PHOENIX
FUNDS
Prospectus February 28, 1998
[triangle] PHOENIX BALANCED FUND
[triangle] PHOENIX CONVERTIBLE FUND
[triangle] PHOENIX GROWTH FUND
[triangle] PHOENIX AGGRESSIVE
GROWTH FUND
[triangle] PHOENIX HIGH YIELD FUND
[triangle] PHOENIX MONEY MARKET FUND
[triangle] PHOENIX U.S. GOVERNMENT
SECURITIES FUND
[logo] PHOENIX
DUFF & PHELPS
<PAGE>
PHOENIX BALANCED FUND
PHOENIX CONVERTIBLE FUND
PHOENIX GROWTH FUND
PHOENIX AGGRESSIVE GROWTH FUND
PHOENIX HIGH YIELD FUND
PHOENIX MONEY MARKET FUND
PHOENIX U.S. GOVERNMENT SECURITIES FUND
101 Munson Street
Greenfield, MA 01301
PROSPECTUS
February 27, 1998
Phoenix Balanced Fund Series ("Balanced Fund") seeks as its investment
objectives reasonable income, long-term capital growth and conservation of
capital. It is intended that this Fund 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 Fund") 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 Fund 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 Fund 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 Fund") seeks as its investment objective
long-term appreciation of capital. Since income is not an objective, any income
generated by the investment of this Fund's assets will be incidental to its
objective. It is intended that this Fund will invest primarily in the common
stocks of companies believed by the Adviser to have appreciation potential.
Phoenix Aggressive Growth Fund Series ("Aggressive Growth Fund") seeks as its
investment objective appreciation of capital through the use of aggressive
investment techniques. It is intended that this Fund 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 Fund 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.
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LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
CUSTOMER SERVICE--(800) 243-1574
MARKETING--(800) 243-4361
TELEPHONE ORDERS--(800) 367-5877
TELECOMMUNICATION DEVICE (TTY)--(800) 243-1926
<PAGE>
Phoenix High Yield Fund Series ("High Yield Fund") 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 Fund 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 18.
Phoenix Money Market Fund Series ("Money Market Fund") 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 Fund 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 Fund is neither insured nor guaranteed by the U.S. Government and there
can be no assurance that the Fund 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
Fund") seeks as its investment objective a high level of current income
consistent with safety of principal. This Fund 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 Funds, except the Money Market Fund and the U.S. Government
Securities Fund, may engage in limited securities and index options transactions
and enter into financial futures contracts and related options for hedging
purposes. See "Investment Techniques and Related Risks."
The Convertible Fund and the High Yield Fund 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 Funds. See "Investment
Objectives and Policies" and "Risk Factors."
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.
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 27, 1998 which has been filed with the Securities and
Exchange Commission (the "Commission") and is available upon request at no
charge by calling (800) 243-4361 or by writing to Phoenix Equity Planning
Corporation at 100 Bright Meadow Boulevard, P.O. Box 2200, Enfield, Connecticut
06083-2200. The Statement of Additional Information is incorporated herein by
reference.
The Commission maintains a Web site (http://www.sec.gov) that contains this
Prospectus, the Statement of Additional Information, material incorporated by
reference, and other information regarding registrants that file electronically
with the Commission.
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
PAGE
INTRODUCTION ........................................................... 4
FUND EXPENSES .......................................................... 5
FINANCIAL HIGHLIGHTS ................................................... 8
PERFORMANCE INFORMATION ................................................ 15
INVESTMENT OBJECTIVES AND POLICIES ..................................... 16
Phoenix Balanced Fund ............................................... 16
Phoenix Convertible Fund ............................................ 16
Phoenix Growth Fund ................................................. 17
Phoenix Aggressive Growth Fund ...................................... 17
Phoenix High Yield Fund ............................................. 18
Phoenix Money Market Fund ........................................... 19
Phoenix U.S. Government Securities Fund ............................. 19
INVESTMENT TECHNIQUES AND RELATED RISKS ................................ 20
INVESTMENT RESTRICTIONS ................................................ 23
MANAGEMENT OF THE FUNDS ................................................ 24
DISTRIBUTION PLANS ..................................................... 25
HOW TO BUY SHARES ...................................................... 27
INVESTOR ACCOUNT SERVICES .............................................. 30
NET ASSET VALUE ........................................................ 32
HOW TO REDEEM SHARES ................................................... 32
DIVIDENDS, DISTRIBUTIONS AND TAXES ..................................... 33
ADDITIONAL INFORMATION ................................................. 34
APPENDIX ............................................................... 34
3
<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, as
amended (the "Declaration of Trust"). The Declaration of Trust authorizes the
assets and shares of the Trust to be divided into series (each a "Fund" and
collectively the "Funds"). Each Fund has a different investment objective and
invests primarily in certain types of securities, as described on the cover page
of this Prospectus, and is designed to meet different investment needs. In many
respects, each Fund 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 Fund.
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 Fund's portfolio. The Adviser is a subsidiary of Phoenix Duff & Phelps
Corporation and an indirect subsidiary of Phoenix Home Life Mutual Insurance
Company. Under the terms of the Investment Advisory Agreement, for its services
to each Fund 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 Funds."
DISTRIBUTOR AND DISTRIBUTION PLANS
Phoenix Equity Planning Corporation ("Equity Planning" or "Distributor"),
serves as 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 fee. See "The Financial Agent." Equity Planning
also serves as the Trust's transfer agent. See "The Custodian and Transfer
Agent."
The Trust has adopted, amended and restated distribution plans pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act")
for all classes of all Funds other than Class A Shares of the Money Market Fund.
Pursuant to the distribution plan adopted for Class A Shares, the Trust shall
reimburse the Distributor at an annual rate of 0.25% of the Trust's average
daily Class A Share net assets of a Fund for distribution expenditures incurred
in connection with the sale and promotion of Class A Shares of a Fund and for
furnishing shareholder services (the "Service Fee"). Pursuant to the
distribution plan adopted for Class B Shares, the Trust shall reimburse the
Distributor up to a maximum annual rate of 0.75% of the Trust's average daily
Class B Share net assets of a Fund (0.50% of the Money Market Fund's average
daily Class B Share net assets) for distribution expenses incurred in connection
with the sale and promotion of Class B Shares of a Fund and 0.25% of the Trust's
average daily Class B Shares net assets of a Fund for furnishing shareholder
services. Pursuant to the distribution plans adopted for Class C Shares and
Class M Shares, the High Yield Fund shall reimburse the Distributor up to a
maximum annual rate of 0.75% and 0.25%, respectively, of the average daily net
assets of the High Yield Fund for distribution expenses incurred in connection
with the sale and promotion of each class of shares and 0.25% of the High Yield
Fund's average daily Class C and M shares net assets for furnishing shareholder
services. See "Distribution Plans."
PURCHASE OF SHARES
The Trust offers two classes of shares of each Fund and two additional
classes of shares of the High Yield Fund 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 Fund) which, at the election of the purchaser, may be
imposed (i) at the time of purchase (the "Class A Shares" and "Class M Shares"),
or (ii) on a contingent deferred basis (the "Class B Shares" and "Class C
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 and M Shares (except Class A Shares of the Money Market Fund) 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% and 3.50%, respectively, of the offering price on single purchases of less
than $50,000. The sales charges are reduced on a graduated scale on single
purchases of $50,000 or more.
Class B and C Shares are offered to the public at the next determined net
asset value after receipt of an order by State Street Bank 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. Class C Shares redeemed within one year
of purchase are subject to a 1% sales charge.
Shares of the Money Market Fund 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 Fund 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 Fund and have the same rights. For more information on fees
and charges applicable for each Fund and class, refer to "Fund Expenses" and
"How to Buy Shares."
MINIMUM INITIAL AND SUBSEQUENT INVESTMENTS
The minimum initial investment is $500 ($25 if using the bank draft investing
program designated "Investo-Matic") and the minimum subsequent investment is
$25. Exceptions to the minimum and subsequent investment amounts are available
under specific circumstances. See "How to Buy Shares."
REDEMPTION OF SHARES
Class A and M Shares of a Fund may be redeemed at any time at the net asset
value per share next computed after receipt of a redemption request by Equity
Planning, the Trust's transfer agent. Class B and C shareholders redeeming
4
<PAGE>
shares within certain time periods 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 Fund will achieve its investment
objectives. In addition, special risks may be presented by the particular types
of securities in which a Fund may invest. For example, several Funds may invest
in below investment grade securities. To the extent that a Fund invests
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."
FUND EXPENSES
The following tables illustrate all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in these tables are for the
fiscal year ended October 31, 1997.
<TABLE>
<CAPTION>
CLASS A SHARES
- --------------------------------------------------------------------------------------------------------------------------
U.S.
AGGRESSIVE MONEY GOVERNMENT
BALANCED CONVERTIBLE GROWTH GROWTH HIGH YIELD MARKET SECURITIES
FUND FUND FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load 4.75% 4.75% 4.75% 4.75% 4.75% None 4.75%
Imposed on Purchases
(as a percentage of
offering price)
Maximum Sales Load None None None None None None None
Imposed on Reinvested
Dividends
Deferred Sales Load (as None None None None None None None
a percentage of original
purchase price or
redemption proceeds,
as applicable)
Redemption Fee None None None None None None None
Exchange Fee None None None None None None None
ANNUAL FUND OPERATING
EXPENSES (as a percentage
of average net assets)
Management Fees 0.53% 0.65% 0.66% 0.70% 0.65% 0.40% 0.45%
12b-1 Fees (a) 0.25% 0.25% 0.25% 0.25% 0.25% None 0.25%
Other Operating Expenses 0.20% 0.22% 0.19% 0.25% 0.21% 0.39%(b) 0.28%
---- ---- ---- ---- ---- ---- ----
Total Fund Operating 0.98% 1.12% 1.10% 1.20% 1.11% 0.79% 0.98%
Expenses ==== ==== ==== ==== ==== ==== ====
</TABLE>
- --------------------
(a) "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"). 12b-1 Fees as
stated include a Service Fee. See "Distribution Plans."
(b) The Adviser has agreed to reimburse the Trust for the amount, if any, by
which the Money Market Fund's 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 Fund. There were no expense
reimbursements for the fiscal year ended October 31, 1997.
5
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------------
BALANCED CONVERTIBLE GROWTH AGGRESSIVE HIGH YIELD MONEY U.S.
FUND FUND FUND GROWTH FUND MARKET GOVERNMENT
FUND FUND SECURITIES
FUND
- ----------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION
EXPENSES
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Load None None None None None None None
Imposed on
Purchases
(as a percentage of
offering price)
Maximum Sales Load None None None None None None None
Imposed on
Reinvested
Dividends
Deferred Sales Load (as 5% during the 5% during 5% during 5% during 5% during 5% during 5% during
a percentage of first year the first the first the first the first the first the first
original purchase decreasing 1% year, year, year, year, year, year,
price or redemption annually to decreasing decreasing decreasing 1% decreasing decreasing decreasing 1%
proceeds, as applicable) 2% during the 1% annually 1% annually annually to 1% annually 1% annually annually to
fourth and to 2% during to 2% during 2% during the to 2% during to 2% during 2% during the
fifth years, the fourth the fourth fourth and the fourth the fourth fourth and
dropping from and fifth and fifth fifth years, and fifth and fifth fifth years,
2% to 0% years, years, dropping from years, years, dropping from
after the dropping from dropping from 2% to 0% dropping from dropping from 2% to 0%
fifth year 2% to 0% 2% to 0% after the 2% to 0% 2% to 0% after the
after the after the fifth year after the after the fifth year
fifth year fifth year fifth year fifth year
Redemption Fee None None None None None None None
Exchange Fee None None None None None None None
ANNUAL FUND OPERATING
EXPENSES (as a
percentage
of average net assets)
Management Fees 0.53% 0.65% 0.66% 0.70% 0.65% 0.40% 0.45%
12b-1 Fees (a) 1.00% 1.00% 1.00% 1.00% 1.00% 0.75% 1.00%
Other Operating Expenses 0.20% 0.22% 0.19% 0.25% 0.21% 0.39%(b) 0.28%
---- ---- ---- ---- ---- ---- ----
Total Fund Operating 1.73% 1.87% 1.85% 1.95% 1.86% 1.54% 1.73%
==== ==== ==== ==== ==== ==== ====
Expenses
</TABLE>
- ----------
(a) "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"). 12b-1 Fees as
stated include a Service Fee. See "Distribution Plans."
