As filed with the Securities and Exchange Commission on December 22, 1999
Registration No. 333-34537
File No. 811-08343
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM N-1A
REGISTRATION STATEMENT
Under the
SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 4 [X]
and/or
REGISTRATION STATEMENT
Under the
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 5 [X]
(Check appropriate box or boxes)
-------------
Phoenix Investment Trust 97
(Exact Name of Registrant as Specified in Charter)
-------------
101 Munson Street, Greenfield, Massachusetts 01301
(Address of Principal Executive Offices) (Zip Code)
(800) 243-1574
(Registrant's Telephone Number, including Area Code)
-------------
Pamela S. Sinofsky
Assistant Vice President and Assistant Counsel
Phoenix Investment Partners, Ltd.
56 Prospect Street
Hartford, Connecticut 06115-0479
(name and address of Agent for Service)
-------------
It is proposed that this filing will become effective (check
appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on December 29, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed effective amendment.
================================================================================
<PAGE>
PHOENIX INVESTMENT TRUST 97
Cross Reference Sheet Pursuant to Rule 404
PART A
<TABLE>
<CAPTION>
Item Number Form N-1A, Part A Prospectus Caption
- ------------------------------------------------------------------- -------------------------------------------------------
<S> <C> <C>
1. Front and Back Cover Pages ............................... Cover Page, Back Cover Page
2. Risk/Return Summary: Investments, Risks, Performance...... Investment Risk and Return Summary
3. Risk Return Summary: Fee Table ........................... Fund Expenses
4. Investment Objectives, Principal Investment Strategies, Investment Risk and Return Summary; Additional
and Related Risks ........................................ Investment Techniques
5. Management's Discussion of Fund Performance .............. Performance Tables
6. Management, Organization, and Capital Structure .......... Management of the Fund
7. Shareholder Information .................................. Pricing of Fund Shares; Sales Charges; Your Account;
How to Buy Shares; How to Sell Shares; Things to
Know When Selling Shares; Account Policies; Investor
Services; Tax Status of Distributions
8. Distribution Arrangements ................................ Sales Charges
9. Financial Highlights Information ......................... Financial Highlights
PART B
Item Number Form N-1A, Part B Statement of Additional Information Caption
- ------------------------------------------------------------------- -------------------------------------------------------
10. Cover Page and Table of Contents ......................... Cover Page, Table of Contents
11. Fund History ............................................. The Fund
12. Description of the Fund and Its Investment Risks ......... Investment Objectives and Policies; Investment
Restrictions
13. Management of the Fund ................................... Management of the Trust
14. Control Persons and Principal Holders of Securities ...... Management of the Trust
15. Investment Advisory and Other Services ................... Services of the Adviser; The Distributor; Distribution
Plans; Other Information
16. Brokerage Allocation and Other Practices ................. Portfolio Transactions and Brokerage
17. Capital Stock and Other Securities ....................... Other Information
18. Purchase, Redemption, and Pricing of Shares .............. Net Asset Value; How to Buy Shares; Investor Account
Services; How to Redeem Shares; Tax Sheltered
Retirement Plans
19. Taxation of the Fund ..................................... Dividends, Distributions and Taxes
20. Underwriters ............................................. The Distributor
21. Calculation of Performance Data .......................... Performance Information
22. Financial Statements ..................................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this Registration Statement.
<PAGE>
Phoenix Investment Partners
Prospectus
December 29, 1999
Hollister
Phoenix-Hollister
Small Cap Value Fund
Phoenix-Hollister
Value Equity Fund
Neither the Securities and Exchange
Commission nor any state securities
commission has approved or
disapproved of these securities or
determined if this propsectus is
truthful or complete. Any representation
to the contrary is a criminal offense.
This prospectus contains important
information that you should know
before investing in the Phoenix-Hollister
Small Cap Value Fund and the
Phoenix-Hollister Value Equtiy Fund.
[PHOENIX INVESTMENT PARTNERS, LTD. LOGO]
<PAGE>
> Phoenix
Investment
Trust 97
Table of Contents
- ------------------------
<TABLE>
<S> <C>
Phoenix-Hollister Small Cap Value Fund
Investment Risk and Return Summary ................ 1
Fund Expenses ..................................... 4
Phoenix-Hollister Value Equity Fund
Investment Risk and Return Summary ................ 6
Fund Expenses ..................................... 9
Additional Investment Techniques ................... 11
Management of the Funds ............................ 12
Pricing of Fund Shares ............................. 14
Sales Charges ...................................... 15
Your Account ....................................... 17
How to Buy Shares .................................. 18
How to Sell Shares ................................. 19
Things You Should Know When Selling Shares ......... 19
Account Policies ................................... 21
Investor Services .................................. 22
Tax Status of Distributions ........................ 22
Financial Highlights ............................... 23
Additional Information ............................. 25
</TABLE>
<PAGE>
Phoenix-Hollister Small Cap Value Fund
Investment Risk and Return Summary
- -----------------------------------------------------------------
Investment Objective
Phoenix-Hollister Small Cap Value Fund has an investment
objective to seek long-term capital appreciation. There is no
guarantee that the fund will achieve its objective.
Principal Investment Strategies
> The fund invests in a portfolio of common stocks and
securities convertible into common stocks of primarily
domestic (U.S.) companies with market capitalizations of
between $100 million and $1 billion. Generally, the fund will
invest in securities traded on the New York Stock Exchange,
the American Stock Exchange and in over-the-counter markets.
Under normal circumstances, the fund will invest at least 65%
of its total assets in securities of issuers with
capitalizations of less than $1 billion at the time of
investment.
> The fund is designed to invest in common stocks that meet the
adviser's quantitative standards that indicate intrinsic value
relative to price and above-average financial soundness. The
adviser applies a security selection process that selects
stocks meeting certain investment criteria relating to price,
dividend yield, going concern value and debt levels. For the
few hundred of the approximately 5,00 companies that survive
this screening process, the adviser projects growth in
earnings and dividends, earnings momentum and relative
undervaluation based on dividend discount models. From this
analysis, the adviser develops target prices and value ranges
and selects the top-rated securities for purchase.
> Generally, the adviser sells when a stock's target price is
reached, when the issuer or industry suffers negative changes,
or when there is a change in the investment criteria that
prompted the initial purchase.
Temporary Defensive Strategy: If the adviser believes that market
conditions are not favorable to the fund's principal strategies,
the fund may invest without limit in U.S. Government securities
and in money market instruments. When this happens, the fund may
not achieve its investment objective.
Principal Risks
If you invest in this fund, you risk that you may lose your
investment.
General
The value of the fund's investments that supports your share
value can decrease as well as increase. If between the time you
purchase shares and the time you sell shares the value of the
fund's investments decreases, you will lose money.
Phoenix-Hollister Small Cap Value Fund 1
<PAGE>
Conditions affecting the overall economy, specific industries or
companies in which the fund invests can be worse than expected
and investments may fail to perform as the adviser expects. As a
result, the value of your shares may decrease.
Small Capitalizations
Companies with small capitalizations are often companies with a
limited operating history or companies in industries that have
recently emerged due to cultural, economic, regulatory or
technological developments. Such developments can have a
significant impact or negative effect on small capitalization
companies and their stock performance, and can make investment
returns highly volatile. Product lines are often less diversified
and subject to competitive threats. Smaller capitalization stocks
are subject to varying patterns of trading volume and may, at
times, be difficult to sell.
Convertible Securities
Convertible securities may be subject to redemption at the option
of the issuer. If a security is called for redemption, the fund
may have to redeem the security, convert it into common stock or
sell it to a third party at a price and time that is not
beneficial for the fund. In addition, securities convertible into
common stocks may have higher yields than common stocks but lower
yields than comparable non-convertible securities.
Impact of the Year 2000 Issue on Fund Investments
The Year 2000 issue is the result of computer programs being
written using two rather than four digits to define the
applicable year. There is the possibility that some or all of an
entity's computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year
2000. If an entity whose securities are held by the fund does not
"fix" its Year 2000 issue it is possible that its operations and
financial results would be hurt. Also, the cost of modifying
computer programs to become Year 2000 compliant may hurt the
financial performance and market price of entities whose
securities are held by the fund.
2 Phoenix-Hollister Small Cap Value Fund
<PAGE>
Performance Tables
The bar chart and table below provide some indication of the
risks of investing in the Phoenix-Hollister Small Cap Value Fund.
The bar chart shows the fund's Class A Shares performance.(1) The
table shows how the fund's annual returns compare to those of a
broad-based securities market index. The fund's past performance
is not necessarily an indication of how the fund will perform in
the future.
Phoenix-Hollister Small Cap Value Fund
<TABLE>
<CAPTION>
1998
Calendar
Year
--------
<S> <C>
Annual Return (%) 2.58
</TABLE>
(1) The fund's annual return in the chart above does not reflect
the deduction of any sales charges. The return would have been
less than that shown if sales charges were deducted. During the
period shown in the chart above, the highest return for a quarter
was 23.87 (quarter ending December 31, 1998) and the lowest return
for a quarter was (22.24) (quarter ending September 30, 1998).
Year-to-date performance (through September 30, 1999) was 13.84%.
<TABLE>
<CAPTION>
Average Annual Total Returns(1)
(for the periods ending 12/31/98) One Year Life of the Fund(2)
<S> <C> <C>
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
Class A Shares (2.29)% 0.86%
- -----------------------------------------------------------------------
Class B Shares (2.04)% 1.19%
- -----------------------------------------------------------------------
Class C Shares 1.80% 4.60%
- -----------------------------------------------------------------------
Russell 2000 Value Index(3) (6.45)% (3.20)%
- -----------------------------------------------------------------------
</TABLE>
(1) The fund's average annual returns in the table above reflect the deduction
of the maximum sales charge for an investment in the fund's Class A Shares and a
full redemption of the fund's Class B and Class C Shares.
(2) Class A Shares, Class B Shares and Class C Shares since November 20, 1997.
(3) The Russell Value Index is a measure of small-capitalization, value-oriented
stock total return performance. This index's performance does not reflect sales
charges.
Phoenix-Hollister Small Cap Value Fund 3
<PAGE>
Fund Expenses
- -------------------------------
This table illustrates all fees and expenses that you may pay if you buy
and hold shares of the fund.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
-------- -------- -------
<S> <C> <C> <C>
Shareholder Fees (fees paid directly from your
investment)
Maximum Sales Charge (load) Imposed on Purchases (as a
percentage of offering price) 4.75% None None
Maximum Deferred Sales Charge (load) (as a percentage of the None 5%(b) 1%(c)
lesser of the value redeemed or the amount invested)
Maximum Sales Charge (load) Imposed on Reinvested Dividends None None None
Redemption Fee None None None
Exchange Fee None None None
-------------------------------
Class A Class B Class C
Shares Shares Shares
-------- -------- -------
Annual Fund Operating Expenses (expenses that are
deducted from fund assets)
Management Fees 0.90% 0.90% 0.90%
Distribution and Service (12b-1) Fees (d) 0.25% 1.00% 1.00%
Other Expenses 0.72% 0.72% 0.72%
---- ---- ----
Total Annual Fund Operating Expenses (a) 1.87% 2.62% 2.62%
==== ===== =====
</TABLE>
- ----------------
(a) The fund's investment adviser has agreed to reimburse through
August 31, 2000 the Phoenix-Hollister Small Cap Value Fund's
expenses, other than Management Fees and Distribution and Service
Fees, to the extent that such expenses exceed 0.25% for each
class of shares. Actual Total Annual Fund Operating Expenses,
after expense reimbursement, were 1.40% for Class A Shares, 2.15%
for Class B Shares, and 2.15% for Class C Shares.
(b) The maximum deferred sales charge is imposed on Class B
Shares redeemed during the first year; thereafter, it decreases
1% annually to 2% during the fourth and fifth years and to 0%
after the fifth year.
(c) The deferred sales charge is imposed on Class C Shares
redeemed during the first year only.
(d) Distribution and Service Fees represent an asset-based sales
charge that, for a long-term shareholder, may be higher than the
maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc. ("NASD").
Example
This example is intended to help you compare the cost of
investing in the fund with the cost of investing in other mutual
funds.
The example assumes that you invest $10,000 in the fund for the
time periods indicated and then redeem all of your shares at the
end of those periods. The example also assumes that your
investment has a 5% return each year and that the fund's
operating expenses remain the same. In the case of Class B
Shares, it is assumed that your shares are converted to Class A
after eight years. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
4 Phoenix-Hollister Small Cap Value Fund
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------
Class 1 year 3 years 5 years 10 years
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $656 $1,035 $1,438 $2,561
- ----------------------------------------------------------
Class B $665 $1,014 $1,390 $2,772
- ----------------------------------------------------------
Class C $365 $ 814 $1,390 $2,954
- ----------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
- ----------------------------------------------------------
Class 1 year 3 years 5 years 10 years
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
Class B $265 $814 $1,390 $2,772
- ----------------------------------------------------------
Class C $265 $814 $1,390 $2,954
- ----------------------------------------------------------
</TABLE>
Note: Your actual expenses may be lower than those shown in the
tables above since the expense levels used to calculate the
figures shown do not include the reimbursement of expenses over
certain levels by the fund's investment adviser. Refer to the
section "Management of the Funds" for information about expense
reimbursement.
Phoenix-Hollister Small Cap Value Fund 5
<PAGE>
Phoenix-Hollister Value Equity Fund
Investment Risk and Return Summary
- -----------------------------------------------------------------
Investment Objectives
Phoenix-Hollister Value Equity Fund has a primary investment
objective to seek long-term capital appreciation. The fund has a
secondary investment objective to seek current income. There is
no guarantee that the fund will achieve either objective.
Principal Investment Strategies
> The fund invests in common stocks of primarily domestic
(U.S.), large capitalization companies. Under normal
circumstances, the fund will invest at least 65% of its total
assets in common stocks.
> The fund is designed to invest in common stocks that meet the
adviser's quantitative standards that indicate intrinsic value
relative to price and above-average financial soundness. The
adviser applies a security selection process that selects
stocks meeting certain investment criteria relating to price,
dividend yield, going concern value and debt levels. For the
few hundred of the approximately 2,500 companies that
survive this screening process, the adviser projects growth in
earnings and dividends, earnings momentum and relative
undervaluation based on dividend discount models. From this
analysis, the adviser develops target prices and value ranges
and selects the top-rated securities for purchase.
> Generally, the adviser sells when a stock's target price is
reached, when the issuer or industry suffer negative changes,
or when there is a change in the investment criteria that
prompted the initial purchase.
Temporary Defensive Strategy: If the adviser believes that market
conditions are not favorable to the fund's principal strategies,
the fund may invest without limit in U.S. Government securities
and in money market instruments. When this happens, the fund may
not achieve its investment objective.
Principal Risks
If you invest in this fund, you risk that you may lose your
investment.
General
The value of the fund's investments that supports your share
value can decrease as well as increase. If between the time you
purchase shares and the time you sell shares the value of the
fund's investments decreases, you will lose money.
Conditions affecting the overall economy, specific industries or
companies in which the fund invests can be worse than expected
and investments may fail to perform as the adviser expects. As a
result, the value of your shares may decrease.
6 Phoenix-Hollister Value Equity Fund
<PAGE>
Impact of the Year 2000 Issue on Fund Investments
The Year 2000 issue is the result of computer programs being
written using two rather than four digits to define the
applicable year. There is the possibility that some or all of an
entity's computer programs that have date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year
2000. If an entity whose securities are held by the fund does not
"fix" its Year 2000 issue it is possible that its operations and
financial results would be hurt. Also, the cost of modifying
computer programs to become Year 2000 compliant may hurt the
financial performance and market price of entities whose
securities are held by the fund.
Phoenix-Hollister Value Equity Fund 7
<PAGE>
Performance Tables
The bar chart and table below provide some indication of the
risks of investing in the Phoenix-Hollister Value Equity Fund.
The bar chart shows the fund's Class A Shares performance.(1) The
table shows how the fund's annual returns compare to those of a
broad-based securities market index. The fund's past performance
is not necessarily an indication of how the fund will perform in
the future.
Phoenix-Hollister Value Equity Fund
<TABLE>
<CAPTION>
1998
Calendar
Year
--------
<S> <C>
Annual Return (%) 17.22
</TABLE>
(1) The fund's annual return in the chart above does not reflect
the deduction of any sales charges. The return would have been
less than that shown if sales charges were deducted. During the
period shown in the chart above, the highest return for a quarter
was 26.00 (quarter ending December 31, 1998) and the lowest return
for a quarter was (17.98) (quarter ending September 30, 1998).
Year-to-date performance (through September 30, 1999) was 1.19%.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Average Annual Total Returns(1)
(for the periods ending 12/31/98) One Year Life of the Fund(2)
- ---------------------------------------------------------------------------
<S> <C> <C>
Class A Shares 11.65% 10.71%
- ---------------------------------------------------------------------------
Class B Shares 12.44% 11.37%
- ---------------------------------------------------------------------------
Class C Shares 16.29% 14.59%
- ---------------------------------------------------------------------------
S&P 500 Index(3) 28.76% 28.13%
- ---------------------------------------------------------------------------
</TABLE>
(1) The fund's average annual return in the table above reflect the deduction of
the maximum sales charge for an investment in the fund's Class A Shares and a
full redemption of the fund's Class B and Class C Shares.
(2) Class A Shares, Class B Shares and Class C Shares since November 5, 1997.
(3) The S&P 500 Index is a measure of stock market total return performance.
This index's performance does not reflect sales charges.
8 Phoenix-Hollister Value Equity Fund
<PAGE>
Fund Expenses
- -------------------------------
This table illustrates all fees and expenses that you may pay if
you buy and hold shares of the fund.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
------- ------- -------
<S> <C> <C> <C>
Shareholder Fees (fees paid directly from your
investment)
Maximum Sales Charge (load) Imposed on Purchases (as a
percentage of offering price) 4.75% None None
Maximum Deferred Sales Charge (load) (as a percentage of the None 5%(b) 1%(c)
lesser of the value redeemed or the amount invested)
Maximum Sales Charge (load) Imposed on Reinvested Dividends None None None
Redemption Fee None None None
Exchange Fee None None None
-------------------------------------
Class A Class B Class C
Shares Shares Shares
------- ------- -------
Annual Fund Operating Expenses (expenses that are
deducted from fund assets)
Management Fees 0.75% 0.75% 0.75%
Distribution and Service (12b-1) Fees (d) 0.25% 1.00% 1.00%
Other Expenses 0.57% 0.57% 0.57%
----- ----- -----
Total Annual Fund Operating Expenses (a) 1.57% 2.32% 2.32%
===== ===== =====
</TABLE>
- ----------------
(a) The fund's investment adviser has agreed to reimburse through
August 31, 2000 the Phoenix-Hollister Value Equity Fund's
expenses, other than Management Fees and Distribution and Service
Fees, to the extent that such expenses exceed 0.25% for each
class of shares. Actual Total Annual Fund Operating Expenses,
after expense reimbursement, were 1.25% for Class A Shares, 2.00%
for Class B Shares, and 2.00% for Class C Shares.
(b) The maximum deferred sales charge is imposed on Class B
Shares redeemed during the first year; thereafter, it decreases
1% annually to 2% during the fourth and fifth years and to 0%
after the fifth year.
(c) The deferred sales charge is imposed on Class C Shares
redeemed during the first year only.
(d) Distribution and Service Fees represent an asset-based sales
charge that, for a long-term shareholder, may be higher than the
maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc. ("NASD").
Example
This example is intended to help you compare the cost of
investing in the fund with the cost of investing in other mutual
funds.
The example assumes that you invest $10,000 in the fund for the
time periods indicated and then redeem all of your shares at the
end of those periods. The example also assumes that your
investment has a 5% return each year and that the fund's
operating expenses remain the same. In the case of Class B
Shares, it is assumed that your shares are converted to Class A
after eight years. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
Phoenix-Hollister Value Equity Fund 9
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------
Class 1 year 3 years 5 years 10 years
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $627 $947 $1,290 $2,254
- --------------------------------------------------------------
Class B $635 $924 $1,240 $2,468
- --------------------------------------------------------------
Class C $335 $724 $1,240 $2,656
- --------------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
Class 1 year 3 years 5 years 10 years
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B $235 $724 $1,240 $2,468
- --------------------------------------------------------------
Class C $235 $724 $1,240 $2,656
- --------------------------------------------------------------
</TABLE>
Note: Your actual expenses may be lower than those shown in the tables above
since the expense levels used to calculate the figures shown do not include the
reimbursement of expenses over certain levels by the fund's investment adviser.
Refer to the section "Management of the Funds" for information about expense
reimbursement.
10 Phoenix-Hollister Value Equity Fund
<PAGE>
Additional Investment Techniques
- ---------------------------------------------------
In addition to the Principal Investment Strategies and Risks,
Phoenix-Hollister Small Cap Value Fund and Phoenix-Hollister
Value Equity Fund each may engage in the following investment
techniques:
Foreign Investing
Each of the funds may invest up to 30% of its assets in
securities of foreign (non-U.S.) issuers. Investments in non-U.S.
companies involve additional risks and conditions, including
differences in accounting standards, generally higher commission
rates, differences in transaction settlement systems, political
instability, and the possibility of confiscatory or expropriation
taxes. Political and economic uncertainty in foreign countries,
as well as less public information about foreign investments, may
negatively impact the fund's portfolio. Dividends and other
income payable on foreign securities may also be subject to
foreign taxes. Some investments may be made in currencies other
than U.S. dollars that will fluctuate in value as a result of
changes in the currency exchange rate. Foreign markets and
currencies may not perform as well as U.S. markets.
Depository Receipts
The funds may invest in American Depository Receipts (ADRs) and
New York Shares. While investment in ADRs may eliminate some of
the risk associated with foreign investments, it does not
eliminate all the risks inherent in investing in securities of
foreign issuers. ADRs which are not sponsored by U.S. banks are
subject to the same investment risks as foreign securities.
Mutual Fund Investing
Each of the funds may invest up to 10% of its total assets in
shares of other mutual funds. Assets invested in other mutual
funds incur a layering of expenses including operating costs,
advisory fees and administrative fees that you, as a shareholder
in the funds, indirectly bear.
Financial Futures and Related Options
The funds may use financial futures contracts and related options
for hedging purposes. Futures and options involve market risk in
excess of their value and may not be as liquid as other
securities.
Securities Lending
Each fund may loan portfolio securities with a value up to one
third of its total assets to increase investment returns. If the
borrower is unwilling or unable to return the borrowed securities
when due, the fund can suffer losses.
Phoenix Investment Trust 97 11
<PAGE>
Borrowing
Each fund may obtain fixed interest rate loans from a bank in
amounts up to one third the value of its net assets and invest
the loan proceeds in other assets. Interest on money borrowed is
an expense of the fund. Because such expense would not have
otherwise been incurred, during periods when borrowings for
investment purposes are substantial the net investment income of
the fund is not expected to be as high as it otherwise would be.
In addition, if the securities purchased with such borrowed money
decrease in value or do not increase enough to cover interest and
other borrowing costs, the funds will suffer greater losses than
if no borrowing took place.
Repurchase Agreements
The funds may invest in repurchase agreements. Default or
insolvency of the other party presents a risk to the funds.
Illiquid Securities
Each of the funds may invest up to 15% of its net assets in
illiquid securities. The inability of the funds to dispose of
such securities in a timely manner and at a fair price at a time
when it might be necessary or advantageous to do so may harm the
funds.
The adviser may buy other types of securities or employ other
portfolio management techniques on behalf of each fund. Please
refer to the Statement of Additional Information for more
detailed information about these and other investment techniques
of the fund.
Management of The Funds
- -----------------------------------------------------
The Adviser
Phoenix Investment Counsel, Inc. ("Phoenix") is the investment
adviser to the funds and is located at 56 Prospect Street,
Hartford, CT 06115. Phoenix also acts as the investment adviser
for 14 other mutual funds, as subadviser to three additional
mutual funds and as adviser to institutional clients. As of
September 30, 1999, Phoenix had $23.4 billion in assets under
management. Phoenix has acted as an investment adviser for over
sixty years.
