Combination Purchase Privilege. Purchases, either singly or in any
combination, of shares of the Funds or shares of any other Affiliated Phoenix
Fund (including Class B Shares but excluding Phoenix Money Market Fund Series),
if made at a single time by a single purchaser, will be combined for the
purpose of determining whether the total dollar amount of such purchases
entitles the purchaser to a reduced sales charge on any purchases of Class A
Shares. Each purchase of Class A Shares will then be made at the public
offering price, as described in the then current Prospectus relating to such
shares, which at the time of such purchase is applicable to a single
transaction of the total dollar amount of all such purchases. The term "single
purchaser" includes an individual, or an individual, his spouse and their
children under the age of majority purchasing for his or their own account
(including an IRA account) including his or their own trust, commonly known as
a living trust; a trustee or other fiduciary purchasing for a single trust,
estate or single fiduciary account, although more than one beneficiary is
involved; multiple trusts or 403(b) plans for the same employer; multiple
accounts (up to 200) under a qualified employee benefit plan or administered by
a third party administrator; or 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
17
<PAGE>
in a fiduciary, agency, custodial or similar capacity, provided all shares are
held in record in the name, or nominee name, of the entity placing the order.
Letter of Intent. Class A Shares or shares of any other Affiliated Phoenix
Fund (including Class B Shares but excluding Class A Shares of the Phoenix
Money Market Fund Series) may be purchased by a "single purchaser" (as defined
above) within a period of thirteen months pursuant to a Letter of Intent, in
the form provided by Equity Planning, stating the investor's intention to
invest in such shares during such period an amount which, together with the
value (at their maximum offering prices on the date of the Letter) of the
shares of the Funds or shares of any other Phoenix Fund then owned by such
investor, equals a specified dollar amount. Each purchase of shares made
pursuant to a Letter of Intent will be made at the public offering price, as
described in the then current Prospectus relating to such shares, which at the
time of purchase is applicable to a single transaction of the total dollar
amount specified in the Letter of Intent.
An investor's Letter of Intent is not a binding commitment of the investor
to purchase or a binding obligation of the Trust or Equity Planning to sell a
specified dollar amount of shares qualifying for a reduced sales charge.
Accordingly, out of an initial purchase (and subsequent purchases if
necessary), 5% of the dollar amount of purchases required to complete the
investment is held in escrow in the form of shares (valued at the purchase
price thereof) registered in the investor's name until completion of the
investment, at which time escrowed shares are deposited to the investor's
account. If the investor does not complete the investment and does not within
20 days after written request by Equity Planning or the investor's dealer pay
the difference between the sales charge on the dollar amount specified in the
Letter of Intent and the sales charge on the dollar amount of actual purchases,
the difference will be realized through the redemption of an appropriate number
of the escrowed shares and any remaining escrowed shares will be deposited to
the investor's account.
Right of Accumulation. "Single purchasers" (as defined above) may also
qualify for reduced sales charges based on the combined value of purchases of
either class of shares of the Funds, or any other Affiliated Phoenix Fund, made
over time. Reduced sales charges are offered to investors whose shares, in the
aggregate, are valued (i.e., the dollar amount of such purchases plus the then
current value (at the public offering price as described in the then current
prospectus relating to such shares) of shares of all Phoenix Funds owned) in
excess of the threshold amounts described in the section entitled "Initial
Sales Charge Alternative--Class A Shares." To use this option, the investor
must supply sufficient account information to Equity Planning to permit
verification that one or more purchases qualify for a reduced sales charge.
Associations. A group or association may be treated as a "single
purchaser" and qualify for reduced initial sales charges under the Combination
Privilege and Right of Accumulation if the group or association (1) has been in
existence for at least six months; (2) has a legitimate purpose other than to
purchase mutual fund shares at a reduced sales charge; (3) facilitates
solicitation of the membership by the investment dealer, thus assisting in
effecting economies of sales effort; and (4) is not a group whose sole
organizational nexus is that the members are credit card holders of a company,
policyholders of an insurance company, customers of a bank or a broker-dealer
or clients of an investment adviser.
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative purchase Class B
Shares at net asset value per share without the imposition of a sales charge at
the time of purchase. The Class B Shares are subject to a sales charge if
redeemed within five years of purchase.
The contingent deferred sales charge will be imposed on most Class B Share
redemptions made within five years of purchase. The contingent deferred sales
charge alternative permits an investor to choose the method of purchasing
shares that is most beneficial given the amount of the purchase, the length of
time he or she expects to hold the shares and other circumstances. Each class
of shares pays ongoing distribution and service fees at an annual rate (i) for
Class A Shares, of up to 0.25% of the Series aggregate average daily net assets
attributable to the Class A Shares, and (ii) for Class B Shares, of up to 1.00%
of the Series aggregate average daily net assets attributable to the Class B
Shares. Investors should understand that the purpose and function of the
deferred sales charge and distribution and service fees with respect to Class B
Shares are the same as those of the initial sales charge and service fees with
respect to Class A Shares.
The alternative purchase arrangement permits an investor to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time he or she expects to hold the shares, whether the
investor wishes to receive distributions in cash or to reinvest them in
additional shares of a Fund, and other circumstances. Investors should consider
whether, during the anticipated term of their investment in a Fund, the
accumulated continuing distribution and service fees and contingent deferred
sales charges on Class B Shares prior to conversion would be more than the
initial sales charge and accumulated distribution and service fees on Class A
Shares purchased at the same time. In this regard, Class A Shares will normally
be more beneficial to the investor who qualifies for reduced initial sales
charges or who maintains a large account size. For this reason, Equity Planning
intends to limit sales of Class B Shares sold to any shareholder to a maximum
total value of $250,000. Class B Shares sold to unallocated qualified employer
sponsored plans will be limited to a total value of $1,000,000. Class B Shares
sold to allocated qualified employer sponsored plans, including 401(k) plans,
will be limited to a total value of $250,000 for each participant provided such
plans utilize an approved participant tracking system. In addition, Class B
Shares will not be sold to any qualified employee benefit plan, endowment fund
or foundation if, on the date of the initial investment, the plan, fund or
foundation has assets of $10,000,000 or more or at least 200 participant
employees.
18
<PAGE>
Class B Shares will also not be sold to investors who have reached the age of
85, because of such persons' expected distribution requirements.
Class A Shares are subject to a lower distribution fee and, accordingly,
pay correspondingly higher dividends per share. However, because initial sales
charges are deducted at the time of purchase, such investors do not have all
their funds invested initially and, therefore, initially own fewer shares.
Investors not qualifying for reduced initial sales charges who expect to
maintain their investment for an extended period of time should consider
purchasing Class A Shares because the accumulated continuing distribution
charges on Class B Shares may exceed the initial sales charge on Class A Shares
during the term of the investment. An investor might determine, however, that
it would be more advantageous to purchase Class B Shares in order that all of
his or her funds be invested initially, although remaining subject to higher
continuing distribution charges and, for a five-year period, being subject to a
contingent deferred sales charge. For example, based on current fees and
expenses, an investor subject to a 4.75% initial sales charge on Class A Shares
would have to hold his investment approximately 7 years for the Class B
distribution fee to exceed the initial sales charge plus the accumulated
distribution and service fees of Class A Shares. In this example, an investor
intending to maintain his investment for more than 6 years might consider
purchasing Class A Shares.
Proceeds from the contingent deferred sales charge are paid to Equity
Planning and are used to defray the expenses of Equity Planning in connection
with the sale of the Class B Shares, such as the payment of compensation to
selected dealers and agents.
Contingent Deferred Sales Charge. Class B Shares redeemed within five
years of purchase will be subject to a contingent deferred sales charge at the
rates set forth below. The charge will be assessed on an amount equal to the
lesser of the current market value or the cost of the shares being redeemed.
Accordingly, no sales charge will be imposed on increases in net asset value of
shares above the initial purchase price. In addition, no charge will be
assessed on shares derived from the reinvestment of dividends or capital gains
distributions.
Equity Planning intends to pay investment dealers a sales commission of 4%
of the sale price of Class B Shares sold by such dealers, subject to future
amendment or termination. Equity Planning will retain all or a portion of the
continuing distribution and service fee assessed to Class B shareholders and
will receive the entire amount of the contingent deferred sales charge paid by
shareholders on the redemption of shares. These amounts will be used by Equity
Planning to finance the commission plus interest and related marketing
expenses.
The amount of the contingent deferred sales charge, if any, will vary
depending on the number of years from the time of payment for the Class B
Shares to the time of redemption of such shares. For the purpose of determining
the number of years from the time of any payment for the purchase of shares,
all payments made during a month will be aggregated and deemed to have been
made on the last day of the prior month.
<TABLE>
<CAPTION>
Contingent Deferred
Sales Charge as
a Percentage of
Dollar Amount
Year Since Purchase Subject to Charge
- --------------------- --------------------
<S> <C>
First 5%
Second 4%
Third 3%
Fourth 2%
Fifth 2%
Sixth 0%
</TABLE>
In determining whether a contingent deferred sales charge is applicable to
a redemption, the calculation will be determined in a manner that minimizes the
rate being charged. Therefore, it will be assumed that any Class A Shares are
being redeemed first; any Class B Shares held for over five years or acquired
pursuant to reinvestment of dividends or distributions are redeemed next, and
any Class B Shares held longest during the five-year period are redeemed next,
unless the shareholder directs otherwise. The charge will not be applied to
dollar amounts representing an increase in the net asset value since the time
of purchase.
For example, assume an investor purchased 100 Class B Shares at $10 per
share (at a cost of $1,000) and in the second year after purchase, the net
asset value per share has increased to $12 and, during such time, the investor
has acquired 10 additional Class B Shares through dividend reinvestment. If, at
such time the investor makes his first redemption of 50 Class B Shares
(proceeds of $600), 10 shares will not be subject to charge because they were
acquired through dividend reinvestment. With respect to the remaining 40
shares, the charge is applied only to the original cost of $10 per share and
not to the increase in net asset value of $2 per share. Therefore, $400 of the
$600 redemption proceeds will be charged at a rate of 4% (the applicable rate
in the second year after purchase) or $16.00.
The contingent deferred sales charge is waived on redemptions of shares
(a) if redemption is made 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) if redemption is made within one year of disability, as defined in
Section 72(m)(7) of the Code; (c) in connection with mandatory distributions
upon reaching age 70 1/2 under any retirement plan qualified under Sections 401,
408 or 403(b) of the Code or any redemption resulting from the tax-free return
of an excess contribution to an IRA; (d) in connection with redemptions 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) in connection with the exercise of certain exchange
privileges among the Class B Shares of a Series and Class B Shares of other
Affiliated Phoenix Funds; (f) in connection with any direct rollover
19
<PAGE>
transfer of shares from an established Phoenix Fund qualified plan into a
Phoenix Fund IRA by participants terminating from the qualified plan; and (g)
in accordance with the terms specified under the Systematic Withdrawal Program.
If, upon the occurrence of a death as outlined above, the account is
transferred to an account registered in the name of the deceased's estate, the
contingent deferred sales charge will be waived on any redemption from the
estate account occurring within one year of the death. If the Class B Shares
are not redeemed within one year of the death, they will remain subject to the
applicable contingent deferred sales charge when redeemed.
Class B Shares will automatically convert to Class A Shares of the same
Fund based upon relative net asset values of each class after eight years from
the acquisition of the Class B Shares, and as a result, will thereafter be
subject to the lower distribution and service fee paid under the Class A
distribution plan. 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. The purpose of the conversion feature is to relieve the holders
of Class B Shares that have been outstanding for a period of time sufficient
for Equity Planning to have been compensated for distribution expenses from
most of the burden of such distribution-related expenses.
For purposes of conversion to Class A, shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B Shares
in a shareholder's fund account will be considered to be held in a separate
sub-account. Each time any Class B Shares in the shareholder's fund account
(other than those in the sub-account) are converted to Class A Shares, an
equal pro rata portion of the Class B Shares in the sub-account will also be
converted to Class A Shares.
The conversion of Class B Shares to Class A Shares is subject to the
continuing availability of an opinion of counsel or a ruling of the Internal
Revenue Service ("IRS") to the effect that (i) the assessment of the higher
distribution and service fees and transfer agency costs with respect to Class B
Shares does not result in any dividends or distributions constituting
"preferential dividends" under the Code, and (ii) that the conversion of shares
does not constitute a taxable event under federal income tax law. The
conversion of Class B Shares to Class A Shares may be suspended if such an
opinion or ruling is no longer available. In that event, no further conversions
of Class B Shares would occur, and shares might continue to be subject to the
higher distribution and service fee for an indefinite period which may extend
beyond the period ending eight years after the end of the month in which
affected Class B Shares were purchased. If the Trust were unable to obtain such
assurances with respect to the assessment of distribution and service fees and
transfer agent costs relative to the Class B Shares, it might make additional
distributions if doing so would assist in complying with the Trust's general
practice of distributing sufficient income to reduce or eliminate federal
taxes.
INVESTOR ACCOUNT SERVICES
The Funds mail periodic statements and reports to shareholders. In order
to reduce the volume and cost of mailings, to the extent possible, only one
copy of most Fund reports will be mailed to households for multiple accounts
with the same surname at the same household address. Please contact Equity
Planning to request additional copies of shareholder reports toll free at (800)
243-4361.
In most cases, changes to any shareholder account may be accomplished by
calling Shareholder Services at (800) 243-1574. More information relating to
the shareholder account services can be found in the Funds' Statement of
Additional Information ("SAI").
Bank Draft Investing Program (Investo-Matic Plan). By completing the
Investo-Matic Section of the New Account Application, you may authorize the
bank named in the form to draw $25 or more from your personal bank account to
be used to purchase additional shares for your account. The amount you
designate will be made available, in form payable to the order of the Transfer
Agent, by the bank on the date the bank draws on your account and will be used
to purchase shares at the applicable offering price.
Distribution Option. The Funds currently declare all income dividends and
all capital gain distributions, if any, payable in shares of the Funds at net
asset value or, at your option, in cash. By exercising the distribution option,
you may elect to: (1) receive both dividends and capital gain distributions in
additional shares or (2) receive dividends in cash and capital gain
distributions in additional shares or (3) receive both dividends and capital
gain distributions in cash. If you elect to receive dividends and/or
distributions in cash and the check cannot be delivered or remains uncashed due
to an invalid address, then the dividend and/or distribution will be reinvested
after the Transfer Agent has been informed that the proceeds are undeliverable.
Additional shares will be purchased in your account at the then current net
asset value. Dividends and capital gain distributions received in shares are
taxable to you and credited to your account in full and fractional shares
computed at the closing net asset value on the next business day after the
record date. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
Systematic Withdrawal Program. The Systematic Withdrawal Program allows
you to periodically redeem a portion of your account on a predetermined
monthly, quarterly, semiannual or annual basis. A sufficient number of full and
fractional shares will be redeemed so that the designated payment is made on or
about the 20th day of the month. Shares are tendered for redemption by the
Transfer Agent, as agent for the shareowner, on or about the 15th of the month
at the closing net asset value on the date of redemption. The Systematic
Withdrawal Program also provides for redemptions to be tendered on or about the
10th, 15th or 25th of the month with proceeds to be directed
20
<PAGE>
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 the Funds worth $5,000 or more, as determined by the then current net
asset value per share, and elect to have all dividends reinvested. The purchase
of shares while participating in the withdrawal program will ordinarily be
disadvantageous to the Class A Shares investor since a sales charge will be
paid by the investor on the purchase of Class A Shares at the same time as
other shares are being redeemed. For this reason, investors in Class A Shares
may not participate in an automatic investment program while participating in
the Systematic Withdrawal Program.
Through the Program, Class B shareholders may withdraw up to 1% of their
aggregate net investments (purchases, at initial value, to date net of
non-Program redemptions) each month or up to 3% of their aggregate net
investments each quarter without incurring otherwise applicable contingent
deferred sales charges. Class B shareholders redeeming more shares than the
percentage permitted by the withdrawal program will be subject to any
applicable contingent deferred sales charge on all shares redeemed.
Accordingly, the purchase of Class B Shares will generally not be suitable for
an investor who anticipates withdrawing sums in excess of the above limits
shortly after purchase.
Tax Sheltered Retirement Plans. Shares of the Funds are offered in
connection with the following qualified prototype retirement plans: IRA,
Rollover IRA, SEP-IRA, SIMPLE IRA, Roth IRA, SIMPLE 401(k), Profit-Sharing and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations and 403(b) Retirement Plans. Write or call Equity
Planning at (800) 243-4361 for further information about the plans.
Exchange Privileges
You may exchange shares of one Phoenix Fund for shares of another
Affiliated Phoenix Fund without paying any fees or sales charges. On exchanges
with share classes that carry a contingent deferred sales charge, the CDSC
schedule of the original shares purchased continues to apply. Shares held in
book-entry form may be exchanged for shares of the same class of other
Affiliated Phoenix Funds, provided the following conditions are met: (1) the
shares that will be acquired in the exchange (the "Acquired Shares") are
available for sale; (2) the Acquired Shares are the same class as the shares to
be surrendered (the "Exchanged Shares"); (3) the Acquired Shares will be
registered to the same shareholder account as the Exchanged Shares; (4) the
account value of the fund whose shares are to be acquired must equal or exceed
the minimum initial investment amount required by that Affiliated Phoenix Fund
after the exchange is made; and (5) if you have elected not to use the
telephone exchange privilege (see below), a properly executed exchange request
must be received by the Distributor. Exchanges may be made over the telephone
or in writing and may be made at one time or systematically over a period of
time. Note, each Affiliated Phoenix Fund has different investment objectives
and policies. You should read the prospectus of the Affiliated Phoenix Fund
into which the exchange is to be made before making any exchanges. This
privilege may be modified or terminated at any time on 60 days' notice.
Market Timer Restrictions. Because excessive trading can hurt Fund
performance and harm shareholders, the Funds reserve the right to temporarily
or permanently terminate exchange privileges or reject any specific order from
anyone whose transactions seem to follow a timing pattern, including those who
request more than one exchange out of a fund within any 30 day period. The
Distributor has entered into agreements with certain market timer entities
permitting them to exchange their clients' shares by telephone. These
privileges are limited under those agreements. The Distributor has the right to
reject or suspend these privileges upon reasonable notice.
Telephone Exchanges. If permitted in your state and unless you waive this
privilege in writing, you or your broker may sell or exchange your shares over
the phone by calling the Distributor at (800) 243-1574. Reasonable procedures
will be used to confirm that telephone instructions are genuine. In addition to
requiring that the exchange is only made between accounts with identical
registrations, the Distributor may require address or other forms of
identification and will record telephone instructions. All exchanges will be
confirmed in writing to you. If procedures reasonably designed to prevent
unauthorized telephone exchanges are not followed, the Trust and/or Distributor
may be liable for following telephone instructions that prove to be fraudulent.
Broker/dealers other than the Distributor assume the risk of any loss resulting
from any unauthorized telephone exchange instructions from their firm or their
registered representatives. You assume the risk that the Distributor acts upon
unauthorized instructions it reasonably believes to be genuine. During times of
severe economic or market changes, this privilege may be difficult to exercise
or may be temporarily suspended. In such event, an exchange may be effected by
written request by following the procedure outlined for selling shares
represented by certificate(s).
NET ASSET VALUE
The net asset value per share of each Fund is determined as of the close
of trading of the New York Stock Exchange (the "Exchange") on days when the
Exchange is open for trading. The net asset value per share of each Fund is
determined by adding the values of all securities and other assets of each
Fund, subtracting liabilities, and dividing by the total number of outstanding
shares of the Fund. The total liability allocated to a class, plus that class's
distribution fee and any other expenses allocated solely to that class, are
deducted from the proportionate interest of such class in the assets of the
Fund, and the resulting amount of each is divided by the number of shares of
that class outstanding to produce the net asset value per share.
Each Fund's investments are valued at market value or, where market
quotations are not available, at fair value as determined in good faith by the
Trustees or their delegates. Foreign and domestic debt securities (other than
short-term
21
<PAGE>
investments) are valued on the basis of broker quotations or valuations
provided by a pricing service approved by the Trustees when such prices are
believed to reflect the fair value of such securities. Foreign and domestic
equity securities are valued at the last sale price or, if there has been no
sale that day, at the last bid price, generally. Short-term investments having
a remaining maturity of less than sixty-one days are valued at amortized cost,
which the Trustees have determined approximates market value. For further
information about security valuations, see the Statement of Additional
Information.
HOW TO REDEEM SHARES
You have the right to have the Trust buy back shares at the net asset
value next determined after receipt of a redemption order, and any other
required documentation in proper form, by Phoenix Funds c/o State Street Bank
and Trust Company, P.O. Box 8301, Boston, MA 02266-8301. In the case of a Class
B Share redemption, you will be subject to the applicable deferred sales
charge, if any, for such shares (see "Deferred Sales Charge Alternative--Class
B Shares," above). Subject to certain restrictions, shares may be redeemed by
telephone, by check 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 Trust does not charge any redemption fees. Payment
for shares redeemed is made within seven days; provided, however, that
redemption proceeds will not be disbursed until each check used for purchases
of shares has been cleared for payment by your bank, which may take up to 15
days after receipt of the check.
The requirements to redeem shares are outlined in the table below.
Additional documentation may be required for redemptions by corporations,
partnerships or other organizations, executors, administrators, trustees,
custodians, guardians, or from IRA's or other retirement plans, or if
redemption is requested by anyone but the shareholder(s) of record. To avoid
delay in redemption or transfer, shareholders having questions about specific
requirements should contact the Funds at (800) 243-1574. Redemption requests
will not be honored until all required documents in proper form have been
received.
How can I sell my Shares?
<TABLE>
<S> <C> <C>
[Telephone] By Phone o Sales up to $50,000
o Not available on most retirement accounts
(800) 243-1574 o Requests received after 4PM will be
executed on the following business day
[Envelope] In Writing o Letter of instruction from the registered
owner including the fund and account
number and the number of shares or dollar
amount you wish to sell
o No signature guarantee is required if your
shares are registered individually, jointly,
or as custodian under the Uniform Gifts to
Minors Act or Uniform Transfers to Minors
Act, the proceeds of the redemption do not
exceed $50,000, and the proceeds are
payable to the registered owners(s) at the
address of record
</TABLE>
Shares previously issued in certificate form cannot be redeemed until the
certificated shares have been deposited to your account.
Telephone Redemptions. The Trust and the Transfer Agent will employ
reasonable procedures to confirm that telephone instructions are genuine.
Address and bank account information will be verified, telephone redemption
instructions will be recorded on tape, and all redemptions will be confirmed in
writing to you. If there has been an address change within the past 60 days, a
telephone redemption will not be authorized. To the extent that procedures
reasonably designed to prevent unauthorized telephone redemptions are not
followed, the Trust and/or the Transfer Agent may be liable for following
telephone instructions for redemption transactions that prove to be fraudulent.
Broker/dealers other than Equity Planning have agreed to bear the risk of any
loss resulting from any unauthorized telephone redemption instruction from the
firm or its registered representatives. However, you would bear the risk of
loss resulting from instructions entered by an unauthorized third party that
the Trust and/or the Transfer Agent reasonably believe to be genuine. The
Telephone Redemption Privilege may be modified or terminated at any time on 60
days' notice to shareholders. In addition, during times of drastic economic or
market changes, the Telephone Redemption Privilege may be difficult to exercise
or may be temporarily suspended. In such event, a redemption may be effected by
written request by following the procedure outlined above.
Written Redemptions. Ownership of shares is recorded electronically in
book entry form; no share certificates are available. If you elect not to use
the telephone redemption or telephone exchange privileges or if the shares
being exchanged are represented by a previously issued certificate(s), you must
submit your request in writing. If the shares are being exchanged between
accounts that are not identically registered, the signature on such request
must be guaranteed by an eligible guarantor institution as defined by the
Transfer Agent in accordance with its signature guarantee procedures.
Currently, such procedures generally permit guarantees by banks, broker
dealers, credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. Any outstanding
certificate or certificates for the tendered shares must be duly endorsed and
submitted. The Distributor reserves the right to charge you for lost or stolen
certificates.
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 Funds 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
22
<PAGE>
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 Funds. A shareholder receiving such securities would incur
brokerage costs when selling the securities.
Account Reinstatement Privilege
You have a one time privilege of using redemption proceeds from Class A
and B Shares to purchase Class A Shares of any Affiliated Phoenix Fund with no
sales charge (at net asset value next determined after the request for
reinvestment is made). For federal income tax purposes, a redemption and
reinvestment will be treated as a sale and purchase of shares. Special rules
may apply in computing the amount of gain or loss in these situations. (See
"Dividends, Distributions and Taxes" for information on the federal income tax
treatment of a disposition of shares.) A written request to reinstate your
account must be received by the Transfer Agent within 180 days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption value). Class B shareholders who have had the contingent deferred
sales charge waived through participation in the Systematic Withdrawal Program
are not eligible to use the Reinstatement Privilege.
Redemption of Small Accounts
Due to the relatively high cost of maintaining small accounts, the Fund
reserves the right to redeem, at net asset value, the shares of any shareholder
whose account has a value, due to redemptions, of less than $200. Before the
Fund redeems these shares, the shareholder will be given notice that the value
of the shares in the account is less than the minimum amount and will be
allowed 30 days to make an additional investment in an amount which will
increase the value of the account to at least $200.