(b) The Adviser has agreed to reimburse the Trust for the amount, if any, by
which the Money Market Fund's 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 Fund. There were no expense
reimbursements for the fiscal year ended October 31, 1997.
<TABLE>
<CAPTION>
CLASS C SHARES CLASS M SHARES
- ----------------------------------------------------------------------------------------------------------------------------
HIGH YIELD HIGH YIELD
FUND (B) FUND (B)
- ----------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases None 3.50%
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load (as a percentage of original purchase price 1% during None
or redemption proceeds, as applicable) the first year
Redemption Fee None None
Exchange Fee None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 0.65% 0.65%
12b-1 Fees (a) 1.00% 0.50%
Other Operating Expenses 0.21% 0.21%
----- -----
Total Fund Operating Expenses 1.86% 1.36%
===== =====
</TABLE>
- ----------
(a) "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"). 12b-1 Fees as
stated include a Service Fee. See "Distribution Plans."
(b) Prior to February 27, 1998, Class C and M Shares of the High Yield Fund were
not offered.
6
<PAGE>
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES
PAID FOR THE PERIOD
EXAMPLE* 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
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:
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Balanced Fund (Class A Shares) $57 $77 $ 99 $162
- ------------------------------------------------------------------------------------------------------------------------
Balanced Fund (Class B Shares) 58 74 94 184
- ------------------------------------------------------------------------------------------------------------------------
Convertible Fund (Class A Shares) 58 81 106 177
- ------------------------------------------------------------------------------------------------------------------------
Convertible Fund (Class B Shares) 59 79 101 199
- ------------------------------------------------------------------------------------------------------------------------
Growth Fund (Class A Shares) 58 81 105 175
- ------------------------------------------------------------------------------------------------------------------------
Growth Fund (Class B Shares) 59 78 100 197
- ------------------------------------------------------------------------------------------------------------------------
Aggressive Growth Fund (Class A Shares) 59 84 110 186
- ------------------------------------------------------------------------------------------------------------------------
Aggressive Growth Fund (Class B Shares) 60 81 105 208
- ------------------------------------------------------------------------------------------------------------------------
High Yield Fund (Class A Shares) 58 81 106 176
- ------------------------------------------------------------------------------------------------------------------------
High Yield Fund (Class B Shares) 59 78 101 198
- ------------------------------------------------------------------------------------------------------------------------
High Yield Fund (Class C Shares) 29 58 101 218
- ------------------------------------------------------------------------------------------------------------------------
High Yield Fund (Class M Shares) 48 77 107 193
- ------------------------------------------------------------------------------------------------------------------------
Money Market Fund (Class A Shares) 8 25 44 98
- ------------------------------------------------------------------------------------------------------------------------
Money Market Fund (Class B Shares) 56 69 84 163
- ------------------------------------------------------------------------------------------------------------------------
U.S. Government Sec. Fund (Class A Shares) 57 77 99 162
- ------------------------------------------------------------------------------------------------------------------------
U.S. Government Sec. Fund (Class B Shares) 58 74 94 184
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE EXPENSES
PAID FOR THE PERIOD
EXAMPLE* 1 YEAR 3 YEARS 5 YEARS 10 YEARS
An investor would pay the following expenses on a hypothetical $1,000 investment
assuming no redemption at the end of each time period:
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Balanced Fund (Class A Shares) $57 $77 $ 99 $162
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Balanced Fund (Class B Shares) 18 54 94 184
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Convertible Fund (Class A Shares) 58 81 106 177
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Convertible Fund (Class B Shares) 19 59 101 199
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Growth Fund (Class A Shares) 58 81 105 175
- ------------------------------------------------------------------------------------------------------------------------
Growth Fund (Class B Shares) 19 58 100 197
- ------------------------------------------------------------------------------------------------------------------------
Aggressive Growth Fund (Class A Shares) 59 84 110 186
- ------------------------------------------------------------------------------------------------------------------------
Aggressive Growth Fund (Class B Shares) 20 61 105 208
- ------------------------------------------------------------------------------------------------------------------------
High Yield Fund (Class A Shares) 58 81 106 176
- ------------------------------------------------------------------------------------------------------------------------
High Yield Fund (Class B Shares) 19 58 101 198
- ------------------------------------------------------------------------------------------------------------------------
High Yield Fund (Class C Shares) 19 58 101 218
- ------------------------------------------------------------------------------------------------------------------------
High Yield Fund (Class M Shares) 48 77 107 193
- ------------------------------------------------------------------------------------------------------------------------
Money Market Fund (Class A Shares) 8 25 44 98
- ------------------------------------------------------------------------------------------------------------------------
Money Market Fund (Class B Shares) 16 49 84 163
- ------------------------------------------------------------------------------------------------------------------------
U.S. Government Sec. Fund (Class A Shares) 57 77 99 162
- ------------------------------------------------------------------------------------------------------------------------
U.S. Government Sec. Fund (Class B Shares) 18 54 94 184
</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. CLASS B SHARE FIGURES
ASSUME CONVERSION TO CLASS A SHARES AFTER EIGHT YEARS. SEE "MANAGEMENT OF THE
FUND," "DISTRIBUTION PLANS" AND "HOW TO BUY SHARES."
7
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables set forth certain financial information for the
respective fiscal years of the Trust. The 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 (containing the report of Independent
Accountants and additional information relating to each Series' performance) are
available at no charge upon request by calling (800) 243-4361.
<TABLE>
FINANCIAL HIGHLIGHTS
(SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE INDICATED PERIOD)
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
BALANCED FUND
CLASS A
-------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Net asset value, beginning
<S> <C> <C> <C> <C> <C>
of period $17.56 $17.04 $15.23 $16.64 $15.92
Income from investment
operations
Net investment income 0.48 0.48 0.52 0.48 0.46
Net realized and unrealized
gain (loss) 2.38 1.46 1.80 (1.01) 1.08
----- ----- ----- ----- -----
Total from investment
operations 2.86 1.94 2.32 (0.53) 1.54
----- ----- ----- ----- -----
Less distributions
Dividends from net
investment income (0.48) (0.49) (0.51) (0.49) (0.46)
Dividends from net realized
gains (1.87) (0.93) -- (0.39) (0.36)
----- ----- ----- ----- -----
Total distributions (2.35) (1.42) (0.51) (0.88) (0.82)
----- ----- ----- ----- -----
Change in net asset value 0.51 0.52 1.81 (1.41) 0.72
----- ----- ----- ----- -----
Net asset value, end of period $18.07 $17.56 $17.04 $15.23 $16.64
====== ====== ====== ====== ======
Total return(1) 18.04% 12.03% 15.52% (3.28)% 9.92%
Ratios/supplemental data:
Net assets, end of period
(thousands) $1,702,385 $1,897,306 $2,345,440 $2,601,808 $3,126,014
Ratio to average net assets of:
Operating expenses 0.98% 1.01% 1.02% 0.96% 0.95%
Net investment income 2.65% 2.74% 3.27% 3.03% 2.88%
Portfolio turnover 206% 191% 197% 159% 130%
Average commission rate paid(4) $0.0541 $0.0546 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
BALANCED FUND
CLASS A
--------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
Net asset value, beginning
<S> <C> <C> <C> <C> <C>
of period $16.05 $13.86 $13.91 $12.19 $13.53
Income from investment
operations
Net investment income 0.52 0.62 0.69 0.69 0.58
Net realized and unrealized
gain (loss) 0.92 2.84 (0.04) 1.74 (0.33)
----- ----- ----- ----- -----
Total from investment
operations 1.44 3.46 0.65 2.43 0.25
----- ----- ----- ----- -----
Less distributions
Dividends from net
investment income (0.54) (0.64) (0.67) (0.71) (0.61)
Dividends from net realized
gains (1.03) (0.63) (0.03) -- (0.98)
----- ----- ----- ----- -----
Total distributions (1.57) (1.27) (0.70) (0.71) (1.59)
----- ----- ----- ----- -----
Change in net asset value (0.13) 2.19 (0.05) 1.72 (1.34)
----- ----- ----- ----- -----
Net asset value, end of period $15.92 $16.05 $13.86 $13.91 $12.19
====== ====== ====== ====== ======
Total return(1) 9.77% 26.26% 4.71% 20.60% 2.14%
Ratios/supplemental data:
Net assets, end of period
(thousands) $2,146,726 $941,754 $472,642 $446,970 $425,737
Ratio to average net assets of:
Operating expenses 0.98% 0.98% 0.85% 0.93% 0.80%
Net investment income 3.55% 4.22% 4.91% 5.28% 4.87%
Portfolio turnover 136% 196% 181% 172% 226%
Average commission rate paid(4) N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
BALANCED FUND
CLASS B
------------------------------------------------------------
YEAR ENDED
OCTOBER 31, FROM INCEPTION
--------------------------------------- 7/15/94 TO
1997 1996 1995 10/31/94
---- ---- ---- --------
Net asset value, beginning
<S> <C> <C> <C> <C>
of period $17.54 $17.01 $15.23 $15.27
Income from investment
operations
Net investment income 0.35 0.35 0.40 0.09
Net realized and unrealized
gain (loss) 2.37 1.47 1.80 (0.04)
----- ---- ---- -----
Total from investment
operations 2.72 1.82 2.20 0.05
----- ---- ---- -----
Less distributions
Dividends from net
investment income (0.35) (0.36) (0.42) (0.09)
Dividends from net realized
gains (1.87) (0.93) -- --
----- ---- ---- -----
Total distributions (2.22) (1.29) (0.42) (0.09)
----- ---- ---- -----
Change in net asset value 0.50 0.53 1.78 (0.04)
----- ---- ---- -----
Net asset value, end of period $18.04 $17.54 $17.01 $15.23
====== ====== ====== ======
Total return(1) 17.13% 11.24% 14.68% 0.34%(3)
Ratios/supplemental data:
Net assets, end of period
(thousands) $30,216 $26,209 $16,971 $4,629
Ratio to average net assets of:
Operating expenses 1.73% 1.76% 1.78% 1.65%(2)
Net investment income 1.90% 1.96% 2.46% 2.36%(2)
Portfolio turnover 206% 191% 197% 159%
Average commission rate paid(4) $0.0541 $0.0546 N/A N/A
</TABLE>
- ----------
(1) Maximum sales load is not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
(4) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for securities trades on
which commissions are charged. This rate generally does not reflect
mark-ups, mark-downs or spreads on shares traded on a principal basis.