Subject to the direction of the funds' Board of Trustees, Phoenix
is responsible for managing each fund's investment program and
the day-to-day management of each fund's portfolio. Phoenix
manages each fund's assets to conform with the investment
policies as described in this prospectus. Each fund pays Phoenix
a monthly investment management fee that is accrued daily against
the value of the fund's net assets at the following rates.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1st billion $1+ billion through $2 billion $2+ billion
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Phoenix-Hollister Small Cap Value Fund 0.90% 0.85% 0.80%
- ---------------------------------------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Fund 0.75% 0.70% 0.65%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Phoenix has voluntarily agreed to assume total fund operating
expenses of each fund, excluding interest, taxes, brokerage fees,
commissions and extraordinary expenses, until August 31, 2000,
12 Phoenix Investment Trust 97
<PAGE>
to the extent that such expenses exceed the following percentages
of the average annual net asset values for each fund:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Phoenix-Hollister Small Cap Value Fund 1.40% 2.15% 2.15%
- --------------------------------------------------------------------------------
Phoenix-Hollister Value Equity Fund 1.25% 2.00% 2.00%
- --------------------------------------------------------------------------------
</TABLE>
During the funds' last fiscal year, the funds paid total
management fees of $627,271. The ratio of management fees to
average net assets for the fiscal year ended August 31, 1999, for
Phoenix-Hollister Small Cap Value Fund was 0.90% and for
Phoenix-Hollister Value Equity Fund was 0.75%.
Portfolio Management
Christian C. Bertelsen serves as portfolio manager of both the
Phoenix-Hollister Small Cap Value Fund and Phoenix-Hollister
Value Equity Fund, and as such is primarily responsible for the
day to day management of the funds' investments. Mr. Bertelsen
joined Phoenix in July 1997. Previously, from 1996 to July 1997,
Mr. Bertelsen was employed by Dreman Value Advisors where he
served as chief investment officer and portfolio manager of the
Kemper-Dreman Contrarian and Small Cap Value Funds. From 1993 to
1996, Mr. Bertelsen was a Senior Vice President of Eagle Asset
Management where he managed private and institutional assets, as
well as the Heritage Value Equity Fund.
Impact of the Year 2000 Issue on Fund Operations
The Trustees have directed management to ensure that the systems
used by service providers (Phoenix and its affiliates) in support
of the funds' operations be assessed and brought into Year 2000
compliance. Based on its assessment, Phoenix determined that it
would be required to modify or replace portions of its software
so that its computer systems would properly utilize dates beyond
December 31, 1999. As of August 31, 1999, Phoenix completed
upgrades and testing for Year 2000 compliance on its
mission-critical systems. Phoenix has also identified critical
business functions and developed contingency plans. Phoenix
believes that the modifications and conversions to new software
and contingency planning will mitigate the Year 2000 issue.
However, if the problem is not fully addressed, the fund may be
negatively impacted.
The total cost to become Year 2000 compliant is not an expense of
the fund and is not expected to have a material impact on the
operating results of Phoenix.
Phoenix Investment Trust 97 13
<PAGE>
Pricing of Fund Shares
- -------------------------------------------------
How is the Share Price determined?
Each fund calculates a share price for each class of its shares.
The share price is based on the net assets of the fund and the
number of outstanding shares. In general, each fund calculates
net asset value by:
o adding the values of all securities and other assets of the
fund,
o subtracting liabilities, and
o dividing by the total number of outstanding shares of the fund.
Asset Value: The funds' investments are valued at market value.
If market quotations are not available, a fund determines a "fair
value" for an investment according to rules and procedures
approved by the Trustees. Foreign and domestic debt securities
(other than short-term investments) are valued on the basis of
broker quotations or valuations provided by a pricing service
approved by the Trustees when such prices are believed to reflect
the fair value of such securities. Foreign and domestic equity
securities are valued at the last sale price or, if there has
been no sale that day, at the last bid price, generally.
Short-term investments having a remaining maturity of sixty days
or less are valued at amortized cost, which the Trustees have
determined approximates market value.
Liabilities: Class specific expenses, distribution fees, service
fees and other liabilities are deducted from the assets of each
class. Expenses and liabilities that are not class specific (such
as management fees) are allocated to each class in proportion to
each class's net assets, except where an alternative allocation
can be more fairly made.
Net Asset Value: The liability allocated to a class plus any
other expenses are deducted from the proportionate interest of
such class in the assets of the fund. The resulting amount for
each class is then divided by the number of shares outstanding of
that class to produce each class's net asset value per share.
The net asset value per share of each class of each fund is
determined on days when the New York Stock Exchange (the "NYSE")
is open for trading as of the close of trading (normally 4:00 PM
eastern time). A fund will not calculate its net asset values per
share on days when the NYSE is closed for trading. If the funds
hold securities that are traded on foreign exchanges that trade
on weekends or other holidays when the funds do not price their
shares, the net asset value of the funds' shares may change on
days when the shareholders will not be able to purchase or redeem
the funds' shares.
14 Phoenix Investment Trust 97
<PAGE>
At what price are shares purchased?
All investments received by the funds' authorized agents prior to
the close of regular trading on the NYSE (normally 4:00 PM
eastern time) will be executed based on that day's net asset
value. Shares credited to your account from the reinvestment of
fund distributions will be in full and fractional shares that are
purchased at the closing net asset value on the next business day
on which the fund's net asset value is calculated following the
dividend record date.
Sales Charges
- ----------------------------------------
What are the classes and how do they differ?
Each fund presently offers three classes of shares that have
different sales and distribution charges (see "Fund Expenses"
previously in this prospectus). The funds have adopted
distribution and service plans allowed under Rule 12b-1 of the
Investment Company Act of 1940 that authorize the funds to pay
distribution and service fees for the sale of their shares and
for services provided to shareholders.
What arrangement is best for you?
The different classes permit you to choose the method of
purchasing shares that is most beneficial to you. In choosing a
class, consider the amount of your investment, the length of time
you expect to hold the shares, whether you decide to receive
distributions in cash or to reinvest them in additional shares,
and any other personal circumstances. Depending upon these
considerations, the accumulated distribution and service fees and
contingent deferred sales charges of one class may be more or
less than the initial sales charge and accumulated distribution
and service fees of another class of shares bought at the same
time. Because distribution and service fees are paid out of a
fund's assets on an ongoing basis, over time these fees will
increase the cost of your investment and may cost you more than
paying other types of sales charges.
Class A Shares. If you purchase Class A Shares, you will pay a
sales charge at the time of purchase equal to 4.75% of the
offering price (4.99% of the amount invested). The sales charge
may be reduced or waived under certain conditions. Class A Shares
are not subject to any charges by the fund when redeemed. Class A
Shares have lower distribution and service fees (0.25%) and pay
higher dividends than any other class.
Class B Shares. If you purchase Class B Shares, you will not pay
a sales charge at the time of purchase. If you sell your Class B
Shares within the first 5 years after they are purchased, you
will pay a sales charge of up to 5% of your shares' value. See
"Deferred Sales Charge Alternative--Class B and C Shares" below.
This charge declines to 0% over a period of 5 years and may be
waived under certain conditions. Class B shares have higher
distribution and service fees (1.00%) and pay lower dividends
than Class A Shares. Class B Shares automatically
Phoenix Investment Trust 97 15
<PAGE>
convert to Class A Shares eight years after purchase. Purchases
of Class B Shares may be inappropriate for any investor who may
qualify for reduced sales charges of Class A Shares and anyone
who is over 85 years of age. The underwriter may decline
purchases in such situations.
Class C Shares. If you purchase Class C Shares, you will not pay
a sales charge at the time of purchase. If you sell your Class C
Shares within the first year after they are purchased, you will
pay a sales charge of 1%. See "Deferred Sales Charge
Alternative--Class B and C Shares" below. Class C Shares have the
same distribution and service fees (1.00%) and pay comparable
dividends as Class B Shares. Class C Shares do not convert to any
other class of shares of the fund.
Initial Sales Charge Alternative--Class A Shares
The public offering price of Class A Shares is the net asset
value plus a sales charge that varies depending on the size of
your purchase (see "Class A Shares--Reduced Initial Sales
Charges: Combination Purchase Privilege" in the Statement of
Additional Information). Shares purchased based on the automatic
reinvestment of income dividends or capital gains distributions
are not subject to any sales charges. The sales charge is divided
between your investment dealer and the fund's underwriter
(Phoenix Equity Planning Corporation or "PEPCO").
Sales Charge you may pay to purchase Class A Shares
<TABLE>
<CAPTION>
Sales Charge as
a percentage of
---------------------------
Amount of Net
Transaction Offering Amount
at Offering Price Price Invested
- ---------------------------------------------------------------
<S> <C> <C>
Under $50,000 4.75% 4.99%
$50,000 but under $100,000 4.50 4.71
$100,000 but under $250,000 3.50 3.63
$250,000 but under $500,000 3.00 3.09
$500,000 but under $1,000,000 2.00 2.04
$1,000,000 or more None None
</TABLE>
Deferred Sales Charge Alternative--
Class B and C Shares
Class B and C Shares are purchased without an initial sales
charge; however, shares sold within a specified time period are
subject to a declining contingent deferred sales charge ("CDSC")
at the rates listed below. The sales charge will be multiplied by
the then current market value or the initial cost of the shares
being redeemed, whichever is less. No sales charge will be
imposed on increases in net asset value or on shares purchased
through the reinvestment of income dividends or capital gains
distributions. To minimize the sales charge, shares not subject
to any charge will be redeemed first, followed by shares held the
longest time. To calculate the amount of shares owned and time
period held, all Class B Shares purchased in any month are
considered purchased on the last day of the preceding month, and
all Class C Shares are considered purchased on the trade date.
16 Phoenix Investment Trust 97
<PAGE>
Deferred Sales Charge you may pay to sell Class B Shares
Year 1 2 3 4 5 6+
----------------------------------------------------------------
CDSC 5% 4% 3% 2% 2% 0%
Deferred Sales Charge you may pay to sell Class C Shares
Year 1 2+
----------------------------------------------------------------
CDSC 1% 0%
Your Account
- ---------------------------------------
Opening an Account
Your financial advisor can assist you with your initial purchase
as well as all phases of your investment program. If you are
opening an account by yourself, please follow the instructions
outlined below.
Step 1.
Your first choice will be the initial amount you intend to
invest.
Minimum initial investments:
> $25 for individual retirement accounts, or accounts that use
the systematic exchange privilege, or accounts that use the
Investo-Matic program (see below for more information on the
Investo-Matic program).
> There is no initial dollar requirement for defined
contribution plans, profit-sharing plans, or employee benefit
plans. There is also no minimum for reinvesting dividends and
capital gains into another account.
> $500 for all other accounts.
Minimum additional investments:
> $25 for any account.
> There is no minimum for defined contribution plans,
profit-sharing plans, or employee benefit plans. There is also
no minimum for reinvesting dividends and capital gains into an
existing account.
Phoenix Investment Trust 97 17
<PAGE>
Step 2.
Your second choice will be what class of shares to buy. Each fund
offers three classes of shares for individual investors. Each has
different sales and distribution charges. Because all future
investments in your account will be made in the share class you
choose when you open your account, you should make your decision
carefully. Your financial advisor can help you pick the share
class that makes the most sense for your situation.
Step 3.
Your next choice will be how you want to receive any dividends
and capital gain distributions. Your options are:
o Receive both dividends and capital gain distributions in
additional shares;
o Receive dividends in additional shares and capital gains
distributions in cash;
o Receive dividends in cash and capital gain distributions
in additional shares; or
o Receive both dividends and capital gain distributions in
cash.
No interest will be paid on uncashed distribution checks.
How To Buy Shares
- ----------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
To Open An Account
- ----------------------------------------------------------------------------------------------------
<S> <C>
Through a financial advisor Contact your advisor. Some advisors may charge a fee.
Complete a New Account Application and send it with a check
- ----------------------------------------------------------------------------------------------------
Through the mail payable to the fund. Mail them to: State Street Bank, P.O. Box
8301, Boston, MA 02266-8301.
- ----------------------------------------------------------------------------------------------------
By Federal Funds wire Call us at (800) 243-1574 (press 1, then 0).
Complete a New Account Application and send it with a check
payable to the fund. Send them to: Boston Financial Data
- ----------------------------------------------------------------------------------------------------
Through express delivery
Services, Attn: Phoenix Funds, 66 Brooks Drive, Braintree, MA
02184.
Complete the appropriate section on the application and send it
- ----------------------------------------------------------------------------------------------------
By Investo-Matic with your initial investment payable to the fund. Mail them to:
State Street Bank, P.O. Box 8301, Boston, MA 02266-8301.
- ----------------------------------------------------------------------------------------------------
By telephone exchange Call us at (800)243-1574 (press 1, then 0).
- ----------------------------------------------------------------------------------------------------
</TABLE>
18 Phoenix Investment Trust 97
<PAGE>
How to Sell Shares
- -----------------------------------
You have the right to have the funds buy back shares at the net
asset value next determined after receipt of a redemption order
by the funds' Transfer Agent or an authorized agent. In the case
of a Class B or C Share redemption, you will be subject to the
applicable deferred sales charge, if any, for such shares.
Subject to certain restrictions, shares may be redeemed by
telephone or in writing. In addition, shares may be sold through
securities dealers, brokers or agents who may charge customary
commissions or fees for their services. The funds do not charge
any redemption fees. Payment for shares redeemed is made within
seven days; however, redemption proceeds will not be disbursed
until each check used for purchases of shares has been cleared
for payment by your bank, which may take up to 15 days after
receipt of the check.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
To Sell Shares
- ----------------------------------------------------------------------------------------------------
<S> <C>
Through a financial advisor Contact your advisor. Some advisors may charge a fee.
- ----------------------------------------------------------------------------------------------------
Through the mail Send a letter of instruction and any share certificates (if you
hold certificate shares) to: State Street Bank, P.O. Box 8301,
Boston, MA 02266-8301. Be sure to include the registered
owner's name, fund and account number, number of shares
or dollar value you wish to sell.
- ----------------------------------------------------------------------------------------------------
Through express delivery Send a letter of instruction and any share certificates (if you
hold certificate shares) to: Boston Financial Data Services,
Attn: Phoenix Funds, 66 Brooks Drive, Braintree, MA 02184.
Be sure to include the registered owner's name, fund and
account number.
- ----------------------------------------------------------------------------------------------------
By telephone For sales up to $50,000, requests can be made by calling
(800) 243-1574.
- ----------------------------------------------------------------------------------------------------
By telephone exchange Call us at (800) 243-1574 (press 1, then 0).
- ----------------------------------------------------------------------------------------------------
</TABLE>
Things You Should Know When Selling Shares
- ------------------------------------------------------------
You may realize a taxable gain or loss (for federal income tax
purposes) if you redeem shares of a fund. Each fund reserves the
right to pay large redemptions "in-kind" (in securities owned by
a fund rather than in cash). Large redemptions are those over
$250,000 or 1% of a fund's net assets. Additional documentation
will be required for redemptions by organizations, fiduciaries,
or retirement plans, or if redemption is requested by anyone but
the shareholder(s) of record. Transfers between broker-dealer
"street" accounts are governed by the accepting broker-dealer.
Questions regarding this type of transfer should be directed to
your financial advisor. Redemption requests will not be honored
until all required documents in proper form have been received.
To avoid delay in redemption or transfer, shareholders having
questions about specific requirements should contact the funds'
Transfer Agent at (800) 243-1574.
Phoenix Investment Trust 97 19
<PAGE>
Redemptions by Mail
> If you are selling shares held individually, jointly, or as
custodian under the Uniform Gifts to Minors Act or Uniform
Transfers to Minors Act.
Send a clear letter of instructions if all of these apply:
o The proceeds do not exceed $50,000.
o The proceeds are payable to the registered owner at the
address on record.
Send a clear letter of instructions with a signature guarantee
when any of these apply:
o You are selling more than $50,000 worth of shares.
o The name or address on the account has changed within the
last 60 days.
o You want the proceeds to go to a different name or address
than on the account.
> If you are selling shares held in a corporate or fiduciary
account, please contact the fund's Transfer Agent at (800)
243-1574.
If required, the signature guarantee must be made by an eligible
guarantor institution as defined by the funds' Transfer Agent in
accordance with its signature guarantee procedures. Currently,
such procedures generally permit guarantees by banks, broker
dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings
associations.
Selling Shares by Telephone
The Transfer Agent will use reasonable procedures to confirm that
telephone instructions are genuine. Address and bank account
information are verified, redemption instructions are taped, and
all redemptions are confirmed in writing.
The individual investor bears the risk from instructions given by
an unauthorized third party that the Transfer Agent reasonably
believed to be genuine.
The Transfer Agent may modify or terminate the telephone
redemption privilege at any time with 60 days notice to
shareholders.
During times of drastic economic or market changes, telephone
redemptions may be difficult to make or temporarily suspended.
20 Phoenix Investment Trust 97
<PAGE>
Account Policies
- -------------------------------------------
Account Reinstatement Privilege
For 180 days after you sell your Class A, B, or C Shares, you can
purchase Class A Shares of any fund at net asset value, with no
sales charge, by reinvesting all or part of your proceeds, but
not more. Send your written request to State Street Bank, P.O.
Box 8301, Boston, MA 02266-8301. You can call us at
1-800-243-1574 for more information.
Please remember, a redemption and reinvestment are considered to
be a sale and purchase for tax-reporting purposes. Class B
shareholders who have had the contingent deferred sales charge
waived because they are in the Systematic Withdrawal Program are
not eligible for this reinstatement privilege.
Redemption of Small Accounts
Due to the high cost of maintaining small accounts, if your
account balance is less than $200, you may receive a notice
requesting you to bring the balance up to $200 within 60 days. If
you do not, the shares in the account will be sold at net asset
value, and a check will be mailed to the address of record.
Exchange Privileges
You should read the prospectus carefully before deciding to make
an exchange. You can obtain a prospectus from your financial
advisor or by calling us at (800) 243-4361 or accessing our Web
site at www.phoenixinvestments.com.
o You may exchange shares for another fund in the same class
of shares; e.g., Class A for Class A.
o Exchanges may be made by phone ((800) 243-1574) or by mail
(State Street Bank, P.O. Box 8301, Boston, MA 02266-8301).
o The amount of the exchange must be equal to or greater than
the minimum initial investment required.
o The exchange of shares is treated as a sale and purchase for
federal income tax purposes.
o Because excessive trading can hurt fund performance and harm
other shareholders, the funds reserve the right to
temporarily or permanently end exchange privileges or reject
an order from anyone who appears to be attempting to time
the market, including investors who request more than one
exchange in any 30-day period. The funds' underwriter has
entered into agreements with certain market timing firms
permitting them to exchange by telephone. These privileges
are limited, and the funds' distributor has the right to
reject or suspend them.
Phoenix Investment Trust 97 21
<PAGE>
Retirement Plans
Shares of the funds may be used as investments under the
following qualified prototype retirement plans: traditional IRA,
rollover IRA, SIMPLE IRA, Roth IRA, 401(k) plans, profit-sharing,
money purchase plans, and 403(b) plans. For more information,
call (800) 243-4361.
Investor Services
- ---------------------------------
Investo-Matic is a systematic investment plan that allows you to
have a specified amount automatically deducted from your checking
or savings account and then deposited into your mutual fund
account. Just complete the Investo-Matic Section on the
application and include a voided check.
Systematic Exchange allows you to automatically move money from
one Phoenix Fund to another on a monthly, quarterly, semiannual
or annual basis. Shares of one Phoenix Fund will be exchanged for
shares of the same class of another fund at the interval you
select. To sign up, just complete the Systematic Exchange Section
on the application.
Telephone Exchange lets you exchange shares of one fund for the
same class of shares in another fund, using our customer service
telephone service. See the Telephone Exchange Section on the
application.
Systematic Withdrawal Program allows you to periodically redeem a
portion of your account on a predetermined monthly, quarterly,
semiannual, or annual basis. Sufficient shares will be redeemed
on the 15th of the month at the closing net asset value so that
the payment is made about the 20th of the month. The program also
provides for redemptions on or about the 10th, 15th, or 25th with
proceeds directed through Automated Clearing House (ACH) to your
bank. The minimum withdrawal is $25.00, and minimum account
balance requirements continue. Shareholders in the program must
own fund shares worth at least $5,000.
Tax Status of Distributions
- -------------------------------------------
The funds plan to make distributions from net investment income
semiannually, and to distribute net realized capital gains, if
any, at least annually. Distributions of short-term capital gains
and net investment income are taxable to shareholders as ordinary
income. Long-term capital gains, if any, distributed to
shareholders and which are designated by a fund as capital gain
distributions, are taxable to shareholders as long-term capital
gain distributions regardless of the length of time you have
owned your shares.
Unless you elect to receive distributions in cash, dividends and
capital gain distributions are paid in additional shares. All
distributions, cash or additional shares, are subject to federal
income tax and may be subject to state, local and other taxes.
22 Phoenix Investment Trust 97
<PAGE>
Financial Highlights
- ------------------------------------
These tables are intended to help you understand the funds'
financial performance since inception. Certain information
reflects financial results for a single fund share. The total
returns in the table represent the rate that an investor would
have earned or lost on an investment in the fund (assuming
reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP,
independent accountants. Their report, together with the funds'
financial statements, are included in the funds' most recent
Annual Report, which is available upon request.
Phoenix-Hollister Small Cap Value Fund
<TABLE>
<CAPTION>
Class A
--------------------------------------------
Year From Inception
Ended 11/20/97 to
8/31/99 8/31/98
--------------------- ----------------------
<S> <C> <C>
Net asset value, beginning of period $ 8.11 $ 10.00
Income from investment operations
Net investment income (loss) 0.01 (1)(2) (0.01)(1)(2)
Net realized and unrealized gain (loss) 3.31 (1.85)
------------- -----------
Total from investment operations 3.32 (1.86)
------------- -----------
Less distributions
Dividends from net investment income (0.02) --
In excess of net investment income -- (0.03)
------------- -----------
Total distributions (0.02) (0.03)
------------- -----------
Change in net asset value 3.30 (1.89)
------------- -----------
Net asset value, end of period $ 11.41 $ 8.11
============= ===========
Total return(5) 40.90% (18.64)%(6)
Ratios/supplemental data:
Net assets, end of period (thousands) $ 26,926 $ 14,519
Ratio to average net assets of:
Operating expenses 1.40% 1.40%(7)
Net investment income (loss) 0.15% (0.14)%(7)
Portfolio turnover 203% 105%(6)
<CAPTION>
Class B Class C
--------------------------------------------- ----------------------
Year From Inception Year
Ended 11/20/97 to Ended
8/31/99 8/31/98 8/31/99
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 8.07 $ 10.00 $ 8.07
Income from investment operations
Net investment income (loss) (0.06)(1)(3) (0.08)(1)(3) (0.06)(1)(4)
Net realized and unrealized gain (loss) 3.28 (1.82) 3.28
----------- ----------- -----------
Total from investment operations 3.22 (1.90) 3.22
----------- ----------- -----------
Less distributions
Dividends from net investment income (0.02) -- (0.02)
In excess of net investment income -- (0.03) --
----------- ----------- -----------
Total distributions (0.02) (0.03) (0.02)
----------- ----------- -----------
Change in net asset value 3.20 (1.93) 3.20
----------- ----------- -----------
Net asset value, end of period $ 11.27 $ 8.07 $ 11.27
=========== =========== ===========
Total return(5) 39.86% (19.07)%(6) 39.86%
Ratios/supplemental data:
Net assets, end of period (thousands) $ 9.494 $ 5,922 $ 6,465
Ratio to average net assets of:
Operating expenses 2.15% 2.15%(7) 2.15%
Net investment income (loss) (0.60)% (1.01)%(7) (0.60)%
Portfolio turnover 203% 105%(6) 203%
<CAPTION>
Class C
----------------------
From Inception
11/20/97 to
8/31/98
----------------------
<S> <C>
Net asset value, beginning of period $ 10.00
Income from investment operations
Net investment income (loss) (0.08)(1)(4)
Net realized and unrealized gain (loss) (1.82)
-----------
Total from investment operations (1.90)
-----------
Less distributions
Dividends from net investment income --
In excess of net investment income (0.03)
-----------
Total distributions (0.03)
-----------
Change in net asset value (1.93)
-----------
Net asset value, end of period $ 8.07
===========
Total return(5) (19.09)%(6)
Ratios/supplemental data:
Net assets, end of period (thousands) $ 2,770
Ratio to average net assets of:
Operating expenses 2.15%(7)
Net investment income (loss) (0.98)%(7)
Portfolio turnover 105%(6)
</TABLE>
- ----------------
(1) Computed using average shares outstanding.