A shareholder should contact his/her broker/dealer if he/she wishes to
transfer shares from an existing broker/dealer street name account to a street
name account with another broker/ dealer. The Fund has no specific procedures
governing such account transfers.
DIVIDENDS, DISTRIBUTIONS
AND TAXES
Each Fund intends to qualify annually as a regulated investment company
under the provisions of Subchapter M of the Internal Revenue Code, as amended
(the "Code") and to distribute annually to shareholders all or substantially
all of its net investment income and net realized capital gains, after
utilization of any capital loss carryovers. If each Fund so qualifies, it
generally will not be subject to federal income tax on the income it
distributes.
Each Fund will distribute its net investment income to its shareholders on
a semi-annual basis and net realized capital gains, if any, to its shareholders
on an annual basis. Distributions, whether received by shareholders in shares
or in cash, will be taxable to them as income or capital gains. Distributions
of net realized long-term capital gains, if designated as such by a Fund, are
taxable to shareholders as long-term capital gains, regardless of how long they
have owned shares in the Fund. Shareholders who are not subject to tax on their
income will not be required to pay tax on amounts distributed to them. Written
notices will be sent to shareholders following the end of each calendar year
regarding the tax status of all distributions made during each taxable year.
Each Fund will be subject to a nondeductible 4% excise tax if it fails to
meet certain annual distribution requirements. In order to prevent imposition
of the excise tax, it may be necessary for each Fund to make distributions more
frequently than described in the previous paragraph.
All dividends and distributions with respect to the shares of any class of
any Fund will be payable in shares of such class of Fund at net asset value or,
at the option of the shareholder, in cash. Any shareholder who purchases shares
of a Fund prior to the close of business on the record date for a dividend or
distribution will be entitled to receive such dividend or distribution.
Dividends and distributions (whether received in shares or in cash) are treated
either as ordinary income or long- term capital gains for federal income tax
purposes.
Investment income received by any Fund from sources within foreign
countries may be subject to foreign income taxes withheld at the source. If a
Fund should have more than 50% of the value of its assets invested in
securities of foreign corporations at the close of its taxable year, which is
the Trust's present intention, the Fund may elect to permit its shareholders to
take, either as a credit or a deduction, their proportionate share of the
foreign income taxes paid.
The foregoing is only a summary of some of the important tax
considerations generally affecting the Funds and their shareholders.
Important Notice Regarding Taxpayer IRS Certification
Pursuant to IRS regulations, the Funds may be required to withhold 31% of
all reportable payments including any taxable dividends, capital gain
distributions or share redemption proceeds, for any account which does not have
a taxpayer identification number or social security number and certain required
certifications.
The Funds reserve the right to refuse to open an account for any person
failing to provide a taxpayer identification number along with the required
certifications.
The Funds send to all shareholders, within 31 days after the end of the
calendar year, information which is required by the Internal Revenue Service
for preparing federal income tax returns. Investors are urged to consult their
attorney or tax adviser regarding specific questions as to federal, foreign,
state or local taxes.
ADDITIONAL INFORMATION
Organization of the Trust
The Trust was established on May 31, 1996 as a Massachusetts business
trust. The capitalization of the Trust consists solely of an unlimited number
of shares of beneficial interest. The Trust
23
<PAGE>
currently offers shares in two funds and different classes of those Funds.
Holders of shares of a Fund have equal rights with regard to voting,
redemptions, dividends, distributions, and liquidations with respect to that
Fund, except that Class B Shares of any Fund, which bear higher distribution
and services fees and certain incrementally higher expenses associated with the
deferred sales arrangement, pay correspondingly lower dividends per share than
Class A Shares of the same Fund. Shareholders of all Funds vote on the election
of Trustees. On matters affecting an individual Fund (such as approval of an
investment advisory agreement or a change in fundamental investment policies)
and on matters affecting an individual class (such as approval of matters
relating to a Distribution Plan for a particular class of shares), a separate
vote of that Fund or class is required. Trustees will call a meeting when at
least 10% of the outstanding shares so request in writing. If the Trustees fail
to call a meeting after being so notified, the Shareholders may call the
meeting. The Trustees will assist the Shareholders by identifying other
shareholders or mailing communications, as required under Section 16(c) of the
Investment Company Act of 1940.
Shares are fully paid, nonassessable, redeemable and fully transferable
when they are issued. Shares do not have cumulative voting rights, preemptive
rights or subscription rights. The assets received by the Trust for the issue
or sale of shares of each Fund, and any class thereof and all income, earnings,
profits and proceeds thereof, are allocated to such Fund, and Class,
respectively, subject only to the rights of creditors, and constitute the
underlying assets of such Fund or class. The underlying assets of each Fund are
required to be segregated on the books of account, and are to be charged with
the expenses in respect to such Fund and with a share of the general expenses
of the Trust. Any general expenses of the Trust not readily identifiable as
belonging to a particular Fund or Class will be allocated by or under the
direction of the Trustees as they determine fair and equitable.
Unlike the stockholders of a corporation, there is a possibility that the
shareholders of a business trust such as the Trust may be personally liable for
debts or claims against the Trust. The Declaration of Trust provides that
shareholders shall not be subject to any personal liability for the acts or
obligations of the Trust and that every written agreement, undertaking or
obligation made or issued by the Trust shall contain a provision to that
effect. The Declaration of Trust provides for indemnification out of the Trust
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability, which is considered remote,
is limited to circumstances in which the Trust itself would be unable to meet
its obligations.
Additional Inquiries
Inquiries and requests for the Statement of Additional Information, the
Annual Report to Shareholders and the Semi-Annual Report to Shareholders should
be directed to Equity Planning at (800) 243-4361 or 100 Bright Meadow
Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200.
Registration Statement
This Prospectus omits certain information included in the Statement of
Additional Information and Part C of the Registration Statement filed with the
Securities and Exchange Commission under the Securities Act of 1933 and the
1940 Act. A copy of the Registration Statement may be obtained from the
Securities and Exchange Commission in Washington, D.C.
24
<PAGE>
BACKUP WITHHOLDING INFORMATION
Step 1. Please make sure that the social security number or taxpayer
identification number (TIN) which appears on the Application complies
with the following guidelines:
<TABLE>
<CAPTION>
Account Type Give Social Security Number or Tax Identification Number of:
- -------------------------------------------------------------------------------------------------------
<S> <C>
Individual Individual
- -------------------------------------------------------------------------------------------------------
Joint (or Joint Tenant) Owner who will be paying tax
- -------------------------------------------------------------------------------------------------------
Uniform Gifts to Minors Minor
- -------------------------------------------------------------------------------------------------------
Legal Guardian Ward, Minor or Incompetent
- -------------------------------------------------------------------------------------------------------
Sole Proprietor Owner of Business (also provide owner's name)
- -------------------------------------------------------------------------------------------------------
Trust, Estate, Pension Plan Trust Trust, Estate, Pension Plan Trust (not personal TIN of fiduciary)
- -------------------------------------------------------------------------------------------------------
Corporation, Partnership,
Other Organization Corporation, Partnership, Other Organization
- -------------------------------------------------------------------------------------------------------
Broker/Nominee Broker/Nominee
- -------------------------------------------------------------------------------------------------------
</TABLE>
Step 2. If you do not have a TIN, you must obtain Form SS-5 (Application for
Social Security Number) or Form SS-4 (Application for Employer
Identification Number) from your local Social Security or IRS office and
apply for one. Write "Applied For" in the space on the application.
Step 3. If you are one of the entities listed below, you are exempt from
backup withholding.
o A corporation
o Financial institution
o Section 501(a) exempt organization (IRA, Corporate Retirement Plan,
403(b), Keogh)
o United States or any agency or instrumentality thereof
o A State, the District of Columbia, a possession of the United States,
or any subdivision or instrumentality thereof
o International organization or any agency or instrumentality thereof
o Registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
o Real estate investment trust
o Common trust fund operated by a bank under section 584(a)
o An exempt charitable remainder trust, or a non-exempt trust described
in section 4947(a)(1)
o Regulated Investment Company
If you are in doubt as to whether you are exempt, please contact the Internal
Revenue Service.
Step 2. IRS Penalties--If you do not supply us with your TIN, you will be
subject to an IRS $50 penalty unless your failure is due to reasonable
cause and not willful neglect. If you fail to report interest, dividend
or patronage dividend income on your federal income tax return, you will
be treated as negligent and subject to an IRS 5% penalty tax on any
resulting underpayment of tax unless there is clear and convincing
evidence to the contrary. If you falsify information on this form or
make any other false statement resulting in no backup withholding on an
account which should be subject to a backup withholding, you may be
subject to an IRS $500 penalty and certain criminal penalties including
fines and imprisonment.
- -----------
This Prospectus sets forth concisely the information about the Phoenix-Aberdeen
Series Fund (the "Trust") which you should know before investing. Please read
it carefully and retain it for future reference.
The Trust has filed with the Securities and Exchange Commission a Statement of
Additional Information about the Trust, dated November 27, 1998. The Statement
contains more detailed information about the Trust and is incorporated into
this Prospectus by reference. You may obtain a free copy of the Statement by
writing the Trust c/o Phoenix Equity Planning Corporation, 100 Bright Meadow
Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200.
Financial information relating to the Trust is contained in the Annual Report
to Shareholders for the period ended July 31, 1998 and is incorporated into the
Statement of Additional Information by reference.
[Recycle Logo] Printed on recycled paper using soybean ink
<PAGE>
[BACKCOVER]
Phoenix Funds
PO Box 2200
Enfield CT 06083-2200
[PHOENIX INVESTMENT PARTNERS LOGO]
----------------
BULK RATE MAIL
U.S. POSTAGE
PAID
SPRINGFIELD, MA
PERMIT NO. 444
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PXP 147 (11/98)
<PAGE>
PHOENIX-ABERDEEN NEW ASIA FUND
PHOENIX-ABERDEEN GLOBAL SMALL CAP FUND
101 Munson Street,
Greenfield, MA 01301
Statement of Additional Information
November 27, 1998
This Statement of Additional Information is not a prospectus, but expands
upon and supplements the information contained in the current prospectus of
Phoenix-Aberdeen Series Fund (the "Trust") dated November 27, 1998, and should
be read in conjunction with it. The Trust's Prospectus may be obtained by
calling Phoenix Equity Planning Corporation ("Equity Planning" or the
"Distributor") at (800) 243-4361 or by writing to Equity Planning at 100 Bright
Meadow Boulevard, P.O. Box 2200, Enfield, CT 06083-2200.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
THE TRUST ..................................... 1
INVESTMENT OBJECTIVES AND POLICIES ............ 1
INVESTMENT RESTRICTIONS ....................... 5
PERFORMANCE INFORMATION ....................... 7
PORTFOLIO TRANSACTIONS AND BROKERAGE .......... 8
SERVICES OF THE ADVISER ....................... 9
SERVICES OF THE ADMINISTRATOR ................. 10
NET ASSET VALUE ............................... 11
HOW TO BUY SHARES ............................. 11
ALTERNATIVE PURCHASE ARRANGEMENTS ............. 11
INVESTOR ACCOUNT SERVICES ..................... 12
REDEMPTION OF SHARES .......................... 13
DIVIDENDS, DISTRIBUTIONS AND TAXES ............ 14
TAX-SHELTERED RETIREMENT PLANS ................ 15
THE DISTRIBUTOR ............................... 16
DISTRIBUTION PLANS ............................ 17
TRUSTEES AND OFFICERS ......................... 17
OTHER INFORMATION ............................. 25
</TABLE>
Numbers appearing in parentheses correspond to related disclosures in the
Fund's Prospectus.
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders: (800) 367-5877
Telecommunications Device (TTY)-(800) 243-1926
PXP 147B (11/98)
<PAGE>
THE TRUST
Phoenix-Aberdeen Series Fund (the "Trust") is an open-end management
investment company established as a business trust under the laws of the
Commonwealth of Massachusetts by an Agreement and Declaration of Trust dated
May 31, 1996 (the "Declaration of Trust"). The Declaration of Trust authorizes
the assets and shares of the Funds to be divided into two Funds (the "Funds").
Each Fund has a different investment objective, invests primarily in certain
types of securities, and is designed to meet different investment needs. In
many respects, each Fund operates as if it were a separate mutual fund. The
Funds' Prospectus describes the investment objectives of each Fund. The
following discussion supplements the description of each Fund's investment
policies and investment techniques in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of each Fund are described in the
"Investment Objectives and Policies" section of the Prospectus. The following
discussion supplements the "Investment Techniques and Related Risks" section of
the Prospectus.
Financial Futures Contracts and Related Options
Each Fund may use financial futures contracts and related options to hedge
against changes in the market value of their portfolio securities or securities
which they intend to purchase. A Fund may use foreign currency futures
contracts to hedge against changes in the value of foreign currencies. See
"Foreign Currency Transactions" below. Hedging is accomplished when an investor
takes a position in the futures market opposite to the investor's cash market
position. There are two types of hedges-long (or buying) and short (or selling)
hedges. Historically, prices in the futures market have tended to move in
concert with (although in inverse relation to) cash market prices, and prices
in the futures market have maintained a fairly predictable relationship to
prices in the cash market. Thus, a decline in the market value of securities or
the value of foreign currencies may be protected against to a considerable
extent by gains realized on futures contracts sales. Similarly, it is possible
to protect against an increase in the market price of securities which a Fund
utilizing this investment technique may wish to purchase in the future by
purchasing futures contracts.
Each Fund may purchase or sell any financial futures contracts which are
traded on a recognized exchange or board of trade and may purchase exchange- or
board-traded put and call options on financial futures contracts as a hedge
against anticipated changes in the market value of its portfolio securities or
securities which it intends to purchase. Financial futures contracts consist of
interest rate futures contracts, securities index futures contracts and foreign
currency futures contracts. A clearing corporation associated with the exchange
or board of trade on which a financial futures contract trades assumes
responsibility for the completion of transactions and also guarantees that open
futures contracts will be performed.
In contrast to the situation in which a Fund purchases or sells a
security, no security is delivered or received by a Fund upon the purchase or
sale of a financial futures contract (although an obligation to deliver or
receive the underlying security in the future is created by such a contract).
Initially, when it enters into a financial futures contract, a Fund utilizing
this investment technique will be required to deposit in a pledged account with
the Funds' custodian bank with respect to such Fund an amount of cash or U.S.
Treasury bills. This amount is known as initial margin and is in the nature of
a performance bond or good faith deposit on the contract. The current initial
margin deposit required per contract is approximately 5% of the contract
amount. Brokers may establish deposit requirements higher than this minimum,
however, subsequent payments, called variation margin, will be made to and from
the account on a daily basis as the price of the futures contract fluctuates.
This process is known as marking to market.
The writer of an option on a futures contract is required to deposit
margin pursuant to requirements similar to those applicable to futures
contracts. Upon exercise of an option on a futures contract, the delivery of
the futures position by the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
margin account. This amount will be equal to the amount by which the market
price of the futures contract at the time of exercise exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price of the option
on the futures contract.
Although financial futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery.
Closing out is accomplished by effecting an offsetting transaction. A futures
contract sale is closed out by effecting a futures contract purchase for the
same aggregate amount of securities and the same delivery date. If the sale
price exceeds the offsetting purchase price, the seller immediately would be
paid the difference and would realize a gain. If the offsetting purchase price
exceeds the sale price, the seller immediately would pay the difference and
would realize a loss. Similarly, a futures contract purchase is closed out by
effecting a futures contract sale for the same securities and the same delivery
date. If the offsetting sale price exceeds the purchase price, the purchaser
would realize a gain, whereas if the purchase price exceeds the offsetting sale
price, the purchaser would realize a loss.
Any Fund utilizing this investment technique will pay commissions on
financial futures contracts and related options transactions. These commissions
may be higher than those which would apply to purchases and sales of securities
directly, and will be in addition to those paid for direct purchases and sales
of securities.
1
<PAGE>
Limitations On Futures Contracts and Related Options. Any Fund utilizing
this investment technique may not engage in transactions in financial futures
contracts or related options for speculative purposes but only as a hedge
against anticipated changes in the market value of portfolio securities or
securities which it intends to purchase or foreign currencies. A Fund utilizing
this investment technique may not purchase or sell financial futures contracts
or related options if, immediately thereafter, the sum of the amount of initial
margin deposits on the Fund's existing futures and related options positions
and the premiums paid for related options would exceed 5% of the market value
of the Fund's total assets. At the time of purchase of a futures contract or a
call option on a futures contract, any asset, including equity securities and
non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily equal to the market value of the futures contract minus
the Fund's initial margin deposit with respect thereto will be deposited in a
pledged account with the Fund's custodian bank with respect to such Fund to
collateralize fully the position and thereby ensure that it is not leveraged.
The extent to which a Fund may enter into financial futures contracts and
related options also may be limited by the requirements of the Internal Revenue
Code of 1986 for qualification as a regulated investment company. See
"Dividends, Distributions and Taxes."
Risks Relating to Futures Contracts and Related Options. Positions in
futures contracts and related options may be closed out on an exchange if the
exchange provides a secondary market for such contracts or options. A Fund
utilizing this investment technique will enter into a futures or futures
related option position only if there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist
for any particular option or futures contract at any specific time. Thus, it
may not be possible to close out a futures or related option position. In the
case of a futures position, in the event of adverse price movements the Fund
would continue to be required to make daily margin payments. In this situation,
if the Fund has insufficient cash to meet daily margin requirements, it may
have to sell portfolio securities to meet its margin obligations at a time when
it may be disadvantageous to do so. In addition, the Fund may be required to
take or make delivery of the securities underlying the futures contracts it
holds. The inability to close out futures positions also could have an adverse
impact on the Fund's ability to hedge its positions effectively.
There are several risks in connection with the use of futures contracts as
a hedging device. While hedging can provide protection against an adverse
movement in market prices, it can also limit a hedger's opportunity to benefit
fully from favorable market movement. In addition, investing in futures
contracts and options on futures contracts will cause a Fund to incur
additional brokerage commissions and may cause an increase in a Fund's turnover
rate.
The successful use of futures contracts and related options depends on the
ability of the Adviser to forecast correctly the direction and extent of market
movements, interest rates and other market factors within a given time frame.
To the extent market prices remain stable during the period a futures contract
or option is held by a Fund or such prices move in a direction opposite to that
anticipated, the Fund may realize a loss on the hedging transaction which is
not offset by an increase in the value of its portfolio securities. Options and
futures may also fail as a hedging technique in cases where the movements of
the securities underlying the options and futures do not follow the price
movements of the portfolio securities subject to the hedge. As a result, the
Fund's total return for the period may be less than if it had not engaged in
the hedging transaction.
Utilization of futures or options contracts by a Fund involves the risk of
imperfect correlation in movements in the price of futures contracts and
movements in the price of the securities or currencies which are being hedged.
If the price of the futures contract moves more or less than the price of the
securities or currency being hedged, the Fund will experience a gain or loss
which will not be completely offset by movements in the price of the securities
or currency. It is possible that, where a Fund has sold futures contracts to
hedge against decline in the market, the market may advance and the value of
securities held in the Fund or the currencies in which its foreign securities
are denominated may decline. If this occurred, the Fund would lose a
potentially unlimited amount of money on the futures contract and would also
experience a decline in value in its portfolio securities. Where futures are
purchased to hedge against a possible increase in the prices of securities or
foreign currencies before the Fund is able to invest its cash (or cash
equivalents) in securities (or options) in an orderly fashion, it is possible
that the market may decline; if the Fund then determines not to invest in
securities (or options) at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the
futures that would not be offset by a reduction in the price of the securities
purchased.
The market prices of futures contracts may be affected if participants in
the futures market elect to close out their contracts through offsetting
transactions rather than to meet margin deposit requirements. In such cases,
distortions in the normal relationship between the cash and futures markets
could result. Price distortions could also result if investors in futures
contracts opt to make or take delivery of the underlying securities or
currencies rather than to engage in closing transactions because such action
would reduce the liquidity of the futures market. In addition, because, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the underlying securities
market, increased participation by speculators in the futures market could
cause temporary price distortions. Because of the possibility of price
distortions in the futures market and of the imperfect correlation between
movements in the prices of securities or foreign currencies and movements in
the prices of futures contracts, a correct forecast of market trends may still
not result in a successful hedging transaction.
2
<PAGE>
Repurchase Agreements
Repurchase agreements, as described in the Funds' Prospectus, will be
entered into only with commercial banks, brokers and dealers considered by the
Funds to be credit-worthy. The Trustees of the Funds will monitor each Fund's
repurchase agreement transactions periodically and, with the Funds' investment
adviser, will consider standards which the Funds' investment adviser will use
in reviewing the creditworthiness of any party to a repurchase agreement with a
Fund. No more than an aggregate of 15% of a Fund's net assets, at the time of
investment, will be invested in repurchase agreements having maturities longer
than seven days and other investments subject to legal or contractual
restrictions on resale, or for which there are not readily available market
quotations.
The use of repurchase agreements involves certain risks. For example, if
the seller under a repurchase agreement defaults on its obligation to
repurchase the underlying instrument at a time when the value of the instrument
has declined, a Fund may incur a loss upon its disposition. If the seller
becomes insolvent and subject to liquidation or reorganization under bankruptcy
or other laws, a bankruptcy court may determine that the underlying instrument
is collateral for a loan by the Fund and therefore is subject to sale by the
trustee in bankruptcy. Finally, it is possible that the Fund may not be able to
substantiate its interest in the underlying instrument. While the Trustees of
the Funds acknowledge these risks, it is expected that they can be controlled
through careful structuring of repurchase agreement transactions to meet
requirements for treatment as a purchase and sale under the bankruptcy laws and
through monitoring procedures designed to assure the creditworthiness of
counter-parties to such transactions.
Lending Portfolio Securities
Each Fund may lend portfolio securities to broker-dealers and other
financial institutions in amounts up to 25% of the market or other fair value
for its total assets provided that such loans are callable at any time by the
Fund utilizing this investment technique and are at all times secured by
collateral held by the Fund at least equal to 102% of the market value
determined daily of the loaned securities. The Fund utilizing this investment
technique will continue to receive any income on the loaned securities and at
the same time will earn interest on cash collateral (which will be invested in
short-term debt obligations) or a securities lending fee in the case of
collateral in the form of U.S. Government securities. A loan may be terminated
at any time by either the Fund or the borrower. Upon termination of a loan the
borrower will be required to return the securities to the Fund and any gain or
loss in the market price during the period of the loan would accrue to the
Fund. If the borrower fails to maintain the requisite amount of collateral the
loan will automatically terminate and the Fund may use the collateral to
replace the loaned securities while holding the borrower liable for any excess
of the replacement cost over the amount of the collateral.
When voting or consent rights which accompany loaned securities pass to
the borrower, the Fund will follow the policy of calling the loan in whole or
in part as may be appropriate in order to exercise such rights if the matters
involved would have a material effect on the Fund's investment in the
securities which are the subject of the loan. The Fund may pay reasonable
finders administrative and custodial fees in connection with loans of its
portfolio securities.
As with any extension of credit there are risks of delay in recovery of
the loaned securities and in some cases loss of rights in the collateral should
the borrower of the securities fail financially. However loans of portfolio
securities will be made only to firms considered by the Funds to be
creditworthy and when the Adviser believes the consideration to be earned
justifies the attendant risks.
Foreign Currency Transactions
Each Fund may engage in foreign currency transactions. A forward foreign
currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date which may be any fixed number of days from
the date of the contract agreed upon by the parties at a price set at the time
of the contract. These contracts are traded directly between currency traders
(usually large commercial banks) and their customers. No Fund intends to enter
into forward contracts if it would have more than 15% of the value of its total
assets committed to such contracts on a regular or continuous basis. No Fund
will enter into such forward contracts or maintain a net exposure in such
contracts where it would be obligated to deliver an amount of foreign currency
in excess of the value of its portfolio securities and other assets denominated
in that currency. The Funds' custodian banks will segregate any asset,
including equity securities and non-investment grade debt securities, so long
as the asset is liquid, unencumbered and marked to market daily in an amount
not less than the value of a Fund's total assets committed to forward foreign
currency exchange contracts entered into for the purchase of a foreign
currency. If the value of the securities segregated declines additional cash or
securities will be added so that the segregated amount is not less than the
amount of the Fund's commitments with respect to such contracts. Generally, a
Fund will not enter into forward contracts with terms longer than one year.
Foreign Currency Options. A foreign currency option provides the option
buyer with the right to buy or sell a stated amount of foreign currency at the
exercise price at a specified date or during the option period. A call option
gives its owner the right, but not the obligation, to buy the currency, while a
put option gives its owner the right, but not the obligation, to sell the
currency. The option seller (writer) is obligated to fulfill the terms of the
option sold if it is exercised. However, either seller or buyer may close its
position during the option period for such options any time prior to
expiration.
3
<PAGE>
A call rises in value if the underlying currency appreciates. Conversely,
a put rises in value if the underlying currency depreciates. While purchasing a
foreign currency option can protect a Fund utilizing this technique against an
adverse movement in the value of a foreign currency, it does not limit the gain
which might result from a favorable movement in the value of such currency. For
example, if a Fund were holding securities denominated in an appreciating
foreign currency and had purchased a foreign currency put to hedge against a
decline in the value of the currency, it would not have to exercise its put.