8
<PAGE>
<TABLE>
<CAPTION>
CONVERTIBLE FUND
CLASS A
-------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Net asset value, beginning
<S> <C> <C> <C> <C> <C>
of period $19.26 $18.23 $17.56 $19.34 $18.86
Income from investment
operations
Net investment income 0.61(4) 0.70(4) 0.87 0.78 0.68
Net realized and unrealized
gain (loss) 2.54 1.68 1.04 (1.06) 1.53
----- ---- ---- ----- -----
Total from investment
operations 3.15 2.38 1.91 (0.28) 2.21
----- ---- ---- ----- -----
Less distributions
Dividends from net
investment income (0.64) (0.77) (1.05) (0.69) (0.73)
Dividends from net realized
gains (1.26) (0.58) (0.19) (0.81) (1.00)
----- ---- ---- ----- -----
Total distributions (1.90) (1.35) (1.24) (1.50) (1.73)
----- ---- ---- ----- -----
Change in net asset value 1.25 1.03 0.67 (1.78) 0.48
----- ---- ---- ----- -----
Net asset value, end of period $20.51 $19.26 $18.23 $17.56 $19.34
====== ====== ====== ====== ======
Total return(1) 17.40% 13.55% 11.45% (1.48)% 12.58%
Ratios/supplemental data:
Net assets, end of period
(thousands) $201,170 $214,874 $219,384 $226,294 $252,072
Ratio to average net assets of:
Operating expenses 1.12% 1.17% 1.18% 1.14% 1.15%
Net investment income 3.11% 3.75% 4.78% 4.27% 3.70%
Portfolio turnover 152% 141% 79% 91% 94%
Average commission rate paid(5) $0.0661 $0.0619 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CONVERTIBLE FUND
CLASS A
--------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
Net asset value, beginning
<S> <C> <C> <C> <C> <C>
of period $18.36 $16.63 $17.13 $15.55 $17.84
Income from investment
operations
Net investment income 0.77 0.87 0.91 0.95 0.86
Net realized and unrealized
gain (loss) 1.54 1.75 (0.49) 1.58 (0.06)
----- ----- ----- ----- -----
Total from investment
operations 2.31 2.62 0.42 2.53 0.80
----- ----- ----- ----- -----
Less distributions
Dividends from net
investment income (0.72) (0.89) (0.92) (0.95) (0.84)
Dividends from net realized
gains (1.09) -- -- -- (2.25)
----- ----- ----- ----- -----
Total distributions (1.81) (0.89) (0.92) (0.95) (3.09)
----- ----- ----- ----- -----
Change in net asset value 0.50 1.73 (0.50) 1.58 (2.29)
----- ----- ----- ----- -----
Net asset value, end of period $18.86 $18.36 $16.63 $17.13 $15.55
====== ====== ====== ====== ======
Total return(1) 13.77% 15.97% 2.35% 16.83% 4.90%
Ratios/supplemental data:
Net assets, end of period
(thousands) $200,944 $169,288 $143,200 $156,279 $159,426
Ratio to average net assets of:
Operating expenses 1.20% 1.14% 0.99% 1.03% 0.83%
Net investment income 4.28% 4.84% 5.17% 5.71% 5.51%
Portfolio turnover 200% 284% 194% 214% 213%
Average commission rate paid(5) N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
CONVERTIBLE FUND
CLASS B
------------------------------------------------------------
YEAR ENDED
OCTOBER 31, FROM INCEPTION
--------------------------------------- 7/15/94 TO
1997 1996 1995 10/31/94
---- ---- ---- --------
Net asset value, beginning
<S> <C> <C> <C> <C>
of period $19.20 $18.17 $17.55 $17.59
Income from investment
operations
Net investment income 0.46(4) 0.55(4) 0.70(4) 0.15
Net realized and unrealized
gain (loss) 2.52 1.68 1.07 (0.06)
----- ----- ----- -----
Total from investment
operations 2.98 2.23 1.77 0.09
----- ----- ----- -----
Less distributions
Dividends from net
investment income (0.49) (0.62) (0.96) (0.13)
Dividends from net realized
gains (1.26) (0.58) (0.19) --
----- ----- ----- -----
Total distributions (1.75) (1.20) (1.15) (0.13)
----- ----- ----- -----
Change in net asset value 1.23 1.03 0.62 (0.04)
----- ----- ----- -----
Net asset value, end of period $20.43 $19.20 $18.17 $17.55
====== ====== ====== ======
Total return(1) 16.49% 12.72% 10.59% 0.49%(3)
Ratios/supplemental data:
Net assets, end of period
(thousands) $8,063 $5,947 $3,715 $856
Ratio to average net assets of:
Operating expenses 1.87% 1.92% 1.95% 1.83%(2)
Net investment income 2.33% 2.95% 3.92% 3.29%(2)
Portfolio turnover 152% 141% 79% 91%
Average commission rate paid(5) $0.0661 $0.0619 N/A N/A
paid(5)
</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) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs or spreads on shares traded on a principal
basis.
9
<PAGE>
<TABLE>
<CAPTION>
GROWTH FUND
CLASS A
-------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Net asset value, beginning
<S> <C> <C> <C> <C> <C>
of period $26.87 $24.92 $21.24 $21.53 $20.76
Income from investment
operations(5)
Net investment income (loss) 0.14(4) 0.20(4) 0.26 0.26 0.32
Net realized and unrealized
gain (loss) 5.62 3.63 4.53 0.17 1.15
----- ---- ---- ----- -----
Total from investment
operations 5.76 3.83 4.79 0.43 1.47
----- ---- ---- ----- -----
Less distributions
Dividends from net
investment income (0.21) (0.25) (0.30) (0.24) (0.32)
Dividends from net
realized gains (4.59) (1.63) (0.81) (0.48) (0.38)
----- ---- ---- ----- -----
Total distributions (4.80) (1.88) (1.11) (0.72) (0.70)
----- ---- ---- ----- -----
Change in net asset value 0.96 1.95 3.68 (0.29) 0.77
----- ---- ---- ----- -----
Net asset value, end of period $27.83 $26.87 $24.92 $21.24 $21.53
====== ====== ====== ====== ======
Total return(1) 24.81% 16.34% 23.91% 2.06% 7.20%
Ratios/supplemental data:
Net assets, end of period
(thousands) $2,518,289 $2,347,471 $2,300,251 $2,140,458 $2,563,442
Ratio to average net
assets of:
Operating expenses 1.10% 1.17% 1.20% 1.19% 1.18%
Net investment income (loss) 0.53% 0.80% 0.92% 1.22% 1.55%
Portfolio turnover 196% 116% 109% 118% 176%
Average commission rate paid(6) $0.0518 $0.0534 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
GROWTH FUND
CLASS A
--------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
Net asset value, beginning
<S> <C> <C> <C> <C> <C>
of period $22.60 $18.45 $18.76 $16.01 $17.96
Income from investment
operations(5)
Net investment income (loss) 0.36 0.50 0.64 0.67 0.39
Net realized and unrealized
gain (loss) 0.97 4.97 (0.05) 2.68 0.72
----- ----- ----- ----- -----
Total from investment
operations 1.33 5.47 0.59 3.35 1.11
----- ----- ----- ----- -----
Less distributions
Dividends from net
investment income (0.45) (0.55) (0.62) (0.60) (0.51)
Dividends from net
realized gains (2.72) (0.77) (0.28) -- (2.55)
----- ----- ----- ----- -----
Total distributions (3.17) (1.32) (0.90) (0.60) (3.06)
----- ----- ----- ----- -----
Change in net asset value (1.84) 4.15 (0.31) 2.75 (1.95)
----- ----- ----- ----- -----
Net asset value, end of period $20.76 $22.60 $18.45 $18.76 $16.01
====== ====== ====== ====== ======
Total return(1) 6.95% 30.97% 3.05% 21.44% 6.99%
Ratios/supplemental data:
Net assets, end of period
(thousands) $2,186,868 $1,251,565 $678,151 $680,498 $603,600
Ratio to average net
assets of:
Operating expenses 1.17% 1.15% 1.01% 1.06% 0.85%
Net investment income (loss) 1.86% 2.49% 3.37% 3.79% 2.48%
Portfolio turnover 192% 227% 203% 180% 221%
Average commission rate paid(6) N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
GROWTH FUND
CLASS B
------------------------------------------------------------
YEAR ENDED
OCTOBER 31, FROM INCEPTION
--------------------------------------- 7/15/94 TO
1997 1996 1995 10/31/94
---- ---- ---- --------
Net asset value, beginning
<S> <C> <C> <C> <C>
of period $26.63 $24.74 $21.19 $20.48
Income from investment
operations(5)
Net investment income (loss) (0.06)(4) --(4) --(4) 0.01
Net realized and unrealized
gain (loss) 5.57 3.61 4.60 0.70
----- ----- ----- -----
Total from investment
operations 5.51 3.61 4.60 0.71
----- ----- ----- -----
Less distributions
Dividends from net
investment income (0.04) (0.09) (0.24) --
Dividends from net
realized gains (4.59) (1.63) (0.81) --
----- ----- ----- -----
Total distributions (4.63) (1.72) (1.05) --
----- ----- ----- -----
Change in net asset value 0.88 1.89 3.55 0.71
----- ----- ----- -----
Net asset value, end of period $27.51 $26.63 $24.74 $21.19
====== ====== ====== ======
Total return(1) 23.89% 15.48% 23.02% 3.47%(3)
Ratios/supplemental data:
Net assets, end of period
(thousands) $68,022 $45,326 $20,111 $2,966
Ratio to average net
assets of:
Operating expenses 1.85% 1.93% 1.97% 1.87%(2)
Net investment income (loss) (0.25)% 0.01% 0.01% 0.32%(2)
Portfolio turnover 196% 116% 109% 118%
Average commission rate paid(6) $0.0518 $0.0534 N/A N/A
</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.
(6) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs or spreads on shares traded on a principal
basis.
10
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND
CLASS A
-------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Net asset value, beginning
<S> <C> <C> <C> <C> <C>
of period $16.84 $16.51 $13.33 $14.56 $13.56
Income from investment
operations(5)
Net investment income (loss) (0.08)(4) (0.13)(4) 0.06(4) 0.27 0.22
Net realized and unrealized
gain (loss) 2.95 2.64 4.21 (0.21) 1.62
----- ---- ---- ----- -----
Total from investment
operations 2.87 2.51 4.27 0.06 1.84
----- ---- ---- ----- -----
Less distributions
Dividends from net
investment income -- (0.02) (0.19) (0.22) (0.23)
Dividends from net realized
gains (2.51) (2.16) (0.90) (1.07) (0.61)
Distributions in excess of
accumulated realized gains -- -- -- -- --
----- ---- ---- ----- -----
Total distributions (2.51) (2.18) (1.09) (1.29) (0.84)
----- ---- ---- ----- -----
Change in net asset value 0.36 0.33 3.18 (1.23) 1.00
----- ---- ---- ----- -----
Net asset value, end of period $17.20 $16.84 $16.51 $13.33 $14.56
====== ====== ====== ====== ======
Total return(1) 19.67% 17.43% 35.14% 0.37% 14.15%
Ratios/supplemental data:
Net assets, end of period
(thousands) $246,002 $233,488 $180,288 $140,137 $143,035
Ratio to average net assets of:
Operating expenses 1.20% 1.20% 1.29% 1.26% 1.17%
Net investment income (loss) (0.53)% (0.81)% 0.43% 1.97% 1.58%
Portfolio turnover 518% 401% 331% 306% 192%
Average commission rate paid(6) $0.0586 $0.0655 N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND
CLASS A
--------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
Net asset value, beginning
<S> <C> <C> <C> <C> <C>
of period $14.88 $10.77 $12.68 $11.09 $13.89
Income from investment
operations(5)
Net investment income (loss) 0.23 0.23 0.17 0.43 0.27
Net realized and unrealized
gain (loss) 0.59 4.05 (1.82) 1.58 0.26
----- ----- ----- ----- -----
Total from investment
operations 0.82 4.28 (1.65) 2.01 0.53
----- ----- ----- ----- -----
Less distributions
Dividends from net
investment income (0.25) (0.17) (0.26) (0.42) (0.33)
Dividends from net realized
gains (1.50) -- -- -- (3.00)
Distributions in excess of
accumulated realized gains (0.39) -- -- -- --
----- ----- ----- ----- -----
Total distributions (2.14) (0.17) (0.26) (0.42) (3.33)
----- ----- ----- ----- -----
Change in net asset value (1.32) 4.11 (1.91) 1.59 (2.80)
----- ----- ----- ----- -----
Net asset value, end of
period $13.56 $14.88 $10.77 $12.68 $11.09
====== ====== ====== ====== ======
Total return(1) 7.11% 39.99% (13.27)% 18.59% 4.52%
Ratios/supplemental data:
Net assets, end of period
(thousands) $128,530 $125,942 $99,428 $130,290 $124,650
Ratio to average net assets of:
Operating expenses 1.25% 1.20% 1.07% 1.09% 0.84%
Net investment income (loss) 1.70% 1.68% 1.37% 3.60% 2.39%
Portfolio turnover 251% 332% 407% 248% 278%
Average commission rate paid(6) N/A N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND
CLASS B
------------------------------------------------------------
YEAR ENDED
OCTOBER 31, FROM INCEPTION
--------------------------------------- 7/21/94 TO
1997 1996 1995 10/31/94
---- ---- ---- --------
Net asset value, beginning
<S> <C> <C> <C> <C>
of period $16.57 $16.38 $13.31 $13.09
Income from investment
operations(5)
Net investment income (loss) (0.20)(4) (0.25)(4) (0.12)(4) 0.02
Net realized and unrealized
gain (loss) 2.90 2.60 4.26 0.20
----- ----- ----- -----
Total from investment
operations 2.70 2.35 4.14 0.22
----- ----- ----- -----
Less distributions
Dividends from net
investment income -- -- (0.17) --
Dividends from net realized
gains (2.51) (2.16) (0.90) --
Distributions in excess of
accumulated realized gains -- -- -- --
----- ----- ----- -----
Total distributions (2.51) (2.16) (1.07) --
----- ----- ----- -----
Change in net asset value 0.19 0.19 3.07 0.22
----- ----- ----- -----
Net asset value, end of period $16.76 $16.57 $16.38 $13.31
====== ====== ====== ======
Total return(1) 18.70% 16.52% 34.15% 1.68%(3)
Ratios/supplemental data:
Net assets, end of period
(thousands) $13,611 $10,466 $2,393 $330
Ratio to average net assets of:
Operating expenses 1.96% 1.95% 2.04% 1.81%(2)
Net investment income (loss) (1.28)% (1.57)% (0.83)% 1.45%(2)
Portfolio turnover 518% 401% 331% 306%
Average commission rate paid(6) $0.0586 $0.0655 N/A N/A
</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.