(2) Includes reimbursement of operating expenses by investment adviser of $0.06
and $0.14, respectively.
(3) Includes reimbursement of operating expenses by investment adviser of $0.06
and $0.14, respectively.
(4) Includes reimbursement of operating expenses by investment adviser of $0.06
and $0.14, respectively.
(5) Maximum sales charges are not reflected in the total return calculation.
(6) Not annualized.
(7) Annualized.
Phoenix Investment Trust 97 23
<PAGE>
Financial Highlights (continued)
- -------------------------------------------------------
Phoenix-Hollister Value Equity Fund
<TABLE>
<CAPTION>
Class A
--------------------------------------------
Year From Inception
Ended 11/5/97 to
8/31/99 8/31/98
--------------------- ----------------------
<S> <C> <C>
Net asset value, beginning of period $ 8.94 $ 10.00
Income from investment operations
Net investment income (loss) 0.02 (1)(2) 0.03 (1)(2)
Net realized and unrealized gain (loss) 3.20 (1.07)
------------- --------------
Total from investment operations 3.22 (1.04)
------------- --------------
Less distributions
Dividends from net investment income (0.03) (0.01)
In excess of net investment income (0.02) (0.01)
------------- --------------
Total distributions (0.05) (0.02)
------------- --------------
Change in net asset value 3.17 (1.06)
------------- --------------
Net asset value, end of period $ 12.11 $ 8.94
============= ==============
Total return(5) 35.89% (10.28)%(6)
Ratios/supplemental data:
Net assets, end of period (thousands) $ 26,974 $ 19,766
Ratio to average net assets of:
Operating expenses 1.25% 1.25%(7)
Net investment income (loss) 0.14% 0.31%(7)
Portfolio turnover 192% 59%(6)
<CAPTION>
Class B Class C
--------------------------------------------- ----------------------
Year From Inception Year
Ended 11/5/97 to Ended
8/31/99 8/31/98 8/31/99
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 8.89 $ 10.00 $ 8.89
Income from investment operations
Net investment income (loss) (0.07)(1)(3) (0.04)(1)(3) (0.07)(1)(4)
Net realized and unrealized gain (loss) 3.19 (1.05) 3.19
----------- ----------- -----------
Total from investment operations 3.12 (1.09) 3.12
----------- ----------- -----------
Less distributions
Dividends from net investment income (0.01) (0.01) (0.01)
In excess of net investment income -- (0.01) --
----------- ----------- -----------
Total distributions (0.01) (0.02) (0.01)
----------- ----------- -----------
Change in net asset value 3.11 (1.11) 3.11
----------- ----------- -----------
Net asset value, end of period $ 12.00 $ 8.89 $ 12.00
=========== =========== ===========
Total return(5) 35.05% (10.92)%(6) 34.91%
Ratios/supplemental data:
Net assets, end of period (thousands) $ 24,709 $ 5,291 $ 3,108
Ratio to average net assets of:
Operating expenses 2.00% 2.00%(7) 2.00%
Net investment income (loss) (0.62)% (0.45)%(7) (0.60)%
Portfolio turnover 192% 59%(6) 192%
<CAPTION>
Class C
----------------------
From Inception
11/5/97 to
8/31/98
----------------------
<S> <C>
Net asset value, beginning of period $ 10.00
Income from investment operations
Net investment income (loss) (0.04)(1)(4)
Net realized and unrealized gain (loss) (1.05)
-----------
Total from investment operations (1.09)
-----------
Less distributions
Dividends from net investment income (0.01)
In excess of net investment income (0.01)
-----------
Total distributions (0.02)
-----------
Change in net asset value (1.11)
-----------
Net asset value, end of period $ 8.89
===========
Total return(5) (10.86)%(6)
Ratios/supplemental data:
Net assets, end of period (thousands) $ 2,005
Ratio to average net assets of:
Operating expenses 2.00%(7)
Net investment income (loss) (0.45)%(7)
Portfolio turnover 59%(6)
</TABLE>
----------------
(1) Computed using average shares outstanding.
(2) Includes reimbursement of operating expenses by investment
adviser of $0.04 and $0.15, respectively.
(3) Includes reimbursement of operating expenses by investment
adviser of $0.03 and $0.15, respectively.
(4) Includes reimbursement of operating expenses by investment
adviser of $0.04 and $0.15, respectively.
(5) Maximum sales charges are not reflected in the total return
calculation.
(6) Not annualized.
(7) Annualized.
24 Phoenix Investment Trust 97
<PAGE>
Additional Information
- -------------------------------------------------
Statement of Additional Information
The fund has filed a Statement of Additional Information about the funds,
dated December 29, 1999 with the Securities and Exchange Commission. The
Statement contains more detailed information about the funds. It is
incorporated into this prospectus by reference and is legally part of the
prospectus. You may obtain a free copy of the Statement:
> by writing to Phoenix Equity Planning Corporation, 100 Bright Meadow
Blvd., P.O. Box 2200, Enfield, Connecticut 06083-2200 or
> by calling (800) 243-4361.
You may also obtain information about the funds from the Securities and
Exchange Commission:
> through its internet site (http://www.sec.gov),
> by visiting its Public Reference Room in Washington, DC or
> by writing to its Public Reference Section, Washington, DC 20549-6009
(a fee may be charged).
Information about the operation of the Public Reference Room may be
obtained by calling (800) SEC-0330.
Shareholder Reports
The funds semiannually mail to shareholders detailed reports containing
information about the fund's investments. The funds' Annual Report contains
a detailed discussion of the market conditions and investment strategies
that significantly affected the funds' performance from September 1 through
August 31. You may request a free copy of the funds' Annual and Semiannual
Reports:
> by writing to Phoenix Equity Planning Corporation, 100 Bright Meadow
Blvd., P.O. Box 2200, Enfield, Connecticut 06083-2200 or
> by calling (800) 243-4361.
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders: (800) 367-5877
Telecommunication Device (TTY): (800) 243-1926
SEC File Nos. 333-34537 & 811-08343
[Recycle Logo] Printed on recycled paper using soybean ink
Phoenix Investment Trust 97 25
<PAGE>
"[This Page Intentionally Left Blank]"
<PAGE>
Phoenix Equity Planning Corporation ------------------
PO Box 2200 PRSRT STD
Enfield CT 06083-2200 U.S. Postage
PAID
Andrews
Associates
------------------
[PHOENIX INVESTMENT PARTNERS LOGO]
<PAGE>
PHOENIX-HOLLISTER SMALL CAP VALUE FUND
PHOENIX-HOLLISTER VALUE EQUITY FUND
101 Munson Street
Greenfield, MA 01301
Statement of Additional Information
December 29, 1999
This Statement of Additional Information is not a prospectus, but expands
upon and supplements the information contained in the current prospectus of the
Phoenix-Hollister Small Cap Value Fund and Phoenix-Hollister Value Equity Fund,
dated December 29, 1999 (the "Prospectus"), and should be read in conjunction
with it. The prospectus may be obtained by calling Phoenix Equity Planning
Corporation ("Equity Planning") at (800) 243-4361 or by writing to Equity
Planning at 100 Bright Meadow Boulevard, 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 ....................... 9
Performance Information ....................... 9
Portfolio Transactions and Brokerage .......... 10
The Investment Adviser ........................ 11
Net Asset Value ............................... 12
How to Buy Shares ............................. 13
Alternative Purchase Arrangements ............. 13
Investor Account Services ..................... 16
How to Redeem Shares .......................... 17
Dividends, Distributions and Taxes ............ 18
Tax Sheltered Retirement Plans ................ 18
The Distributor ............................... 19
Distribution Plans ............................ 20
Management of the Trust ....................... 22
Other Information ............................. 28
</TABLE>
Customer Service: (800) 243-1574
Marketing: (800) 243-4361
Telephone Orders: (800) 367-5877
Telecommunications Device (TTY)-(800) 243-1926
PXP 2053B (12/99)
<PAGE>
THE TRUST
Phoenix Investment Trust 97 (the "Trust") is a diversified open-end
management investment company which was organized under Massachusetts law in
1997 as a business trust. The Trust presently comprises two series: the
Phoenix-Hollister Small Cap Value Fund and Phoenix-Hollister Value Equity Fund,
each a "Fund" and collectively the "Funds."
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Fund is deemed to be a fundamental policy
which may not be changed without the approval of the holders of a majority of
the outstanding shares of each Fund. Investment restrictions described in this
Statement of Additional Information are fundamental policies of each Fund and
may not be changed without the approval of each Fund's shareholders.
Notwithstanding the foregoing, certain investment restrictions affect more than
one series of the Trust and therefore modifications may require the consent of
other shareholders. There is no assurance that any Fund will meet its
investment objective.
Investment Techniques
The Funds may utilize the following practices or techniques in pursuing
its investment objectives.
U.S. Government Securities. Each Fund may invest in U.S. government
securities, including bills, notes and bonds issued by the U.S. Treasury and
securities issued or guaranteed by agencies or instrumentalities of the U.S.
government. Some U.S. government securities are supported by the direct full
faith and credit pledge of the U.S. government; others are supported by the
right of the issuer to borrow from the U.S. Treasury; others such as securities
issued by the Federal National Mortgage Association, are supported by the
discretionary authority of the U.S. government to purchase the agencies'
obligations; and others are supported only by the credit of the issuing or
guaranteeing instrumentality. There is no assurance that the U.S. government
will provide financial support to an instrumentality it sponsors when it is not
obligated by law to do so.
Repurchase Agreements. Repurchase Agreements are agreements by which a
Fund purchases a security and obtains a simultaneous commitment from the seller
(a member bank of the Federal Reserve System or, to the extent permitted by the
Investment Company Act of 1940, a recognized securities dealer) that the seller
will repurchase the security at an agreed upon price and date. The resale price
is in excess of the purchase price and reflects an agreed upon market rate
unrelated to the coupon rate on the purchased security.
A repurchase transaction is usually accomplished either by crediting the
amount of securities purchased to the account of the custodian of the Fund
maintained in a central depository of book-entry system or by physical delivery
of the securities to the Fund's custodian in return for delivery of the
purchase price to the seller. Repurchase transactions are intended to be
short-term transactions with the seller repurchasing the securities, usually
within seven days.
Even though repurchase transactions usually do not impose market risks on
the purchasing Fund, if the seller of the repurchase agreement defaults and
does not repurchase the underlying securities, the Fund might incur a loss if
the value of the underlying securities declines, and disposition costs may be
incurred in connection with liquidating the underlying securities. In addition,
if bankruptcy proceedings are commenced regarding the seller, realization upon
the underlying securities may be delayed or limited, and a loss may be incurred
if the underlying securities decline in value.
Securities and Index Options. Each Fund may write covered call options and
purchase call and put options. Options and the related risks are summarized
below.
Writing and Purchasing Options. Call options written by the Funds normally
will have expiration dates between three and nine months from the date written.
During the option period the Funds may be assigned an exercise notice by the
broker-dealer through which the call option was sold, requiring the Funds to
deliver the underlying security (or cash in the case of securities index calls)
against payment of the exercise price. This obligation is terminated upon the
expiration of the option period or at such earlier time as a Fund effects a
closing purchase transaction. A closing purchase transaction cannot be effected
with respect to an option once a Fund has received an exercise notice.
The exercise price of a call option written by a Fund may be below, equal
to or above the current market value of the underlying security or securities
index at the time the option is written.
A multiplier for an index option performs a function similar to the unit
of trading for an option on an individual security. It determines the total
dollar value per contract of each point between the exercise price of the
option and the current level of the underlying index. A multiplier of 100 means
that a one-point difference will yield $100. Options on different indices may
have different multipliers.
Securities indices for which options are currently traded include the
Standard & Poor's 100 and 500 Composite Stock Price Indices, Computer/Business
Equipment Index, Major Market Index, Amex Market Value Index, Computer
Technology Index, Oil and Gas Index, NYSE Options Index, Gaming/Hotel Index,
Telephone Index, Transportation Index, Technology Index, and Gold/ Silver
Index. Each Fund may write call options and purchase call and put options on
any other indices traded on a recognized exchange.
1
<PAGE>
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option written by a Fund to prevent an underlying
security from being called, or to enable a Fund to write another call option
with either a different exercise price or expiration date or both. The Fund may
realize a net gain or loss from a closing purchase transaction depending upon
whether the amount of the premium received on the call option is more or less
than the cost of effecting the closing purchase transaction. If a call option
written by a Fund expires unexercised, the Fund will realize a gain in the
amount of the premium on the option less the commission paid.
Limitations on Options. Each Fund may write call options only if they are
covered and if they remain covered so long as the Fund is obligated as a
writer. If the Fund writes a call option on an individual security, the Fund
will own the underlying security at all times during the option period. Each
Fund will write call options on indices only to hedge in an economically
appropriate way portfolio securities which are not otherwise hedged with
options or financial futures contracts. Call options on securities indices
written by a Fund will be "covered" by identifying the specific portfolio
securities being hedged.
To secure the obligation to deliver the underlying security, the writer of
a covered call option on an individual security is required to deposit the
underlying security or other assets in escrow with the broker in accordance
with clearing corporation and exchange rules. In the case of an index call
option written by a Fund, the Fund will be required to deposit qualified
securities. A "qualified security" is a security against which the Fund has not
written a call option and which has not been hedged by the Fund by the sale of
a financial futures contract. If at the close of business on any day the market
value of the qualified securities falls below 100% of the current index value
times the multiplier times the number of contracts, the Fund will deposit any
asset, including equity securities and non-investment grade debt so long as the
asset is liquid, unencumbered and marked to market daily, equal in value to the
difference. In addition, when the Funds write a call on an index which is
"in-the-money" at the time the call is written, the Funds will pledge with its
custodian bank any asset, including equity securities and non-investment grade
debt so long as the asset is liquid, unencumbered and marked to market daily,
equal in value to the amount by which the call is "in-the-money" times the
multiplier times the number of contracts. Any amount pledged may be applied
to the Fund's obligation to pledge additional amounts in the event that the
market value of the qualified securities falls below 100% of the current index
value times the multiplier times the number of contracts.
Each Fund may sell a call option or a put option which it has previously
purchased prior to the purchase (in the case of a call) or the sale (in the
case of a put) of the underlying security. Any such sale of a call option or a
put option would result in a net gain or loss, depending on whether the amount
received on the sale is more or less than the premium and other transaction
costs paid.
Each Fund may enter into futures contracts and options, provided that such
obligations represent no more than 50% of the Fund's net assets. Under the
Commodity Exchange Act, a Fund may enter into futures and options transactions
for hedging purposes without regard to the percentage of assets committed to
initial margin and option premiums and for other than hedging purposes provided
that assets committed to initial margin and option premiums do not exceed 5% of
the Fund's net assets. To the extent required by law, each Fund will set aside
cash and appropriate liquid assets in a pledged account to cover its
obligations related to futures contracts and options. In connection with each
Fund qualifying as a regulated investment company under the Internal Revenue
Code, other restrictions on the Funds' ability to enter into option
transactions may apply from time to time. See "Dividends, Distributions and
Taxes."
Risks Relating to Options. During the option period, the writer of a call
option has, in return for the premium received on the option, given up the
opportunity for capital appreciation above the exercise price should the market
price of the underlying security increase, but has retained the risk of loss
should the price of the underlying security decline. The writer has no control
over the time when it may be required to fulfill its obligation as a writer of
the option.
The risk of purchasing a call option or a put option is that the Fund may
lose the premium it paid plus transaction costs. If the Fund does not exercise
the option and is unable to close out the position prior to expiration of the
option, it will lose its entire investment.
An option position may be closed out only on an exchange which provides a
secondary market for an option of the same series. Although the Funds will
write and purchase options only when the Adviser believes that a liquid
secondary market will exist for options of the same series, there can be no
assurance that a liquid secondary market will exist for a particular option at
a particular time and that the Fund, if it so desires, can close out its
position by effecting a closing transaction. If the writer of a covered call
option is unable to effect a closing purchase transaction, it cannot sell the
underlying security until the option expires or the option is exercised.
Accordingly, a covered call writer may not be able to sell the underlying
security at a time when it might otherwise be advantageous to do so.
Possible reasons for the absence of a liquid secondary market on an
exchange include: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) inadequacy of the facilities
of an exchange or the clearing corporation to handle trading volume; and (v) a
decision by one or more exchanges to discontinue the trading of options or
impose restrictions on orders.
Each exchange has established limitations governing the maximum number of
call options, whether or not covered, which may be written by a single investor
acting alone or in concert with others (regardless of whether such options are
written on the same
2
<PAGE>
or different exchanges or are held or written on one or more accounts or
through one or more brokers). An exchange may order the liquidation of
positions found to be in violation of these limits and it may impose other
sanctions or restrictions.
Risks of Options on Indices. Because the value of an index option depends
upon movements in the level of the index rather than movements in the price of
a particular security, whether each Fund will realize a gain or loss on the
purchase or sale of an option on an index depends upon movements in the level
of prices in the market generally or in an industry or market segment rather
than upon movements in the price of an individual security. Accordingly,
successful use by the Funds of options on indices will be subject to the
Adviser's ability to predict correctly movements in the direction of the market
generally or in the direction of a particular industry. This requires different
skills and techniques than predicting changes in the prices of individual
securities.
Index prices may be distorted if trading of certain securities included in
the index is interrupted. Trading in index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number
of securities included in the index. If this occurred, the Fund would not be
able to close out options which it had written or purchased and, if
restrictions on exercise were imposed, might be unable to exercise an option it
purchased, which would result in substantial losses to the Fund. However, it is
the Trust's policy to write or purchase options only on indices which include a
sufficient number of securities so that the likelihood of a trading halt in the
index is minimized.
Because the exercise of an index option is settled in cash, an index call
writer cannot determine the amount of its settlement obligation in advance and,
unlike call writing on portfolio securities, cannot provide in advance for its
potential settlement obligation by holding the underlying securities.
Consequently, the Funds will write call options on indices only subject to the
limitations described above.
Price movements in securities in the Funds' portfolios will not correlate
perfectly with movements in the level of the index and, therefore, the Funds
bear the risk that the price of the securities held by a Fund may not increase
as much as the level of the index. In this event, the Fund would bear a loss on
the call which would not be completely offset by movements in the prices of the
Fund's portfolio securities. It is also possible that the index may rise when
the value of the Fund's portfolio securities does not. If this occurred, the
Fund would experience a loss on the call which would not be offset by an
increase in the value of its portfolio and might also experience a loss in the
market value of portfolio securities.
Unless the Fund has other liquid assets which are sufficient to satisfy
the exercise of a call on an index, the Fund will be required to liquidate
portfolio securities in order to satisfy the exercise. Because an exercise must
be settled within hours after receiving the notice of exercise, if the Fund
fails to anticipate an exercise, to the extent permissible, it may have to
borrow from a bank pending settlement of the sale of securities in its
portfolio and pay interest on such borrowing.
When a Fund has written a call on an index, there is also a risk that the
market may decline between the time the Fund has the call exercised against it,
at a price which is fixed as of the closing level of the index on the date of
exercise, and the time the Fund is able to sell securities in its portfolio. As
with options on portfolio securities, the Fund will not learn that a call has
been exercised until the day following the exercise date but, unlike a call on
a portfolio security where the Fund would be able to deliver the underlying
security in settlement, the Fund may have to sell part of its portfolio
securities in order to make settlement in cash, and the price of such
securities might decline before they could be sold.
If a Fund exercises a put option on an index which it has purchased before
final determination of the closing index value for that day, it runs the risk
that the level of the underlying index may change before closing. If this
change causes the exercised option to fall "out-of-the-money" the Fund will be
required to pay the difference between the closing index value and the exercise
price of the option (multiplied by the applicable multiplier) to the assigned
writer. Although the Fund may be able to minimize this risk by withholding
exercise instructions until just before the daily cutoff time or by selling
rather than exercising an option when the index level is close to the exercise
price, it may not be possible to eliminate this risk entirely because the
cutoff times for index options may be earlier than those fixed for other types
of options and may occur before definitive closing index values are announced.
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 its portfolio securities or securities which it intends to
purchase. Hedging is accomplished when an investor takes a position in the
futures market opposite to his 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 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
in a Fund's portfolio 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 the Fund may wish
to purchase in the future by purchasing futures contracts.
The Funds may purchase or sell any financial futures contracts which are
traded on a recognized exchange or board of trade. Financial futures contracts
consist of interest rate futures contracts and securities index futures
contracts. A public market presently exists in interest rate futures contracts
covering long-term U.S. Treasury bonds, U.S. Treasury notes, three-month U.S.
Treasury bills and GNMA certificates. Securities index futures contracts are
currently traded with respect to the Standard & Poor's 500
3
<PAGE>
Composite Stock Price Index and such other broad-based stock market indices as
the New York Stock Exchange Composite Stock Index and the Value Line Composite
Stock Price Index. 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 when a Fund purchases or sells a security, no
security is delivered or received by the Fund upon the purchase or sale of a
financial futures contract. Initially, the Fund will be required to deposit in
a pledged account with its custodian bank any asset, including equity
securities and non-investment grade debt so long as the asset is liquid,
unencumbered and marked to market daily. 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. 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.
The Funds 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.
Limitations on Futures Contracts and Related Options. Each Fund may enter
into futures contracts and options, provided that such obligations represent no
more than 50% of the Fund's net assets. Under the Commodity Exchange Act, a
Fund may enter into futures and options transactions for hedging purposes
without regard to the percentage of assets committed to initial margin and
option premiums and for other than hedging purposes provided that assets
committed to initial margin and option premiums do not exceed 5% of the Fund's
net assets. To the extent required by law, the Fund will set aside cash and
appropriate liquid assets in a pledged account to cover its obligations related
to futures contracts and options.
The extent to which the Funds may enter into financial futures contracts
and related options also may be limited by the requirements of the Internal
Revenue Code for qualifications as a regulated investment company. See
"Dividends, Distributions and Taxes."
Risks Relating to Futures Contracts. Positions in futures contracts may be
closed out only on an exchange which provides a secondary market for such
contracts or options. Each Fund will enter into a futures 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 futures
contract at any specific time. Thus, it may not be possible to close out a
futures position. In the case of a futures position, in the event of adverse
price movements each Fund would continue to be required to make daily margin
payments. In this situation, if each Fund has insufficient cash to meet daily
margin requirements it may have to sell portfolio securities at a time when it
may be disadvantageous to do so. In addition, each 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 portfolio 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 preclude a hedger's opportunity to
benefit from a favorable market movement. In addition, investing in futures
contracts will cause the Fund to incur additional brokerage commissions and may
cause an increase in the Fund's portfolio turnover rate.
The successful use of futures contracts also depends on the ability of the
Adviser to forecast correctly the direction and extent of market movements
within a given time frame. To the extent market prices remain stable during the
period a futures contract is held by the Fund or such prices move in a
direction opposite to that anticipated, the Fund may realize a potential
unlimited loss on the hedging transaction which is not offset by an increase in
the value of its portfolio securities. As a result, the Fund's return for the
period may be less than if it had not engaged in the hedging transaction.
