PROSPECTUS
PHOENIX SERIES FUND
PROSPECTUS
MARCH 1, 1996
Balanced Fund Series
Convertible Fund Series
Growth Fund Series
U.S. Stock Fund Series
High Yield Fund Series
Money Market Fund Series
U.S. Government Securities Fund Series
P H O E N I X
[Phoenix logo] Phoenix Investments
<PAGE>
PHOENIX SERIES FUND
101 Munson Street
Greenfield, MA 01301
PROSPECTUS
February 28, 1996
Phoenix Series Fund (the "Trust") is a diversified, open-end management
investment company whose shares are presently offered in seven series. Each
series generally operates as a separate fund with its own investment
objectives and policies designed to meet its specific investment goals. There
can be no assurance that any series will achieve its objectives.
Phoenix Balanced Fund Series ("Balanced Series") seeks as its investment
objectives reasonable income, long-term capital growth and conservation of
capital. It is intended that this Series will invest in common stocks and
fixed income securities, with emphasis on income-producing securities which
appear to have some potential for capital enhancement.
Phoenix Convertible Fund Series ("Convertible Series") seeks as its
investment objectives income and the potential for capital appreciation,
which objectives are to be considered as relatively equal. It is intended
that this Series will invest at least 65% of its total assets (exclusive of
cash and government securities) in debt securities and preferred stocks which
are convertible into, or carry the right to purchase, common stock or other
equity securities.
This Series may employ "leverage" by borrowing money and using such funds
to increase its investments in securities above the amounts otherwise
possible. Leverage may involve greater costs and risks than would otherwise
be the case. See the Statement of Additional Information.
Phoenix Growth Fund Series ("Growth Series") seeks as its investment
objective long-term appreciation of capital. Since income is not an
objective, any income generated by the investment of this Series' assets will
be incidental to its objective. It is intended that this Series will invest
primarily in the common stocks of companies believed by the Adviser to have
appreciation potential.
Phoenix U.S. Stock Fund Series ("U.S. Stock Series") seeks as its
investment objective appreciation of capital through the use of aggressive
investment techniques. It is intended that this Series will invest primarily
in domestic common stocks believed by management to have a substantial
potential for capital growth without being subject to unreasonable risks.
This Series may employ "leverage" by borrowing money and using such funds to
increase its investments in securities above the amounts otherwise possible.
Leverage may involve greater costs and risks than would otherwise be the
case. See the Statement of Additional Information.
================================================================================
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
CUSTOMER SERVICE--(800) 243-1574
MARKETING--(800) 243-4361
TELEPHONE ORDERS/EXCHANGES--(800) 367-5877
TELECOMMUNICATION DEVICE (TTY)--(800) 243-1926
<PAGE>
Phoenix High Yield Fund Series ("High Yield Series") seeks as its
investment objective high current income. Capital growth is a secondary
objective which will also be considered when consistent with the primary
objective of high current income. It is intended that this Series will invest
primarily in a diversified portfolio of high yield fixed income securities,
commonly known as junk bonds. In addition to other risks, these high yield,
high risk bonds are often subject to greater market fluctuations and risk of
loss of income and principal due to issuer default than are lower-yielding,
higher-rated bonds. The risks of investing in high yield, high risk bonds
should be carefully considered and are outlined on page 19.
Phoenix Money Market Fund Series ("Money Market Series") seeks as its
investment objective as high a level of current income as is consistent with
the preservation of capital and the maintenance of liquidity. It is intended
that this Series will invest primarily in a portfolio of high-quality money
market instruments generally maturing in less than one year. An investment in
the Money Market Series is neither insured nor guaranteed by the U.S.
Government and there can be no assurance that the Series will be able to
maintain a stable net asset value of $1.00 per share.
Phoenix U.S. Government Securities Fund Series ("U.S. Government
Securities Series") seeks as its investment objective a high level of current
income consistent with safety of principal. This Series invests in securities
which are issued or guaranteed by the U.S. Government or its agencies and
backed by the full faith and credit of the U.S. Government and those
supported by the ability to borrow from the U.S. Treasury or by the credit of
an agency or otherwise supported by the U.S. Government.
All of the above Series, except the Money Market Series and the U.S.
Government Securities Series, may engage in limited securities and index
options transactions and enter into financial futures contracts and related
options for hedging purposes. See "Investment Techniques."
The Convertible Series and the High Yield Series may invest up to 100% and
65% respectively of their Portfolios in non-investment grade securities
(sometimes referred to as "junk bonds") which entail default and other risks
greater than those associated with higher rated securities. Investors should
carefully assess the risks associated with an investment in these Series. See
"Investment Objectives and Policies," and "Risk Factors."
This Prospectus sets forth concisely the information about the Trust that
a prospective investor should know before investing. No dealer, salesperson
or any other person has been authorized to give any information or to make
any representations other than those contained in this Prospectus, and, if
given or made, such other information or representations must not be relied
upon as having been authorized by the Trust, Adviser or Distributor. This
Prospectus does not constitute an offer to sell or solicitation of an offer
to buy any of the securities offered hereby in any state in which, or to any
person whom, it is unlawful to make such offer. Neither the delivery of this
Prospectus nor any sale hereunder shall, under any circumstances, create any
implication that information herein is correct at any time subsequent to its
date. Investors should read and retain this Prospectus for future reference.
Additional information about the Trust is contained in the Statement of
Additional Information dated February 28, 1996 which has been filed with the
Securities and Exchange Commission (the "Commission") and is available upon
request at no charge by calling (800) 243-4361 or by writing to Phoenix
Equity Planning Corporation at 100 Bright Meadow Boulevard, P.O. Box 2200,
Enfield, Connecticut 06083-2200. The Statement of Additional Information is
incorporated herein by reference.
Shares of the Trust are not deposits or obligations of, or guaranteed or
endorsed by, any bank, credit union or affiliated entity and are not
federally insured or otherwise protected by the Federal Deposit Insurance
Corporation (FDIC), the Federal Reserve Board or any other agency and involve
investment risk, including possible loss of principal.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
FUND EXPENSES 4
INTRODUCTION 7
FINANCIAL HIGHLIGHTS 9
PERFORMANCE INFORMATION 16
INVESTMENT OBJECTIVES AND POLICIES 17
Phoenix Balanced Fund Series 17
Phoenix Convertible Fund Series 17
Phoenix Growth Fund Series 18
Phoenix U.S. Stock Fund Series 18
Phoenix High Yield Fund Series 19
Phoenix Money Market Fund Series 20
Phoenix U.S. Government Securities Fund Series 21
INVESTMENT TECHNIQUES AND RELATED RISKS 21
INVESTMENT RESTRICTIONS 24
MANAGEMENT OF THE FUND 25
DISTRIBUTION PLANS 26
HOW TO BUY SHARES 28
NET ASSET VALUE 33
HOW TO REDEEM SHARES 34
DIVIDENDS, DISTRIBUTIONS AND TAXES 35
ADDITIONAL INFORMATION 35
APPENDIX 37
</TABLE>
3
<PAGE>
FUND EXPENSES
The following tables illustrate all expenses and fees that a shareholder
will incur. The expenses and fees set forth in these tables are for the
fiscal year ended October 31, 1995.
<TABLE>
<CAPTION>
Class A Shares
--------------------------------------------------
Balanced Convertible Growth High Yield
Series Series Series Series
--------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.75% 4.75% 4.75% 4.75%
Maximum Sales Load Imposed on Reinvested
Dividends None None None None
Deferred Sales Load (as a percentage of
original purchase price or redemption
proceeds, as applicable) None None None None
Redemption Fee None None None None
Exchange Fee None None None None
Annual Fund Operating Expenses (as a
percentage of average net assets)
Management Fees 0.51% 0.65% 0.67% 0.65%
12b-1 Fees (a) 0.25% 0.25% 0.25% 0.25%
Other Operating Expenses (after
reimbursement) 0.26% 0.28% 0.28% 0.31%
-------- ----------- ------- -----------
Total Fund Operating Expenses 1.02% 1.18% 1.20% 1.21%
======== =========== ======= ===========
</TABLE>
<TABLE>
<CAPTION>
Class A Shares
------------------------------------
U.S.
Money U.S. Government
Market Stock Securities
Series Series Series
--------- ------------ ---------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) None 4.75% 4.75%
Maximum Sales Load Imposed on Reinvested
Dividends None None None
Deferred Sales Load (as a percentage of
original purchase price or redemption
proceeds, as applicable) None None None
Redemption Fee None None None
Exchange Fee None None None
Annual Fund Operating Expenses (as a
percentage of average net assets)
Management Fees 0.40% 0.70% 0.45%
12b-1 Fees (a) None 0.25% 0.25%
Other Operating Expenses (after
reimbursement) 0.31%(b) 0.34% 0.29%
------- ----------- --------
Total Fund Operating Expenses 0.71% 1.29% 0.99%
======== =========== ========
</TABLE>
(a) "Rule 12b-1 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").
(b) The Adviser has agreed to reimburse the Trust for the amount, if any,
by which the Money Market Series' operating expenses for any fiscal year
exceeded 0.85% of the average daily net assets of Class A Shares and 1.60% of
the average daily net assets of Class B Shares of the Series. There were no
expense reimbursements for the fiscal year ended October 31, 1995.
4
<PAGE>
FUND EXPENSES
<TABLE>
<CAPTION>
Class B Shares
-------------------------------------------------------------------
Balanced Convertible Growth High Yield
Series Series Series Series
-------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Shareholder
Transaction Expenses
Maximum Sales Load
Imposed on Purchases
(as a percentage of
offering price) None None None None
Maximum Sales Load
Imposed on Reinvested
Dividends None None None None
Deferred Sales Load 5% during the 5% during the 5% during the
(as a percentage of first year, first year, first year, 5% during the
original purchase decreasing 1% decreasing 1% decreasing 1% first year,
price or redemption annually to annually to annually to decreasing 1%
proceeds, as 2% during the 2% during the 2% during the annually to 2%
applicable) fourth and fourth and fourth and during the
fifth years, fifth years, fifth years, fourth and
dropping from dropping from dropping from fifth years,
2% to 0% 2% to 0% 2% to 0% dropping from
after the after the after the 2% to 0% after
fifth year fifth year fifth year the fifth year
Redemption Fee None None None None
Exchange Fee None None None None
Annual Fund
Operating
Expenses (as a
percentage of
average net assets)
Management Fees 0.50% 0.65% 0.67% 0.65%
12b-1 Fees (a) 1.00% 1.00% 1.00% 1.00%
Other Operating
Expenses (after
reimbursement) 0.27% 0.28% 0.28% 0.31%
------------- ------------- ------------- ---------------
Total Fund Operating
Expenses 1.77% 1.93% 1.95% 1.96%
============= ============= ============= ===============
</TABLE>
<TABLE>
<CAPTION>
Class B Shares
-------------------------------------------------
U.S. U.S. Government
Money Market Stock Securities
Series Series Series
-------------- -------------- ---------------
<S> <C> <C> <C>
Shareholder
Transaction Expenses
Maximum Sales Load
Imposed on Purchases
(as a percentage of
offering price) None None None
Maximum Sales Load
Imposed on Reinvested
Dividends None None None
Deferred Sales Load 5% during the
(as a percentage of 5% during the first year,
original purchase first year, decreasing 1% 5% during the
price or redemption decreasing 1% annually to first year,
proceeds, as annually to 2% during the decreasing 1%
applicable) 2% during the fourth annually to 2%
fourth and and fifth during the
fifth years, years, fourth and
dropping from dropping from fifth years,
2% to 0% 2% to 0% dropping from
after the after the 2% to 0% after
fifth year fifth year the fifth year
Redemption Fee None None None
Exchange Fee None None None
Annual Fund
Operating
Expenses (as a
percentage of
average net assets)
Management Fees 0.40% 0.70% 0.45%
12b-1 Fees (a) 0.75% 1.00% 1.00%
Other Operating
Expenses (after
reimbursement) 0.31%(b) 0.34% 0.29%
------------- ------------- --------------
Total Fund Operating
Expenses 1.46% 2.04% 1.74%
============= ============= ==============
</TABLE>
(a) "Rule 12b-1 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").
(b) The Adviser has agreed to reimburse the Trust for the amount, if any,
by which the Money Market Series' operating expenses for any fiscal year
exceeded 0.85% of the average daily net assets of Class A Shares and 1.60% of
the average daily net assets of Class B Shares of the Series. There were no
expense reimbursements for the fiscal year ended October 31, 1995.
5
<PAGE>
<TABLE>
<CAPTION>
Cumulative Expenses Paid for the Period
-----------------------------------------
Example* 1 year 3 years 5 years 10 years
----------------------------------------------------------- ------- -------- -------- ----------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a
hypothetical
$1,000 investment assuming (1) 5% annual return and (2)
redemption at the end of each time period:
Balanced Series (Class A Shares) $57 $78 $101 $166
Balanced Series (Class B Shares) 68 86 116 189
Convertible Series (Class A Shares) 59 83 109 184
Convertible Series (Class B Shares) 70 91 124 206
Growth Series (Class A Shares) 59 84 110 186
Growth Series (Class B Shares) 70 91 125 208
High Yield Series (Class A Shares) 59 84 111 187
High Yield Series (Class B Shares) 70 92 126 209
Money Market Series (Class A Shares) 7 23 40 88
Money Market Series (Class B Shares) 65 76 100 154
U.S. Stock Series (Class A Shares) 60 86 115 196
U.S. Stock Series (Class B Shares) 71 94 130 218
U.S. Government Sec. Series (Class A Shares) 57 78 100 163
U.S. Government Sec. Series (Class B Shares) 68 85 114 185
</TABLE>
<TABLE>
<CAPTION>
Cumulative Expenses Paid for the Period
-----------------------------------------
1 year 3 years 5 years 10 years
------- -------- -------- ----------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on the
same $1,000 investment assuming no redemption at the end
of each time period:
Balanced Series (Class A Shares) $57 $78 $101 $166
Balanced Series (Class B Shares) 18 56 96 189
Convertible Series (Class A Shares) 59 83 109 184
Convertible Series (Class B Shares) 20 61 104 206
Growth Series (Class A Shares) 59 84 110 186
Growth Series (Class B Shares) 20 61 105 208
High Yield Series (Class A Shares) 59 84 111 187
High Yield Series (Class B Shares) 20 62 106 209
Money Market Series (Class A Shares) 7 23 40 88
Money Market Series (Class B Shares) 15 46 80 154
U.S. Stock Series (Class A Shares) 60 86 115 196
U.S. Stock Series (Class B Shares) 21 64 110 218
U.S. Government Sec. Series (Class A Shares) 57 78 100 163
U.S. Government Sec. Series (Class B Shares) 18 55 94 185
</TABLE>
*The purpose of the tables above are to help the investor understand the
various costs and expenses that the investor will bear, directly or
indirectly. The Example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown. See
"Management of the Fund," "Distribution Plans" and "How to Buy Shares."
6
<PAGE>
INTRODUCTION
This Prospectus describes the shares offered by and the operations of the
Phoenix Series Fund (the "Trust"). The Trust is a diversified, open-end
management investment company established as a business trust under the laws
of Massachusetts by an Agreement and Declaration of Trust dated April 7, 1958
(the "Declaration of Trust"). The Declaration of Trust authorizes the assets
and shares of the Trust to be divided into series (the "Series"). Each Series
has a different investment objective and invests primarily in certain types
of securities, as described on the cover page of this Prospectus, and is
designed to meet different investment needs. In many respects, each Series
operates as if it were a separate mutual fund. The Trustees have authority to
issue an unlimited number of shares of beneficial interest of one dollar par
value of each Series.
The Investment Adviser
Phoenix Investment Counsel, Inc. (the "Adviser") is the investment adviser
to the Trust and its professional staff selects and supervises the
investments in each Series' portfolio. The Adviser is a subsidiary of Phoenix
Duff & Phelps Corporation and, prior to November 1, 1995, was an indirect
subsidiary of Phoenix Home Life Mutual Insurance Company. Under the terms of
the Investment Advisory Agreement, for its services to all Series of the
Trust, the Adviser is entitled to fees as set forth under "The Adviser." The
Adviser has agreed to reimburse the Trust for certain expenses as described
under "Management of the Fund."
Distributor and Distribution Plans
Phoenix Equity Planning Corporation ("Equity Planning" or "Distributor"),
serves as National Distributor of the Trust's shares. See "Distribution
Plans" and the Statement of Additional Information. Equity Planning also acts
as financial agent and as such receives a quarterly fee based on the average
of the aggregate daily net asset values of the Trust at an annual rate of
$300 per $1 million. Equity Planning also serves as the Trust's transfer
agent.
The Trust has adopted distribution plans pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act") for all classes
of all Series other than Class A Shares of the Money Market Series. Pursuant
to the distribution plan adopted for Class A Shares, the Trust shall
reimburse the Distributor up to a maximum annual rate of 0.25% of the Trust's
average daily Class A Share net assets of a Series for distribution
expenditures incurred in connection with the sale and promotion of Class A
Shares of a Series and for furnishing shareholder services. Pursuant to the
distribution plan adopted for Class B Shares, the Trust shall reimburse the
Distributor up to a maximum annual rate of 1.00% of the Trust's average daily
Class B Share net assets of a Series for distribution expenses incurred in
connection with the sale and promotion of Class B Shares of a Series and for
furnishing shareholder services. See "Distribution Plans."
Purchase of Shares
The Trust offers two classes of shares of each Series which may be
purchased at a price equal to their net asset value per share plus a sales
charge (except for Class A Shares of the Money Market Series) which, at the
election of the purchaser may be imposed (i) at the time of purchase (the
"Class A Shares") or (ii) on a contingent deferred basis (the "Class B
Shares"). Completed applications for the purchase of shares should be mailed
to the Phoenix Funds, c/o State Street Bank and Trust Company, P.O. Box 8301,
Boston, MA 02266-8301.
Class A Shares (except the Money Market Series) are offered to the public
at the next determined net asset value after receipt of the order by State
Street Bank and Trust Company plus a maximum sales charge of 4.75% of the
offering price (4.99% of the amount invested) on single purchases of less
than $50,000. The sales charge for Class A Shares is reduced on a graduated
scale on single purchases of $50,000 or more and subject to other conditions
stated below. See "How to Buy Shares," "How to Obtain Reduced Sales Charges
- -- Class A Shares," and "Net Asset Value."
Class B Shares are offered to the public at the next determined net asset
value after receipt of an order by State Street Bank and Trust Company with
no sales charge. Class B Shares are subject to a sales charge if they are
redeemed within five years of purchase. See "How to Buy Shares" and "Deferred
Sales Charge Alternative--Class B Shares."
Shares of the Money Market Series are offered to the public at their
constant net asset value of $1.00 per share with no sales charge on Class A
Shares. There can be no assurance that the Money Market Series will be able
to maintain a stable net asset value of $1.00 per share.
Shares of each class represent an identical interest in the investment
portfolio of that Series and have the same rights except that Class B Shares
bear the cost of the higher distribution fees which cause the Class B Shares
to have a higher expense ratio and to receive lower dividends than Class A
Shares.
Minimum Initial and Subsequent Investments
The minimum initial investment is $500 ($25 if using the bank draft
investing program designated "Investo-Matic") and the minimum subsequent
investment is $25. Exceptions to the minimum and subsequent investment
amounts are available under specific circumstances. See "How to Buy Shares."
Redemption Price
Class A Shares of a Series may be redeemed at any time at the net asset
value per share next computed after receipt of a redemption request by Equity
Planning, the Trust's transfer agent. Class B shareholders redeeming shares
within five years of the date of purchase will normally be assessed a
contingent deferred sales charge. See "How to Redeem Shares".
Risk Factors
There can be no assurance that any Series will achieve its investment
objectives. In addition, special risks may be presented by the particular
types of securities in which a Series may invest. For example, several Series
may invest in below investment grade securities. To the extent that a Series
invests
7
<PAGE>
in lower-rated securities (sometimes referred to as "junk bonds"), such an
investment is speculative and involves risks not typically associated with
investment in higher rated securities, including overall greater risk of
non-payment of interest and principal and potentially greater sensitivity to
general economic conditions and changes in interest rates. In addition,
investors should consider risks inherent in foreign debt securities, futures
and options. See "Investment Objectives and Policies"
8
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables set forth certain financial information for the
respective fiscal years of the Trust. This financial information has been
audited by Price Waterhouse LLP, independent accountants. Their opinion and
the Trust's Financial Statements and notes thereto are incorporated by
reference in the Statement of Additional Information. The Statement of
Additional Information and the Trust's most recent Annual Report (which
contains a discussion of each Series' performance) are available at no charge
upon request by calling (800) 243-4361.
FINANCIAL HIGHLIGHTS
(Selected data for a share outstanding throughout the indicated period)
BALANCED FUND SERIES
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------
Year Ended October 31,
-------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $15.23 $16.64 $15.92 $16.05 $13.86
Income from investment operations
Net investment income 0.52 0.48 0.46 0.52 0.62
Net realized and unrealized gain
(loss) 1.80 (1.01) 1.08 0.92 2.84
-------- -------- -------- -------- ---------
Total from investment operations 2.32 (0.53) 1.54 1.44 3.46
-------- -------- -------- -------- ---------
Less distributions
Dividends from net investment
income (0.51) (0.49) (0.46) (0.54) (0.64)
Dividends from net realized gains -- (0.39) (0.36) (1.03) (0.63)
-------- -------- -------- -------- ---------
Total distributions (0.51) (0.88) (0.82) (1.57) (1.27)
-------- -------- -------- -------- ---------
Change in net asset value 1.81 (1.41) 0.72 (0.13) 2.19
-------- -------- -------- -------- ---------
Net asset value, end of period $17.04 $15.23 $16.64 $15.92 $16.05
======== ======== ======== ======== =========
Total return((1)) 15.52% -3.28% 9.92% 9.77% 26.26%
Ratios/supplemental data:
Net assets, end of period
(thousands) $2,345,440 $2,601,808 $3,126,014 $2,146,726 $941,754
Ratio to average net assets of:
Operating expenses 1.02% 0.96% 0.95% 0.98% 0.98%
Net investment income 3.27% 3.03% 2.88% 3.55% 4.22%
Portfolio turnover 197% 159% 130% 136% 196%
</TABLE>
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------ ---------------------------
Year From
Year Ended October 31, Ended Inception
------------------------------------------ October 31, 7/15/94 to
1990 1989 1988 1987 1986 1995 10/31/94
---- ---- ---- ---- ---- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $13.91 $12.19 $13.53 $14.29 $11.86 $15.23 $15.27
Income from investment operations
Net investment income 0.69 0.69 0.58 0.57 0.67 0.40 0.09
Net realized and unrealized gain
(loss) (0.04) 1.74 (0.33) 0.85 3.12 1.80 (0.04)
---- ---- ---- ---- ---- ---------- -----------
Total from investment operations 0.65 2.43 0.25 1.42 3.79 2.20 0.05
---- ---- ---- ---- ---- ---------- -----------
Less distributions
Dividends from net investment
income (0.67) (0.71) (0.61) (0.59) (0.68) (0.42) (0.09)
Dividends from net realized gains (0.03) -- (0.98) (1.59) (0.68) -- --
---- ---- ---- ---- ---- ---------- -----------
Total distributions (0.70) (0.71) (1.59) (2.18) (1.36) (0.42) (0.09)
---- ---- ---- ---- ---- ---------- -----------
Change in net asset value (0.05) 1.72 (1.34) (0.76) 2.43 1.78 (0.04)
---- ---- ---- ---- ---- ---------- -----------
Net asset value, end of period $13.86 $13.91 $12.19 $13.53 $14.29 $17.01 $15.23
==== ==== ==== ==== ==== ========== ===========
Total return((1)) 4.71% 20.60% 2.14% 10.78% 33.06% 14.68% 0.34%((3))
Ratios/supplemental data:
Net assets, end of period
(thousands) $472,642 $446,970 $425,737 $368,695 $164,935 $16,971 $4,629
Ratio to average net assets of:
Operating expenses 0.85% 0.93% 0.80% 0.72% 0.75% 1.78% 1.65%((2))
Net investment income 4.91% 5.28% 4.87% 4.28% 5.04% 2.46% 2.36%((2))
Portfolio turnover 181% 172% 226% 171% 129% 197% 159%
</TABLE>
((1)) Maximum sales load is not reflected in the total return calculation.
((2)) Annualized
((3)) Not Annualized
9
<PAGE>
CONVERTIBLE FUND SERIES
<TABLE>
<CAPTION>
Class A
------------------------------------------------
Year Ended October 31,
------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $17.56 $19.34 $18.86 $18.36 $16.63
Income from investment
operations
Net investment income 0.87 0.78 0.68 0.77 0.87
Net realized and
unrealized gain (loss) 1.04 (1.06) 1.53 1.54 1.75
------ ------ ------ ------ -------
Total from
investment operations 1.91 (0.28) 2.21 2.31 2.62
------ ------ ------ ------ -------
Less distributions
Dividends from net
investment income (1.05) (0.69) (0.73) (0.72) (0.89)
Dividends from net
realized gains (0.19) (0.81) (1.00) (1.09) --
------ ------ ------ ------ -------
Total distributions (1.24) (1.50) (1.73) (1.81) (0.89)
------ ------ ------ ------ -------
Change in net asset
value 0.67 (1.78) 0.48 0.50 1.73
------ ------ ------ ------ -------
Net asset value, end of
period $18.23 $17.56 $19.34 $18.86 $18.36
====== ====== ====== ====== =======
Total return((1)) 11.45% -1.48% 12.58% 13.77% 15.97%
Ratios/supplemental
data:
Net assets, end of
period (thousands) $219,384 $226,294 $252,072 $200,944 $169,288
Ratio to average net
assets of:
Operating expenses 1.18% 1.14% 1.15% 1.20% 1.14%
Net investment income 4.78% 4.27% 3.70% 4.28% 4.84%
Portfolio turnover 79% 91% 94% 200% 284%
</TABLE>
<TABLE>
<CAPTION>
Class A Class B
---------------------------------------------- --------------------------
Year From
Year Ended October 31, Ended Inception
---------------------------------------------- October 31, 7/15/94 to
1990 1989 1988 1987 1986 1995 10/31/94
------ ------ ------ ------ ----- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $17.13 $15.55 $17.84 $19.10 $16.58 $17.55 $7.59
Income from investment
operations
Net investment income 0.91 0.95 0.86 0.92 0.90 0.70((4)) 0.15
Net realized and
unrealized gain (loss) (0.49) 1.58 (0.06) 0.78 3.17 1.07 (0.06)
------ ------ ------ ------ ----- --------- -----------
Total from
investment operations 0.42 2.53 0.80 1.70 4.07 1.77 0.09
------ ------ ------ ------ ----- --------- -----------
Less distributions
Dividends from net
investment income (0.92) (0.95) (0.84) (0.92) (0.89) (0.96) (0.13)
Dividends from net
realized gains -- -- (2.25) (2.04) (0.66) (0.19) --
------ ------ ------ ------ ----- --------- -----------
Total distributions (0.92) (0.95) (3.09) (2.96) (1.55) (1.15) (0.13)
------ ------ ------ ------ ----- --------- -----------
Change in net asset
value (0.50) 1.58 (2.29) (1.26) 2.52 0.62 (0.04)
------ ------ ------ ------ ----- --------- -----------
Net asset value, end of
period $16.63 $17.13 $15.55 $17.84 $19.10 $18.17 $17.55
====== ====== ====== ====== ===== ========= ===========
Total return((1)) 2.35% 16.83% 4.90% 9.23% 25.66% 10.59% 0.49%((3))
Ratios/supplemental
data:
Net assets, end of
period (thousands) $143,200 $156,279 $159,426 $154,716 $105,158 $3,715 $856
Ratio to average net
assets of:
Operating expenses 0.99% 1.03% 0.83% 0.73% 0.80% 1.95% 1.83%((2))
Net investment income 5.17% 5.71% 5.51% 5.12% 4.99% 3.92% 3.29%((2))
Portfolio turnover 194% 214% 213% 299% 187% 79% 91%
</TABLE>
((1)) Maximum sales load is not reflected in the total return calculation.
((2)) Annualized
((3)) Not Annualized
((4)) Computed using average shares outstanding.
10
<PAGE>
GROWTH FUND SERIES
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------
Year Ended October 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $21.24 $21.53 $20.76 $22.60 $18.45
Income from investment operations((5))
Net investment income 0.26 0.26 0.32 0.36 0.50
Net realized and unrealized gain
(loss) 4.53 0.17 1.15 0.97 4.97
-------- -------- -------- -------- ---------
Total from investment operations 4.79 0.43 1.47 1.33 5.47
-------- -------- -------- -------- ---------
Less distributions
Dividends from net investment
income (0.30) (0.24) (0.32) (0.45) (0.55)
Dividends from net realized gains (0.81) (0.48) (0.38) (2.72) (0.77)
-------- -------- -------- -------- ---------
Total distributions (1.11) (0.72) (0.70) (3.17) (1.32)
-------- -------- -------- -------- ---------
Change in net asset value 3.68 (0.29) 0.77 (1.84) 4.15
-------- -------- -------- -------- ---------
Net asset value, end of period $24.92 $21.24 $21.53 $20.76 $22.60
======== ======== ======== ======== =========
Total return((1)) 23.91% 2.06% 7.20% 6.95% 30.97%
Ratios/supplemental data:
Net assets, end of period
(thousands) $2,300,251 $2,140,458 $2,563,442 $2,186,868 $1,251,565
Ratio to average net assets of:
Operating expenses 1.20% 1.19% 1.18% 1.17% 1.15%
Net investment income 0.92% 1.22% 1.55% 1.86% 2.49%
Portfolio turnover 109% 118% 176% 192% 227%
</TABLE>
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------ ---------------------------
Year From
Year Ended October 31, Ended Inception
------------------------------------------ October 31, 7/15/94 to
1990 1989 1988 1987 1986 1995 10/31/94
---- ---- ---- ---- ---- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $18.76 $16.01 $17.96 $18.59 $14.56 $21.19 $20.48
Income from investment operations((5))
Net investment income 0.64 0.67 0.39 0.36 0.39 0.00((4)) 0.01
Net realized and unrealized gain
(loss) (0.05) 2.68 0.72 1.37 4.75 4.60 0.70
---- ---- ---- ---- ---- ---------- -----------
Total from investment operations 0.59 3.35 1.11 1.73 5.14 4.60 0.71
---- ---- ---- ---- ---- ---------- -----------
Less distributions
Dividends from net investment
income (0.62) (0.60) (0.51) (0.21) (0.34) (0.24) --
Dividends from net realized gains (0.28) -- (2.55) (2.15) (0.77) (0.81) --
---- ---- ---- ---- ---- ---------- -----------
Total distributions (0.90) (0.60) (3.06) (2.36) (1.11) (1.05) --
---- ---- ---- ---- ---- ---------- -----------
Change in net asset value (0.31) 2.75 (1.95) (0.63) 4.03 3.55 0.71
---- ---- ---- ---- ---- ---------- -----------
Net asset value, end of period $18.45 $18.76 $16.01 $17.96 $18.59 $24.74 $21.19
==== ==== ==== ==== ==== ========== ===========
Total return((1)) 3.05% 21.44% 6.99% 9.95% 35.43% 23.02% 3.47%((3))
Ratios/supplemental data:
Net assets, end of period
(thousands) $678,151 $680,498 $603,600 $528,962 $271,874 $20,111 $ 2,966
Ratio to average net assets of:
Operating expenses 1.01% 1.06% 0.85% 0.71% 0.78% 1.97% 1.87%((2))
Net investment income 3.37% 3.79% 2.48% 2.64% 2.68% 0.01% 0.32%((2))
Portfolio turnover 203% 180% 221% 185% 170% 109% 118%
</TABLE>
((1)) Maximum sales load is not reflected in the total return calculation.