(6) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for securities
trades on which commissions are charged. This rate generally does not
reflect mark-ups, mark-downs or spreads on shares traded on a principal
basis.
11
<PAGE>
<TABLE>
<CAPTION>
HIGH YIELD FUND
CLASS A
-------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Net asset value, beginning
<S> <C> <C> <C> <C> <C>
of period $8.63 $8.17 $8.11 $9.11 $8.14
Income from investment
operations
Net investment income 0.80 0.78 0.80 0.76 0.74
Net realized and unrealized
gain (loss) 0.46 0.46 0.04 (0.97) 0.97
----- ----- ----- ----- -----
Total from investment
operations 1.26 1.24 0.84 (0.21) 1.71
----- ----- ----- ----- -----
Less distributions
Dividends from net
investment income (0.80) (0.78) (0.78) (0.76) (0.74)
Tax return of capital -- -- -- (0.03) --
----- ----- ----- ----- -----
Total distributions (0.80) (0.78) (0.78) (0.79) (0.74)
----- ----- ----- ----- -----
Change in net asset value 0.46 0.46 0.06 (1.00) 0.97
----- ----- ----- ----- -----
Net asset value, end of
period $9.09 $8.63 $8.17 $8.11 $9.11
===== ===== ===== ===== =====
Total return(1) 15.03% 15.95% 11.19% (2.57)% 21.87%
Ratios/supplemental data:
Net assets, end of period
(thousands) $532,906 $501,265 $507,855 $531,773 $182,333
Ratio to average net assets of:
Operating expenses 1.11% 1.17% 1.21% 1.19% 1.04%
Net investment income 8.76% 9.21% 10.01% 9.01% 8.46%
Portfolio turnover 167% 162% 147% 222% 157%
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD FUND
CLASS A
-------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------------
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
Net asset value, beginning
<S> <C> <C> <C> <C> <C>
of period $7.70 $6.72 $7.90 $8.84 $8.42
Income from investment
operations
Net investment income 0.77 0.74 0.81 1.03 1.01
Net realized and unrealized
gain (loss) 0.44 0.98 (1.18) (0.95) 0.42
----- ----- ----- ----- -----
Total from investment
operations 1.21 1.72 (0.37) 0.08 1.43
----- ----- ----- ----- -----
Less distributions
Dividends from net
investment income (0.77) (0.74) (0.81) (1.02) (1.01)
Tax return of capital -- -- -- -- --
----- ----- ----- ----- -----
Total distributions (0.77) (0.74) (0.81) (1.02) (1.01)
----- ----- ----- ----- -----
Change in net asset value 0.44 0.98 (1.18) (0.94) 0.42
----- ----- ----- ----- -----
Net asset value, end of
period $8.14 $7.70 $6.72 $7.90 $8.84
===== ===== ===== ===== =====
Total return(1) 16.28% 26.77% (4.99)% 0.64% 17.71%
Ratios/supplemental data:
Net assets, end of period
(thousands) $113,197 $91,664 $80,391 $133,887 $161,208
Ratio to average net assets of:
Operating expenses 1.08% 1.08% 0.89% 0.85% 0.76%
Net investment income 9.51% 10.12% 11.02% 11.81% 11.45%
Portfolio turnover 205% 326% 321% 285% 217%
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD FUND
CLASS B
------------------------------------------------------------
YEAR ENDED
OCTOBER 31, FROM INCEPTION
--------------------------------------- 2/16/94 TO
1997 1996 1995 10/31/94
---- ---- ---- --------
Net asset value, beginning
<S> <C> <C> <C> <C>
of period $8.63 $8.19 $8.13 $9.38
Income from investment
operations
Net investment income 0.73 0.71 0.72 0.54
Net realized and unrealized
gain (loss) 0.46 0.45 0.07 (1.25)
----- ----- ----- -----
Total from investment
operations 1.19 1.16 0.79 (0.71)
----- ----- ----- -----
Less distributions
Dividends from net
investment income (0.75) (0.72) (0.73) (0.52)
Tax return of capital -- -- -- (0.02)
----- ----- ----- -----
Total distributions (0.75) (0.72) (0.73) (0.54)
----- ----- ----- -----
Change in net asset value 0.44 0.44 0.06 (1.25)
----- ----- ----- -----
Net asset value, end of
period $9.07 $8.63 $8.19 $8.13
----- ----- ----- -----
Total return(1) 14.18% 14.88% 10.44% (7.67)%(3)
===== ===== ===== =====
Ratios/supplemental data:
Net assets, end of period
(thousands) $52,184 $25,595 $12,331 $6,056
Ratio to average net assets of:
Operating expenses 1.86% 1.92% 1.97% 1.80%(2)
Net investment income 8.00% 8.47% 9.18% 9.12%(2)
Portfolio turnover 167% 162% 147% 222%
</TABLE>
- ----------
(1) Maximum sales load is not reflected in the total return calculation.
(2) Annualized.
(3) Not annualized.
12
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET FUND
CLASS A
-------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Net asset value, beginning
<S> <C> <C> <C> <C> <C>
of period $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
operations
Net investment income 0.048 0.047 0.053 0.032 0.025(1)
----- ----- ----- ----- -----
Total from investment
operations 0.048 0.047 0.053 0.032 0.025
----- ----- ----- ----- -----
Less distributions
Dividends from net
investment income (0.048) (0.047) (0.053) (0.032 (0.025)
----- ----- ----- ----- -----
Total distributions (0.048) (0.047) (0.053) (0.032) (0.025)
----- ----- ----- ----- -----
Change in net asset value -- -- -- -- --
----- ----- ----- ----- -----
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total return 4.76% 4.67% 5.32% 3.20% 2.50%
atios/supplemental data:
Net assets, end of period
(thousands) $188,695 $192,859 $193,534 $196,566 $170,334
Ratio to average net assets of:
Operating expenses 0.79% 0.84% 0.71% 0.85% 0.85%
Net investment income 4.76% 4.68% 5.31% 3.19% 2.53%
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET FUND
CLASS A
-------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------------
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
Net asset value, beginning
<S> <C> <C> <C> <C> <C>
of period $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
operations
Net investment income 0.035(1) 0.060 0.076 0.085(1) 0.067(1)
----- ----- ----- ----- -----
Total from investment
operations 0.035 0.060 0.076 0.085 0.067
----- ----- ----- ----- -----
Less distributions
Dividends from net
investment income (0.035) (0.060) (0.076) (0.085) (0.067)
----- ----- ----- ----- -----
Total distributions (0.035) (0.060) (0.076) (0.085) (0.067)
----- ----- ----- ----- -----
Change in net asset value -- -- -- -- --
----- ----- ----- ----- -----
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total return 3.50% 6.00% 7.60% 8.50% 6.70%
Ratios/supplemental data:
Net assets, end of period
(thousands) $180,786 $168,573 $163,645 $149,968 $107,262
Ratio to average net assets of:
Operating expenses 0.85% 0.82% 0.85% 0.85% 0.85%
Net investment income 3.50% 6.01% 7.59% 8.53% 6.71%
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET FUND
CLASS B
------------------------------------------------------------
YEAR ENDED
OCTOBER 31, FROM INCEPTION
--------------------------------------- 7/15/94 TO
1997 1996 1995 10/31/94
---- ---- ---- --------
Net asset value, beginning
<S> <C> <C> <C> <C>
of period $1.00 $1.00 $1.00 $1.00
Income from investment
operations
Net investment income 0.040 0.039 0.046 0.007
----- ----- ----- -----
Total from investment
operations 0.040 0.039 0.046 0.007
----- ----- ----- -----
Less distributions
Dividends from net
investment income (0.040) (0.039) (0.046) (0.007)
----- ----- ----- -----
Total distributions (0.040) (0.039) (0.046) (0.007)
----- ----- ----- -----
Change in net asset value -- -- -- --
----- ----- ----- -----
Net asset value, end of period $1.00 $1.00 $1.00 $1.00
===== ===== ===== =====
Total return 4.02% 3.93% 4.63% 0.70%(3)
Ratios/supplemental data:
Net assets, end of period
(thousands) $15,013 $10,223 $8,506 $2,086
Ratio to average net assets of:
Operating expenses 1.55% 1.59% 1.44% 1.60%(2)
Net investment income 4.02% 3.92% 4.62% 3.46%(2)
</TABLE>
- ----------
(1) Includes reimbursement of operating expenses by Adviser of $0.0001, $0.001,
$0.001 and $0.001, respectively.
(2) Annualized.
(3) Not annualized.