4
<PAGE>
Utilization of futures contracts by the Fund involves the risk of
imperfect correlation in movements in the price of futures contracts and
movements in the price of the securities which are being hedged. If the price
of the futures contract moves more or less than the price of the securities
being hedged, the Fund will experience a gain or loss which will not be
completely offset by movements in the price of the securities. It is possible
that, where the Fund has sold futures contracts to hedge its portfolio against
decline in the market, the market may advance and the value of securities held
in the Fund's portfolio may decline. If this occurred, the Fund would lose
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 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 also elect to close out their contracts through off-setting
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 rather than
to engage in closing transactions due to the resultant reduction in the
liquidity of the futures market. In addition, due to the fact that, from the
point of view of speculators, the deposit requirements in the futures markets
are less onerous than margin requirements in the cash market, increased
participation by speculators in the futures market could cause temporary price
distortions. Due to the possibility of price distortions in the futures market
and because of the imperfect correlation between movements in the prices of
securities and movements in the prices of futures contracts, a correct forecast
of market trends may still not result in a successful hedging transaction.
Leverage. Each Fund may borrow for temporary, extraordinary or emergency
purposes. Each Fund will borrow only from banks, and only if immediately after
such borrowing the value of the assets of the Fund (including the amount
borrowed) less its liabilities (not including any borrowings) is at least three
times the amount of funds borrowed. The effect of this provision is to permit
the Fund to borrow up to 25% of the total assets (including any borrowings) of
the Fund. If, due to market fluctuations or other reasons, the value of the
Fund's assets computed as provided above becomes at any time less than three
times the amount of the borrowings, the Fund, within three business days, is
required to reduce bank debt to the extent necessary to meet the required 300%
asset coverage.
Interest on money borrowed will be an expense of the Fund with respect to
which the borrowing has been made. Because such expense would not otherwise be
incurred, the net investment income of the Fund is not expected to be as high
as it otherwise would be during periods when borrowings for investment purposes
are substantial. Bank borrowings must be obtained on an unsecured basis. Any
such borrowing must also be made subject to an agreement by the lender that any
recourse is limited to the assets of the Fund with respect to which the
borrowing has been made.
Foreign Securities. Each Fund may purchase foreign securities, including
those issued by foreign branches of U.S. banks. In any event, such investments
in foreign securities will be limited to 30% of the total assets of each Fund.
Investments in foreign securities, particularly those of non-governmental
issuers, involve considerations which are not ordinarily associated with
investing in domestic issues. These considerations include changes in currency
rates, currency exchange control regulations, the possibility of expropriation,
the unavailability of financial information, the difficulty of interpreting
financial information prepared under foreign securities markets, the impact of
political, social or diplomatic developments, difficulties in invoking legal
process abroad and the difficulty of assessing economic trends in foreign
countries.
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, and 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. 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 which foreign
currencies are appreciating or depreciating in value relative to the U.S.
dollar. Exchange rates fluctuate over both the short and long term.
Foreign securities held by the Fund may not be registered with the
Securities and Exchange Commission ("SEC") and the issuers thereof will not be
subject to the SEC'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 differ
favorably or unfavorably from the United States economy in such respects as
growth of Gross National Product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payment positions.
In investing in securities denominated in foreign currencies, the Fund
will be subject to the additional risk of currency fluctuations. An adverse
change in the value of a particular foreign currency as against the U.S.
dollar, to the extent that such change is not offset by a gain in other foreign
currencies, will result in a decrease in the Fund's assets. Any such change may
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also have the effect of decreasing or limiting the income available for
distribution. Foreign currencies may be affected by revaluation, adverse
political and economic developments, and governmental restrictions. Although
the Fund will invest only in securities denominated in foreign currencies that
are fully convertible into U.S. dollars without legal restriction at the time
of investment, no assurance can be given that currency exchange controls will
not be imposed on any particular currency at a later date.
Securities of U.S. issuers denominated in foreign currencies may be less
liquid and their prices more volatile than securities issued by domestic
issuers and denominated in U.S. dollars. In addition, investing in securities
denominated in foreign currencies often entails costs not associated with
investment in U.S. dollar-denominated securities of U.S. issuers, such as the
cost of converting foreign currency to U.S. dollars, higher brokerage
commissions, custodial expenses and other fees. Non-U.S. dollar denominated
securities may be subject to certain withholding and other taxes of the
relevant jurisdiction, which may reduce the yield on the securities to the Fund
and which may not be recoverable by the Fund or its investors.
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 a Fund 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 the Fund's portfolio may be affected by such trading on days when a
shareholder has no access to the Fund.
Investment income received by the 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, the Fund
may elect to pass through to its shareholders their proportionate shares of
foreign income taxes paid. Investors are urged to consult their tax attorney
with respect to specific questions regarding foreign, federal, state or local
taxes.
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 the Funds' 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
expropriations, 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.
Although the Funds may buy securities of foreign issuers in foreign
markets, most of their foreign securities investments are made by purchasing
American Depositary Receipts (ADRs), "ordinary shares," or "New York Shares."
The Funds may invest in foreign-currency-denominated securities that trade in
foreign markets if the Adviser believes that such investments will be
advantageous to the Funds.
ADRs are dollar-denominated receipts representing interests in the
securities of a foreign issuer. They are issued by U.S. banks and traded on
exchanges or over the counter in the United States. Ordinary shares are shares
of foreign issuers that are traded abroad and on a U.S. exchange. New York
shares are shares that a foreign issuer has allocated for trading in the United
States. ADRs, ordinary shares, and New York shares all may be purchased with
and sold for U.S. dollars, which protects the Fund from the foreign settlement
risks described below.
Lending Portfolio Securities. In order to increase its return on
investments, each Fund may make loans of its portfolio securities, as long as
the market value of the loaned securities does not exceed one-third of the
value of the Fund's total assets. Loans of portfolio securities will always be
fully collateralized by cash or securities issued or guaranteed by the U.S.
Government and marked to market daily, at no less than 100% of the market value
of the loaned securities (as marked to market daily) and made only to borrowers
considered by the Adviser to be creditworthy. Lending portfolio securities
involves a risk of delay in the recovery of the loaned securities and possibly
the loss of the collateral if the borrower fails financially.
Forward Foreign Currency Exchange Contracts. 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 ("Term") 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. These contracts will only
be used to facilitate settlements.
Each Fund does not intend to enter into such forward contracts if it would
have more than 5% of the value of its net assets committed to the initial
margin and option premiums on such contracts on a regular or continuous basis.
A Fund will not 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 Adviser believes that it is important to have
the flexibility to enter into such forward contracts when it determines that to
do so is in the best interests of the Fund. The Funds' custodian bank will
pledge any asset, including equity securities and non-investment grade debt so
long as the asset is liquid, unencumbered and marked to market daily, in an
amount not less than the value of the 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 pledged declines, additional cash or
securities will be added so that the pledged amount is not less than the amount
of the Fund's commitments with respect to such contracts. Generally, the Funds
will not enter into forward contracts with a term longer than one year.
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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, it 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.
Utilizing this investment technique may also hedge the 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 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 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 the 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 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. The 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.
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.
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 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.
Each Fund may enter into futures contracts and options, provided that such
obligations represent no more than 50% of a Fund's net assets. Under the
Commodity Exchange Act, a Fund may enter into futures and options transactions
for hedging purposes
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without regard to the percentage of assets committed to initial margin and
option premiums and for other than hedging purposes provided that assets
committed to initial margin and option premiums do not exceed 5% of a Fund's
net assets. To the extent required by law, the Funds will set aside cash and
appropriate liquid assets in a pledged account to cover its obligations related
to futures contracts and options.
Derivative Investments. In order to hedge various portfolio positions,
including to hedge against price movements in markets in which the Funds
anticipate increasing their exposure, the Funds may invest in certain
instruments which may be characterized as derivative investments. These
investments include various types of interest rate transactions, options and
futures. Such investments also may consist of indexed securities. Other of such
investments have no express quantitative limitations, although they may be made
solely for hedging purposes, not for speculation, and may in some cases be
limited as to the type of counter-party permitted. Interest rate transactions
involve the risk of an imperfect correlation between the index used in the
hedging transactions and that pertaining to the securities which are the
subject of such transactions. Similarly, utilization of options and futures
transactions involves the risk of imperfect correlation in movements in the
price of options and futures and movements in the price of the securities or
interest rates which are the subject of the hedge. Investments in indexed
securities, including inverse securities, subject the Funds to the risks
associated with changes in the particular indices, which may include reduced or
eliminated interest payments and losses of invested principal.
Illiquid Securities. Each Fund may invest up to 15% of its net assets in
securities that are not liquid. The Funds consider investments that the adviser
is not likely to be able to sell within seven days as not liquid. These
securities can include repurchase agreements with maturities of more than seven
days and private placements. Repurchase agreements are contracts under which
the fund will buy securities and simultaneously agree to resell them at a later
date for an agreed, higher price. Private placements are securities that are
not sold to investors through a public offering but instead are sold in direct,
private transactions. Illiquid securities may have a lower value than
comparable securities that have active markets for resale, and they can lose
their value more quickly under unfavorable conditions.
Investment Companies. Each Fund may invest up to 10% of its assets in
mutual funds. The Funds may invest in mutual funds advised by the fund's
adviser or other advisers controlled by the same persons who control the fund's
adviser. Assets invested in other investment companies and mutual funds will
incur fees similar to the investment management, custodial and other fees that
this fund charges. You will in effect incur a second set of fees on these fund
investments.
Standard & Poor's Depositary Receipts. Each Fund may invest up to 5% of
its assets in a special investment company issuing Standard & Poor's Depositary
Receipts ("SPDR"s). Each SPDR represents a proportionate interest, in
substantially the same weighting, as the stocks that make up the Standard &
Poor's 500 Index. The same types of events and circumstances affecting stocks
generally can affect the value of SPDRs.
Private Placements
"Private Placement" securities are those that are not sold to investors
through a public offering but instead are sold in direct, private transactions.
Federal and state law imposes restrictions on the resale of private placements.
Securities such as private placements and other restricted securities tend
to be illiquid. Illiquid securities are those that the Funds would not likely
be able to sell in any given seven day period and are limited to no more than
15% of each Fund's net assets. The Board of Trustees of the Funds have adopted
procedures for evaluating the liquidity of securities. The procedures take into
account the frequency of trades and quotes for the security, the number of
dealers willing to purchase and sell the security and the number of other,
qualified purchasers, dealer undertakings to make a market in the security, and
the nature of the marketplace for effecting trades (i.e. the time needed to
dispose of the security, the method of soliciting offers, and the mechanics of
transfer).
Such securities may ordinarily be re-sold in privately negotiated
transactions to a limited number of purchasers or in a public offering made
pursuant to an effective registration statement under the Securities Act of
1933. Public sales of such securities may involve significant delays and
expense. Private sales often require negotiation with one or more purchasers
and may produce less favorable prices than the sale of similar unrestricted
securities. Public sales generally involve the time and expense of the
preparation and processing of a registration statement under the 1933 Act (and
the possible decline in value of the securities during such period) and may
involve the payment of underwriting commissions.
Short-Term Instruments
For liquidity purposes, each Fund may invest in high-quality money market
instruments with remaining maturities of one year or less. Such instruments may
include U.S. Government securities, Certificates of Deposit, Commercial Paper
and Bankers Acceptances. Each Fund may also invest in repurchase agreements
with maturities of seven days or less to generate income from its excess cash
balances. Each Fund may invest up to 15% of its net assets in repurchase
agreements having maturities of more than seven days (together with any other
illiquid securities held). Securities acquired through repurchase agreements
will be subject to resale to the seller at an agreed upon price and date
(normally the next business day). The 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
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instrument. A repurchase agreement acquired by the 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 Funds' 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 Adviser to be creditworthy.
INVESTMENT RESTRICTIONS
The following investment restrictions constitute fundamental policies of
each Fund which may be changed only upon approval by the holders of a majority
of the outstanding shares of such Fund's shareholders. Each Fund may not:
(1) issue senior securities, as such term is defined in the Investment Company
Act of 1940, as amended, except as otherwise permitted under these
fundamental investment restrictions;
(2) make short sales of securities or purchase any securities on margin,
except for such short-term credits as are necessary for the clearance of
transactions; provided, however, the deposit or payment of an initial or
maintenance margin in connection with financial futures contracts or
related options transactions is not considered the purchase of a security
on margin;
(3) borrow money in excess of 25% of the value of its total assets (including
any borrowings). Any such borrowings shall be from banks subject to an
agreement by the lender that any recourse is limited to the value of the
assets of the Fund with respect to which the borrowing has been made.
Deposits in escrow in connection with the writing of covered call options
or in connection with the purchase or sale of financial futures contracts
and related options shall not be deemed to be a pledge or other
encumbrance;
(4) engage in the business of underwriting the securities of others;
(5) concentrate its investments in the securities of issuers all of which
conduct their principal business activities in the same industry provided
that this restriction shall not apply to obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities;
(6) make any investment in real estate, real estate mortgage loans and/or
commodities, except that the Fund may (a) purchase or sell readily
marketable securities which are secured by interests in real estate, or
issued by companies which deal in real estate including real estate
investment and mortgage investment trusts, and (b) engage in financial
futures contracts and related options transactions, provided that the sum
of the initial margin deposits on the Fund's futures and related options
positions and the premiums paid for related options do not exceed 5% of
the value of the Fund's net assets;
(7) make loans, except that the Fund may (a) invest up to 15% of its total
assets in repurchase agreements of a type regarded as "liquid" which are
fully collateralized as to principal and interest and which are entered
into only with commercial banks, brokers and dealers considered by the
Fund to be creditworthy and (b) loan its portfolio securities in amounts
up to one-third of the value of its total assets; and
(8) purchase securities which are not deemed liquid pursuant to procedures
adopted by the Board of Trustees if as a result of such purchase more than
15% of the Fund's net assets would be invested in the aggregate in such
securities.
If a percentage restriction on investment or utilization of assets as set
forth is adhered to at the time an investment is made, a later change in the
percentage resulting from a change in the values or costs of the Fund's assets
will not be considered violate of the restriction with the exception of the
Fund's policy on borrowing.
PERFORMANCE INFORMATION
The Funds may, from time to time, include total return in advertisements,
sales literature or reports to shareholders or prospective investors.
Performance information in advertisements and sales literature may be expressed
as yield of a class or Fund and as total return of any Class or Fund.
Standardized quotations of average annual total return for each Class of
Shares of a Fund will be expressed in terms of the average annual compounded
rate of return for a hypothetical investment in either Class A, Class B or
Class C Shares of a Fund over periods of 1, 5 and 10 years or up to the life of
the class of shares of a Fund, 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 each 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 and C Shares, and
assume that all dividends and distributions are reinvested when paid.
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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 Daily, Stanger's Mutual Fund Monitor,
The Stanger Register, Stanger's Investment Adviser, The Wall Street Journal,
The New York Times, Consumer Reports, Registered Representative, Financial
Planning, Financial Services Weekly, Financial World, U.S. News and World
Report, Standard & Poor's The Outlook, and Personal Investor. The Funds may
from time to time illustrate the benefits of tax deferral by comparing taxable
investments to investments made through tax-deferred retirement plans. The
total return may also be used to compare the performance of 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 1000 Value Index, Russell 2000 Value Index, Dow
Jones Industrial Average, Europe Australia Far East Index (EAFE), 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, each Fund may
separate its cumulative and average annual returns into income and capital
gains components.
Phoenix-Hollister Small Cap Value Fund's annual total return for the one
year period ended August 31, 1999 and since inception November 20, 1997 through
August 31, 1999 for Class A Shares was 34.21% and 5.07%, for Class B Shares was
36.02% and 5.16% and for Class C Shares was 39.86% and 7.20%. Phoenix-Hollister
Value Equity Fund's annual total return for the one year period ended August
31, 1999 and since inception November 5, 1997 through August 31, 1999 for Class
A Shares was 29.44% and 8.55%, for Class B Shares was 31.21% and 8.73% and for
Class C Shares was 34.91% and 10.66%. Performance information reflects only the
performance of a hypothetical investment in each class during the particular
time period on which the calculations are based. Performance information should
be considered in light of each Fund's investment objectives and policies,
characteristics and quality of the portfolio, and the market condition during
the given time period, and should not be considered as a representation of what
may be achieved in the future.
The Funds may also compute aggregate cumulative total return for specified
periods based on a hypothetical Class A, Class B or Class C account with an
assumed initial investment of $10,000. The aggregate total return is determined
by dividing the net asset value of this account at the end of the specified
period by the value of the initial investment and is expressed as a percentage.
Calculation of aggregate total return reflects payment of the Class A Shares'
maximum sales charge of 4.75%, and assumes reinvestment of all income dividends
and capital gain distributions during the period.
The Funds also may quote annual, average annual and annualized total
return and aggregate total return performance data, for each class of shares of
the Funds, 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.
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 Funds. It is the practice of the Adviser to seek the best prices and
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 benefit with a
securities industry comprised of many and diverse firms and that the long-term
interest of shareholders of the Funds is best served by 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 Funds. 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.
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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 Funds. 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 shareholders.
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
shared 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.
A high rate of portfolio turnover involves a correspondingly higher amount
of brokerage commissions and other costs which must be borne directly by the
Funds and indirectly by shareholders.
During the fiscal year ended August 31, 1998 and 1999, brokerage
commissions paid by the Funds totaled $106,252 and $298,832. In the fiscal year
ended August 31, 1999, no commissions were paid to the Distributor for
portfolio transactions. Brokerage commissions of $152,639 paid during the
fiscal year ended August 31, 1999 were paid on portfolio transactions
aggregating $84,054,798 and executed by brokers who provided research and other
statistical and factual information.
THE INVESTMENT ADVISER
The offices of Phoenix Investment Counsel, Inc. ("PIC" or the "Adviser")
are located at 56 Prospect Street, Hartford, Connecticut 06115-0480. PIC was
organized in 1932 as John P. Chase, Inc. All of the outstanding shares of PIC
are owned by Phoenix Equity Planning Corporation ("Equity Planning"), which
acts as Distributor and Financial Agent for the Trust. All of the outstanding
shares of Equity Planning are owned by Phoenix Investment Partners, Ltd. A
majority of the outstanding shares of Phoenix Investment Partners, Ltd. are
owned by PM Holdings, Inc. ("Holdings"), a wholly-owned subsidiary of Phoenix
Home Life Mutual Insurance Company ("Phoenix Home Life") of Hartford,
Connecticut. Phoenix Home Life is in the business of writing ordinary and group
life and health insurance and annuities. Equity Planning, a mutual fund
distributor, acts as the national distributor of the Trust's shares and as
Financial Agent of the Trust. The principal office of Phoenix Home Life is
located at One American Row, Hartford, Connecticut, 06115. The principal office
of Equity Planning is located at 100 Bright Meadow Boulevard, Enfield,
Connecticut, 06082.
Phoenix Investment Partners, Ltd., is a publicly-traded independent
registered investment advisory firm and has served investors for over 70 years.
It manages approximately $58 billion in assets (as of September 30, 1999)
through its investment partners: Aberdeen Fund Managers, Inc. (Aberdeen) in
Aberdeen London, Singapore and Fort Lauderdale; Duff & Phelps Investment
Management Co. (Duff & Phelps) in Chicago and Cleveland; Roger Engemann &
Associates, Inc. (Engemann) in Pasadena; Seneca Capital Management LLC (Seneca)
in San Francisco; and Phoenix Investment Counsel, Inc. (Goodwin, Hollister, and
Oakhurst divisions) in Hartford, Sarasota, and Scotts Valley, CA, respectively.
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Philip R. McLoughlin, a director and officer of the Trust, is also a
director of the Adviser. Michael E. Haylon, an officer of the Fund, is also a
director and officer of the Adviser. Christian C. Bertelsen, G. Jeffrey Bohne,
Robert S. Driessen and William R. Moyer, officers of the Fund, are officers of
the Adviser.
The Adviser provides certain services and facilities required to carry on
the day-to-day operations of the Funds (for which it receives management fees)
other than the costs of printing and mailing proxy materials, reports and
notices to shareholders; legal, auditing and accounting services; regulatory
filing fees and expenses of printing the Funds' registration statement (but the
Distributor purchases such copies of the Funds' prospectuses and reports and
communications to shareholders as it may require for sales purposes); insurance
expense; association membership dues; brokerage fees; and taxes.
All costs and expenses (other than those specifically referred to as being
borne by the Adviser) incurred in the operation of the Funds are borne by the
Funds. Each Fund pays expenses incurred in its own operation and also pays a
portion of the Trust's general administration expenses allocated on the basis
of the asset size of the respective Fund, except where an allocation using an
alternative method can be more fairly made. Such expenses include, but shall
not be limited to, all expenses incurred in the operation of the Funds and any
public offering of its shares, including, among others, interest, taxes,
brokerage fees and commissions, fees of Trustees who are not employees of the
Adviser or any of its affiliates, expenses of Trustees' and shareholders'
meetings, including the cost of printing and mailing proxies, 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 Equity Planning under its agreement with the Funds), 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 Trust and its shares with the Securities
and Exchange Commission and registering or qualifying its shares under state or
other securities laws and the expense of preparing and mailing prospectuses and
reports to shareholders.
The investment advisory agreement provides that the Adviser shall not be
liable to the Funds or to 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 investment
advisory agreement relates, except a loss resulting from willful misfeasance,
bad faith, gross negligence or reckless disregard on the part of the Adviser in
the performance of its duties thereunder.
As full compensation for the services and facilities furnished to the
Funds, the Adviser is entitled to a fee, payable monthly, as described in the
prospectus. Total management fees for the fiscal year ended August 31, 1998 and
1999 amounted to $269,984 and $627,271. There is no assurance that the Funds
will reach net asset levels high enough to realize reductions in the rates of
the advisory fees. Any reduction in the rate of the advisory fee on each Fund
will be in proportion to the averages of the aggregate daily net asset values
for each class of shares for the period for which the fee had been paid.
The advisory agreement continues in force from year to year for each Fund,
provided that, with respect to each Fund, the agreement must be approved at
least annually by the Trustees or by vote of a majority of the outstanding
voting securities of each Fund. In addition, and in either event, the terms of
the agreement and any renewal thereof must be 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 any
such party, cast in person at a meeting called for the purpose of voting on
such approval. The agreement will terminate automatically if assigned and may
be terminated at any time, without payment of any penalty, either by the Trust
or by the Adviser, on sixty (60) days written notice.
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,
Presidents' 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
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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 Funds have authorized one or more brokers to accept on their behalf
purchase and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Funds' behalf.
The Funds will be deemed to have received a purchase or redemption order when
an authorized broker or, if applicable, a broker's authorized designee, accepts
the order. Customer orders will be priced at the Funds' net asset values next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
ALTERNATIVE PURCHASE ARRANGEMENTS
Shares may be purchased from investment dealers at a price equal to their
net asset value per share, plus a sales charge which, at the election of the
purchaser, may be imposed either (i) at the time of the purchase (the "initial
sales charge alternative") or (ii) on a contingent deferred basis (the
"deferred sales charge alternative"). Orders received by dealers prior to the
close of trading on the New York Stock Exchange are confirmed at the offering
price effective at that time, provided the order is received by the Distributor
prior to its close of business.
The alternative purchase arrangements permit an investor to choose the
method of purchasing shares that is more beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, whether
the investor wishes to receive distributions in cash or to reinvest them in
additional shares of the Funds, and other circumstances. Investors should
consider whether, during the anticipated life of their investment in the Funds,
the accumulated continuing distribution plan fees and contingent deferred sales
charges on Class B or C Shares would be less than the initial sales charge and
accumulated distribution plan fees on Class A Shares purchased at the same
time.
Dividends paid by the Funds, if any, with respect to each Class of Shares
will be calculated in the same manner at the same time on the same day, except
that fees such as higher distribution plan fees and any incremental transfer
agency costs relating to each Class of Shares will be borne exclusively by that
class. See "Dividends, Distributions and Taxes."