Similarly, if a Fund had entered into a contract to purchase a security
denominated in a foreign currency and had purchased a foreign currency call to
hedge against a rise in the value of the currency but instead the currency had
depreciated in value between the date of purchase and the settlement date, the
Fund would not have to exercise its call but could acquire in the spot market
the amount of foreign currency needed for settlement.
Foreign Currency Futures Transactions. Each Fund may use foreign currency
futures contracts and options on such futures contracts. Through the purchase
or sale of such contracts, a Fund may be able to achieve many of the same
objectives attainable through the use of foreign currency forward contracts,
but more effectively and possibly at a lower cost. Unlike forward foreign
currency exchange contracts, foreign currency futures contracts and options on
foreign currency futures contracts are standardized as to amount and delivery
period and are traded on boards of trade and commodities exchanges. It is
anticipated that such contracts may provide greater liquidity and lower cost
than forward foreign currency exchange contracts.
Regulatory Restrictions. To the extent required to comply with Securities
and Exchange Commission Release No. IC-10666, when purchasing a futures
contract or writing a put option, each Fund will maintain in a pledged account
any asset, including equity securities and non-investment grade debt so long as
the asset is liquid, unencumbered and marked to market daily equal to the value
of such contracts. To the extent required to comply with Commodity Futures
Trading Commission Regulation 4.5 and thereby avoid "commodity pool operator"
status, a Fund will not enter into a futures contract or purchase an option
thereon if immediately thereafter the initial margin deposits for futures
contracts (including foreign currency and all other futures contracts) held by
the Fund plus premiums paid by it for open options on futures would exceed 5%
of the Fund's total assets. No Fund will engage in transactions in financial
futures contracts or options thereon for speculation, but only to attempt to
hedge against changes in market conditions affecting the values of securities
which the Fund holds or intends to purchase. When futures contracts or options
thereon are purchased to protect against a price increase on securities
intended to be purchased later, it is anticipated that at least 75% of such
intended purchases will be completed. When other futures contracts or options
thereon are purchased, the underlying value of such contracts will at all times
not exceed the sum of: (1) accrued profit on such contracts held by the broker;
(2) cash or high quality money market instruments set aside in an identifiable
manner; and (3) cash proceeds from investments due in 30 days.
Emerging Market Securities
Each Fund may invest in countries or regions with relatively low gross
national product per capita compared to the world's major economies, and in
countries or regions with the potential for rapid economic growth (emerging
markets). Emerging markets will include any country: (i) having an "emerging
stock market" as defined by the International Finance Corporation; (ii) with
low-to-middle-income economies according to the International Bank for
Reconstruction and Development (the "World Bank"); (iii) listed in World Bank
publications as developing; or (iv) determined by the Adviser to be an emerging
market as defined above. Each Fund may also invest in securities of: (i)
companies the principal securities trading market for which is an emerging
market country; (ii) companies organized under the laws of, and with a
principal office in, an emerging market country, or (iii) companies whose
principal activities are located in emerging market countries.
The risks of investing in foreign securities may be intensified in the
case of investments in emerging markets. Securities of many issuers in emerging
markets may be less liquid and more volatile than securities of comparable
domestic issuers. Emerging markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of a Fund is not invested and no
return is earned thereon. The inability of a Fund to make intended security
purchases due to settlement problems could cause a Fund to miss attractive
investment opportunities. Inability to dispose of portfolio securities due to
settlement problems could result either in losses to the Fund due to subsequent
declines in value of the portfolio securities or, if the Fund has entered into
a contract to sell the security, in possible liability to the purchaser.
Securities prices in emerging markets can be significantly more volatile than
in the more developed nations of the world, reflecting the greater
uncertainties of investing in less established markets and economies. In
particular, countries with emerging markets may have relatively unstable
governments, present the risk of nationalization of businesses, restrictions on
foreign ownership, or prohibitions of repatriation of assets, and may have less
protection of property rights than more developed countries. The economies of
countries with emerging markets may be predominantly based on only a few
industries, may be highly vulnerable to changes in local or global trade
conditions, and may suffer from extreme and volatile debt burdens or inflation
rates. Local securities markets may trade a small number of securities and may
be unable to respond effectively to increases in trading volume, potentially
making prompt liquidation of substantial holdings difficult or impossible at
times. Securities of issuers located in countries with emerging markets may
have limited marketability and may be subject to more abrupt or erratic price
movements.
4
<PAGE>
Certain emerging markets may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in an
emerging market's balance of payments or for other reasons, a country could
impose temporary restrictions on foreign capital remittances. A Fund could be
adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the
application to the Fund any restrictions on investments. Investments in certain
foreign emerging market debt obligations may be restricted or controlled to
varying degrees. These restrictions or controls may at times preclude
investment in certain foreign emerging market debt obligations and increase the
expenses of a Fund.
Investing in Small Cap Issuers
Under normal market conditions, the Global Fund expects to invest at least
65% of its total assets in equity securities of small and medium capitalization
companies. Market capitalization of such issuers are determined at the time of
purchase. While the issuers in which the Fund will primarily invest may offer
greater opportunities for capital appreciation than larger capitalization
issuers, investments in smaller companies may have limited product lines,
markets or financial resources, or they may be dependent on a limited
management group. Full development of these companies takes time and, for this
reason, the Fund should be considered as a long-term investment and not as a
vehicle for seeking short-term profits, nor should an investment in the Fund be
considered a complete investment program. In addition, many small company
stocks trade less frequently and in smaller volume, and may be subject to more
abrupt or erratic price movements than stocks of large companies. The
securities of small companies may also be more sensitive to market changes than
the securities of large companies. These factors may result in above-average
fluctuations in the net asset value of the Fund's shares. The Fund is not an
appropriate investment for individual investors requiring safety of principal
or a predictable return of income from their investment.
Additional Risk Factors
As a result of its investments in foreign securities, each Fund may
receive interest or dividend payments, or the proceeds of the sale or
redemption of such securities, in the foreign currencies in which such
securities are denominated. In that event, a Fund may convert such currencies
into dollars at the then current exchange rate. Under certain circumstances,
however, such as where the Adviser believes that the applicable rate is
unfavorable at the time the currencies are received or the Adviser anticipates,
for any other reason, that the exchange rate will improve, a Fund may hold such
currencies for an indefinite period of time.
In addition, a Fund may be required to receive delivery of the foreign
currency underlying forward foreign currency contracts it has entered into.
This could occur, for example, if an option written by a Fund is exercised or
the Fund is unable to close out a forward contract. A Fund may hold foreign
currency in anticipation of purchasing foreign securities. A Fund may also
elect to take delivery of the currencies underlying options or forward
contracts if, in the judgment of the Adviser, it is in the best interest of the
Fund to do so. In such instances as well, the Fund may convert the foreign
currencies to dollars at the then current exchange rate, or may hold such
currencies for an indefinite period of time.
While the holding of currencies will permit a Fund to take advantage of
favorable movements in the applicable exchange rate, it also exposes the Fund
to risk of loss if such rates move in a direction adverse to the Fund's
position. Such losses could reduce any profits or increase any losses sustained
by the Fund from the sale or redemption of securities, and could reduce the
dollar value of interest or dividend payments received. In addition, the
holding of currencies could adversely affect the Fund's profit or loss on
currency options or forward contracts, as well as its hedging strategies.
INVESTMENT RESTRICTIONS
The Funds' fundamental policies as they affect any Fund cannot be changed
without the approval vote of a majority of the outstanding shares of such Fund,
which is the lesser of (i) 67% or more of the voting securities of such Fund
present at a meeting if the holders of more than 50% of the outstanding voting
securities of such Fund are present or represented by proxy or (ii) more than
50% of the outstanding voting securities of such Fund. A proposed change in
fundamental policy or investment objective will be deemed to have been
effectively acted upon with respect to any Fund if a majority of the
outstanding voting securities of that Fund votes for the approval of the
proposal as provided above, notwithstanding (1) that such matter has not been
approved by a majority of the outstanding securities of any other Fund affected
by such matter and (2) that such matter has not been approved by a majority of
the outstanding voting securities of the Trust.
The following investment restrictions are fundamental policies of the
Funds with respect to all Funds and may not be changed except as described
above. The Funds may not:
1. Purchase for any Fund securities of any issuer, other than obligations
issued or guaranteed as to principal and interest by the United States
Government or its agencies or instrumentalities, if immediately thereafter (i)
more than 5% of such Fund's total assets (taken at market value) would be
invested in the securities of such issuer or (ii) more than 10% of the
outstanding securities of any class of such issuer would be held by such Fund
or by all Funds of the Trust in the aggregate.
2. Act as securities underwriter except as it technically may be deemed to
be an underwriter under the Securities Act of 1933 in selling a portfolio
security.
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3. Purchase securities on margin, but it may obtain short-term credit as
may be necessary for the clearance of purchases and sales of securities.
4. Make short sales of securities or maintain a short position unless
against-the-box or unless at the time of sale the Fund owns an equal amount of
such securities.
5. Make cash loans, except that the Funds may (i) purchase bonds, notes,
debentures or similar obligations which are customarily purchased by
institutional investors whether publicly distributed or not, and (ii) enter
into repurchase agreements, provided that no more than 15% of any Fund's net
assets (taken at market value) may be subject to repurchase agreements maturing
in more than seven days.
6. Make securities loans, except that the Funds may make loans of the
portfolio securities of any Fund, provided that the market value of the
securities subject to any such loans does not exceed 25% of the value of the
total assets (taken at market value) of such Fund.
7. Make investments in real estate (including real estate limited
partnerships) or commodities or commodity contracts, although (i) the Funds may
purchase securities of issuers which deal in real estate or commodities and may
purchase securities which are secured by interests in real estate,
specifically, securities issued by real estate investment trusts and (ii) any
Fund may engage in transactions in financial futures contracts and related
options, provided that the sum of the initial margin deposits on such Fund's
existing futures positions and the premiums paid for related options would not
exceed in the aggregate 5% of such Fund's total assets.
8. Invest in oil, gas or other mineral leases or exploration or
development programs, although the Funds may purchase securities of issuers
which engage in whole or in part in such activities.
9. Invest in puts, calls, straddles and any combination thereof, except
that any Fund may (i) write (sell) exchange-traded covered call options on
portfolio securities and on securities indices and engage in related closing
purchase transactions and (ii) invest up to 2% of its total assets in
exchange-traded call and put options on securities and securities indices.
10. Purchase securities of companies for the purpose of exercising
management or control.
11. Participate in a joint or joint and several trading account in
securities.
12. Purchase or retain securities of any issuer if any officer or Trustee
of the Trust, or officer or director of its investment adviser(s), owns
beneficially more than 1/2 of 1% of the outstanding securities or shares, or
both, of such issuer and all such persons owning more than 1/2 of 1% of such
securities or shares together own beneficially more than 5% of such securities
or shares.
13. Borrow money, except that the Funds may (i) borrow money for any Fund
for temporary administrative purposes provided that any such borrowing does not
exceed 10% of the value of the total assets (taken at market value) of such
Fund and (ii) borrow money for any Fund for investment purposes, provided that
any such borrowing for investment purposes with respect to any such Fund is (a)
authorized by the Trustees prior to any public distribution of the shares of
such Fund or is authorized by the shareholders of such Fund thereafter, (b) is
limited to 33 1/3% of the value of the total assets (taken at market value) of
such Fund, and (c) is subject to an agreement by the lender that any recourse
is limited to the assets of that Fund with respect to which the borrowing has
been made. No Fund may invest in portfolio securities while the amount of
borrowing of the Fund exceeds 5% of the total assets of such Fund. Borrowing
for investment purposes has not been authorized for any Fund whose shares are
offered by the Funds.
14. Pledge, mortgage or hypothecate the assets of any Fund to an extent
greater than 10% of the total assets (taken at market value) of such Fund to
secure borrowings made pursuant to the provisions of item 13 above.
15. Issue senior securities, as defined in the 1940 Act, provided,
however, that such Fund may secure borrowings made pursuant to the provisions
of item 13 above; and provided, further, that such Fund's obligations under
interest-rate swaps, reverse repurchase agreements, when issued,
delayed-delivery and forward-commitment transactions and similar transactions
are not treated as senior securities if covering assets are appropriately
segregated; such Fund may not pledge its assets other than to secure such
issuances of senior securities or such borrowings or in connection with hedging
transactions, short sales, when-issued and forward-commitment transactions and
similar investment strategies; for purposes of this restriction, the term
"total assets" includes the proceeds of senior securities issued but is reduced
by any liabilities and indebtedness not constituting senior securities or
excluded from treatment as senior securities by this restriction.
16. Purchase securities of other investment companies, except that a Fund
may make such purchase (a) in the open market involving no commission or profit
to a sponsor or dealer (other than customary broker's commissions), provided
that immediately thereafter (i) not more than 10% of the Fund's total assets
would be invested in such securities and (ii) not more than 3% of the stock of
another investment company would be owned by the Fund, or (b) as part of a
merger, consolidation, or acquisition of assets.
17. Invest in amounts greater than 25% of a Fund assets in a particular
"industry."
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The Funds may purchase illiquid securities, including repurchase
agreements providing for settlement more than seven days after notice and
restricted securities (securities that must be registered with the Securities
and Exchange Commission before they can be sold to the public) not deemed to be
liquid, but such securities will not constitute more than 15% of each Fund's
net assets.
The Board of Trustees, or the Adviser acting at its direction, values
these securities, taking into consideration quotations available from
broker-dealers and pricing services and other information deemed relevant.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage beyond the specified limit resulting
from a change in values of portfolio securities or amount of net assets shall
not be considered a violation of the restrictions.
For the Global Small Cap Fund, industry classifications are established by
reference to the Directory of Companies Filing Annual Reports published by the
SEC.
PERFORMANCE INFORMATION
Each Fund may, from time to time, include performance information in
advertisements or reports to shareholders or prospective investors. Performance
information in advertisements and sales literature may be expressed as yield on
a class of shares of a Fund and as total return for a class of shares of such
Fund.
Standardized quotations of average annual total return for a class of
shares of a Fund will be expressed in terms of the average annual compounded
rate of return for a hypothetical investment over periods of 1, 5 and 10 years
(or up to the life of the class of shares), calculated for each class
separately pursuant to the following formula:
P(1+T)(n) = ERV (where P = a hypothetical initial payment of $1,000,
T = the average annual total return,
(n) = the number of years, and
ERV = the ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period).
All total return figures reflect the deduction of a proportional share of
such class's expenses (on an annual basis), deduction of the maximum initial
sales load in the case of Class A Shares and the maximum contingent deferred
sales charge applicable to a complete redemption of the investment in the case
of Class B Shares, and assume that all dividends and distributions on such
class are reinvested when paid.
Quotations of yield for a class of shares of a Fund will be based on all
investment income per share earned during a particular 30-day period (including
dividends and interest), less expenses accrued during the period ("net
investment income"), and is computed by dividing net investment income by the
value of a share on the last day of the period according to the following
formula:
a-b
YIELD = 2[(---)+ 1)(6) -1]
cd
where a = dividends and interest earned during the period by the Fund.
b = expenses accrued for the period (net of any reimbursements),
the average daily number of shares outstanding during the period
that were entitled to
c = receive dividends, and
d = the maximum offering price per share on the last day of the
period.
For the New Asia Fund, the average annual total return for the one-year
period and since inception September 4, 1996 through July 31, 1998 for Class A
Shares was (47.88)% and (27.15)%, respectively, and for Class B Shares was
(47.91)% and (27.38)%, respectively. For the Global Small Cap Fund, the average
annual total return for the one-year period and since inception September 4,
1996 through July 31, 1998 for Class A Shares was (2.96)% and 3.87%,
respectively, and for Class B Shares was (2.52)% and 3.73%, respectively.
A Fund also may quote annual, average annual and annualized total return
and aggregate total return performance data, for each class of shares of such
Fund, both as a percentage and as a dollar amount based on a hypothetical
$10,000 investment for various periods other than those noted below. Such data
will be computed as described above, except that (1) the rates of return
calculated will not be average annual rates, but rather, actual annual,
annualized or aggregate rates of return and (2) the maximum applicable sales
charge will not be included with respect to annual, annualized or aggregate
rate of return calculations.
The Funds may from time to time include in advertisements containing total
return the ranking of those performance figures relative to such figures for
groups of mutual funds having similar investment objectives as categorized by
ranking services such as Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Weisenberger Financial Services, Inc. and Morningstar, Inc.
Additionally, the Funds may compare performance results to other investment or
savings vehicles (such as certificates of deposit) and may refer to results
published in various publications such as Changing Times, Forbes, Fortune,
Money, Barrons, Business Week, Investor's Business Daily, Stanger's Mutual Fund
Monitor, The Stanger Register, Stanger's Investment Adviser,
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<PAGE>
The Wall Street Journal, The New York Times, Consumer Reports, Registered
Representative, Financial Planning, Financial Services Weekly, Financial World,
U.S. News and World Report, Standard & Poor's The Outlook, and Personal
Investor. The Funds may from time to time illustrate the benefits of tax
deferral by comparing taxable investments to investments made through tax-
deferred retirement plans. The total return may also be used to compare the
performance of the Funds against certain widely acknowledged outside standards
or indices for stock and bond market performance, such as the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500"), Russell 2000 Index, Morgan
Stanley Capital International All Country World Index, Dow Jones Industrial
Average, Europe Australia Far East Index (EAFE), Morgan Stanley Capital
International Developed Market Indices and AC Asia Pacific (excluding Japan)
Index, FT (S&P--Actuaries' World Indices (medium-small components), Consumer
Price Index, Lehman Brothers Corporate Index and Lehman Brothers T-Bond Index.
Advertisements, sales literature and other communications may contain
information about the Funds and Adviser's current investment strategies and
management style. Current strategies and style may change to allow the Funds to
respond quickly to changing market and economic conditions. From time to time
the Funds may include specific portfolio holdings or industries in such
communications. To illustrate components of overall performance, the Funds may
separate its cumulative and average annual returns into income and capital
gains components.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser places orders for the purchase and sale of securities,
supervises their execution and negotiates brokerage commissions on behalf of
the Trust. It is the practice of the Adviser to seek the best prices and best
execution of orders and to negotiate brokerage commissions which in the
Adviser's opinion are reasonable in relation to the value of the brokerage
services provided by the executing broker. Brokers who have executed orders for
the Funds are asked to quote a fair commission for their services. If the
execution is satisfactory and if the requested rate approximates rates
currently being quoted by the other brokers selected by the Adviser, the rate
is deemed by the Adviser to be reasonable. Brokers may ask for higher rates of
commission if all or a portion of the securities involved in the transaction
are positioned by the broker, if the broker believes it has brought the Funds
an unusually favorable trading opportunity, or if the broker regards its
research services as being of exceptional value, and payment of such
commissions is authorized by the Adviser after the transaction has been
consummated. If the Adviser more than occasionally differs with the broker's
appraisal of opportunity or value, the broker would not be selected to execute
trades in the future. The Adviser believes that the Funds' benefits with a
securities industry comprised of many diverse firms and that the long-term
interest of shareholders of the Funds are best served by its brokerage policies
which include paying a fair commission rather than seeking to exploit its
leverage to force the lowest possible commission rate. The primary factors
considered in determining the firms to which brokerage orders are given are the
Adviser's appraisal of the firm's ability to execute the order in the desired
manner, the value of research services provided by the firm, and the firm's
attitude toward and interest in mutual funds in general including the sale of
mutual funds managed and sponsored by the Adviser. The Adviser does not offer
or promise to any broker an amount or percentage of brokerage commissions as an
inducement or reward for the sale of shares of the Trust. Over-the-counter
purchases and sales are transacted directly with principal market-makers except
in those circumstances where in the opinion of the Adviser better prices and
execution are available elsewhere.
In general terms, the nature of research services provided by brokers
encompasses statistical and background information, and forecasts and
interpretations with respect to U.S. and foreign economies, U.S. and foreign
money markets, fixed income markets and equity markets, specific industry
groups, and individual issues. Research services will vary from firm to firm,
with broadest coverage generally from the large full-line firms. Smaller firms
in general tend to provide information and interpretations on a smaller scale,
frequently with a regional emphasis. In addition, several firms monitor
federal, state, local and foreign political developments; many of the brokers
also provide access to outside consultants. The outside research assistance is
particularly useful to the Adviser's staff since the brokers as a group tend to
monitor a broader universe of securities and other matters than the Adviser's
staff can follow. In addition, it provides the Adviser with a diverse
perspective on financial markets. Research and investment information is
provided by these and other brokers at no cost to the Adviser and is available
for the benefit of other accounts advised by the Adviser and its affiliates and
not all of this information will be used in connection with the Trust. While
this information may be useful in varying degrees and may tend to reduce the
Adviser's expenses, it is not possible to estimate its value and in the opinion
of the Adviser it does not reduce the Adviser's expenses in a determinable
amount. The extent to which the Adviser makes use of statistical, research and
other services furnished by brokers is considered by the Adviser in the
allocation of brokerage business but there is no formula by which such business
is allocated. The Adviser does so in accordance with its judgment of the best
interest of the Funds and its shareholders.
Purchases and sales of fixed-income securities will usually be principal
transactions. Such securities often will be purchased or sold from or to
dealers serving as market makers for the securities at a net price. The Funds
will also purchase such securities in underwritten offerings and will, on
occasion, purchase securities directly from the issuer. Generally, fixed-income
securities are traded on a net basis and do not involve brokerage commissions.
The cost of executing fixed-income securities transactions consists primarily
of dealer spreads and underwriting commissions.
In purchasing and selling fixed-income securities, it is the policy of the
Funds to obtain the best results taking into account the dealer's general
execution and operational facilities, the type of transaction involved and
other factors, such as the dealer's
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<PAGE>
risk in positioning the securities involved. While the Adviser generally seeks
reasonably competitive spreads or commissions, the Funds will not necessarily
pay the lowest spread or commission available.
The Funds may, in circumstances in which two or more dealers are in a
position to offer comparable results, give preference to a dealer which has
provided statistical or other research services to the Trust. By allocating
transactions in this manner, the Adviser is able to supplement its research and
analysis with the views and information of other securities firms.
The Funds have adopted a policy and procedures governing the execution of
aggregated advisory client orders ("bunching procedures") in an attempt to
lower commission costs on a per-share and per-dollar basis. According to the
bunching procedures, the Adviser shall aggregate transactions unless it
believes in its sole discretion that such aggregation is inconsistent with its
duty to seek best execution (which shall include the duty to seek best price)
for the Funds. No advisory account of the Adviser is to be favored over any
other account and each account that participates in an aggregated order is
expected to participate at the average share price for all transactions of the
Adviser in that security on a given business day, with all transaction costs
share pro rata based on the Funds' participation in the transaction. If the
aggregated order is filled in its entirety, it shall be allocated among the
Adviser's accounts in accordance with the allocation order, and if the order is
partially filled, it shall be allocated pro rata based on the allocation order.
Notwithstanding the foregoing, the order may be allocated on a basis different
from that specified in the allocation order if all accounts of the Adviser
whose orders are allocated receive fair and equitable treatment and the reason
for such different allocation is explained in writing and is approved in
writing by the Adviser's compliance officer as soon as practicable after the
opening of the markets on the trading day following the day on which the order
is executed. If an aggregated order is partially filled and allocated on a
basis different from that specified in the allocation order, no account that is
benefited by such different allocation may intentionally and knowingly effect
any purchase or sale for a reasonable period following the execution of the
aggregated order that would result in it receiving or selling more shares than
the amount of shares it would have received or sold had the aggregated order
been completely filled. The Trustees will annually review these procedures or
as frequently as shall appear appropriate.
For the fiscal years ended July 31, 1997 and 1998, the Funds paid
brokerage commissions of $294,129 and $212,101, respectively. During the same
period, no commissions were paid to the Distributor. Brokerage commissions of
$169,680 paid during the fiscal year ended July 31, 1998 were paid on portfolio
transactions aggregating $66,225,000 and were executed by brokers who provided
research and other statistical and factual information.
SERVICES OF THE ADVISER
The Trust's investment adviser is Phoenix-Aberdeen International Advisors,
LLC (the "Adviser"), which is a Delaware limited liability company formed in
1996 and having a place of business located at One American Row, Hartford,
Connecticut 06102. The Adviser is jointly owned and managed by PM Holdings,
Inc., a direct subsidiary of Phoenix Home Life Mutual Insurance Company
("Phoenix Home Life"), and Aberdeen Fund Managers, Inc., a wholly-owned
subsidiary of Aberdeen Asset Management plc. Based upon the diverse range of
portfolio holdings contemplated and the expertise available through certain
affiliates, the Adviser has engaged Phoenix Investment Counsel, Inc. ("PIC")
and Aberdeen Fund Managers, Inc. as sub-advisers.
Phoenix Home Life was founded in 1851 and is in the business of writing
individual and group life and health insurance and annuities. The principal
office of Phoenix Home Life is located at One American Row, Hartford,
Connecticut, 06115. Its affiliate, Phoenix Investment Partners, Ltd. ("PXP"), a
New York Stock Exchange traded company, provides various financial advisory
services to institutional investors, corporations and individuals through its
operating subsidiaries. As of September 30, 1998, PXP, and its advisory
subsidiaries, had approximately $48 billion in assets under management. PIC is
an indirect subsidiary of PXP and its principal offices are located at 56
Prospect Street, Hartford, Connecticut 06115.