((2)) Annualized
((3)) Not Annualized
((4)) Computed using average shares outstanding.
((5)) Distributions are made in accordance with the prospectus; however,
class level per share income from investment operations may vary from
anticipated results depending on the timing of share purchases and
redemptions.
11
<PAGE>
U.S. STOCK FUND SERIES
<TABLE>
<CAPTION>
Class A
------------------------------------------------------
Year Ended October 31,
------------------------------------------------------
1995 1994 1993 1992 1991
------------ ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.33 $14.56 $13.56 $14.88 $10.77
Income from investment operations((5))
Net investment income 0.06((4)) 0.27 0.22 0.23 0.23
Net realized and unrealized gain
(loss) 4.21 (0.21) 1.62 0.59 4.05
----------- ------ ------ ------ -------
Total from investment operations 4.27 0.06 1.84 0.82 4.28
----------- ------ ------ ------ -------
Less distributions
Dividends from net investment income (0.19) (0.22) (0.23) (0.25) (0.17)
Dividends from net realized gains (0.90) (1.07) (0.61) (1.50) --
Distributions in excess of accumulated
realized gains -- -- -- (0.39) --
----------- ------ ------ ------ -------
Total distributions (1.09) (1.29) (0.84) (2.14) (0.17)
----------- ------ ------ ------ -------
Change in net asset value 3.18 (1.23) 1.00 (1.32) 4.11
----------- ------ ------ ------ -------
Net asset value, end of period $16.51 $13.33 $14.56 $13.56 $14.88
=========== ====== ====== ====== =======
Total return((1)) 35.14% 0.37% 14.15% 7.11% 39.99%
Ratios/supplemental data:
Net assets, end of period (thousands) $180,288 $140,137 $143,035 $128,530 $125,942
Ratio to average net assets of:
Operating expenses 1.29% 1.26% 1.17% 1.25% 1.20%
Net investment income (loss) 0.43% 1.97% 1.58% 1.70% 1.68%
Portfolio turnover 331% 306% 192% 251% 332%
</TABLE>
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------ -----------------------------
Year From
Year Ended October 31, Ended Inception
------------------------------------------ October 31, 7/15/94 to
1990 1989 1988 1987 1986 1995 10/31/94
---- ---- ---- ---- ---- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $12.68 $11.09 $13.89 $14.91 $12.57 $13.31 $13.09
Income from investment
operations((5))
Net investment income 0.17 0.43 0.27 0.29 0.27 (0.12)((4)) 0.02
Net realized and unrealized gain
(loss) (1.82) 1.58 0.26 1.47 3.25 4.26 0.20
---- ---- ---- ---- ---- ------------ -----------
Total from investment operations (1.65) 2.01 0.53 1.76 3.52 4.14 0.22
---- ---- ---- ---- ---- ------------ -----------
Less distributions
Dividends from net investment
income (0.26) (0.42) (0.33) (0.19) (0.25) (0.17) --
Dividends from net realized gains -- -- (3.00) (2.59) (0.93) (0.90) --
Distributions in excess of
accumulated realized gains -- -- -- -- -- -- --
---- ---- ---- ---- ---- ------------ -----------
Total distributions (0.26) (0.42) (3.33) (2.78) (1.18) (1.07) --
---- ---- ---- ---- ---- ------------ -----------
Change in net asset value (1.91) 1.59 (2.80) (1.02) 2.34 3.07 0.22
---- ---- ---- ---- ---- ------------ -----------
Net asset value, end of period $10.77 $12.68 $11.09 $13.89 $14.91 $16.38 $13.31
==== ==== ==== ==== ==== ============ ===========
Total return((1)) -13.27% 18.59% 4.52% 13.04% 28.07% 34.15% 1.68%((3))
Ratios/supplemental data:
Net assets, end of period
(thousands) $99,428 $130,290 $124,650 $115,236 $99,604 $2,393 $330
Ratio to average net assets of:
Operating expenses 1.07% 1.09% 0.84% 0.76% 0.85% 2.04% 1.81%((2))
Net investment income (loss) 1.37% 3.60% 2.39% 2.20% 1.86% (0.83)% 1.45%((2))
Portfolio turnover 407% 248% 278% 152% 241% 331% 306%
</TABLE>
((1)) Maximum sales load is not reflected in the total return calculation.
((2)) Annualized
((3))Not Annualized
((4)) Computed using average shares outstanding.
((5)) Distributions are made in accordance with the prospectus; however,
class level per share income from investment operations may vary from
anticipated results depending on the timing of share purchases and
redemptions.
12
<PAGE>
HIGH YIELD FUND SERIES
<TABLE>
<CAPTION>
Class A
---------------------------------------------
Year Ended October 31,
---------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.11 $ 9.11 $ 8.14 $ 7.70 $ 6.72
Income from investment operations
Net investment income 0.80 0.76 0.74 0.77 0.74
Net realized and unrealized gain (loss) 0.04 (0.97) 0.97 0.44 0.98
----- ----- ------ ------ ------
Total from investment operations 0.84 (0.21) 1.71 1.21 1.72
----- ----- ------ ------ ------
Less distributions
Dividends from net investment income (0.78) (0.76) (0.74) (0.77) (0.74)
Tax return of capital -- (0.03) -- -- --
----- ----- ------ ------ ------
Total distributions (0.78) (0.79) (0.74) (0.77) (0.74)
----- ----- ------ ------ ------
Change in net asset value 0.06 (1.00) 0.97 0.44 0.98
----- ----- ------ ------ ------
Net asset value, end of period $ 8.17 $ 8.11 $ 9.11 $ 8.14 $ 7.70
===== ===== ====== ====== ======
Total return((1)) 11.19% -2.57% 21.87% 16.28% 26.77%
Ratios/supplemental data:
Net assets, end of period (thousands) $507,855 $531,773 $182,333 $113,197 $91,664
Ratio to average net assets of:
Operating expenses 1.21% 1.19% 1.04% 1.08% 1.08%
Net investment income 10.01% 9.01% 8.46% 9.51% 10.12%
Portfolio turnover 147% 222% 157% 205% 326%
</TABLE>
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------ ---------------------------
Year From
Year Ended October 31, Ended Inception
------------------------------------------ October 31, 7/15/94 to
1990 1989 1988 1987 1986 1995 10/31/94
---- ---- ---- ---- ---- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $7.90 $8.84 $8.42 $9.73 $9.11 $8.13 $9.38
Income from investment operations
Net investment income 0.81 1.03 1.01 1.20 1.17 0.72 0.54
Net realized and unrealized gain
(loss) (1.18) (0.95) 0.42 (1.25) 0.64 0.07 (1.25)
---- ---- ---- ---- ---- ---------- -----------
Total from investment operations (0.37) 0.08 1.43 (0.05) 1.81 0.79 (0.71)
---- ---- ---- ---- ---- ---------- -----------
Less distributions
Dividends from net investment
income (0.81) (1.02) (1.01) (1.26) (1.19) (0.73) (0.52)
Tax return of capital -- -- -- -- -- -- (0.02)
---- ---- ---- ---- ---- ---------- -----------
Total distributions (0.81) (1.02) (1.01) (1.26) (1.19) (0.73) (0.54)
---- ---- ---- ---- ---- ---------- -----------
Change in net asset value (1.18) (0.94) 0.42 (1.31) 0.62 0.06 (1.25)
---- ---- ---- ---- ---- ---------- -----------
Net asset value, end of period $6.72 $7.90 $8.84 $8.42 $9.73 $8.19 $8.13
==== ==== ==== ==== ==== ========== ===========
Total return((1)) -4.99% 0.64% 17.71% -2.29% 20.68% 10.44% -7.67%((3))
Ratios/supplemental data:
Net assets, end of period
(thousands) $80,391 $133,887 $161,208 $137,951 $111,430 $12,331 $ 6,056
Ratio to average net assets of:
Operating expenses 0.89% 0.85% 0.76% 0.72% 0.79% 1.97% 1.80%((2))
Net investment income 11.02% 11.81% 11.45% 11.42% 12.01% 9.18% 9.12%((2))
Portfolio turnover 321% 285% 217% 97% 91% 147% 222%
</TABLE>
((1))Maximum sales load is not reflected in the total return calculation.
((2))Annualized
((3))Not Annualized
13
<PAGE>
MONEY MARKET FUND SERIES
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------
Year Ended October 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations
Net investment income 0.053 0.032 0.025((1)) 0.035((1)) 0.060
-------- -------- ----------- ----------- ---------
Total from investment operations 0.053 0.032 0.025 0.035 0.060
-------- -------- ----------- ----------- ---------
Less distributions
Dividends from net investment
income (0.053) (0.032) (0.025) (0.035) (0.060)
-------- -------- ----------- ----------- ---------
Total distributions (0.053) (0.032) (0.025) (0.035) (0.060)
----------- ----------- ---------
Change in net asset value -- -- -- -- --
-------- -------- ----------- ----------- ---------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== =========== =========== =========
Total return 5.32% 3.20% 2.50% 3.50% 6.00%
Ratios/supplemental data:
Net assets, end of period
(thousands) $193,534 $196,566 $170,334 $180,786 $168,573
Ratio to average net assets of:
Operating expenses 0.71% 0.85% 0.85% 0.85% 0.82%
Net investment income 5.31% 3.19% 2.53% 3.50% 6.01%
</TABLE>
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------
Year Ended October 31,
-------------------------------------------------------------------
1990 1989 1988 1987 1986
---- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations
Net investment income 0.076 0.085((1)) 0.067((1)) 0.057((1)) 0.065((1))
---- ----------- ----------- ----------- -----------
Total from investment operations 0.076 0.085 0.067 0.057 0.065
---- ----------- ----------- ----------- -----------
Less distributions
Dividends from net investment
income (0.076) (0.085) (0.067) (0.057) (0.065)
---- ----------- ----------- ----------- -----------
Total distributions (0.076) (0.085) (0.067) (0.057) (0.065)
---- ----------- ----------- ----------- -----------
Change in net asset value -- -- -- -- --
---- ----------- ----------- ----------- -----------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
==== =========== =========== =========== ===========
Total return 7.60% 8.50% 6.70% 5.70% 6.50%
Ratios/supplemental data:
Net assets, end of period
(thousands) $163,645 $149,968 $107,262 $92,481 $111,430
Ratio to average net assets of:
Operating expenses 0.85% 0.85% 0.85% 0.85% 0.85%
Net investment income 7.59% 8.53% 6.71% 5.78% 6.45%
</TABLE>
<TABLE>
<CAPTION>
Class B
----------------------------
Year From
Ended Inception
October 31, 7/15/94 to
1995 10/31/94
---------- ------------
<S> <C> <C>
Net asset value, beginning of
period $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.046 0.007
---------- ------------
Total from investment operations 0.046 0.007
---------- ------------
Less distributions
Dividends from net investment
income (0.046) (0.007)
---------- ------------
Total distributions (0.046) (0.007)
---------- ------------
Change in net asset value -- --
---------- ------------
Net asset value, end of period $ 1.00 $ 1.00
========== ============
Total return 4.63% 0.70%((3))
Ratios/supplemental data:
Net assets, end of period
(thousands) $ 8,506 $ 2,086
Ratio to average net assets of:
Operating expenses 1.44% 1.60%((2))
Net investment income 4.62% 3.46%((2))
</TABLE>
((1)) Includes reimbursement of operating expenses by Adviser of $0.001,
$0.001, $0.001, $0.001, $0.002 and $0.003, respectively.
((2)) Annualized
((3)) Not annualized
14
<PAGE>
U.S. GOVERNMENT SECURITIES FUND SERIES
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $8.88 $9.87 $9.91 $9.65 $9.08
Income from investment operations
Net investment income 0.55 0.64 0.62((1)) 0.65((1)) 0.68((1))
Net realized and unrealized gain
(loss) 0.72 (1.02) 0.34 0.26 0.57
-------- -------- ----------- ----------- ------------
Total from investment operations 1.27 (0.38) 0.96 0.91 1.25
-------- -------- ----------- ----------- ------------
Less distributions
Dividends from net investment
income (0.55) (0.45) (0.62) (0.65) (0.68)
Dividends from net realized gains -- (0.02) (0.38) -- --
Tax return of capital -- (0.14) -- -- --
-------- -------- ----------- ----------- ------------
Total distributions (0.55) (0.61) (1.00) (0.65) (0.68)
-------- -------- ----------- ----------- ------------
Change in net asset value 0.72 (0.99) (0.04) 0.26 0.57
-------- -------- ----------- ----------- ------------
Net asset value, end of period $9.60 $8.88 $9.87 $9.91 $9.65
======== ======== =========== =========== ============
Total return((2)) 14.81% -3.98% 10.18% 9.74% 14.24%
Ratios/supplemental data:
Net assets, end of period
(thousands) $235,879 $262,157 $57,072 $40,365 $22,123
Ratio to average net assets of:
Operating expenses 0.99% 0.98% 0.75% 0.77% 0.97%
Net investment income 6.01% 5.92% 6.19% 6.64% 7.20%
Portfolio turnover 178% 101% 264% 285% 130%
</TABLE>
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------
From
Year Ended October 31, inception
----------------------------------------- 3/9/87 to
1990 1989 1988 10/31/87
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $9.28 $9.25 $9.14 $10.00
Income from investment operations
Net investment income 0.71((1)) 0.72 0.73((1)) 0.40((1))
Net realized and unrealized gain
(loss) (0.20) 0.03 0.22 (0.97)
----------- ----------- ----------- -----------
Total from investment operations 0.51 0.75 0.95 (0.57)
----------- ----------- ----------- -----------
Less distributions
Dividends from net investment
income (0.71) (0.72) (0.84) (0.29)
Dividends from net realized gains -- -- -- --
Tax return of capital -- -- -- --
----------- ----------- ----------- -----------
Total distributions (0.71) (0.72) (0.84) (0.29)
----------- ----------- ----------- -----------
Change in net asset value (0.20) 0.03 0.11 (0.86)
----------- ----------- ----------- -----------
Net asset value, end of period $9.08 $9.28 $9.25 $9.14
=========== =========== =========== ===========
Total return((2)) 5.82% 8.56% 10.92% -5.34%((4))
Ratios/supplemental data:
Net assets, end of period
(thousands) $11,957 $10,747 $8,980 $5,215
Ratio to average net assets of:
Operating expenses 1.00% 1.00% 1.00% 1.00%
Net investment income 7.77% 7.93% 7.93% 4.51%
Portfolio turnover 265% 297% 160% 26%
</TABLE>
<TABLE>
<CAPTION>
Class B
----------------------------
Year From
Ended Inception
October 31, 2/24/94 to
1995 10/31/94
----------- -----------
<S> <C> <C>
Net asset value, beginning of
period $ 8.86 $ 9.61
Income from investment operations
Net investment income 0.48 0.39
Net realized and unrealized gain
(loss) 0.72 (0.75)
----------- -----------
Total from investment operations 1.20 (0.36)
----------- -----------
Less distributions
Dividends from net investment
income (0.48) (0.30)
Dividends from net realized gains -- --
Tax return of capital -- (0.09)
----------- -----------
Total distributions (0.48) (0.39)
----------- -----------
Change in net asset value 0.72 (0.75)
----------- -----------
Net asset value, end of period $ 9.58 $ 8.86
=========== ===========
Total return((2)) 13.82 -3.83%((4))
Ratios/supplemental data:
Net assets, end of period
(thousands) $3,655 $ 1,238
Ratio to average net assets of:
Operating expenses 1.73% 2.00%((3))
Net investment income 5.23% 4.49%((3))
Portfolio turnover 178% 101%
</TABLE>
((1)) Includes reimbursement of operating expenses by Adviser of $0.03,
$0.04, $0.01, $0.01, $0.08 and $0.07, respectively.
((2)) Maximum sales load is not reflected in the total return calculation.
((3)) Annualized
((4)) Not annualized
15
<PAGE>
PERFORMANCE INFORMATION
The Trust may, from time to time, include the performance history of any
or all of the Series in advertisements, sales literature or reports to
current or prospective shareholders. Performance information about each
Series is based on that Series' past performance only and is not an
indication of future performance. Performance information may be expressed as
yield and effective yield of the Money Market Series, as yield of any other
Series or Class thereof, and as total return of any Series or Class thereof.
Current yield for the Money Market Series will be based on the income earned
by the Series over a given 7-day period (less a hypothetical charge
reflecting deductions for expenses taken during the period) and then
annualized, i.e., the income earned in the period is assumed to be earned
every seven days over a 52-week period and is stated in terms of an annual
percentage return on the investment. Effective yield is calculated similarly
but reflects the compounding effect of earnings on reinvested dividends.
The yield of each Series will be computed by dividing the Series' net
investment income over a 30-day period by an average value of invested assets
(using the average number of shares entitled to receive dividends and the
maximum offering price per share at the end of the period), all in accordance
with applicable regulatory requirements. Such amount will be compounded for
six months and then annualized for a twelve-month period to derive the
Series' yield for each class.
Standardized quotations of average annual total return for Class A and
Class B Shares of each Series will be expressed in terms of the average
annual compounded rate of return of a hypothetical investment in either Class
A or Class B Shares of each Series over a period of 1, 5, and 10 years (or up
to the life of the class of shares). Standardized total return quotations
reflect the deduction of a proportional share of each Class's expenses of
each Series (on an annual basis), deduction of the maximum initial sales load
in the case of Class A Shares and the maximum contingent deferred sales
charge applicable to a complete redemption of the investment in the case of
Class B Shares, and assume that all dividends and distributions on Class A
and Class B Shares are reinvested when paid. It is expected that the
performance of Class A Shares will be better than that of Class B Shares as a
result of lower distribution fees, and certain incrementally lower expenses
paid by Class A Shares. The Trust may also quote supplementally a rate of
total return over different periods of time by means of aggregate, average,
and year-by-year or other types of total return figures. In addition, the
Trust may from time to time, publish material citing historical volatility
for Shares of the Trust.
The Trust may from time to time include in advertisements containing total
return and the ranking of these performance figures relative to such figures
for groups of mutual funds having similar investment objectives as
categorized by ranking services such as Lipper Analytical Services, Inc., CDA
Investment Technologies, Inc., Weisenberger Financial Services, Inc., and
Morningstar, Inc. Additionally, the Trust may compare a Series' 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 and 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 and Poors The
Outlook and Personal Investor. The Trust may from time to time illustrate the
benefits of tax deferral by comparing taxable investments to investments made
through tax-deferred retirement plans. The total return may also be used to
compare the performance of a Series with certain widely acknowledged outside
standards or indices for stock and bond market performance, such as the
Standard & Poor's 500 Stock Index (the "S&P 500"), Dow Jones Industrial
Average, Europe Australia Far East Index (EAFE), Consumer's Price Index,
Shearson Lehman Corporate Index and Shearson Lehman T-Bond Index. The S&P 500
is a commonly quoted market value-weighted and unmanaged index showing the
changes in the aggregate market value of 500 common stocks relative to the
base period 1941-43. The S&P 500 is composed almost entirely of common stocks
of companies listed on the New York Stock Exchange, although the common
stocks of a few companies listed on the American Stock Exchange or traded
over the counter are included. The 500 companies represented include 400
industrial, 60 transportation and 40 financial services concerns. The S&P 500
represents about 80% of the market value of all issues traded on the New York
Stock Exchange.
Advertisements, sales literature and other communications may contain
information about the Trust or Adviser's current investment strategies and
management style. Current strategies and style may change to respond to a
changing market and economic conditions. From time to time, the Trust may
discuss specific portfolio holdings or industries in such communications. To
illustrate components of overall performance, the Trust may separate its
cumulative and average annual returns into income results and capital gains
or losses; or cite separately as a return figure the equity or bond portion
of a Series' portfolio; or compare a Series' equity or bond return figure to
well-know indices of market performance including but not limited to: the S&P
500 Index, Dow Jones Industrial Average, First Boston High Yield Index and
Solomon Brothers Corporate and Government Bond Indices.
Performance information for a Series reflects only the performance of a
hypothetical investment in Class A or Class B Shares of that Series during
the particular time period on which the calculations are based. Performance
information should be considered in light of a particular Series' investment
objectives and policies, characteristics and qualities of the Series, and the
market conditions during the given time period, and should not be considered
as a representation of what may be achieved in the future. For a description
of the methods used to determine total return for each Series, see the
Statement of Additional Information.
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The Trust's Annual Report, available upon request and without charge,
contains a discussion of the performance of each Series and a comparison of
that performance to a securities market index.
INVESTMENT OBJECTIVES AND POLICIES
Each Series has a different investment objective and is designed to meet
different investment needs. The differences in objectives and policies among
the seven Series can be expected to affect the investment return of each
Series and the degree of market and financial risk to which each Series is
subject. The investment objective of each Series is a fundamental policy
which may not be changed without the approval of a vote of a majority of the
outstanding shares of that Series. Since certain risks are inherent in the
ownership of any security, there can be no assurance that any Series will
achieve its investment objective. The investment policies of each Series will
also affect the rate of portfolio turnover. A high rate of portfolio turnover
generally involves correspondingly greater brokerage commissions, which are
paid directly by the Series. The rate for each Series, except the Money
Market Series (which does not normally pay brokerage commissions), is
included under "Financial Highlights."
Phoenix Balanced Fund Series
The Balanced Series seeks as its investment objectives reasonable income,
long-term capital growth and conservation of capital. The Balanced Series
intends to invest based on combined considerations of risk, income, capital
enhancement and protection of capital value.
The Balanced Series may invest in any type or class of security. Normally,
the Balanced Series will invest in common stocks and fixed income senior
securities; however, it may also invest in securities convertible into common
stocks. At least 25% of the value of its assets will be invested in fixed
income senior securities which are rated within the four highest rating
categories by recognized rating agencies (i.e., AAA to BBB by Standard &
Poor's Corporation, Aaa to Baa by Moody's Investors Services, Inc. (Moody's),
AAA to BBB-by Duff & Phelps Credit Rating Co.; or AAA to BBB by Fitch
Investor Services Inc.). Fixed-income securities which are rated in these
categories are sometimes referred to as "investment grade" securities. See
"Appendix" for a discussion of ratings.
The Series may also engage in certain options transactions and enter into
financial futures contracts and related options for hedging purposes and may
invest in deferred or zero coupon debt obligations. See "Investment
Techniques and Related Risks."
In implementing the investment objectives of this Series, management will
select securities believed to have potential for the production of current
income, with emphasis on securities that also have potential for capital
enhancement. For temporary defensive purposes when the Adviser believes that
adverse market conditions warrant, the Balanced Series may actively pursue a
policy of retaining cash or investing part or all of its assets in cash
equivalents, such as government securities and high grade commercial paper.
Risk Factors. The Series may invest up to 35% of its net assets,
determined at the time of investment, in high yield, high risk,
non-investment grade fixed income securities (commonly referred to as "junk
bonds"). Securities rated Baa by Moody's or BBB by S&P may have some
speculative characteristics and changes in economic conditions or other
circumstances may affect the ability to make principal and interest payments
on these types of bonds. A fixed income securities issue may have its ratings
reduced below the minimum permitted for purchase by the Series. In that
event, the Adviser will determine whether the Series should continue to hold
such issue in its portfolio. If, in the Adviser's opinion, market conditions
warrant, the Series may increase its position in lower or non-rated
securities from time to time. The lower rated and non-rated convertible
securities are predominantly speculative with respect to the issuer's
capacity to repay principal and pay interest. Investment in lower rated and
non-rated convertible fixed-income securities normally involves a greater
degree of market and credit risk than does investment in securities having
higher ratings. The price of these fixed income securities will generally
move in inverse proportion to interest rates. In addition, non-rated
securities are often less marketable than rated securities. To the extent
that the Series holds any lower rated or non-rated securities, it may be
negatively affected by adverse economic developments, increased volatility
and lack of liquidity.
Phoenix Convertible Fund Series
The Convertible Series seeks as its investment objectives income and the
potential for capital appreciation, which objectives are to be considered as
relatively equal.
Under normal circumstances, this Series intends to invest at least 65% of
the value of its total assets in debt securities and preferred stocks which
are convertible into, or carry the right to purchase, common stock or other
equity securities ("Convertible Securities"). Convertible securities have
several unique investment characteristics such as (1) higher yields than
common stocks, but lower yields than comparable nonconvertible fixed income
securities, (2) a lesser degree of fluctuation in value than the underlying
stocks since they have fixed income characteristics, and (3) the potential
for capital appreciation if the market price of the underlying common stock
increases. A convertible security might be subject to redemption at the
option of the issuer at a price established in the convertible security's
governing instrument. If a convertible security held by the Trust is called
for redemption, the Trust might be required to permit the issuer to redeem
the security, convert it into the underlying common stock or sell it to a
third party.
The Convertible Series invested the following weighted average percentages
of assets by S&P ratings category for the fiscal year ended October 31, 1995:
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AAA 0.12%
AA 7.22%
A 22.59%
BBB 18.88%
BB 10.42%
B 7.40%
Unrated 4.94%
If at any time the market value of the Convertible Series' investments in
common stocks, warrants and non-convertible securities exceeds 35% of the
market value of its total assets (exclusive of cash and government
securities), it will (except when a temporary defensive position is deemed
advisable) thereafter invest only in Convertible Securities until the 65%
standard is equaled or exceeded. The 65% standard may not be maintained at
all times because securities received upon conversion or exercise of warrants
and securities remaining upon the break-up of units or detachment of warrants
may be retained to permit orderly disposition or to establish long-term
holding periods for tax purposes. The Convertible Series may also invest up
to 100% of the Series' total net assets in non-rated and non-investment
grade convertible securities.
The Convertible Series will invest its assets, without limit, in
high-grade senior securities or government securities or retain cash or cash
equivalents when a temporary defensive position is deemed advisable by the
Adviser. In seeking to achieve its objectives, the Adviser may utilize the
Convertible Series' ability to expand its investments through the permitted
use of bank borrowings (See "Leverage"). The Convertible Series may also
engage in certain options transactions and enter into financial futures
contracts and related options for hedging purposes and may invest in deferred
or zero coupon debt obligations. See "Investment Techniques and Related
Risks."
Diversification is an important consideration in selecting the Convertible
Series' portfolio. However, more emphasis will be placed upon careful
selection of securities believed to have good potential for income and
appreciation than upon wide diversification.
Risk Factors. The convertible securities acquired by this Series are not
subject to any limitations as to ratings and may include high, medium, lower
and non-rated securities. Historically, the Convertible Series has emphasized
investments in investment grade convertible securities which are rated within
the four highest categories by recognized rating agencies, i.e., S&P,
Moody's, D&P and Fitch. (See the Appendix for a discussion of the S&P,
Moody's, D&P and Fitch ratings.) The Convertible Series may invest up to 100%
of the Series' total net assets in non-rated and non-investment grade
convertible securities. Lower rated and some non-rated convertible securities
are predominantly speculative with respect to the issuer's capacity to repay
principal and pay interest. Investment in lower rated and non-rated
convertible fixed-income securities normally involves a greater degree of
investment and credit risk than does investment in convertible securities
having higher ratings. In addition, the market for non-rated convertible
securities is usually less broad than the market for rated securities, which
could affect their marketability. To the extent that the Convertible Series
holds any lower rated or non-rated securities, it may be negatively affected
by adverse economic developments, increased volatility or lack of liquidity.
Phoenix Growth Fund Series
The Growth Series' investment objective is to seek long-term appreciation
of capital. Since income is not an objective, any income generated by the
investment of the Growth Series' assets will be incidental to its objective.
Under normal circumstances, the Growth Series will invest at least 65% of
its total assets in the common stock of companies believed by the Adviser to
have appreciation potential. However, since no one class or type of security
at all times necessarily affords the greatest promise for capital
appreciation, the Growth Series may invest any amount or proportion of its
assets in any class or type of security believed by the Adviser to offer
potential for capital appreciation over both the intermediate and long term.
Normally, of course, its investment will consist largely of common stocks
selected for the promise they offer of appreciation of capital. However, the
Growth Series may also invest in preferred stocks, investment grade bonds
(Moody's rating Baa or higher), convertible preferred stocks and convertible
debentures if, in the judgment of the Adviser, the investment would further
its investment objective. The Growth Series may also engage in certain
options transactions and enter into financial futures contracts and related
options for hedging purposes. See "Investment Techniques." Each security held
will be monitored to determine whether it is contributing to the basic
objective of long-term appreciation of capital.
The Adviser believes that a portfolio of such securities provides the most
effective way to obtain capital appreciation, but when, for temporary
defensive purposes (as when market conditions for growth stocks are adverse),
other types of investments appear advantageous on the basis of combined
considerations of risk and the protection of capital values, investments may
be made in fixed income securities with or without warrants or conversion
features. In addition, for such temporary defensive purposes, the Growth
Series may pursue a policy of retaining cash or investing part or all of its
assets in cash equivalents.
Diversification is an important consideration in selecting the Growth
Series' portfolio. However, greater emphasis will be placed upon careful
selection of securities believed to have good potential for appreciation than
upon wide diversification.
To the extent that the Series holds bonds, it may be negatively affected
by adverse interest rate movements and credit quality. Generally, when
interest rates rise it may be expected that the value of bonds may decrease.
Phoenix U.S. Stock Fund Series
Appreciation of capital through the use of aggressive investment techniques
is this Series' investment objective, and income will not generally be
considered in the selection of
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investments. In seeking to achieve this objective, management may utilize the
U.S. Stock Series' ability to expand its investments through the permitted
use of bank borrowings (see "Leverage").