Class A Shares
Class A Shares incur a sales charge when they are purchased and enjoy the
benefit of not being subject to any sales charge when they are redeemed. Class
A Shares are subject to an ongoing distribution services fee at an annual rate
of 0.25% of the Funds' aggregate average daily net assets attributable to the
Class A Shares. In addition, certain purchases of Class A Shares qualify for
reduced initial sales charges.
Class B Shares
Class B Shares do not incur a sales charge when they are purchased, but
they are subject to a sales charge if they are redeemed within five years of
purchase. The deferred sales charge may be waived in connection with certain
qualifying redemptions.
Class B Shares are subject to an ongoing distribution services fee at an
annual rate of up to 1.00% of the Fund's aggregate average daily net assets
attributable to the Class B Shares. Class B Shares enjoy the benefit of
permitting all of the investor's dollars to work from the time the investment
is made. The higher ongoing distribution plan fees paid by Class B Shares will
cause such shares to have a higher expense ratio and to pay lower dividends, to
the extent any dividends are paid, than those related to Class A Shares. Class
B Shares will automatically convert to Class A Shares eight years after the end
of the calendar month in which the shareholder's order to purchase was
accepted, in the circumstances and subject to the qualifications described in
the Funds' Prospectus. The purpose of the conversion feature is to relieve the
holders of the Class B Shares that have been outstanding for a period of time
sufficient for the adviser and the Distributor to have been compensated for
distribution expenses related to the Class B Shares from most of the burden of
such distribution related expenses.
Class B Shares include all shares purchased pursuant to the deferred sales
charge alternative which have been outstanding for less than the period ending
eight years after the end of the month in which the shares were issued. At the
end of this period,
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Class B Shares will automatically convert to Class A Shares and will no longer
be subject to the higher distribution plan fees. Such conversion will be on the
basis of the relative net asset value of the two classes without the imposition
of any sales load, fee or other charge.
For purposes of conversion to Class A Shares, shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B Shares
in a shareholder's Trust account will be considered to be held in a separate
sub-account. Each time any Class B Shares in the shareholder's Trust account
(other than those in the sub-account) convert to Class A, an equal pro rata
portion of the Class B Share dividends in the sub-account will also convert to
Class A Shares.
Class C Shares
Class C Shares are purchased without an initial sales charge but are
subject to a deferred sales charge if redeemed within one year of purchase. The
deferred sales charge may be waived in connection with certain qualifying
redemptions. Shares issued in conjunction with the automatic reinvestment of
income distributions and capital gain distributions are not subject to any
sales charges. Class C Shares are subject to an ongoing distribution services
fee of up to 1.00% of the Funds' aggregate average daily net assets
attributable to Class C Shares.
Class A Shares -- Reduced Initial Sales Charges
Investors choosing Class A Shares may be entitled to reduced sales
charges. The ways in which sales charges may be avoided or reduced are
described below.
Qualified Purchasers. If you fall within any one of the following
categories, you will not have to pay a sales charge on your purchase of Class A
Shares: (1) trustee, director or officer of the Phoenix Funds, the
Phoenix-Engemann Funds, Phoenix-Seneca Funds or any other mutual fund advised,
subadvised or distributed by the Adviser, Distributor or any of their corporate
affiliates (an "Affiliated Phoenix Fund"); (2) any director or officer, or any
full-time employee or sales representative (for at least 90 days) of the
Adviser or Distributor; (3) registered representatives and employees of
securities dealers with whom Distributor has sales agreements; (4) any
qualified retirement plan exclusively for persons described above; (5) any
officer, director or employee of a corporate affiliate of the Adviser or
Distributor; (6) any spouse, child, parent, grandparent, brother or sister of
any person named in (1), (2), (3) or (5) above; (7) employee benefit plans for
employees of the Adviser, Distributor and/or their corporate affiliates; (8)
any employee or agent who retires from Phoenix Home Life, Distributor and/or
their corporate affiliates; (9) any account held in the name of a qualified
employee benefit plan, endowment fund or foundation if, on the date of the
initial investment, the plan, fund or foundation has assets of $10,000,000 or
more or at least 100 eligible employees; (10) any person with a direct rollover
transfer of shares from an established Phoenix Fund or any other Affiliated
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, Fund company, or bank Fund
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 or any other Affiliated Phoenix Fund 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;
(16) any deferred compensation plan established for the benefit of any Phoenix
Fund or any other Affiliated Phoenix Fund trustee or director; provided that
sales to persons listed in (1) to (16) above are made upon the written
assurance of the purchaser that the purchase is made for investment purposes
and that the shares so acquired will not be resold except to the Fund; (17)
purchasers of Class A Shares bought through investment 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 such purchases; (19) 401(k) participants
in the Merrill Lynch Daily K Plan (the "Plan") if the Plan has at least $3
million in assets or 500 or more eligible employees; (20) clients of investment
advisors or financial planners who buy shares for their own accounts but only
if their accounts are linked to a master account of their investment advisor of
financial planner on the books and records of the broker, agent or financial
intermediary with which the Distributor has made such special arrangements
(each of the investors described in (17) through (20) may be charged a fee by
the broker, agent or financial intermediary for purchasing shares).
Combination Purchase Privilege. Your purchase of any class of shares of
this or any other Affiliated Phoenix Fund (other than Phoenix Money Market Fund
Series Class A Shares), if made at the same time by the same "person," will be
added together to determine whether the combined sum entitles you to an
immediate reduction in sales charge. A "person" is defined in this and the
following sections as (a) any individual, their spouse and minor children
purchase shares for his or their own account (including an IRA account)
including his or their own trust; (b) a trustee or other fiduciary purchasing
for a single trust, estate or single fiduciary account (even though more than
one beneficiary may exist); (c) multiple employer trusts or Section 403(b)
plans for the same employer; (d) multiple accounts (up to 200) under a
qualified employee benefit plan or administered by a third party administrator;
or (e) trust companies, bank trust departments, registered investment advisers,
and similar entities placing orders or providing
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administrative services with respect to funds over which they exercise
discretionary investment authority and which are held in a fiduciary, agency,
custodial or similar capacity, provided all shares are held of record in the
name, or nominee name, of the entity placing the order.
Letter of Intent. If you sign a Letter of Intent, your purchase of any
class of shares or this or any other Affiliated Phoenix Fund (other than
Phoenix Money Market Fund Series Class A Shares), if made by the same person
within a 13-month period, will be added together to determine whether you are
entitled to an immediate reduction in sales charges. Sales charges are reduced
based on the overall amount you indicate that you will buy under the Letter of
Intent. The Letter of Intent is a mutually non-binding arrangement between you
and the Distributor. Since the Distributor doesn't know whether you will
ultimately fulfill the Letter of Intent, shares worth 5% of the amount of each
purchase will be set aside until you fulfill the Letter of Intent. When you buy
enough shares to fulfill the Letter of Intent, these shares will no longer be
restricted. If, on the other hand, you do not satisfy the Letter of Intent, or
otherwise wish to sell any restricted shares, you will be given the choice of
either buying enough shares to fulfill the Letter of Intent or paying the
difference between any sales charge you previously paid and the otherwise
applicable sales charge based on the intended aggregate purchases described in
the Letter of Intent. You will be given 20 days to make this decision. If you
do not exercise either election, the Distributor will automatically redeem the
number of your restricted shares needed to make up the deficiency in sales
charges received. The Distributor will redeem restricted Class A Shares before
Class C or B Shares, respectively. Oldest shares will be redeemed before
selling newer shares. Any remaining shares will then be deposited to your
account.
Right of Accumulation. Your purchase of any class of shares of this or any
other Affiliated Phoenix Fund, if made over time by the same person may be
added together to determine whether the combined sum entitles you to a
prospective reduction in sales charges. You must provide certain account
information to the distributor to exercise this right.
Associations. Certain groups or associations may be treated as a "person"
and qualify for reduced Class A share sales charges. The group or association
must: (1) have been in existence for at least six months; (2) have a legitimate
purpose other than to purchase mutual fund shares at a reduced sales charge;
(3) work through an investment dealer; or (4) not be a group whose sole reason
for existing is to consist of members who are credit card holders of a
particular company, policyholders of an insurance company, customers of a bank
or a broker-dealer or clients of an investment adviser.
Class B and C Shares -- Waiver of Sales Charges
The CDSC is waived on the redemption (sale) of Class B Shares if the
redemption is made (a) within one year of death (i) of the sole shareholder of
an individual account, (ii) of a joint tenant where the surviving joint tenant
is the deceased's spouse, or (iii) of the beneficiary of a Uniform Gifts to
Minors Act (UGMA), Uniform Transfers to Minors Act (UTMA) or other custodial
account; (b) within one year of disability, as defined in Code Section
72(m)(7); (c) as a mandatory distribution upon reaching age 701/2 under any
retirement plan qualified under Code Sections 401, 408 or 403(b) or resulting
from the tax-free return of an excess contribution to an IRA; (d) by 401(k)
plans using an approved participant tracking system for participant hardships,
death, disability or normal retirement, and loans which are subsequently
repaid; (e) from the Merrill Lynch Daily K Plan ("Plan") invested in Class B
Shares, in which such shares the Distributor has not paid the dealer the Class
B sales commission; (f) based on the exercise of exchange privileges among
Class B Shares of this or any other Affiliated Phoenix Fund; (g) based on any
direct rollover transfer of shares from an established Affiliated Phoenix Fund
qualified plan into an Affiliated Phoenix Fund IRA by participants terminating
from the qualified plan; and (h) based on the systematic withdrawal program.
If, as described in condition (a) above, an account is transferred to an
account registered in the name of a deceased's estate, the CDSC will be waived
on any redemption from the estate account occurring within one year of the
death. If the Class B Shares are not redeemed within one year of the death,
they will remain subject to the applicable CDSC.
Conversion Features--Class B Shares
Class B Shares will automatically convert to Class A Shares of the same
Portfolio eight years after they are purchased. Conversion will be on the basis
of the then-prevailing net asset value of Class A and B Shares. There is no
sales load, fee or other charge for this feature. Class B Shares acquired
through dividend or distribution reinvestments will be converted into Class A
Shares at the same time that other Class B Shares are converted based on the
proportion that the reinvested shares bear to purchased Class B Shares. The
conversion feature is subject to the continuing availability of an opinion of
counsel or a ruling of the Internal Revenue Service that the assessment of the
higher distribution fees and associated costs with respect to Class B Shares
does not result in any dividends or distributions constituting "preferrential
dividends" under the code, and that the conversion of shares does not
constitute a taxable event under federal income tax law. If the conversion
feature is suspended, Class B Shares would continue to be subject to the higher
distribution fee for an indefinite period. Even if the Fund was unable to
obtain such assurances, it might continue to make distribuitons if doing so
would assist in complying with its general practice of distributing sufficient
income to reduce or eliminate federal taxes otherwise payable by the Fund.
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INVESTOR ACCOUNT SERVICES
The Funds offer accumulation plans, withdrawal plans and reinvestment and
exchange privileges. Certain privileges may not be available in connection with
all classes. In most cases, changes to account services may be accomplished
over the phone. Inquiries regarding policies and procedures relating to
shareholder account services should be directed to Shareholder Services at
(800) 243-1574.
Exchanges. Under certain circumstances, shares of any Phoenix Fund may be
exchanged for shares of the same Class of another Phoenix Fund or any other
Affiliated Phoenix Fund on the basis of the relative net asset values per share
at the time of the exchange. Exchanges are subject to the minimum initial
investment requirement of the designated Fund, Series, or Portfolio, except if
made in connection with the Systematic Exchange privilege. Shareholders may
exchange shares held in book-entry form for an equivalent number (value) of the
same class of shares of any other Affiliated Phoenix Fund, if currently
offered. On exchanges with share classes that carry a contingent deferred sales
charge, the CDSC schedule of the original shares purchased continues to apply.
The exchange of shares is treated as a sale and purchase for federal income tax
purposes (see 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, semi-annual or annual basis or may cancel this privilege at
any time. If you maintain an account balance of at least $5,000, or $2,000 for
tax qualified retirement benefit plans (calculated on the basis of the net
asset value of the shares held in a single account), you may direct that shares
be automatically exchanged at predetermined intervals for shares of the same
class of another Affiliated Phoenix Fund. This requirement does not apply to
Phoenix "Self Security" program participants. Systematic exchanges will be
executed upon the close of business on the 10th day of each month or the next
succeeding business day. Systematic exchange forms are available from the
Distributor. Exchanges will be based upon each Fund's net asset value per share
next computed after the close of business on the 10th day of each month (or
next succeeding business day), without sales charge.
Dividend Reinvestment Across Accounts. If you maintain an account balance
of at least $5,000, or $2,000 for tax qualified retirement benefit plans
(calculated on the basis of the net asset value of the shares held in a single
account), you may direct that any dividends and distributions paid with respect
to shares in that account be automatically reinvested in a single account of
one of the other Phoenix Fund or any other Affiliated Phoenix Fund at net asset
value. You should obtain a current prospectus and consider the objectives and
policies of each Fund carefully before directing dividends and distributions to
another Fund. Reinvestment election forms and prospectuses are available from
Equity Planning. Distributions may also be mailed to a second payee and/or
address. Requests for directing distributions to an alternate payee must be
made in writing with a signature guarantee of the registered owner(s). To be
effective with respect to a particular dividend or distribution, notification
of the new distribution option must be received by the Transfer Agent at least
three days prior to the record date of such dividend or distribution. If all
shares in your account are repurchased or redeemed or transferred between the
record date and the payment date of a dividend or distribution, you will
receive cash for the dividend or distribution regardless of the distribution
option selected.
Invest-by-Phone
This expedited investment service allows a shareholder to make an
investment in an account by requesting a transfer of funds from the balance of
their bank account. Once a request is phoned in, Equity Planning will initiate
the transaction by wiring a request for monies to the shareholder's commercial
bank, savings bank or credit union via Automated Clearinng House (ACH). The
shareholder's bank, which must be an ACH member, will in turn forward the
monies to Equity Planning for credit to the shareholder's account. ACH is a
computer based clearinng and settlement operation established for the exchange
of electronic transactions among participating depository institutions.
To establish this service, please complete an Invest-by-Phone Application
and attach a voided check if applicable. Upon Equity Planning's acceptance of
the authorization form (usually within two weeks) shareholders may call toll
free (800) 367-5877 prior to 3:00 p.m. (New York time) to place their purchase
request. Instructions as to the account number and amount to be invested must
be communicated to Equity Planning. Equity Planning will then contact the
shareholder's bank via ACH with appropriate instructions. The purchase is
normally credited to the shareholder's account the day following receipt of the
verbal instructions. The Fund may delay the mailing of a check for redemption
proceeds of Fund shares purchased with a check or via Invest-by-Phone service
until the Fund has assured itself that good payment has been collected for the
purchase of the shares, which may take up to 15 days. The Fund and Equity
Planning reserve the right to modify or terminate the Invest-by-Phone service
for any reason or to institute charges for maintaining an Invest-by-Phone
account.
Systematic Withdrawal Program
The Systematic Withdrawal Program allows you to periodically redeem a
portion of your account on a predetermined monthly, quarterly, semiannual or
annual basis. A sufficient number of full and fractional shares will be
redeemed so that the designated payment is made on or about the 20th day of the
month. Shares are tendered for redemption by the Transfer Agent, as agent for
the shareowner, on or about the 15th of the month at the closing net asset
value on the date of redemption. The Systematic Withdrawal Program also
provides for redemptions to be tendered on or about the 10th, 15th or 25th of
the month with proceeds
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to be directed through Automated Clearing House (ACH) to your bank account. In
addition to the limitations stated below, withdrawals may not be less than $25
and minimum account balance requirements shall continue to apply.
Shareholders participating in the Systematic Withdrawal Program must own
shares of a Fund worth $5,000 or more, as determined by the then current net
asset value per share, and elect to have all dividends reinvested. The purchase
of shares while participating in the withdrawal program will ordinarily be
disadvantageous to the Class A Shares investor since a sales charge will be
paid by the investor on the purchase of Class A Shares at the same time as
other shares are being redeemed. For this reason, investors in Class A Shares
may not participate in an automatic investment program while participating in
the Systematic Withdrawal Program.
Through the Program, Class B shareholders may withdraw up to 1% of their
aggregate net investments (purchases, at initial value, to date net of
non-Program redemptions) each month or up to 3% of their aggregate net
investments each quarter without incurring otherwise applicable contingent
deferred sales charges. Class B shareholders redeeming more shares than the
percentage permitted by the withdrawal program will be subject to any
applicable contingent deferred sales charge on all shares redeemed.
Accordingly, the purchase of Class B Shares will generally not be suitable for
an investor who anticipates withdrawing sums in excess of the above limits
shortly after purchase.
HOW TO REDEEM SHARES
Under the 1940 Act, payment for shares redeemed must ordinarily be made
within seven days after tender. The right to redeem shares may be suspended and
payment therefor postponed during periods when the New York Stock Exchange is
closed, other than customary weekend and holiday closings, or if permitted by
rules of the Securities and Exchange Commission, during periods when trading on
the Exchange is restricted or during any emergency which makes it impracticable
for the Fund to dispose of its securities or to determine fairly the value of
its net assets or during any other period permitted by order of the Securities
and Exchange Commission for the protection of investors. Furthermore, the
Transfer Agent will not mail redemption proceeds until checks received for
shares purchased have cleared, which may take up to 15 days or more. See the
Funds' current Prospectus for further information. Redemptions by Class B and C
shareholders will be subject to the applicable deferred sales charge, if any.
The Funds have authorized one or more brokers to accept on their behalf
purchase and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Funds' behalf.
The Funds will be deemed to have received a purchase or redemption order when
an authorized broker or, if applicable, a broker's authorized designee, accepts
the order. Customer orders will be priced at the Funds' net asset values next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
Redemption of Small Accounts
Each shareholder account in the Funds which has been in existence for at
least one year and has a value of less than $200 may be redeemed upon the
giving of not less than 30 days written notice to the shareholder mailed to the
address of record. During the 30-day period the shareholder has the right to
add to the account to bring its value to $200 or more.
By Mail
Shareholders may redeem shares by making written request, executed in the
full name of the account, directly to Phoenix Funds, c/o State Street Bank and
Trust Company, P.O. Box 8301, Boston, MA 02266-8301. However, when certificates
for shares are in the possession of the shareholder, they must be mailed or
presented, duly endorsed in the full name of the account, with a written
request to Equity Planning that the Trust redeem the shares. See the Funds'
current Prospectus for more information.
Telephone Redemptions
Shareholders may redeem up to $50,000 worth of their shares by telephone.
See the Funds' current Prospectus for additional information.
Redemption in Kind
To the extent consistent with state and federal law, the Funds may make
payment of the redemption price either in cash or in kind. However, the Funds
have elected to pay in cash all requests for redemption by any shareholder of
record, limited in respect to each shareholder during any 90-day period to the
lesser of $250,000 or 1% of the net asset value of the Fund at the beginning of
such period. This election has been made pursuant to Rule 18f-1 under the
Investment Company Act of 1940 and is irrevocable while the Rule is in effect
unless the Securities and Exchange Commission, by order, permits the withdrawal
thereof. In case of a redemption in kind, securities delivered in payment for
shares would be readily marketable and valued at the same value assigned to
them in computing the net asset value per share of the Fund. A shareholder
receiving such securities would incur brokerage costs when selling the
securities.
Account Reinstatement Privilege
Shareholders who may have overlooked features of their investment at the
time they redeemed have a privilege of reinvestment of their investment at net
asset value. See the Funds' current Prospectus for more information and
conditions attached to this privilege.
17
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund is treated as a separate entity for federal income tax purposes.
Each Fund intends to elect to be treated as a regulated investment company
("RIC") and qualify annually as such under certain provisions of the Internal
Revenue Code (the "Code"). Under such provisions, each Fund 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, each Fund 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 other disposition of securities. If in any taxable year each Fund does not
qualify as a regulated investment company, all of its taxable income will be
taxed at corporate rates.
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 the Fund's net ordinary income, with certain
adjustments, for such calendar year, plus 98% of each Fund' 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 calendar 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 each Fund to
shareholders of record in October, November and December of any year will be
deemed to have been received by, and will be taxable to shareholders as of
December 31 of such year, provided that the dividend is actually paid by each
Fund before February 1, of the following year.
The Funds' policy is to distribute to its shareholders substantially all
investment company taxable income as defined in the Code and any net realized
capital gains for each year and consistent therewith to meet the distribution
requirements of Part I of subchapter M of the Code. The Funds intend to meet
the other requirements of Part I of subchapter M, including the requirements
with respect to diversification of assets and sources of income, so that the
Funds will pay no taxes on net investment income and net realized capital gains
distributed to shareholders.
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 from the tax basis of the
shares disposed of all or a portion of the sales 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 the Funds'
shares. Should a distribution reduce the net asset value of a share below a
shareholder's cost for the shares, 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 a Fund. 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.
Transactions in options on stock indices 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, with 40% of any resulting
gain or loss treated as short-term and 60% long-term.
A high portfolio turnover rate may result in the realization of larger
amounts of short-term gains, which are taxable to shareholders as ordinary
income.
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 gains
distributions or share redemption proceeds, for an 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 will furnish shareholders, within 31 days after the end of the
calendar year, with information which is required by the Internal Revenue
Service for preparing income tax returns. Investors are urged to consult their
attorney or tax adviser regarding specific questions as to federal, foreign,
state or local taxes.
TAX SHELTERED RETIREMENT PLANS
Shares of the Fund are offered in connection with the following retirement
plans or programs: IRA, Rollover IRA, SEP-IRA, SIMPLE IRA, Roth IRA, 401(k),
Profit-Sharing, Money Purchase Pension Plans, and 403(b) Retirement Programs.
Write or call Equity Planning (800) 243-4361 for further information about the
plans.
18
<PAGE>
Merrill Lynch Daily K Plan
Class A Shares of a Fund are made available to Merrill Lynch Daily K Plan
(the "Plan") participants at NAV without an initial sales charge if:
(i) the Plan is recordkept on a daily valuation basis by Merrill Lynch
and, on the date the Plan Sponsor signs the Merrill Lynch
Recordkeeping Service Agreement, the Plan has $3 million or more in
assets invested in broker/dealer funds not advised or managed by
Merrill Lynch Asset Management L.P. ("MLAM") that are made available
pursuant to a Service Agreement between Merrill Lynch and the fund's
principal underwriter or distributor and in funds advised or managed
by MLAM (collectively, the "Applicable Investments");
(ii) The Plan is recordkept on a daily valuation basis by an independent
recordkeeper whose services are provided through a contract or
alliance arrangement with Merrill Lynch, and, on the date the Plan
Sponsor signs the Merrill Lynch Recordkeeping Service Agreement, the
Plan has $3 million or more in assets, excluding money market funds,
invested in Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by a
Merrill Lynch plan conversion manager, on the date the Plan Sponsor
signs the Merrill Lynch Recordkeeping Service Agreement.
Alternatively, Class B Shares of a Fund are made available to Plan
participants at NAV without a CDSC if the Plan conforms with the requirements
for eligibility set for in (i) through (iii) above but either does not meet the
$3 million asset threshold or does not have 500 or more eligible employees.
Plans recordkept on a daily basis by Merrill Lynch or an independent
recordkeeper under a contract with Merrill Lynch that are currently investing
in Class B Shares of a Fund convert to Class A Shares once the Plan has reached
$5 million invested in Applicable Investments, or after the normal holding
period of seven years from the initial date of purchase.
THE DISTRIBUTOR
Pursuant to an Underwriting Agreement with the Funds, Phoenix Equity
Planning Corporation (the "Distributor"), an indirect wholly-owned subsidiary
of Phoenix Investment Partners, Ltd., serves as distributor for the Funds. 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 address of the Distributor is 100
Bright Meadow Blvd., P.O. Box 2200, Enfield, Connecticut 06083-2200.
For the fiscal year ended August 31, 1998 and 1999, purchasers of shares
of the Funds paid aggregate sales charges of $282,725 and $203,174, of which
the Distributor received net commissions of $39,280 and $75,635 for its
services, the balance being paid to dealers. For the fiscal year ended August
31, 1999, the distributor received net commissions of $16,008 for Class A
Shares and deferred sales charges of $59,627 for Class B and Class C Shares.