Aberdeen Asset Management PLC was founded in 1983 and through subsidiaries
operated from offices in Aberdeen, Scotland; London, England; Singapore and
Fort Lauderdale, Florida, provides investment management services to unit and
investment trusts, segregated pension funds and other institutional and private
portfolios. As of September 30, 1998, Aberdeen Asset Management PLC, and its
advisory subsidiaries, had approximately $22.3 billion in assets under
management.
The investment advisory agreements provide that the Funds will bear all
costs and expenses (other than those specifically referred to as being borne by
the Adviser) incurred in the operation of the Trust. Such expenses include, but
shall not be limited to, all expenses incurred in any public offering of its
shares, including among others, interest, taxes, brokerage fees and
commissions, fees of Trustees who are not full-time employees of the Adviser or
any of its affiliates, expenses of Trustees' and shareholders' meetings
including the cost of printing and mailing proxies, expenses of insurance
premiums for fidelity and other coverage, expenses of repurchase and redemption
of shares, expenses of issue and sale of shares (to the extent not borne by its
national distributor under its agreement with the Trust), expenses of printing
and mailing stock certificates (if any) representing shares of the Trust,
association membership dues, charges of custodians, transfer agents, dividend
disbursing agents and financial agents, bookkeeping, auditing and legal
expenses. The Funds will also pay the fees and bear the expense of registering
and maintaining the registration of the Funds and its shares with the
Securities and Exchange Commission and registering or qualifying its shares
under state or other securities laws and the expense of preparing and mailing
prospectuses and reports to shareholders. If authorized
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<PAGE>
by the Trustees, the Funds shall pay for extraordinary expenses and expenses of
a non-recurring nature which may include, but not be limited to the reasonable
and proportionate cost of any reorganization or acquisition of assets and the
cost of legal proceedings to which the Funds is a party.
The Adviser continuously furnishes an investment program for each Fund and
manages the investment and reinvestment of the assets of each Fund subject at
all times to the supervision of the Trustees. The Adviser, at its expense,
furnishes to the Funds adequate office space and facilities and certain
administrative services, including the services of any member of its staff who
serves as an officer of the Trust.
As compensation for its services to each Fund, the Adviser is entitled to
a fee, payable monthly, at an annual rate of 0.85% of the Fund's average daily
net assets. For providing cash management and other services to each Fund, as
needed, the Adviser pays a monthly fee to PIC equivalent to 0.15% of the
average daily net asset value of each Fund. For providing advisory services
with respect to the Trust's assets allocated from time to time by the Adviser,
the Adviser pays a fee to PIC equivalent to 0.40% of the average daily net
asset value of the assets of each Fund so allocated. For implementing certain
portfolio transactions and providing research and other services to each Fund,
the Adviser also pays a monthly subadvisory fee to Aberdeen Fund Managers, Inc.
equivalent to 0.40% of the average daily net asset value of the New Asia Fund
and 0.40% of the average daily net asset value of the Global Fund allocated to
it by the Adviser for management. Total management fees for the fiscal years
ended July 31, 1997 and 1998 for the New Asia Fund were $105,851 and $106,419,
respectively, and for the Global Small Cap Fund were $240,064 and $301,367,
respectively.
The Investment Advisory Agreement with the Funds provide that the Adviser
will reimburse the Funds for the amount, if any, by which the total operating
expenses of any Fund (including the Adviser's compensation, but excluding
interest, taxes, brokerage fees and commissions and extraordinary expenses) for
any fiscal year exceed the level of expenses which such Fund is permitted to
bear under the most restrictive expense limitation (which has not been waived)
imposed on mutual funds by any state in which shares of the Fund are then
qualified for sale. In the event legislation were to be adopted in each state
so as to eliminate this restriction, the Funds would take such action necessary
to eliminate this expense limitation.
The investment advisory agreements also provide that each adviser shall
not be liable to the Funds or any shareholder of the Funds for any error of
judgment or mistake of law or for any loss suffered by the Funds or by any
shareholder of the Funds in connection with the matters to which the agreement
relates, except a loss resulting from willful misfeasance, bad faith, gross
negligence or reckless disregard on the part of such adviser in the performance
of its duties thereunder.
Provided that it has been approved by a vote of the majority of the
outstanding shares of a Fund of the Funds which is subject to its terms and
conditions, each agreement continues from year to year with respect to such
Fund so long as (1) such continuance is approved at least annually by the
Trustees or by a vote of the majority of the outstanding voting securities of
such Fund and (2) the terms and any renewal of the agreements with respect to
such Fund have been approved by the vote of a majority of the Trustees who are
not parties to the agreement or "interested persons," as that term is defined
in the Investment Company Act of 1940, of the Funds or the relevant adviser, of
any such party cast in person at a meeting called for the purpose of voting on
such approval. On sixty days' written notice and without payment of any penalty
the agreements may be terminated as to the Funds or as to a Fund by the
Trustees or by the relevant adviser and may be terminated as to a Fund by a
vote of the majority of the outstanding voting securities of such Fund. Each
agreement automatically terminates upon its assignment (within the meaning of
the Investment Company Act). The Investment Advisory Agreement provides that
upon its termination, or at the request of the adviser, the Funds will
eliminate all references to "Phoenix" and/or "Phoenix-Aberdeen" from its name,
and will not thereafter transact business in the a name using the word
"Phoenix" or "Phoenix-Aberdeen."
SERVICES OF THE ADMINISTRATOR
Phoenix Investment Partners, Ltd. (the "Administrator") serves as
administrator for the Trust. Under the terms of the Administration Agreement,
the Administrator will assist in maintaining office facilities, furnish
clerical services, office supplies and stationery, prepare and file tax returns
of the Trust, monitor the Trust's expense accruals and pay all expenses upon
proper authorization from the Trust, monitor the Funds' status as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
monitor and make recommendations concerning fidelity bond coverage, monitor
compliance with the policies and limitations of the Funds as set forth in the
Funds' governing documents, supervise the external audit and tax return
preparation by the Trust's auditor, and prepare and/or coordinate all materials
for the Board of Trustees' meetings. As compensation, the Administrator
receives a fee, computed daily and payable monthly, at the annual rate of 0.15%
of the average daily net assets of the Trust. For the fiscal years ended July
31, 1997 and 1998, the administration fees for the New Asia Fund were $18,680
and $18,882, respectively, and for the Global Small Cap Fund were $42,364 and
$53,182, respectively.
The Agreement continues in effect from year to year provided such
continuance is specifically approved at least annually by the Trust's Board of
Trustees including a majority of the trustees who are not interested persons or
by a vote of a majority of the outstanding voting securities of the Trust. The
Agreement automatically terminates upon its assignment and may be terminated by
the either party at any time upon not less than 60 days' written notice.
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NET ASSET VALUE
The net asset value per share of each Fund is determined as of the close
of trading of the New York Stock Exchange (the "Exchange") on days when the
Exchange is open for trading. The Exchange will be closed on the following
observed national holidays: New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Since the Funds do not price securities on
weekends or United States national holidays, the net asset value of a Fund's
foreign assets may be significantly affected on days when the investor has no
access to the Funds. The net asset value per share of a Fund is determined by
adding the values of all securities and other assets of the Fund, subtracting
liabilities, and dividing by the total number of outstanding shares of the
Fund. Assets and liabilities are determined in accordance with generally
accepted accounting principles and applicable rules and regulations of the
Securities and Exchange Commission. The total liability allocated to a class,
plus that class's distribution fee and any other expenses allocated solely to
that class, are deducted from the proportionate interest of such class in the
assets of the Fund, and the resulting amount of each is divided by the number
of shares of that class outstanding to produce the net asset value per share.
A security that is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary exchange for such
security by the Trustees or their delegates. Because of the need to obtain
prices as of the close of trading on various exchanges throughout the world,
the calculation of net asset value may not take place for any Fund which
invests in foreign securities contemporaneously with the determination of the
prices of the majority of the portfolio securities of such Fund. All assets and
liabilities initially expressed in foreign currency values will be converted
into United States dollar values at the mean between the bid and ask quotations
of such currencies against United States dollars as last quoted by any
recognized dealer. If an event were to occur after the value of an investment
was so established but before the net asset value per share was determined,
which was likely to materially change the net asset value, then the instrument
would be valued using fair value considerations by the Trustees or their
delegates. If at any time a Fund has investments where market quotations are
not readily available, such investments are valued at the fair value thereof as
determined in good faith by the Trustees although the actual calculations may
be made by persons acting pursuant to the direction of the Trustees.
HOW TO BUY SHARES
The minimum initial investment is $500 and the minimum subsequent
investment is $25. However, both the minimum initial and subsequent investment
amounts are $25 for investments pursuant to the "Investo-Matic" plan, a bank
draft investing program administered by Distributor, or pursuant to the
Systematic Exchange privilege or for an individual retirement account (IRA). In
addition, there are no subsequent investment minimum amounts in connection with
the reinvestment of dividend or capital gain distributions. Completed
applications for the purchase of shares should be mailed to: Phoenix Funds, c/o
State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301.
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 of the Funds 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").
The alternative purchase arrangement permits 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 Funds,
the accumulated continuing distribution and services fee and contingent
deferred sales charges on Class B shares prior to conversion would be less than
the initial sales charge and accumulated distribution and services fee on Class
A shares purchased at the same time, and to what extent such differential would
be offset by the lower expenses attributable to Class A shares.
Class A shares are subject to a lower distribution and services fee and,
accordingly, pay correspondingly higher dividends, to the extent any dividends
are paid, per share. However, because initial sales charges are deducted at the
time of purchase, such investors would not have all their funds invested
initially and, therefore, would initially own fewer shares. Investors not
qualifying for reduced initial sales charges who expect to maintain their
investment for an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on Class B
shares may exceed the initial sales charge on Class A shares during the life of
the investment. Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not all their
funds will be invested initially. However, other investors might determine
11
<PAGE>
that it would be more advantageous to purchase Class B shares to have all their
funds invested initially, although remaining subject to higher continuing
distribution charges and, for a five-year period, being subject to a contingent
deferred sales charge.
The distribution expenses incurred by the Distributor in connection with
the sale of the shares will be paid, in the case of Class A shares, from the
proceeds of the initial sales charge and the ongoing distribution and services
fee and, in the case of Class B shares, from the proceeds of the ongoing
distribution and services fee and the contingent deferred sales charge incurred
upon redemption within five years of purchase. Sales personnel of
broker-dealers distributing the Trust's shares may receive differing
compensation for selling Class A or Class B shares. Investors should understand
that the purpose and function of the contingent deferred sales charge and
ongoing distribution and services fee with respect to the Class B shares are
the same as those of the initial sales charge and ongoing distribution and
services fees with respect to the Class A shares.
Dividends paid by the Funds, if any, with respect to Class A and Class B
shares will be calculated in the same manner at the same time on the same day,
except that the higher distribution and services fee and any incremental
transfer agency costs relating to Class B shares will be borne exclusively by
that class. See "Dividends, Distributions and Taxes."
The Trustees have determined that currently no conflict of interest exists
between the Class A and Class B shares. On an ongoing basis, the Trustees,
pursuant to their fiduciary duties under the 1940 Act and state laws, will seek
to ensure that no such conflict arises.
Class A Shares
An investor who elects the initial sales charge alternative acquires Class
A shares. Class A shares incur a sales charge when they are purchased and enjoy
the benefit of not being subject to any sales charge when they are redeemed.
Class A shares are subject to an ongoing distribution and services fee at an
annual rate of 0.25% of the Trust's aggregate average daily net assets
attributable to the Class A shares. In addition, certain purchases of Class A
shares qualify for reduced initial sales charges. See the Funds' current
Prospectus.
Class B Shares
An investor who elects the deferred sales charge alternative acquires
Class B shares. Class B shares do not incur a sales charge when they are
purchased, but they are subject to a sales charge if they are redeemed within
five years of purchase. The deferred sales charge may be waived in connection
with certain qualifying redemptions. See the Funds' current Prospectus.
Class B shares are subject to an ongoing distribution and services fee at
an annual rate of up to 1.00% of the Trust'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 services fee paid by Class B
shares will cause such shares to have a higher expense ratio and to pay lower
dividends, to the extent any dividends are paid, than those related 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.
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 services fee. Such
conversion will be on the basis of the relative net asset value of the two
classes without the imposition of any sales load, fee or other charge. The
purpose of the conversion feature is to relieve the holders of 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.
For purposes of conversion to Class A, shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B shares
in a shareholder's Fund account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's Fund account
(other than those in the sub-account) convert to Class A, an equal pro rata
portion of the Class B shares in the sub-account will also convert to Class A.
INVESTOR ACCOUNT SERVICES
The Funds offer combination purchase privileges, letters of intent,
accumulation plans, withdrawal plans and reinvestment and exchange privileges
as described in the Funds' current Prospectus. Certain privileges may not be
available in connection with all classes. In most cases, changes to account
services may be accomplished over the phone. Inquiries regarding policies and
procedures relating to shareholder account services should be directed to
Shareholder Services at (800) 243-1574.
Exchanges. Class A Shares of the Funds held under six months are not
eligible for the exchange privilege. Under certain circumstances, shares of any
Affiliated Phoenix Fund may be exchanged for shares of the same Class 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 Series, Fund, or Portfolio, except if made in connection with the
Systematic Exchange privilege. Shareholders may
12
<PAGE>
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. Exchanges will be based upon each Fund's net asset value per share
next computed after the close of business, without a sales charge. On exchanges
with share classes that carry a contingent deferred sales charge, the CDSC
schedule of original shares purchased continues to apply. The exchange of
shares is treated as a sale and purchase for federal income tax purposes (see
also "Dividends, Distributions and Taxes").
Systematic Exchanges. If the conditions above have been met, you or your
broker may, by telephone or written notice, elect to have shares exchanged for
the same class of shares of another Affiliated Phoenix Fund automatically on a
monthly, quarterly, semiannual 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 the
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.
Dividend Reinvestment Across Accounts. If you maintain an account balance
of at least $5,000, or $2,000 for tax qualified retirement benefit plans
(calculated on the basis of the net asset value of the shares held in a single
account), you may direct that any dividends and distributions paid with respect
to shares in that account be automatically reinvested in a single account of
one of the other Affiliated Phoenix Funds at net asset value. You should obtain
a current prospectus and consider the objectives and policies of each fund
carefully before directing dividends and distributions to another fund.
Reinvestment election forms and prospectuses are available from Equity
Planning. Distributions may also be mailed to a second payee and/or address.
Requests for directing distributions to an alternate payee must be made in
writing with a signature guarantee of the registered owner(s). To be effective
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 you to make an
investment in an account by requesting a transfer of funds from the balance of
your bank account. Once a request is phoned in, the Transfer Agent will
initiate the transaction by wiring a request for monies to your commercial
bank, savings bank or credit union via Automated Clearing House (ACH). Your
bank, which must be an ACH member, will in turn forward the monies to the
Transfer Agent for credit to your account. ACH is a computer based clearing and
settlement operation established for the exchange of electronic transactions
among participating depository institutions. This service may also be used to
sell shares of each Fund and direct proceeds of sale through ACH to your bank
account.
To establish this service, please complete the Invest-by-Phone Application
and attach a voided check. Upon the Transfer Agent's acceptance of the
authorization form (usually within two weeks) you may call toll free (800)
367-5877 prior to 3:00 p.m. (Eastern Time) to place your purchase request.
Instructions as to the account number and amount to be invested must be
communicated to the Transfer Agent. The Transfer Agent will then contact your
bank via ACH with appropriate instructions. The purchase is normally credited
to your account the day following receipt of the verbal instructions. The Funds
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 after receipt of the check. The Funds and
the Transfer Agent 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.
REDEMPTION OF SHARES
Under the 1940 Act, payment for shares redeemed must ordinarily be made
within seven days after tender. The right to redeem shares may be suspended and
payment therefore postponed during periods when the New York Stock Exchange is
closed, other than a customary weekend and holiday closings, or, if permitted
by rules of the Securities and Exchange Commission, during periods when trading
on the Exchange is restricted or during any emergency which makes it
impracticable for the Fund to dispose of its securities or to determine fairly
the value of its net assets or during any other period permitted by order of
the Securities and Exchange Commission for the protection of investors.
Furthermore, the Transfer Agent will not mail redemption proceeds until checks
received for shares purchased have cleared, which may take up to 15 days, but
payment will be forwarded immediately upon demand. See the Funds' current
Prospectus for further information.
The Trust has authorized one or more brokers to accept on its behalf
purchase and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Trust's behalf.
The Trust will be deemed to have received a purchase or redemption order when
an authorized broker or, if applicable, a broker's authorized designee, accepts
the order. Customer orders will be priced at the Funds' net asset values next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
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<PAGE>
Redemptions by holders of Class B Shares will be subject to the applicable
deferred sales charge, if any.
Each shareholder account in the Funds which has been in existence for at
least one year and has a value of less than $200 may be redeemed upon the
giving of not less than 30 days' written notice to the shareholder mailed to
the address of record. During the 30-day period the shareholder has the right
to add to the account to bring its value to $200 or more. See the Funds'
current Prospectus for more information.
Telephone Redemption
Shareholders may redeem by telephone up to $50,000 worth of their shares
held in book-entry form. See the Funds' current Prospectus for additional
information.
Reinvestment Privilege
Shareholders who may have overlooked features of their investment at the
time they redeemed have a privilege of reinstatement of their investment at net
asset value. See the Funds' current Prospectus for more information and
conditions attached to the privilege.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund intends to remain qualified as a regulated investment company
under certain provisions of the Internal Revenue Code, as amended ("Code").
Under such provisions, the Funds will not be subject to federal income tax on
such part of its ordinary income and net realized capital gains which it
distributes to shareholders provided it meets certain distribution
requirements. To qualify for treatment as a regulated investment company, the
Funds generally must, among other things, derive in each taxable year at least
90% of its gross income from dividends, interest and gains from the sale or
disposition of securities. If, in any taxable year, each Fund does not qualify
as a regulated investment company all of the Funds' taxable income will be
taxed to the Funds at corporate rates.
The Code imposes a 4% nondeductible excise tax on a regulated investment
company, if it does not distribute to its shareholders during the calendar year
an amount equal to 98% of its net ordinary income, with certain adjustments,
plus 98% of each Fund's net capital gains for the 12-month period ending on
October 31 of such calendar year. In addition, an amount equal to any
undistributed investment company taxable income or capital gain net income from
the previous reporting year must also be distributed to avoid the excise tax.
The excise tax is imposed on the amount by which the regulated investment
company does not meet the foregoing distribution requirements. If each Fund has
taxable income that would be subject to the excise tax, each Fund intends to
distribute such income so as to avoid payment of the excise tax.
Under another provision of the Code, any dividend declared by the Funds to
shareholders of record in October, November or December of any year will be
deemed to have been received by, and will be taxable to shareholders as of
December 31, provided that the dividend is actually paid by the Funds in
January of the following year.
Under certain circumstances, the sales charge incurred in acquiring shares
of the Funds may not be taken into account in determining the gain or loss on
the disposition of those shares. This rule applies where shares of the Funds
are disposed of within 90 days after the date on which they were acquired and
new shares of a regulated investment company are acquired without a sales
charge or at a reduced sales charge. In that case, the gain or loss realized on
the disposition will be determined by excluding the charge incurred in
acquiring those shares. This exclusion applies to the extent that the otherwise
applicable sales charge with respect to the newly acquired shares is reduced as
a result of the shareholder having incurred a sales charge initially. The
portion of the sales charge affected by this rule will be treated as a sales
charge paid for the new shares.
Distributions by the Funds reduce the net asset value of each Fund's
shares. Should a distribution reduce the net asset value of a share below a
shareholder's cost for the share, such a distribution nevertheless generally
would be taxable to the shareholder as ordinary income or long-term capital
gain, even though, from an investment standpoint, it may constitute a partial
return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution by the Funds.
The price of shares purchased at that time may include the amount of the
forthcoming distribution, but the distribution generally would be taxable to
them.
Some shareholders may be subject to withholding of Federal income tax on
dividends and redemption payments from the Funds backup withholding at the rate
of 31%. Corporate shareholders and certain other shareholders specified in the
Code generally are exempt from such backup withholding. Generally, shareholders
subject to backup withholding will be (i) those for whom a certified taxpayer
identification number is not on file with the Funds, (ii) those about whom
notification has been received (either by the shareholder or the Funds) from
the IRS that they are subject to backup withholding or (iii) those who, to the
Funds' knowledge, have furnished an incorrect taxpayer identification number.
Generally, to avoid backup withholding, an investor must, at the time an
account is opened, certify under penalties of perjury that the taxpayer
identification number furnished is correct and that he or she is not subject to
backup withholding.
Each Fund may invest in certain debt securities that are originally issued
or acquired at a discount. Special rules apply under the Code to the
recognition of income with respect to such debt securities. Under the special
rules, each Fund may recognize
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<PAGE>
income for tax purposes without a corresponding current receipt of cash. In
addition, gain on a disposition of a debt security subject to the special rules
may be treated wholly or partially as ordinary income, not capital gain.
The Funds intend to accrue dividend income for Federal income tax purposes
in accordance with the rules applicable to regulated investment companies. In
some cases, these rules may have the effect of accelerating (in comparison to
other recipients of the dividend) the time at which the dividend is taken into
account by the Funds as taxable income.
Transactions in options on stock indexes are subject to the Code rules of
section 1256. Pursuant to these rules, such options, whether sold by the Funds
during a taxable year or held by the Funds at the close of its taxable year,
will be treated as if sold for their market value. Generally, 60% of any net
gain or loss recognized on the deemed sale, as well as 60% of the gain or loss
with respect to any actual termination (including expiration), will be treated
as long-term capital gain or loss and the remaining 40% will be treated as
short-term capital gain or loss.
In order to qualify under Part I of Subchapter M, the Funds may be
restricted from certain activities, including (i) writing of options on
securities which have been held less than three months, (ii) writing of options
which expire in less than three months, and (iii) effecting closing purchase
transactions with respect to options which have been written less than three
months prior to such transactions.
The Funds may be subject to tax on dividend or interest income received
from securities of non-U.S. issuers withheld by a foreign country at the
source. The United States has entered into tax treaties with many foreign
countries which entitle the Funds to a reduced rate of tax or exemption from
tax on income. It is impossible to determine the effective rate of foreign tax
in advance since the amount of the Funds' assets to be invested within various
countries is not known. The Funds intend to operate so as to qualify for treaty
tax benefits where applicable. To the extent that the Funds are liable for
foreign income taxes withheld at the source, the Funds may operate so as to
meet the requirements of the Code to "pass through" to the Funds' shareholders
tax benefits attributable to foreign income taxes paid by the Funds. If more
than 50% of the value of the Funds' total assets at the close of its taxable
year is comprised of securities issued by foreign corporations, the Funds may
elect with the IRS to "pass through" to the Funds' shareholders the amount of
foreign income taxes paid by the Funds. Pursuant to this election, shareholders
will be required to (i) include in gross income, even though not actually
received, their respective pro rata share of foreign taxes paid by the Funds;
(ii) treat their pro rata share of foreign taxes as paid by them; (iii) either
deduct their pro rata share of foreign taxes in computing their taxable income,
or use such share as foreign tax credit against U.S. income tax (but not both).
No deduction for foreign taxes may be claimed by a non-corporate shareholder
who does not itemize deductions. The Funds may meet the requirements to "pass
through" to its shareholders foreign income taxes paid, but there can be no
assurance that the Funds will be able to do so. Each shareholder will be
notified within 60 days after the close of each taxable year of the Funds if
the foreign taxes paid by the Funds will "pass through" for that year, and, if
so, the amount of each shareholder's pro rata share (by country) of (i) the
foreign taxes paid and (ii) the Funds' gross income from foreign sources.
Shareholders who are not liable for Federal income taxes will not be affected
by such "pass through" of foreign tax credits.
If the Funds invest in stocks of certain passive foreign investment
companies, the Funds may be subject to U.S. Federal income taxation on a
portion of the "excess distribution" with respect to, or gain from, the
disposition of such stock. The tax would be determined by allocating such
distribution or gain ratably to each day of the Funds' holding period for the
stock. The distribution or gain so allocated to any taxable year of the excess
distribution or disposition would be taxed to the Funds at the highest ordinary
income rate in effect for such year, and the tax would be further increased by
an interest charge to reflect the value of the tax deferral deemed to have
resulted from ownership of foreign company's stock. Any amount of distribution
or gain allocated to the taxable year of the distribution or disposition would
be included in the Funds' investment company taxable income and, accordingly,
would not be taxable to the Funds to the extent distributed by the Funds as a
dividend to its shareholder.
The foregoing is a general summary of the applicable provisions of the
Code and Treasury Regulations presently in effect. For the complete provisions,
reference should be made to the pertinent Code sections and the Treasury
Regulations promulgated thereunder. The Code and these Treasury Regulations are
subject to change by legislative or administrative action either prospectively
or retroactively. Distributions and the transactions referred to above may be
subject to state and local income tax, and the treatment thereof may differ
from the Federal tax treatment discussed herein. Shareholders are advised to
consult with their tax advisor or attorney.