Under normal circumstances, the U.S. Stock Series will invest at least 65%
of the value of its total assets in domestic common and preferred stocks and
domestic securities convertible into domestic common stocks or other domestic
equity securities. Domestic issuers are those listed on a U.S. securities
exchange or a designated securities market. In addition, domestic issuers
represent those entities which, at the date of acquisition, are incorporated
or organized under the laws of the United States or any State which also
satisfy one or more of the following criteria: (a) the parent corporation is
incorporated or organized in the United States; (b) the majority of the
executive officers or directors are U.S. citizens or residents; (c) the
principal place of business/chief operational office is in the United States;
(d) more than 50 percent of the assets are located in the United States; or
(e) the business is administered principally in the United States. The Fund
may continue to hold the securities even if they do not continue to satisfy
any or all of these conditions.
The U.S. Stock Series may also invest in debt securities which, in the
judgment of management, offer opportunities for capital growth. However, when
a temporary defensive position is deemed advisable, the U.S. Stock Series
may, without limit, invest in high-grade senior securities or U.S. Government
securities or retain cash or cash equivalents. The U.S. Stock Series may also
engage in certain options transactions and enter into financial futures
contracts and related options for hedging purposes. See "Investment
Techniques and Related Risks."
Since investments normally will consist primarily of securities believed
by the Adviser to have a substantial potential for capital growth, the assets
of the U.S. Stock Series may be considered to be subject to greater risks
than would be involved if the U.S. Stock Series invested in securities that
did not have these growth characteristics. The U.S. Stock Series is intended
for investors who have the financial ability and the investment experience to
regard their shares as a long-term investment involving risks commensurate
with the possibility of achieving substantial capital gains.
Phoenix High Yield Fund Series
The High Yield Series' primary objective is to seek high current income.
This Series intends to invest at least 65% of the value of its total assets
in a diversified portfolio of high yield, high risk fixed income securities
(commonly referred to as "junk" bonds). Capital growth is a secondary
objective which will also be considered when consistent with the objective of
high current income. The risks of investing in high yield (high risk) fixed
income securities are outlined below.
Higher yields are available ordinarily from securities in the lower rating
categories of recognized rating agencies (Baa or lower by Moody's or BBB or
lower by S&P, D&P, or Fitch) and from unrated securities of comparable
quality. The High Yield Series will not invest in securities in the lowest
rating categories (C for Moody's and D for S&P, D&P, or Fitch) unless
management believes that the financial condition of the issuer, or the
protections afforded to the particular securities, is stronger than would
otherwise be indicated by such low ratings. However, when the investment
objective of this Series can be met by investing in securities in higher
rating categories, such investments may be made. This Series may retain
securities when their ratings have changed.
The High Yield Series invested the following weighted average percentages
of assets as rated by Moody's or having a comparable rating according to
Standard & Poor's Corporation, Duff & Phelps Credit Rating Company, or Fitch
Investor Services, during the fiscal year ended October 31, 1995:
Rating Moody's
- -------- --------
Aaa 2.58%
Aa 2.44%
Baa 0.33%
Ba 24.54%
B 37.79%
Caa 8.69%
Ca 0.11%
Unrated 20.19%
Under normal conditions, at least 80% of the value of the total assets of
the High Yield Series will be invested, consistent with its primary
investment objective, in fixed income securities including preferred stocks,
convertible securities, debt obligations, certificates of deposit, commercial
paper, bankers' acceptances, government obligations issued or guaranteed by
federal, state or municipal governments or their agencies or
instrumentalities and loan participations in secured and unsecured corporate
loans. Up to 15% of the value of the High Yield Series' net assets may be
invested in non-publicly offered or "restricted" debt securities, which the
Adviser deems to be "liquid" pursuant to standards approved by the Trust's
Board of Trustees. These restricted securities are typically less marketable
than publicly offered debt securities. The High Yield Series' remaining
assets may be invested in equity securities when such investments are
consistent with its primary investment objective or are acquired as part of a
unit consisting of a combination of fixed income securities and equity
securities. The High Yield Series may also engage in certain options
transactions and enter into financial futures contracts and related options
for hedging purposes and may invest in deferred or zero coupon debt
obligations. See "Investment Techniques and Related Risks."
When a more conservative investment strategy is necessary for temporary
defensive purposes, the High Yield Series may retain cash or invest part or
all of its assets in cash equivalents or in other fixed income securities
deemed by management to be consistent with a temporary defensive posture.
Risk Factors. While the High Yield Series' management will seek to
minimize risk through diversification and continual evaluation of current
developments in interest rates
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and economic conditions, the market prices of lower rated securities
generally fluctuate in response to changes in interest rates and economic
conditions more than those of higher rated securities. Using credit ratings
helps to evaluate the safety of principal and interest payments but does not
assess market risk. Fluctuations in the market value of portfolio securities
subsequent to acquisition by the High Yield Series will not normally affect
cash income from such securities but will be reflected in the Series' net
asset value. Additionally, with lower rated securities, there is a greater
possibility that an adverse change in the financial condition of the issuer,
particularly a highly leveraged issuer, may affect its ability to make
payments of income and principal and increase the expenses of the Series
seeking recovery from the issuer. Also, because the High Yield Series intends
to invest primarily in securities in the lower rating categories, the
achievement of its goals will be more dependent on the Adviser's ability than
would be the case if the High Yield Series were investing in securities in
the higher rating categories. Lower-rated securities may be thinly traded and
less liquid than higher rated securities and therefore harder to value and
more susceptible to adverse publicity concerning the issuer.
Phoenix Money Market Fund Series
The investment objective of the Money Market Series is to seek as high a
level of current income as is consistent with the preservation of capital and
maintenance of liquidity by investing in a diversified portfolio of high
quality money market instruments maturing in 397 days or less.
The Money Market Series seeks to achieve this objective by investing
exclusively in the following instruments:
(a) obligations issued or guaranteed by the United States Government or
its agencies, authorities or instrumentalities;
(b) obligations issued by banks and savings and loan associations (such as
bankers' acceptances, certificates of deposit and time deposits,
including dollar-denominated obligations of foreign branches of U.S.
banks and U. S. branches of foreign banks) and dollar-denominated
obligations unconditionally guaranteed as to payment by banks or
savings and loan associations, which at the date of investment have
capital surplus, and undivided profits in excess of $100,000,000 as of
the date of their most recently published financial statements which
obligations have been determined by the Board, or the Adviser acting
at its direction, to present minimal credit risk; and obligations of
other banks or savings and loan associations if such obligations are
insured by the Federal Deposit Insurance Corporation or the Federal
Savings and Loan Insurance Corporation;
(c) commercial paper which at the date of investment is rated A-1 by S&P
and/or P-1 by Moody's Investors Service, Inc., or, if not rated, is
issued or guaranteed by companies which at the date of investment have
an outstanding debt issue rated AA or higher by S&P or Aa or higher by
Moody's;
(d) other corporate obligations maturing in one year or less which at the
date of investment are rated AA or higher by S&P or Aa or higher by
Moody's; and
(e) repurchase agreements with recognized securities dealers and banks
with respect to any of the foregoing obligations.
Generally, investments will be limited to securities rated in the two
highest short-term rating categories by at least two nationally recognized
statistical rating organizations, or by one such organization if only one has
rated the security, and comparable unrated securities. In addition, no more
than 5% of the Money Market Series' total assets will be invested in
securities of any one issuer or in securities not rated in the highest short
- -term rating category. Moreover, no more than the greater of 1% of the Money
Market Series' total assets or $1 million will be invested in the securities
of any one issuer that are not in the highest short-term rating category.
Finally, in no event will investments in time deposits and/or repurchase
agreements maturing in more than seven days exceed 10% of the Money Market
Series' net assets taken at market value.
Obligations of foreign branches of U.S. banks are subject to somewhat
different risks than those of domestic banks. These risks include foreign
economic and political developments, foreign governmental restrictions which
may adversely affect payment of principal and interest on the obligations,
foreign withholding and other taxes on interest income, and difficulties in
obtaining and enforcing a judgment against a foreign branch of a domestic
bank. In addition, different risks may result from the fact that foreign
branches of U.S. banks and U.S. branches of foreign banks are not necessarily
subject to the regulatory requirements that apply to domestic banks.
Obligations of such branches will be purchased only when the Adviser believes
the risks are minimal.
The Money Market Series may not necessarily invest in money market
instruments paying the highest available yield at a particular time as a
result of considerations of liquidity and preservation of capital. Rather,
consistent with its investment objective, it will attempt to maximize yields
by engaging in portfolio trading and buying and selling portfolio investments
in anticipation of or in response to changing economic and money market
conditions and trends. These policies, as well as the relatively short
maturities of obligations to be purchased by the Money Market Series, may
result in frequent changes in its portfolio.
The value of the securities in the Money Market Series' portfolio can be
expected to vary inversely to the changes in prevailing interest rates. Thus,
if interest rates increase after a security was purchased, that security, if
sold, might be sold at less than cost. Conversely, if interest rates decline
after purchase, the security, if sold, might be sold at a profit. In either
instance, if the security were held to maturity, no gain or loss would
normally be realized as a result of these fluctuations. Substantial
redemptions of Money Market Series shares could require the sale of portfolio
investments at a time when a sale might not be desirable.
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The average maturity of the Money Market Series' portfolio securities
based on their dollar value will not exceed 90 days.
Phoenix U.S. Government Securities Fund Series
The U.S. Government Securities Series seeks as its investment objective a
high level of current income consistent with safety of principal. This Series
intends to invest in securities which are issued or guaranteed by the U.S.
Government or its agencies and instrumentalities and backed by the full faith
and credit of the United States ("U.S. Government Securities"), those which
are supported by the ability to borrow from the U.S. Treasury or by the
credit of an agency or instrumentality and those otherwise supported by the
U.S. Government. This Series is authorized to invest up to 20% of the value
of its net assets in short-term instruments including bank certificates of
deposit and time deposits, bankers' acceptances and repurchase agreements.
These instruments are used for the investment of the Series' temporary cash
balances.
U.S. Government Securities include (i) U.S. Treasury obligations which
differ only in their interest rates, maturities and times of issuance as
follows: U.S. Treasury bills (maturity of one year or less), U.S. Treasury
notes (maturity of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years); and (ii) obligations issued or
guaranteed by U.S. Government agencies and instrumentalities that are backed
by the full faith and credit of the United States; such as securities issued
by the Federal Housing Administration, the Government National Mortgage
Association ("GNMA"), the Department of Housing and Urban Development, the
Export-Import Bank, the General Services Administration and the Maritime
Administration and certain securities issued by the Farmers Home
Administration and the Small Business Administration.
Securities issued by the GNMA ("GNMA Certificates") differ in certain
respects from other U.S. Government securities, which normally provide for
periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates. GNMA Certificates are mortgage-backed
securities representing part ownership of a pool of mortgage loans. These
loans--issued by lenders such as mortgage bankers, commercial banks and
savings and loan associations--are either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration. A "pool" or
group of such mortgages is assembled and, after being approved by GNMA, is
offered to investors through securities dealers. Once approved by GNMA, the
timely payment of interest and principal on each mortgage is guaranteed by
the full faith and credit of the United States. GNMA Certificates also differ
from other U.S. Government securities in that principal is paid back monthly
by the borrower over the term of the loan rather than returned in a lump sum
at maturity. GNMA Certificates are called "pass-through" securities because
both interest and principal payments (including prepayments) are passed
through to the holder of the GNMA Certificate.
The U.S. Government Securities Series may invest in debt or
mortgage-backed securities issued by the Federal National Mortgage
Association ("FNMA") and by the Federal Home Loan Mortgage Corporation
("FHLMC"). FNMA is a federally chartered, privately-owned corporation that
issues mortgage pass-through securities which are guaranteed as to payment of
principal and interest by FNMA. FHLMC is a corporate instrumentality of the
United States and issues participation certificates which represent an
interest in mortgages from FHLMC's portfolio. FHLMC guarantees the timely
payment of interest and the collection of principal. Securities guaranteed by
FNMA and FHLMC are not backed by the full faith and credit of the U.S.
Government.
The U.S. Government Securities Series may also invest in collateralized
mortgage obligations ("CMOs") issued by U.S. Government agencies. These are
debt obligations collateralized by whole mortgage loans or by portfolios of
mortgage pass-through securities guaranteed by GNMA, FHLMC or FNMA. The U.S.
Government Securities Series may also invest in ownership interests in pools
of mortgage assets such as FNMA Guaranteed REMIC Pass-through Certificates
and FHLMC Multi-Class Mortgage Participation Certificates. Mortgage
pass-through and other mortgage-related securities are subject to prepayment
risk which may adversely affect yields. Generally, prepayments will increase
during a period of falling interest rates.
Although the payment of interest and principal on a portfolio security may
be guaranteed by the U.S. Government or one of its agencies or
instrumentalities, the net asset value of shares of the U.S. Government
Securities Series will fluctuate in response to interest rate levels. In
general, when interest rates rise, prices of fixed income securities decline.
When interest rates decline, prices of fixed income securities rise.
Descriptions of the short-term money market instruments the U.S.
Government Securities Series may invest in are contained in the section
"Phoenix Money Market Fund Series." The quality ratings and maturity
restrictions described in that section also apply to the short-term
investments of the U.S. Government Securities Series.
INVESTMENT TECHNIQUES
AND RELATED RISKS
In addition to the investment policies described above, the Trust may
utilize the following investment practices or techniques.
Repurchase Agreements
Each Series may invest in repurchase agreements. A repurchase agreement is
a transaction where a Series buys a security at one price and the seller
simultaneously agrees to buy that same security back at a higher price. The
Adviser reviews the creditworthiness of the other party to the agreement and
must find it satisfactory before engaging in a repurchase agreement.
Even though repurchase transactions usually do not impose market risks on
the purchasing Series, if the seller of the repurchase agreement defaults and
does not repurchase the
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underlying securities, the Series 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. For more information
about repurchase agreements, see the Statement of Additional Information.
Zero Coupon Bonds
The Balanced, Convertible and High Yield Series may invest in debt
obligations that do not make any interest payments for a specified period of
time prior to maturity or until maturity ("deferred coupon" or "zero coupon"
obligations). Even though interest is not actually paid on these instruments,
for tax purposes the Series that owns them is imputed with ordinary income.
This imputed income is paid out to shareholders as dividends. These
distributions must be made from the Series' cash assets or, if necessary,
from the proceeds of sales of portfolio securities. The Series will not be
able to purchase additional income producing securities with the cash used to
make such distributions and its current income ultimately may be reduced as a
result. The value of zero coupon obligations fluctuates more in response to
interest rate changes than does the value of debt obligations that make
current interest payments. (See the Statement of Additional Information.)
Securities and Index Options
All Series, except the Money Market Series and the U.S. Government
Securities Series, may write covered call options and purchase call and put
options. These instruments are referred to as "derivatives" as their value is
derived from the value of any underlying security or securities index.
Securities and index options and the related risks are summarized below and
are described in more detail in the Statement of Additional Information.
Writing (Selling) Call Options. The Balanced Series, Convertible Series,
Growth Series, High Yield Series and the U.S. Stock Series may write
exchange-traded covered call options. A call option on a security gives the
purchaser of the option, in return for the premium paid to the writer
(seller), the right to buy the underlying security at the exercise price at
any time during the option period. Upon exercise by the purchaser, the writer
of a call option has the obligation to sell the underlying security at the
exercise price. A call option on a securities index is similar to a call
option on an individual security, except that the value of the option depends
on the weighted value of the group of securities comprising the index and all
settlements are made in cash. A call option may be terminated by the writer
(seller) by entering into a closing purchase transaction in which it
purchases an option of the same series as the option previously written. A
call option is "covered" if a Series owns the underlying security or has an
absolute and immediate right to acquire that security without additional cash
consideration (or for additional cash consideration held in a segregated
account by its custodian) upon conversion or exchange of other securities
held in its portfolio. A call option written by a Series is also covered if
the Series holds on a share-for-share basis a covering call on the same
security as the call written where (i) the exercise price of the covering
call held is equal to or less than the exercise price of the call written or
greater than the exercise price of the call written if the difference is
maintained by the Series in cash, U.S. Treasury bills or other high quality
short-term debt obligations in a segregated account with its custodian, and
(ii) the covering call expires at the same time or after the call written.
The Trustees have limited the value of the total assets of a Series which
may be subject to call options to 50% of a Series' total assets. Management
presently intends to cease writing options if and as long as 25% of such
total assets are subject to outstanding options contracts or if required
under regulations of state securities administrators. Call options on
securities indices will be written only to hedge in an economically
appropriate way portfolio securities which are not otherwise hedged with
options or financial futures contracts and will be "covered" by identifying
the specific portfolio securities being hedged.
A Series will write call options in order to obtain a return on its
investments from the premiums received and will retain the premiums whether
or not the options are exercised. Any decline in the market value of
portfolio securities will be offset to the extent of the premiums received
(net of transaction costs). If an option is exercised, the premium received
on the option will effectively increase the exercise price.
During the option period the writer of a call option has 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. Writing call
options also involves risks relating to the Series' ability to close out
options it has written.
Purchasing Call and Put Options. A call option is described above. A put
option on a security gives the purchaser of the option, in return for the
premium paid to the writer (seller), the right to sell the underlying
security at the exercise price at any time during the option period. Upon
exercise by the purchaser, the writer of a put option has the obligation to
purchase the underlying security at the exercise price. A put option on a
securities index is similar to a put option on an individual security, except
that the value of the option depends on the weighted value of the group of
securities comprising the index and all settlements are made in cash.
A Series may invest up to 2% of its total assets in exchange-traded call
and put options on securities and securities indices for the purpose of
hedging against changes in the market value of its portfolio securities. A
Series will invest in call and put options whenever, in the opinion of its
Adviser, a hedging transaction is consistent with the investment objectives
of a Series. A Series 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
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security. Any such sale 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 on the call or put which is sold.
Purchasing a call or a put option involves the risk that a Series may lose
the premium it paid plus transaction costs.
Warrants and Stock Rights
Warrants and stock rights are almost identical to call options in their
nature, use and effect except that they are issued by the issuer of the
underlying security rather than an option writer. A Series may invest up to
5% of its net assets in warrants or stock rights valued at the lower of cost
or market, but no more than 2% of its net assets may be invested in warrants
or stock rights not listed on the New York Stock Exchange or American Stock
Exchange.
Financial Futures and Related Options
All Series, except the Money Market Series and the U.S. Government
Securities Series, may enter into financial futures contracts and related
options. Financial futures contracts and related options and associated risks
are summarized below and are described in more detail in the Statement of
Additional Information.
Financial futures contracts consist of interest rate futures contracts and
securities index futures contracts. An interest rate futures contract
obligates the seller of the contract to deliver, and the purchaser to take
delivery of, the interest rate securities called for in the contract at a
specified future time and at a specified price. A stock index assigns
relative values to the common stocks included in the index, and the index
fluctuates with changes in the market values of the common stocks so
included. A stock index futures contract is a bilateral agreement pursuant to
which two parties agree to take or make delivery of an amount of cash equal
to a specified dollar amount times the difference between the stock index
value at the close of the last trading day of the contract and the price at
which the futures contract is originally struck. An option on a financial
futures contract gives the purchaser the right to assume a position in the
contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period
of the option.
A Series may purchase and sell financial futures contracts which are
traded on a recognized exchange or board of trade and may purchase
exchange-or board-traded put and call options on financial futures contracts
as a hedge against anticipated changes in the market value of its portfolio
securities or securities which it intends to purchase. Hedging is the
initiation of a position in the futures market which is intended as a
temporary substitute for the purchase or sale of the underlying securities in
the cash market.
A Series will engage in transactions in financial futures contracts and
related options only for hedging purposes and not for speculation. In
addition, a Series will not purchase or sell any financial futures contract
or related option if, immediately thereafter, the sum of the cash or U.S.
Treasury bills initially committed with respect to a Series' existing futures
and related options positions and the premiums paid for related options would
exceed 2% of the market value of the Series' total assets. At the time of
purchase of a futures contract or a call option on a futures contract, an
amount of cash, U.S. Government securities or other appropriate high-grade
debt obligations equal to the market value of the futures contract minus the
Series' initial margin deposit with respect thereto will be deposited in a
segregated account with the Series' custodian bank to collateralize fully the
position and thereby ensure that it is not leveraged. The extent to which a
Series may enter into financial futures contracts and related options may
also be limited by requirements of the Internal Revenue Code for
qualification as a regulated investment company.
Engaging in transactions in financial futures contracts involves certain
risks, such as the possibility of an imperfect correlation between futures
market prices and cash market prices and the possibility that the Adviser
could be incorrect in its expectations as to the direction or extent of
various interest rate movements, in which case the Series' return might have
been greater had hedging not taken place. There is also the risk that a
liquid secondary market may not exist and the loss from investing in futures
contracts is potentially unlimited because the Series may be unable to close
its position. The risk in purchasing an option on a financial futures
contract is that a Series will lose the premium it paid. Also, there may be
circumstances when the purchase of an option on a financial futures contract
would result in a loss to a Series while the purchase or sale of the contract
would not have resulted in a loss. Futures and options may fail as hedging
techniques in cases where the price movements of the securities underlying
the options and futures do not follow the price movements of the portfolio
securities subject to the hedge. Losses relating to futures and options are
potentially unlimited.
Foreign Securities
Each of the Series, except Money Market Series, U.S. Government Securities
Series and the U.S. Stock Series, may purchase foreign securities, including
emerging market securities and those issued by foreign branches of U.S.
banks. Such investment in foreign securities will be less than 25% of the
total net asset value of each Series. The High Yield Series may invest up to
35% of its total net asset value in foreign securities. The Trust may invest
in a broad range of foreign securities including equity, debt and convertible
securities and foreign government securities. In connection with investments
in foreign securities, the Trust may enter into forward foreign currency
exchange contracts for the purpose of protecting against losses resulting
from fluctuations in exchange rates between the U.S. dollar and a particular
foreign currency denominating a security which the Trust holds or intends to
acquire. The Trust will not speculate in forward foreign currency exchange
contracts.
Investing in the securities of foreign companies involves special risks
and considerations not typically associated with investing in U.S. companies.
These include differences in accounting, auditing and financial reporting
standards, generally higher commission rates on foreign portfolio
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transactions, the possibility of expropriation or confiscatory taxation,
adverse changes in investment or exchange control regulations, political
instability which could affect U.S. investments in foreign countries,
difficulty in invoking legal process abroad and potential restrictions on the
flow of international capital. Additionally, dividends payable on foreign
securities may be subject to foreign taxes withheld prior to distribution.
Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility. Changes in
foreign exchange rates will affect the value of those securities which are
denominated or quoted in currencies other than the U.S. dollar. Many of the
foreign securities held by the Trust will not be registered with the
Securities and Exchange Commission and many of the issuers of foreign
securities will not be subject to the Commission's reporting requirements.
Accordingly, there may be less publicly available information about the
securities and about the foreign company or government issuing them than is
available about a domestic company or government entity. Moreover, individual
foreign economies may compare favorably or unfavorably with the United States
economy with respect to such factors as rate of growth, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payment
positions, and economic trends in foreign countries may be difficult to
assess.
Particular risks are posed by investments in third world countries or
so-called "emerging markets." These securities may be especially volatile
based on relative economic, political and market conditions present in these
countries. These and other relevant conditions vary widely between emerging
market countries. For instance, certain emerging market countries are either
comparatively undeveloped or are in the process of becoming developed and may
consequently be economically based on a relatively few or closely
interdependent industries. A high proportion of the shares of many emerging
market issuers may also be held by a limited number of large investors
trading significant blocks of securities. While the Trust will strive to be
sensitive to publicized reversals of economic conditions, political unrest
and adverse changes in trading status, unanticipated political and social
developments may affect the values of a Series' investments in such countries
and the availability of additional investments in such countries.
The Trust 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 Trust's foreign securities transactions. The use of a
foreign custodian invokes considerations which are not ordinarily associated
with domestic custodians. These considerations include the possibility of
expropriation, restricted access to books and records of the foreign
custodian, inability to recover assets that are lost while under the control
of the foreign custodian, and the impact of political, social or diplomatic
developments.
The Trust will calculate its net asset value and complete orders to
purchase, exchange or redeem shares only on a Monday-Friday basis (excluding
holidays on which the New York Stock Exchange is closed). Foreign securities
in which the Trust 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 Trust's portfolio may be affected by such trading on
days when a shareholder has no access to the Trust.
Leverage
The Trust may from time to time increase the Convertible Series' or the
U.S. Stock Series' ownership of securities holdings above the amounts
otherwise possible by borrowing from banks at fixed amounts of interest and
investing the borrowed funds. The Trust will borrow only from banks, and only
if immediately after such borrowing the value of the assets of a Series
(including the amount borrowed) less its liabilities (not including any
borrowings) is at least three times the amount of funds borrowed for
investment purposes. The effect of this provision is to permit the Trust to
borrow up to 50% of the net assets of a Series, not including the proceeds of
any such borrowings. However, the amount of the borrowings will be dependent
upon the availability and cost of credit from time to time. If, due to market
fluctuations or other reasons, the value of such Series' assets computed as
provided above becomes less than three times the amount of the borrowings for
investment purposes, the Trust, 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 Series with respect
to which the borrowing has been made. Because such expense would not
otherwise be incurred, the net investment income of such Series is not
expected to be as high as it otherwise would be during periods when
borrowings for investment purposes are substantial.
Bank borrowings for investment purposes 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 Series with respect
to which the borrowing has been made.
Any investment gains made with the additional monies borrowed in excess of
interest paid will cause the net asset value of a Series' shares to rise
faster than would otherwise be the case. On the other hand, if the investment
performance of the additional securities purchased fails to cover their cost
(including any interest paid on the monies borrowed) to the Series, the net
asset value of the Series will decrease faster than would otherwise be the
case.
INVESTMENT RESTRICTIONS
The Trust may not invest more than 25% of the assets of any one Series in
any one industry, except the Money Market Series may invest more than 25% of
its assets in the domestic banking industry and the U.S. Government
Securities Series will invest at least 80% of its net assets in securities
backed or supported by the U.S. Government. If the Trust loans the portfolio
securities of any Series, the market value of the securities loaned may not
exceed 25% of the market value of the total
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assets of such Series. The Trust may borrow money for any Series only for
temporary administrative purposes, provided that any such borrowing does not
exceed 10% of the market value of the total assets of the Series. The Trust
may also borrow for investment purposes as described under "Leverage" above.
In order to secure any such borrowing, the Trust may pledge, mortgage or
hypothecate up to 10% of the market value of the assets of such Series. With
the exception of the Convertible Series and the Stock Series, no Series may
invest in portfolio securities while the amount of borrowing of the Series
exceeds 5% of the total assets of such Series.
In addition to the investment restrictions described above, each Series'
investment program is subject to further restrictions which are described in
the Statement of Additional Information. The restrictions for each Series
described above are fundamental and may not be changed without shareholder
approval.
MANAGEMENT OF THE FUND
The Trust is a mutual fund technically known as an open-end, diversified
investment company. The Trustees of the Trust ("Trustees") are responsible
for the overall supervision of the Trust and perform the various duties
imposed on Trustees by the 1940 Act and Massachusetts business trust law.
The Adviser
The Trust's investment adviser is Phoenix Investment Counsel, Inc. (the
"Adviser"), which is located at 56 Prospect Street, Hartford, Connecticut
06115-0480. All of the outstanding stock of the Adviser is owned by Phoenix
Equity Planning Corporation ("Equity Planning"), a subsidiary of Phoenix Duff
& Phelps Corporation of Chicago, Illinois. Prior to November 1, 1995, the
Adviser and Equity Planning were indirect wholly-owned subsidiaries of
Phoenix Home Life Mutual Insurance Company ("Phoenix Home Life") of Hartford,
Connecticut. Phoenix Home Life is a majority shareholder of Phoenix Duff &
Phelps Corporation. Phoenix Home Life is in the business of writing ordinary
and group life and health insurance and annuities. Its principal offices are
located at One American Row, Hartford, Connecticut 06115. Phoenix Duff and
Phelps Corporation is a New York Stock Exchange traded company that provides
various financial advisory services to institutional investors, corporations
and individuals through operating subsidiaries. The Adviser also acts as the
investment adviser to other entities including Phoenix Multi-Portfolio Fund
(all portfolios other than the Real Estate Securities Portfolio), Phoenix
Total Return Fund, Inc., and The Phoenix Edge Series Fund (all Series other
than the Real Estate Securities Series) and as subadviser to the Chubb
America Fund, Inc., SunAmerica Series Trust, JNL Trust, and American Skandia
Trust, among other investment advisory clients. As of December 31, 1995, PIC
had approximately $18.4 billion in assets under management. The Adviser was
originally organized in 1932 as John P. Chase, Inc.
The Adviser continuously furnishes an investment program for each Series
and manages the investment and reinvestment of the assets of each Series
subject at all times to the supervision of the Trustees. The Adviser, at its
expense, furnishes to the Trust adequate office space and facilities and
certain administrative services, including the services of any member of its
staff who serves as an officer of the Trust.
The shareholders of each Series approved the Investment Advisory Agreement
at a shareholder meeting held on November 22, 1993. The Investment Advisory
Agreement provides that for its services to all Series of the Trust the
Adviser is entitled to a fee, payable monthly, at the following annual rates:
1st $1-2 $2+
SERIES $1 Billion Billion Billion
---------------------------------- ------------ --------- ----------
Growth Fund Series .70% .65% .60%
U.S. Stock Fund Series .70% .65% .60%
Convertible Fund Series .65% .60% .55%
High Yield Fund Series .65% .60% .55%
Balanced Fund Series .55% .50% .45%
U.S. Government Securities Fund
Series .45% .40% .35%
Money Market Fund Series .40% .35% .30%
For its services to all Series of the Trust during the fiscal year ended
October 31, 1995, the Adviser received a fee of $34,684,220. The Adviser has
agreed to assume expenses and reduce the advisory fee for the benefit of the
Money Market Series to the extent that operating expenses of that Series
exceed 0.85% for Class A Shares and 1.60% for Class B Shares of the average
daily net asset value of the Series.
The Portfolio Managers
Balanced Series
Mr C. Edwin Riley, Jr. serves as portfolio manager of the Balanced Series
and as such is primarily responsible for the day-to-day management of the
Series' portfolio. Mr. Riley is also portfolio manager of the Phoenix Total
Return Fund, Inc. and of the Total Return Series of The Phoenix Edge Series
Fund. From 1988 to 1995, Mr. Riley served as Senior Vice President and
Director of Equity Management for Nationsbank Investment Management.
Convertible Series
Mr. John H. Hamlin has served as portfolio manager of the Convertible
Series since 1992 and as such, Mr. Hamlin is primarily responsible for the
day-to-day management of the Series' portfolio. From 1989 to 1992, Mr. Hamlin
was Portfolio Manager for the Convertible Series. Mr. Hamlin is also
Portfolio Manager, Common Stock, Phoenix Home Life Mutual Insurance Company,
and Vice President of Phoenix Income and Growth Fund.