The Underwriting Agreement may be terminated at any time on not more than
60 days written notice, without payment of a penalty, by the Distributor, by
vote of a majority of the outstanding voting securities of the Funds, or by
vote of a majority of the Funds' Trustees who are not "interested persons" of
the Funds and who have no direct or indirect financial interest in the
operation of the Distribution Plan or in any related agreements. The
Underwriting Agreement will terminate automatically in the event of its
assignment.
Dealer Concessions
Dealers with whom the Distributor has entered into sales agreements
receive a discount or commission as set forth below.
<TABLE>
<CAPTION>
Dealer Discount
Sales Charge Sales Charge or Agency Fee
Amount of Transaction as Percentage as Percentage as Percentage of
at Offering Price of Offering Price of Amount Invested Offering Price
- ---------------------------------- ------------------- -------------------- -----------------
<S> <C> <C> <C>
Less than $50,000 4.75% 4.99% 4.25%
$50,000 but under $100,000 4.50% 4.71% 4.00%
$100,000 but under $250,000 3.50% 3.63% 3.00%
$250,000 but under $500,000 3.00% 3.09% 2.75%
$500,000 but under $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more None None None
</TABLE>
In addition to the dealer discount on purchases of Class A Shares, the
Distributor intends to pay investment dealers a sales commission of 4% of the
sale price of Class B Shares and a sales commission of 1% of the sale price of
Class C Shares sold by such dealers. This sales commission will not be paid to
dealers for sales of Class B or Class C Shares purchased by 401(k) participants
of the Merrill Lynch Daily K Plan due to a waiver of the CDSC for these Plan
participants' purchases. Your broker, dealer or investment adviser may also
charge you additional commissions or fees for their services in selling shares
to you provided they notify the Distributor of their intention to do so.
19
<PAGE>
Dealers and other entities who enter into special arrangements with the
Distributor may receive compensation for the sale and promotion of shares of
the Funds and/or for providing other shareholder services. Such fees are in
addition to the sales commissions referenced above and may be based upon the
amount of sales of fund shares by a dealer; the provision of assistance in
marketing of fund shares; access to sales personnel and information
dissemination services; provision of recordkeeping and administrative services
to qualified employee benefit plans; and other criteria as established by the
Distributor. Depending on the nature of the services, these fees may be paid
either from the Funds through distribution fees, service fees or transfer agent
fees or in some cases, the Distributor may pay certain fees from its own
profits and resources. From its own profits and resources, the Distributor does
intend to: (a) sponsor sales contests, training and educational meetings and
provide additional compensation to qualifying dealers in the form of trips,
merchandise or expense reimbursements; (b) from time to time pay special
incentive and retention fees to qualified wholesalers, registered financial
institutions and third party marketers; (c) pay broker/dealers an amount equal
to 1% of the first $3 million of Class A Share purchases by an account held in
the name of a qualified employee benefit plan with at least 100 eligible
employees, 0.50% on the next $3 million, plus 0.25% on the amount in excess of
$6 million; and (d) excluding purchases as described in (c) above, pay
broker/dealers an amount equal to 1% of the amount of Class A Shares sold above
$1 million but under $3 million, 0.50% on the next $3 million, plus 0.25% on
the amount in excess of $6 million. If part or all of such investment,
including investments by qualified employee benefit plans, is subsequently
redeemed within one year of the investment date, the broker-dealer will refund
to the Distributor such amounts paid with respect to the investment. In
addition, the Distributor may pay the entire applicable sales charge on
purchases of Class A Shares to selected dealers and agents. From its own
resources, the Distributor intends to pay the following additional compensation
to Merrill Lynch, Pierce, Fenner & Smith, Incorporated: 0.25% on sales of Class
A and B Shares, 0.10% on sales of Class C Shares, 0.10% on sales of Class A
shares sold at net asset value, and 0.10% annually on the average daily net
asset value of fund shares on which Merrill Lynch is broker of record and which
such shares exceed the amount of assets on which Merrill Lynch is broker of
record as of July 1, 1999. Any dealer who receives more than 90% of a sales
charge may be deemed to be an "underwriter" under the Securities Act of 1933.
Equity Planning reserves the right to discontinue or alter such fee payment
plans at any time.
Administrative Services
Equity Planning also acts as administrative agent of the Funds and as such
performs administrative, bookkeeping and pricing functions for the Funds. For
its services, Equity Planning will be paid a fee equal to the sum of (1) the
documented cost of fund accounting and related services provided by PFPC, Inc.,
as subagent, plus (2) the documented cost to Equity Planning to provide
financial reporting and tax services and to oversee the subagent's performance.
The current fee schedule of PFPC, Inc. is based upon the average of the
aggregate daily net asset values of the Funds, 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 administrative agent.
PFPC, Inc. agreed to a modified fee structure and waived certain charges.
Because PFPC, Inc.'s arrangement would have favored smaller funds over larger
funds, Equity Planning reallocates PFPC, Inc.'s overall asset-based charges
among all funds for which it serves as administrative agent on the basis of the
relative net assets of each fund. As a result, the PFPC, Inc. charges to the
Fund 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 Fund's fiscal year ended August 31, 1999, Equity Planning received
$123,066.
DISTRIBUTION PLANS
The Trust has adopted separate distribution plans under Rule 12b-1 of the
1940 Act for each class of shares of each series of the Trust (the "Class A
Plan," the "Class B Plan," the "Class C 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.
Pursuant to the Plans, the Funds will pay the Distributor 0.25% of the
average daily net assets of the Funds for providing services to shareholders,
including assistance with inquiries related to shareholder accounts (the
"Service Fee"). Pursuant to the Plans, the Funds may reimburse the Distributor
monthly for actual expenses of the Distributor up to 0.75% of the average daily
net assets of the Funds' Class B and of Class C Shares. Expenditures under the
Plans shall consist of: (i) commissions to sales personnel for selling shares
of the Funds (including underwriting fees and financing expenses incurred in
connection with the payment of commissions); (ii) compensation, sales
incentives and payments to sales, marketing and service personnel; (iii)
payments to broker-dealers and other financial institutions which have entered
into agreements with the Distributor in the form of the Dealer Agreement for
Phoenix Funds for services rendered in connection with the sale and
distribution of shares of the Funds; (iv) payment of expenses
20
<PAGE>
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' Prospectuses and
Statements 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.
From the Service Fee the Distributor expects to pay a quarterly fee to
qualifying broker/dealer firms, as compensation for providing personal services
and/or the maintenance of shareholder accounts, with respect to shares sold by
such firms. This fee will not exceed on an annual basis 0.25% of the average
annual net asset value of such shares, and will be in addition to sales charges
on Fund shares which are re-allowed to such firms. To the extent that the
entire amount of the Service Fee is not paid to such firms, the balance will
serve as compensation for personal and account maintenance services furnished
by the Distributor.
From its own resources or pursuant to the Plan, and subject to the
dealers' prior approval, the Distributor may provide additional compensation to
registered representatives of dealers in the form of travel expenses, meals,
and lodging associated with training and educational meetings sponsored by the
Distributor. The Distributor may also provide gifts amounting in value to less
than $100, and occasional meals or entertainment, to registered representatives
of dealers. Any such travel expenses, meals, lodging, gifts or entertainment
paid will not be preconditioned upon the registered representatives' or
dealers' achievement of a sales target. The Distributor may, from time to time,
reallow the entire portion of the sales charge on Class A shares which it
normally retains to individual selling dealers. However, such additional
reallowance generally will be made only when the selling dealer commits to
substantial marketing support such as internal wholesaling through dedicated
personnel, internal communications and mass mailings.
In order to receive payments under the Plans, participants must meet such
qualifications to be established in the sole discretion of the Distributor,
such as services to the Funds' shareholders; or services providing the Funds
with more efficient methods of offering shares to coherent groups of clients,
members or prospects of a participant; or services permitting bulking of
purchases or sales, or transmission of such purchases or sales by computerized
tape or other electronic equipment; or other processing.
For the fiscal year ended August 31, 1999 the Funds paid Rule 12b-1 Fees
in the amount of $414,365, of which the Distributor received $319,335, W.S.
Griffith & Co., an affiliate, received $6,834 and unaffiliated broker-dealers
received $88,196. The Rule 12b-1 payments were used for (1) compensation to
dealers, $300,641; (2) compensation to sales personnel, $786,948; (3)
advertising, $521,404; (4) service costs, $83,411; (5) printing and mailing of
prospectuses to other than current shareholders, $20,163; and (6) other,
$164,576. 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 Fund under the Class B Plan. Those
expenses may be carried over and paid in future years. At August 31, 1999, the
end of the last Plan year, the Distributor had incurred unreimbursed expenses
under the Class B Plan of $1,212,366 (equal to 1.24% of the Fund's net assets)
which have been carried over into the present Class B Plan year.
The fee received by the Distributor under the early years of the Plans is
not likely to reimburse the Distributor for the total distribution expenses it
will actually incur as a result of the Funds having fewer assets and the
Distributor incurring greater promotional expenses during the start-up phase.
If the Plans are terminated in accordance with their terms, the obligations of
the Funds to make payments to the Distributor pursuant to the Plans will cease
and the Funds will not be required to make any payments past the date on which
each Plan terminates.
On a quarterly basis, the Funds' Trustees review a report on expenditures
under the Plans and the purposes for which expenditures were made. The Trustees
conduct an additional, more extensive review annually in determining whether
the Plans will be continued. By its terms, continuation of the Plans from year
to year is contingent on annual approval by a majority of the Funds' Trustees
and by a majority of the Trustees who are not "interested persons" (as defined
in the 1940 Act) and who have no direct or indirect financial interest in the
operation of the Plans or any related agreements (the "Plan Trustees"). The
Plans provide that they may not be amended to increase materially the costs
which the Funds may bear pursuant to the Plans without approval of the
shareholders of the Funds and that other material amendments to the Plans must
be approved by a majority of the Plan Trustees by vote cast in person at a
meeting called for the purpose of considering such amendments. The Plans
further provide that while they are in effect, the selection and nomination of
Trustees who are not "interested persons" shall be committed to the discretion
of the Trustees who are not "interested persons." The Plans may be terminated
at any time by vote of a majority of the Plan Trustees or a majority of the
outstanding shares of the Funds. The Trustees have concluded that there is a
reasonable likelihood that the Plans will benefit the Fund and all classes of
shareholders.
The National Association of Securities Dealers, Inc. (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
amend the Plans.
21
<PAGE>
MANAGEMENT OF THE TRUST
The Trustees of the Trust are responsible for the overall supervision of
the operations of the Trust and perform the various duties imposed on Trustees
by the 1940 Act and Massachusetts business trust law.
Trustees and Officers
The Trustees and Officers of the Trust and their business affiliations for
the past five years are set forth below and, unless otherwise noted, the
address of each executive officer and Trustee is 56 Prospect Street, Hartford,
Connecticut, 06115-0480.
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Trust During the Past 5 Years
- -------------------------- ---------------- --------------------------------------------------------------
<S> <C> <C>
Robert Chesek (65) Trustee Trustee/Director (1981-present) and Chairman (1989-1994),
49 Old Post Road Phoenix Funds. Trustee, Phoenix-Aberdeen Series Fund and
Wethersfield, CT 06109 Phoenix Duff & Phelps Institutional Mutual Funds (1996-
present). Vice President, Common Stock, Phoenix Home Life
Mutual Insurance Company (1980-1994).
E. Virgil Conway (70) Trustee Chairman, Metropolitan Transportation Authority (1992-
9 Rittenhouse Road present). Trustee/Director, Consolidated Edison Company
Bronxville, NY 10708 of New York, Inc. (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 Academy of Political Science (Vice
Chairman) (1985 to 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). Advisory Director, Fund Directions (1993-
1998). Chairman/Member, 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 (1992-1995).
Harry Dalzell-Payne (70) Trustee Director/Trustee, Phoenix Funds (1983-present). Trustee,
330 East 39th Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Apartment 29G Institutional Mutual Funds (1996-present). Director, Duff &
New York, NY 10016 Phelps Utilities Tax-Free Income Inc. and Duff & Phelps
Utility and Corporate Bond Trust Inc. (1995-present).
Formerly a Major General of the British Army.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Trust During the Past 5 Years
- ---------------------------- ---------------- ------------------------------------------------------------------
<S> <C> <C>
*Francis E. Jeffries (69) Trustee Director/Trustee, Phoenix Funds (1995-present). Trustee,
6585 Nicholas Blvd. Phoenix-Aberdeen Series Inc. and Phoenix Duff & Phelps
Apt. 1601 Institutional Mutual Funds (1996-present). Director, Duff &
Naples, FL 33963 Phelps Utilities Income Inc. (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. (60) Trustee Chairman and Chief Executive Officer, Carson Products
Chairman and Chief Company (1995-present). Director/Trustee, Phoenix Funds
Executive Officer (1980-present). Trustee, Phoenix-Aberdeen Series Fund and
Carson Product Company Phoenix Duff & Phelps Institutional Mutual Funds (1996-
64 Ross Road present). Director, Equifax Corp. (1991-present) and
Savannah, GA 30750 Evergreen International Fund, Inc. (1989-present). Trustee,
Evergreen Liquid Trust, Evergreen Tax Exempt Trust,
Evergreen Tax Free Fund, Master Reserves Tax Free Trust,
and Master Reserves Trust.
*Philip R. McLoughlin (53) Trustee and Chairman (1997-present), Director (1995-present), Vice
President Chairman (1995-1997) and Chief Executive Officer (1995-
present), Phoenix Investment Partners, Ltd. Director (1994-
present) and Executive Vice President, Investments (1988-
present), Phoenix Home Life Mutual Insurance Company.
Director/Trustee and President, Phoenix Funds (1989-present).
Trustee and President, Phoenix-Aberdeen Series Fund and
Phoenix Duff & Phelps Institutional Mutual Funds (1996-
present). Director, Duff & Phelps Utilities Tax-Free Income Inc.
(1995-present) and Duff & Phelps Utility and Corporate Bond
Trust Inc. (1995-present). Trustee Phoenix-Seneca Funds (1999-
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, PHL Associates, Inc.
(1995-present). Director and President, Phoenix Securities
Group, Inc. (1993-1995). Director (1992-present) and President
(1992-1994), W.S. Griffith & Co., Inc.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Trust During the Past 5 Years
- --------------------------- ---------------- ---------------------------------------------------------------
<S> <C> <C>
Everett L. Morris (71) Trustee Vice President, W.H. Reaves and Company (1993-present).
164 Laird Road Director/Trustee, Phoenix Funds (1995-present). Trustee,
Colts Neck, NJ 07722 Phoenix-Aberdeen 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 (53) Trustee Chairman, IBEX Capital Markets Inc. (formerly IBEX Capital
Managing Director Markets, LLC) (1997-present). Managing Director, Wydown
The Wydown Group Group (1994-present). Director, Phoenix Investment Partners,
IBEX Capital Markets Inc. Ltd. (1995-present). Director/Trustee, Phoenix Funds (1987-
60 State Street present). Trustee, Phoenix-Aberdeen Series Fund and Phoenix
Suite 950 Duff & Phelps Institutional Mutual Funds (1996-present).
Boston, MA 02109 Director, AIB Govett Funds (1991-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) Connecticut River Bancorp
(1998-present) and Endowment for Health, Inc. (1999-
present). Member, Chief Executives Organization (1996-
present). Vice Chairman, Massachusetts Housing Partnership
(1998-1999). Director, Blue Cross and Blue Shield of New
Hampshire (1994-1999).
*Calvin J. Pedersen (57) Trustee Director (1986-present), President (1993-present) and
Phoenix Investment Executive Vice President (1992-1993), Phoenix Investment
Partners Ltd. Partners, Ltd. Director/Trustee, Phoenix Funds (1995-present).
55 East Monroe Street Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff &
Suite 3600 Phelps Institutional Mutual Funds (1996-present). President
Chicago, IL 60603 and Chief Executive Officer, Duff & Phelps 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).
Herbert Roth, Jr. (71) Trustee Director/Trustee, Phoenix Funds (1980-present). Trustee,
134 Lake Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
P.O. Box 909 Institutional Mutual Funds (1996-present). Director, Boston
Sherborn, MA 01770 Edison Company (1978-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 Council, Phoenix Home Life Mutual Insurance
Company (1998-present). Director, Phoenix Home Life Mutual
Insurance Company (1972-1998).
Richard E. Segerson (53) Trustee Managing Director, Northway Management Company (1998-
102 Valley Road present). Director/Trustee, Phoenix Funds (1993-present).
New Canaan, CT 07840 Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff &
Phelps Institutional Mutual Funds (1996-present). Managing
Director, Mullin Associates (1993-1998).
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Trust During the Past 5 Years
- ----------------------------- ---------------- ---------------------------------------------------------------
<S> <C> <C>
Lowell P. Weicker, Jr. (68) Trustee Trustee/Director, Phoenix Funds (1995-present). Trustee,
731 Lake Avenue Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Greenwich, CT 06830 Institutional Mutual Funds (1996-present). Director, UST Inc.
(1995-present), Burroughs Wellcome Fund (1996-present),
HPSC Inc. (1995-present), Duty Free International, Inc.
(1997-1998) and Compuware (1996-present). Visiting
Professor, University of Virginia (1997-present). Chairman,
Dresing, Lierman, Weicker (1995-1996). Governor of the State
of Connecticut (1991-1995).
Michael E. Haylon (41) 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, Phoenix Equity Planning Corporation (1995-present).
Senior Vice President, Securities Investments, Phoenix Home
Life Mutual Insurance Company (1993-1995).
Christian C. Bertelsen (56) Vice Managing Director, Value Equities, Phoenix Investment
President Counsel, Inc. (1997-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).
William R. Moyer (55) Vice Executive Vice President and Chief Financial Officer (1999-
100 Bright Meadow Blvd. President present), Senior Vice President and Chief Financial Officer,
P.O. Box 2200 Phoenix Investment Partners, Ltd. (1995-1999). Director
Enfield, CT 06083-2200 (1998-present), Senior Vice President, Finance (1990-present),
Chief Financial Officer (1996-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.
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) and
Phoenix- Aberdeen Series Fund (1996-present). Vice
President, Investment Products Finance, Phoenix Home Life
Mutual Insurance Company (1990-1995). Senior Vice
President and Chief Financial Officer, W. S. Griffith & Co.,
Inc. (1992-1995) and Townsend Financial Advisers, Inc.
(1993-1995).
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Positions Held Principal Occupations
Name, Address and Age With the Trust During the Past 5 Years
- ------------------------- ---------------- ----------------------------------------------------------------
<S> <C> <C>
Leonard J. Saltiel (45) Vice Managing Director, Operations and Service (1996-present),
President Senior Vice 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, 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).
Nancy G. Curtiss (47) 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 (1995-present) and 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).
G. Jeffrey Bohne (52) Secretary Vice President and General Manager, Phoenix Home Life
101 Munson Street Mutual Insurance Co. (1993-present). Vice President, Transfer
Greenfield, MA 01301 Agent Operations (1993-1996), Vice President, Mutual Fund
Customer Service (1996-present), Phoenix Equity Planning
Corporation. Secretary/Clerk, Phoenix Funds (1993-present).
Phoenix Duff & Phelps Institutional Mutual Funds (1996-
present) and Phoenix-Aberdeen Series Fund (1996-present).
Vice President, Home Life of New York Insurance Company
(1984-1992).
</TABLE>
- -----------
*Indicates that the Trustee is an "interested person" of the Trust within the
meaning of the definition set forth in Section 2(a)(19) of the Investment
Company Act of 1940.
For services rendered to the Fund for the fiscal year ended August 31,
1999, the Trustees received aggregate remuneration of $31,475. For services on
the Boards of Directors/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 a 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 Fund receives 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. Trustee costs are allocated equally to each of the Series and Funds
within the Fund complex. 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 by the Adviser and
receive no compensation from the Fund.
26
<PAGE>
For the Funds' last fiscal year, the Trustees received the following
compensation:
<TABLE>
<CAPTION>
Total
Compensation
Pension or From Fund and
Aggregate Retirement Benefits Estimated Fund Complex
Compensation Accrued as Part Annual Benefits (14 Funds)
Name From Fund of Fund Expenses Upon Retirement Paid to Trustees
- ------------------------ -------------- --------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Robert Chesek $2,838 $62,750
E. Virgil Conway+ $3,750 $83,250
Harry Dalzell-Payne+ $3,338 $73,750
Francis E. Jeffries $2,750* $61,000
Leroy Keith, Jr. $2,838 $62,750
Philip R. McLoughlin+ $ 0 None for $ 0
Everett L. Morris+ $3,250 any Trustee $72,750
James M. Oates+ $3,250 $72,250
Calvin Pedersen $ 0 $ 0
Herbert Roth, Jr.+ $2,963 $66,000
Richard E. Segerson $3,250* $72,000
Lowell P. Weicker, Jr. $3,250 $71,000
</TABLE>
*This compensation (and the earnings thereon) paid to Messrs. Jeffries and
Roth, will be deferred pursuant to the Directors' Deferred Compensation
Plan. At September 30, 1999, the total amount of deferred compensation
(including interest and other accumulation earned on the original amounts
deferred) accrued for Messrs. Jeffries, Morris, Roth and Segerson was
$241,931.17, $153,651.87, $152,500.93 and $55,754.32, respectively. At
present, by agreement among the Trust, the Distributor and the electing
director, director fees that are deferred are paid by the Trust 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.
At Delcember 7, 1999, the trustees and officers as a group owned less than
1% of the outstanding shares of the Trust.
Principal Shareholders
The following table sets forth information as of December 3, 1999 with
respect to each person who owns of record or is known by the Funds to own of
record or beneficially own 5% or more of any class of each Fund's equity
securities.
<TABLE>
<CAPTION>
Name of Shareholder Class Number of Shares Percent of Class
- ----------------------------- --------- ------------------ -----------------
<S> <C> <C> <C>
Small Cap Value Fund
Phoenix Home Life Class A 472,213.4720 17.90%
56 Prospect St.
Hartford, CT 06103-2818
MLPF&S For The Sole Class B 121,687.0450 13.80%
Benefit of its Customers Class C 128,001.1960 19.76%
ATTN: Fund Administration
4800 Deer Lake Dr. E 3rd Fl
Jacksonville, FL 32246-6484
Value Equity Fund
Phoenix Home Life Class A 1,161,424.8790 51.45%
56 Prospect St. Class B 1,381,952.4690 66.98%
Hartford, CT 06103-2818
MLPF&S For the Sole Class C 48,614.9950 8.71%
Benefit of its Customers
ATTN: Fund Administration
4800 Deer Lake Dr. E 3rd Fl
Jacksonville, FL 32246-6484
</TABLE>
27
<PAGE>
OTHER INFORMATION
Capital Stock
The capitalization of the Trust consists solely of an unlimited number of
shares of beneficial interest. The Trust currently offers shares in different
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 and C Shares of any
Fund, which bear higher distribution plan 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 Plan of Distribution 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 Funds 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.
Independent Accountants
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, MA 02110, has been
selected as the independent accountants for the Funds. PricewaterhouseCoopers
LLP audits the Funds' annual financial statements and expresses an opinion
thereon.
Custodian and Transfer Agent
State Street Bank and Trust Company ("State Street"), P.O. Box 351,
Boston, MA 02101, serves as custodian of the Funds' assets (the "Custodian").
Equity Planning, 100 Bright Meadow Blvd., P.O. Box 2200, Enfield, CT
06083-2250, acts as Transfer Agent for the Funds (the "Transfer Agent"). As
compensation, Equity Planning receives a fee equivalent to $17.95 for each
designated 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 Funds ends on August 31. The Funds will send
financial statements to shareholders at least semi-annually. An annual report,
containing financial statements, audited by independent accountants, will be
sent to shareholders each year.
Financial Statements
The Financial Statements for the Fund's fiscal year ended August 31, 1999,
appearing in the Fund's 1999 Annual Report to Shareholders, are incorporated
herein by reference.