TAX-SHELTERED RETIREMENT PLANS
Shares of the Funds and other Affiliated Phoenix Funds may be offered in
connection with employer-sponsored 401(k) plans. The Adviser(s) and their
affiliates may provide administrative services to these plans and to their
participants, in addition to the services that Adviser and its affiliates
provide to the Phoenix Funds, and receive compensation therefor. For
information on the terms and conditions applicable to employee participation in
such plans, including information on applicable plan administrative charges and
expenses, prospective investors should consult the plan documentation and
employee enrollment information which is available from participating
employers.
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<PAGE>
THE DISTRIBUTOR
Pursuant to an Underwriting Agreement with the Funds, Phoenix Equity
Planning Corporation (the "Distributor"), a direct wholly-owned subsidiary of
Phoenix Investment Partners, Ltd. and an affiliate of Phoenix Investment
Counsel, Inc., one of the Funds' subadvisers, serves as distributor for the
Fund. The address of the Distributor is P.O. Box 2200, 100 Bright Meadow Blvd.,
Enfield, Connecticut 06083-2200. As such, the Distributor conducts a continuous
offering pursuant to a "best efforts" arrangement requiring the Distributor to
take and pay for only such securities as may be sold to the public. The fees
are used to compensate sales and service persons for selling shares of the
Funds and for providing services to shareholders. In addition, the fees are
used to compensate the Distributor for sales and promotional activities. For
the fiscal years ended July 31, 1997 and 1998, purchasers of shares of the
Funds paid aggregate sales charges of $699,467 and $262,562, respectively, of
which the Distributor received net commissions of $125,818 and $210,029,
respectively, for its services, the balance being paid to dealers. The fees
were used to compensate sales and service persons for selling shares of the
Funds and for providing services to shareholders. In addition, the fees were
used to compensate the Distributor for sales and promotional activities.
The Underwriting Agreement may be terminated at any time on not more than
60 days' written notice, without payment of a penalty, by the Distributor, by
vote of a majority of the outstanding voting securities of the Funds, or by
vote of a majority of the Fund's Trustees who are not "interested persons" of
the Trust and who have no direct or indirect financial interest in the
operation of the Distribution Plan or in any related agreements. The
Underwriting Agreement will terminate automatically in the event of its
assignment.
Dealers with whom the Distributor has entered into sales agreements
receive sales charges in accordance with the commission table set forth in the
Prospectus. The Distributor may from time to time pay, from its own resources
or pursuant to the Distribution Plans described below, a bonus or other
incentive to dealers (other than the Distributor) which employ a registered
representative who sells a minimum dollar amount of the shares of the Funds
during a specific period of time. Such bonus or other incentive may take the
form of payment for travel expenses, including lodging, incurred in connection
with trips taken by qualifying registered representatives and members of their
families to places within or without the United States or other bonuses such as
gift certificates or the cash equivalent of such bonuses. The Distributor may,
from time to time, reallow the entire portion of the sales charge which it
normally retains to individual selling dealers. However, such additional
reallowance generally will be made only when the selling dealer commits to
substantial marketing support such as internal wholesaling through dedicated
personnel, internal communications and mass mailings.
Equity Planning also acts as financial agent of the Trust and as such
performs administrative, bookkeeping and pricing functions for the Funds. For
services as financial agent, 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 to the financial agent, plus (2) the documented cost
of the financial agent to provide financial reporting and tax services and
oversight of 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 Planning serves as financial 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 financial 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 its services
during the Funds' fiscal year ended July 31, 1998, Equity Planning received
$150,620.
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<PAGE>
DISTRIBUTION PLANS
The Funds has adopted separate distribution plans under Rule 12b-1 of the
1940 Act for each class of shares of the Funds (the "Class A Plan," the "Class
B Plan," and collectively the "Plans"). The Plans 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 and to pay the
Distributor for providing shareholder services.
Pursuant to the Class B Plan, each Fund may reimburse the Distributor
monthly for actual expense of the Distributor up to 0.75% of the average daily
net assets of the Class B Shares of such Fund. Expenditures under the Plans
shall consist of: (i) commissions to sales personnel for selling shares of the
Funds: (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 Funds determine
are reasonably calculated to result in the sale of shares of the Funds. In
addition, the Funds will pay the Distributor 0.25% annually of the average
daily net assets of the Funds' shares for providing services to the
shareholders, including assistance in connection with inquiries related to
shareholder accounts (the "Service Fee").
In order to receive payments under the Plans, participants must meet such
qualifications to be established in the sole discretion of the Distributor,
such as services to the Funds' shareholders; or services providing the Funds
with more efficient methods of offering shares to coherent groups of clients,
members or prospects of a participant; or services permitting bulking of
purchases or sales, or transmission of such purchases or sales by computerized
tape or other electronic equipment; or other processing.
On a quarterly basis, the Trustees of the Funds 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 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 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 provides that while it is in effect, the selection and nomination
of Trustees who are not "interested persons" shall be committed to the
discretion of the Trustees who are not "interested persons." The Plans may be
terminated at any time by vote of a majority of the Plan Trustees or a majority
of the outstanding shares of the Funds.
For the fiscal year ended July 31, 1998, the Funds paid Rule 12b-1 Fees in
the amount of $264,118, of which the principal underwriter received $190,472,
W.S. Griffith & Co., Inc., an affiliate received $11,119 and unaffiliated
broker-dealers received $62,527. Distributor expenses under the Plans consisted
of: (1) advertising ($141,481); (2) printing and mailing of prospectuses to
other than current shareholders ($13,286); (3) compensation to dealers
($167,307); (4) compensation to sales personnel ($270,152); (5) service costs
($55,360) and (6) other ($55,359).
TRUSTEES AND OFFICERS
The following table sets forth information concerning the Trustees and
executive officers of the Funds, including their principal occupations during
the past five years. Unless otherwise noted, the address of each Trustee and
executive officer is 56 Prospect Street, Hartford, Connecticut 06115.
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s)
Name, Address and Age the Trust During Past Five Years
- --------------------- --------- ----------------------
<S> <C> <C>
Robert Chesek (64) Trustee Trustee/Director (1981-present) and Chairman (1989-1994), Phoenix
49 Old Post Road Funds. Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff &
Wethersfield, CT 06109 Phelps Institutional Mutual Funds (1996-present). Vice President,
Common Stock, Phoenix Home Life Mutual Insurance Company (1980-
1994). Director/Trustee, the National Affiliated Investment Companies
(until 1993).
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s)
Name, Address and Age the Trust During Past Five Years
- --------------------- --------- ----------------------
<S> <C> <C>
E. Virgil Conway (69) Trustee Chairman, Metropolitan Transportation Authority (1992-present).
9 Rittenhouse Road Trustee/Director, Consolidated Edison Company of New York, Inc.
Bronxville, NY 10708 (1970-present), Pace University (1978-present), Atlantic Mutual
Insurance Company (1974-present), HRE Properties (1989-present),
Greater New York Councils, Boy Scouts of America (1985-present),
Union Pacific Corp. (1978-present), Blackrock Freddie Mac Mortgage
Securities Fund (Advisory Director) (1990-present), Centennial
Insurance Company (1974-present), Josiah Macy, Jr., Foundation
(1975-present), The Harlem Youth Development Foundation (1987-
present), Accuhealth (1994-present), Trism, Inc. (1994-present), Realty
Foundation of New York (1972-present), New York Housing Partnership
Development Corp. (Chairman) (1981-present) and Fund Directions
(Advisory Director) (1993-present). Director/Trustee, Phoenix Funds
(1993-present). Trustee, Phoenix-Aberdeen Series Fund and Phoenix
Duff & Phelps Institutional Mutual Funds (1996-present). Director,
Duff & Phelps Utilities Tax-Free Income Inc. and Duff & Phelps
Utility and Corporate Bond Trust Inc. (1995-present). Chairman, Audit
Committee of the City of New York (1981-1996). Advisory Director,
Blackrock Fannie Mae Mortgage Securities Fund (1989-1996). Member
(1990-1995), Chairman (1992-1995), Financial Accounting Standards
Advisory Council. Director/Trustee, the National Affiliated Investment
Companies (until 1993).
Harry Dalzell-Payne (69) Trustee Director/Trustee, Phoenix Funds (1983-present). Trustee, Phoenix-
330 East 39th Street Aberdeen Series Fund and Phoenix Duff & Phelps Institutional Mutual
Apartment 29G Funds (1996-present). Director, Duff & Phelps Utilities Tax-Free
New York, NY 10016 Income Inc. and Duff & Phelps Utility and Corporate Bond Trust Inc.
(1995-present). Director, Farragut Mortgage Co., Inc. (1991-1994).
Director/Trustee, the National Affiliated Investment Companies (1983-
1993). Formerly a Major General of the British Army.
*Francis E. Jeffries (68) Trustee Director/Trustee, Phoenix Funds (1995-present). Trustee, Phoenix-
6585 Nicholas Blvd. Aberdeen Series Inc. and Phoenix Duff & Phelps Institutional Mutual
Apt. 1601 Funds (1996-present). Director, Duff & Phelps Utilities Income Inc.
Naples, FL 33963 (1987-present), Duff & Phelps Utilities Tax-Free Income Inc. (1991-
present) and Duff & Phelps Utility and Corporate Bond Trust Inc.
(1993-present). Director, The Empire District Electric Company (1984-
present). Director (1989-1997), Chairman of the Board (1993-1997),
President (1989-1993), and Chief Executive Officer (1989-1995),
Phoenix Investment Partners, Ltd.
Leroy Keith, Jr. (59) Trustee Chairman and Chief Executive Officer, Carson Products Company
Chairman and Chief (1995-present). Director/Trustee, Phoenix Funds (1980-present).
Executive Officer Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Carson Product Company Institutional Mutual Funds (1996-present). Director, Equifax Corp.
64 Ross Road (1991-present) and Evergreen International Fund, Inc. (1989-present).
Savannah, GA 30750 Trustee, Evergreen Liquid Trust, Evergreen Tax Exempt Trust,
Evergreen Tax Free Fund, Master Reserves Tax Free Trust, and Master
Reserves Trust. President, Morehouse College (1987-1994). Chairman
and Chief Executive Officer, Keith Ventures (1992-1994). Director/
Trustee, the National Affiliated Investment Companies (until 1993).
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s)
Name, Address and Age the Trust During Past Five Years
- --------------------- --------- ----------------------
<S> <C> <C>
*Philip R. McLoughlin (52) Trustee and Chairman (1997-present), Vice Chairman (1995-1997) and Chief
President 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 Utilities 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
(1993-present), Chairman (1993-present) and Chief Executive Officer
(1993-1995), National Securities & Research 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 (1992-present) and President (1992-1994), Townsend
Financial Advisers, Inc. Director/Trustee, the National Affiliated
Investment Companies (until 1993).
Everett L. Morris (70) Trustee Vice President, W.H. Reaves and Company (1993-present). Director/
164 Laird Road Trustee, Phoenix Funds (1995-present). Trustee, Phoenix-Aberdeen
Colts Neck, NJ 07722 Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Director, Duff & Phelps Utilities Tax-Free Income Inc.
(1991-present) and Duff & Phelps Utility and Corporate Bond Trust
Inc. (1993-present).
*James M. Oates (52) Trustee Chairman, IBEX Capital Markets LLC (1997-present). Managing
Managing Director Director, Wydown Group (1994-present). Director, Phoenix Investment
The Wydown Group Partners, Ltd. (1995-present). Director/Trustee, Phoenix Funds (1987-
IBEX Capital Markets LLC present). Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff &
60 State Street Phelps Institutional Mutual Funds (1996-present). Director, Govett
Suite 950 Funds, Inc. (1991-present), Blue Cross and Blue Shield of New
Boston, MA 02109 Hampshire (1994-present), Investors Financial Service Corporation
(1995-present), Investors Bank & Trust Corporation (1995-present),
Plymouth Rubber Co. (1995-present), Stifel Financial (1996-present)
and Command Systems, Inc. (1998-present). Vice Chairman,
Massachusetts Housing Partnership (1992-present). Member, Chief
Executives Organization (1996-present). Director (1984-1994),
President (1984-1994) and Chief Executive Officer (1986-1994),
Neworld Bank. Director/Trustee, the National Affiliated Investment
Companies (until 1993).
*Calvin J. Pedersen (56) Trustee Director (1986-present), President (1993-present) and Executive Vice
Phoenix Investment President (1992-1993), Phoenix Investment Partners, Ltd. Director/
Partners, Ltd. Trustee, Phoenix Funds (1995-present). Trustee, Phoenix-Aberdeen
55 East Monroe Street Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
Suite 3600 (1996-present). President and Chief Executive Officer, Duff & Phelps
Chicago, IL 60603 Utilities Tax-Free Income Inc. (1995-present), Duff & Phelps Utilities
Income Inc. (1994-present) and Duff & Phelps Utility and Corporate
Bond Trust Inc. (1995-present).
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s)
Name, Address and Age the Trust During Past Five Years
- --------------------- --------- ----------------------
<S> <C> <C>
Herbert Roth, Jr. (70) Trustee Director/Trustee, Phoenix Funds (1980-present). Trustee, Phoenix-
134 Lake Street Aberdeen Series Fund and Phoenix Duff & Phelps Institutional Mutual
P.O. Box 909 Funds (1996-present). Director, Boston Edison Company (1978-
Sherborn, MA 01770 present), Landauer, Inc. (medical services) (1970-present),Tech Ops./
Sevcon, Inc. (electronic controllers) (1987-present), and Mark IV
Industries (diversified manufacturer) (1985-present). Member, Directors
Advisory Counsel, Phoenix Home Life Mutual Insurance Company
(1998-present). Director, Key Energy Group (oil rig service) (1988-
1994) and Phoenix Home Life Mutual Insurance Company (1972-
1998). Director/Trustee, the National Affiliated Investment Companies
(until 1993).
Richard E. Segerson (52) Managing Director, Mullin Associates (1993-present). Director/Trustee,
102 Valley Road Phoenix Funds (1993-present). Trustee, Phoenix-Aberdeen Series Fund
New Canaan, CT 07840 and Phoenix Duff & Phelps Institutional Mutual Funds (1996-present).
Vice President and General Manager, Coats & Clark, Inc. (previously
Tootal American, Inc.) (1991-1993). Director/Trustee, the National
Affiliated Investment Companies (1984-1993).
Lowell P. Weicker, Jr. (67) Trustee/Director, Phoenix Funds (1995-present). Trustee, Phoenix-
731 Lake Avenue Aberdeen Series Fund and Phoenix Duff & Phelps Institutional Mutual
Greenwich, CT 06830 Funds (1996-present). Director, UST Inc. (1995-present), Burroughs
Wellcome Fund (1996-present), HPSC Inc. (1995-present) and
Compuware (1996-present). Visiting Professor, University of Virginia
(1997-present). Director, Duty Free International, Inc. (1997).
Chairman, Dresing, Lierman, Weicker (1995-1996). Governor of the
State of Connecticut (1991-1995).
Michael E. Haylon (40) Executive Director and Executive Vice President--Investments, Phoenix
Vice Investment Partners, Ltd. (1995-present). Executive Vice President,
President Phoenix Funds (1993-present) and Phoenix-Aberdeen Series Fund
(1996-present). Executive Vice President (1997-present), Vice
President (1996-1997), Phoenix Duff & Phelps Institutional Mutual
Funds. Director (1994-present), President (1995-present), Executive
Vice President (1994-1995), Vice President (1991-1994), Phoenix
Investment Counsel, Inc. Director (1994-present), President (1996-
present), Executive Vice President (1994-1996), Vice President (1993-
1994), National Securities & Research Corporation. Director, Phoenix
Equity Planning Corporation (1995-present). Senior Vice President,
Securities Investments, Phoenix Home Life Mutual Insurance Company
(1993-1995). Various other positions with Phoenix Home Life Mutual
Insurance Company (1990-1993).
John F. Sharry (46) Executive Managing Director, Retail, Phoenix Equity Planning Corporation (1995-
Vice present). Executive Vice President, Phoenix Funds and Phoenix-
President Aberdeen Series Fund (1998-present). Managing Director, Director and
National Sales Manager (December 1993-November 1995), Senior Vice
President, Director and National Sales Manager (December 1992-
December 1993), Putnam Funds.
Chong Yoon Chou (30) Senior Investment Director, Aberdeen Asset Management Asia Limited
Aberdeen Asset Management Vice ( 1994-present).
Asia Limited President
88A Circular Road
Singapore 049439
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s)
Name, Address and Age the Trust During Past Five Years
- --------------------- --------- ----------------------
<S> <C> <C>
Christopher D. Fishwick (37) Senior Investment Director, Aberdeen Asset Managers, LTD (1991-present).
Aberdeen Asset Vice Director, Phoenix-Aberdeen International Advisors LLC (1996-present).
Managers, LTD President
10 Queens Terrace
Aberdeen, Scotland
Vivek Gandhi (29) Senior Investment Manager, Aberdeen Asset Management Asia Limited
Aberdeen Asset Management Vice (1994-present). Project Finance Officer, Industrial Credit & Investment
Asia Limited President Corporation of India Ltd (1993-1994).
88A Circular Road
Singapore 049439
Peter Hames (37) Senior European Fund Manager, Aberdeen Asset Managers, Ltd. (1989-1992).
Aberdeen Asset Management Vice Far East Investment Director, Aberdeen Asset Management Asia
Asia Limited President Limited (1992-present).
88A Circular Road
Singapore 049439
Gawaine Lewis (35) Senior Investment Manager, Aberdeen Fund Managers, Inc. (1995-present).
Aberdeen Fund Managers Inc. Vice Investment Manager, Aberdeen Asset Managers, LTD (1994-1995).
1 Financial Plaza President Portfolio Manager, CIM Fund Managers (1991-1994).
Ft. Lauderdale, FL 33394
Hugh Young (40) Senior Director, Aberdeen Asset Management Limited (1988-present). Far
Aberdeen Asset Vice East Investment Director, Aberdeen Asset Management Asia Limited
Management President (1992-present). Managing Director, Aberdeen Asset Management Asia
Asia Limited Limited (1992-present). Director, Phoenix-Aberdeen International
88A Circular Road Advisors LLC (1996-present). Far East Investment Director, Phoenix
Singapore 049439 Investment Counsel, Inc. (1996-present). Senior Vice President, The
Phoenix Edge Series Fund (1996-present). Director, Abtrust Asian
Smaller Companies Investment Trust plc (1995-present), Abtrust New
Dawn Investment Trust plc (1989-present), Abtrust New Thai
Investment Trust plc (1989-present), Abtrust Emerging Asia Investment
Trust Limited (1990-present), JF Philippine Fund Inc. (1991-present) and
Apollo Tiger Fund (1994-present).
Shahreza Yusof (26) Senior Investment Manager, Aberdeen Asset Management Asia Limited
Aberdeen Asset Management Vice ( 1994-present).
Asia Limited President
88A Circular Road
Singapore 049439
Christian C. Bertelsen (55) Vice Managing Director, Value Equities, Phoenix Investment Counsel, Inc.
President (1997-present). Managing Director, National Securities and Research
Corporation (1998-present). Vice President, Phoenix Investment
Trust 97 (1997-present), Phoenix-Aberdeen Series Fund (1998-present)
and The Phoenix Edge Series Fund (1998-present). Senior Vice
President and Chief Investment Officer, Zurich Kemper (1996-1997).
Vice President and Portfolio Manager, Zurich Kemper Small Cap Fund
and Zurich Kemper Contrarian Fund (1996-1997). Senior Vice
President, Eagle Asset Management (1993-1996). Vice President and
Portfolio Manager, Heritage Value Fund and Golden Select Variable
Annuity Value Trust (1995-1996)
John D. Kattar (43) Vice Managing Director, Equities, Phoenix Investment Counsel, Inc. (1997-
President present). Vice President, The Phoenix Edge Series Fund, Phoenix-
Aberdeen Series Fund and Phoenix Duff & Phelps Institutional Mutual
Funds (1997-present). Director (1989-1997), Senior Vice President
(1993-1996) Baring Asset Management Company, Inc.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s)
Name, Address and Age the Trust During Past Five Years
- --------------------------- ----------------- ------------------------------------------------------------------------
<S> <C> <C>
William E. Keen, III (35) Vice Assistant Vice President, Mutual Fund Regulation, Phoenix Equity
100 Bright Meadow Blvd. President Planning Corporation (1996-present). Assistant Vice President, Mutual
P.O. Box 2200 Fund Regulation, Phoenix Investment Counsel (1998-present).
Enfield, CT 06083-2200 Assistant Vice President, Mutual Fund Regulation, National Securities
and Research Corporation (1998-present). Vice President, Phoenix
Funds (1996-present), Phoenix Duff & Phelps Institutional Mutual
Funds (1996-present), Phoenix-Aberdeen Series Fund (1996-present).
Assistant Vice President, USAffinity Investments LP (1994-1995).
Treasurer and Secretary, USAffinity Funds (1994-1995). Manager, Fund
Administration, SEI Corporation (1991-1994).
William R. Moyer (54) Vice Senior Vice President and Chief Financial Officer, Phoenix Investment
100 Bright Meadow Blvd. President Partners, Ltd. (1995-present). Director (1998-present), Senior Vice
P.O. Box 2200 President, Finance (1990-present), Chief Financial Officer (1996-
Enfield, CT 06083-2200 present), and Treasurer (1994-1996 and 1998-present), Phoenix Equity
Planning Corporation. Director (1998-present), Senior Vice President
(1990-present), Chief Financial Officer (1996-present) and Treasurer
(1994-present), Phoenix Investment Counsel, Inc. Director (1998-
present), Senior Vice President, Finance (1993-present), Chief
Financial Officer (1996-present), and Treasurer (1994-present),
National Securities & Research Corporation. Senior Vice President
and Chief Financial Officer, Duff & Phelps Investment Management
Co. (1996-present). Vice President, Phoenix Funds (1990-present),
Phoenix-Duff & Phelps Institutional Mutual Funds (1996-present),
Phoenix-Aberdeen Series Fund (1996-present). Senior Vice President
and Chief Financial Officer, W. S. Griffith & Co., Inc. (1992-1995) and
Townsend Financial Advisers, Inc. (1993-1995). Vice President,
Investment Products Finance, Phoenix Home Life Mutual Insurance
Company (1990-1995). Vice President, the National Affiliated
Investment Companies (until 1993).
Leonard J. Saltiel (44) Vice Managing Director, Operations and Service, (1996-present), Senior Vice
President President (1994-1996), Phoenix Equity Planning Corporation. Vice
President, Phoenix Funds (1994-present), Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present), and Phoenix-Aberdeen
Series Fund (1996-present). Vice President, National Securities &
Research Corporation (1994-1996). Vice President, Investment
Operations, Phoenix Home Life Mutual Insurance Company (1994-
1995). Various positions with Home Life Insurance Company and
Phoenix Home Life Mutual Insurance Company (1987-1994).
Julie L. Sapia (41) Vice Director, Money Market Trading (1998-present), Head Money Market
President Trader (1997), Money Market Trader (1995-1997), Phoenix Investment
Counsel, Inc. Vice President (1997-present), The Phoenix Edge Series
Fund, Phoenix Series Fund, Phoenix Duff & Phelps Institutional
Mutual Funds, and Phoenix-Aberdeen Series Fund. Various positions
with Phoenix Home Life Mutual Insurance Company (1985-1995).
Nancy G. Curtiss (46) Treasurer Vice President, Fund Accounting (1994-present) and Treasurer (1996-
present), Phoenix Equity Planning Corporation. Treasurer, Phoenix Funds
(1994-present), Phoenix Duff & Phelps Institutional Mutual Funds (1996-
present), Phoenix-Aberdeen Series Fund (1996-present). Second Vice
President and Treasurer, Fund Accounting, Phoenix Home Life Mutual
Insurance Company (1994-1995). Various positions with Phoenix Home
Life Insurance Company (1987-1994).
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s)
Name, Address and Age the Trust During Past Five Years
- --------------------- --------- ----------------------
<S> <C> <C>
G. Jeffrey Bohne (51) Secretary Vice President and General Manager, Phoenix Home Life Mutual
101 Munson Street Insurance Co. (1993-present). Vice President, Mutual Fund Customer
Greenfield, MA 01301 Service (1996-present), Vice President, Transfer Agency Operations
(1993-1996), Phoenix Equity Planning Corporation. Clerk, Phoenix
Investment Counsel, Inc. (1995-present). Secretary/Clerk, Phoenix Funds
(1993-present), Phoenix Duff & Phelps Institutional Mutual Funds (1996-
present) and Phoenix-Aberdeen Series Fund (1996-present).
</TABLE>
- -----------
*Indicates that the Trustee is an "interested person" of the Fund within
the meaning of the definition set forth in Section 2(a)(19) of the 1940 Act.