13
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND
CLASS A
-------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Net asset value, beginning
<S> <C> <C> <C> <C> <C>
of period $9.47 $9.60 $8.88 $9.87 $9.91
Income from investment
operations
Net investment income 0.55 0.52 0.55 0.64 0.62(1)
Net realized and unrealized
gain (loss) 0.17 (0.15) 0.72 (1.02) 0.34
----- ----- ----- ----- -----
Total from investment
operations 0.72 0.37 1.27 (0.38) 0.96
----- ----- ----- ----- -----
Less distributions
Dividends from net
investment income (0.53) (0.50) (0.55) (0.45) (0.62)
Dividends from net realized
gains -- -- -- (0.02) (0.38)
Tax return of capital -- -- -- (0.14) --
----- ----- ----- ----- -----
Total distributions (0.53) (0.50) (0.55) (0.61) (1.00)
----- ----- ----- ----- -----
Change in net asset value 0.19 (0.13) 0.72 (0.99) (0.04)
----- ----- ----- ----- -----
Net asset value, end of period $9.66 $9.47 $9.60 $8.88 $9.87
===== ===== ===== ===== =====
Total return(2) 7.85% 4.05% 14.81% (3.98)% 10.18%
Ratios/supplemental data:
Net assets, end of period
(thousands) $182,250 $208,552 $235,879 $262,157 $57,072
Ratio to average net
assets of:
Operating expenses 0.98% 1.03% 0.99% 0.98% 0.75%
Net investment income 5.63% 5.55% 6.01% 5.92% 6.19%
Portfolio turnover 377% 379% 178% 101% 264%
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND
CLASS A
-------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------------
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
Net asset value, beginning
<S> <C> <C> <C> <C> <C>
of period $9.65 $9.08 $9.28 $9.25 $9.14
Income from investment
operations
Net investment income 0.65(1) 0.68(1) 0.71(1) 0.72 0.73(1)
Net realized and unrealized
gain (loss) 0.26 0.57 (0.20) 0.03 0.22
----- ----- ----- ----- -----
Total from investment
operations 0.91 1.25 0.51 0.75 0.95
----- ----- ----- ----- -----
Less distributions
Dividends from net
investment income (0.65) (0.68) (0.71) (0.72) (0.84)
Dividends from net realized
gains -- -- -- -- --
Tax return of capital -- -- -- -- --
----- ----- ----- ----- -----
Total distributions (0.65) (0.68) (0.71) (0.72) (0.84)
----- ----- ----- ----- -----
Change in net asset value 0.26 0.57 (0.20) 0.03 0.11
----- ----- ----- ----- -----
Net asset value, end of period $9.91 $9.65 $9.08 $9.28 $9.25
===== ===== ===== ===== =====
Total return(2) 9.74% 14.24% 5.82% 8.56% 10.92%
Ratios/supplemental data:
Net assets, end of period
(thousands) $40,365 $22,123 $11,957 $10,747 $8,980
Ratio to average net
assets of:
Operating expenses 0.77% 0.97% 1.00% 1.00% 1.00%
Net investment income 6.64% 7.20% 7.77% 7.93% 7.93%
Portfolio turnover 285% 130% 265% 297% 160%
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND
CLASS B
------------------------------------------------------------
YEAR ENDED
OCTOBER 31, FROM INCEPTION
--------------------------------------- 2/24/94 TO
1997 1996 1995 10/31/94
---- ---- ---- --------
Net asset value, beginning
<S> <C> <C> <C> <C>
of period $9.45 $9.58 $8.86 $9.61
Income from investment
operations
Net investment income 0.47 0.44 0.48 0.39
Net realized and unrealized
gain (loss) 0.17 (0.14) 0.72 (0.75)
----- ----- ----- -----
Total from investment
operations 0.64 0.30 1.20 (0.36)
----- ----- ----- -----
Less distributions
Dividends from net
investment income (0.49) (0.43) (0.48) (0.30)
Dividends from net realized
gains -- -- -- --
Tax return of capital -- -- -- (0.09)
----- ----- ----- -----
Total distributions (0.49) (0.43) (0.48) (0.39)
----- ----- ----- -----
Change in net asset value 0.15 (0.13) 0.72 (0.75)
----- ----- ----- -----
Net asset value, end of period $9.60 $9.45 $9.58 $8.86
===== ===== ===== =====
Total return(2) 6.94% 3.39% 13.82% (3.83)%(4)
Ratios/supplemental data:
Net assets, end of period
(thousands) $5,321 $4,875 $3,655 $1,238
Ratio to average net assets of:
Operating expenses 1.71% 1.78% 1.73% 2.00%(3)
Net investment income 4.91% 4.79% 5.23% 4.49%(2)
Portfolio turnover 377% 379% 178% 101%
</TABLE>
- ----------
(1) Includes reimbursement of operating expenses by Adviser of $0.03, $0.04,
$0.01, $0.01 and $0.08, respectively.
(2) Maximum sales load is not reflected in the total return calculation.
(3) Annualized.
(4) Not annualized.
14
<PAGE>
PERFORMANCE INFORMATION
The Trust may, from time to time, include the yield and total return history
of any or all of the Funds in advertisements, sales literature or reports to
current or prospective shareholders. Both yield and total return figures are
computed separately for each class of shares in accordance with formulas
specified by the Securities and Exchange Commission. Yield and total return are
based on historical earnings of each Fund and are not an indication of future
performance. Performance information may be expressed as yield and effective
yield of the Money Market Fund, as yield of any other Fund or class thereof, and
as total return of any Fund or class thereof. Current yield for the Money Market
Fund will be based on the income earned by the Fund 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 Fund will be computed by dividing the Fund's net investment
income over a 30-day period by an average value of invested assets (using the
average number of shares entitled to receive dividends and the maximum offering
price per share at the end of the period), all in accordance with applicable
regulatory requirements. Such amount will be compounded for six months and then
annualized for a twelve-month period to derive the Fund's yield for each class.
Standardized quotations of average annual total return for each class of
shares of each Fund will be expressed in terms of the average annual compounded
rate of return of a hypothetical investment in such class of shares of each Fund
over a period of 1, 5, and 10 years (or up to the life of the class of shares).
Standardized total return quotations reflect the deduction of a proportional
share of each class's expenses of each Fund (on an annual basis), deduction of
the maximum initial sales load in the case of Class A and M Shares and the
maximum contingent deferred sales charge applicable to a complete redemption of
the investment in the case of Class B and C Shares, and assume that all
dividends and distributions are reinvested when paid. Performance data quoted
for Class B, C and M Shares covering periods prior to the inception of such
classes of shares will reflect historical performance of Class A Shares of a
Fund as adjusted for the higher operating expenses applicable to such class of
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 also advertise performance relative to certain performance
rankings and indices compiled by independent organizations. The Trust may
include the ranking of these performance figures relative to such figures for
groups of mutual funds having similar investment objectives as categorized by
ranking services such as Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Weisenberger Financial Services, Inc., and Morningstar, Inc.
Additionally, the Trust may compare a Fund's performance results to other
investment or savings vehicles (such as certificates of deposit) and may refer
to results published in various publications such as 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 Fund with
certain widely acknowledged outside standards or indices for stock and bond
market performance, such as the Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500"), Dow Jones Industrial Average, Europe Australia Far East
Index (EAFE), Russell 2000 Growth Index, Salomon Brothers 90-Day Treasury Bill
Index, Consumer Price Index, Lehman Brothers Corporate Index and Lehman Brothers
T-Bond Index. The S&P 500 is a commonly quoted measure of stock market
performance and represents common stocks of companies of varying sizes segmented
across 90 different industries which are listed on the New York Stock Exchange,
the American Stock Exchange and traded over the NASDAQ National Market System.
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
Fund's portfolio; or compare a Fund's equity or bond return figure to well-known
indices of market performance including but not limited to: the S&P 500 Index,
Dow Jones Industrial Average, CS First Boston High Yield Index and Solomon
Brothers Corporate and Government Bond Indices.
Performance information for a Fund reflects only the performance of a
hypothetical investment in Class A, Class B, Class C and Class M Shares of that
Fund during the particular time period on which the calculations are based.
Performance information should be considered in light of a particular Fund's
investment objectives and policies, characteristics and qualities of the Fund,
and the market conditions during the given time period, and should not be
considered as a representation of what may be achieved in the future. For a
description of the methods used to determine total return for each Fund, see the
Statement of Additional Information.
15
<PAGE>
The Trust's Annual Report, available upon request and without charge,
contains a discussion of the performance of each Fund and a comparison of that
performance to a securities market index.
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has a different investment objective and is designed to meet
different investment needs. The differences in objectives and policies among the
seven Funds can be expected to affect the investment return of each Fund and the
degree of market and financial risk to which each Fund is subject. The
investment objective of each Fund is a fundamental policy which may not be
changed without the approval of a vote of a majority of the outstanding shares
of that Fund. Since certain risks are inherent in the ownership of any security,
there can be no assurance that any Fund will achieve its investment objective.
The investment policies of each Fund will also affect the rate of portfolio
turnover. A high rate of portfolio turnover generally involves correspondingly
greater brokerage commissions, which are paid directly by the Fund. The rate for
each Fund, except the Money Market Fund (which does not normally pay brokerage
commissions), is included under "Financial Highlights."
PHOENIX BALANCED FUND
The Balanced Fund seeks as its investment objectives reasonable income,
long-term capital growth and conservation of capital. The Balanced Fund intends
to invest based on combined considerations of risk, income, capital enhancement
and protection of capital value.
The Balanced Fund may invest in any type or class of security. The Balanced
Fund will invest at least 65% of the value of its total assets 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)). 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 Fund 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 Fund, 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 Fund 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 Fund 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 Fund. In that event, the Adviser will determine whether the Fund
should continue to hold such issue in its portfolio. If, in the Adviser's
opinion, market conditions warrant, the Fund 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 Fund 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
The Convertible Fund 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 Fund 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.
If at any time the market value of the Convertible Fund's 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
16
<PAGE>
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 Fund may also invest up to 100% of the Fund's total net assets
in non-rated and non-investment grade convertible securities.
The Convertible Fund 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
Fund's ability to expand its investments through the permitted use of bank
borrowings (see "Leverage"). The Convertible Fund 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
Fund's 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 Fund are not
subject to any limitations as to ratings and may include high, medium, lower and
non-rated securities. Historically, the Convertible Fund has emphasized
investments in investment grade convertible securities which are rated within
the four highest categories by recognized rating agencies, i.e., S&P and
Moody's. (See the Appendix for a discussion of the S&P and Moody's ratings.) The
Convertible Fund may invest up to 100% of the Fund's 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 Fund 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
The Growth Fund's 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 Fund's assets will be incidental to its objective.
Under normal circumstances, the Growth Fund will invest at least 65% of the
value 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 Fund 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 Fund 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 Fund 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." 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 Fund 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 Fund's
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 Fund 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 AGGRESSIVE GROWTH FUND
Appreciation of capital through the use of aggressive investment techniques
is this Fund's investment objective, and income will not generally be considered
in the selection of investments. In seeking to achieve this objective,
management may utilize the Fund's ability to expand its investments through the
permitted use of bank borrowings (see "Leverage").
Under normal circumstances, the Aggressive Growth Fund will invest at least
65% of the value of its total assets in common and preferred stocks and
securities convertible into common stocks or other equity securities. Up to 10%
of the Fund's total net assets may be invested in foreign securities.
The Aggressive Growth Fund may also invest in debt securities which, in the
judgment of the Adviser, offer opportunities for capital growth. However, when a
temporary defensive position is deemed advisable, the Fund may, without limit,
invest in high-grade senior securities or U.S. Government securities or retain
cash or cash equivalents. The Fund may also engage in certain options
transactions and enter
17
<PAGE>
into financial futures contracts and related options for hedging purposes. See
"Investment Techniques and Related Risks."
The debt obligations which may be acquired by the Aggressive Growth Fund
include direct and indirect obligations of the U.S. Government and its agencies,
states and municipalities and their agencies, or corporate issuers. Any
corporate debt obligations in which the Aggressive Growth Fund may invest must
be rated at least BBB or Baa or better by national agencies, or, if unrated,
are, in the Adviser's opinion, of equivalent investment quality. Securities
which are rated "BBB" or "Baa" are generally regarded as having an adequate
capacity to pay interest and repay principal in accordance with the terms of the
obligation, but may have some speculative characteristics. In addition, such
securities are generally more sensitive to changes in economic conditions than
securities rated in the higher categories, which tend to be more sensitive to
interest rate changes. In the event that the rating for any security held in the
Aggressive Growth Fund's portfolio drops below "BBB" or "Baa," such change will
be considered by the Fund's Adviser in evaluating the overall composition of the
Fund's portfolio. See the Appendix.
Since investments normally will consist primarily of securities believed by
the Adviser to have a substantial potential for capital growth, the assets of
the Aggressive Growth Fund may be considered to be subject to greater risks than
those involved if the Fund invested in securities that did not have these growth
characteristics. The Fund 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
The High Yield Fund's primary objective is to seek high current income. This
Fund 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). Under normal conditions, at least 80% of the value
of the total assets of the High Yield Fund 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. 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 Fund 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 Fund can be met
by investing in securities in higher rating categories, such investments may be
made. This Fund may retain securities when their ratings have changed.
The High Yield Fund may also invest 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. The High Yield Fund's 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 Fund 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 Fund 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 Fund's management will seek to minimize
risk through diversification and continual evaluation of current developments in
interest rates 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 Fund will not normally affect cash
income from such securities but will be reflected in the Fund's 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 Fund seeking recovery from the
issuer. Also, because the High Yield Fund 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
Fund 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. Liquid restricted securities are typically less marketable than
publicly offered debt securities.