28
<PAGE>
Phoenix-Hollister Small Cap Value Fund
INVESTMENTS AT AUGUST 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE
-------- ----------------
<S> <C> <C>
COMMON STOCKS--92.7%
BANKS (REGIONAL)--2.4%
Cullen/Frost Bankers, Inc............. 40,000 $ 1,045,000
BIOTECHNOLOGY--2.5%
Cell Genesys, Inc.(b)................. 120,000 1,065,000
CHEMICALS (SPECIALTY)--1.0%
Fuller (H.B.) Co...................... 7,000 421,750
COMMUNICATIONS EQUIPMENT--7.8%
C-Cube Microsystems, Inc.(b).......... 42,000 1,168,125
General Instrument Corp.(b)........... 18,000 885,375
L-3 Communications Holdings,
Inc.(b)............................... 15,000 595,312
ViaSat, Inc.(b)....................... 47,000 696,187
----------------
3,344,999
----------------
COMPUTERS (HARDWARE)--2.8%
Computer Network Technology
Corp.(b).............................. 75,000 1,185,937
COMPUTERS (SOFTWARE & SERVICES)--0.6%
Network Associates, Inc.(b)........... 15,000 253,125
CONSTRUCTION (CEMENT & AGGREGATES)--1.3%
Texas Industries, Inc................. 18,000 576,000
ELECTRICAL EQUIPMENT--4.0%
Black Box Corp.(b).................... 25,000 1,146,875
Littelfuse, Inc.(b)................... 28,000 556,500
----------------
1,703,375
----------------
<CAPTION>
SHARES VALUE
-------- ----------------
<S> <C> <C>
ELECTRONICS (SEMICONDUCTORS)--15.5%
Amkor Technology, Inc.(b)............. 96,000 $ 1,692,000
Atmel Corp.(b)........................ 52,000 2,044,250
Dallas Semiconductor Corp............. 29,000 1,464,500
SMART Modular Technologies, Inc.(b)... 70,000 1,456,875
----------------
6,657,625
----------------
ENGINEERING & CONSTRUCTION--3.4%
Dycom Industries, Inc.(b)............. 30,000 926,250
MasTec, Inc.(b)....................... 19,000 530,812
----------------
1,457,062
----------------
HEALTH CARE (GENERIC AND OTHER)--2.6%
Dura Pharmaceuticals, Inc.(b)......... 85,000 1,131,562
HEALTH CARE (MANAGED CARE)--2.1%
Trigon Healthcare, Inc.(b)............ 25,000 907,812
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--3.5%
Cooper Companies, Inc. (The).......... 35,000 837,813
Eclipse Surgical Technologies, Inc.
(b)................................... 45,000 646,875
----------------
1,484,688
----------------
HOMEBUILDING--1.8%
Lennar Corp........................... 40,000 760,000
INSURANCE (PROPERTY-CASUALTY)--9.2%
Commerce Group, Inc. (The)............ 20,000 445,000
Frontier Insurance Group, Inc......... 60,000 727,500
Horace Mann Educators Corp............ 45,000 1,355,625
Radian Group, Inc..................... 15,000 694,688
RenaissanceRe Holdings Ltd............ 11,000 397,375
</TABLE>
See Notes to Financial Statements 3
<PAGE>
Phoenix-Hollister Small Cap Value Fund
<TABLE>
<CAPTION>
SHARES VALUE
-------- ----------------
<S> <C> <C>
INSURANCE (PROPERTY-CASUALTY)--CONTINUED
Selective Insurance Group, Inc........ 17,000 $ 302,813
----------------
3,923,001
----------------
MANUFACTURING (DIVERSIFIED)--1.6%
Furon Co.............................. 43,000 688,000
OIL & GAS (DRILLING & EQUIPMENT)--0.5%
Gulf Island Fabrication, Inc.(b)...... 18,000 231,750
POWER PRODUCERS (INDEPENDENT)--4.4%
Calpine Corp.(b)...................... 21,000 1,903,125
REITS--7.1%
Health Care REIT, Inc................. 31,000 623,875
Hospitality Properties Trust.......... 21,000 564,375
LaSalle Hotel Properties.............. 60,000 866,250
RFS Hotel Investors, Inc.............. 37,000 423,188
Sunstone Hotel Investors, Inc......... 61,000 549,000
----------------
3,026,688
----------------
RESTAURANTS--0.9%
Lone Star Steakhouse & Saloon,
Inc.(b)............................... 49,000 373,625
RETAIL (SPECIALTY)--2.4%
Claire's Stores, Inc.................. 55,000 1,034,688
RETAIL (SPECIALTY-APPAREL)--3.4%
Men's Wearhouse, Inc. (The)(b)........ 25,000 515,625
Talbots, Inc. (The)................... 30,000 928,125
----------------
1,443,750
----------------
SAVINGS & LOAN COMPANIES--1.4%
Bank United Corp. Class A............. 18,000 617,625
SERVICES (COMMERCIAL & CONSUMER)--3.0%
Crown Castle International Corp.(b)... 35,000 529,375
<CAPTION>
SHARES VALUE
-------- ----------------
<S> <C> <C>
SERVICES (COMMERCIAL & CONSUMER)--CONTINUED
Wackenhut Corp. (The) Class A......... 31,000 $ 749,813
----------------
1,279,188
----------------
SPECIALTY PRINTING--4.2%
Valassis Communications, Inc.(b)...... 41,000 1,793,750
TELEPHONE--3.3%
Network Access Solutions Corp.(b)..... 100,000 1,425,000
- - -----------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $36,082,913) 39,734,125
- - -----------------------------------------------------------------------
FOREIGN COMMON STOCKS--2.0%
COMMUNICATIONS EQUIPMENT--2.0%
Gilat Satellite Networks Ltd.
(Israel)(b)........................... 18,000 848,250
- - -----------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(IDENTIFIED COST $1,018,432) 848,250
- - -----------------------------------------------------------------------
UNIT INVESTMENT TRUSTS--2.5%
AMEX Financial Select Sector
Depository Receipts................... 14,000 330,969
Diamonds Trust, Series I.............. 7,000 756,875
- - -----------------------------------------------------------------------
TOTAL UNIT INVESTMENT TRUSTS
(IDENTIFIED COST $1,107,984) 1,087,844
- - -----------------------------------------------------------------------
TOTAL INVESTMENTS--97.2%
(IDENTIFIED COST $38,209,329) 41,670,219(a)
Cash and receivables, less liabilities--2.8% 1,215,485
----------------
NET ASSETS--100.0% $ 42,885,704
================
</TABLE>
<TABLE>
<S> <C>
(a) Federal Income Tax Information: Net unrealized
appreciation of investment securities is comprised of
gross appreciation of $5,558,332 and gross depreciation
of $2,221,257 for federal income tax purposes. At August
31, 1999, the aggregate cost of securities for federal
income tax purposes was $38,333,144.
(b) Non-income producing.
</TABLE>
4 See Notes to Financial Statements
<PAGE>
Phoenix-Hollister Small Cap Value Fund
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1999
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $38,209,329) $41,670,219
Cash 38,010
Receivables
Investment securities sold 2,111,564
Fund shares sold 54,659
Dividends and interest 22,825
Prepaid expenses 621
-----------
Total assets 43,897,898
-----------
LIABILITIES
Payables
Investment securities purchased 780,186
Fund shares repurchased 19,391
Investment advisory fee 98,718
Distribution fee 19,063
Transfer agent fee 17,867
Trustees' fee 8,617
Financial agent fee 6,185
Accrued expenses 62,167
-----------
Total liabilities 1,012,194
-----------
NET ASSETS $42,885,704
===========
NET ASSETS CONSIST OF:
Capital paid in on shares of
beneficial interest $39,329,797
Accumulated net realized gain 95,017
Net unrealized appreciation 3,460,890
-----------
NET ASSETS $42,885,704
===========
CLASS A
Shares of beneficial interest
outstanding, $1 par value,
unlimited authorization
(Net Assets $26,926,466) 2,360,383
Net asset value per share $11.41
Offering price per share
$11.41/(1-4.75%) $11.98
CLASS B
Shares of beneficial interest
outstanding, $1 par value,
unlimited authorization
(Net Assets $9,493,760) 842,647
Net asset value and offering price
per share $11.27
CLASS C
Shares of beneficial interest
outstanding, $1 par value,
unlimited authorization
(Net Assets $6,465,478) 573,841
Net asset value and offering price
per share $11.27
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 479,080
Interest 36,035
Foreign taxes withheld (480)
-----------
Total investment income 514,635
-----------
EXPENSES
Investment advisory fee 304,049
Distribution fee, Class A 52,948
Distribution fee, Class B 79,934
Distribution fee, Class C 45,972
Distribution fee, Class M 35
Financial agent fee 57,911
Transfer agent 73,221
Printing 21,973
Professional 18,982
Registration 18,554
Organizational 17,418
Trustees 16,458
Custodian 13,030
Miscellaneous 5,192
-----------
Total expenses 725,677
Less expenses borne by
investment adviser (158,287)
-----------
Net expenses 567,390
-----------
NET INVESTMENT LOSS (52,755)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on securities 192,893
Net change in unrealized
appreciation (depreciation) on
investments 10,201,578
-----------
NET GAIN ON INVESTMENTS 10,394,471
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $10,341,716
===========
</TABLE>
See Notes to Financial Statements 5
<PAGE>
Phoenix-Hollister Small Cap Value Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From
Inception
Year Ended 11/20/97 to
8/31/99 8/31/98
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (52,755) $ (66,488)
Net realized gain (loss) 192,893 12,932
Net change in unrealized appreciation (depreciation) 10,201,578 (6,740,688)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 10,341,716 (6,794,244)
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net realized gains, Class A (29,557) --
Net realized gains, Class B (11,989) --
Net realized gains, Class C (5,756) --
In excess of net investment income, Class A -- (27,475)
In excess of net investment income, Class B -- (2,932)
In excess of net investment income, Class C -- (1,800)
In excess of net investment income, Class M -- (251)
----------- -----------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (47,302) (32,458)
----------- -----------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (1,080,990 and 2,003,648
shares, respectively) 11,142,835 20,830,478
Net asset value of shares issued from reinvestment of
distributions (2,728 and 2,693 shares, respectively) 27,226 26,901
Cost of shares repurchased (513,966 and 215,710 shares,
respectively) (5,211,308) (2,249,618)
----------- -----------
Total 5,958,753 18,607,761
----------- -----------
CLASS B
Proceeds from sales of shares (328,886 and 779,154 shares,
respectively) 3,326,336 8,252,028
Net asset value of shares issued from reinvestment of
distributions (1,052 and 224 shares, respectively) 10,468 2,235
Cost of shares repurchased (221,287 and 45,382 shares,
respectively) (2,235,715) (463,815)
----------- -----------
Total 1,101,089 7,790,448
----------- -----------
CLASS C
Proceeds from sales of shares (338,260 and 381,563 shares,
respectively) 3,417,996 4,020,977
Net asset value of shares issued from reinvestment of
distributions (397 and 102 shares, respectively) 3,935 1,015
Cost of shares repurchased (108,144 and 38,337 shares,
respectively) (1,092,574) (402,328)
----------- -----------
Total 2,329,357 3,619,664
----------- -----------
CLASS M
Proceeds from sales of shares (0 and 14,556 shares,
respectively) -- 146,910
Net asset value of shares issued from reinvestment of
distributions (0 and 25 shares, respectively) -- 250
Cost of shares repurchased (10,849 and 3,732 shares,
respectively) (95,668) (40,572)
----------- -----------
Total (95,668) 106,588
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 9,293,531 30,124,461
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS 19,587,945 23,297,759
NET ASSETS
Beginning of period 23,297,759 0
----------- -----------
END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF $0 AND $0,
RESPECTIVELY] $42,885,704 $23,297,759
=========== ===========
</TABLE>
6 See Notes to Financial Statements
<PAGE>
Phoenix-Hollister Small Cap Value Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------------------------- -------------------------- --------------------------
FROM FROM FROM
YEAR INCEPTION YEAR INCEPTION YEAR INCEPTION
ENDED 11/20/97 TO ENDED 11/20/97 TO ENDED 11/20/97 TO
8/31/99 8/31/98 8/31/99 8/31/98 8/31/99 8/31/98
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $8.11 $10.00 $8.07 $10.00 $8.07 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (loss) 0.01(1)(2) (0.01)(1)(2) (0.06)(1)(3) (0.08)(1)(3) (0.06)(1)(4) (0.08)(1)(4)
Net realized and unrealized
gain (loss) 3.31 (1.85) 3.28 (1.82) 3.28 (1.82)
------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT
OPERATIONS 3.32 (1.86) 3.22 (1.90) 3.22 (1.90)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net realized
gains (0.02) -- (0.02) -- (0.02) --
In excess of net investment
income -- (0.03) -- (0.03) -- (0.03)
------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.02) (0.03) (0.02) (0.03) (0.02) (0.03)
------- ------- ------- ------- ------- -------
Change in net asset value 3.30 (1.89) 3.20 (1.93) 3.20 (1.93)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.41 $8.11 $11.27 $8.07 $11.27 $8.07
======= ======= ======= ======= ======= =======
Total return(5) 40.90% (18.64)%(6) 39.86% (19.07)%(6) 39.86% (19.09)%(6)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $26,926 $14,519 $9,494 $5,922 $6,465 $2,770
RATIO TO AVERAGE NET ASSETS
OF:
Operating expenses 1.40% 1.40%(7) 2.15% 2.15%(7) 2.15% 2.15%(7)
Net investment income (loss) 0.15% (0.14)%(7) (0.60)% (1.01)%(7) (0.60)% (0.98)%(7)
Portfolio turnover 203% 105%(6) 203% 105%(6) 203% 105%(6)
</TABLE>
(1) Computed using average shares outstanding.
(2) Includes reimbursement of operating expenses by investment adviser of $0.06
and $0.14, respectively.
(3) Includes reimbursement of operating expenses by investment adviser of $0.06
and $0.14, respectively.
(4) Includes reimbursement of operating expenses by investment adviser of $0.06
and $0.14, respectively.
(5) Maximum sales charges are not reflected in the total return calculation.
(6) Not annualized.
(7) Annualized.
See Notes to Financial Statements 7
<PAGE>
Phoenix-Hollister Value Equity Fund
INVESTMENTS AT AUGUST 31, 1999
<TABLE>
<CAPTION>
SHARES VALUE
-------- ----------------
<S> <C> <C>
COMMON STOCKS--81.0%
AUTO PARTS & EQUIPMENT--2.8%
Delphi Automotive Systems Corp.......... 82,500 $ 1,546,875
BANKS (MONEY CENTER)--8.3%
Bank of America Corp.................... 20,000 1,210,000
Chase Manhattan Corp. (The)............. 22,000 1,841,125
Morgan (J.P.) & Co., Inc................ 11,500 1,485,656
----------------
4,536,781
----------------
BEVERAGES (ALCOHOLIC)--2.8%
Anheuser-Busch Companies, Inc........... 20,000 1,540,000
BROADCASTING (TELEVISION, RADIO & CABLE)--2.2%
MediaOne Group, Inc.(b)................. 18,000 1,183,500
CHEMICALS--0.9%
Praxair, Inc............................ 10,000 470,000
CHEMICALS (DIVERSIFIED)--2.8%
Monsanto Co............................. 38,000 1,560,375
COMMUNICATIONS EQUIPMENT--2.8%
CIENA Corp.(b).......................... 44,000 1,545,500
COMPUTERS (NETWORKING)--1.4%
3Com Corp.(b)........................... 30,000 744,375
COMPUTERS (SOFTWARE & SERVICES)--3.5%
Computer Associates International,
Inc..................................... 22,000 1,243,000
Healtheon Corp.(b)...................... 20,000 676,250
----------------
1,919,250
----------------
<CAPTION>
SHARES VALUE
-------- ----------------
<S> <C> <C>
ELECTRICAL EQUIPMENT--5.1%
Honeywell, Inc.......................... 24,800 $ 2,814,800
ENGINEERING & CONSTRUCTION--2.3%
Dycom Industries, Inc.(b)............... 40,000 1,235,000
ENTERTAINMENT--2.6%
Royal Caribbean Cruises Ltd............. 30,000 1,404,375
FINANCIAL (DIVERSIFIED)--8.7%
Citigroup, Inc.......................... 40,000 1,777,500
Fannie Mae.............................. 18,000 1,118,250
SLM Holding Corp........................ 42,000 1,855,875
----------------
4,751,625
----------------
INSURANCE (MULTI-LINE)--5.8%
American International Group, Inc....... 19,000 1,761,063
CIGNA Corp.............................. 16,000 1,437,000
----------------
3,198,063
----------------
MACHINERY (DIVERSIFIED)--2.2%
Caterpillar, Inc........................ 21,000 1,189,125
MANUFACTURING (DIVERSIFIED)--9.2%
Corning, Inc............................ 33,000 2,194,500
Eaton Corp.............................. 18,000 1,764,000
Illinois Tool Works, Inc................ 14,000 1,091,125
----------------
5,049,625
----------------
MANUFACTURING (SPECIALIZED)--2.4%
Diebold, Inc............................ 50,000 1,331,250
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Phoenix-Hollister Value Equity Fund
<TABLE>
<CAPTION>
SHARES VALUE
-------- ----------------
<S> <C> <C>
OFFICE EQUIPMENT & SUPPLIES--2.5%
Pitney Bowes, Inc....................... 23,000 $ 1,357,000
OIL (INTERNATIONAL INTEGRATED)--0.7%
Exxon Corp.............................. 5,000 394,375
PHOTOGRAPHY/IMAGING--2.9%
Xerox Corp.............................. 33,600 1,604,400
RAILROADS--0.9%
Union Pacific Corp...................... 10,000 486,875
SERVICES (DATA PROCESSING)--1.6%
First Data Corp......................... 20,000 880,000
TELECOMMUNICATIONS (LONG DISTANCE)--2.2%
AT&T Corp............................... 27,000 1,215,000
TELEPHONE--4.4%
BellSouth Corp.......................... 27,000 1,221,750
GTE Corp................................ 17,000 1,166,625
----------------
2,388,375
----------------
- ---------------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $40,774,132) 44,346,544
- ---------------------------------------------------------------------------
FOREIGN COMMON STOCKS--11.3%
COMMUNICATIONS EQUIPMENT--8.3%
Alcatel SA ADR (France)................. 63,000 1,949,062
Newbridge Networks Corp. (Canada)(b).... 41,000 1,124,937
Telefonaktiebolaget LM Ericsson
Sponsored ADR (Sweden).................. 45,000 1,465,313
----------------
4,539,312
----------------
<CAPTION>
SHARES VALUE
-------- ----------------
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)--3.0%
SAP AG Sponsored ADR (Germany).......... 50,000 $ 1,650,000
- ---------------------------------------------------------------------------
TOTAL FOREIGN COMMON STOCKS
(IDENTIFIED COST $5,667,039) 6,189,312
- ---------------------------------------------------------------------------
TOTAL LONG-TERM INVESTMENTS--92.3%
(IDENTIFIED COST $46,441,171) 50,535,856
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD
& POOR'S PAR
RATING VALUE
(Unaudited) (000)
----------- --------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS--0.5%
COMMERCIAL PAPER--0.5%
Koch Industries, Inc. 5.52%,
9/1/99......................... A-1+ $285 285,000
- ----------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(IDENTIFIED COST $285,000) 285,000
- ----------------------------------------------------------------------------
TOTAL INVESTMENTS--92.8%
(IDENTIFIED COST $46,726,171) 50,820,856(a)
Cash and receivables, less liabilities--7.2% 3,970,384
----------------
NET ASSETS--100.0% $ 54,791,240
================
</TABLE>
<TABLE>
<S> <C>
(a) Federal Income Tax Information: Net unrealized
appreciation of investment securities is comprised of
gross appreciation of $5,746,517 and gross depreciation
of $1,740,723 for federal income tax purposes. At August
31, 1999, the aggregate cost of securities for federal
income tax purposes was $46,815,062.
(b) Non-income producing.
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Phoenix-Hollister Value Equity Fund
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1999
<TABLE>
<S> <C>
ASSETS
Investment securities at value
(Identified cost $46,726,171) $50,820,856
Cash 188,813
Receivables
Investment securities sold 4,696,360
Fund shares sold 104,660
Dividends and interest 58,236
Prepaid expenses 688
-----------
Total assets 55,869,613
-----------
LIABILITIES
Payables
Investment securities purchased 826,998
Fund shares repurchased 9,630
Investment advisory fee 123,631
Distribution fee 30,053
Transfer agent fee 12,300
Trustees' fee 8,617
Financial agent fee 7,015
Accrued expenses 60,129
-----------
Total liabilities 1,078,373
-----------
NET ASSETS $54,791,240
===========
NET ASSETS CONSIST OF:
Capital paid in on shares of
beneficial interest $51,189,350
Accumulated net realized loss (492,795)
Net unrealized appreciation 4,094,685
-----------
NET ASSETS $54,791,240
===========
CLASS A
Shares of beneficial interest
outstanding, $1 par value,
unlimited authorization
(Net Assets $26,974,253) 2,226,738
Net asset value per share $12.11
Offering price per share
$12.11/(1-4.75%) $12.71
CLASS B
Shares of beneficial interest
outstanding, $1 par value,
unlimited authorization
(Net Assets $24,709,291) 2,059,944
Net asset value and offering price
per share $12.00
CLASS C
Shares of beneficial interest
outstanding, $1 par value,
unlimited authorization
(Net Assets $3,107,696) 258,908
Net asset value and offering price
per share $12.00
</TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $ 599,766
Interest 7,025
Foreign taxes withheld (9,251)
----------
Total investment income 597,540
----------
EXPENSES
Investment advisory fee 323,222
Distribution fee, Class A 65,123
Distribution fee, Class B 141,449
Distribution fee, Class C 28,862
Distribution fee, Class M 42
Financial agent fee 65,155
Transfer agent 68,419
Registration 24,388
Professional 20,406
Trustees 20,080
Custodian 14,986
Organizational 13,715
Printing 10,047
Miscellaneous 7,440
----------
Total expenses 803,334
Less expenses borne by investment
adviser (137,203)
----------
Net expenses 666,131
----------
NET INVESTMENT LOSS (68,591)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain on securities 87,678
Net change in unrealized appreciation
(depreciation) on investments 8,940,662
----------
NET GAIN ON INVESTMENTS 9,028,340
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $8,959,749
==========
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Phoenix-Hollister Value Equity Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
From
Inception
Year Ended 11/5/97 to
8/31/99 8/31/98
----------- -----------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (68,591) $ 15,327
Net realized gain (loss) 87,678 (579,675)
Net change in unrealized appreciation (depreciation) 8,940,662 (4,845,977)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 8,959,749 (5,410,325)
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income, Class A (61,486) (11,186)
Net investment income, Class B (2,136) (2,802)
Net investment income, Class C (982) (1,239)
Net investment income, Class M -- (100)
In excess of net investment income, Class A (49,116) (6,975)
In excess of net investment income, Class B (1,706) (1,747)
In excess of net investment income, Class C (784) (773)
In excess of net investment income, Class M -- (61)
----------- -----------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS (116,210) (24,883)
----------- -----------
FROM SHARE TRANSACTIONS
CLASS A
Proceeds from sales of shares (511,993 and 2,356,722
shares, respectively) 6,168,646 25,504,049
Net asset value of shares issued from reinvestment of
distributions (9,487 and 1,823 shares, respectively) 110,073 18,045
Cost of shares repurchased (504,840 and 148,447 shares,
respectively) (6,064,609) (1,615,279)
----------- -----------
Total 214,110 23,906,815
----------- -----------
CLASS B
Proceeds from sales of shares (1,603,387 and 621,551
shares, respectively) 20,006,209 6,514,113
Net asset value of shares issued from reinvestment of
distributions (298 and 370 shares, respectively) 3,446 3,662
Cost of shares repurchased (138,841 and 26,821 shares,
respectively) (1,652,638) (296,436)
----------- -----------
Total 18,357,017 6,221,339
----------- -----------
CLASS C
Proceeds from sales of shares (87,709 and 260,718 shares,
respectively) 985,203 2,734,842
Net asset value of shares issued from reinvestment of
distributions (122 and 108 shares, respectively) 1,405 1,073
Cost of shares repurchased (54,302 and 35,447 shares,
respectively) (656,192) (375,236)
----------- -----------
Total 330,416 2,360,679
----------- -----------
CLASS M
Proceeds from sales of shares (0 and 12,175 shares,
respectively) -- 122,245
Net asset value of shares issued from reinvestment of
distributions (0 and 16 shares, respectively) -- 161
Cost of shares repurchased (10,024 and 2,167 shares,
respectively) (105,146) (24,727)
----------- -----------
Total (105,146) 97,679
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS 18,796,397 32,586,512
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS 27,639,936 27,151,304
NET ASSETS
Beginning of period 27,151,304 0
----------- -----------
END OF PERIOD [INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS) OF $0 AND $69,817,
RESPECTIVELY] $54,791,240 $27,151,304
=========== ===========
</TABLE>
See Notes to Financial Statements 11
<PAGE>
Phoenix-Hollister Value Equity Fund
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------------- ------------------------- -------------------------
FROM FROM FROM
YEAR INCEPTION YEAR INCEPTION YEAR INCEPTION
ENDED 11/5/97 TO ENDED 11/5/97 TO ENDED 11/5/97 TO
8/31/99 8/31/98 8/31/99 8/31/98 8/31/99 8/31/98
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $8.94 $10.00 $8.89 $10.00 $8.89 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (loss) 0.02(1)(2) 0.03(1)(2) (0.07)(1)(3) (0.04)(1)(3) (0.07)(1)(4) (0.04)(1)(4)
Net realized and unrealized
gain (loss) 3.20 (1.07) 3.19 (1.05) 3.19 (1.05)
------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT
OPERATIONS 3.22 (1.04) 3.12 (1.09) 3.12 (1.09)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net
investment income (0.03) (0.01) (0.01) (0.01) (0.01) (0.01)
In excess of net investment
income (0.02) (0.01) -- (0.01) -- (0.01)
------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.05) (0.02) (0.01) (0.02) (0.01) (0.02)
------- ------- ------- ------- ------- -------
Change in net asset value 3.17 (1.06) 3.11 (1.11) 3.11 (1.11)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $12.11 $8.94 $12.00 $8.89 $12.00 $8.89
======= ======= ======= ======= ======= =======
Total return(5) 35.89% (10.28)%(6) 35.05% (10.92)%(6) 34.91% (10.86)%(6)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(thousands) $26,974 $19,766 $24,709 $5,291 $3,108 $2,005
RATIO TO AVERAGE NET ASSETS
OF:
Operating expenses 1.25% 1.25%(7) 2.00% 2.00%(7) 2.00% 2.00%(7)
Net investment income (loss) 0.14% 0.31%(7) (0.62)% (0.45)%(7) (0.60)% (0.45)%(7)
Portfolio turnover 192% 59%(6) 192% 59%(6) 192% 59%(6)
</TABLE>
(1) Computed using average shares outstanding.