Growth Series
Mr. William J. Newman serves as portfolio manager of the Growth Series and
as such is primarily responsible for the day to day management of the Series.
Mr. Newman presently serves as Chief Investment Strategist and Managing
Director for Phoenix Investments. Mr. Newman is also Executive Vice President
of PIC. Mr. Newman also serves as a Vice President of Phoenix Strategic
Equity Series Fund. Mr. Newman was
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Chief Investment Strategist for Kidder Peabody, Inc. from May, 1993 to
December, 1994. He was managing Director at Bankers Trust from March, 1991 to
May 1993 and Managing Director at MacKay Shields from June, 1988 to November
1990.
U.S. Stock Series
Mr. Michael K. Arends serves as Portfolio Manager of the U.S. Stock Series
and as such is primarily responsible for the day to day management of the
Fund's investments. Mr. Arends has served in this capacity since January 1,
1995. Mr. Arends is a Vice President of the Phoenix Series Fund, which is
advised by Phoenix Investment Counsel, Inc. Mr. Arends is also a portfolio
manager and Vice President of Phoenix Strategic Equity Series Fund and a Vice
President of National Securities & Research Corporation. From 1989 to 1994,
Mr. Arends served as Co-Portfolio Manager for various Kemper Funds, the
Kemper Investment Portfolio-Growth Fund, Kemper Growth Fund and Kemper
Retirement Fund Series.
High Yield Series
Mr. Curtiss O. Barrows has served as portfolio manager of the High Yield
Series since 1985 and, as such, is primarily responsible for the day-to-day
management of the Series' portfolio. Mr. Barrows is also portfolio manager of
the Bond Series of The Phoenix Edge Series Fund and has been a Vice President
of the Adviser. Mr. Barrows is also Portfolio Manager, Public Bonds, Phoenix
Home Life Mutual Insurance Company and a Vice President of National
Securities & Research Corporation.
Money Market Series
Ms. Dorothy J. Skaret has served as the portfolio manager of the Money
Market Series since 1990 and as such, Ms. Skaret is primarily responsible for
the day-to-day management of the Series' portfolio. Ms. Skaret is also the
portfolio manager of the Money Market Series of The Phoenix Edge Series Fund,
which also is advised by the Adviser. Ms. Skaret is also Director, Public
Fixed Income, Phoenix Home Life Mutual Insurance Company, and Vice President
of National Securities & Research Corporation.
U.S. Government Securities Series
Mr. Christopher J. Kelleher has served as the portfolio manager of the
Phoenix U.S. Government Securities Series since 1989 and as such, is
primarily responsible for the day-to-day management of the Series'
portfolio. Mr. Kelleher has been a Vice President of the Adviser since 1991
and is also Portfolio Manager, Public Bonds, Phoenix Home Life Mutual
Insurance Company, and Vice President of National Securities & Research
Corporation. He is also a Vice President of The Phoenix Edge Series Fund.
The Financial Agent
Equity Planning also acts as financial agent of the Trust and, as such,
performs administrative, bookkeeping and pricing services and certain other
administrative functions for the Trust. As compensation, Equity Planning
receives a quarterly fee based on the average of the aggregate daily net
asset values of the Trust at an annual rate of $300 per $1 million. For its
services during the Trust's fiscal year ended October 31, 1995, Equity
Planning received $1,772,342 or 0.03% of average net assets.
The Custodian and Transfer Agent
The custodian of the assets of the Trust is State Street Bank and Trust
Company, P.O. Box 351, Boston, Massachusetts, 02101. The Trust has authorized
the custodian to appoint one or more subcustodians for the assets of the
Trust held outside the United States. The securities and other assets of each
Series of the Trust are held by the custodian or any subcustodian separate
from the securities and assets of each other Series.
Pursuant to a Transfer Agent and Service Agreement with the Phoenix Funds,
Equity Planning acts as transfer agent for the Trust (the "Transfer Agent")
for which it is paid $19.25 for daily dividend accounts and $14.95 for
non-daily dividend shareholder accounts plus out-of-pocket expenses. The
Transfer Agent is authorized to engage sub-agents to perform certain
shareholder servicing functions from time to time for which such agents shall
be paid a fee by Equity Planning.
Brokerage Commissions
Although the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. prohibit its members from seeking orders for the
execution of investment company portfolio transactions on the basis of their
sales of investment company shares, under such Rules, sales of investment
company shares may be considered in selecting brokers to effect portfolio
transactions. Accordingly, some portfolio transactions are, subject to such
Rules and to obtaining best prices and executions, effected through dealers
(excluding Equity Planning) who sell shares of the Trust. The Adviser may
also select an affiliated broker-dealer to execute transactions for the
Trust, provided that the commissions, fees or other remuneration paid to such
affiliated broker is reasonable and fair as compared to that paid to
non-affiliated brokers for comparable transactions.
DISTRIBUTION PLANS
The offices of Equity Planning, the National Distributor of the Trust's
shares, are located at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield,
Connecticut 06083-2200. Philip R. McLoughlin is a Trustee and President of
the Trust and a director and officer of Equity Planning. G. Jeffrey Bohne,
James M. Dolan, William R. Moyer, Leonard J. Saltiel, and Nancy G. Curtiss
are officers of the Trust and officers of Equity Planning.
Equity Planning and the Trust have entered into distribution agreements
under which Equity Planning has agreed to use its best efforts to find
purchasers for Trust shares sold subject to an initial sales charge and those
sold subject to a contingent deferred sales charge. The Trust has granted
Equity Planning the exclusive right to purchase from the Trust and resell, as
principal, shares needed to fill unconditional orders for Trust shares.
Equity Planning may sell Trust shares through its registered representatives
or through securities dealers with whom it has sales agreements. Equity
Planning may also sell Trust shares
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pursuant to sales agreements entered into with banks or bank affiliated
securities brokers who, acting as agent for their customers, place orders for
Trust shares with Equity Planning. Although the Glass-Steagall Act prohibits
banks and bank affiliates from engaging in the business of underwriting,
distributing or selling securities (including mutual fund shares), banking
regulators have not indicated that such institutions are prohibited from
purchasing mutual fund shares upon the order and for the account of their
customers. If, because of changes in law or regulations, or because of new
interpretations of existing law, it is determined that agency transactions of
banks or bank affiliated securities brokers are not permitted under the
Glass-Steagall Act, the Trustees will consider what action, if any, is
appropriate. It is not anticipated that termination of sales agreements with
banks or bank affiliated securities brokers would result in a loss to their
customers or a change in the net asset value per share of a Series of the
Trust.
The sale of Trust shares through a bank or a securities broker affiliated
with a bank is not expected to preclude the Trust from borrowing from such
bank or from availing itself of custodial or transfer agency services offered
by such bank.
The Trustees adopted a distribution plan on behalf of all Series of the
Trust except the Money Market Series on August 22, 1990, pursuant to Rule
12b-1 under the Investment Company Act of 1940. That distribution plan (the
"Plan") was approved by the shareholders of those Series on December 13,
1990. The Plan authorizes the payment by the Trust to Equity Planning of the
Trust's shares of an amount not exceeding 0.25% annually of the average daily
net assets of each Series for each year elapsed after the inception of the
Plan. Under a separate Class B plan adopted by the Trustees (including a
majority of the non-interested or independent trustees) on November 17, 1993,
and ratified by the initial sole shareholder of Class B shares, the Trust is
authorized to pay up to 1.00% annually of the average daily net assets of the
Series representing Class B Shares.
Although under no contractual obligation to do so, the Trust intends to
make such payments to Equity Planning (i) as commissions for shares of the
Series sold, all or any part of which commissions will be paid by Equity
Planning upon receipt from the Trust to others (who may be other dealers or
registered representatives of Equity Planning), (ii) to enable Equity
Planning to pay to such others maintenance or other fees in respect of the
Series' shares sold by them and remaining outstanding on the Trust's books
during the period in respect of which the fee is paid (the "Service Fee");
and (iii) to enable Equity Planning to pay to bank affiliated securities
brokers maintenance or other fees in respect of shares of the Series
purchased by their customers and remaining outstanding on the Trust's books
during the period in respect of which the fee is paid. The portion of the
above fees paid by the Trust to Equity Planning as "Service Fees" shall not
exceed 0.25% annually of the average daily net assets of the class to which
such fee relates. Payments less the portion thereof paid by Equity Planning
to others, will be used by Equity Planning for its expenses of distribution
of shares of the Series. If expenses of distribution of shares of a Series or
a Class of a Series exceed payments and any sales charges retained by Equity
Planning, the Trust is not required to reimburse Equity Planning for excess
expenses; if payments and any sales charges retained by Equity Planning
exceed expenses of distribution of shares of the Series or a Class of a
Series Equity Planning may realize a profit.
In order to receive payments under the Plan, participants must meet such
qualifications as are to be established in the sole discretion of the
Distributor, such as services to the Trust's shareholders; or services
providing the Trust with more efficient methods of offering shares to groups
of clients, members or prospects of a participant; or services permitting
bulking of purchases or sales, or transmissions of such purchases or sales by
computerized tape or other electronic equipment; or other batch processing.
For the fiscal year ended October 31, 1995, the Trust paid $14,220,203
under the Class A Plan and $416,632 under the Class B Plan. The fees were
used to compensate unaffiliated broker-dealers for servicing shareholder's
accounts, compensating sales personnel and reimbursing the Distributor for
commission expenses and expenses related to preparation of the marketing
material. On a quarterly basis, the Trust's Trustees review a report on
expenditures under each Plan and the purposes for which expenditures were
made. The Trustees conduct an additional more extensive review annually in
determining whether each Plan will be continued. By its terms, continuation
of each Plan from year to year is contingent on annual approval by a majority
of the Trust's Trustees and by a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of either Plan or any related
agreements (the "Plan Trustees"). Each Plan provides that it may not be
amended to increase materially the costs which the Trust may bear without
approval of the applicable class of shareholders of the Trust and that other
material amendments must be approved by a majority of the Plan Trustees by
vote cast in person at a meeting called for the purpose of considering such
amendments. Each Plan further provides that while it is in effect, the
selection and nomination of Trustees who are not "interested persons" shall
be committed to the discretion of the Trustees who are not "interested
persons". Each Plan may be terminated at any time by vote of a majority of
the Plan Trustees or a majority of the applicable class of outstanding shares
of the Trust. If the Plans are terminated in accordance with their terms, the
obligations of the Trust to make payments to the Distributor pursuant to the
Plan, including payments for expenses carried over from previous years will
cease.
The National Association of Securities Dealers ("NASD") regards certain
distribution fees as asset-based sales charges subject to NASD sales load
limits. The NASD's maximum sales charge rule may require the Trustees to
suspend distribution fees or amend either or both Plans.
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HOW TO BUY SHARES
The minimum initial purchase is $500, and the minimum subsequent
investment is $25. Both the minimum initial and subsequent investment amounts
are $25 for investments pursuant to the "Investo-Matic" plan, a bank draft
investing program administered by Equity Planning, or pursuant to the
Systematic Exchange Privilege. (See Statement of Additional Information.)
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.
Each class of shares represents an interest in the same portfolio of
investments of the Series, has the same rights, and is identical to the other
in all respects, except that Class B Shares bear the expenses of the deferred
sales arrangement and any expenses (including the higher distribution
services fee and any incremental transfer agency costs) resulting from such
sales arrangement. Each class has exclusive voting rights with respect to
provisions of the Rule 12b-1 distribution plan pursuant to which its
distribution services fee is paid and each class has different exchange
privileges. Only the Class B Shares are subject to a conversion feature. The
net income attributable to Class B Shares and the dividends paid on Class B
Shares will be reduced by the amount of the higher distribution services fee
and incremental expenses associated with such distribution services fee;
likewise, the net asset value of the Class B Shares will be reduced by such
amount to the extent the Trust has undistributed net income.
Subsequent investments for the purchase of full and fractional shares in
amounts of $25 or more may be made through an investment dealer or by sending
a check to the Phoenix Funds, c/o State Street Bank and Trust Company, P.O.
Box 8301, Boston, MA 02266-8301. Share certificates representing any number
of full shares will be issued only on request, and suject to certain
conditions. A fee may be incurred by the shareholder for a lost or stolen
share certificate. Sales personnel of broker-dealers distributing the Series'
shares may receive differing compensation for selling Class A or Class B
Shares.
The Trust offers combination purchase privileges, letters of intent,
accumulation plans, withdrawal plans and reinvestment and exchange
privileges. (See the Statement of Additional Information.) Certain privileges
may not be available in connection with Class B Shares. Under certain
circumstances, shares of any Series (except shares of the Money Market Series
Class A Shares), or shares of any of other Phoenix Fund (except Phoenix
Multi-Sector Short Term Bond Fund Class A Shares held less than 6 months),
may be exchanged for shares of the same class on the basis of the relative
net asset values per share at the time of the exchange. Exchanges are subject
to the minimum initial investment requirement of the designated Phoenix Fund
except if made in connection with the Systematic Exchange privilege.
Shareholders may exchange shares held in book-entry form for an equivalent
number (value) of the same class of shares of any other Phoenix Fund. On
Class B share exchanges, the contingent deferred sales charge schedule of the
original shares purchased is not taken and continues to apply.
Alternative Sales Arrangements
The alternative purchase arrangement permits an investor to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, whether
the investor wishes to receive distributions in cash or to reinvest them in
additional shares of the Trust, and other circumstances. Investors should
consider whether, during the anticipated life of their investment in the
Trust, the accumulated continuing distribution service fee and contingent
deferred sales charges on Class B Shares prior to conversion would be less
than the initial sales charge and accumulated distribution fee on Class A
Shares purchased at the same time, and to what extent such differential would
be offset by the higher yield of Class A Shares. In this regard, Class A
Shares will normally be more beneficial to the investor who qualifies for
certain reduced initial sales charges. For this reason, the Underwriter
intends to limit sales of Class B Shares sold to any shareholder to a maximum
total value of $250,000. Class B Shares sold to unallocated qualified
employer sponsored plans will be limited to a total value of $1,000,000.
Class B Shares sold to allocated qualified employer sponsored plans,
including 401(k) plans, will be limited to a maximum total value of $250,000
for each participant. The Distributor reserves the right to decline the sale
of Class B Shares to allocated qualified employer sponsored plans not
utilizing an approved participant tracking system. In addition, Class B
Shares will not be sold to any qualified employee benefit plan, endowment
fund or foundation if, on the date of the initial investment, the plan, fund
or foundation has assets of $10,000,000 or more or at least 100 eligible
employees. Class B Shares will also not be sold to investors who have reached
the age of 85 because of such persons' expected distribution requirements.
Class A Shares are subject to a lower distribution services fee and,
accordingly, pay correspondingly higher dividends per share. However, because
initial sales charges are deducted at the time of purchase, such investors
would not have all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced initial
sales charges who expect to maintain their investment for an extended period
of time might consider purchasing Class A Shares because the accumulated
continuing distribution charges on Class B Shares may exceed the initial
sales charge on Class A Shares during the life of the investment. Again,
however, such investors must weigh this consideration against the fact that,
because of such initial sales charge, not all their funds will be invested
initially. However, other investors might determine that it would be more
advantageous to purchase Class B Shares to have all their funds invested
initially, although remaining subject to higher continuing distribution
charges and, for a five-year period, being subject to a contingent deferred
sales charge.
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<PAGE>
Initial Sales Charge Alternative--Class A Shares
The public offering price of Class A Shares (other than the Money Market
Series) is the net asset value plus a sales charge, as set forth below.
Offering prices become effective at the close of the general trading session
of the New York Stock Exchange. Orders received by dealers prior to such time
are confirmed at the offering price effective at that time, provided the
order is received by State Street Bank and Trust Company prior to its close
of business.
The sales charge varies with the size of the purchase and reduced charges
apply to the aggregate of purchases of the Trust made at one time be "any
person," which term includes an individual, an individual and his/her spouse
and their children under the age of 21, or a trustee or other fiduciary
purchasing shares for a single trust, estate or fiduciary account although
more than one beneficiary is involved.
Class A Shares of the Trust (other than the Money Market Series) are
offered to the public at the net asset value next computed after the purchase
order is received by State Street Bank and Trust Company plus a maximum sales
charge of 4.75% of the offering price (4.99% of the amount invested) on
single purchases of less than $50,000. The sales charge is reduced on a
graduated scale on single purchases of $50,000 or more as shown below.
Sales Charge Sales Charge Dealer Discount
Amount of as Percentage as Percentage or Agency Fee
Transaction of Offering of Amount as Percentage of
at Offering Price Price Invested Offering Price*
------------------- -------------- -------------- -----------------
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**
*Equity Planning shall sponsor sales contests, training and educational
meetings and provide to all qualifying dealers, from its own profits and
resources, additional compensation in the form of trips, merchandise or
expense reimbursement. Brokers or dealers other than Equity Planning may also
make customary additional charges for their services in effecting purchases,
if they notify the Trust of their intention to do so. Equity Planning shall
also pay service and retention fees, from its own profits and resources, to
qualified wholesalers in connection with the sale of shares of Phoenix Funds
(exclusive of Class A Shares of Phoenix Money Market Series) by registered
financial institutions and related third party marketers.
**In connection with Class A Share purchases (or subsequent purchases in any
amount) by an account held in the name of a qualified employee benefit plan
with at least 100 eligible employees, and new Class A Share purchases of $10
million or more by existing accounts held in the name of such plans, Equity
Planning may pay broker/dealers, from its own resources, an amount equal to
1% on the first $3 million of purchases, 0.50% on the next $3 million, plus
0.25% on the amount in excess of $6 million.
In connection with Class A Share purchases of $1,000,000 or more (or
subsequent purchases in any amount), including purchases of shares of the Money
Market Series, and excluding purchases by qualified employee benefit plans as
described above Equity Planning may pay broker-dealers, from its own profits and
resources, a percentage of the net asset value of any shares sold (excluding
Money Market Series shares) as set forth below:
Purchase Amount Payment to Broker/Dealer
------------------------- ---------------------------
$1,000,000 - $3,000,000 1%
$3,000,001 - $6,000,000 .50 of 1%
$6,000,001 or more .25 of 1%
If part or all of such an investment, including investments by qualified
employee benefit plans, is subsequently redeemed within one year of the
investment date, the broker/dealer will refund to Equity Planning any such
amounts paid with respect to the investment.
Shares of the Money Market Series are offered to the public at their
constant net asset value of $1.00 per share with no sales charge on the Class
A Shares. (See Statement of Additional Information.
How To Obtain Reduced Sales Charges--Class A Shares
Investors choosing the initial sales charge alternative under certain
circumstances may be entitled to pay reduced sales charges. The circumstances
under which such investors may pay reduced sales charges are described below.
Qualified Purchasers. No sales charge will be imposed on sales of shares
to (1) any Phoenix Fund trustee, director or officer; (2) any director or
officer, or any full-time employee or sales representative (who has acted as
such for at least 90 days), of the Adviser, or of Equity Planning; (3)
registered representatives and employees of securities dealers with whom
Equity Planning has sales agreements; (4) any qualified retirement plan
exclusively for persons described above; (5) any officer, director or
employee of a corporate affiliate of the Adviser or Equity Planning; (6) any
spouse, child, parent, grandparent, brother or sister of any person named in
(1), (2), (3) or (5) above; (7) employee benefit plans for employees of the
Adviser, Equity Planning and/or their corporate affiliates; (8) any employee
or agent who retires from Phoenix Home Life or Equity Planning; (9) any
account held in the name of a qualified employee benefit plan, endowment fund
or foundation if, on the date of the initial investment, the plan, fund or
foundation has assets of $10,000,000 or more or at least 100 eligible
employees; (10) any person with a direct rollover transfer of shares from an
established Phoenix Fund qualified plan; (11) any Phoenix Home Life separate
account which funds group annuity contracts offered to qualified employee
benefit plans; (12) any state, county, city, department, authority or similar
agency prohibited by law from paying a sales charge; (13) any fully
matriculated student in any U.S. service
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<PAGE>
academy; (14) any unallocated account held by a third party administrator,
registered investment adviser, trust company, or bank trust department which
exercises discretionary authority and holds the account in a fiduciary, agency,
custodial or similar capacity, if in the aggregate such accounts held by such
entity equal or exceed $1,000,000; (15) any person who is investing redemption
proceeds from investment companies other than the Phoenix Funds if, in
connection with the purchases or redemption of the redeemed shares, the investor
paid a prior sales charge provided such investor supplies verification that the
redemption occurred within 90 days of the Phoenix Fund purchase and that a sales
charge was paid; or (16) any accounts established by financial institutions,
broker/ dealers or registered investment advisers that charge an account
management fee or transaction fee, provided such entity has entered into an
agreement for such program with the Distributor; provided that sales to persons
listed in (1) through (15) above are made upon the written assurance of the
purchaser that the purchase is made for investment purposes and that the shares
so acquired will not be resold except to the Fund.
Shares issued pursuant to the automatic reinvestment of income dividends
or capital gains distributions are not subject to any sales charges. The
Trust receives the entire net asset value of its Class A Shares sold to
investors. The Distributor's commission is the sales charge shown above less
any applicable discount or commission "re-allowed" to selected dealers and
agents. The Distributor will re-allow discounts to selected dealers and
agents in the amounts indicated in the table above. In this regard, the
Distributor may elect to re-allow the entire sales charge to selected
dealers and agents for all sales with respect to which orders are placed with
the Distributor. A selected dealer who receives re-allowance in excess of 90%
of such a sales charge may be deemed to be an "underwriter" under the
Securities Act of 1933.
Combination Purchase Privilege. Purchases, either singly or in any
combination, of shares of the Trust or shares of any other Phoenix Fund
(including Class B Shares but excluding Money Market Fund Series), if made at
a single time by a single purchaser, will be combined for the purpose of
determining whether the total dollar amount of such purchases entitles the
purchaser to a reduced sales charge on any purchases of Class A Shares. Each
purchase of Class A Shares will then be made at the public offering price, as
described in the then current Prospectus relating to such shares, which at
the time of such purchase is applicable to a single transaction of the total
dollar amount of all such purchases. The term "single purchaser" includes an
individual, or an individual, his spouse and their children under the age of
majority purchasing for his or their own account (including an IRA account)
including his or their own trust, commonly known as a living trust; a trustee
or other fiduciary purchasing for a single trust, estate or single fiduciary
account, although more than one beneficiary is involved; multiple trusts or
403(b) plans for the same employer; multiple accounts (up to 200) under a
qualified employee benefit plan or administered by a third party
administrator; or trust companies, bank trust departments, registered
investment advisers, and similar entities placing orders or providing
administrative services with respect to funds over which they exercise
discretionary investment authority and which are held in a fiduciary, agency,
custodial or similar capacity, provided all shares are held in record in the
name, or nominee name, of the entity placing the order.
Letter of Intent. Class A Shares or shares of any other Phoenix Fund
(including Class B Shares but excluding Class A Shares of the Money Market
Fund Series) may be purchased by a "single purchaser" (as defined above)
within a period of thirteen months pursuant to a Letter of Intent, in the
form provided by Equity Planning, stating the investor's intention to invest
in such shares during such period an amount which, together with the value
(at their maximum offering prices on the date of the Letter) of the shares of
the Class A Shares of the Trust or the Class A or Class B Shares of any other
Phoenix Fund then owned by such investor, equals a specified dollar amount.
Each purchase of shares made pursuant to a Letter of Intent will be made at
the public offering price, as described in the then current Prospectus
relating to such shares, which at the time of purchase is applicable to a
single transaction of the total dollar amount specified in the Letter of
Intent.
An investor's Letter of Intent is not a binding commitment of the investor
to purchase or a binding obligation of the Trust or Equity Planning to sell a
specified dollar amount of shares qualifying for a reduced sales charge.
Accordingly, out of his initial purchase (and subsequent purchases if
necessary), 5% of the dollar amount of purchases required to complete his
investment is held in escrow in the form of shares (valued at the purchase
price thereof) registered in the investor's name until he completes his
investment, at which time escrowed shares are deposited to his account. If
the investor does not complete his investment and does not within 20 days
after written request by Equity Planning or his dealer pay the difference
between the sales charge on the dollar amount specified in his Letter of
Intent and the sales charge on the dollar amount of actual purchases, the
difference will be realized through the redemption of an appropriate number
of the escrowed shares and any remaining escrowed shares will be deposited to
his account.
Right of Accumulation. "Single purchasers" (as defined above) may also
qualify for reduced sales charges based on the combined value of purchases of
either class of shares of the Trust, or any other Phoenix Fund, made over
time. Reduced sales charges are offered to investors whose shares, in the
aggregate, are valued (i.e., the dollar amount of such purchases plus the
then current value (at the public offering price as described in the then
current prospectus relating to such shares) of shares of all Phoenix Funds
owned) in excess of the threshold amounts described in the section entitled
"Initial Sales Charge Alternative--Class A Shares". To use this option, the
investor must supply sufficient account information to Equity Planning to
permit verification that one or more purchases qualify for a reduced sales
charge.
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<PAGE>
Associations. A group or association may be treated as a "single purchaser"
and qualify for reduced initial sales charges under the Combination Privilege
and Right of Accumulation if the group or association (1) has been in existence
for at least six months; (2) has a legitimate purpose other than to purchase
mutual fund shares at a reduced sales charge; (3) facilitates solicitation of
the membership by the investment dealer, thus assisting in effecting economies
of sales effort; and (4) is not a group whose sole organizational nexus is that
the members are credit card holders of a company, policyholders of an insurance
company, customers of a bank or a broker-dealer or clients of an investment
adviser.
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative purchase Class B
Shares at net asset value per share without the imposition of a sales charge
at the time of purchase. The Class B Shares are subject to a sales charge if
redeemed within five years of purchase.
Proceeds from the contingent deferred sales charge are paid to Equity
Planning and are used in whole or in part by Equity Planning to defray the
expenses related to providing distribution-related services to the Trust in
connection with the sale of the Class B Shares, such as the payment of
compensation to selected dealers and agents for selling Class B Shares. The
combination of the contingent deferred sales charge and the distribution fee
facilitates the ability of the Trust to sell the Class B Shares without a
sales charge being deducted at the time of purchase.
Contingent Deferred Sales Charge. Class B Shares redeemed within five
years of purchase will be subject to a contingent deferred sales charge at
the rates set forth below charged as a percentage of the dollar amount
subject thereto. The charge will be assessed on an amount equal to the lesser
of the current market value or the cost of the shares being redeemed.
Accordingly, no sales charge will be imposed on increases in net asset value
of shares above the initial purchase price. In addition, no charge will be
assessed on shares derived from the reinvestment of dividends or capital
gains distributions.
Equity Planning intends to pay investment dealers a sales commission of 4%
of the sale price of Class B Shares sold by such dealers, subject to future
amendment or termination. Equity Planning will retain all or a portion of the
continuing distribution fee assessed to Class B shareholders and will receive
the entire amount of the contingent deferred sales charge paid by
shareholders on the redemption of shares. 4% to finance the commission plus
interest and related marketing expenses.
The amount of the contingent deferred sales charge, if any, will vary
depending on the number of years from the time of payment for the Class B
Shares to the time of redemption of such shares. Solely for the purpose of
determining the number of years from the time of any payment for the purchase
of shares, all payments made during a month will be aggregated and deemed to
have been made on the last day of the previous month.
Contingent Deferred
Sales Charge as
a Percentage of
Dollar Amount
Year Since Purchase Subject to Charge
---------------------- ---------------------
First 5%
Second 4%
Third 3%
Fourth 2%
Fifth 2%
Sixth 0%
In determining whether a contingent deferred sales charge is applicable to
a redemption, it will be assumed that any Class A Shares are being redeemed
first, Class B Shares held for over five years or acquired pursuant to
reinvestment of dividends or distributions are redeemed next. Any Class B
Shares held longest during the five-year period are redeemed next unless the
shareholder directs otherwise. The charge will not be applied to dollar
amounts representing an increase in the net asset value since the time of
purchase.
To provide an example, assume in 1990, an investor purchased 100 Class B
Shares. In 1993, the investor purchased another 100 Class B Shares at $12 per
share. In 1995, the investor purchased 100 Class A Shares. Assume that in
1996, the investor owns 225 Class B Shares (15 Class B Shares resulting from
dividend reinvestment and distributions upon the Class B Shares purchased in
1990 and 10 Class B Shares resulting from dividend reinvestment and
distributions upon the Class B Shares purchased in 1993) as well as 100 Class
A Shares. If the investor wished to then redeem 300 shares and had not
specified a preference in redeeming shares: first, 100 Class A Shares would
be redeemed without charge. Second, 115 Class B Shares purchased in 1990
(including 15 shares issued as a result of dividend reinvestment and
distributions) would be redeemed next without charge. Finally, 85 Class B
Shares purchased in 1993 would be redeemed resulting in a deferred sales
charge of $27 [75 shares (85 shares minus 10 shares resulting from dividend
reinvestment) x $12 (original price or current NAV if less than original) x
3% (applicable rate in the third year after purchase)].
The contingent deferred sales charge is waived on redemptions of shares
(a) if redemption is made within one year of death (i) of the sole
shareholder on an individual account, (ii) of a joint tenant where the
surviving joint tenant is the deceased's spouse, or (iii) of the beneficiary
of a Uniform Gifts to Minors Act (UGMA), Uniform Transfers to Minors Act
(UTMA) or other custodial account; (b) if redemption is made within one year
of disability, as defined in Section 72(m)(7) of the Code; (c) in connection
with mandatory distributions upon reaching age 70-1/2 under any retirement
plan qualified under Sections 401, 408 or 403(b) of the Code or any
redemption resulting from the tax-free return of an excess contribution to an
IRA; (d) in connection with redemptions by 401(k) plans using an approved
participant tracking system for: participant hardships, death, disability or
normal retirement, and loans which are subsequently repaid; (e) in connection
with the exercise of certain exchange
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<PAGE>
privileges among the Class B Shares of a Series and Class B Shares of other
Phoenix Funds; (f) in connection with any direct rollover transfer of shares
from an established Phoenix Fund qualified plan into a Phoenix Fund IRA by
participants terminating from the qualified plan; and (g) in accordance with
the terms specified under the Systematic Withdrawal Program. If, upon the
occurrence of a death as outlined above, the account is transferred to an
account registered in the name of the deceased's estate, the contingent
deferred sales charge will be waived on any redemption from the estate
account occurring within one year of the death. If the Class B Shares are not
redeemed within one year of the death, they will remain subject to the
applicable contingent deferred sales charge when redeemed.