The table below shows the dollar weighted average of total investments, as of
October 31, 1997, listed by Moody's rating categories, or comparable rating by
another Nationally Recognized Statistical Rating Organization ("NRSRO"). The
column titled "Not Rated" reflects the percentage of portfolio holdings which
were not rated by any NRSRO but which the Adviser has judged to be comparable in
quality to the corresponding rating categories.
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MOODY'S RATING RATED NOT RATED
-------------- ----- ---------
Aaa 1.1% 0.0%
Aa 0.0 0.0
A 0.0 0.0
Baa 2.1 0.0
Ba 24.4 3.8
B 56.2 4.9
Caa 1.8 0.5
Ca 0.0 0.0
C 0.0 0.0
D 0.0 0.0
---- ---
Total 85.6 9.2
PHOENIX MONEY MARKET FUND
The investment objective of the Money Market Fund 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 Fund 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 Fund's 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 Fund's 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 illiquid securities, time deposits and/or repurchase agreements maturing in
more than seven days exceed 10% of the Money Market Fund's 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 Fund 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 Fund, may result in frequent changes in its
portfolio.
The value of the securities in the Money Market Fund's 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 Fund shares could require the sale of portfolio investments at a time
when a sale might not be desirable.
The average maturity of the Money Market Fund's portfolio securities based on
their dollar value will not exceed 90 days.
PHOENIX U.S. GOVERNMENT SECURITIES FUND
The U.S. Government Securities Fund seeks as its investment objective a high
level of current income consistent with safety of principal. This Fund intends
to invest at least 65% of the value of its total assets 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 Fund may invest up to
35% of its net assets in short-term instruments
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including bank certificates of deposit and time deposits, bankers' acceptances
and repurchase agreements. In addition, this Fund may invest up to 35% of its
net assets in investment grade securities including taxable municipal bonds,
non-agency mortgage-backed securities and corporate bonds.
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 (maturities of one year or less), U.S. Treasury notes (maturities
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 Fund 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 Fund 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 Fund may also invest in ownership interests in pools of mortgage
assets such as FNMA Guaranteed REMIC (real estate mortgage investment conduits)
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 Fund 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 Fund may invest in are contained in the section "Phoenix Money Market
Fund." The quality ratings and maturity restrictions described in that section
also apply to the short-term investments of the U.S. Government Securities Fund.
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 Fund may invest in repurchase agreements. A repurchase agreement is a
transaction where a Fund buys a security and the seller simultaneously agrees to
buy that same security back at a fixed price and agreed-upon date. 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 Fund, if the seller of the repurchase agreement defaults and does not
repurchase the underlying securities, the Fund might incur a loss if the value
of the underlying securities declines, and disposition costs may be incurred in
connection with liquidating the underlying securities. In addition, if
bankruptcy proceedings are commenced regarding the seller, realization upon the
underlying securities may be delayed or limited, and a loss may be incurred if
the underlying securities decline in value. For more information about
repurchase agreements, see the Statement of Additional Information.
ZERO COUPON BONDS
The Balanced, Convertible and High Yield Funds may invest in debt obligations
that do not make any interest payments for a specified period of time prior to
maturity or
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until maturity ("deferred coupon" or "zero coupon" obligations). Even though
interest is not actually paid on these instruments, for tax purposes the Fund
that owns them is imputed with ordinary income. This imputed income is paid out
to shareholders as dividends. These distributions must be made from a Fund's
cash assets or, if necessary, from the proceeds of sales of portfolio
securities. The Funds 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 Funds, except the Money Market Fund and the U.S. Government Securities
Fund, 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 Fund, Convertible Fund, Growth
Fund, High Yield Fund and the Aggressive Growth Fund 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 Fund 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 pledged account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option written by a
Fund is also covered if the Fund 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 any asset, including equity securities and non-investment grade
debt so long as the asset is liquid, unencumbered and marked to market daily in
a pledged 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 Fund which may
be subject to call options to 50% of a Fund's 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 Fund 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 a Fund's 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.
The Balanced Fund, Convertible Fund, Growth Fund, High Yield Fund and the
Aggressive Growth Fund 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 Fund will invest in call and put options whenever, in the opinion
of its Adviser, a hedging transaction is consistent with the investment
objectives of the Fund. A Fund may sell a call option or a put option which it
has previously purchased prior to the purchase (in the case of a call) or the
sale (in the case of a put) of the underlying security. Any such sale 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 Fund 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 Fund may invest up to 5% of
its net assets in warrants or stock
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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 Funds, except the Money Market Fund and the U.S. Government Securities
Fund, 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 Fund may purchase and sell financial futures contracts which are traded on
a recognized exchange or board of trade and may purchase exchange or
board-traded put and call options on financial futures contracts 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 Fund will engage in transactions in financial futures contracts and related
options only for hedging purposes and not for speculation. In addition, a Fund
will not purchase or sell any financial futures contract or related option if,
immediately thereafter, the sum of the cash or other liquid assets initially
committed with respect to a Fund's existing futures and related options
positions and the premiums paid for related options would exceed 2% of the
market value of the Fund's total assets. At the time of purchase of a futures
contract or a call option on a futures contract, any asset, including equity
securities and non-investment grade debt so long as the asset is liquid,
unencumbered and marked to market daily, equal to the market value of the
futures contract minus the Fund's initial margin deposit with respect thereto
will be deposited in a pledged account with the Fund's custodian bank to
collateralize fully the position and thereby ensure that it is not leveraged.
The extent to which a Fund may enter into financial futures contracts and
related options may also be limited by requirements of the Internal Revenue Code
for qualification as a regulated investment company.
Engaging in transactions in financial futures contracts involves certain
risks, such as the possibility of an imperfect correlation between futures
market prices and cash market prices and the possibility that the Adviser could
be incorrect in its expectations as to the direction or extent of various
interest rate movements, in which case the Fund's return might have been greater
had hedging not taken place. There is also the risk that a liquid secondary
market may not exist and the loss from investing in futures contracts is
potentially unlimited because the Fund may be unable to close its position. The
risk in purchasing an option on a financial futures contract is that a Fund will
lose the premium it paid. Also, there may be circumstances when the purchase of
an option on a financial futures contract would result in a loss to a Fund while
the purchase or sale of the contract would not have resulted in a loss. 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 Funds, except the Money Market Fund and the U.S. Government
Securities Fund, 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 limited to 25% of the total net asset value of the
Balanced Fund, Convertible Fund and Growth Fund. The High Yield Fund may invest
up to 35% of its total net asset value in foreign securities and the Aggressive
Growth Fund may invest up to 10% of its total net asset value in foreign
securities. The Funds 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 Funds 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 Funds hold or intend to acquire. The Funds will not speculate in forward
foreign currency exchange contracts.
Investing in the securities of foreign companies involves special risks and
considerations not typically associated with investing in U.S. companies. These
include differences in accounting, auditing and financial reporting standards,
generally higher commission rates on foreign portfolio transactions, the
possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations, political instability which could
affect U.S. investments in foreign countries, difficulty in invoking legal
process abroad and potential restrictions on the flow of international capital.
Additionally, dividends payable on foreign securities may be subject to foreign
taxes withheld prior to distribution. Foreign securities often trade with less
frequency and volume than domestic securities and therefore
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may exhibit greater price volatility. Changes in foreign exchange rates will
affect the value of those securities which are denominated or quoted in
currencies other than the U.S. dollar. Many of the foreign securities held by
the Funds will not be registered with the Securities and Exchange Commission and
many of the issuers of foreign securities will not be subject to the
Commission's reporting requirements. Accordingly, there may be less publicly
available information about the securities and about the foreign company or
government issuing them than is available about a domestic company or government
entity. Moreover, individual foreign economies may compare favorably or
unfavorably with the United States economy with respect to such factors as rate
of growth, rate of inflation, capital reinvestment, resource self-sufficiency
and balance of payment positions, 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. The economies of developing countries generally are heavily dependent
upon international trade and, accordingly, have been and may continue to be
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been and may
continue to be adversely affected by economic conditions in the countries with
which they trade. 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 Adviser will strive to be sensitive to publicized reversals of
economic conditions, political unrest and adverse changes in trading status,
unanticipated political and social developments may affect the values of a
Fund's investments in such countries and the availability of additional
investments in such countries.
The 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 Funds will calculate their net asset values and complete orders to
purchase, exchange or redeem shares only on a Monday-Friday basis (excluding
holidays on which the New York Stock Exchange is closed). Foreign securities in
which the Funds may invest may be primarily listed on foreign stock exchanges
which may trade on other days (such as Saturdays). As a result, the net asset
values of the Funds may be affected by such trading on days when a shareholder
has no access to the Funds.
LEVERAGE
The Trust may from time to time increase the Convertible Fund's or the
Aggressive Growth Fund's 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 Fund (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 25% of the total
assets of a Fund, 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 Fund's 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 Fund with respect to
which the borrowing has been made. Because such expense would not otherwise be
incurred, the net investment income of such Fund 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 Fund 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 Fund's 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 Fund, the net asset
value of the Fund 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 Fund in any
one industry, except the Money Market Fund may invest more than 25% of its
assets in the domestic banking industry. If the Trust loans the portfolio
securities of any Fund, the market value of the securities loaned may not exceed
25% of the market value of the total assets of such Fund. The Trust may borrow
money for any Fund only for temporary administrative purposes, provided that any
such borrowing does not exceed 10% of the market value of the total assets of
the
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Fund. 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
Fund. With the exception of the Convertible Fund and the Aggressive Growth Fund,
no Fund may invest in portfolio securities while the amount of borrowing of the
Fund exceeds 5% of the total assets of such Fund.
In addition to the investment restrictions described above, each Fund's
investment program is subject to further restrictions which are described in the
Statement of Additional Information. The restrictions for each Fund described
above are fundamental and may not be changed without shareholder approval.
MANAGEMENT OF THE FUNDS
The Trust is a mutual fund 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 the laws of the Commonwealth of Massachusetts.
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. 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 & 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 Strategic Allocation Fund, Inc., Phoenix
Strategic Equity Series Fund (except the Equity Opportunities Fund), Phoenix
Duff & Phelps Institutional Funds (except Real Estate Equity Securities
Portfolio and Enhanced Reserves Portfolio), Phoenix Growth and Income Fund of
Phoenix Equity Series Fund, Phoenix Investment Trust 97 and The Phoenix Edge
Series Fund (all Series other than the Real Estate Securities Series and
Aberdeen New Asia Series) and as subadviser to the SunAmerica Series Trust,
among other investment advisory clients. As of September 30, 1997, PIC had
approximately $20.2 billion in assets under management. The Adviser was
originally organized in 1932 as John P. Chase, Inc.
The shareholders of each Fund 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 Funds of the Trust the Adviser is entitled
to a fee, payable monthly, at the following annual rates:
FUND 1ST $1 BILLION $1-2 BILLION $2+ BILLION
- ---- -------------- ------------ -----------
Growth Fund .70% .65% .60%
Aggressive Growth
Fund .70% .65% .60%
Convertible Fund .65% .60% .55%
High Yield Fund .65% .60% .55%
Balanced Fund .55% .50% .45%
U.S. Government
Securities Fund .45% .40% .35%
Money Market Fund .40% .35% .30%
For its services to all Funds of the Trust during the fiscal year ended
October 31, 1997, the Adviser received a fee of $34,413,328. The Adviser has
agreed to assume expenses and reduce the advisory fee for the benefit of the
Money Market Fund to the extent that operating expenses of that Fund exceed
0.85% for Class A Shares and 1.60% for Class B Shares of the average daily net
asset value of the Fund.
THE PORTFOLIO MANAGER
Balanced Fund
Investment and trading decisions for the Balanced Fund are made by a team of
equity investment professionals and a team of fixed income investment
professionals.