(2) Includes reimbursement of operating expenses by investment adviser of $0.04
and $0.15, respectively.
(3) Includes reimbursement of operating expenses by investment adviser of $0.03
and $0.15, respectively.
(4) Includes reimbursement of operating expenses by investment adviser of $0.04
and $0.15, respectively.
(5) Maximum sales charges are not reflected in the total return calculation.
(6) Not annualized.
(7) Annualized.
12 See Notes to Financial Statements
<PAGE>
PHOENIX INVESTMENT TRUST 97
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
The Phoenix Investment Trust 97 (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 a "Fund". Each Fund has distinct
investment objectives.
Phoenix-Hollister Small Cap Value Fund seeks long-term capital appreciation.
Phoenix-Hollister Value Equity Fund's primary investment objective is to seek
long-term capital appreciation and its secondary objective is to seek current
income by investing in a diversified portfolio of common stocks.
Each Fund offers Class A, Class B and Class C shares. Class M shares have been
closed. Class A shares are sold with the front-end sales charge of up to 4.75%.
Class B shares are sold with a contingent deferred sales charge which declines
from 5% to zero depending on the period of time the shares are held. Class C
shares are sold with a 1% contingent deferred sales charge if redeemed within
one year of purchase. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that each
class bears different distribution expenses and has exclusive voting rights with
respect to its distribution plan. Income and expenses of each Fund are borne pro
rata by the holders of all 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. 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. Interest income is
recorded on the accrual basis. Dividend income is recorded on the ex-dividend
date or, in the case of certain foreign securities, as soon as the Fund is
notified. Realized gains and losses are determined on the identified cost basis.
C. INCOME TAXES:
Each Fund is treated as a separate taxable entity. It is the policy of each
Fund 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 income to its shareholders. In addition, each Fund intends to
distribute an amount sufficient to avoid imposition of any excise tax under
Section 4982 of the Code. Therefore, no provision for federal income taxes or
excise taxes has been made.
D. DISTRIBUTIONS TO SHAREHOLDERS:
Distributions are recorded by each Fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences include the treatment of non-taxable dividends, foreign
currency gain/loss, partnerships, operating losses and losses deferred due to
wash sales and excise tax regulations. Permanent book and tax basis differences
relating to shareholder distributions will result in reclassifications to paid
in capital.
E. FOREIGN CURRENCY TRANSLATION:
Foreign securities and other assets and liabilities are valued using the
foreign currency exchange rate effective at the end of the reporting period.
Cost of investments is translated at the currency exchange rate effective at the
trade date. The gain or loss resulting from a change in currency exchange rates
between the trade and settlement dates of a portfolio transaction is treated as
a gain or loss on foreign currency. Likewise, the gain or loss resulting from a
change in currency exchange rates between the date income is accrued and paid is
treated as a gain or loss on foreign currency. The Trust does not separate that
portion of the results of operations arising from changes in exchange rates and
that portion arising from changes in the market prices of securities.
F. FORWARD CURRENCY CONTRACTS:
Each Fund may enter into forward currency contracts in conjunction with the
planned purchase or sale of foreign denominated securities in order to hedge the
U.S. dollar cost or proceeds. Forward currency contracts involve, to varying
degrees, elements of market risk in excess of the amount recognized in the
statement of assets and liabilities. Risks arise from the possible movements in
foreign exchange rates or if the counterparty does not perform under the
contract.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any number of days from the
date of the contract agreed upon by the parties, at a price set at the time of
the contract. These contracts are traded
13
<PAGE>
PHOENIX INVESTMENT TRUST 97
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1999 (CONTINUED)
directly between currency traders and their customers. The contract is
marked-to-market daily and the change in market value is recorded by each Fund
as an unrealized gain (or loss). When the contract is closed or offset with the
same counterparty, the Fund records a realized gain (or loss) equal to the
change in the value of the contract when it was opened and the value at the time
it was closed or offset.
G. OPTIONS:
Each Fund may write covered options or purchase options contracts for the
purpose of hedging against changes in the market value of the underlying
securities or foreign currencies.
Each Fund will realize a gain or loss upon the expiration or closing of the
option transaction. Gains and losses on written options are reported separately
in the Statement of Operations. When a written option is exercised, the proceeds
on sales or amounts paid are adjusted by the amount of premium received. Options
written are reported as a liability in the Statement of Assets and Liabilities
and subsequently marked-to-market to reflect the current value of the option.
The risk associated with written options is that the change in value of options
contracts may not correspond to the change in value of the hedged instruments.
In addition, losses may arise from changes in the value of the underlying
instruments, or if a liquid secondary market does not exist for the contracts.
Each Fund may purchase options which are included in the Funds' Schedule of
Investments and subsequently marked-to-market to reflect the current value of
the option. When a purchased option is exercised, the cost of the security is
adjusted by the amount of premium paid. The risk associated with purchased
options is limited to the premium paid.
H. EXPENSES:
Expenses incurred by the Trust with respect to more than one Fund are
allocated in proportion to the net assets of each Fund, except where allocation
of direct expense to each Fund or an alternative allocation method can be more
fairly made.
I. REPURCHASE AGREEMENTS:
A repurchase agreement is a transaction where a Fund acquires a security for
cash and obtains a simultaneous commitment from the seller to repurchase the
security at an agreed upon price and date. Each Fund, through its custodian,
takes possession of securities collateralizing the repurchase agreement. The
collateral is marked-to-market daily to ensure that the market value of the
underlying assets remains sufficient to protect the Fund in the event of default
by the seller. If the seller defaults and the value of the collateral declines,
or, if the seller enters insolvency proceedings, realization of collateral may
be delayed or limited.
2. INVESTMENT ADVISORY FEE AND RELATED PARTY TRANSACTIONS
As compensation for its services to the Trust, the Adviser, Phoenix Investment
Counsel, Inc., an indirect majority-owned subsidiary of Phoenix Home Life Mutual
Insurance Company ("PHL"), is entitled to a fee based upon the following annual
rates as a percentage of the average daily net assets of each separate Fund:
<TABLE>
<CAPTION>
1st $1 $1-2 $2+
Fund Billion Billion Billion
- - ---- -------- -------- --------
<S> <C> <C> <C>
Small Cap Value Fund............... 0.90% 0.85% 0.80%
Value Equity Fund.................. 0.75% 0.70% 0.65%
</TABLE>
The Adviser has voluntarily agreed to assume total operating expenses of each
Fund excluding interest, taxes, brokerage fees, commissions and extraordinary
expenses, until December 31, 1999, to the extent that such expenses exceed the
following percentages of the average annual net asset values for each Fund:
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
-------- -------- --------
<S> <C> <C> <C>
Small Cap Value Fund.............. 1.40% 2.15% 2.15%
Value Equity Fund................. 1.25% 2.00% 2.00%
</TABLE>
As Distributor of the Trust's shares, Phoenix Equity Planning Corp. ("PEPCO"),
an indirect majority-owned subsidiary of PHL, has advised the Trust that it
retained net selling commissions of $16,008 for Class A shares, and deferred
sales charges of $53,653 for Class B shares and $5,974 for Class C shares for
the year ended August 31, 1999. In addition, each Fund pays PEPCO a distribution
fee at an annual rate of 0.25% for Class A shares, 1.00% for Class B shares and
1.00% for Class C shares applied to the average daily net assets of the Fund.
The Distributor has advised the Trust that of the total amount expensed for the
year ended August 31, 1999, $319,335 was retained by the Distributor, $88,196
was paid to unaffiliated participants, and $6,834 was paid to W.S. Griffith, an
indirect subsidiary of PHL.
As Financial Agent of each Fund, 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 each Fund. Certain minimum fees and fee
waivers may apply.
PEPCO serves as the Trust's Transfer Agent with State Street Bank and Trust
Company as sub-transfer agent. For the year ended August 31, 1999, transfer
agent fees were $141,640 of which PEPCO retained $8,079 which is net of the fees
paid to State Street.
14
<PAGE>
PHOENIX INVESTMENT TRUST 97
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1999 (CONTINUED)
At August 31, 1999, PHL and its affiliates held shares of the Trust which
aggregated the following:
<TABLE>
<CAPTION>
Aggregate Net
Shares Asset Value
--------- -------------
<S> <C> <C>
Small Cap Value Fund, Class A....... 472,213 $ 5,387,956
Value Equity Fund, Class A.......... 1,161,425 14,064,855
Value Equity Fund, Class B.......... 1,381,952 16,583,430
</TABLE>
3. PURCHASE AND SALE OF SECURITIES
Purchases and sales of securities during the year ended August 31, 1999
(excluding U.S. Government and agency securities, and short-term securities)
aggregated the following:
<TABLE>
<CAPTION>
Purchases Sales
----------- -----------
<S> <C> <C>
Small Cap Value Fund................. $75,326,118 $67,368,420
Value Equity Fund.................... 95,787,856 81,183,929
</TABLE>
There were no purchases or sales of long-term U.S. Government and agency
securities during the year ended August 31, 1999.
4. CREDIT RISK
In countries with limited or developing markets, investments may present
greater risks than in more developed markets and the prices of such investments
may be volatile. The consequences of political, social or economic changes in
these markets may have disruptive effects on the market prices of these
investments and the income they generate, as well as a Fund's ability to
repatriate such amounts.
5. CAPITAL LOSS CARRYOVERS
At August 31, 1999, the Value Equity Fund had a capital loss carryover of
$403,905, expiring in 2007, which may be used to offset future capital gains.
Under current tax law, capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following fiscal year.
For the year ended August 31, 1999, the Small Cap Value Fund deferred capital
losses of $1,016,461 and the Value Equity Fund utilized capital losses deferred
in the prior year in the amount of $678,812.
6. RECLASS OF CAPITAL ACCOUNTS
In accordance with accounting pronouncements, the Funds have recorded
reclassifications in the capital accounts. These reclassifications have no
impact on the net asset value of each of the Funds and are designed generally to
present undistributed income and realized gains on a tax basis which is
considered to be more informative to the shareholder. As of August 31, 1999, the
Funds recorded the following reclassifications to increase (decrease) the
accounts listed below:
<TABLE>
<CAPTION>
Capital paid
Undistributed Accumulated in on shares
net investment net realized of benefical
income gain (loss) interest
-------------- ------------ ------------
<S> <C> <C> <C>
Small Cap Value
Fund.................. $ 52,755 $ (37,541) $ (15,214)
Value Equity Fund..... 114,984 (798) (114,186)
</TABLE>
This report is not authorized for distribution to prospective investors in the
Phoenix Investment Trust 97 unless preceded or accompanied by an effective
Prospectus which includes information concerning the sales charge, the Fund's
record and other pertinent information.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
[LOGO]
To the Trustees and Shareholders of
Phoenix Investment Trust 97:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments (except for bond ratings), and the
related statements of operations and of changes in net assets, and the financial
highlights present fairly, in all material respects, the financial position of
the Phoenix-Hollister Small Cap Value Fund and the Phoenix-Hollister Value
Equity Fund (constituting the Phoenix Investment Trust 97, hereinafter referred
to as the "Trust") at August 31, 1999, the results of each of their operations,
the changes in each of their net assets and the financial highlights for the
periods presented, 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 August
31, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
October 8, 1999
16
<PAGE>
PHOENIX INVESTMENT TRUST 97
PART C--OTHER INFORMATION
Item 23. Exhibits
<TABLE>
<S> <C>
a.1 Declaration of Trust of the Registrant previously filed as Exhibit 1.1
via EDGAR with Pre-Effective Amendment No. 1 on November 3, 1997 and
incorporated by reference.
a.2 Amendment to Declaration of Trust changing names of series to
"Phoenix-Hollister Small Cap Value Fund" and "Phoenix-Hollister Value
Equity Fund" filed via EDGAR with Post-Effective Amendment No. 3 on
November 30, 1998 and incorporated herein by reference.
b. None.
c.1 Reference is hereby made to Article IV of Registrant's Declaration of
Trust.
d.1 Investment Advisory Agreement between Registrant and Phoenix Investment
Counsel, Inc. filed as Exhibit 5.1 via EDGAR with Pre-Effective
Amendment No. 1 on November 3, 1997 and incorporated by reference.
e.1 Underwriting Agreement between Registrant and Phoenix Equity Planning
Corporation ("Equity Planning") dated November 19, 1997 filed as Exhibit
6.1 via EDGAR with Post-Effective Amendment No. 1 on May 15, 1998 and
incorporated by reference.
e.2 Form of Sales Agreement between Phoenix Equity Planning Corporation and
dealers filed as Exhibit 6.2 via EDGAR with Post-Effective Amendment No.
1 on May 15, 1998 and incorporated by reference.
e.3 Form of Supplement to Phoenix Family of Funds Sales Agreement filed as
Exhibit 6.3 via EDGAR with Post-Effective Amendment No. 1 on May 15,
1998 and incorporated by reference.
e.4 Form of Financial Institution Sales Contract for the Phoenix Family of
Funds filed as Exhibit 6.4 via EDGAR with Post-Effective Amendment No. 1
on May 15, 1998 and incorporated by reference.
f. None.
g.1 Master Custodian Contract between Registrant and State Street Bank and
Trust Company dated May 1, 1997 filed as Exhibit 8.1 via EDGAR with
Pre-Effective Amendment No. 1 on November 3, 1997 and incorporated by
reference.
h.1 Transfer Agency and Service Agreement between Registrant and Equity
Planning filed as Exhibit 9.1 via EDGAR with Pre-Effective Amendment
No. 1 on November 3, 1997 and incorporated by reference.
h.2 Sub-Transfer Agency Agreement between Registrant and Phoenix Equity
Planning Corporation dated June 1, 1994 filed as Exhibit 9.2 via EDGAR
with Post-Effective Amendment No. 1 on May 15, 1998 and incorporated by
reference.
h.3 Amended and Restated Financial Agent Agreement between Registrant and
Phoenix Equity Planning Corporation dated November 19, 1997 filed as
Exhibit 9.3 via EDGAR with Post-Effective Amendment No.
1 on May 15, 1998 and incorporated by reference.
h.4 First Amendment to the Amended and Restated Financial Agreement between
Registrant and Phoenix Equity Planning Corporation effective as of
February 27, 1998 filed as Exhibit 9.4 via EDGAR with Post- Effective
Amendment No. 1 on May 15, 1998 and incorporated by reference.
h.5 Second Amendment to Amended and Restated Financial Agent Agreement
between Registrant and Phoenix Equity Planning Corporation dated July
31, 1998 filed via EDGAR with Post-Effective Amendment No. 2 on October
30, 1998 and incorporated herein by reference.
i. Opinion and consent of Counsel as to legality of the shares filed via
EDGAR as Exhibit 10 with Pre- Effective Amendment No. 1 on November 3,
1997 and incorporated herein by reference.
j.* Consent of Independent Accountant filed via EDGAR herewith.
k. Not applicable.
l. Initial Capital Agreement filed as Exhibit 13 via EDGAR with
Pre-Effective Amendment No. 1 on November 3, 1997 and incorporated by
reference.
m.1 Distribution Plan for Class A Shares filed as Exhibit 15.1 via EDGAR
with Pre-Effective Amendment No. 1 on November 3, 1997 and incorporated
by reference.
m.2 Distribution Plan for Class B Shares filed as Exhibit 15.2 via EDGAR
with Pre-Effective Amendment No. 1 on November 3, 1997 and incorporated
by reference.
m.3 Distribution Plan for Class C Shares filed as Exhibit 15.3 via EDGAR
with Pre-Effective Amendment No. 1 on November 3, 1997 and incorporated
by reference.
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C>
n. Financial Data Schedules.
o.1 Amended and Restated Plan pursuant to Rule 18f-3 effective November 5,
1997 filed as Exhibit 18 via EDGAR with Post-Effective Amendment No. 1
on May 15, 1998 and incorporated by reference.
o.2 First Amendment to Amended and Restated Plan Pursuant to Rule 18f-3
effective August 26, 1998 filed via EDGAR with Post-Effective Amendment
No. 2 on October 30, 1998 and incorporated herein by reference.
p.1 Powers of Attorney for Messrs. Chesek, Conway, Dalzell-Payne, Jeffries,
Keith, Morris, Oates, Pedersen, Roth, Segerson and Weicker and Ms.
Curtiss filed via EDGAR with Post-Effective Amendment No. 3 on
November 30, 1998 and incorporated herein by reference.
</TABLE>
- --------------
*Filed herewith.
Item 24. Persons Controlled by or Under Common Control with The Fund
None.
Item 25. 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 provide 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 adviser and distributor pursuant to
the foregoing provisions or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a trustee,
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 26. Business and Other Connections of Investment Adviser
See "Management of the Funds" in the Prospectus and "The Investment
Adviser" and "Management of the Trust" in the Statement of Additional
Information which is included in this Post-Effective Amendment. 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 No. 801-5995) filed under the Investment Advisers Act
of 1940, incorporated herein by reference.
Item 27. Principal Distributor
(a) Equity Planning also serves as the principal underwriter for the following
other registrants:
Phoenix-Aberdeen Series Fund, Phoenix-Aberdeen Worldwide Opportunities Fund,
Phoenix Duff & Phelps Institutional Mutual Funds, Phoenix-Engemann Funds,
Phoenix Equity Series Fund, Phoenix-Euclid Funds, Phoenix-Goodwin California
Tax Exempt Bonds, Inc., Phoenix-Goodwin Multi-Sector Fixed Income Fund,
Inc., Phoenix-Goodwin Multi-Sector Short Term Bond Fund, Phoenix
Multi-Portfolio Fund, Phoenix-Oakhurst Income & Growth Fund, Phoenix-
Oakhurst Strategic Allocation Fund, Inc., Phoenix-Seneca Funds, Phoenix
Series Fund, Phoenix Strategic Equity Series Fund, Phoenix-Zweig Trust,
Phoenix Home Life Variable Universal Life Account, Phoenix Home Life
Variable Accumulation Account, PHL Variable Accumulation Account, Phoenix
Life and Annuity Variable Universal Life Account and PHL Variable Separate
Account MVA1.
(b) Directors and executive officers of Phoenix Equity Planning Corporation are
as follows:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business 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
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Distributor with Registrant
- -------------------------- ------------------------------- -------------------------
<S> <C> <C>
Philip R. McLoughlin Director, Chairman and Trustee and President
56 Prospect Street President
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 President, Executive Vice President
56 Prospect Street Retail Distribution
P.O. Box 150480
Hartford, CT 06115-0480
Leonard J. Saltiel Managing Director, Vice President
56 Prospect Street Operations and Service
P.O. Box 150480
Hartford, CT 06115-0480
G. Jeffrey Bohne Vice President, Clerk and
101 Munson Street Mutual Fund Secretary
P.O. Box 810 Customer Service and Clerk
Greenfield, MA 01302-0810
Nancy G. Curtiss Vice President and Treasurer, Treasurer
56 Prospect Street Fund Accounting
P.O. Box 150480
Hartford, CT 06115-0480
Thomas N. Steenburg Vice President, None
55 East Monroe Street Counsel and Secretary
Suite 3600
Chicago, IL 60603
Jacqueline M. Porter Assistant Vice President, Assistant Treasurer
56 Prospect Street Financial Reporting
P.O. Box 150480
Hartford, CT 06115-0480
</TABLE>
(c) To the best of the Registrant's knowledge, no commissions or other
compensation was received by any principal underwriter who is not an
affiliated person of the Registrant or an affiliated person of such
affiliated person, directly or indirectly, from the Registrant during the
Registrant's last fiscal year.
Item 28. Location of Accounts and Records
All accounts, books and other documents required to be maintained by 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 101
Munson Street, P.O. Box 810, Greenfield, Massachusetts 01302, or its investment
adviser, Phoenix Investment Counsel, Inc., 56 Prospect Street, Hartford,
Connecticut 06115, or the custodian, State Street Bank and Trust Company, 1
Heritage Drive, P2N, North Quincy, MA 02171. 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 06083.
Item 29. Management Services
None.
Item 30. Undertakings
None.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this registration statement under Rule 485(b)
of the Securities Act and has duly caused this amendment to its registration
statement to be signed on its behalf by the undersigned, duly authorized, in the
City of Hartford, and State of Connecticut on the 22nd day of December, 1999.
PHOENIX INVESTMENT TRUST 97
ATTEST: /s/ Pamela S. Sinofsky By: /s/ Philip R. McLoughlin
------------------------------- -----------------------------------
Pamela S. Sinofsky 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 22nd day of December, 1999.
<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 Trustee (Principal
- ---------------------------- Executive Officer)
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.*
By /s/ Philip R. McLoughlin
- ----------------------------
*Philip R. McLoughlin pursuant to powers
filed previously.
</TABLE>
S-1
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.4 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated October 8, 1999, relating to the financial
statements and financial highlights appearing in the August 31, 1999 Annual
Report to Shareholders of the Phoenix Investment Trust 97 Fund, which is 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.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 16, 1999