Class B Shares will automatically convert to Class A Shares of the same
Series without a sales charge at the relative net asset values of each class
after eight years from the acquisition of the Class B Shares, and as a
result, will thereafter be subject to the lower distribution fee paid under
the Class A Plan. Such conversion will be on the basis of the relative net
asset value of the two classes without the imposition of any sales load, fee
or other charge. The purpose of the conversion feature is to relieve the
holders of Class B Shares that have been outstanding for a period of time
sufficient for Equity Planning to have been compensated for distribution
expenses from most of the burden of such distribution-related expenses.
For purposes of conversion to Class A Shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B Shares
in a shareholder's fund account will be considered to be held in a separate
sub-account. Each time any Class B Shares in the shareholder's Trust account
(other than those in the sub-account) are converted to Class A Shares, an
equal pro rata portion of the Class B Shares in the sub-account will also be
converted to Class A Shares.
The conversion of Class B Shares to Class A Shares is subject to the
continuing availability of an opinion of counsel or a ruling of the Internal
Revenue Service ("IRS") to the effect that (i) the assessment of the higher
distribution fees and transfer agency costs with respect to Class B Shares
does not result in any dividends or distributions constituting "preferential
dividends" under the Code, and (ii) that the conversion of shares does not
constitute a taxable event under federal income tax law. The Trust has not
sought opinions of counsel as to these matters but has or shall apply to the
IRS for such a ruling. While a ruling similar to the one sought by the Trust
as to preferential dividends has been issued previously by the IRS with
respect to Phoenix Multi-Sector Fixed Income Fund, Inc., complete assurance
cannot be given when or whether the Trust will receive a favorable ruling.
While an adverse determination by the IRS is not expected, the Trust may be
required to reassess the alternative purchase arrangement structure if the
IRS does not rule favorably. In addition, were the IRS not to rule favorably,
the Trust might make additional distributions if doing so would assist in
complying with the Trust's general practice of distributing sufficient income
to reduce or eliminate U.S. federal taxes. The conversion of Class B Shares
to Class A Shares may be suspended if such an opinion or ruling is no longer
available. In that event, no further conversions of Class B Shares would
occur, and shares might continue to be subject to the higher distribution fee
for an indefinite period which may extend beyond the period ending six years
after the end of the month in which affected Class B Shares were purchased.
Exchange Privileges
Shareholders may exchange Class A or Class B Shares held in book-entry form
for shares of the same class of other Phoenix Funds, provided the following
conditions are met: (1) the shares that will be acquired in the exchange (the
"Acquired Shares") are available for sale in the shareholder's state of
residence; (2) the Acquired Shares are the same class as the shares to be
surrendered (the "Exchanged Shares"); (3) the Acquired Shares will be
registered to the same shareholder account as the Exchanged Shares; (4) the
account value of the Fund whose shares are to be acquired must equal or
exceed the minimum initial investment amount required by that Phoenix Fund
after the exchange is implemented; and (5) if a shareholder has elected not
to utilize the Telephone Exchange Privilege (see below), a properly executed
exchange request must be received by State Street Bank and Trust Company.
Exchange privileges are not available for certain shareholders holding Class
A Shares of Phoenix Money Market Series and Class A Shares of the Phoenix
Multi-Sector Short Term Bond Fund held for less than 6 months.
Subject to the above requirements for an exchange, a shareholder or
his/her registered representative may, by telephone or written notice, elect
to have Class A or Class B Shares of the Trust exchanged for the same class
of shares of another Phoenix Fund automatically on a monthly, quarterly,
semi-annual or annual basis or may cancel the privilege ("Systematic
Exchange").
Shareholders who maintain an account balance in the Trust 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), may
direct that shares of the Trust be automatically exchanged at predetermined
intervals for shares of the same class of another Phoenix Fund. If the
shareholder is participating in the Self Security program offered by Phoenix
Home Life, it is not necessary to maintain the above account balances in
order to use the Systematic Exchange privilege.
Such exchanges will be executed upon the close of business on the 10th of
a month and if the 10th falls on a holiday or weekend, then at the close of
business on the next succeeding business day. The minimum initial and
subsequent amount that may be exchanged under the Systematic Exchange is $25.
Systematic Exchange forms are available from Equity Planning.
Exchanges will be based upon each Series' net asset value per share next
computed following receipt of a properly executed exchange request, without
sales charge. On Class B
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<PAGE>
Share exchanges, the contingent deferred sales charge schedule of the
original shares purchased continues to apply.
The exchange of shares from one Phoenix Fund to another is treated as a
sale of the Exchanged Shares and a purchase of the Acquired Shares for
Federal income tax purposes. The shareholder may, therefore, realize a
taxable gain or loss. See "Dividends, Distributions and Taxes" for
information concerning the Federal income tax treatment of the disposition of
shares.
It is the policy of the Adviser to discourage and prevent frequent trading
by shareholders among the Trust and other Phoenix Funds in response to market
fluctuations. The Trust reserves the right to refuse exchange purchases by
any person or broker/dealer if, in the Trust's or Adviser's opinion, the
exchange would adversely affect the Trust's ability to invest effectively
according to its investment objective and policies, or otherwise adversely
affect the Trust and its shareholders. The Trust reserves the right to
terminate or modify its exchange privileges at any time upon giving prominent
notice to shareholders at least 60 days in advance.
Each Phoenix Fund has different investment objectives and policies.
Shareholders should, therefore, obtain and review the prospectus of the fund
into which the exchange is to be made before any exchange requests are made.
Telephone Exchanges
Telephone Exchange Privileges are available only in States where shares to
be acquired may be legally sold. Unless a shareholder elects in writing not
to participate in the Telephone Exchange Privilege, shares for which
certificates have not been issued may be exchanged by calling (800)-367-5877
provided that the exchange is made between accounts with identical
registrations. Under the Telephone Exchange Privilege, telephone exchange
orders may also be entered on behalf of the shareholder by his or her
registered representative.
The Trust and the Transfer Agent will employ reasonable procedures to
confirm that telephone instructions are genuine. In addition to requiring
identical registrations on both accounts, the Transfer Agent will require
address verification and will record telephone instructions on tape. All
exchanges will be confirmed in writing to the shareholder. To the extent that
procedures reasonably designed to prevent unauthorized telephone exchanges
are not followed, the Trust and/or the Transfer Agent may be liable for
following telephone instructions for exchange transactions that prove to be
fraudulent. Broker/dealers other than Equity Planning have agreed to bear the
risk of any loss resulting from any unauthorized telephone exchange
instruction from the firm or its registered representatives. However, the
shareholder would bear the risk of loss resulting from instructions entered
by an unauthorized third party that the Trust and/or the Transfer Agent
reasonably believe to be genuine. The Telephone Exchange Privilege may be
modified or terminated at any time on 60 days' notice to shareholders. In
addition, during times of drastic economic or market changes, the Telephone
Exchange Privilege may be difficult to exercise or may be suspended
temporarily. In such event an exchange may be effected by following the
procedure outlined for tendering shares represented by certificate(s).
If a shareholder elects not to use the Telephone Exchange Privilege or if
the shares being exchanged are represented by a certificate or certificates,
in order to exchange shares the shareholder must submit a written request to
Phoenix Funds c/o State Street Bank and Trust Company, P.O. Box 8301, Boston,
MA 02266-8301. If the shares are being exchanged between accounts that are
not registered identically, the signature on such request must be guaranteed
by an eligible guarantor institution as defined by the Transfer Agent in
accordance with its signature guarantee procedures. Currently, such
procedures generally permit guarantees by banks, broker dealers, credit
union, national securities exchanges, registered securities associations,
clearing agencies and savings associations. Any outstanding certificate or
certificates for the tendered shares must be duly endorsed and submitted.
Purchase and withdrawal plans and reinvestment and exchange privileges are
described more fully in the Statement of Additional Information. For further
information, call Equity Planning at (800) 243-1574.
NET ASSET VALUE
The net asset value of the shares of each Series of the Trust is
determined once daily as of the close of trading of the New York Stock
Exchange, on days when the Exchange is open for trading. The net asset value
is determined by adding the values of all securities and other assets of the
Series, subtracting liabilities and expenses, and dividing by the number of
outstanding shares of the Series. The price at which a purchase is effected
is based on the next calculation of net asset value after the order is
placed. 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
Series, 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.
In determining the value of the assets of the Balanced Series, the
Convertible Series, the Growth Series, the High Yield Series, the U.S. Stock
Series and the U.S. Government Securities Series, the securities for which
market quotations are readily available are valued at market value.
Each Series may invest up to 15% of its net assets in securities for which
market quotations are not readily available. The value of these securities is
determined in good faith by the Trustees or the Adviser acting at their
direction, considering all relevant factors including but not limited to,
prices disseminated by pricing services (when such prices are believed to
reflect the fair value of such securities) and the value of any comparable
securities for which market quotations are readily available.
33
<PAGE>
The assets of the Money Market Series are valued on an amortized cost basis
absent extraordinary or unusual market conditions.
HOW TO REDEEM SHARES
Any holder of shares of any Series may require the Trust to redeem his
shares at any time at the net asset value per share next computed after
receipt of a redemption request in proper form by Phoenix Funds c/o State
Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301 (see "Net
Asset Value"). In the case of Class B Share redemptions, investors will be
subject to the applicable deferred sales charge, if any, for such shares (see
"Deferred Sales Charge Alternative--Class B Shares", above). In addition,
each Series maintains a continuous offer to repurchase its shares, and
shareholders may normally sell their shares through securities dealers, who
may charge customary commissions for their services. Payment will be made
within seven days after receipt of the duly endorsed share certificates or
telephone request unless the repurchase or redemption request relates to
shares for which good payment has not yet been collected. For shares
purchased by check or via Invest-by-Phone service, collection of good payment
may take up to 15 days.
The Trustees reserve the right, upon 30 days' written notice, to redeem an
account in any Series if the total net asset value of the shares in such
account falls below $200, and the shareholder, upon such notice, fails to add
sufficient funds to his account to maintain a net asset value of $200 or
more.
When non-certificated shares are held in an Open Account, the shareholder
may redeem them by making written request directly to Phoenix Funds, c/o
State Street Bank and Trust Company, P.O. Box 8301, Boston, MA 02266-8301.
The redemption request must contain the name of the Series, the
shareholder(s') account name(s) and number(s), the number of shares to be
redeemed and the signature(s) of the registered shareholder(s). If the shares
are registered in the names of individuals singly, jointly or as custodian
under the Uniform Gifts to Minors Act and the proceeds of the redemption do
not exceed $50,000 and are to be paid to the registered owner(s) at the
address of record, the signature(s) on the redemption request need not be
guaranteed. Otherwise, the signature(s) must be guaranteed by an eligible
guarantor institution as defined by the Transfer Agent in accordance with its
signature guarantee procedures. Currently such procedures generally permit
guarantees by banks, broker-dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations. 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, with the signature guaranteed, if required, as described
above. In addition, shareholders of the Money Market Series, U.S. Government
Securities Series (Class A) and High Yield Series (Class A) may elect to
redeem shares held in any Open Account by check. Signature(s) must also be
guaranteed on any change of address request submitted in conjunction with any
redemption request.
Unless a shareholder elects in writing not to participate in the Telephone
Redemption Privilege, shares for which certificates have not been issued may
be redeemed by telephoning (800) 367-5877 and telephone redemptions will also
be accepted on behalf of the shareholder from his or her registered
representative. The Trust and the Transfer Agent will employ reasonable
procedures to confirm that telephone instructions are genuine. Address and
bank account information will be verified, telephone redemption instructions
will be recorded on tape, and all redemptions will be confirmed in writing to
the shareholder. If there has been an address change within the past 60 days,
a telephone redemption will not be authorized. To the extent that procedures
reasonably designed to prevent unauthorized telephone redemptions are not
followed, the Trust and/or the Transfer Agent may be liable for following
telephone instructions for redemption transactions that prove to be
fraudulent. Broker/dealers other than Equity Planning have agreed to bear the
risk of any loss resulting from any unauthorized telephone redemption
instruction from the firm or its registered representatives. However, the
shareholder would bear the risk of loss resulting from instructions entered
by an unauthorized third party that the Trust and/or the Transfer Agent
reasonably believe to be genuine. The Telephone Redemption Privilege may be
modified or terminated at any time without prior notice to shareholders. In
addition, during times of drastic economic or market changes, the telephone
redemption privilege may be difficult to exercise and a shareholder should
submit a written redemption request, as described above.
If the amount of the redemption is $500 or more, the proceeds will be
wired to the shareholder's designated U.S. commercial bank account. If the
amount of the redemption is less than $500, the proceeds will be sent by
check to the address of record on the shareholder's account.
Telephone redemption requests must be received by Equity Planning by the
close of trading on the New York Stock Exchange on any day when Equity
Planning is open for business. Requests made after that time or on a day when
Equity Planning is not open for business cannot be accepted by Equity
Planning. The proceeds of a telephone redemption will normally be sent on the
first business day following receipt of the redemption request. However, with
respect to the telephone redemption of shares purchased by check, such
requests will only be effected after the Trust has assured itself that good
payment has been collected for the purchase of shares, which may take up to
15 days. This expedited redemption privilege is not available to HR-10, IRA
and 403(b)(7) Plans.
To the extent consistent with state and federal law, the Trust may make
payment of the redemption price either in cash or in kind. The Trust has
elected to pay in cash all requests for redemption by any shareholder of
record, but may limit such cash 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
34
<PAGE>
Trust at the beginning of such period. This election has been made pursuant
to Rule 18f-1 under the 1940 Act and is irrevocable while the Rule is in
effect unless the Securities and Exchange Commission, by order, permits its
withdrawal. In case of a redemption in kind, securities delivered in payment
for shares would be valued at the same value assigned to them in computing
the net asset value per share of the Trust. A shareholder receiving such
securities would incur brokerage costs when he sold the securities. A
complete description of redemption procedures is contained in the Statement
of Additional Information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
All dividends and distributions with respect to the shares of any class of
any Series will be payable in shares of such class of Series at net asset
value or, at the option of the shareholder, in cash. Any shareholder who
purchases shares of a Series prior to the close of business on the record
date for a dividend or distribution will be entitled to receive such dividend
or distribution. Dividends and distributions (whether received in shares or
in cash) are treated either as ordinary income or long-term capital gains
for Federal income tax purposes. Each shareholder concerned should consult a
competent tax adviser.
Any shareholder with an account in any one Series equal to at least $5,000
(or $2,000 in a tax-qualified account) may direct that dividends and
distributions from that account be invested in a single account of one other
Series or in a single account of any other Phoenix Fund. Any such investment
will be made at net asset value and will not be subject to a minimum initial
or subsequent investment amount.
The Balanced Series and the Convertible Series each will distribute its
net investment income to its shareholders on a quarterly basis and net
realized capital gains, if any, to its shareholders on an annual basis.
The Growth Series and the U.S. Stock Series each will distribute its net
investment income semi-annually and net realized capital gains, if any, at
least annually.
The High Yield Series, and the U.S. Government Securities Series each will
distribute its net investment income to its shareholders on a monthly basis
and net realized capital gains, if any, to its shareholders on an annual
basis.
The net income of the Money Market Series will be declared as dividends
daily. Dividends will be invested or distributed in cash monthly. The net
income of the Money Market Series for Saturdays, Sundays and other days on
which the New York Stock Exchange is closed will be declared as dividends on
the next business day.
Each Series is treated as a separate entity for Federal income tax
purposes. Each Series intends to qualify and elect to be taxed as a
"regulated investment company" under the provisions of Subchapter M of the
Internal Revenue Code, as amended (the "Code") and the Trustees believe that
each Series so qualified for the last taxable year. Because each Series
intends to distribute all of its net investment income and net capital gains
to shareholders in accordance with the timing requirements imposed by the
Code, it is not expected that the Series will be required to pay any federal
income or excise taxes.
Distributions, whether received by shareholders in shares or in cash, will
be taxable to them as income or capital gains. Distributions of net realized
long-term capital gains, if designated as such by a Series, are taxable to
shareholders as long-term capital gains, regardless of how long they have
owned shares in the Series. Shareholders who are not subject to tax on their
income will not be required to pay tax on amounts distributed to them.
Written notices will be sent to shareholders following the end of each
calendar year regarding the tax status of all distributions made during each
taxable year.
The foregoing is only a summary of some of the important tax
considerations generally affecting the Series and their shareholders.
Shareholders should consult competent tax advisers regarding specific tax
situations.
ADDITIONAL INFORMATION
Organization of the Trust
The capitalization of the Trust consists solely of an unlimited number of
shares of beneficial interest. The Trust currently offers shares in different
Series and different classes of those Series. Holders of shares of a Series
have equal rights with regard to voting, redemptions, dividends,
distributions, and liquidations with respect to that Series, except that
Class B Shares of any Series, which bear higher distribution 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 Series. Shareholders of all Series vote on the election of
Trustees. On matters affecting an individual Series (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 Series or Class is required. Regular shareholder
meetings are held every third calendar year for the purpose of electing the
Trustees. In addition, the 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 1940 Act.
Shares are fully paid, nonassessable, redeemable and fully transferable
when they are issued. Shares do not have cumulative voting rights, preemptive
rights or subscription rights. The assets received by the Trust for the issue
or sale of shares of each Series, and any class thereof and all income,
earnings, profits and proceeds thereof, are allocated to such Series, and
Class, respectively, subject only to the rights of creditors, and constitute
the underlying assets of such Series or class. The underlying assets of each
Series are required to be segregated on the books of account, and are to be
charged with the expenses in respect to such Series and with a share of the
general expenses of the Trust. Any general expenses of
35
<PAGE>
the Trust not readily identifiable as belonging to a particular Series or
class will be allocated by or under the direction of the Trustees as they
determine fair and equitable.
Unlike the stockholders of a corporation, there is a possibility that the
shareholders of a business trust such as the Trust may be personally liable
for debts or claims against the Trust. The Declaration of Trust provides that
shareholders shall not be subject to any personal liability for the acts or
obligations of the Trust and that every written agreement, undertaking or
obligation made or issued by the Trust shall contain a provision to that
effect. The Declaration of Trust provides for indemnification out of the
Trust property for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability, which is
considered remote, is limited to circumstances in which the Trust itself
would be unable to meet its obligations.
Additional Inquiries
Inquiries and requests for the Statement of Additional Information, the
Annual Report to Shareholders and the Semi-Annual Report to Shareholders
should be directed to Equity Planning at (800) 243-4361 or 100 Bright Meadow
Boulevard, P.O. Box 2200, Enfield, Connecticut 06083-2200.
36
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APPENDIX
A-1 and P-1 Commercial Paper Ratings
The Money Market Series will only invest in commercial paper which at the
date of investment is rated A-1 by Standard & Poor's Corporation or P-1 by
Moody's Investors Services, Inc., or, if not rated, is issued or guaranteed
by companies which at the date of investment have an outstanding debt issue
rated AA or higher by Standard & Poor's or Aa or higher by Moody's.
Commercial paper rated A-1 by Standard & Poor's Corporation ("S&P") has
the following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long-term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and
cash flow have an upward trend with allowance made for unusual circumstances.
Typically, the issuer's industry is well established and the issuer has a
strong position within the industry. The reliability and quality of
management are unquestioned.
The rating P-1 is the highest commercial paper rating assigned by Moody's
Investors Services, Inc. ("Moody's"). Among the factors considered by Moody's
in assigning ratings are the following: (1) evaluation of the management of
the issuer; (2) economic evaluation of the issuer's industry or industries
and an appraisal of speculative-type risks which may be inherent in certain
areas; (3) evaluation of the issuer's products in relation to competition and
customer acceptance; (4) liquidity; (5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten years; (7) financial strength of a
parent company and the relationship which exists with the issuer; and (8)
recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparations to meet such
obligations.
Moody's Investors Service, Inc., Corporate Bond Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they Comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca--Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Standard and Poor's Corporation's Corporate Bond Ratings
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay principal and interest for bonds in this
category than for bonds in the A category.
BB-B-CCC-CC--Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation.
BB
37
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indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Fitch Investor Services, Inc.
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA--Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA". Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated "F-1+."
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds with
higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited
margin of safety and the need for reasonable business and economic activity
throughout the life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D--Bonds are in default on interest and/or principal
payments. Such bonds are extremely speculative and should be valued on the
basis of their ultimate recovery value in liquidation or reorganization of
the obligor. "DDD" represents the highest potential for recovery on these
bonds, and "D" represents the lowest potential for recovery.
Plus (+) Minus (-)--Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus
and minus signs however, are not used in the "DDD", "DD", or "D" categories.
Duff & Phelps Credit Rating Co.
Rating Scale--Duff & Phelps offers ratings for short-term and long-term
debt, preferred stock, structured financings, and insurer's claims paying
ability. D&P ratings are specific to credit quality, i.e., the likelihood of
timely payment for principal, interest, and in the case of a preferred stock
rating, preferred stock dividends. The insurance company claims paying
ability ratings reflect an insurer's ability to meet its claims obligations.
Long-Term Ratings
AAA Highest Quality
AA+, AA, AA- High Quality
A+, A, A- Good Quality
BBB+, BBB, BBB- Satisfactory Quality
(investment grade)
BB+, B, B- Non-Investment Grade
B+, B, B- Non-Investment Grade
CCC Speculative
38
<PAGE>
BACKUP WITHHOLDING INFORMATION
Step 1. Please make sure that the social security number or taxpayer
identification number (TIN) which appears on the Application complies
with the following guidelines:
<TABLE>
<CAPTION>
Account Type Give Social Security Number or Tax Identification Number of:
----------------------------------------------------------------------------------------------------------
<S> <C>
Individual Individual
----------------------------------------------------------------------------------------------------------
Joint (or Joint Tenant) Owner who will be paying tax
----------------------------------------------------------------------------------------------------------
Uniform Gifts to Minors Minor
----------------------------------------------------------------------------------------------------------
Legal Guardian Ward, Minor or Incompetent
----------------------------------------------------------------------------------------------------------
Sole Proprietor Owner of Business (also provide owner's name)
----------------------------------------------------------------------------------------------------------
Trust, Estate, Pension Plan Trust Trust, Estate, Pension Plan Trust (not personal TIN of fiduciary)
----------------------------------------------------------------------------------------------------------
Corporation, Partnership,
Other Organization Corporation, Partnership, Other Organization
----------------------------------------------------------------------------------------------------------
Broker/Nominee Broker/Nominee
----------------------------------------------------------------------------------------------------------
</TABLE>
Step 2. If you do not have a TIN, you must obtain Form SS-5 (Application for
Social Security Number) or Form SS-4 (Application for Employer
Identification Number) from your local Social Security or IRS office
and apply for one. Write "Applied For" in the space on the
application.
Step 3. If you are one of the entities listed below, you are exempt from
backup withholding.
(bullet) A corporation
(bullet) Financial institution
(bullet) Section 501(a) exempt organization (IRA, Corporate
Retirement Plan, 403(b), Keogh)
(bullet) United States or any agency or instrumentality thereof
(bullet) A State, the District of Columbia, a possession of the
United States, or any subdivision or instrumentality thereof
(bullet) International organization or any agency or instrumentality
thereof
(bullet) Registered dealer in securities or commodities registered in
the U.S. or a possession of the U.S.
(bullet) Real estate investment trust
(bullet) Common trust fund operated by a bank under section 584(a)
(bullet) An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1)
(bullet) Regulated Investment Company
If you are in doubt as to whether you are exempt, please contact the Internal
Revenue Service.
Step 4. IRS Penalties--If you do not supply us with your TIN, you will be
subject to an IRS $50 penalty unless your failure is due to
reasonable cause and not willful neglect. If you fail to report
interest, dividend or patronage dividend income on your federal
income tax return, you will be treated as negligent and subject to an
IRS 5% penalty tax on any resulting underpayment of tax unless there
is clear and convincing evidence to the contrary. If you falsify
information on this form or make any other false statement resulting
in no backup withholding on an account which should be subject to a
backup withholding, you may be subject to an IRS $500 penalty and
certain criminal penalties including fines and imprisonment.
- ----------------
This Prospectus sets forth concisely the information about the Phoenix Series
Fund (the "Trust") which you should know before investing. Please read it
carefully and retain it for future reference.
The Trust has filed with the Securities and Exchange Commission a Statement
of Additional Information, dated February 28, 1996. The Statement contains
more detailed information about the Trust and is incorporated into this
Prospectus by reference. You may obtain a free copy of the Statement by
writing the Trust c/o Phoenix Equity Planning Corporation, 100 Bright Meadow,
P.O. Box 2200, Enfield, Connecticut 06083-2200.
Financial information relating to the Trust is contained in the Annual Report
to Shareholders for the year ended October 31, 1995 and is incorporated into
the Statement of Additional Information by reference.
[Recycle logo] Printed on recycled paper using soybean ink
<PAGE>
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<PAGE>
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<PAGE>
Phoenix Series Fund
P.O. Box 2200
Enfield, CT 06083-2200
Bulk Rate
U.S. Postage
PAID
Springfield, MA
Permit No. 444
[Phoenix Duff & Phelps logo] Phoenix Duff & Phelps
PDP 393 (3/96)
<PAGE>
PHOENIX SERIES FUND
101 Munson Street
Greenfield, Massachusetts 01301
Statement of Additional Information
February 28, 1996
This Statement of Additional Information is not the Prospectus but expands
upon and supplements the information contained in the current Prospectus of
Phoenix Series Fund (the "Trust"), dated February 28, 1996 and should be read
in conjunction with it. The Trust's Prospectus may be obtained by calling
Phoenix Equity Planning Corporation ("Equity Planning") at (800) 243-4361, or
by writing to Phoenix Funds c/o State Street Bank and Trust Company, P.O. Box
8301, Boston, MA 02266-8301.
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
-------
<S> <C>
PERFORMANCE INFORMATION 2
PERFORMANCE COMPARISONS 3
INVESTMENT POLICIES (17) 4
INVESTMENT RESTRICTIONS 10
PORTFOLIO TURNOVER 11
MANAGEMENT OF THE TRUST (25) 12
THE INVESTMENT ADVISER (25) 17
BROKERAGE ALLOCATION 18
DETERMINATION OF NET ASSET VALUE (33) 19
PURCHASE OF SHARES (28) 20
Alternative Purchase Arrangements 20
Purchases of Shares of the Money Market Series 21
Purchases of Shares of the Balanced, Convertible, Growth, High Yield, and U.S. Stock Series
and the U.S. Government Securities Series 21
SHAREHOLDER SERVICES 22
SPECIAL SERVICES 24
HOW TO REDEEM SHARES (34) 24
TAXES (35) 26
THE NATIONAL DISTRIBUTOR AND DISTRIBUTION PLANS (26) 27
OTHER INFORMATION 28
</TABLE>
* Numbers in parenthesis are cross-references to related sections of the
Prospectus.
Customer Service--(800) 243-1574
Sales Information--(800) 243-4361
Telephone Orders/Exchanges--(800) 367-5877
Telecommunication Device TTY--(800) 243-1926
PDP427 (2/96)
1
<PAGE>
PERFORMANCE INFORMATION
Performance information for each Series (and Class of Series) may appear
in advertisements, sales literature, or reports to shareholders or
prospective shareholders. Performance information in advertisements and sales
literature may be expressed as yield and effective yield of the Money Market
Series, as yield of the other Series offered, or any Class of such Series,
and as total return of any Series or Class thereof. Current yield for the
Money Market Series will be based on the change in the value of a
hypothetical investment (exclusive of capital changes) over a particular
7-day period, less a hypothetical charge reflecting deductions for expenses
during the period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The
base period return is then annualized by multiplying by 365/7, with the
resulting yield figure carried to at least the nearest hundredth of one
percent. "Effective yield" for the Money Market Series (and each Class of
such Series) assumes that all dividends received during an annual period have
been reinvested. Calculation of "effective yield" begins with the same "base
period return" used in the calculation of yield, which is then annualized to
reflect weekly compounding pursuant to the following formula:
Effective Yield = [(Base Period Return) + 1) (365/7)] - 1
For the 7-day period ending October 31, 1995, the yield of the Class A
Shares of the Money Market Series was 5.06% and the effective yield of the
Class A Shares of this Series was 4.32%.
Quotations of yield for the High Yield, Convertible, U.S. Government
Securities, Balanced, Growth, and U.S. Stock Series will be based on all
investment income per share earned during a particular 30-day period
(including dividends and interest), less expenses (including pro rata Trust
expenses and expenses applicable to each particular Series or Class of a
Series) accrued during the period ("net investment income"), and are computed
by dividing net investment income by the value of a share of the Series or
Class on the last day of the period, according to the following formula:
YIELD = 2[((a-b)) + 1)(6) - 1]
cd
where a = dividends and interest earned during the period by the Series.
b = expenses accrued for the period (net of any reimbursements),
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends, and
d = the maximum offering price per share on the last day of the
period.
For the period ended October 31, 1995, the yield of the Class A Shares of
the other Series were as follows: 8.92% for the High Yield Series; 3.76% for
the Convertible Series; 5.18% for the U.S. Government Securities Series;
2.57% and for the Balanced Series.
For the same period, the yield of the Class B Shares of the other Series
were as follows: High Yield 8.58%; Convertible 3.16%; U.S. Government 4.67%;
and Balanced 1.94%.
As summarized in the Prospectus under the heading "Performance History",
total return is a measure of the change in value of an investment in a
Series, or Class thereof, over the period covered. The formula for total
return used herein includes four steps: (1) adding to the total number of
shares purchased by a hypothetical $1,000 investment in the Series or a Class
of Series; (2) calculating the value of the hypothetical initial investment
of $1,000 as of the end of the period by multiplying the total number of
shares of a class owned at the end of the period by the net asset value on
the last trading day of the period; (3) assuming maximum sales charge
deducted and reinvestment of all dividends at net asset value and (4)
dividing this account value for the hypothetical investor by the initial
$1,000 investment. Total return will be calculated for one year, five years
and ten years or the time period during which the registration statement
including the Series was in effect if a Series has not been in existence for
at least ten years.
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The manner in which total return will be calculated for public use is
described above. The following table summarizes the calculation of total
return for each Series, where applicable, through October 31, 1995.
AVERAGE ANNUAL TOTAL RETURN AS OF OCTOBER 31, 1995
PERIODS ENDED
-----------------------------------
10 YEAR OR
SERIES 1 YEAR 5 YEAR SINCE INCEPTION*
------------------------------------- ------ ------ -----------------
BALANCED (CLASS A) 10.03% 10.13% 11.90%
BALANCED (CLASS B) 9.68% N/A 8.41%
CONVERTIBLE (CLASS A) 6.14% 9.19% 10.33%
CONVERTIBLE (CLASS B) 5.59% N/A 5.44%
GROWTH (CLASS A) 18.02% 12.56% 13.67%
GROWTH (CLASS B) 18.02% N/A 17.47%
U.S. STOCK (CLASS A) 28.76% 17.16% 13.14%
U.S. STOCK (CLASS B) 29.15% N/A 24.29%
HIGH YIELD (CLASS A) 5.96% 13.10% 9.42%
HIGH YIELD (CLASS B) 4.62% N/A -1.34%
U.S. GOVERNMENT SECURITIES (CLASS A) 9.39% 7.71% 6.68%
U.S. GOVERNMENT SECURITIES (CLASS B) 8.82% N/A 3.23%
*Since inception, July 15, 1994 for Class B Balanced, Convertible and Growth;
July 21, 1994 for Class B U.S. Stock; February 16, 1994 for Class B High
Yield; and February 24, 1994 for U.S. Government Class B.