For services rendered to the Trust during the fiscal year ended July 31,
1998, the Trustees received an aggregate of $37,277 from the Trust as Trustees'
fees. For services on the Board of Trustees of the Phoenix Funds, each Trustee
who is not a full-time employee of the Adviser or any of its affiliates
currently receives a retainer at the annual rate of $40,000 and a fee of $2,500
per joint meeting of the Boards. Each Trustee who serves on the Audit Committee
receives a retainer at the annual rate of $2,000 and a fee of $2,000 per joint
Audit Committee meeting attended. Each Trustee who serves on the Nominating
Committee receives an annual retainer at the annual rate of $1,000 and a fee of
$1,000 per joint Nominating Committee meeting attended. Each Trustee who serves
on the Executive Committee and who is not an interested person of the Funds
receive a retainer at the annual rate of $2,000 and $2,000 per joint Executive
Committee meeting attended. The function of the Executive Committee is to serve
as a contract review, compliance review and performance review delegate of the
full Board of Trustees. Costs are allocated equally to each of the series of
the funds within the Fund Complex (which includes the Trust). The foregoing
fees do not include the reimbursement of expenses incurred in connection with
meeting attendance. Officers and employees of the Adviser who are interested
persons are compensated for their services by the Adviser and receive no
compensation from the Trust.
23
<PAGE>
For the Trust's last fiscal year, the Trustees received the following
compensation:
<TABLE>
<CAPTION>
Total
Compensation
Pension or Estimated From Fund and
Retirement Annual Fund Complex
Aggregate Benefits Benefits (14 Funds)
Compensation Accrued as Part Upon Paid to
Name From Fund of Fund Expenses Retirement Trustees
---- --------- ---------------- ---------- --------
<S> <C> <C> <C> <C>
Robert Chesek $2,888 $58,500
E. Virgil Conway+ $3,880 $78,750
Harry Dalzell-Payne+ $3,455 $70,000
Francis E. Jeffries $2,948* $60,000
Leroy Keith, Jr. $3,004 None None $61,000
Philip R. McLoughlin+ -- for any for any --
Everett L. Morris+ $3,399* Trustee Trustee $69,750
James M. Oates+ $3,339 $69,000
Calvin J. Pedersen -- --
Herbert Roth, Jr.+ $3,997 $80,000
Richard E. Segerson $3,489 $70,750
Lowell P. Weicker, Jr. $3,489 $70,000
</TABLE>
*This compensation (and the earnings thereon) will be deferred pursuant to the
Deferred Compensation Plan. At September 30, 1998, the total amount of deferred
compensation (including interest and other accumulation earned on the original
amounts deferred) accrued for Messrs. Jeffries, Morris and Roth was
$122,231.42, $131,172.55 and $145,070.99, respectively. At present, by
agreement among the Fund, the Distributor and the electing director, director
fees that are deferred are paid by the Fund to the Distributor. The liability
for the deferred compensation obligation appears only as a liability of the
Distributor.
+Messrs. Conway, Dalzell-Payne, McLoughlin, Morris, Oates and Roth are members
of the Executive Committee.
As of July 31, 1998, the Trustees and officers of the Funds beneficially
owned less than 1% of the outstanding shares of the Trust.
Principal Shareholders
The following table sets forth information as of November 9, 1998 with
respect to each person who owns of record or is known by the Trust to own of
record or beneficially owns 5% or more of any Class of the Trust's equity
securities.
<TABLE>
<CAPTION>
Name of Shareholder Fund and Class Number of Shares Percent of Class
- ------------------- -------------- ---------------- ----------------
<S> <C> <C> <C>
Phoenix Home Life
Attn Pam Levesque
56 Prospect St Phoenix-Aberdeen New
Hartford CT 06103-2818 Asia Fund Class A 305,646.2570 27.36%
Prudential Securities Inc. FBO
Spitzer Management
150 E Bridge St Phoenix-Aberdeen New
Elyria OH 44035-5219 Asia Fund Class B 41,301.8030 8.87%
Merrill Lynch Pierce
Fenner & Smith
4800 Deer Lake Dr E 3rd Fl Phoenix-Aberdeen New
Jacksonville FL 32246-6484 Asia Fund Class B 33,147.4210 7.12%
Phoenix Home Life
Attn Pam Levesque
56 Prospect St Phoenix-Aberdeen Global
Hartford CT 06103-2818 Small Cap Fund Class A 547,011.1980 31.90%
Merrill Lynch Pierce
Fenner & Smith
4800 Deer Lake Dr E 3rd Fl Phoenix-Aberdeen Global
Jacksonville FL 32246-6484 Small Cap Fund Class B 90,320.6380 8.12%
</TABLE>
24
<PAGE>
OTHER INFORMATION
Independent Accountants
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, MA 02110, has been
selected as the independent accountants for the Trust. PricewaterhouseCoopers
LLP audits the Trust's annual financial statements and expresses an opinion
thereon.
Custodian and Transfer Agent
Brown Brothers Harriman & Co., 40 Water Street, Boston, MA 02109, serves
as custodian of the Trust's assets (the "Custodian"). Phoenix Equity Planning
Corporation, 100 Bright Meadow Boulevard, Enfield, CT 06082, serves as Transfer
Agent for the Funds (the "Transfer Agent"). As compensation, Equity Planning
receives a fee equivalent to $17.95 for each designated non-daily dividend
shareholder account, plus out-of-pocket expenses. Transfer Agent fees are also
utilized to offset costs and fees paid to subtransfer agents employed by Equity
Planning. State Street Bank and Trust Company serves as a subtransfer agent
pursuant to a Subtransfer Agency Agreement.
Report to Shareholders
The fiscal year of the Trust ends on July 31. The Trust will send
financial statements to its shareholders at least semiannually. An annual
report containing financial statements, audited by the Trust's independent
accountants, will be sent to shareholders each year.
Financial Statements
The Financial Statements for the Funds' fiscal year ended July 31, 1998,
appearing in the Funds' 1998 Annual Report to Shareholders, are incorporated
herein by reference.
25
3
<PAGE>
NEW ASIA SERIES
- - ------------------------------------------------------
INVESTMENTS AT JULY 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
---------- ----------
<S> <C> <C>
FOREIGN COMMON STOCKS--95.4%
AUSTRALIA--16.8%
Australian Gas Light Co. Ltd.
(Utility-Gas Distribution)..... 25,000 $ 165,513
BRL Hardy Ltd. (Beverages
(Alcoholic))................... 127,500 378,621
Commonwealth Bank of Australia
(Banks (Major Regional))....... 14,000 174,713
Leighton Holdings Ltd.
(Engineering & Construction)... 40,000 136,030
Pacifica Group Ltd.
(Manufacturing
(Diversified))................. 85,000 193,569
QBE Insurance Group Ltd.
(Insurance (Multi-Line))....... 80,000 296,350
Telstra Corp. Ltd.
(Communications Equipment)..... 65,000 185,523
----------
1,530,319
----------
HONG KONG--21.2%
CDL Hotels International Ltd.
(Lodging (Hotels))............. 900,000 249,758
Citybus Group Ltd. (Services
(Commercial & Consumer))....... 700,000 89,448
Giordano International Ltd.
(Retail (General
Merchandise)).................. 599,000 103,603
HSBC Holdings PLC (Banks (Money
Center))....................... 13,600 331,772
Hongkong Electric Holdings Ltd.
(Electric Companies)........... 100,000 313,650
National Mutual Asia Ltd.
(Insurance (Multi-Line))....... 600,000 336,883
Smartone Telecommunications
(Telecommunications
(Cellular/Wireless))........... 75,000 217,328
Swire Pacific Ltd. Class B
(Diversified Miscellaneous).... 575,000 289,449
----------
1,931,891
----------
INDIA--10.6%
BSES Ltd. GDR (Diversified
Miscellaneous) (b)............. 22,000 249,150
Industrial Credit & Investment
Corporation of India Ltd.
Sponsored GDR (Financial
(Diversified))................. 20,000 225,000
Mahanagar Telephone Nigam Ltd.
Sponsored GDR (Telephone)...... 24,000 291,000
Ranbaxy Laboratories GDR (Health
Care (Drugs - Major
Pharmaceuticals)).............. 13,000 204,750
----------
969,900
----------
INDONESIA--3.2%
PT Bank Bali (Banks (Major
Regional))..................... 669,000 52,148
PT Indosat (Communications
Equipment)..................... 220,000 243,847
----------
295,995
----------
<CAPTION>
SHARES VALUE
---------- ----------
<S> <C> <C>
MALAYSIA--5.1%
Carlsberg Brewery Malaysia Berhad
(Beverages (Alcoholic))........ 60,000 $ 158,837
Malaysian Oxygen Berhad
(Chemicals).................... 95,000 168,431
Muhibbah Engineering Berhad
(Engineering & Construction)
(b)............................ 100,000 29,145
Sime UEP Properties Berhad (Real
Estate)........................ 230,000 107,810
----------
464,223
----------
NEW ZEALAND--2.5%
Telecom Corporation of New
Zealand Ltd. (Communications
Equipment)..................... 50,000 224,369
----------
PHILIPPINES--8.3%
Ayala Land, Inc. Class B
(Engineering & Construction)... 840,000 214,495
Bank of the Philippines Islands
(Banks (Major Regional))....... 60,000 128,982
La Tondena Distillers, Inc.
(Beverages (Alcoholic))........ 200,000 81,950
Philippine Long Distance
Telephone Co. Sponsored ADR
(Telephone).................... 15,000 331,875
----------
757,302
----------
SINGAPORE--12.7%
Chemical Industries (Far East)
Ltd. (Chemicals)............... 100,000 121,056
Clipsal Industries Ltd.
(Electrical Equipment)......... 150,000 93,000
Robinson & Company Ltd. (Retail
(Department Stores))........... 126,000 291,925
Rothmans Industries Ltd.
(Tobacco)...................... 60,000 278,024
Singapore Press Holdings Ltd.
(Publishing (Newspapers))...... 28,000 197,860
United Overseas Bank Ltd. Foreign
(Banks (Money Center))......... 60,000 172,375
----------
1,154,240
----------
SOUTH KOREA--2.5%
Pohang Iron & Steel Co. (Iron &
Steel)......................... 5,000 224,049
----------
SRI LANKA--3.2%
John Keells Holdings Ltd.
(Diversified Miscellaneous).... 40,000 136,523
National Development Bank Ltd.
(Banks (Major Regional))....... 75,000 158,139
----------
294,662
----------
TAIWAN--4.6%
Standard Foods Taiwan Ltd. GDR
(Retail (Food Chains))......... 35,000 417,375
----------
</TABLE>
See Notes to Financial Statements 5
<PAGE>
NEW ASIA SERIES
- - ------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ----------
<S> <C> <C>
THAILAND--3.4%
Bangkok Bank Public Co. Ltd.
Foreign (Banks (Major
Regional))..................... 30,000 $ 35,619
Phatra Insurance Public Co. Ltd.
Foreign (Insurance
(Multi-Line)).................. 73,700 129,904
Ruam Pattana Fund II (Financial
(Diversified)) (b)............. 1,500,000 139,539
----------
305,062
----------
UNITED KINGDOM--1.3%
Rowe Evans Investments PLC
(Agricultural Products)........ 125,000 117,587
----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $13,900,981)................ 8,686,974
----------
TOTAL LONG-TERM INVESTMENTS--95.4%
(Identified cost $13,900,981)................ 8,686,974
----------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000) VALUE
---------- ----------
<S> <C> <C>
SHORT-TERM OBLIGATIONS--3.3%
Salomon Brothers, repurchase
agreement, 5.48%, dated 7/31/98
due 8/3/98, repurchase price
$300,137, collateralized by
U.S. Treasury Bill 5.60%,
1/7/99, market value
$305,989....................... $ 300 $ 300,000
----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $300,000)................... 300,000
----------
TOTAL INVESTMENTS--98.7%
(Identified cost $14,200,981)................ 8,986,974(a)
Cash and receivables, less
liabilities--1.3%.......................... 121,464
----------
NET ASSETS--100.0%............................. $9,108,438
----------
----------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $555,769 and gross
depreciation of $5,920,901 for federal income tax purposes. At July 31,
1998, the aggregate cost of securities for federal income tax purposes was
$14,352,106.
(b) Non-income producing.
6 See Notes to Financial Statements
<PAGE>
NEW ASIA SERIES
- - ------------------------------------------------------
INDUSTRY DIVERSIFICATION
AS A PERCENTAGE OF TOTAL VALUE OF LONG-TERM INVESTMENTS
(UNAUDITED)
<TABLE>
<S> <C>
Agricultural Products............................................ 1.3%
Banks (Major Regional)........................................... 6.3
Banks (Money Center)............................................. 5.8
Beverages (Alcoholic)............................................ 7.1
Chemicals........................................................ 3.3
Communications Equipment......................................... 7.5
Diversified Miscellaneous........................................ 7.8
Electric Companies............................................... 3.6
Electrical Equipment............................................. 1.1
Engineering & Construction....................................... 4.4
Financial (Diversified).......................................... 4.2
Health Care (Drugs-Major Pharmaceuticals)........................ 2.4
Insurance (Multi-Line)........................................... 8.8
Iron & Steel..................................................... 2.6
Lodging (Hotels)................................................. 2.9
Manufacturing (Diversified)...................................... 2.2
Publishing (Newspapers).......................................... 2.3
Real Estate...................................................... 1.2
Retail (Department Stores)....................................... 3.4
Retail (Food Chains)............................................. 4.8
Retail (General Merchandise)..................................... 1.2
Services (Commercial & Consumer)................................. 1.0
Telecommunications (Cellular/Wireless)........................... 2.5
Telephone........................................................ 7.2
Tobacco.......................................................... 3.2
Utility-Gas Distribution......................................... 1.9
------
100.0%
------
------
</TABLE>
See Notes to Financial Statements 7
<PAGE>
NEW ASIA SERIES
- - ------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $14,200,981) $ 8,986,974
Cash 116,310
Foreign currency at value
(Identified cost $125,906) 124,527
Receivables
Investment securities sold 43,076
Dividends and interest 34,030
Receivable from adviser 24,378
Fund shares sold 4,858
-------------
Total assets 9,334,153
-------------
LIABILITIES
Payables
Investment securities purchased 124,527
Fund shares repurchased 17,141
Distribution fee 3,839
Trustees' fee 3,636
Transfer agent fee 4,625
Financial agent fee 2,797
Administration fee 1,233
Accrued expenses 67,917
-------------
Total liabilities 225,715
-------------
NET ASSETS $ 9,108,438
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 17,184,020
Distributions in excess of net investment income (71,526)
Accumulated net realized loss (2,789,281)
Net unrealized depreciation (5,214,775)
-------------
NET ASSETS $ 9,108,438
-------------
-------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $6,351,996) 1,166,559
Net asset value per share $5.45
Offering price per share
$5.45/(1-4.75%) $5.72
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $2,756,442) 510,174
Net asset value and offering price per share $5.40
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 367,585
Interest 33,158
Foreign taxes withheld (24,320)
-----------
Total investment income 376,423
-----------
EXPENSES
Investment advisory fee 106,419
Distribution fee--Class A 21,801
Distribution fee--Class B 38,678
Financial agent fee 73,890
Administration fee 18,882
Transfer agent 59,193
Custodian 55,159
Registration 31,434
Trustees 20,582
Printing 20,315
Professional 15,508
Miscellaneous 9,119
-----------
Total expenses 470,980
Less expenses borne by investment adviser (179,218)
-----------
Net expenses 291,762
-----------
NET INVESTMENT INCOME 84,661
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities (2,529,914)
Net realized loss on foreign currency transactions (9,688)
Net change in unrealized appreciation (depreciation) on investments (5,877,623)
Net change in unrealized appreciation (depreciation) on foreign
currency and foreign currency transactions (802)
-----------
NET LOSS ON INVESTMENTS (8,418,027)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $(8,333,366)
-----------
-----------
</TABLE>
8 See Notes to Financial Statements
<PAGE>
NEW ASIA SERIES
- - ------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FROM
INCEPTION
SEPTEMBER 4,
1996
YEAR ENDED TO JULY 31,
JULY 31, 1998 1997
------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 84,661 $ 86,832
Net realized loss (2,539,602) (134)
Net change in unrealized appreciation
(depreciation) (5,878,425) 663,650
------------- -------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS (8,333,366) 750,348
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income--Class A (119,514) (52,987)
Net investment income--Class B (43,580) (15,128)
In excess of net investment income--Class A (239,479) --
In excess of net investment income--Class B (87,326) --
------------- -------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (489,899) (68,115)
------------- -------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (568,922 and
1,467,788 shares, respectively) 3,994,745 14,761,764
Net asset value of shares issued from
reinvestment of distributions (54,456 and
4,967 shares, respectively) 341,985 49,716
Cost of shares repurchased (735,511 and 194,063
shares, respectively) (5,284,710) (1,936,251)
------------- -------------
Total (947,980) 12,875,229
------------- -------------
CLASS B
Proceeds from sales of shares (146,419 and
673,230 shares, respectively) 1,054,677 6,773,565
Net asset value of shares issued from
reinvestment of distributions (18,909 and
1,408 shares, respectively) 118,368 14,076
Cost of shares repurchased (272,894 and 56,898
shares, respectively) (2,064,578) (573,887)
------------- -------------
Total (891,533) 6,213,754
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS (1,839,513) 19,088,983
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS (10,662,778) 19,771,216
NET ASSETS
Beginning of period 19,771,216 0
------------- -------------
END OF PERIOD (INCLUDING DISTRIBUTIONS IN EXCESS
OF NET INVESTMENT INCOME
AND UNDISTRIBUTED NET INVESTMENT INCOME OF
($71,526) AND $72,144, RESPECTIVELY) $ 9,108,438 $ 19,771,216
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements 9
<PAGE>
NEW ASIA SERIES
- - ------------------------------------------------------
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------- -------------------------
FROM FROM
INCEPTION YEAR INCEPTION
YEAR ENDED 9/4/96 TO ENDED 9/4/96 TO
7/31/98 7/31/97 7/31/98 7/31/97
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.44 $ 10.00 $ 10.39 $ 10.00
INCOME FROM INVESTMENT OPERATIONS(7)
Net investment income (loss) 0.06(4)(5) 0.09(4)(5) 0.01(4)(6) 0.01(4)(6)
Net realized and unrealized gain (loss) (4.75) 0.41 (4.73) 0.43
----------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS (4.69) 0.50 (4.72) 0.44
----------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income (0.10) (0.06) (0.09) (0.05)
In excess of net investment income (0.20) -- (0.18) --
----------- --------- --------- ---------
TOTAL DISTRIBUTIONS (0.30) (0.06) (0.27) (0.05)
----------- --------- --------- ---------
Change in net asset value (4.99) 0.44 (4.99) 0.39
----------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 5.45 $ 10.44 $ 5.40 $ 10.39
----------- --------- --------- ---------
----------- --------- --------- ---------
Total return(1) (45.29)% 4.98%(3) (45.83)% 4.37%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $6,352 $13,355 $ 2,756 $ 6,416
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.10% 2.10%(2) 2.85% 2.85%(2)
Net investment income 0.89% 0.95%(2) 0.18% 0.06%(2)
Portfolio turnover 44% 9%(3) 44% 9%(3)
</TABLE>
(1) Maximum sales charges are not reflected in the total calculation.
(2) Annualized
(3) Not annualized
(4) Computed using average shares outstanding.
(5) Includes reimbursement of operating expenses by investment adviser of $0.10
and $0.15, respectively.
(6) Includes reimbursement of operating expenses by investment adviser of $0.10
and $0.15, respectively.
(7) Distributions are made in accordance with the prospectus; however, class
level per share income from investment operations may vary from anticipated
results depending on the timing of share purchases and redemptions.
10 See Notes to Financial Statements
<PAGE>
GLOBAL SMALL CAP SERIES
- - ------------------------------------------------------
INVESTMENTS AT JULY 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
FOREIGN COMMON STOCKS--63.4%
ARGENTINA--0.6%
Banco Frances SA Sponsored ADR
(Banks-Foreign)................ 4,000 $ 99,750
Disco SA Sponsored ADR (Retail-
Supermarkets) (b).............. 2,000 69,250
-----------
169,000
-----------
AUSTRALIA--1.5%
BRL Hardy Ltd.
(Beverages-Alcoholic).......... 75,000 222,718
Pacifica Group Ltd. (Diversified
Operations).................... 100,000 227,728
-----------
450,446
-----------
BELGIUM--0.3%
Lernout & Hauspie Speech Products
NV (Electronic-Parts
Distributors) (b).............. 1,500 77,438
-----------
BRAZIL--0.8%
Centrais Eletricas de Santa
Catarina SA Preference Class B
(Utility-Electric Power)....... 90,000 75,845
Companhia Energetica Brasilia
Preference Class A (Electric
Products-Miscellaneous) (b).... 443,292 15,248
Companhia Energetica Brasilia
Preference Class B (Electric
Products-Miscellaneous) (b).... 800,000 28,205
Companhia Paranaense de Energia
Sponsored ADR (Utility-Electric
Power)......................... 10,000 108,750
-----------
228,048
-----------
CANADA--0.5%
Imax Corp. (Leisure-Movies &
Related) (b)................... 7,000 147,000
-----------
CHILE--0.0%
Santa Isabel SA Sponsored ADR
(Retail-Supermarkets).......... 1,496 16,550
-----------
DENMARK--0.9%
Sondagsavisen A/S
(Media-Newspapers)............. 4,950 284,839
-----------
FINLAND--2.3%
Elcoteq Network Corp. A Shares
(Telecommunications-
Equipment)..................... 28,400 393,954
Sampo Insurance Co. PLC A Shares
(Insurance-Multi-Line)......... 5,250 294,217
-----------
688,171
-----------
FRANCE--5.8%
Altran Technologies SA
(Commercial
Services-Engineering/R&D)...... 1,540 361,496
Coflexip SA Sponsored ADR (Oil &
Gas-Drilling & Equipment)...... 1,000 49,500
LVL Medical
(Medical-Outpatient/Home
Care).......................... 11,550 222,867
Penauille Polyservices
(Commercial
Services-Security/Safety)...... 830 264,604
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
FRANCE--CONTINUED
Picogiga (Electric-Semiconductor
Equipment)..................... 4,710 $ 184,928
Societe Industrielle D'Aviations
Latecoere SA (Aerospace/Defense
Equipment)..................... 2,310 308,138
Union des Assurances Federales
(Insurance-Life)............... 2,370 353,919
-----------
1,745,452
-----------
GERMANY--4.9%
Apcoa Parking AG (Commercial
Services-Miscellaneous)........ 3,000 210,424
Berliner Kraft-und Licht AG
(Electronic-Parts
Distributors).................. 5,520 217,256
KM Europa Metal AG (Metal
Processing & Fabrication)...... 3,540 477,693
LOESCH Umweltschutz AG (Pollution
Control-Equipment)............. 11,568 247,809
Sauer, Inc. (Machinery-General
Industrial).................... 23,000 316,831
-----------
1,470,013
-----------
GREECE--0.9%
STET Hellas Telecommunications SA
ADR (Telecommunications-
Cellular) (b).................. 6,500 281,531
-----------
HONG KONG--1.1%
Giordano International Ltd.
(Retail-Apparel/Shoe).......... 751,000 129,892
Magician Industries Holding Ltd.
(Commercial
Services-Miscellaneous)........ 1,500,000 191,675
-----------
321,567
-----------
INDIA--1.1%
Crompton Greaves Ltd. Sponsored
GDR (Electric
Products-Miscellaneous) (b).... 155,000 100,750
Industrial Credit & Investment
Corporation of India Ltd.
Sponsored GDR
(Finance-Investment
Management).................... 20,000 225,000
-----------
325,750
-----------
INDONESIA--0.4%
PT Bank Bali (Banks-Foreign)..... 600,000 46,769
PT Tigaraksa Satria (Commercial
Services-Miscellaneous)........ 350,000 74,527
-----------
121,296
-----------
IRELAND--1.6%
IFG Group PLC (Financial
Services-Miscellaneous)........ 400,000 480,803
-----------
ISRAEL--1.9%
Tadiran Ltd. (Telecommunications-
Equipment)..................... 15,242 566,086
-----------
ITALY--2.7%
Banca di Roma (Banks-Money
Center) (b).................... 172,000 399,955
Banca Popolare di Bergamo Credito
Varesino SPA (Banks-Foreign)... 17,000 401,486
-----------
801,441
-----------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
GLOBAL SMALL CAP SERIES
- - ------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
JAPAN--4.2%
FCC Co. Ltd. (Auto/Truck-Original
Equipment) (b)................. 35,000 $ 303,029
Kawasumi Laboratories
(Medical/Dental-Supplies)
(b)............................ 29,000 534,301
Nishio Rent All Co.
(Commercial-Leasing Companies)
(b)............................ 31,000 251,220
Shinmei Electric
(Electric-Miscellaneous
Components) (b)................ 12,000 167,064
-----------
1,255,614
-----------
MEXICO--0.6%
Grupo Elektra SA de C.V.-CPO
(Retail-Consumer Electric)..... 90,000 71,425
Industrias CH SA Class B
(Machinery-General Industrial)
(b)............................ 21,400 76,760
Tekchem SA Class A (Chemicals-
Specialty) (b)................. 182,000 36,313
-----------
184,498
-----------
NETHERLANDS--0.9%
BE Seminconductor Industries NV
(Electric-Semiconductor Mfg.)