Convertible Fund
Mr. John H. Hamlin has served as Portfolio Manager of the Convertible Fund
since 1992 and as such, Mr. Hamlin is primarily responsible for the day-to-day
management of the Fund's portfolio. Mr. Hamlin is a Portfolio Manager, Equities,
of Phoenix Investment Counsel, Inc. and National Securities & Research
Corporation.
Growth Fund
Investment and trading decisions for the Growth Fund are made by a team of
equity investment professionals.
Aggressive Growth Fund
Mr. Roger Engemann, Mr. James E. Mair and Mr. John S. Tilson head the team
that is primarily responsible for the day-to-day management of the Aggressive
Growth Series. Each is a Vice President of the Adviser. Mr. Engemann has been
president of Roger Engemann & Associates, Inc. ("REA") since its inception in
1969. Messrs. Mair and Tilson are both Executive Vice Presidents of Portfolio
Management of REA and both have been with REA since 1983. Messrs. Engemann and
Mair have been Chartered Financial Analysts ("CFAs") since 1972, and Mr. Tilson
has been a CFA since 1974.
High Yield Fund
Mr. Curtiss O. Barrows has served as Portfolio Manager of the High Yield Fund
since 1985 and, as such, is primarily
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responsible for the day-to-day management of the Fund's portfolio. Mr. Barrows
is also Vice President and Portfolio Manager of the Multi-Sector Fixed Income
Series of The Phoenix Edge Series Fund. Mr. Barrows is a Managing Director,
Fixed Income, of Phoenix Investment Counsel, Inc. and National Securities &
Research Corporation.
Money Market Fund
Ms. Julie Sapia is the Portfolio Manager of the Money Market Fund and as such
is primarily responsible for the day-to-day management of the Fund. Ms. Sapia is
also Vice President and Portfolio Manager for The Phoenix Edge Series Fund,
Money Market Series and Phoenix Duff & Phelps Institutional Mutual Funds, Money
Market Portfolio. She is also Vice President of the Phoenix-Aberdeen Series
Fund. From December 1997 to present she has been Director, Money Market Trading;
from April 1997 to December 1997 she served as Head Money Market Trader of PIC;
from 1995 to 1997 she served as Money Market Trader of PIC; and from 1991 to
1995 she served as Money Market Trader for Phoenix Home Life Mutual Insurance
Company.
U.S. Government Securities Fund
Mr. Christopher Saner and Mr. Andrew Szabo have served as Co-Portfolio
Managers of the Phoenix U.S. Government Securities Fund since January 1998 and
as such are primarily responsible for the day-to-day management of the Fund's
portfolio. Messrs. Saner and Szabo are also Managing Directors of Phoenix
Investment Counsel, Inc.
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 is
entitled to a fee, payable monthly and based upon (a) the average of the
aggregate daily net asset values of each Fund, at the following incremental
annual rates:
First $100 million .05%
$100 million to $300 million .04%
$300 million through $500 million .03%
Greater than $500 million .015%
(b) a minimum fee based on the predominant type of assets of the Fund; and (c)
an annual fee of $12,000 for each class of shares beyond one. For its services
during the Trust's fiscal year ended October 31, 1997, Equity Planning received
$1,567,552 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 Fund of
the Trust are held by the custodian or any subcustodian separate from the
securities and assets of each other Fund.
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 Conduct Rules of the National Association of Securities Dealers,
Inc. ("NASD") prohibit its members from seeking orders for the execution of
investment company portfolio transactions on the basis of their sales of
investment company shares, under such Rules, sales of investment company shares
may be considered in selecting brokers to effect portfolio transactions.
Accordingly, some portfolio transactions are, subject to such Rules and to
obtaining best prices and executions, effected through dealers (excluding Equity
Planning) who sell shares of the Trust. 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. Michael E. Haylon, a
director of Equity Planning, is an officer of the Trust. G. Jeffrey Bohne, Nancy
G. Curtiss, William E. Keen, III, William R. Moyer, Leonard J. Saltiel, and
Thomas N. Steenburg are officers of the Trust and officers of Equity Planning.
Equity Planning and the Trust have entered into distribution agreements under
which Equity Planning has agreed to use its best efforts to find purchasers for
Trust shares sold subject to an initial sales charge and those sold subject to
a contingent deferred sales charge. The Trust has granted Equity Planning the
exclusive right to purchase from the Trust and resell, as principal, shares
needed to fill unconditional orders for Trust shares. Equity Planning may sell
Trust shares through its registered representatives or through securities
dealers with whom it has sales agreements. Equity Planning may also sell Trust
shares pursuant to sales agreements entered into with banks or bank affiliated
securities brokers who, acting as agent for their customers, place orders for
Trust shares with Equity Planning. Although the Glass-Steagall Act prohibits
banks and bank affiliates from engaging in the business of underwriting,
distributing or selling securities (including mutual fund shares), banking
regulators have not indicated that such institutions are prohibited from
purchasing mutual fund shares upon the order and for the account of their
customers. If, because of changes in law or regulations, or
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<PAGE>
because of new interpretations of existing law, it is determined that agency
transactions of banks or bank affiliated securities brokers are not permitted
under the Glass-Steagall Act, the Trustees will consider what action, if any, is
appropriate. It is not anticipated that termination of sales agreements with
banks or bank affiliated securities brokers would result in a loss to their
customers or a change in the net asset value per share of a Fund 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 have adopted separate amended and restated distribution plans on
behalf of all Funds of the Trust (excluding Class A Shares of the Money Market
Fund), pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"Class A Plan," the "Class B Plan," the "Class C Plan," the "Class M Plan" and
collectively the "Plans"). The Plans authorize a Fund to reimburse the
Distributor for expenses in connection with the sale and promotion of such
Fund's shares and the furnishing of shareholder services. A 12b-1 fee paid by
one Fund may be used to finance distribution of the shares of another Fund based
on the number of shareholder accounts within the Funds. Pursuant to the Class B
Plan, a Fund is authorized to reimburse the Distributor monthly for actual
expenses of the Distributor up to 0.75% (0.50% of the Money Market Fund's Class
B Shares) annually of the average daily net assets of each Fund's Class B
Shares. Under the Class C and Class M Plans, the Funds may reimburse the
Distributor monthly for actual expenses of the Distributor up to 0.75% and 0.25%
annually of the average daily net assets of the High Yield Fund's Class C and
Class M Shares, respectively. In addition, under the Plans the Funds will pay
the Distributor 0.25% annually of the average daily net assets of the Funds for
providing services to shareholders, including assistance in connection with
inquiries related to shareholder accounts (the "Service Fee").
Expenditures incurred under the Plans may consist of: (i) commissions to
sales personnel for selling shares of the Trust (including underwriting
commissions and finance charges related to the payment of commissions for sales
of Class B Shares); (ii) compensation, sales incentives and payments to sales,
marketing and service personnel; (iii) payments to broker-dealers and other
financial institutions which have entered into agreements with the Distributor
for services rendered in connection with the sale and distribution of shares of
the Trust; (iv) payment of expenses incurred in sales and promotional activities
including advertising expenditures related to the Trust; (v) the costs of
preparing and distributing promotional materials; (vi) the costs of printing the
Trust's Prospectus and Statement of Additional Information for distribution to
potential investors; and (vii) such other similar services that the Trustees
determine are reasonably calculated to result in the sale of shares of the
Trust. From the Service Fee, the Distributor expects to pay a quarterly fee to
qualifying broker-dealer firms, as compensation for providing personal
services and/or the maintenance of shareholder accounts, with respect to shares
sold by such firms. This fee will not exceed on an annual basis 0.25% of the
average annual net asset value of such shares, and will be in addition to sales
charges on Trust shares which are reallowed to such firms. To the extent that
the entire amount of the Service Fee is not paid to such firms, the balance will
serve as compensation for personal and account maintenance services furnished by
the Distributor.
In order to receive payments under the Plans, participants must meet such
qualifications as are to be established in the sole discretion of the
Distributor, such as services to the Trust's shareholders; or services providing
the Trust with more efficient methods of offering shares to groups of clients,
members or prospects of a participant; or services permitting 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, 1997, the Trust paid $13,410,632 under
the Class A Plan and $1,568,465 under the Class B Plan. The fees were used to
compensate broker-dealers for servicing shareholder's accounts, including
$1,358,415 paid to W.S. Griffith & Co., Inc., an affiliate, compensating sales
personnel and reimbursing the Distributor for commission expenses and expenses
related to preparation of the marketing material. The Distributor's expenses
from selling and servicing Class B Shares may be more than the payments received
from contingent deferred sales charges collected on redeemed shares and from the
Funds under the Class B Plan. Those expenses may be carried over without any
interest charges and paid in future years. At October 31, 1997, the end of the
last Plan year, the Distributor had incurred unreimbursed expenses under the
Class B Plan of $5,044,554 (equal to 0.09% of the Funds' net assets) which have
been carried over into the present Class B Plan year.
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.
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The NASD regards certain distribution fees as asset-based sales charges
subject to NASD sales load limits. The NASD's maximum sales charge rule may
require the Trustees to suspend distribution fees or amend the Plans.
HOW TO BUY SHARES
HOW DO YOU INVEST?
You may open a fund account with an initial investment of $500. This amount
is reduced to $25 for investments made under the "Investo-Matic" plan (see the
Funds' Application), individual retirement accounts or under the systematic
exchange privilege described below. The initial investment requirement is waived
for investments made under pension, profit sharing or employee benefit plans as
well as in connection with reinvested dividends and distributions.
You may make additional investments at any time with at least $25. The
subsequent investment minimum is waived for investments made under pension,
profit sharing or employee benefit plans as well as in connection with
reinvested dividends and distributions.
An application should be completed to open a new Phoenix Funds account. A
check for the amount you wish to invest, made payable to the "Phoenix Funds,"
(along with the completed application if opening a new account), must be sent
to: Phoenix Funds, c/o State Street Bank and Trust Company ("State Street
Bank"), P.0. Box 8301, Boston, MA 02266-8301. You may also write to the
Distributor at 100 Bright Meadow Boulevard, Enfield, Connecticut 06083-2200 or
call (800) 243-1574.
Shares are sold at the public offering price based on the net asset value for
the class of shares bought next determined after State Street Bank receives your
order. In most cases, in order to receive that day's public offering price,
State Street Bank must receive your order before the close of trading on the New
York Stock Exchange. Shares purchased will be recorded electronically in
book-entry form by the Transfer Agent. No share certificates are available. See
"Net Asset Value."
WHAT ARE THE CLASSES AND HOW DO THEY DIFFER?
The Funds presently offer investors four classes of shares which bear sales
and distribution charges in different amounts. Currently, only the High Yield
Fund offers Class C and M Shares.
CLASS A SHARES. If you buy Class A Shares, you will pay a sales charge at the
time of purchase equal to 4.75% of the offering price (4.99% of the amount
invested). The sales charge may be reduced or waived under certain conditions.
Class A Shares are not subject to any charges by the Funds when they are sold.
Class A Shares have lower Rule 12b-1 fees and pay higher dividends than any
other class.
CLASS B SHARES. If you buy Class B Shares, you will not pay a sales charge at
the time of purchase. If you sell your Class B Shares within the first 5 years
after they are bought, you will pay a sales charge of up to 5% of your shares'
value. See "Deferred Sales Charge Alternative--Class B Shares." This charge
declines to zero over a period of 5 years and may be waived under certain
conditions. Class B shares have higher Rule 12b-1 fees and pay lower dividends
than Class A and M Shares. Class B Shares automatically convert to Class A
Shares eight years after purchase. The Distributor intends to limit investments
in Class B Shares to: (a) $250,000 for any person; (b) $1 million for any
unallocated employer sponsored plan; and (c) $250,000 for each participant in
any allocated qualified employer sponsored plan, including 401(k) plans,
provided such plan uses an approved participant tracking system. Class B Shares
will not be sold to any qualified employee benefit plan, endowment fund or
foundation if, on the date of the initial investment, such entity has assets of
over $10 million or more than 200 participant employees. Class B Shares will not
be sold to anyone who is over 85 years old.