NOTE: Average annual total return assumes a hypothetical initial payment of
$1,000. At the end of each period, a total redemption is assumed. The
ending redeemable value is divided by the original investment to
calculate total return.
Performance information for any Series or Class reflects only the
performance of a hypothetical investment in the Series or Class during the
particular time period on which the calculations are based. Performance
information should be considered in light of the investment objectives and
policies, characteristics and quality of the particular Series, and the
market conditions during the given time period, and should not be considered
as a representation of what may be achieved in the future.
PERFORMANCE COMPARISONS
Each Series or Class of Series 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 rating services such as Morningstar, Inc.
Additionally, a Series or Class of Series may compare its 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 and 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 and Poors The Outlook,
and Personal Investor. A Series 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 Series or the Class of Series against certain
widely acknowledged outside standards or indices for stock and bond market
performance, such as the Standard & Poor's 500 Stock Index (the "S&P 500"),
Dow Jones Industrial Average, Europe Australia Far East Index (EAFE),
Consumer Price Index, Shearson Lehman Corporate Index and Shearson Lehman T-
Bond Index. The S&P 500 is a commonly quoted market value-weighted and
unmanaged index showing the changes in the aggregate market value of 500
stocks relative to the base period 1941-43. The S&P 500 is composed almost
entirely of common stocks of companies listed on the New York Stock Exchange,
although the common stocks of a few companies listed on the American Stock
Exchange or traded over-the-counter are included. The 500 companies
represented include 400 industrial, 60 transportation and 40 financial
services concerns. The S&P 500 represents about 80% of the market value of
all issues traded on the New York Stock Exchange.
Advertisements, sales literature, and other communications may contain
information about the Adviser's current investment strategies and management
style. Current strategies and style may change to allow the Trust to respond
quickly to changing market and economic conditions. From time to time the
Trust may include specific portfolio holdings or industries. To illustrate
components of overall performance, the Trust may separate its cumulative and
average annual returns into income and capital gains components; or cite
separately as a return figure the equity or bond portion of the Trust's
portfolio; or compare the Trust's equity or bond return figure to well-known
indices of market performance, including but not limited to: the S&P 500
Index, Dow Jones Industrial Average, First Boston High Yield Index and
Salomon Brothers Corporate Bond and Government Bond Indices.
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INVESTMENT POLICIES
The investment objectives and policies of each Series are described in the
"Investment Objectives and Policies" section of the Prospectus. The following
specific policies supplement the information contained in that section of the
Prospectus.
Money Market Instruments. Certain money market instruments used
extensively by the Money Market Fund Series are described below. They may
also be used by the other Series except U.S. Government Securities Fund
Series to a very limited extent (to invest otherwise idle cash) or on a
temporary basis (for defensive purposes).
Repurchase Agreements. Repurchase Agreements are agreements by which a
Series 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 Trust
maintained in a central depository of book-entry system or by physical
delivery of the securities to the Trust'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 Series, if the seller of the repurchase agreement defaults and
does not repurchase the underlying securities, the Series 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.
Certificates of Deposit. Certificates of deposit are generally short-term,
interest-bearing negotiable certificates issued by banks or savings and loan
associations against funds deposited in the issuing institution.
Time Deposits. Time deposits are deposits in a bank or other financial
institution for a specified period of time at a fixed interest rate for which
a negotiable certificate is not received.
Banker's Acceptances. A bankers' acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an international
commercial transaction (to finance the import, export, transfer or storage of
goods). The borrower, as well as the bank, is liable for payment, and the
bank unconditionally guarantees to pay the draft at its face amount on the
maturity date. Most acceptances have maturities of six months or less and are
traded in secondary markets prior to maturity.
Commercial Paper. Commercial paper refers to short-term, unsecured
promissory notes issued by corporations to finance short-term credit needs.
Commercial paper is usually sold on a discount basis and has a maturity at
the time of issuance not exceeding nine months.
Corporate Debt Securities. Corporate debt securities with a remaining
maturity of less than one year tend to become extremely liquid and are traded
as money market securities.
U.S. Government Obligations. Securities issued or guaranteed as to
principal and interest by the United States Government include a variety of
Treasury securities, which differ only in their interest rates, maturities,
and times of issuance. Treasury bills have maturities of one year or less.
Treasury notes have maturities of one to seven years, and Treasury bonds
generally have maturities of greater than five years.
Agencies of the United States Government which issue or guarantee
obligations include, among others, Export-Import Banks of the United States,
Farmers Home Administration, Federal Housing Administration, Government
National Mortgage Association, Maritime Administration, Small Business
Administration and The Tennessee Valley Authority. Obligations of
instrumentalities of the United States Government include securities issued
or guaranteed by, among others, the Federal National Mortgage Association,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal
Intermediate Credit Banks, Banks for Cooperatives, and the U.S. Postal
Service. Some of these securities are supported by the full faith and credit
of the U.S. Government; others are supported by the right of the issuer to
borrow from the Treasury, while still others are supported only by the credit
of the instrumentality. The U.S. Government Securities Series will invest
primarily in securities which are supported by the full faith and credit of
the U.S. Government.
Securities and Index Options. All Series, except the Money Market Series
and U.S. Government Securities Series, may write covered call options and
purchase call and put options. Options and the related risks are summarized
below.
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Writing and Purchasing Options. Call options written by a Series normally
will have expiration dates between three and nine months from the date written.
During the option period a Series may be assigned an exercise notice by the
broker-dealer through which the call option was sold, requiring the Series 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 the Series effects a
closing purchase transaction. A closing purchase transaction cannot be effected
with respect to an option once the Series has received an exercise notice.
The exercise price of a call option written by a Series 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. A Series may write call options and purchase call and
put options on any other indices traded on a recognized exchange.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option written by a Series, to prevent an
underlying security from being called, or to enable a Series to write another
call option with either a different exercise price or expiration date or
both. A Series 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 Series expires unexercised, a
Series will realize a gain in the amount of the premium on the option less
the commission paid.
The option activities of a Series may increase its portfolio turnover rate
and the amount of brokerage commissions paid. A Series will pay a commission
each time it purchases or sells a security in connection with the exercise of
an option. These commissions may be higher than those which would apply to
purchases and sales of securities directly.
Limitations on Options. A Series may write call options only if they are
covered and if they remain covered so long as a Series is obligated as a
writer. If a Series writes a call option on an individual security, a Series
will own the underlying security at all times during the option period. A
Series 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 Series 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 Series, a Series will be required to deposit qualified
securities. A "qualified security" is a security against which a Series has
not written a call option and which has not been hedged by a Series 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, a Series will
deposit an amount of cash or liquid assets equal in value to the difference.
In addition, when a Series writes a call on an index which is "in-the-money"
at the time the call is written, a Series will segregate with its custodian
bank cash or liquid assets equal in value to the amount by which the call is
"in-the-money" times the multiplier times the number of contracts. Any amount
segregated may be applied to a Series' obligation to segregate 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.
A Series may invest up to 2% of its total assets in exchange-traded call
and put options. A Series 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.
In connection with a Series qualifying as a regulated investment company
under the Internal Revenue Code, other restrictions on a Series' ability to
enter into option transactions may apply from time to time. See "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.
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<PAGE>
The risk of purchasing a call option or a put option is that a Series may
lose the premium it paid plus transaction costs. If a Series 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 a Series 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 a Series, 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 the following: (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 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. The Adviser believes that
the position limits established by the exchanges will not have any adverse
impact upon a Series or all of the Series, in the aggregate.
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 a Series 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 a Series 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, a Series 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 a Series. 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, a Series will write call options on indices only subject to the
limitations described above.
Price movements in securities in a Series' portfolio will not correlate
perfectly with movements in the level of the index and, therefore, a Series
bears the risk that the price of the securities held by the Series may not
increase as much as the level of the index. In this event, the Series would
bear a loss on the call which would not be completely offset by movements in
the prices of a Series' portfolio securities. It is also possible that the
index may rise when the value of a Series' portfolio securities does not. If
this occurred, the Series 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 a Series has other liquid assets which are sufficient to satisfy
the exercise of a call on an index, a Series 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 a
Series fails to anticipate an exercise, it may have to borrow from a bank (in
an amount not exceeding 10% of a Series' total assets) pending settlement of
the sale of securities in its portfolio and pay interest on such borrowing.
When a Series has written a call on an index, there is also a risk that
the market may decline between the time a Series 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 a Series is able to sell securities in its
portfolio. As with options on portfolio securities, a Series 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 a Series would be able to deliver
the underlying security in settlement, a Series 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.
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If a Series 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" a Series 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 a Series 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. All Series except the
Money Market Series and the U.S. Government Securities Series 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 Series' 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 a Series may wish to purchase in the future by purchasing
futures contracts.
A Series 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 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 Series purchases or sells a security,
no security is delivered or received by a Series upon the purchase or sale of
a financial futures contract. Initially, a Series will be required to deposit
in a segregated account with its custodian bank an amount of cash, U.S.
Treasury bills or liquid high grade debt obligations. 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.
A Series 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. A Series may not
engage in transactions in financial futures contracts or related options for
speculative purposes but only as a hedge against anticipated changes in the
market value of its portfolio securities or securities which it intends to
purchase. A Series may not purchase or sell financial futures contracts or
related options if, immediately thereafter, the sum of the amount of initial
margin deposits on a Series' existing futures and related options positions
and the premiums paid for related options would exceed 2% of the market value
of a Series' total assets after taking into account unrealized profits and
losses on any such contracts. At the time of purchase of a futures contract
or a call option
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on a futures contract, an amount of cash, U.S. Government securities or other
appropriate high-grade debt obligations equal to the market value of the
futures contract minus a Series' initial margin deposit with respect thereto
will be deposited in a segregated account with a Series' custodian bank to
collateralize fully the position and thereby ensure that it is not leveraged.
The extent to which a Series may enter into financial futures contracts
and related options also may be limited by the requirements of the Internal
Revenue Code of 1954 for qualification as a regulated investment company. See
"Taxes."
Risks Relating to Futures Contracts and Related Options. Positions in
futures contracts and related options may be closed out only on an exchange
which provides a secondary market for such contracts or options. A Series
will enter into an option or 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 option or futures contract at
any specific time. Thus, it may not be possible to close out a futures or
related option position. In the case of a futures position, in the event of
adverse price movements a Series would continue to be required to make daily
margin payments. In this situation, if a Series 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, a Series 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 a Series' 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 and options on futures contracts will cause a Series to incur
additional brokerage commissions and may cause an increase in a Series'
portfolio turnover rate.
The successful use of futures contracts and related options 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 or option is held by a
Series or such prices move in a direction opposite to that anticipated, a
Series may realize a loss on the hedging transaction which is not offset by
an increase in the value of its portfolio securities. As a result, a Series'
return for the period may be less than if it had not engaged in the hedging
transaction.
Utilization of futures contracts by a Series 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, a Series 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 a Series has sold futures contracts to hedge its portfolio
against decline in the market, the market may advance and the value of
securities held in a Series' portfolio may decline. If this occurred, a
Series 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 a Series
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 a
Series 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, a Series will realize a loss on the futures that would not be offset
by a reduction in the price of the securities purchased.
The market prices of futures contracts may be affected if participants in
the futures market elect to close out their contracts through off-setting
transactions rather than to meet margin deposit requirements. In such case,
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.
Compared to the purchase or sale of futures contracts, the purchase of put
or call options on futures contracts involves less potential risk for a
Series because the maximum amount at risk is the premium paid for the options
plus transaction costs. However, there may be circumstances when the purchase
of an option on a futures contract would result in a loss to a Series while
the purchase or sale of the futures contract would not have resulted in a
loss, such as when there is no movement in the price of the underlying
securities.
Leverage. The Trust may from time to time increase the Convertible Series'
ownership or the Stock Series' ownership of securities holdings above the
amounts otherwise possible by borrowing from banks at fixed amounts of
interest and investing the borrowed funds. The Trust will borrow only from
banks, and only if immediately after such borrowing the value of the assets
of a Series (including the amount borrowed) less its liabilities (not
including any borrowings) is at least three times the amount of funds
borrowed for investment purposes. The effect of this provision is to permit
the Trust to borrow up to 50% of the net assets of a Series, not including
the proceeds of any such borrowings. However, the amount of the borrowings
will be dependent upon the availability and cost of credit from time
8
<PAGE>
to time. If, due to market fluctuations or other reasons, the value of such
Series' assets computed as provided above becomes at any time less than three
times the amount of the borrowings for investment purposes, the Trust, 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 Series with respect
to which the borrowing has been made. Because such expense would not
otherwise be incurred, the net investment income of such Series is not
expected to be as high as it otherwise would be during periods when
borrowings for investment purposes are substantial.
Bank borrowings for investment purposes 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 Series with respect
to which the borrowing has been made.
Any investment gains made with the additional monies borrowed in excess of
interest paid will cause the net asset value of a Series' shares to rise
faster than would otherwise be the case. On the other hand, if the investment
performance of the additional securities purchased fails to cover their cost
(including any interest paid on the monies borrowed) to the Series, the net
asset value of the Series will decrease faster than would otherwise be the
case.
Foreign Securities. Each of the Series, except the Money Market Series,
U.S. Government Securities Series and U.S. Stock Series, 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 25% of the
total net asset value of each Series. The High Yield Series may invest up to
35% of its total net asset value in foreign securities. 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.
The Trust 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 Trust's foreign securities transactions. The use of a
foreign custodian invokes considerations which are not ordinarily associated
with domestic custodians. These considerations include the possibility of
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.
Mortgage-Backed Securities. Securities issued by Government National
Mortgage Association ("GNMA") are, and securities issued by Federal National
Mortgage Association ("FNMA") include, mortgage-backed securities
representing part ownership of a pool of mortgage loans.
In the case of GNMA, the mortgages are insured by the Federal Housing
Administration or Farmers' Home Administration or guaranteed by the Veteran's
Administration. In the case of FNMA, the mortgages are not insured by an
agency of the U.S. Government.
The prices of mortgage-backed securities are inversely affected by changes
in interest rates and, therefore, are subject to the risk of market price
fluctuations. Mortgage-backed securities issued by GNMA and FNMA currently
offer yields which are higher than those available on other securities of the
U.S. Government and its agencies and instrumentalities, but may be less
effective than these other securities as a means of "locking in" attractive
long-term interest rates. This is a result of the need to reinvest prepayment
of principal and the possibility of significant unscheduled prepayments
resulting from declines in mortgage interest rates. As a result, these
securities have less potential for capital appreciation during periods of
declining interest rates than other investments of comparable risk of decline
in value during periods of rising rates.
Lower Rated Convertible Securities. Convertible securities which are not
rated in the four highest categories, in which the Convertible Series may
invest, are predominantly speculative with respect to the issuer's capacity
to repay principal and interest and may include issues on which the issuer
defaults.
Nonpublicly Offered Debt Securities. The High Yield Series may invest up
to 15% of the value of its total assets in debt securities that cannot be
sold in the public market without first being registered with the Securities
and Exchange Commission but which the Adviser deems to be "liquid."
Deferred Coupon Debt Securities. The High Yield Series may invest in debt
obligations that do not make any interest payments for a specified period of
time prior to maturity ("deferred coupon" obligations). Because the deferred
coupon bonds do not make interest payments for a certain period of time, they
are purchased by the Series at a deep discount and their value fluctuates
more in response to interest rate changes than does the value of debt
obligations that make current interest payments. The degree of fluctuation
with interest rate changes is greater when the deferred period is longer.
Therefore, there is a risk that the value of the Series shares may decline
more as a result of an increase in interest rates than would be the case if
the Series did not invest in deferred coupon bonds.
9
<PAGE>
Lending Portfolio Securities. In order to increase its return on
investments, the Trust may make loans of the portfolio securities of any
Series, as long as the market value of the loaned securities does not exceed
25% of the value of that Series' total assets. Loans of portfolio securities
will always be fully collateralized at no less than 100% of the market value
of the loaned securities (as marked to market daily) and made only to
borrowers considered 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.
Loan Participations. The High Yield Series may invest up to 5% of its net
assets, determined at the time of investment, in loan participations. A loan
participation agreement involves the purchase of a share of a loan made by a
bank to a company in return for a corresponding share of the borrower's
principal and interest payments. Loan participations of the type in which the
Series may invest include interests in both secured and unsecured corporate
loans. In the event that a corporate borrower failed to pay its scheduled
interest or principal payments on participations held by the Series, the
market value of the affected participation would decline, resulting in a loss
of value of such investment to the Series. Accordingly, such participations
are speculative and may result in the income level and net assets of the
Series being reduced. Moreover, loan participation agreements generally limit
the right of a participant to resell its interest in the loan to a third
party and, as a result, loan participations will be deemed by the Trust to be
illiquid investments.
INVESTMENT RESTRICTIONS
The Trust's fundamental policies as they affect any Series cannot be
changed without the approval vote of a majority of the outstanding shares of
such Series, which is the lesser of (i) 67% or more of the voting securities
of such Series present at a meeting if the holders of more than 50% of the
outstanding voting securities of such Series are present or represented by
proxy or (ii) more than 50% of the outstanding voting securities of such
Series. A proposed change in fundamental policy or investment objective will
be deemed to have been effectively acted upon with respect to any Series if a
majority of the outstanding voting securities of that Series votes for the
approval of the proposal as provided above, notwithstanding (1) that such
matter has not been approved by a majority of the outstanding securities of
any other Series affected by such matter and (2) that such matter has not
been approved by a majority of the outstanding voting securities of the
Trust.
The following investment restrictions are fundamental policies of the
Trust with respect to all Series and may not be changed except as described
above. The Trust may not:
1. Purchase for any Series securities of any issuer, other than
obligations issued or guaranteed as to principal and interest by the United
States Government or its agencies or instrumentalities, if immediately
thereafter (i) more than 5% of such Series' total assets (taken at market
value) would be invested in the securities of such issuer or (ii) more than
10% of the outstanding securities of any class of such issuer would be held
by such Series or by all Series of the Trust in the aggregate.
2. Concentrate the portfolio investments of any Series in any one
industry. To comply with this restriction, no security may be purchased for a
Series if such purchase would cause the value of the aggregate investment of
such Series in any one industry to exceed 25% of that Series' total assets
(taken at market value). However, the Money Market Series may invest more
than 25% of its assets in the domestic banking industry.
3. Act as securities underwriter except as it technically may be deemed to
be an underwriter under the Securities Act of 1933 in selling a portfolio
security.
4. Purchase securities on margin, but it may obtain short-term credit as
may be necessary for the clearance of purchases and sales of securities.
5. Make short sales of securities or maintain a short position.
6. Make cash loans, except that the Trust may (i) purchase bonds, notes,
debentures or similar obligations which are customarily purchased by
institutional investors whether publicly distributed or not, and (ii) enter
into repurchase agreements, provided that no more than 10% of any Series' net
assets (taken at market value) may be subject to repurchase agreements
maturing in more than seven days.
7. Make securities loans, except that the Trust may make loans of the
portfolio securities of any Series, provided that the market value of the
securities subject to any such loans does not exceed 25% of the value of the
total assets (taken at market value) of such Series.
8. Make investments in real estate or commodities or commodity contracts,
although (i) the Trust may purchase securities of issuers which deal in real
estate or commodities and may purchase securities which are secured by
interests in real estate, specifically, securities issued by real estate
investment trusts and (ii) any Series (excluding the Money Market Series and
the U.S. Government Securities Series) may engage in transactions in
financial futures contracts and related options, provided that the sum of the
initial margin deposits on such Series' existing futures positions and the
premiums paid for related options would not exceed in the aggregate 2% of
such Series' total assets.
10
<PAGE>
9. Invest in oil, gas or other mineral exploration or development
programs, although the Trust may purchase securities of issuers which engage
in whole or in part in such activities.
10. Invest in puts, calls, straddles and any combination thereof, except
that any Series (excluding the Money Market Series and the U.S. Government
Securities Series) may (i) write (sell) exchange-traded covered call options
on portfolio securities and on securities indices and engage in related
closing purchase transactions and (ii) invest up to 2% of its total assets in
exchange-traded call and put options on securities and securities indices.
11. Purchase securities of companies for the purpose of exercising
management or control.
12. Participate in a joint or joint and several trading account in
securities.
13. Purchase securities of any other investment company except in the open
market at customary brokers' commission rates or as a part of a plan of
merger or consolidation.
14. Purchase for any Series securities of any issuer which together with
predecessors has a record of less than three years' continuous operation, if
as a result more than 5% of the total net assets (taken at market value) of
such Series would then be invested in such securities.
15. Purchase or retain securities of any issuer if any officer or Trustee
of the Trust, or officer or director of its investment adviser, owns
beneficially more than 1/2 of 1% of the outstanding securities or shares, or
both, of such issuer and all such persons owning more than 1/2 of 1% of such
securities or shares together own beneficially more than 5% of such
securities or shares.
16. Borrow money, except that the Trust may (i) borrow money for any
Series for temporary administrative purposes provided that any such borrowing
does not exceed 10% of the value of the total assets (taken at market value)
of such Series and (ii) borrow money for any Series for investment purposes,
provided that any such borrowing for investment purposes with respect to any
such Series is (a) authorized by the Trustees prior to any public
distribution of the shares of such Series or is authorized by the
shareholders of such Series thereafter, (b) is limited to 33 1/3% of the
value of the total assets (taken at market value) of such Series, and (c) is
subject to an agreement by the lender that any recourse is limited to the
assets of that Series with respect to which the borrowing has been made. With
the exception of the Convertible Series and the Stock Series, no Series may
invest in portfolio securities while the amount of borrowing of the Series
exceeds 5% of the total assets of such Series. Borrowing for investment
purposes has not been authorized for any Series (except the Convertible
Series and the Stock Series) whose shares are offered by the Trust.
17. Pledge, mortgage or hypothecate the assets of any Series to an extent
greater than 10% of the total assets (taken at market value) of such Series
to secure borrowings made pursuant to the provisions of item 16 above.
18. Issue senior securities as defined in the Investment Company Act of
1940, except to the extent that it is permissible to (a) borrow monthly from
banks pursuant to the Trust's investment restrictions regarding the borrowing
of money, and (b) enter into transactions involving forward foreign currency
contracts, foreign currency contracts and options thereon, as described in
the Trust's Prospectus and this Statement of Additional Information.
The Trust may purchase illiquid securities including repurchase agreements
providing for settlement more than seven days after notice and restricted
securities (securities that must be registered with the Securities and
Exchange Commission before they can be sold to the public) deemed to be
illiquid provided such securities will not constitute more than 15% (or 10%
in the case of the Money Market Series) of each Series' net assets. The Board
of Trustees, or the Adviser acting at its direction, values these securities,
taking into consideration quotations available from broker-dealers and
pricing services and other information deemed relevant.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage beyond the specified limit resulting
from a change in values of portfolio securities or amount of net assets shall
not be considered a violation of the restrictions.
PORTFOLIO TURNOVER
Each Series has a different expected annual rate of portfolio turnover,
which is calculated by dividing the lesser of purchases or sales of portfolio
securities during the fiscal year by the monthly average of the value of the
Series' securities (excluding from the computation all securities, including
options, with maturities at the time of acquisition of one year or less). A
high rate of portfolio turnover generally involves correspondingly greater
brokerage commission expenses, which must be borne directly by the Series.
Turnover rates may vary greatly from year to year as well as within a
particular year and may also be affected by cash requirements for redemptions
of each Series' shares and by requirements which enable the Trust to receive
certain favorable tax treatment. The 1994 and 1995 annual rates of portfolio
turnover for all Series except the Money Market Series (which for this
purpose does not calculate a portfolio turnover rate) are set forth in the
prospectus, a copy of which must precede or accompany this Statement of
Additional Information.
11
<PAGE>
Balanced Series
In the fiscal years ended October 31, 1994 and October 31, 1995 the
turnover rates for the equity portion of the Balanced Series were 221.02% and
226%, respectively. The turnover rates for the fixed income securities were
69.65% and 155%, respectively for the same periods.
MANAGEMENT OF THE TRUST
The trustees and executive officers of the Trust and their principal
occupations for at least the last five years are set forth below. Unless
otherwise noted, the address of each executive officer and trustee is 56
Prospect Street, Hartford, Connecticut 06115-0480. On November 22, 1993, the
shareholders elected to fix the number of trustees at ten and to elect such
number of trustees. Subsequently the trustees voted to increase the number of
trustees from ten to eleven, and to appoint Lowell P. Weicker, Jr. to fill
the vacancy caused by the increase. The elected and appointed trustees are
listed below.
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s)
Name, Address and Age the Fund During Past Five Years
------------------------ ---------------- ------------------------------------------------------------------
<S> <C> <C>
C. Duane Blinn (68) Trustee Partner in the law firm of Day, Berry & Howard. Director/ Trustee,
Day, Berry & Howard Phoenix Funds (1980-present). Director/Trustee, the National
CityPlace Affiliated Investment Companies (until 1993).
Hartford, CT 06103
Robert Chesek (61) Trustee Trustee/Director, Phoenix Funds (1981-present) and Chairman
49 Old Post Road (1989-1994). Director/Trustee, the National Affiliated Investment
Wethersfield, CT 06109 Companies (until 1993). Vice President, Common Stock, Phoenix Home
Life Mutual Insurance Company (1980-1994).
E. Virgil Conway (66) Trustee Trustee/Director, Consolidated Edison Company of New York, Inc.
9 Rittenhouse Road (1970-present), Pace University (1978-present), Atlantic Mutual
Bronxville, NY 10708 Insurance Company (1974-present), HRE Properties (1989-present),
Greater New York Councils, Boy Scouts of America (1985-present),
Union Pacific Corp. (1978-present), Blackrock Fund for Fannie Mae
Mortgage Securities (Advisory Director) (1989-present), Centennial
Insurance Company, Josiah Macy, Jr., Foundation, and The Harlem
Youth Development Foundation. Advisory Director, Fund Directions
(1993-present). Chairman, Metropolitan Transportation Authority
(1992-present). Chairman, Audit Committee of the City of New York
(1981-present). Director/Trustee, the National Affiliated
Investment Companies (until 1993). Director/Trustee, Phoenix Funds
(1993-present). Director, Accuhealth (1994-present), Trism, Inc.
(1994-present), Realty Foundation of New York (1972-present).
Chairman, New York Housing Partnership Development Corp.
(1981-present).
Harry Dalzell-Payne (66) Trustee Director/Trustee, Phoenix Funds (1983-present). Director, Farragut
330 East 39th Street Mortgage Co., Inc. (1991-1994). Director/Trustee, the National
Apartment 29G Affiliated Investment Companies (1983-1993). Formerly a Major
New York, NY 10016 General of the British Army.
Leroy Keith, Jr. (57) Trustee Chairman and Chief Executive Officer, Carson Products Company
Chairman and Chief (1995-present). Director/Trustee, Phoenix Funds (1980-present).
Executive Officer Director Equifax Corp. (1991-present), and Keystone International
Carson Products Company Fund, Inc. (1989-present). Trustee, Keystone Liquid Trust,
64 Ross Road Keystone Tax Exempt Trust, Keystone Tax Free Fund, Master Reserves
Savannah, GA 31405 Tax Free Trust, and Master Reserves Trust. Director/Trustee, the
National Affiliated Investment Companies (until 1993). Director,
Blue Cross/Blue Shield (1989-1993) and First Union Bank of Georgia
(1989-1993). President, Morehouse College (1987-1994). Chairman
and Chief Executive Officer, Keith Ventures (1994-1995).
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s)
Name, Address and Age the Fund During Past Five Years
------------------------ ---------------- ------------------------------------------------------------------
<S> <C> <C>
*Philip R. McLoughlin Trustee and Director (1994-present) and Executive Vice President, Investments,
(49) President Phoenix Home Life Mutual Insurance Company (1987-present).
Director, Vice Chairman and Chief Executive Officer, Phoenix Duff
& Phelps Corporation (1995-present). Director/Trustee and
President, Phoenix Funds (1989-present). Director, Phoenix
Investment Counsel, Inc. (1983-present). Director (1984-present)
and President (1990-present), Phoenix Equity Planning Corporation.
Director, Phoenix Re Corporation (Delaware) (1985-present).
Director, World Trust Fund (1991-present). Director/Trustee, the
National Affiliated Investment Companies (until 1993). Director,
Chairman and Chief Executive Officer, National Securities &
Research Corporation (1993-present) and Phoenix Securities Group,
Inc. (1993-present). Director (1992-present) and President
(1992-1994) W.S. Griffith & Co., Inc. and Townsend Financial
Advisers, Inc.
James M. Oates (49) Trustee Managing Director, The Wydown Group (1994-present). Director
Managing Director Phoenix Duff & Phelps Corporation (1995-present). Director/
The Wydown Group Trustee, Phoenix Funds (1987-present) Director, Govett Worldwide
50 Congress Street Opportunity Funds, Inc. (1991-present), Stifel Financial
Suite 1000 Corporation (1986-present). Director, Investors Bank and Trust
Boston, MA 02109 Corporation and Investors Financial Services Corporation.
Director/Trustee, the National Affiliated Investment Companies
(until 1993). Director (1984-1994), President (1984-1994) and
Chief Executive Officer (1986-1994), Neworld Bank. Savings Bank
Life Insurance Company (1988-1994). Director, Blue Cross & Blue
Shield of New Hampshire.
Philip R. Reynolds (68) Trustee Director/Trustee, Phoenix Funds (1984-present). Director, Vestaur
43 Montclair Drive Securities, Inc. (1972-present). Trustee, Treasurer, J. Walton
West Hartford, CT 06107 Bissell Foundation and Treasurer, J. Walton Bissell Foundation
Inc. (1988-present). Director/Trustee, the National Affiliated
Investment Companies (until 1993).
Herbert Roth, Jr. (67) Trustee Director/Trustee, Phoenix Funds (1980-present). Director, Boston
134 Lake Street Edison Company (1978-present), Phoenix Home Life Mutual Insurance
P.O. Box 909 Company (1972-present), Landauer, Inc. (medical services)
Sherborn, MA 01770 (1970-present), Tech Ops./Sevcon, Inc. (electronic controllers)
(1987-present), Key Energy Group (oil rig service) (1988-1994),
and Mark IV Industries (diversified manufacturer) (1985-present).