(b)............................ 31,250 258,711
-----------
NORWAY--2.3%
NetCom ASA (Telecommunications-
Cellular) (b).................. 10,450 364,014
Tomra Systems ASA (Pollution
Control-Equipment)............. 10,400 338,856
-----------
702,870
-----------
PERU--0.3%
Credicorp Ltd. (Banks-Foreign)... 6,000 79,125
-----------
SINGAPORE--1.9%
Industrial & Commercial Bank
(Banks-Foreign)................ 78,000 95,327
Robinson & Co. Ltd.
(Retail-Department Stores)..... 80,000 185,349
Rothmans Industries Ltd.
(Tobacco) (b).................. 60,000 278,024
-----------
558,700
-----------
SPAIN--4.5%
Befesa Medio Ambiente SA
(Industrial) (b)............... 26,700 440,182
Catalana Occidente SA
(Insurance-Multi-Line)......... 10,510 327,056
Corporacion Financiera Reunida SA
(Finance-Investment
Management).................... 30,485 412,763
Sotogrande SA (Real Estate
Development) (b)............... 51,000 178,627
-----------
1,358,628
-----------
SRI LANKA--0.4%
John Keells Holdings (Diversified
Operations) (b)................ 40,000 136,523
-----------
SWEDEN--1.8%
Haldex AB (Auto/Truck-Original
Equipment)..................... 18,000 313,132
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
SWEDEN--CONTINUED
Ortivus AB B Shares (Medical-
Products) (b).................. 15,500 $ 224,701
-----------
537,833
-----------
SWITZERLAND--0.9%
SEZ Holding AG Class A (Electric
Products-Miscellaneous)........ 1,000 258,310
-----------
TAIWAN--1.6%
Standard Foods Taiwan Ltd.
Sponsored GDR RegS
(Retail-Supermarkets) (b)...... 39,997 476,964
-----------
UNITED KINGDOM--16.7%
Access Plus PLC (Commercial
Services-Advertising).......... 85,000 278,119
Cedardata PLC
(Computer-Software)............ 200,000 512,065
Charles Stanley Group PLC
(Finance-Investment Bankers)... 265,000 1,315,787
Gresham Computing PLC (Computer-
Software)...................... 570,000 969,816
ILP Group PLC
(Containers-Paper/Plastic)..... 260,000 151,002
JJB Sports PLC
(Retail-Apparel/Shoe).......... 30,000 230,675
London Pacific Group Ltd. ADR
(Financial-Diversified)........ 3,000 37,875
Rolfe & Nolan PLC
(Computer-Software)............ 100,000 474,438
Shire Pharmaceuticals Group PLC
(Drugs-Major Pharmaceuticals)
(b)............................ 4,000 96,000
Virgin Express Holdings PLC
Sponsored IDR
(Transportation-Airline) (b)... 4,300 168,863
Wilmington Group PLC (Media-
Periodicals)................... 250,000 750,511
-----------
4,985,151
-----------
TOTAL FOREIGN COMMON STOCKS
(Identified cost $20,313,712)................ 18,968,358
-----------
U.S. COMMON STOCKS--36.2%
AGRICULTURAL OPERATIONS--0.4%
AgriBioTech, Inc. (b)............ 6,500 117,000
-----------
BANKS-WEST--1.4%
Charter One Financial, Inc....... 4,000 130,250
Washington Federal, Inc.......... 5,000 130,000
Zions Bancorporation............. 3,000 147,000
-----------
407,250
-----------
BUILDING-MOBILE/MANUFACTURING & RV--0.2%
Fleetwood Enterprises, Inc....... 1,500 53,531
-----------
BUILDING-PAINT & ALLIED PRODUCTS--0.5%
Sherwin-Williams Co. (The)....... 5,000 159,375
-----------
BUILDING-RESIDENTIAL/COMMERCIAL--0.6%
Lennar Corp...................... 4,000 110,500
Toll Brothers, Inc. (b).......... 3,000 78,562
-----------
189,062
-----------
COMMERCIAL-LEASING COMPANIES--0.2%
First Sierra Financial, Inc.
(b)............................ 2,100 64,050
-----------
</TABLE>
See Notes to Financial Statements 15
<PAGE>
GLOBAL SMALL CAP SERIES
- - ------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
COMMERCIAL SERVICES-ADVERTISING--0.5%
Catalina Marketing Corp. (b)..... 2,000 $ 98,750
Omnicom Group, Inc............... 1,000 52,500
-----------
151,250
-----------
COMMERCIAL SERVICES-MISCELLANEOUS--1.4%
Professional Detailing, Inc.
(b)............................ 500 11,500
Staff Leasing, Inc. (b).......... 6,500 151,937
Staffmark, Inc. (b).............. 6,500 173,875
United Road Services, Inc. (b)... 3,000 66,750
-----------
404,062
-----------
COMMERCIAL SERVICES-PRINTING--1.0%
Valassis Communications, Inc.
(b)............................ 2,000 75,875
World Color Press, Inc. (b)...... 6,500 221,406
-----------
297,281
-----------
COMPUTER-INTEGRATED SYSTEMS--0.2%
Diebold, Inc..................... 2,500 63,125
-----------
COMPUTER-LOCAL NETWORKS--0.1%
MMC Networks, Inc. (b)........... 1,200 25,800
-----------
COMPUTER-SERVICES--0.9%
Syntel, Inc...................... 6,700 164,150
VeriSign, Inc. (b)............... 3,000 93,000
-----------
257,150
-----------
COMPUTER-SOFTWARE--3.7%
Black Box Corp. (b).............. 3,800 122,312
ISS Group, Inc. (b).............. 7,500 348,750
Manugistics Group, Inc. (b)...... 2,500 54,375
Open Market, Inc. (b)............ 5,000 79,375
Sapient Corp. ................... 3,000 137,250
Verio, Inc. (b).................. 13,000 367,250
-----------
1,109,312
-----------
DIVERSIFIED OPERATIONS--0.1%
Furon Co......................... 2,000 35,500
-----------
ELECTRIC-LASER SYSTEMS/COMPONENT--0.3%
Uniphase Corp.................... 1,500 75,000
-----------
ELECTRICAL-EQUIPMENT--0.2%
AFC Cable Systems, Inc. (b)...... 2,000 63,750
-----------
ELECTRONIC-PARTS DISTRIBUTORS--0.6%
Oak Industries, Inc. (b)......... 5,000 185,625
-----------
FINANCE-INVESTMENT BANKERS--0.9%
Donaldson, Lufkin & Jenrette,
Inc............................ 3,500 184,625
Jefferies Group, Inc............. 2,000 88,000
-----------
272,625
-----------
FINANCE-MORTGAGE & RELATED SERVICES--0.9%
AMRESCO, Inc. (b)................ 2,500 71,406
New Century Financial Corp.
(b)............................ 17,000 192,312
-----------
263,718
-----------
FINANCIAL SERVICES-MISCELLANEOUS--1.0%
Enhance Financial Services Group,
Inc............................ 4,000 125,500
HealthCare Financial Partners,
Inc. (b)....................... 2,000 100,000
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
FINANCIAL SERVICES-MISCELLANEOUS--CONTINUED
Metris Companies, Inc............ 800 $ 59,200
-----------
284,700
-----------
INSURANCE-MULTI-LINE--0.3%
Horace Mann Educators Corp. ..... 3,000 93,750
-----------
INSURANCE-PROPERTY/CASUALTY/TITLE--0.1%
Selective Insurance Group, Inc.
(b)............................ 2,000 38,750
-----------
LEISURE-SERVICES--0.1%
ResortQuest International, Inc.
(b)............................ 1,200 18,825
-----------
MEDIA-CABLE TV--1.0%
TV Filme, Inc. (b)............... 8,000 27,000
USA Networks, Inc................ 6,000 175,500
Westwood One, Inc. (b)........... 4,000 100,000
-----------
302,500
-----------
MEDICAL-BIOMED/GENETICS--1.4%
Aviron (b)....................... 5,000 149,375
Cell Genesys, Inc. (b)........... 3,000 20,250
ICOS Corp. (b)................... 1,000 23,500
Immunex Corp. (b)................ 3,000 212,250
-----------
405,375
-----------
MEDICAL-DRUG/DIVERSIFIED--0.9%
ALZA Corp........................ 4,000 155,500
Algos Pharmaceutical Corp. (b)... 2,500 83,125
PharMerica, Inc. (b)............. 4,000 26,125
-----------
264,750
-----------
MEDICAL-ETHICAL DRUGS--0.4%
Coulter Pharmaceutical, Inc.
(b)............................ 5,000 130,625
-----------
MEDICAL-GENERIC DRUGS--0.3%
Schein Pharmaceutical, Inc.
(b)............................ 3,000 91,500
-----------
MEDICAL-HOSPITALS--0.1%
Province Healthcare Co. (b)...... 1,000 27,750
-----------
MEDICAL-INSTRUMENTS--0.3%
IGEN International, Inc. (b)..... 2,500 93,750
-----------
MEDICAL-NURSING HOMES--0.1%
Sun Healthcare Group, Inc. (b)... 3,000 43,875
-----------
MEDICAL-PRODUCTS--0.8%
ALARIS Medical, Inc. (b)......... 15,000 75,937
Safeskin Corp.................... 4,000 150,250
-----------
226,187
-----------
POLLUTION CONTROL-SERVICES--0.2%
North American Scientific,
Inc............................ 4,450 58,963
-----------
REAL ESTATE OPERATIONS--0.6%
Chicago Title Corp............... 4,000 187,000
-----------
RETAIL-APPAREL/SHOE--1.8%
AnnTaylor Stores Corp. (b)....... 4,000 84,250
Buckle, Inc. (The)............... 2,250 54,281
Genesco, Inc. (b)................ 6,000 65,250
Goody's Family Clothing, Inc.
(b)............................ 3,000 77,625
</TABLE>
16 See Notes to Financial Statements
<PAGE>
GLOBAL SMALL CAP SERIES
- - ------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
RETAIL-APPAREL/SHOE--CONTINUED
Pacific Sunwear of California,
Inc............................ 3,000 $ 88,500
Ross Stores, Inc................. 2,000 84,125
Talbots, Inc. (The).............. 3,500 81,813
-----------
535,844
-----------
RETAIL-DISCOUNT & VARIETY--0.2%
Ames Department Stores, Inc.
(b)............................ 3,000 64,125
-----------
RETAIL-HOME FURNISHINGS--0.7%
Ethan Allen Interiors, Inc. ..... 2,000 82,625
Linens 'n Things, Inc............ 5,000 140,625
-----------
223,250
-----------
RETAIL-MISCELLANEOUS/DIVERSIFIED--1.7%
Best Buy Co., Inc. (b)........... 4,500 210,375
Circuit City Stores-Circuit City
Group.......................... 4,000 207,000
Trans World Entertainment Corp.
(b)............................ 2,000 78,750
-----------
496,125
-----------
RETAIL/WHOLESALE-BUILDING PRODUCTS--0.2%
HomeBase, Inc. (b)............... 8,000 62,000
-----------
RETAIL/WHOLESALE-COMPUTERS--0.3%
Ingram Micro, Inc., Class A
(b)............................ 2,000 93,250
-----------
RETAIL/WHOLESALE-JEWELRY--0.3%
Claire's Stores, Inc............. 5,000 104,375
-----------
TELECOMMUNICATIONS-CELLULAR--0.2%
Iridium World Communications Ltd.
Class A (b).................... 1,000 43,500
-----------
TELECOMMUNICATIONS-EQUIPMENT--2.9%
Antech Corp. (b)................. 10,000 222,500
General Instrument Corp. (b)..... 9,500 257,688
L-3 Communications Corp.......... 5,000 172,813
Scientific Atlanta, Inc.......... 9,000 216,563
-----------
869,564
-----------
TELECOMMUNICATIONS-SERVICES--1.7%
ITC Deltacom, Inc................ 6,000 286,500
Primus Telecommunications Group,
Inc. (b)....................... 2,000 40,250
Star Telecommunications, Inc.
(b)............................ 10,000 183,750
-----------
510,500
-----------
TEXTILE-APPAREL MANUFACTURING--0.7%
Donna Karan International, Inc.
(b)............................ 5,500 75,281
Supreme International Corp.
(b)............................ 4,000 70,500
Tandy Brand Accessories, Inc.
(b)............................ 3,000 55,125
-----------
200,906
-----------
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
TRANSPORTATION-AIRLINES--1.9%
Alaska Air Group, Inc. (b)....... 3,000 $ 125,625
America West Holding Corp. Class
B (b).......................... 5,000 120,313
COMAIR Holdings, Inc............. 1,500 47,344
Mesaba Holdings, Inc............. 4,000 94,000
SkyWest, Inc..................... 4,000 108,000
U.S. Airways Group, Inc. (b)..... 1,000 75,000
-----------
570,282
-----------
TRANSPORTATION-TRUCK--0.2%
Rent Way, Inc. (b)............... 2,500 68,438
-----------
TRUCKS & PARTS-HEAVY DUTY--0.1%
Rush Enterprises, Inc. (b)....... 4,000 38,750
-----------
UTILITY-ELECTRIC POWER--1.6%
Central Maine Power Co........... 3,500 66,281
Montana Power Co................. 2,000 70,125
Northeast Utilities, Inc. (b).... 9,000 137,250
Pinnacle West Capital Corp....... 3,000 128,250
Rochester Gas & Electric Corp.... 2,300 69,288
-----------
471,194
-----------
TOTAL U.S. COMMON STOCKS
(Identified cost $11,013,591)................ 10,814,869
-----------
TOTAL LONG-TERM INVESTMENTS--99.6%
(Identified cost $31,327,303)................ 29,783,227
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
VALUE
(000)
----------
<S> <C> <C>
SHORT-TERM OBLIGATIONS--1.3%
Salomon Brothers, repurchase
agreement, 5.48%, dated 7/31/98
due 8/3/98, repurchase price
$400,183, collateralized by
U.S. Treasury Bill 5.60%,
1/7/99, market value $408,637.. $ 400 400,000
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Identified cost $400,000)................... 400,000
-----------
TOTAL INVESTMENTS--100.9%
(Identified cost $31,727,303)................ 30,183,227(a)
Cash and receivables, less
liabilities--(0.9%)........................ (278,453)
-----------
NET ASSETS--100.0%............................. $29,904,774
-----------
-----------
</TABLE>
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities is comprised of gross appreciation of $3,950,703 and gross
depreciation of $5,681,208 for federal income tax purposes. At July 31,
1998, the aggregate cost of securities for federal income tax purposes was
$31,913,732.
(b) Non-income producing.
See Notes to Financial Statements 17
<PAGE>
GLOBAL SMALL CAP SERIES
- - ------------------------------------------------------
INDUSTRY DIVERSIFICATION
AS A PERCENTAGE OF TOTAL VALUE OF LONG-TERM INVESTMENTS
(UNAUDITED)
<TABLE>
<S> <C>
Aerospace/Defense Equipment...................................... 1.0%
Agricultural Operations.......................................... 0.4
Auto/Truck-Original Equipment.................................... 2.1
Banks-Foreign.................................................... 2.4
Banks-Money Center............................................... 1.3
Banks-West....................................................... 1.4
Beverages-Alcoholic.............................................. 0.7
Building-Mobile/Manufacturing & RV............................... 0.2
Building-Paint & Allied Products................................. 0.5
Building-Residential/Commercial.................................. 0.6
Chemicals-Specialty.............................................. 0.1
Commercial-Leasing Companies..................................... 1.1
Commercial Services-Advertising.................................. 1.4
Commercial Services-Engineering/R&D.............................. 1.2
Commercial Services-Miscellaneous................................ 3.0
Commercial Services-Printing..................................... 1.0
Commercial Services-Security/Safety.............................. 0.9
Computer-Integrated Systems...................................... 0.2
Computer-Local Networks.......................................... 0.1
Computer-Services................................................ 0.9
Computer-Software................................................ 10.4
Containers-Paper/Plastic......................................... 0.5
Diversified Operations........................................... 1.3
Drugs-Major Pharmaceuticals...................................... 0.3
Electric Products-Miscellaneous.................................. 1.4
Electric-Laser Systems/Component................................. 0.3
Electric-Miscellaneous Components................................ 0.6
Electric-Semiconductor Equipment................................. 0.6
Electric-Semiconductor Manufacturing............................. 0.9
Electrical-Equipment............................................. 0.2
Electronic-Parts Distributors.................................... 1.6
Finance-Investment Bankers....................................... 5.4
Finance-Investment Management.................................... 2.1
Finance-Mortgage & Related Services.............................. 0.9
Financial-Diversified............................................ 0.1
Financial Services-Miscellaneous................................. 2.6
Industrial....................................................... 1.5
Insurance-Life................................................... 1.2
Insurance-Multi-Line............................................. 2.4
Insurance-Property/Casualty/Title................................ 0.1
Leisure-Movies & Related......................................... 0.5
Leisure-Services................................................. 0.1%
Machinery-General Industrial..................................... 1.3
Media-Cable TV................................................... 1.0
Media-Newspapers................................................. 1.0
Media-Periodicals................................................ 2.5
Medical-Biomed/Genetics.......................................... 1.4
Medical-Drug/Diversified......................................... 0.9
Medical-Ethical Drugs............................................ 0.4
Medical-Generic Drugs............................................ 0.3
Medical-Hospitals................................................ 0.1
Medical-Instruments.............................................. 0.3
Medical-Nursing Homes............................................ 0.1
Medical-Outpatient/Home Care..................................... 0.7
Medical-Products................................................. 1.5
Medical/Dental-Supplies.......................................... 1.8
Metal Processing & Fabrication................................... 1.6
Oil & Gas-Drilling & Equipment................................... 0.2
Pollution Control-Equipment...................................... 2.0
Pollution Control-Services....................................... 0.2
Real Estate Development.......................................... 0.6
Real Estate Operations........................................... 0.6
Retail-Apparel/Shoe.............................................. 3.0
Retail-Consumer Electric......................................... 0.2
Retail-Department Stores......................................... 0.6
Retail-Discount & Variety........................................ 0.2
Retail-Home Furnishings.......................................... 0.7
Retail-Miscellaneous/Diversified................................. 1.7
Retail-Supermarkets.............................................. 1.9
Retail/Wholesale-Building Products............................... 0.2
Retail/Wholesale Computers....................................... 0.3
Retail/Wholesale-Jewelry......................................... 0.4
Telecommunications-Cellular...................................... 2.3
Telecommunications-Equipment..................................... 6.2
Telecommunications-Services...................................... 1.7
Textile-Apparel Manufacturing.................................... 0.7
Tobacco.......................................................... 0.9
Transportation-Airline........................................... 2.5
Transportation-Truck............................................. 0.2
Trucks & Parts-Heavy Duty........................................ 0.1
Utility-Electric Power........................................... 2.2
------
100.0%
------
------
</TABLE>
18 See Notes to Financial Statements
<PAGE>
GLOBAL SMALL CAP SERIES
- - ------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $31,727,303) $ 30,183,227
Cash 104,086
Foreign currency at value
(Identified cost $495,938) 502,765
Receivables
Investment securities sold 187,907
Fund shares sold 12,384
Dividends and interest 26,983
Tax reclaim 13,995
-------------
Total assets 31,031,347
-------------
LIABILITIES
Payables
Investment securities purchased 882,291
Fund shares repurchased 91,782
Advisory fee 20,653
Distribution fee 15,126
Transfer agent fee 10,971
Administration fee 4,051
Financial agent fee 1,694
Trustees' fee 3,636
Accrued expenses 96,369
-------------
Total liabilities 1,126,573
-------------
NET ASSETS $ 29,904,774
-------------
-------------
NET ASSETS CONSIST OF:
Capital paid in on shares of beneficial interest $ 29,947,244
Undistributed net investment loss (163,858)
Accumulated net realized gain 1,666,152
Net unrealized depreciation (1,544,764)
-------------
NET ASSETS $ 29,904,774
-------------
-------------
CLASS A
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $17,781,425) 1,759,491
Net asset value per share $10.11
Offering price per share
$10.11/(1-4.75%) $10.61
CLASS B
Shares of beneficial interest outstanding, $1 par value,
unlimited authorization (Net Assets $12,123,349) 1,212,849
Net asset value and offering price per share $10.00
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 417,961
Interest 135,085
Foreign taxes withheld (38,868)
-----------
Total investment income 514,178
-----------
EXPENSES
Investment advisory fee 301,367
Distribution fee--Class A 50,272
Distribution fee--Class B 153,367
Financial agent fee 76,730
Administration fee 53,182
Transfer agent 95,186
Custodian 80,821
Registration 40,650
Printing 31,574
Professional 29,621
Trustees 24,171
Miscellaneous 19,900
-----------
Total expenses 956,841
Less expenses borne by investment adviser (97,206)
-----------
Net expenses 859,635
-----------
NET INVESTMENT LOSS (345,457)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities 6,457,288
Net realized loss on foreign currency transactions (5,200)
Net change in unrealized appreciation (depreciation) on investments (5,763,402)
Net change in unrealized appreciation (depreciation) on foreign
currency and foreign currency transactions (993)
-----------
NET GAIN ON INVESTMENTS 687,693
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 342,236
-----------
-----------
</TABLE>
See Notes to Financial Statements 19
<PAGE>
GLOBAL SMALL CAP SERIES
- - ------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FROM
INCEPTION
SEPTEMBER 4,
1996
YEAR ENDED TO JULY 31,
JULY 31, 1998 1997
------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment loss $ (345,457) $ (172,876)
Net realized gain (loss) 6,452,088 (1,105,748)
Net change in unrealized appreciation
(depreciation) (5,764,395) 4,219,631
------------- -------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 342,236 2,941,007
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net realized gains--Class A (1,634,436) --
Net realized gains--Class B (1,345,539) --
In excess of net investment income--Class A (267,897) --
In excess of net investment income--Class B (154,696) --
------------- -------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (3,402,568) --
------------- -------------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (303,616 and
2,544,464 shares, respectively) 3,167,670 26,115,134
Net asset value of shares issued from
reinvestment of distributions (202,252 and
0 shares, respectively) 1,806,110 --
Cost of shares repurchased (900,403 and 390,438
shares, respectively) (9,370,519) (4,060,236)
------------- -------------
Total (4,396,739) 22,054,898
------------- -------------
CLASS B
Proceeds from sales of shares (162,943 and
1,768,033 shares, respectively) 1,661,922 18,246,161
Net asset value of shares issued from
reinvestment of distributions (138,880 and
0 shares, respectively) 1,231,865 --
Cost of shares repurchased (693,656 and 163,351
shares, respectively) (7,063,874) (1,710,134)
------------- -------------
Total (4,170,087) 16,536,027
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE
TRANSACTIONS (8,566,826) 38,590,925
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS (11,627,158) 41,531,932
NET ASSETS
Beginning of period 41,531,932 0
------------- -------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET
INVESTMENT LOSS OF ($163,858) AND ($162,808),
RESPECTIVELY) $ 29,904,774 $ 41,531,932
------------- -------------
------------- -------------
</TABLE>
20 See Notes to Financial Statements
<PAGE>
GLOBAL SMALL CAP SERIES
- - ------------------------------------------------------
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------- -------------------------
FROM FROM
INCEPTION YEAR INCEPTION
YEAR ENDED 9/4/96 TO ENDED 9/4/96 TO
7/31/98 7/31/97 7/31/98 7/31/97
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.08 $ 10.00 $ 11.00 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.07)(4)(5) (0.03)(4)(5) (0.14)(4)(6) (0.10)(4)(6)
Net realized and unrealized gain (loss) 0.14 1.11 0.14 1.10
----------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.07 1.08 -- 1.00
----------- --------- --------- ---------
LESS DISTRIBUTIONS
Dividends from net realized gains (0.89) -- (0.89) --
In excess of net investment income (0.15) -- (0.11) --
----------- --------- --------- ---------
TOTAL DISTRIBUTIONS (1.04) -- (1.00) --
----------- --------- --------- ---------
Change in net asset value (0.97) 1.08 (1.00) 1.00
----------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $10.11 $ 11.08 $ 10.00 $11.00
----------- --------- --------- ---------
----------- --------- --------- ---------
Total return(1) 1.86% 10.80%(3) 1.12% 10.00%(3)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $17,781 $23,874 $12,123 $17,658
RATIO TO AVERAGE NET ASSETS OF:
Operating expenses 2.10% 2.10%(2) 2.85% 2.85%(2)
Net investment income (loss) (0.65)% (0.32)%(2) (1.40)% (1.07)%(2)
Portfolio turnover 212% 162%(3) 212% 162%(3)
</TABLE>
(1) Maximum sales charges are not reflected in the total return calculation.
(2) Annualized
(3) Not annualized
(4) Computed using average shares outstanding.
(5) Includes reimbursement of operating expenses by investment adviser of $0.03
and $0.05, respectively.
(6) Includes reimbursement of operating expenses by investment adviser of $0.03
and $0.05, respectively.
See Notes to Financial Statements 21
<PAGE>
PHOENIX-ABERDEEN SERIES FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
The Phoenix-Aberdeen Series Fund (the "Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company whose shares
are offered in two separate Series. Each Series has distinct investment
objectives.
The New Asia Series seeks as its investment objective long-term capital
appreciation through investing in equity securities of issuers located in at
least three different countries throughout Asia other than Japan. The Global
Small Cap Series seeks as its investment objective long-term capital
appreciation through investing in a globally diversified portfolio of equity
securities of small and medium sized companies.