Director/Trustee, the National Affiliated Investment Companies
(until 1993).
Richard E. Segerson (50) Trustee Director/Trustee, Phoenix Funds, (1993-present). Consultant,
102 Valley Road Tootal Group (1989-1991) and Texas Air Corporation (1987-1989).
New Canaan, CT 06840 Vice President and General Manager, Coats & Clark, Inc.
(previously Tootal American, Inc.) (1991-1993). Director/ Trustee,
the National Affiliated Investment Companies (1984-1993).
Lowell P. Weicker, Jr. Trustee Trustee/Director, the Phoenix Funds (1995-present). Former
(64) Governor of the State of Connecticut (1991-1995). Director, UST,
Dresing Lierman Weicker Inc. (1995-present).
6931 Arlington Road
Suite 501
Bethesda, MD 20814
* Trustees identified with an asterisk are considered to be interested persons of the Trust (within the meaning
of the Investment Company Act of 1940, as amended) because of their affiliation with Phoenix Investment
Counsel, Inc., or Phoenix Equity Planning Corporation.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s)
Name, Address and Age the Fund During Past Five Years
------------------------ ---------------- ------------------------------------------------------------------
<S> <C> <C>
Martin J. Gavin (45) Executive Director and Executive Vice President, Finance and Operations,
Vice President Phoenix Duff & Phelps Corporation (1995-present). Senior Vice
President, Investment Products, Phoenix Home Life Mutual Insurance
Company (1989-1995). Director and Executive Vice President,
Phoenix Equity Planning Corporation (1990-present). Director
(1994-present) and Executive Vice President (1991-present),
Phoenix Investment Counsel, Inc. Director and Executive Vice
President, Phoenix Securities Group, Inc. (1993-present) and
National Securities & Research Corporation (1993-present).
Director (1993-present) and Executive Vice President (1993-1994),
W.S. Griffith & Co., Inc. and Townsend Financial Advisers, Inc.
Executive Vice President, the Phoenix Funds (1993-present).
Director and Vice President, PM Holdings, Inc. (1994-present).
Executive Vice President, National Affiliated Investment Companies
(until 1993).
Michael E. Haylon (38) Executive Director and Executive Vice President, Investments, Phoenix Duff &
Vice President Phelps Corporation (1995-present). Senior Vice President,
Securities Investments, Phoenix Home Life Mutual Insurance Company
(1993-1995). Executive Vice President, the Phoenix Funds
(1995-present). Director (1994-present) and President
(1995-present), Phoenix Investment Counsel, Inc. Director and
Executive Vice President (1994-present), National Securities &
Research Corporation. Various other positions with Phoenix Home
Life Mutual Insurance Company (1990-1993).
Michael K. Arends (42) Vice President Portfolio Manager, Phoenix Home Life Mutual Insurance Company
(1994-present). Vice President, Phoenix Equity Opportunities Fund,
National Securities & Research Corporation and Phoenix Investment
Counsel, Inc. (1994-present). Various other positions with Kemper
Financial Services (1983-1994).
Curtiss O. Barrows (44) Vice President Portfolio Manager, Public Bonds, Phoenix Home Life Mutual
Insurance Company (1991-present). Vice President, National
Securities & Research Corporation (1993-present), The Phoenix Edge
Series Fund (1986-present), Phoenix Multi-Portfolio Fund and
Phoenix Investment Counsel, Inc. (1991-present). Various other
positions with Phoenix Home Life Mutual Insurance Company
(1895-1991).
Mary E. Canning (39) Vice President Associate Portfolio Manager, Common Stock, Phoenix Home Life
Mutual Insurance Company (1989-present). Vice President, The
Phoenix Edge Series Fund (1987-present) and Phoenix Investment
Counsel, Inc. (1991-present). Various other positions with Phoenix
Home Life Mutual Insurance Company (1982-1989).
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s)
Name, Address and Age the Fund During Past Five Years
------------------------ ---------------- ------------------------------------------------------------------
<S> <C> <C>
James M. Dolan (46) Vice President Vice President and Compliance Officer (1994-present), and
100 Bright Meadow Blvd. Assistant Secretary (1981-present), Phoenix Equity Planning
P.O. Box 2200 Corporation. Vice President, Phoenix Funds (1989-present). Vice
Enfield, CT 06083-2200 President (1991-present), Assistant Clerk and Assistant Secretary
(1982-present), Phoenix Investment Counsel, Inc. Vice President
and Compliance Officer, Assistant Secretary (1994-present),
Assistant Vice President (1993-1994), National Securities &
Research Corporation. Vice President and Chief Compliance Officer,
Phoenix Realty Advisors, Inc. (1994-present). Chief Compliance
Officer, Phoenix Realty Securities, Inc. (1995-present). Vice
President, the National Affiliated Investment Companies (until
1993) and various other positions with Phoenix Equity Planning
Corporation (1978-1994).
John M. Hamlin (38) Vice President Portfolio Manager, Common Stock, Phoenix Home Life Mutual
Insurance Company (1989-present). Vice President, Phoenix Income
and Growth Fund (1993-present).
Christopher J. Kelleher Vice President Portfolio Manager, Public Bonds, Phoenix Home Life Mutual
(40) Insurance Company (1991-present). Vice President, National
Securities & Research Corporation (1993-present), The Phoenix Edge
Series Fund (1989-present) and Phoenix Investment Counsel, Inc.
(1991-present). Various other positions with Phoenix Home Life
Mutual Insurance Company (1983-1991).
William R. Moyer (51) Vice President Senior Vice President and Chief Financial Officer, Phoenix Duff &
100 Bright Meadow Blvd. Phelps Corporation (1995-present). Vice President, Investment
P.O. Box 2200 Products Finance, Phoenix Home Life Mutual Insurance Company
Enfield, CT 06083-2200 (1990-1995). Senior Vice President, Finance, and Treasurer,
Phoenix Equity Planning Corporation (1990-present), and Phoenix
Investment Counsel, Inc. (1990-present). Vice President, Phoenix
Funds (1990-present). Senior Vice President, Finance, Phoenix
Securities Group, Inc. (1993-present). Senior Vice President,
Finance (1993-present), and Treasurer (1994-present), National
Securities & Research Corporation. Vice President, the National
Affiliated Investment Companies (until 1993). Senior Vice
President and Chief Financial Officer (1993-present) and Treasurer
(1994-present) W.S. Griffith & Co., Inc. and Townsend Financial
Advisers, Inc. Senior Manager, Price Waterhouse (1983-1990).
Amy L. Robinson (40) Vice President Managing Director, Securities Administration, Phoenix Home Life
Mutual Insurance Company (1991-present). Vice President, National
Securities & Research Corporation (1993-present), The Phoenix Edge
Series Fund (1989-present) and Phoenix Investment Counsel, Inc.
(1992-present). Various other positions with Phoenix Home Life
Mutual Insurance Company (1979-1991).
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s)
Name, Address and Age the Fund During Past Five Years
------------------------ ---------------- ------------------------------------------------------------------
<S> <C> <C>
Leonard J. Saltiel (42) Vice President Vice President, Investment Operations, Phoenix Home Life Mutual
Insurance Company (1994-present). Senior Vice President, Phoenix
Equity Planning Corporation (1994-present). Vice President,
Phoenix Funds (1994-present). Vice President, National Securities
& Research Corporation (1994-present). Various positions with
Home Life Insurance Company and Phoenix Home Life Mutual Insurance
Company (1987-1994).
Dorothy J. Skaret (43) Vice President Director, Public Fixed Income, Phoenix Home Life Mutual Insurance
Company (1991-present). Vice President, National Securities &
Research Corporation (1993-present), The Phoenix Edge Series Fund
(1991-present) and Phoenix Investment Counsel, Inc. (1991-
present). Various other positions with Phoenix Home Life Mutual
Insurance Company (1986-1991).
James D. Wehr (38) Vice President Managing Director, Public Fixed Income, Phoenix Home Life Mutual
Insurance Company, (1991-present). Vice President, Phoenix
Multi-Portfolio Fund (1988-present), The Phoenix Edge Series Fund
(1991-present), Phoenix Investment Counsel, Inc. (1991-present),
Phoenix California Tax Exempt Bond Fund, Inc. (1993-present), and
National Securities & Research Corporation (1993-present). Various
positions with Phoenix Home Life Mutual Insurance Company
(1981-1991).
Nancy G. Curtiss (43) Treasurer Second Vice President and Treasurer, Fund Accounting, Phoenix Home
Life Mutual Insurance Company (1994-present). Treasurer, Phoenix
Funds (1994-present). Vice President, Fund Accounting, Phoenix
Equity Planning Corporation (1994-present). Various positions with
Phoenix Home Life Insurance Company (1987-1994).
G. Jeffrey Bohne (48) Secretary Vice President and General Manager, Phoenix Home Life Mutual
101 Munson St. Insurance Company (1993-present). Vice President, Transfer Agent
Greenfield, MA 03101 Operations, Phoenix Equity Planning Corporation (1993-present).
Secretary, the Phoenix Funds (1993-present). Vice President, Home
Life Insurance Company (1984-1992).
</TABLE>
At October 31, 1995, the Trustees and officers as a group owned less than
1% of the then outstanding shares of the Trust.
For purposes hereof, "National Affiliated Investment Companies" refers to
those mutual funds advised by National Securities & Research Corporation.
For services rendered to the Trust during the fiscal year ended October
31, 1995, the Trustees received an aggregate of $118,120 from the Trust as
Trustees' fees. For his services on the Boards 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 $36,000 and
$2,000 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 $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
$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
Trust receives a retainer at the annual rate of $1,000 and $1,000 per joint
Executive Committee meeting attended. Trustee fee costs are allocated equally
to each of the Series and the Funds within the Phoenix Funds complex. The
foregoing fees do not include reimbursement of expenses incurrred in
connection with meeting attendance. Officers are compensated for their
services by the Adviser and receive no compensation from the Trust.
16
<PAGE>
For the Fund's last fiscal year ending October 31, 1995, the Trustees
received the following compensation:
<TABLE>
<CAPTION>
Total
Pension or Estimated Compensation
Retirement Annual From Fund and
Aggregate Benefits Benefits Fund Complex
Compensation Accrued as Part Upon Paid to
Name From Fund of Fund Expenses Retirement Trustees
----------------------- ----------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
C. Duane Blinn $13,480* $50,000
Robert Chesek 10,780 40,000
E. Virgil Conway 13,750 51,000
Harry Dalzell-Payne 11,310 42,000
Leroy Keith, Jr. 10,790 None None 40,000
Philip R. McLoughlin 0 for any for any 0
James M. Oates 13,480 Trustee Trustee 50,000
Philip R. Reynolds 11,310 42,000
Herbert Roth, Jr. 14,280* 53,000
Richard E. Segerson 13,480 50,000
Lowell P. Weicker, Jr. 5,460 21,000
*This compensation (and the earnings thereon) was deferred pursuant to the Trustees'
Deferred Compensation Plan.
</TABLE>
THE INVESTMENT ADVISER
The offices of the Adviser, Phoenix Investment Counsel, Inc., are located
at 56 Prospect Street, Hartford, Connecticut 06115. Philip R. McLoughlin, a
Trustee and officer of the Trust, is a director of the Adviser. All other
executive officers of the Trust are officers of the Adviser with the
exception of G. Jeffrey Bohne, Secretary of the Trust, who is not an officer
of the Adviser.
All of the outstanding stock of the Adviser is owned by Phoenix Equity
Planning Corporation ("Equity Planning"), an indirect subsidiary of Phoenix
Duff & Phelps Corporation. Phoenix Home Life Mutual Insurance Company
("Phoenix Home Life") owns a controlling interest in Phoenix Duff & Phelps
Corporation. Phoenix Home Life is in the business of writing ordinary and
group life and health insurance and annuities. It was founded in 1851 and at
December 31, 1995, had total assets of approximately $111.6 billion and
insurance in force of approximately $11.7 billion. Equity Planning, the
National Distributor of the Trust's shares, also performs bookkeeping,
pricing, and administrative services for the Trust. It provides bookkeeping
and pricing services to two other investment companies advised by the
Adviser. (See "The National Distributor and Distribution Plans"). Equity
Planning is registered as a broker-dealer in fifty states. 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 Blvd., P.O. Box 2200, Enfield, Connecticut 06083-2200.
All costs and expenses (other than those specifically referred to as being
borne by the Adviser) incurred in the operation of the Trust are borne by the
Trust. Each Series pays expenses incurred in its own operation and also pays
a portion of the Fund's general administration expenses allocated on the
basis of the asset size of the respective Series. Such expenses include, but
shall not be limited to, all expenses incurred in the operation of the Trust
and any public offering of its shares, including, among others, interest,
taxes, brokerage fees and commissions, fees of Trustees who are not employees
of the Adviser or any of its affiliates, expenses of Trustees' and
shareholders' meetings, including the cost of printing and mailing proxies,
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 Trust),
expenses of printing and mailing stock certificates representing shares of
the Trust, association membership dues, charges of custodians, transfer
agents, dividend disbursing agents and financial agents, bookkeeping,
auditing, and legal expenses. The Trust will also pay the fees and bear the
expense of registering and maintaining the registration of the Trust and its
shares with the Securities and Exchange Commission and registering or
qualifying its shares under state or other securities laws and the expense of
preparing and mailing prospectuses and reports to shareholders.
The investment advisory agreement provides that the Adviser shall not be
liable to the Trust or to any shareholder of the Trust for any error of
judgment or mistake of law or for any loss suffered by the Trust or by any
shareholder of the Trust in connection with the matters to which 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
Trust, the Adviser is entitled to a fee, payable within five days after the
end of each month, as described on page 25 in the Prospectus. There is no
assurance that the Trust 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 all Series will be prorated among the Series in
proportion to their respective averages of the aggregate daily net asset
values for the period for which the fee had been paid.
17
<PAGE>
The Adviser has agreed to reimburse the Trust for the amount, if any, by
which the total operating and management expenses of any Series (including
the Adviser's compensation, but excluding interest, taxes, brokerage fees and
commissions and extraordinary expenses) for any fiscal year exceed the level
of expenses which such Series is permitted to bear under the most restrictive
expense limitation imposed on mutual funds by any state in which shares of
such Series are then qualified for sale. Present expense limitations, to the
knowledge of the Trust, require that the Adviser reimburse the Trust, to the
extent of the compensation received by it from the Trust, for the amount, if
any, by which total operating and management expenses (excluding interest,
taxes, brokerage fees and commissions and extraordinary expenses) of any
Series in any fiscal year exceed 2.5% of the first $30,000,000, 2% of the
next $70,000,000 and 1.5% of any excess over $100,000,000 of such Series'
average net asset value for such fiscal year.
The Adviser has agreed to assume expenses and reduce the advisory fee for
the benefit of the Money Market Series to the extent that operating expenses
(excluding interest, taxes, brokerage fees and commissions and extraordinary
expenses) exceed 0.85% and 1.60% of average daily net asset values for Class
A Shares and Class B Shares respectively. Such reimbursement will be made
within five days after the end of each fiscal month. The Adviser agreed to
assume expenses and reduce the advisory fee for the benefit of the High
Quality Bond Series (no longer available) and the U.S. Government Securities
Series for the period from July 22, 1991 to February 28, 1992 to the extent
that operating expenses of each Series exceeded 0.85% of the average daily
net asset values of the Series for the period. In addition, for the period
from February 29, 1992 to October 31, 1993, the Adviser also agreed to assume
expenses and reduce the advisory fees for the benefit of these Series to the
extent that such expenses of each Series exceed 0.75%. Expense reimbursements
other than reimbursement for the Money Market Series were discontinued as of
November 1, 1993.
Pursuant to expense reimbursement agreements, for the fiscal years ended
October 31, 1993, 1994 and 1995, the Adviser reimbursed the Trust $8,535, $0
and $0 respectively, for the benefit of the Money Market Series. In addition,
for the fiscal years ended October 31, 1992 and 1993 the Adviser reimbursed
the Trust $114,139 and $164,132 respectively, for the benefit of the U. S.
Government Securities Series.
The agreement continues in force from year to year for all Series,
provided that, with respect to each Series, the agreement must be approved at
least annually by the Trustees or by vote of a majority of the outstanding
voting securities of the Series. 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. The investment
advisory agreement provides that upon termination of the agreement, or at the
request of the Adviser, the Trust will eliminate all reference to Phoenix
from its name, and will not thereafter transact business in a name using the
word Phoenix.
For services to the Trust during the fiscal years ended October 31, 1993,
1994 and 1995, the Adviser received fees of $34,501,010, $37,915,913 and
$34,684,220 respectively under the investment advisory agreements in effect.
Of these totals, the Adviser received fees from each Series as follows:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
Growth Series $16,518,132 $15,246,456 14,508,081
U.S. Stock Series 908,180 987,859 1,052,902
High Yield Series 777,070 3,641,735 3,336,889
U.S. Government
Series 41,711 1,222,555 1,137,873
Convertible Series 1,502,598 1,564,334 1,438,064
Balanced Series 13,975,318 14,505,771 12,384,575
Money Market Series 689,919 747,203 825,836
</TABLE>
For the fiscal years ended October 31, 1993, 1994 and 1995, the Adviser
was not reimbursed for any expenses incurred in providing services which
would otherwise have been provided at the expense of the Trust.
BROKERAGE ALLOCATION
In effecting portfolio transactions for the Trust, the Adviser adheres to
the Trust's policy of seeking best execution and price, determined as
described below, except to the extent it is permitted to pay higher brokerage
commissions for "brokerage and research services" as defined herein. The
Adviser may cause the Trust to pay a broker an amount of commission for
effecting a securities transaction in excess of the amount of commission
which another broker or dealer would have charged for effecting the
transaction if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or that any offset of direct
expenses of a Series yields the best net price. As provided in Section 28(e)
of the Securities Exchange Act of 1934, "brokerage and research services"
include giving advice as to the value
18
<PAGE>
of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities; furnishing analyses and
reports concerning issuers, industries, economic factors and trends,
portfolio strategy and the performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance
and settlement). Brokerage and research services provided by brokers to the
Trust or to the Adviser are considered to be in addition to and not in lieu
of services required to be performed by the Adviser under its contract with
the Trust and may benefit both the Trust and other clients of the Adviser.
Conversely, brokerage and research services provided by brokers to other
clients of the Adviser may benefit the Trust.
The Trustees of the Trust, including a majority of disinterested Trustees,
have adopted procedures which allow the Adviser to allocate a portion of the
Trust's portfolio brokerage transactions to brokers affiliated with the Trust
or Adviser, including, without limitation, Duff & Phelps Securities Co. In
order for affiliated brokers to effect any portfolio transactions for the
Trust, the commissions, fees, or other remuneration received by such brokers
must be reasonable and fair compared to the commissions, fees or other
remuneration paid to other non-affiliated brokers in connection with
comparable transactions involving similar securities being purchased or sold
on a securities exchange during a comparable period of time.
If the securities in which a particular Series of the Trust invests are
traded primarily in the over-the-counter market, where possible the Series
will deal directly with the dealers who make a market in the securities
involved unless better prices and execution are available elsewhere. Such
dealers usually act as principals for their own account. On occasion,
securities may be purchased directly from the issuer. Bonds and money market
instruments are generally traded on a net basis and do not normally involve
either brokerage commission or transfer taxes.
The determination of what may constitute best execution and price in the
execution of a securities transaction by a broker involves a number of
considerations including, without limitation, the overall direct net economic
result to the Trust (involving both price paid or received and any net
commissions and other costs paid), the efficiency with which the transaction
is effected, the ability to effect the transaction at all where a large block
is involved, the availability of the broker to stand ready to execute
possibly difficult transactions in the future and the financial strength and
stability of the broker. Such considerations are judgmental and are weighed
by the Adviser in determining the overall reasonableness of brokerage
commissions paid by the Trust. Some portfolio transactions are, subject to
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. and subject to obtaining best prices and executions, effected through
dealers (excluding Equity Planning) who sell shares of the Trust.
For the fiscal years ended October 31, 1993, 1994 and 1995, brokerage
commissions paid by the Trust on portfolio transactions totaled $8,786,118,
$10,376,253 and $10,324,000 respectively. Brokerage commissions of $9,950,835
paid during the fiscal year ended October 31, 1995, were paid on portfolio
transactions aggregating $8,232,837,000 executed by brokers who provided
research and other statistical and factual information. None of such commissions
was paid to a broker who was an affiliated person of the Trust or an affiliated
person of such a person or, to the knowledge of the Trust, to a broker an
affiliated person of which was an affiliated person of the Trust, its adviser or
its national distributor.
DETERMINATION OF NET ASSET VALUE
The net asset value of shares of the Trust (as described on page 37 of the
Prospectus) is determined once daily as of the close of trading on the New
York Stock Exchange on each day during which the Exchange is open for
trading. The New York Stock Exchange is scheduled to be closed for trading on
the following days: New Years Day, Washington's Birthday, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. The Board of Directors of the Exchange reserves the right to change this
schedule as conditions warrant.
Balanced, Convertible, Growth, High Yield,
U.S. Stock Series and U.S. Government Securities Series
In determining the value of the assets of the Balanced Series, the
Convertible Series, the Growth Series, the High Yield Series, the U.S. Stock
Series, and the U.S. Government Securities Series, the securities for which
market quotations are readily available are valued at market value, which is
currently determined using the last reported sale price, or, if no sales are
reported--as is the case with many securities traded over-the-counter--the
last reported bid price. Debt securities (other than short-term obligations,
which are valued on the basis of amortized cost as defined below) are
normally valued on the basis of valuations provided by a pricing service when
such prices are believed to reflect the fair value of such securities. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices and take into account appropriate factors such as
institution-size trading in similar groups of securities, yield, quality of
issue, trading characteristics and other market data. Use of the pricing
service has been approved by the Trustees. All other securities and assets
are valued at their fair value 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.
Money Market Series
The assets of the Money Market Series are valued on the basis of amortized
cost absent extraordinary or unusual market conditions. Under the amortized
cost method of valuation, securities are valued at cost on the date of
purchase. Thereafter the value of a security is increased or decreased
incrementally each day so that at maturity any purchase discount or premium
is fully
19
<PAGE>
amortized and the value of the security is equal to its principal amount. Due
to fluctuations in interest rates, the amortized cost value of the Money
Market Series securities may at times be more or less than their market
value. By using amortized cost valuation, the Money Market Series seeks to
maintain a constant net asset value of $1.00 per share despite minor shifts
in the market value of its portfolio securities.
The yield on a shareholder's investment may be more or less than that
which would be recognized if the Series' net asset value per share was not
constant and was permitted to fluctuate with the market value of the Series'
portfolio securities. However, as a result of the following procedures, it is
believed that any difference will normally be minimal. The deviation is
monitored periodically by comparing the Series net asset value per share as
determined by using available market quotations with its net asset value per
share as determined through the use of the amortized cost method of
valuation. The Adviser makes such comparisons at least weekly and will advise
the Trustees promptly in the event of any significant deviation. If the
deviation exceeds 1/2 of 1%, the Trustees will consider what action, if any,
should be initiated to provide fair valuation of the Series' portfolio
securities and prevent material dilution or other unfair results to
shareholders. Such action may include redemption of shares in kind, selling
portfolio securities prior to maturity, withholding dividends or utilizing a
net asset value per share as determined by using available market quotations.
Furthermore, the assets of the Series will not be invested in any security
with a maturity of greater than 397 days, and the average weighted maturity
of its portfolio will not exceed 90 days. Portfolio investments will be
limited to U.S. dollar- denominated securities which present minimal credit
risks and are of high quality as determined either by a major rating service
or, if not rated, by the Trustees.
PURCHASE OF SHARES
Alternative Purchase Arrangements
Each Series is authorized to offer two classes of shares. 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").
Class A Shares
An investor who pays an initial sales charge or purchases at net asset
value acquires Class A shares. Class A shares are subject to an ongoing
distribution fee at an annual rate of up to 0.25% of the Series' aggregate
average daily net assets attributable to Class A shares. Certain purchases of
Class A shares qualify for reduced initial sales charges.
Class B Shares
An investor who elects the deferred sales charge alternative acquires Class
B shares. Class B shares do not incur a sales charge when they are purchased,
but are subject to a sales charge if they are redeemed within six 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 fee at an annual
rate of up to 1.00% of the Series' aggregate average daily net assets
attributable to Class B shares. Class B shares permit the investor's payment
to be invested in full from the time the investment is made. The higher
ongoing distribution fee paid by Class B shares will cause such shares to
have a higher expense ratio and to pay lower dividends 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. The purpose of the conversion feature is to
eliminate the higher distribution fee after the National Distributor has been
compensated for distribution expenses related to the Class B shares. See
"Conversion Feature" below.
The alternative purchase arrangement permits an investor to choose the
method of purchasing shares that is more beneficial given such factors as the
amount of the purchase, the length of time the investor expects to hold the
shares, and whether the investor wishes to receive distributions in cash or
to reinvest them in additional shares. Investors should consider whether,
during the anticipated term of their investment in the Series, the
accumulated continuing distribution fees and contingent deferred sale charges
on Class B shares prior to conversion would be less than the initial sales
charge and accumulated distribution fees on Class A shares purchased at the
same time, and the extent to which such differential would be offset by the
lower expenses attributable to Class A shares.
Class A shares are subject to a lower distribution fee and, accordingly,
pay correspondingly higher dividends. However, because initial sales charges
are deducted at the time of purchase, Class A investors do not have all their
funds invested initially and initially own fewer shares. Investors not
qualifying for reduced initial sales charges who expect to maintain their
investment for an extended period of time should consider purchasing Class A
shares because the accumulated continuing distribution charges on Class B
shares may exceed the initial sales charge on Class A shares during the term
of the investment. However, such investors must weigh this consideration
against the fact that, because of the initial Class A sales charges, not all
of their funds will be invested initially.
The distribution expenses incurred by the Distributor in connection with
the sale of the shares will be paid, in the case of Class A shares, from the
proceeds of the initial sales charge and the ongoing distribution fees and,
in the case of Class B shares, from the proceeds of the ongoing distribution
fees and the contingent deferred sales charge imposed upon redemptions within
six years of purchase. Sales
20
<PAGE>
personnel of broker-dealers distributing a Series shares may receive
differing compensation for selling Class A or Class B shares. The purpose and
function of the contingent deferred sales charge and ongoing distribution
fees with respect to the Class B shares are the same as those of the initial
sale charge and ongoing distribution fees with respect to the Class A shares.
Dividends paid by the Series with respect to Class A and Class B shares
will be calculated in the same manner, at the same time and on the same day,
except that the higher distribution fees and any incremental transfer agency
costs relating to Class B shares will be borne exclusively by that Class and
will result in a lower dividend.
The Trustees of the Trust have determined that no conflict of interest
will exist between the Class A and Class B shares. The Trustees shall,
pursuant to their fiduciary duties under the Investment Company Act of 1940
and state law, monitor the question of Class A and Class B shares and seek to
ensure that no such conflict arises.
Conversion Feature
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
purchased. At the end of this period, Class B shares will automatically
convert to Class A shares and will no longer be subject to the higher
distribution 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. The purpose of the conversion feature is to eliminate the
higher distribution fee after the Distributor has been compensated for
distribution expenses related to the Class B shares.
For purposes of conversion to Class A, shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B shares
will be considered to be held in a separate sub-account. Each time any Class
B shares in the shareholder's account (other than those in the sub-account)
convert to Class A, an equal pro rata portion of the Class B shares in the
sub-account will also convert to Class A.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of an opinion of counsel or a ruling of the Internal
Revenue Service to the effect that (i) the assessment of the higher
distribution fees and transfer agency costs with respect to Class B shares
does not result in any dividends or distributions constituting "preferential
dividends" under the Internal Revenue Code of 1986, as amended (the "Code"),
and (ii) that the conversion of shares does not constitute a taxable event
under federal income tax law. The Trust has not sought opinions of counsel as
to these matters but has applied to the Internal Revenue Service (the "IRS")
for such a ruling. While rulings similar to the one sought by the Trust as to
preferential dividends have been issued previously by the IRS, complete
assurance cannot be given that the Trust will receive a favorable ruling.
While an adverse determination by the IRS is not expected, the Trust may be
required to reassess the alternative purchase arrangement structure if the
IRS does not rule favorably. In addition, were the IRS not to rule favorably,
the Trust might make additional distributions if doing so would assist in
complying with the Trust's general practice of distributing sufficient income
to reduce or eliminate U.S. federal taxes. The conversion of Class B shares
to Class A shares may be suspended if such an opinion or ruling is no longer
available. In that event, no further conversions of Class B shares would
occur, and shares might continue to be subject to the higher distribution fee
for an indefinite period which may extend beyond the period ending eight
years after the end of the month in which the shares were purchased.
Purchases of Shares of the Money Market Series
The minimum initial investment and the minimum subsequent investment for
purchase of shares of the Money Market Series is set forth on page 28 of the
Prospectus. Shares of the Money Market Series are sold through registered
representatives of Equity Planning or through brokers or dealers with whom
Equity Planning has sales agreements. (See DISTRIBUTION PLANS.) There is no
sales charge on Class A shares of the Money Market Series. Class B shares of
the Series are subject to applicable contingent deferred sales charges.
Initial purchases of shares may also be made by mail by completing an
application and mailing it directly to Phoenix Funds c/o State Street Bank
and Trust Company, P.O. Box 8301, Boston, MA 02266-8301. Subsequent purchases
should be sent to State Street Bank and Trust Company. An investment is
accepted when funds are credited to the purchaser. For initial investments,
funds are credited not later than the second business day after receipt by
the Trust of checks drawn on U.S. banks payable in U.S. funds. Subsequent
investments are credited not later than the second business day after receipt
by Equity Planning. Shares purchased begin earning dividends the day after
funds are credited. Certified checks are not necessary.
Purchases of Shares of the Balanced, Convertible,
Growth, High Yield, and U.S. Stock Series and the
U.S. Government Securities Series
The minimum initial investment and the minimum subsequent investment for
purchase of shares of each Series is set forth on page 28 of the Prospectus.
Sales of shares of the Trust are made through registered representatives of
Equity Planning and through securities brokers or dealers with whom Equity
Planning has sales agreements. Dealers purchase shares at a discount from the
applicable offering price if they act as principal. Brokers that act as agent
on behalf of their customer receive an agency fee. The maximum discount or
agency fee on transactions of less than $50,000 is 4.25% of the offering
price. The balance of the sales charge is retained by Equity Planning. The
discount from the applicable offering price or agency fee is the same for all
brokers or dealers.
21
<PAGE>
Sales of shares are made to customers of bank-affiliated securities brokers
with whom Equity Planning has sales agreements. Customers purchase shares at the
applicable offering price. Out of the sales charge included in the offering
price the securities broker is allowed an agency fee equal to the dealer
discount on a like transaction through a dealer and the balance of the sales
charge is retained by Equity Planning.
Where customers of a securities broker or dealer with whom Equity Planning
has a sales agreement hold shares of a Series (except the Money Market
Series) with an aggregate value of $50,000 or more, Equity Planning may pay
to such securities broker or dealer from its own profits and resources (which
may include payments received from the Trust under the Distribution Plans) a
service fee equal to 0.25% on an annualized basis of the aggregate average
daily net asset values of the shares of the Series held by customers of such
securities broker or dealer.
Immediate Investment
In order to obtain immediate investment of funds, initial and subsequent
purchases of shares of any Series may also be made by wiring Federal Funds
directly pursuant to the following instructions. (Federal Funds are monies
held in a bank account with a Federal Reserve Bank.)
1. For initial investments, telephone the Trust at (800) 367-5877. Certain
information will be requested from you regarding the account, and an account
number will be assigned.
2. Once an account has been assigned, direct your bank to wire the Federal
Funds to Equity Planning, attention of the appropriate Series of the Phoenix
Series Fund. Your bank must include the account number and the name(s) in
which your account is registered in its wire and also request a telephone
advice. Your bank may charge you a fee for transmitting funds by wire.
Payment in Federal Funds must be received by 4:00 p.m. for an order to be
accepted on that day. If payment is received after that time, the order will
not be accepted until the next business day. You should bear in mind that
wire transfers may take two or more hours to complete.
Promptly after an initial purchase by wire, the investor should complete
an Account Application and mail it to Equity Planning.
SHAREHOLDER SERVICES
Any shareholder desiring investment assistance or a further explanation of
any Series or service may call Equity Planning at 800-243-1574.
Open Account. As a convenience to shareholders, all shares of a Series of
the Trust registered in a shareholder's name are automatically credited to an
Open Account maintained for the shareholder on the books of the Trust by its
transfer agent, Equity Planning. An Open Account offers the shareholder ready
access to the following options and services:
Record of Share Transactions. Each time shares are credited to or
withdrawn from his Open Account the shareholder will receive a statement
showing the details of the transaction and the then current balance of shares
owned by him except in connection with the redemption of shares by check (see
"How To Redeem Shares"). Shortly after the end of each calendar year each
shareholder will receive information as to the Federal tax status of
dividends and any capital gain distribution paid by the Trust with respect to
the applicable Series during the year.
Safekeeping of Shares. All shares of a Series of the Trust acquired by the
shareholder will be credited to his Open Account and share certificates will
not be issued unless requested. In any event share certificates will not be
issued with respect to the Money Market Series. In no event will certificates
representing fractional shares be issued. Certificates previously acquired
may be surrendered to the transfer agent and will be canceled. The shares
represented thereby will continue to be credited to the Open Account of the
shareholder.
Investing by Mail. An Open Account provides a simple and convenient way of
setting up a flexible investment program for the accumulation of shares of
any Series. At any time the shareholder may send to the Transfer Agent a
check, payable to the order of the Series to be acquired, in the amount of at
least the minimum subsequent investment for the particular Series being
purchased (giving the full name or names of his account) to be used to
purchase additional shares for his Open Account at the applicable offering
price next determined after the check is received.
Bank Draft Investing Program (Investo-Matic Plan). By completing the
Investo-Matic Section of the New Account Application, a shareholder may
authorize the bank named in the form to draw $25 or more from his personal
checking account on or about the 15th day of the month, to be used to
purchase additional shares for his Open Account. The amount the shareholder
designates will be made available, in form payable to the order of Equity
Planning, by the bank on the date the bank draws on his/her account and will
be used to purchase shares at the applicable offering price. The shareholder
or his or her registered representative may, by telephone or written notice,
cancel or change the dollar amount being invested pursuant to the
Investo-Matic Plan unless the shareholder has notified the Trust or Transfer
Agent that his or her registered representative shall not have this
authority.
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Distribution Option. Each Series currently declares all income dividends and
all capital gain distributions, if any, payable in shares of the Series at net
asset value or, at the option of the shareholder, in cash. (The Money Market
Series will normally make no capital gain distributions, since its investments
will generally be made in securities which do not generate capital gains.) By
exercising the distribution option, a shareholder may elect to: (1) receive both
dividends and capital gain distributions in additional shares or (2) receive
dividends in cash and capital gain distributions in additional shares or (3)
receive both dividends and capital gain distributions in cash. If a shareholder
elects to receive dividends and/or distributions in cash and the check cannot be
delivered or remains uncashed by the shareholder due to an invalid address, then
the dividend and/or distribution will be reinvested after the Transfer Agent has
been informed that the proceeds are undeliverable. Additional shares will be
purchased for the shareholder's account at the then current net asset value.
Shareholders who maintain an account balance in a Series 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) 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 Funds
at net asset value. Shareholders should obtain a current prospectus and consider
the objectives and policies of each Series or Fund carefully before directing
dividends and distributions to another Series or Fund. Reinvestment direction
forms and prospectuses are available from Equity Planning. An alternate payee
section has been incorporated into the application allowing distributions to be
mailed to a second payee and/or address. Dividends and capital gain
distributions received in shares are taxable to the shareholder and credited to
the shareholder's Open Account in full and fractional shares computed at the
closing net asset value on the next business day after the record date. A
distribution option may be changed at any time by notifying Customer Service by
telephone at 800-243-1574 or by sending a written letter signed by the
registered owner(s) of the account. Requests for directing distributions to
someone other than the shareholder must be made in writing with all signatures
guaranteed. 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 the shareholder's account are repurchased or
redeemed or transferred between the record date and the payment date of a
dividend or distribution, he will receive cash for the dividend or distribution
regardless of the distribution option selected.
Systematic Withdrawal Program
The Systematic Withdrawal Program allows shareholders to periodically
redeem a portion of their shares on a predetermined monthly or quarterly,
semiannual or annual basis. The designated payment is made on or about the
20th day of the month. Shares are tendered for redemption by the Transfer
Agent, as agent for the shareowner, on or about the 15th of the month at the
closing net asset value on the date of redemption. The Systematic Withdrawal
Program also provides for redemptions to be tendered on or about the 10th,
15th or 25th of the month with proceeds to be directed through Automated
Clearing House (ACH) to the shareholder's 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.
Class A shareholders participating in the Systematic Withdrawal Program
must own shares of the Trust worth $5,000 or more, as determined by the
then-current net asset value per share.
To participate in the Systematic Withdrawal Program, Class B shareholders
must initially own shares of the Trust worth $5,000 or more and elect to have
all dividends reinvested in additional Class B Shares of the Trust. 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. Class B Share withdrawals in accordance with the Systematic
Withdrawal Program will be exempt from otherwise applicable contingent
deferred sales charges.
The purchase of shares while participating in the withdrawal program will
ordinarily be disadvantageous to the Class A Share investor since a sales
charge will be paid by the investor on the purchase of Class A Shares at the
same time 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.
Class B shareholders redeeming more shares than the percentage permitted
under the Program shall be subject to any applicable contingent deferred
sales charge. 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.
Reinstatement Privilege
The reinvestment privilege allows an investor who has redeemed shares of
any Series (other than the Money Market Series) or shares of any other
Phoenix Fund, and who has not previously exercised the privilege as to that
Series or Fund, to apply the proceeds of the redemption to the purchase at
net asset value (without sales charge) of Class A of shares. Information
concerning the privilege will be forwarded to the investor with redemption
proceeds. A written request for this privilege must be received by the
Distributor within 180 days following the date of redemption of the
investor's Series shares accompanied by the payment for the shares (not in
excess of the redemption value). Reinvestment is at the net asset value per
share of the designated Series or Fund next determined after timely receipt
by Equity Planning of a reinvestment order and payment. When a loss is
realized on the redemption of Series shares by an investor who reacquires
shares of the same Series within a 30 day time period, under
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the so-called "wash sale" provisions of present Federal tax laws, the
investor will be unable to recognize some or all of the loss (depending upon
the percentage of the proceeds of the redemption reinvested) until the
reacquired shares are redeemed or otherwise disposed of. A gain realized on
such a redemption, however, is recognized at the time of redemption. The
reinvestment privilege does not apply to the proceeds of the redemption of
shares of the Money Market Series or to Class B shareholders who have had the
contingent deferred sales charge waived through participation in the
Systematic Withdrawal Program.
Tax-Sheltered Retirement Plans
Shares of the Trust are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations, and 403(b) Retirement Plans. Write or call
Equity Planning (800) 243-4361 for further information about the plans.
SPECIAL SERVICES
Invest-by-Phone
This expedited investment service allows a shareholder to make an
investment in an account by requesting a transfer of funds from the balance
of their bank account. Once a request is phoned in, Equity Planning will
initiate the transaction by wiring a request for monies to the shareholder's
commercial bank, savings bank or credit union via Automated Clearing House
(ACH). The shareholder's bank, which must be an ACH member, will in turn
forward the monies to Equity Planning for credit to the shareholder's
account. ACH is a computer based clearing and settlement operation
established for the exchange of electronic transactions among participating
depository institutions.
To establish this service, please complete an Invest-by-Phone Application
and attach a voided check if applicable. Upon Equity Planning's acceptance of
the authorization form (usually within two weeks) shareholders may call toll
free 800-367-5877 prior to 3:00 p.m. (New York time) to place their purchase
request. Instructions as to the account number and amount to be invested must
be communicated to Equity Planning. Equity Planning will then contact the
shareholder's bank via ACH with appropriate instructions. The purchase is
normally credited to the shareholder's account the day following receipt of
the verbal instructions. This service may also be used to request redemption
of shares of the Money Market Series, the proceeds of which are transferred
to the shareholder's bank the second day following receipt of the verbal
request. The Trust may delay the mailing of a check for redemption proceeds
of Trust shares purchased with a check or via Invest-by-Phone service until
the Trust has assured itself that good payment has been collected for the
purchase of the shares, which may take up to 15 days.
Phoenix Series 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.
HOW TO REDEEM SHARES
Any holder of shares of any Series may require the Trust to redeem his
shares at any time. In addition each Series maintains a continuous offer to
repurchase its shares, and shareholders may normally sell their shares
through securities dealers, who may charge customary commissions for their
services.
The redemption price will be the net asset value next computed after
receipt by Equity Planning, of the share certificates, duly endorsed in the
full name of the account, or, in the case of Open Accounts, a proper request
duly executed in the full name of the account. The Trustees do not presently
intend to make a redemption charge and shareholders will be given reasonable
notice of any change in this intention. However, Class B shares are subject
to a contingent deferred sales charge upon a redemption of shares within six
years of the date of purchase.
The signature must be guaranteed by an eligible guarantor institution as
defined by the Transfer Agent in accordance with its signature guarantee
procedures. Currently such procedures generally permit guarantees by banks,
broker/dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations. A
signature notarized by a notary public is not acceptable. No signature
guarantee will be required, however, in the case of shares tendered for
redemption if (a) the shares are registered in the names of individuals
singly, jointly or as custodian under the Uniform Gifts to Minors Act and (b)
the proceeds of the redemption do not exceed $50,000 and are to be paid to
the registered owners(s) at the address of record. Signatures must also be
guaranteed on any change of address request submitted in conjunction with a
redemption request.
Payment for shares repurchased or redeemed will be made within seven days
after receipt of the duly endorsed share certificates, duly executed request
if required, or telephone request if appropriate and a proper signature
guarantee, if necessary. However, if the Trust is requested to redeem or
repurchase shares for which it has not yet received good payment, the mailing
of a check for the proceeds of the redemption or repurchase may be delayed
until the Trust assures itself that good payment has been collected. With
respect to shares purchased by check or via Invest-by-Phone service, payment
of redemption proceeds will only be made after the Trust has assured itself
that good payment has been collected for the purchase of shares, which may
take up to 15 days. Although the payment may be delayed, the redemption price
or repurchase price will be determined in the manner described herein.
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At the discretion of the Trustees, the Trust may, to the extent consistent
with state and Federal law, make payment for shares of a particular Series
repurchased or redeemed in whole or in part in securities or other assets of
such Series taken at current values. The Trust has elected to pay in cash all
requests for redemption by any shareholder of record, but may limit such cash
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 Trust at the beginning of such
period. Should payment be made in securities, the shareholder may incur
brokerage costs in converting such securities to cash. The Trust has elected
to pay in cash all requests for redemption as described in the prospectus on
page 34.
The right of redemption may be suspended or the payment date postponed
when the New York Stock Exchange is closed for other than customary weekend
and holiday closings, or when trading on the New York Stock Exchange is
restricted, as determined by the Securities and Exchange Commission, for any
period when an emergency as defined by rules of the Commission exists, or
during any period when the Commission has, by order, permitted such
suspension. In case of a suspension of the right of redemption, the
shareholder may withdraw his request for redemption of shares prior to the
next determination of net asset value after the suspension has been
terminated or he will receive payment of the net asset value so determined.
A shareholder may receive more or less than he paid for his shares,
depending on the net asset value of the shares at the time they are
repurchased or redeemed.
Repurchases and redemptions may be made in the following manner:
By Mail. When shares are held in an Open Account, the shareholder may
redeem them 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.
By Telephone. Unless a shareholder elects in writing not to participate in
the Telephone Redemption Privilege, shares for which certificates have not
been issued may be redeemed by calling (800) 367-5877 and telephone
redemptions will also be accepted on behalf of the shareholder from his or
her registered representative as described in the Prospectus. Address and
bank account information will be verified, telephone redemption instructions
will be recorded on tape, and all redemptions will be confirmed in writing to
the shareholder. If there has been an address change within the past 60 days,
a telephone redemption will not be authorized. The Trust and the Transfer
Agent will employ reasonable procedures to confirm that telephone
instructions are genuine. To the extent that procedures reasonable designed
to prevent unauthorized telephone redemptions are not followed, the Trust
and/or the Transfer Agent may be liable for following telephone instructions
for redemption transactions that prove to be fraudulent. Broker/dealers other
than Equity Planning have agreed to bear the risk of any loss resulting from
any unauthorized telephone redemption instruction from the firm or its
registered representatives. However, the shareholder would bear the risk of
loss resulting from instructions entered by an unauthorized third party that
the Trust and/or the Transfer Agent reasonably believe to be genuine.
If the amount of the redemption is $500 or more, the proceeds will be
wired to the designated commercial bank account in the United States. If the
amount of the redemption is less than $500, the proceeds will be sent by mail
to the address of record on the shareholder's account. Telephone redemption
requests must be received by Equity Planning by the close of trading on the
New York Stock Exchange on any day when Equity Planning is open for business.
Requests made after that time or on a day when Equity Planning is not open
for business cannot be accepted by Equity Planning. The proceeds of a
telephone redemption will normally be sent on the first business day
following receipt of the redemption request.
However, with respect to the telephone redemption of shares purchased by
check, such redemption requests will only be effected after the Trust has
assured itself that good payment has been collected for the purchase of
shares, which may take up to 15 days. This expedited redemption privilege is
not available to HR-10, IRA and 403(b)(7) Plans. In addition to the Telephone
Redemption Privilege, a shareholder may also redeem by telephone through the
"Invest-by-Phone" service.
Repurchases. The Trust also maintains a continuous offer to repurchase its
shares and shareholders may normally sell their shares through securities
dealers, who may charge customary commissions for their services. Unless made
in connection with an exchange of shares, a request for repurchase must be
placed with a broker or dealer and communicated by the broker or dealer to
Equity Planning. The repurchase price will be the net asset value next
determined after receipt by Equity Planning of the request, except that a
repurchase order placed through a broker or dealer before the close of
trading on the New York Stock Exchange on any day will be executed at the net
asset value determined as of such close provided the broker or dealer
communicates the order to Equity Planning prior to its close of business
(normally 4:00 P.M. New York City time) on such day and subsequently confirms
the order to Equity Planning in writing, time-stamping his confirmation with
the time of the broker or dealer's receipt of the order. It is the
responsibility of brokers or dealers to communicate such orders, and they may
be liable to investors for failing to do so. Brokers or dealers may make
customary charges for their services in effecting repurchases.
The offer to repurchase may be suspended at any time. A shareholder who
has submitted a repurchase request must also submit his share certificates,
duly endorsed in the full name of the account, or, in the case of an Open
Account, Equity Planning may require a proper request, duly executed in the
full name of the account, in which case the signature must be guaranteed as
discussed above.
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By Check (U.S. Government Securities Series, High Yield Series and Money
Market Series Only). Any shareholder of these Series (except Class B
shareholders) may elect to redeem shares held in his Open Account by check.
Checks will be sent to an investor upon receipt by Equity Planning of a
completed application and signature card (attached to the application). If the
signature card accompanies an individual's initial account application, the
signature guarantee section of the form may be disregarded. However, the Trust
reserves the right to require that all signatures be guaranteed prior to the
establishment of a check writing service account. When an authorization form is
submitted after receipt of the initial account application, all signatures must
be guaranteed regardless of account value.
Checks may be drawn payable to any person in an amount of not less than
$500, provided that immediately after the payment of the redemption proceeds
the balance in the shareholder's Open Account is $500 or more.
When a check is presented to Equity Planning for payment, a sufficient
number of full and fractional shares in the shareholder's Open Account will
be redeemed to cover the amount of the check. The number of shares to be
redeemed will be determined on the date the check is received by the Transfer
Agent. Presently there is no charge to the shareholder for the check writing
service, but this may be changed or modified in the future upon two weeks
written notice to shareholders.
The checkwriting procedure for redemption enables a shareholder to receive
income accruing on the shares to be redeemed until such time as the check is
presented to Equity Planning for payment. Inasmuch as canceled checks are
returned to shareholders monthly, no confirmation statement is issued at the
time of redemption.
Shareholders utilizing withdrawal checks will be subject to Equity
Planning's rules governing checking accounts. A shareholder should make sure
that there are sufficient shares in his Open Account to cover the amount of
any check drawn. If insufficient shares are in the account and the check is
presented to Equity Planning on a banking day on which the Series does not
redeem shares (for example, a day on which the New York Stock Exchange is
closed), or if the check is presented against redemption proceeds of an
investment made by check which has not been in the account for at least
fifteen calendar days, the check may be returned marked "Non-sufficient
Funds" and no shares will be redeemed. A shareholder may not close his
account by a withdrawal check because the exact value of the account will not
be known until after the check is received by Equity Planning.
TAXES
As stated in the Prospectus, it will be the policy of the Trust and of
each Series that each comply with provisions of the Internal Revenue Code
relieving investment companies which distribute substantially all of their
net income from Federal income tax on the amounts distributed.
The Federal tax laws also impose a four percent nondeductible excise tax
on each regulated investment company with respect to an amount, if any, by
which such company does not meet distribution requirements specified in such
tax laws. The Trust intends that each Series will comply with such
distribution requirements and thus does not expect to incur the four percent
nondeductible excise tax.
As stated in the Prospectus, the Trust believes that each of its Series
will be treated as a single entity. Prior to November 1, 1986, the Trust was
treated as a single entity.
To qualify for treatment as a "regulated investment company," each Series
must, among other things, derive in each taxable year at least 90 percent of
its gross income from dividends, interest, payments with respect to
securities loans, and gains from the sale or other disposition of stock or
securities or foreign currencies (subject to the authority of the Secretary
of the Treasury to exclude foreign currency gains which are not ancillary to
the Series' principal business of investing in stock or securities or options
and futures with respect to such stock or securities), or other income
(including but not limited to gains from options, futures, or forward
contracts) derived with respect to its investing in such stock, securities,
or currencies. In addition, to qualify for treatment as a "regulated
investment company," each Series must derive less than 30 percent of its
gross income in each taxable year from gains (without deduction for losses)
from the sale or other disposition of securities held for less than three
months. Accordingly, the Trust may be restricted in the selling of securities
which have been held less than three months, in the writing of options on
securities into which convertible securities are convertible, in the writing
of options on securities which have been held for six months or less, in the
writing of options which expire in less than three months and in purchasing
options to terminate options written within the preceding three months.
Income dividends and short-term capital gains distributions, whether
received in shares or in cash, are treated by shareholders as ordinary income
for Federal income tax purposes. Prior to January 1, 1987, income dividends
were eligible for the dividends received exclusion of $100 ($200 for a joint
return) available to individuals and the 85% dividends received deduction
available to corporate shareholders, subject, in either case, to reduction,
for various reasons, including the fact that dividends received from domestic
corporations in any year were less than 95% of the distributing Series' gross
income, in the case of individual distributees, or 100% of the distributing
Series' gross income, in the case of corporate distributees. Any income
dividends received after December 31, 1987 does not qualify for dividend
exclusion on an individual tax return but corporate shareholders are eligible
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for a 70% dividends received deduction (80% in the case of a 20% shareholder)
subject to a reduction for various reasons including the fact that dividends
received from domestic corporations in any year are less than 100% of the
distributing Series' gross income. Gross income includes the excess of net
short-term capital gains over net long-term capital losses.
Distributions which are designated by the Trust as long-term capital
gains, whether received in shares or in cash, are taxable to shareholders as
long-term capital gains (regardless of how long such person has been a
shareholder) and are not eligible for the dividends received exclusion. Any
loss from the sale of shares held for six months or less will be treated as
long-term capital loss to the extent of any capital gain distributions paid
with respect to such shares.
Individuals are entitled to deduct "miscellaneous itemized deductions"
specified in the Code only to the extent they exceed two percent of the
individuals' "adjusted gross income." Effective January 1, 1988, included
within the miscellaneous itemized deductions subject to the two percent
"floor" are indirect deductions through certain pass-through entities such as
the Series. The Secretary of the Treasury is authorized to prescribe
regulations relating to the manner in which the floor will be applied with
respect to indirect deductions and to the manner in which pass-through
entities such as the Series will report such amounts to the individual
shareholders. Individual shareholders are advised that, pursuant to these
rules, they may be required to report as income amounts in excess of actual
distributions made to them.
The Trust is required to withhold for income taxes, 31% of dividends,
distributions and redemption payments, if any of the following circumstances
exist: i) a shareholder fails to provide the Trust with a correct taxpayer
identification number ("TIN"); ii) the Trust is notified by the Internal
Revenue Service that the shareholder furnished an incorrect TIN; or iii) the
Trust is notified by the Internal Revenue Service that withholding is
required because the shareholder failed to report the receipt of dividends or
interest from other sources. Withholding may also be required for accounts
with respect to which a shareholder fails to certify that i) the TIN provided
is correct and ii) the shareholder is not subject to such withholding.
However, withholding will not be required from certain exempt entities nor
those shareholders complying with the procedures as set forth by the Internal
Revenue Service. A shareholder is required to provide the Trust with a
correct TIN. The trust in turn is required to report correct taxpayer
identification numbers when filing all tax forms with the Internal Revenue
Service. Should the IRS levy a penalty on the Trust for reporting an
incorrect TIN and that TIN was provided by the shareholder, the Trust will
pass the penalty onto the shareholder.
Dividends paid by a Series from net investment income and net realized
short-term capital gains to a shareholder who is a nonresident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder") will be subject to United States
withholding tax at a rate of 30% unless a reduced rate of withholding or a
withholding exemption is provided under applicable treaty law. Foreign
shareholders are urged to consult their own tax advisors concerning the
applicability of the United States withholding tax and any foreign taxes.
The discussion of "Taxes" in the Prospectus, in conjunction with the
foregoing, is a general and abbreviated summary of applicable provisions of
the Code and Treasury regulations now in effect as currently interpreted by
the courts and the Internal Revenue Service. The Code and these Regulations,
as well as the current interpretations thereof, may be changed at any time by
legislative, judicial, or administrative action.
Shareholders ordinarily will also be subject to state income taxes on the
dividends and distributions they receive from each Series. Shareholders are
urged to consult counsel or other competent tax advisers regarding specific
questions as to Federal, state or local taxes.
THE NATIONAL DISTRIBUTOR AND DISTRIBUTION PLANS
Phoenix Equity Planning Corporation ("Equity Planning"), which has
undertaken to use its best efforts to find purchasers for shares of the
Trust, serves as the National Distributor of the Trust's shares. Shares of
each Series are offered on a continuous basis. Pursuant to distribution
agreements for each class of shares or distribution method, the Distributor
will purchase shares of the Fund for resale to the public, either directly or
through securities dealers or agents, and is obligated to purchase only those
shares for which it has received purchase orders. Equity Planning may also
sell Trust shares pursuant to sales agreements entered into with
bank-affiliated securities brokers who, acting as agent for their customers,
place orders for Trust shares with Equity Planning. Although the
Glass-Steagall Act prohibits banks and bank affiliates from engaging in the
business of underwriting, distributing or selling securities (including
mutual fund shares), banking regulators have not indicated that such
institutions are prohibited from purchasing mutual fund shares upon the order
and for the account of their customers. In addition, state securities laws on
this issue may differ from the interpretations of federal law and banks and
financial institutions may be required to register as dealers pursuant to
state law. If, because of changes in law or regulations, or because of new
interpretations of existing law, it is determined that agency transactions of
bank-affiliated securities brokers are not permitted, the Trustees will
consider what action, if any, is appropriate. It is not anticipated that
termination of sales agreements with bank-affiliated securities brokers would
result in a loss to their customers or a change in the net asset value per
share of a Series.
For the fiscal years ended October 31, 1993, 1994 and 1995, Equity
Planning's gross commissions on sales of Trust shares totalled $10,208,723,
$4,578,450 and $6,774,491 respectively. Of these gross selling commissions,
$2,684,075, $1,780,450 and $856,873 respectively, were allowed to Equity
Planning as dealer.
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Philip R. McLoughlin is a trustee and an officer of the Trust and a director
and officer of Equity Planning. G. Jeffrey Bohne, James M. Dolan, William R.
Moyer, Elizabeth R. Sadowinski, Leonard J. Saltiel, and Nancy G. Curtiss are
officers of the Trust and officers of Equity Planning.
Pursuant to a Financial Agent Agreement, Equity Planning provides
bookkeeping and pricing services directly to the Trust. As compensation for
such services, Equity Planning receives a quarterly fee based on the average
of the aggregate daily net asset values of the Trust at an annual rate of
$300 per million dollars. It is expected that the compensation to Equity
Planning will be approximately equal to the cost to Equity Planning of
providing the services provided for in the Financial Agent Agreement.
In addition, pursuant to an agreement between Equity Planning, the Trust's
Transfer Agent, and State Street Bank and Trust Company, State Street has
been appointed subagent to perform certain shareholder servicing functions
for the Trust. For performing such services State Street receives a monthly
fee from Equity Planning.
For financial agent and administrative services to the Trust during the
fiscal years ended October 31, 1993, 1994 and 1995, Equity Planning received
fees of $2,405,233, $2,087,779 and $1,772,342 respectively.
Distribution Plans
To permit the use of assets of a Series to encourage activities primarily
intended to result in the sale of shares of that Series, the Trust has
adopted a distribution plan for all Series (except the Money Market Series)
which offer shares sold subject to an initial sales charge and a distribution
plan for all Series which offer shares sold subject to a contingent deferred
sales load (each a "Plan" and collectively the "Plans") pursuant to Rule
12b-1 under the Investment Company Act of 1940. The Plan for shares sold
subject to an initial sales charge was adopted on August 22, 1990 by the
Board of Trustees of the Trust, including a majority of the Trustees who are
not interested persons of the Trust and who have no direct or indirect
financial interest in the Plan or any agreement related thereto (the "Rule
12b-1 Trustees"). It was approved by the shareholders of the Series on
December 13, 1990. The Plan for Class B shares, including the Rule 12b-1
Trustees, was adopted by the Board of Trustees on November 17, 1993.
The Class A and Class B Plans authorize the payment by the Trust to the
Distributor of a Series' shares of amounts not exceeding 0.25% and 1.00%
annually, respectively, of the Series' average daily net assets for each year
elapsed after the inception of the Plan. Although under no contractual
obligation to do so, the Trust intends to make such payments to the National
Distributor (i) as commissions for shares sold, all or any part of which
commissions will be paid by the National Distributor, upon receipt from the
Trust, to others who may be other dealers or registered representatives of
the Distributor, (ii) to enable the Distributor to pay to such others
maintenance or other fees in respect of a Series' shares sold by them and
remaining outstanding on the Trust's books during the period in respect of
which the fee is paid and (iii) to enable the Distributor to pay to
bank-affiliated securities brokers maintenance or other fees in respect of a
Series' shares purchased by their customers and remaining outstanding on the
Trust's books during the period in respect of which the fee is paid;
provided, however, that payments under (ii) and (iii) are subject to limits
of 0.25% and 1.00% annually of the average daily net assets of the Class A or
Class B shares respectively to which the payments relate. Payments, less the
portion thereof paid by the Distributor to others, may be used by the
Distributor for its expenses of distribution of a Series' shares. If expenses
of distribution of a Series' shares exceed payments and any sales charges
retained by the Distributor, the Trust is not required to reimburse the
Distributor for excess expenses; if payments and any sales charges retained
by the Distributor exceed expenses of distribution of a Series' shares, the
Distributor may realize a profit.
Each Plan requires that at least quarterly the Trustees of the Trust
review a written report with respect to the amounts expended under the Plan
and the purposes for which such expenditures were made. While each Plan is in
effect, the Trust will be required to commit the selection and nomination of
candidates for Trustees who are not interested persons of the Trust to the
discretion of other Trustees who are not interested persons. Each Plan
continues in effect from year to year only provided such continuance is
approved annually in advance by votes of the majority of both (a) the Board
of Trustees of the Trust and (b) the Rule 12b-1 Trustees, cast in person at a
meeting called for the purpose of voting on the Plan and any agreements
related to each Plan. No interested person of the Trust and no Trustee who is
not an interested person of the Trust, as that term is defined in the
Investment Company Act of 1940, has any direct or indirect financial interest
in the operation of the Plans.
The Trust's expenditures under the Plan totalled $14,636,835 for the fiscal
year ended October 31, 1995. The 12b-1 payments were used for (1) compensating
dealers ($13,843,228), (2) compensating sales personnel ($679,153), and (3)
compensating the underwriter for marketing material ($114,454).
OTHER INFORMATION
Financial information relating to the Trust is contained in the Annual
Report to Shareholders for the year ended October 31, 1995 and is available
by calling Equity Planning at (800) 243-4361, or by writing to Equity
Planning at 100 Bright Meadow Blvd., P.O. Box 2200, Enfield, Connecticut
06083-2200. The Annual Report is incorporated into this Statement of
Additional Information by reference. A copy of the Annual Report must precede
or accompany this Statement of Additional Information.
Independent Accountants
Price Waterhouse LLP with principal offices at 160 Federal Street, Boston, MA
02110, has been selected independent accountants for the Fund.
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