Each Series offers both Class A and Class B shares. 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. Both classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that each class bears different distribution expenses and has
exclusive voting rights with respect to its distribution plan. Income and
expenses of each Series are borne pro rata by the holders of both classes of
shares, except that each class bears distribution expenses unique 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 last bid price. Debt securities are valued on the basis of
broker quotations or valuations provided by a pricing service which utilizes
information with respect to recent sales, market transactions in comparable
securities, quotations from dealers, and various relationships between
securities in determining value. 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 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 Trust is notified. Interest income is recorded on the accrual
basis. Realized gains and losses are determined on the identified cost basis.
C. INCOME TAXES:
Each of the Series is treated as a separate taxable entity. It is the policy
of each Series in the Trust to comply with the requirements of the Internal
Revenue Code (the "Code") applicable to regulated investment companies, and to
distribute all of its taxable and tax-exempt income to its shareholders. In
addition, each Series 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 Series 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, foreign
currency gain/loss, Passive Foreign Investment Companies, 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 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 Series 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
22
<PAGE>
PHOENIX-ABERDEEN SERIES FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998 (CONTINUED)
value is recorded by each Series as an unrealized gain (or loss). When the
contract is closed or offset with the same counterparty, the Series records a
realized gain (or loss) equal to the change in the value of the contract when it
was opened and the value at the time it was closed or offset.
G. EXPENSES:
Expenses incurred by the Trust with respect to more than one Series are
allocated in proportion to the net assets of each Series, except where
allocation of direct expense to each Series or an alternative allocation method
can be more fairly made.
H. REPURCHASE AGREEMENTS:
A repurchase agreement is a transaction where a Series acquires a security for
cash and obtains a simultaneous commitment from the seller to repurchase the
security at an agreed upon price and date. The Series, 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 Series 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-Aberdeen International Advisors, LLC ("PAIA" or the "Adviser") serves
as the investment adviser to the Trust. PAIA is a joint venture between PM
Holdings, Inc., a direct subsidiary of Phoenix Home Life Mutual Insurance
Company ("PHL"), and Aberdeen Fund Managers, Inc. ("Aberdeen"), a wholly-owned
subsidiary of Aberdeen Asset Management PLC (previously known as Aberdeen Trust
PLC).
PAIA is entitled to a fee at an annual rate of 0.85% of the average daily net
assets of each Series. Pursuant to sub-advisory agreements, the Adviser
delegates certain investment decisions and functions to other entities. Phoenix
Investment Counsel, Inc. ("PIC"), an indirect, majority-owned subsidiary of PHL,
receives a fee at an annual rate of 0.15% of the average aggregate daily net
assets of each Series from PAIA for providing cash management and other
services, as needed. In addition, PAIA allocates certain assets of the Global
Small Cap Series for management by PIC. PAIA pays a sub-advisory fee to PIC at
an annual rate of 0.40% of the average daily net assets of the Global Small Cap
Series so allocated. PAIA also pays a sub-advisory fee to Aberdeen at an annual
rate of 0.40% of the average net assets of the New Asia Series and 0.40% of the
average net assets of the Global Small Cap Series allocated to Aberdeen by the
Adviser for management.
The Adviser has agreed to reimburse the New Asia Series and the Global Small
Cap Series to the extent that other operating expenses (excluding advisory fees,
distribution fees, interest, taxes, brokerage fees and commissions and
extraordinary expenses) exceed 1.00% of the average daily net assets for Class A
and Class B shares for each Series.
Phoenix Equity Planning Corporation ("PEPCO" or the "Distributor"), an
indirect majority-owned subsidiary of PHL, which serves as the national
distributor of the Trust's shares, has advised the Trust that it retained net
selling commissions of $6,512 for Class A shares and deferred sales charges of
$203,517 for Class B shares for the year ended July 31, 1998. In addition, each
Series pays PEPCO a distribution fee at an annual rate of 0.25% for Class A
shares and 1.00% for Class B shares applied to the average daily net assets of
each Series. The Distributor has advised the Trust that of the total amount
expensed for the year ended July 31, 1998, $190,472 was retained by the
Distributor, $62,527 was paid out to unaffiliated participants and $11,119 was
paid to W.S. Griffith, an indirect subsidiary of PHL.
As Financial Agent to the Trust, PEPCO received a fee for bookkeeping and
pricing services through May 31, 1998, at an annual rate of 0.05% of average
daily net assets up to $100 million, 0.04% of average daily net assets of $100
million to $300 million, 0.03% of average daily net assets of $300 million
through $500 million, and 0.015% of average daily net assets greater than $500
million; a minimum fee applied. Effective June 1, 1998, 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 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 minimums and waivers may apply. As Administrator for the Trust,
Phoenix Investment Partners Ltd., an indirect, majority-owned subsidiary of PHL,
receives a fee at an annual rate of 0.15% of the average daily net assets of
each Series for administrative services.
PEPCO serves as the Trust's Transfer Agent with State Street Bank and Trust
Company as sub-transfer agent. For the year ended July 31, 1998, transfer agent
fees were $154,379 of which PEPCO retained $19,675 which is net of fees paid to
State Street.
23
<PAGE>
PHOENIX-ABERDEEN SERIES FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998 (CONTINUED)
At July 31, 1998, PHL and its affiliates held Trust shares which aggregated
the following:
<TABLE>
<CAPTION>
AGGREGATE
NET ASSET
SHARES VALUE
--------- --------------
<S> <C> <C>
New Asia Series Class A........................... 305,646 $1,665,771
New Asia Series Class B........................... 10,470 56,538
Global Small Cap Series Class A................... 547,011 5,530,281
Global Small Cap Series Class B................... 11,123 111,230
</TABLE>
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities during the year ended July 31, 1998
(excluding U.S. Government and agency securities, short-term securities, and
forward currency contracts) aggregated the following:
<TABLE>
<CAPTION>
PURCHASES SALES
------------- -------------
<S> <C> <C>
New Asia Series................................... $ 5,195,927 $ 6,382,710
Global Small Cap Series........................... 71,020,327 80,850,263
</TABLE>
There were no purchases or sales of long-term U.S. Government and agency
securities during the year ended July 31, 1998.
4. MARKET 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 Series' ability to
repatriate such amounts.
5. CAPITAL LOSS CARRYOVERS
At July 31, 1998, the New Asia Series had a capital loss carryover of
$100,079, expiring in 2006, which may be used to offset future capital gains.
The Global Small Cap Series was able to utilize losses deferred in the prior
year against current year capital gains in the amount of $166,196.
Under current tax law, foreign currency and capital losses realized after
October 31, 1997 may be deferred and treated as occurring on the first day of
the following fiscal year. For the year ended July 31, 1998, the following
foreign currency and capital losses were deferred:
<TABLE>
<CAPTION>
FOREIGN
CURRENCY CAPITAL
----------- ---------
<S> <C> <C>
New Asia Series......................... $ 13,207 $2,689,202
Global Small Cap Series................. -- 27,411
</TABLE>
For the year ended July 31, 1998, prior year losses deferred were utilized as
follows: New Asia Series $934 and Global Small Cap Series $777,042.
6. RECLASS OF CAPITAL ACCOUNTS
In accordance with accounting pronouncements, the Series of the Trust have
recorded several reclassifications in the capital accounts. These
reclassifications have no impact on the net asset value of the Series 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 July
31, 1998, the Series recorded the following reclassifications to increase
(decrease) the accounts listed below:
<TABLE>
<CAPTION>
UNDISTRIBUTED CAPITAL PAID
NET ACCUMULATED IN ON SHARES
INVESTMENT NET REALIZED OF BENEFICIAL
INCOME (LOSS) GAIN (LOSS) INTEREST
------------- ------------ -------------
<S> <C> <C> <C>
New Asia Series......................... $ 261,568 $ (255,968) $ (5,600)
Global Small Cap Series................. 767,000 (761,170) (5,830)
</TABLE>
This report is not authorized for distribution to prospective investors in the
Phoenix-Aberdeen Series Fund unless preceded or accompanied by an effective
prospectus which includes information concerning the sales charge, the Fund's
record and other pertinent information.
24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGO]
To the Trustees and Shareholders of
Phoenix-Aberdeen Series Fund
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the New Asia Series and the Global
Small Cap Series (constituting the Phoenix-Aberdeen Series, hereinafter referred
to as the "Trust") at July 31, 1998, 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 Trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with 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 July 31, 1998 by correspondence with the custodian
and brokers provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
September 16, 1998
<PAGE>
PHOENIX ABERDEEN SERIES FUND
PART C--OTHER INFORMATION
Item 24. Financial Statements and Exhibits:
(a) Financial Statements:
Included in Part A: Financial Highlights
Included in Part B: Financial Statements and Notes thereto are included
in the Annual Report to Shareholders dated July 31,
1998, incorporated by reference.
(b) Exhibits:
<TABLE>
<S> <C>
1.1 Declaration of Trust of the Registrant filed via Edgar with the Registration Statement on June 24, 1996 and
incorporated herein by reference.
1.2 Amendment to Declaration of Trust filed via Edgar with Pre-Effective Amendment No. 1 on
August 27, 1996 and incorporated herein by reference.
2. None
3. None
4. Reference is made to Article IV, Section 4.1 of Registrant's Declaration of Trust referred to in Exhibit 1.1.
5.1 Investment Advisory Agreement between Registrant and Phoenix-Aberdeen International Advisors, LLC
filed via Edgar with the Registration Statement on June 24, 1996 and incorporated herein by reference.
5.2 Sub-Investment Advisory Agreement between Phoenix-Aberdeen International Advisors, LLC and Phoenix
Investment Counsel, Inc. filed via Edgar with Pre-Effective Amendment No. 1 on August 27, 1996 and
incorporated herein by reference.
5.3 Sub-Investment Advisory Agreement between Phoenix-Aberdeen International Advisors, LLC and
Aberdeen Fund Managers, Inc. filed via Edgar with Pre-Effective Amendment No. 1 on August 27, 1996
and incorporated herein by reference.
6.1 Underwriting Agreement between Registrant and Phoenix Equity Planning Corporation, dated November
19, 1997, filed via EDGAR with Post-Effective Amendment No. 2 filed on November 26, 1997 and
incorporated herein by reference.
6.2 Form of Sales Agreement between Phoenix Equity Planning Corporation and dealers, filed via EDGAR
with Post-Effective Amendment No. 2 filed on November 26, 1997 and incorporated herein by reference.
6.3 Form of Supplement to Phoenix Family of Funds Sales Agreement filed via EDGAR with Post-Effective
Amendment No. 2 filed on November 26, 1997 and incorporated herein by reference.
6.4 Form of Financial Institution Sales Contract for the Phoenix Family of Funds filed via EDGAR with Post-
Effective Amendment No. 2 filed on November 26, 1997 and incorporated herein by reference.
7. None
8. Custodian Agreement between Registrant and Brown Brothers Harriman & Co. filed via Edgar with
Pre-Effective Amendment No. 1 on August 27, 1996 and incorporated herein by reference.
9.1 Administration Agreement between Registrant and Phoenix Investment Partners Ltd., formerly Phoenix
Duff & Phelps Corporation, filed via Edgar with Pre-Effective Amendment No. 1 on August 27, 1996 and
incorporated herein by reference.
9.2 Financial Agent Agreement between Registrant and Phoenix Equity Planning Corporation dated December
11, 1996 filed via Edgar with Post-Effective Amendment No. 1 on March 31, 1997 and incorporated herein
by reference.
9.3 Transfer Agency and Service Agreement between Registrant and Phoenix Equity Planning Corporation filed
via Edgar with the Registration Statement on June 24, 1996 and incorporated herein by reference.
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C>
9.4 Sub-Transfer Agent Agreement between Phoenix Equity Planning Corporation and State Street Bank and
Trust Company filed via EDGAR with Post-Effective Amendment No. 2 filed on November 26, 1997 and
incorporated herein by reference.
9.5* First Amendment to Financial Agent Agreement dated March 23, 1998 filed via Edgar with Post-Effective
Amendment No. 2 filed on November 26, 1997 filed via Edgar herewith.
10. Opinion of Counsel filed via Edgar with Pre-Effective Amendment No. 2 on September 4, 1996 and
incorporated herein by reference.
11.* Consent of Accountants filed via Edgar herewith.
12. None
13. Initial Capitalization Agreement filed via Edgar with Pre-Effective Amendment No. 1 on August 27, 1996
and incorporated herein by reference.
14. None
15.1 Class A Shares Amended and Restated Distribution Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940, filed via EDGAR with Post-Effective Amendment No. 2 filed on November 26,
1997 and incorporated herein by reference.
15.2 Class B Shares Amended and Restated Distribution Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940, filed via EDGAR with Post-Effective Amendment No. 2 filed on November 26,
1997 and incorporated herein by reference.
16. Schedule for Computation of Performance Quotations filed via EDGAR with Post-Effective Amendment No.
2 filed on November 26, 1997 and incorporated herein by reference.
17.* Financial Data Schedule filed via Edgar herewith and reflected on Edgar as Exhibit 27.
18 Amended and Restated Rule 18f-3 Multi-Class Distribution Plan filed via EDGAR with Post-Effective
Amendment No. 2 filed on November 26, 1997 and incorporated herein by reference.
19. Powers of Attorney filed via Edgar with Pre-Effective Amendment No. 1 on August 27, 1996 and
incorporated herein by reference.
</TABLE>
- -----------
*Filed herewith.
Item 25. Persons Controlled by or under Common Control With Registrant.
As of the date hereof, to the best knowledge of the Registrant, no person
is directly or indirectly controlled by or under common control with the
Registrant.
Item 26. Number of Holders of Securities.
As of September 30, 1998:
<TABLE>
<CAPTION>
Number of
Title of Class Record-holders
- ------------------------------ ---------------
<S> <C>
New Asia Series
Class A Shares 1,192
Class B Shares 570
Global Small Cap Series
Class A Shares 1,568
Class B Shares 1,364
</TABLE>
Item 27. Indemnification.
Please see Article V of the Registrant's Declaration of Trust
(incorporated herein by reference). Registrant's trustees and officers are
covered by an Errors and Omissions Policy. The Investment Advisory Agreement
between the Registrant and its Adviser provides in relevant part that, in the
absence of willful malfeasance, bad faith, gross negligence or reckless
disregard of the obligations or duties under the Investment Advisory Agreement
on the part of the Adviser, the Adviser shall not be liable to the Registrant
or to any shareholder for any act or omission in the course of or connected in
any way with rendering services or for any losses that may be sustained in the
purchase, holding or sale of any security.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, directors, officers and controlling
persons of the Registrant and the investment advisers and distributor pursuant
to the foregoing provisions or
C-2
<PAGE>
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, director,
officer, or controlling person of the Registrant and the principal underwriter
in connection with the successful defense or any action, suit or proceeding) is
asserted against the Registrant by such trustee, director, officer or
controlling person or the Distributor in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
See "Management of the Fund" in the Prospectus for information regarding
the business of the Adviser. For information as to the business, profession,
vocation or employment of a substantial nature of directors and officers of the
Adviser, reference is made to the Adviser's current Form ADV (SEC File Nos.
801-52167) filed under the Investment Advisers Act of 1940, incorporated herein
by reference.
Item 29. Principal Underwriter.
(a) PEPCO also serves as the principal underwriter for the following other
investment companies:
Phoenix California Tax Exempt Bonds, Inc., Phoenix Duff & Phelps
Institutional Mutual Funds, Phoenix-Engemann Funds, Phoenix Equity Series Fund,
Phoenix Income and Growth Fund, Phoenix Investment Trust 97, Phoenix
Multi-Portfolio Fund, Phoenix Multi-Sector Fixed Income Fund, Inc., Phoenix
Multi-Sector Short Term Bond Fund, Phoenix-Seneca Funds, Phoenix Series Fund,
Phoenix Strategic Allocation Fund, Inc., Phoenix Strategic Equity Series Fund,
Phoenix Worldwide Opportunities Fund, 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 Position and Offices Position and Offices
Principal Address with Distributor with Registrant
----------------- ---------------- ---------------
<S> <C> <C>
Michael E. Haylon Director Executive Vice President
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
Philip R. McLoughlin Director and President Trustee and President
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
William R. Moyer Director, Senior Vice Vice President
100 Bright Meadow Blvd. President, Chief Financial
P.O. Box 2200 Officer and Treasurer
Enfield, CT 06083-2200
John F. Sharry Executive Vice President, Executive Vice President
56 Prospect Street Retail Distribution
P.O. Box 150480
Hartford, CT 06115-0480
Leonard J. Saltiel Managing Director, None
56 Prospect Street Operations and Service
P.O. Box 150480
Hartford, CT 06115-0480
G. Jeffrey Bohne Vice President, Mutual Fund Clerk and Secretary
101 Munson Street Customer Service
Greenfield, MA 01301
Nancy G. Curtiss Vice President and Treasurer, Treasurer
56 Prospect Street Fund Accounting
P.O. Box 150480
Hartford, CT 06115-0480
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
Name and Position and Offices Position and Offices
Principal Address with Distributor with Registrant
----------------- ---------------- ---------------
<S> <C> <C>
Thomas N. Steenburg Vice President, Counsel Assistant Secretary and
56 Prospect Street and Secretary Assistant Clerk
P.O. Box 150480
Hartford, CT 06115-0480
William E. Keen, III Assistant Vice President, Vice President
100 Bright Meadow Blvd. Mutual Fund Regulation
P.O. Box 2200
Enfield, CT 06083-2200
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 each 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 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by the
Registrant by Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder will be maintained at the offices of the Registrant located at 56
Prospect Street, Hartford, CT 06115, or its investment adviser,
Phoenix-Aberdeen International Advisors, LLC, One American Row, Hartford, CT
06102, or the custodian, Brown Brothers Harriman & Co., 40 Water Street,
Boston, MA 02109. All such accounts, books and other documents required to be
maintained by the principal underwriter will be maintained at Phoenix Equity
Planning Corporation, 100 Bright Meadow Boulevard, Enfield, Connecticut 06082.
Item 31. Management Services.
None.
Item 32. Undertakings.
(a) Registrant undertakes to furnish to each person to whom a prospectus
is delivered a copy of the Registrant's latest annual report to shareholders
upon request and without charge if the information called for by Item 5A of
Form N-1A is contained in such annual report.
(b) Registrant undertakes to provide the information specified pursuant to
Regulation S-K, Item 512 (Reg. S.229.512), as applicable, the terms of which
are incorporated herein by reference.
(c) Registrant undertakes to call a special meeting of shareholders for
the purpose of voting upon the question of removal of a trustee or trustees and
to assist in communications with other shareholders, as required by Section
16(c) of the 1940 Act, if requested to do so by holders of at least 10% of a
Portfolio's outstanding shares.
C-4
<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 of
the requirements for effectiveness of the Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Hartford and State of Connecticut on
the 20th day of November, 1998.
PHOENIX-ABERDEEN SERIES FUND
ATTEST: /s/ Thomas N. Steenburg By: /s/ Philip R. McLoughlin
----------------------- ------------------------
Thomas N. Steenburg Philip R. McLoughlin
Assistant Secretary President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities indicated, on this 20th day of November, 1997.
<TABLE>
<CAPTION>
Signature Title
- ---------------------------- -------------------------------
<S> <C>
Trustee
-------------------------
Robert Chesek*
Trustee
-------------------------
E. Virgil Conway*
/s/ Nancy G. Curtiss Treasurer (principal financial
------------------------- and accounting officer)
Nancy G. Curtiss
Trustee
-------------------------
Harry Dalzell-Payne*
Trustee
-------------------------
Francis E. Jeffries
Trustee
-------------------------
Leroy Keith, Jr.*
/s/ Philip R. McLoughlin President and Director
-------------------------
Philip R. McLoughlin
Trustee
-------------------------
Everett L. Morris
Trustee
-------------------------
James M. Oates*
Trustee
-------------------------
Calvin J. Pedersen
Trustee
-------------------------
Herbert Roth, Jr.*
Trustee
-------------------------
Richard E. Segerson*
Trustee
-------------------------
Lowell P. Weicker, Jr.*
</TABLE>
*By /s/ Philip R. McLoughlin
-------------------------
*Philip R. McLoughlin pursuant to
powers of attorney previously filed.
S-1(c)
FIRST AMENDMENT TO FINANCIAL AGENT AGREEMENT
THIS AMENDMENT made effective as of the 27th day of February, 1998 amends that
certain Financial Agent Agreement dated December 11, 1996 by and between Phoenix
Equity Planning Corporation and Phoenix-Aberdeen Series Fund (the "Agreement")
as hereinbelow provided.
W I T N E S S E T H :
WHEREAS, the parties hereto wish to amend the Agreement to eliminate the
provision that states that Financial Agent is not responsible for the acts or
omissions of any agent appointed by it:
NOW, THEREFORE, in consideration of the foregoing premise, the first
sentence of Paragraph 4 of the Agreement is amended to read as follows:
"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."
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their duly authorized officers on this 23rd day of March, 1998.
PHOENIX-ABERDEEN SERIES FUND
By: /s/ Michael E. Haylon
----------------------------
Michael E. Haylon
Executive Vice President
PHOENIX EQUITY PLANNING CORPORATION
By: /s/ Michael E. Haylon
----------------------------
Philip R. McLoughlin
President
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 3 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated September 16, 1998, relating to the financial
statements and financial highlights appearing in the July 31, 1998 Annual
Report to Shareholders of the Phoenix-Aberdeen Series Fund, which are also
incorporated by reference into the Registration Statement. We also consent to
the reference to us under the heading "Financial Highlights" in the Prospectus
and under the heading "Other Information - Independent Accountants" in the
Statement of Additional Information.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
November 20, 1998
<TABLE> <S> <C>
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<CIK> 0001015429
<NAME> PHOENIX-ABERDEEN SERIES FUND
<SERIES>
<NUMBER> 011
<NAME> PHOENIX-ABERDEEN NEW ASIA FUND - CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 14201
<INVESTMENTS-AT-VALUE> 8987
<RECEIVABLES> 106
<ASSETS-OTHER> 241
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9334
<PAYABLE-FOR-SECURITIES> 125
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 101
<TOTAL-LIABILITIES> 226
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17184
<SHARES-COMMON-STOCK> 1167
<SHARES-COMMON-PRIOR> 1279
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (72)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2789)
<ACCUM-APPREC-OR-DEPREC> (5215)
<NET-ASSETS> 9108
<DIVIDEND-INCOME> 343
<INTEREST-INCOME> 33
<OTHER-INCOME> 0
<EXPENSES-NET> (291)
<NET-INVESTMENT-INCOME> 85
<REALIZED-GAINS-CURRENT> (2540)
<APPREC-INCREASE-CURRENT> (5878)
<NET-CHANGE-FROM-OPS> (8333)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (359)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 569
<NUMBER-OF-SHARES-REDEEMED> (735)
<SHARES-REINVESTED> 54
<NET-CHANGE-IN-ASSETS> (7003)
<ACCUMULATED-NII-PRIOR> 72
<ACCUMULATED-GAINS-PRIOR> 6
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 106
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 471
<AVERAGE-NET-ASSETS> 12588
<PER-SHARE-NAV-BEGIN> 10.44
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> (4.75)
<PER-SHARE-DIVIDEND> (.30)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 5.45
<EXPENSE-RATIO> 2.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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<TABLE> <S> <C>
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<NAME> PHOENIX-ABERDEEN SERIES FUND
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<NUMBER> 012
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<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 14201
<INVESTMENTS-AT-VALUE> 8987
<RECEIVABLES> 106
<ASSETS-OTHER> 241
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9334
<PAYABLE-FOR-SECURITIES> 125
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 101
<TOTAL-LIABILITIES> 226
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17184
<SHARES-COMMON-STOCK> 510
<SHARES-COMMON-PRIOR> 618
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (72)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2789)
<ACCUM-APPREC-OR-DEPREC> (5215)
<NET-ASSETS> 9108
<DIVIDEND-INCOME> 343
<INTEREST-INCOME> 33
<OTHER-INCOME> 0
<EXPENSES-NET> (291)
<NET-INVESTMENT-INCOME> 85
<REALIZED-GAINS-CURRENT> (2540)
<APPREC-INCREASE-CURRENT> (5878)
<NET-CHANGE-FROM-OPS> (8333)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (131)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 146
<NUMBER-OF-SHARES-REDEEMED> (273)
<SHARES-REINVESTED> 19
<NET-CHANGE-IN-ASSETS> (3660)
<ACCUMULATED-NII-PRIOR> 72
<ACCUMULATED-GAINS-PRIOR> 6
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 106
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 471
<AVERAGE-NET-ASSETS> 12588
<PER-SHARE-NAV-BEGIN> 10.39
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> (4.73)
<PER-SHARE-DIVIDEND> (.27)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 5.40
<EXPENSE-RATIO> 2.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001015429
<NAME> PHOENIX-ABERDEEN SERIES FUND
<SERIES>
<NUMBER> 021
<NAME> PHOENIX-ABERDEEN GLOBAL SMALL CAP - CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 31727
<INVESTMENTS-AT-VALUE> 30183
<RECEIVABLES> 241
<ASSETS-OTHER> 607
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31031
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