CLASS C SHARES. If you buy Class C Shares, you will not pay a sales charge at
the time of purchase. If you sell your Class C Shares within the first year
after they are bought, you will pay a sales charge of 1% of your shares' value.
See "Deferred Sales Charge Alternative--Class C Shares." Class C Shares have the
same Rule 12b-1 fees and pay comparable dividends as Class B Shares. Class C
Shares do not convert to any other class of shares of the Fund. Class C Shares
are not currently offered for all Phoenix Funds.
CLASS M SHARES. If you buy Class M Shares, you will pay a sales charge at the
time of purchase equal to 3.50% of the offering price (3.63% of the amount
invested). Class M Shares are not subject to any charges by the Funds when they
are sold. Class M Shares have lower Rule 12b-1 fees and pay higher dividends
than Class B and C Shares. Class M Shares do not convert to any other class of
shares of the Funds. Class M Shares are not currently offered for all Phoenix
Funds.
WHAT ARRANGEMENT IS BEST FOR YOU?
The alternative purchase arrangement permits you to choose the method of
buying shares that is most beneficial to you given the amount of the purchase,
the length of time you expect to hold the shares, whether you wish to receive
distributions in cash or to reinvest them in additional shares, and other
circumstances. You should consider whether, during the anticipated term of your
investment, the accumulated continuing distribution and service fees and
contingent deferred sales charges of one class would be more than the initial
sales charge and accumulated distribution and service fees of another class of
shares bought at the same time. See "Distribution Plans" and "Fund Expenses."
INITIAL SALES CHARGE ALTERNATIVE--CLASS A AND M SHARES
The public offering price of Class A and M Shares is the net asset value plus
a sales charge that varies depending on the size of any "person's" (see "How To
Obtain Reduced Initial Sales Charges--Class A and M Shares: Combination Purchase
Privilege") purchase. Shares issued based on the automatic reinvestment of
income dividends or capital gains distributions are not subject to any sales
charges. The sales charge is divided between your investment dealer and the
Distributor as shown on the following tables.
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CLASS A SHARES
SALES CHARGE AS
A PERCENTAGE OF
---------------
AMOUNT OF NET DEALER DISCOUNT
TRANSACTION OFFERING AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
- -------------------------------------------------------------
Under $50,000 4.75% 4.99% 4.25%
$50,000 but under
$100,000 4.50 4.71 4.00
$100,000 but under
$250,000 3.50 3.63 3.00
$250,000 but under
$500,000 3.00 3.09 2.75
$500,000 but under
$1,000,000 2.00 2.04 1.75
$1,000,000 or more None None None
CLASS M SHARES
(HIGH YIELD FUND ONLY)
SALES CHARGE AS
A PERCENTAGE OF
---------------
AMOUNT OF NET DEALER DISCOUNT
TRANSACTION OFFERING AMOUNT PERCENTAGE OF
AT OFFERING PRICE PRICE INVESTED OFFERING PRICE
- -------------------------------------------------------------
Under $50,000 3.50% 3.63% 3.00%
$50,000 but under
$100,000 2.50 2.56 2.00
$100,000 but under
$250,000 1.50 1.52 1.00
$250,000 but under
$500,000 1.00 1.01 1.00
$500,000 or more None None None
DEFERRED SALES CHARGE ALTERNATIVE--
CLASS B AND C SHARES
Class B and C Shares are purchased without an initial sales charge; however,
shares sold within a specified time period are subject to a declining contingent
deferred sales charge (the "CDSC") at the rates set forth below. The charge will
be multiplied by the then current market value or the initial cost of the shares
being redeemed, whichever is less. No sales charge will be imposed on increases
in net asset value. In addition, shares issued based on the automatic
reinvestment of income dividends or capital gains distributions are not subject
to any sales charges. To minimize the CDSC, shares not subject to any charge
will be redeemed first, followed by shares held the longest time. The
Distributor will add up all shares bought in any month and use the last day of
the preceding month in calculating the amount of shares owned and time period
held for Class B Shares. The trade date will be used for purposes of aging Class
C Share investments.
DEFERRED SALES CHARGE YOU MAY PAY TO SELL CLASS B
SHARES
YEAR 1 2 3 4 5 6+
- ---------------------------------------------------------
CDSC 5% 4% 3% 2% 2% 0%
DEFERRED SALES CHARGE YOU MAY PAY TO SELL CLASS C
SHARES (HIGH YIELD FUND ONLY)
YEAR 1 2+
- ---------------------------------------------------------
CDSC 1% 0%
DEALER CONCESSIONS
In addition to the dealer discount on purchases of Class A and M Shares, the
Distributor intends to pay investment dealers a sales commission of 4% of the
sale price of Class B Shares and a sales commission of 1% of the sale price of
Class C Shares sold by such dealers. Your broker, dealer or investment adviser
may also charge you additional commissions or fees for their services in selling
shares to you provided they notify the Distributor of their intention to do so.
Dealers and other entities who enter into special arrangements with the
Distributor may receive compensation for the sale and promotion of shares of the
Funds and/or for providing other shareholder services. Depending on the nature
of the services, these fees may be paid either from the Funds through
distribution fees, service fees or transfer agent fees or in some cases, the
Distributor may pay certain fees from its own profits and resources. From its
own profits and resources, the Distributor does intend to: (a) sponsor sales
contests, training and educational meetings and provide additional compensation
to qualifying dealers in the form of trips, merchandise or expense
reimbursements; (b) from time to time pay special incentive and retention fees
to qualified wholesalers, registered financial institutions and third party
marketers; (c) pay broker/dealers an amount equal to 1% of the first $3 million
of Class A Share purchases by an account held in the name of a qualified
employee benefit plan with at least 100 eligible employees, 0.50% on the next $3
million, plus 0.25% on the amount in excess of $6 million; and (d) excluding
purchases as described in (c) above, pay broker/dealers an amount equal to 1% of
the amount of Class A Shares sold above $1 million but under $3 million, 0.50%
on the next $3 million, plus 0.25% on the amount in excess of $6 million. If
part or all of such investment, including investments by qualified employee
benefit plans, is subsequently redeemed within one year of the investment date,
the broker-dealer will refund to the Distributor such amounts paid with respect
to the investment. In addition, the Distributor may pay the entire applicable
sales charge on purchases of Class A Shares to selected dealers and agents. Any
dealer who receives more than 90% of a sales charge may be deemed to be an
"underwriter" under the Securities Act of 1933.
HOW TO OBTAIN REDUCED INITIAL SALES CHARGES--CLASS A AND M SHARES
Investors choosing Class A or M Shares may be entitled to reduced sales
charges. The five ways in which sales charges may be avoided or reduced are
described below.
QUALIFIED PURCHASERS. If you fall within any one of the following categories,
you will not have to pay a sales charge on your purchase of Class A or M Shares:
(1) trustee, director or officer of the Phoenix Funds, the Phoenix-Engemann
Funds, Phoenix-Seneca Funds or any other mutual fund advised, subadvised or
distributed by the Adviser, Distributor or any of
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their corporate affiliates; (2) any director or officer, or any full-time
employee or sales representative (for at least 90 days), of the Adviser or
Distributor; (3) registered representatives and employees of securities dealers
with whom Distributor has sales agreements; (4) any qualified retirement plan
exclusively for persons described above; (5) any officer, director or employee
of a corporate affiliate of the Adviser or Distributor; (6) any spouse, child,
parent, grandparent, brother or sister of any person named in (1), (2), (3) or
(5) above; (7) employee benefit plans for employees of the Adviser, Distributor
and/or their corporate affiliates; (8) any employee or agent who retires from
Phoenix Home Life, Distributor and/or their corporate affiliates; (9) any
account held in the name of a qualified employee benefit plan, endowment fund or
foundation if, on the date of the initial investment, the plan, fund or
foundation has assets of $10,000,000 or more or at least 100 eligible employees;
(10) any person with a direct rollover transfer of shares from an established
Phoenix Fund, Phoenix-Engemann Fund or Phoenix-Seneca Fund qualified plan; (11)
any Phoenix Home Life separate account which funds group annuity contracts
offered to qualified employee benefit plans; (12) any state, county, city,
department, authority or similar agency prohibited by law from paying a sales
charge; (13) any fully matriculated student in any U.S. service academy; (14)
any unallocated account held by a third party administrator, registered
investment adviser, trust company, or bank trust department which exercises
discretionary authority and holds the account in a fiduciary, agency, custodial
or similar capacity, if in the aggregate such accounts held by such entity equal
or exceed $1,000,000; (15) any person who is investing redemption proceeds from
investment companies other than the Phoenix Funds, Phoenix-Engemann Fund or
Phoenix-Seneca Fund if, in connection with the purchases or redemption of the
redeemed shares, the investor paid a prior sales charge provided such investor
supplies verification that the redemption occurred within 90 days of the Phoenix
Fund purchase and that a sales charge was paid; (16) any deferred compensation
plan established for the benefit of any Phoenix Fund, Phoenix-Engemann Fund or
Phoenix-Seneca Fund trustee or director; provided that sales to persons listed
in (1) through (15) above are made upon the written assurance of the purchaser
that the purchase is made for investment purposes and that the shares so
acquired will not be resold except to the Fund; (17) purchasers of Class A or M
Shares bought through investment advisers and financial planners who charge an
advisory, consulting or other fee for their services and buy shares for their
own accounts or the accounts of their clients; (18) retirement plans and
deferred compensation plans and trusts used to fund those plans (including, for
example, plans qualified or created under sections 401(a), 403(b) or 457 of the
Internal Revenue Code), and "rabbi trusts" that buy shares for their own
accounts, in each case if those purchases are made through a broker or agent or
other financial intermediary that has made special arrangements with the
Distributor for such purchases; or (19) clients of investment advisors or
financial planners who buy shares for their own accounts but only if their
accounts are linked to a master account of their investment advisor or financial
planner on the books and records of the broker, agent or financial intermediary
with which the Distributor has made such special arrangements (each of the
investors described in (17) through (19) may be charged a fee by the broker,
agent or financial intermediary for purchasing shares).
COMBINATION PURCHASE PRIVILEGE. Your purchase of any class of shares of this
or any other Affiliated Phoenix Fund (other than Phoenix Money Market Fund
Series Class A Shares), if made at the same time by the same "person," will be
added together to determine whether the combined sum entitles you to an
immediate reduction in sales charges. A "person" is defined in this and the
following sections as (a) any individual, their spouse and minor children
purchasing shares for his or their own account (including an IRA account)
including his or their own trust; (b) a trustee or other fiduciary purchasing
for a single trust, estate or single fiduciary account (even though more than
one beneficiary may exist); (c) multiple employer trusts or Section 403(b) plans
for the same employer; (d) multiple accounts (up to 200) under a qualified
employee benefit plan or administered by a third party administrator; or (e)
trust companies, bank trust departments, registered investment advisers, and
similar entities placing orders or providing administrative services with
respect to funds over which they exercise discretionary investment authority and
which are held in a fiduciary, agency, custodial or similar capacity, provided
all shares are held of record in the name, or nominee name, of the entity
placing the order.
An "Affiliated Phoenix Fund" means any other mutual fund advised, subadvised
or distributed by the Adviser or Distributor or any corporate affiliate of
either or both the Adviser and Distributor provided such other mutual fund
extends reciprocal privileges to shareholders of the Phoenix Funds.
LETTER OF INTENT. If you sign a Letter of Intent, your purchase of any class
of shares of this or any other Affiliated Phoenix Fund (other than Phoenix Money
Market Fund Series Class A Shares), if made by the same person within a thirteen
month period, will be added together to determine whether you are entitled to an
immediate reduction in sales charges. Sales charges are reduced based on the
overall amount you indicate that you will buy under the Letter of Intent. The
Letter of Intent is a mutually non-binding arrangement between you and the
Distributor. Since the Distributor doesn't know whether you will ultimately
fulfill the Letter of Intent, shares worth 5% of the amount of each purchase
will be set aside until you fulfill the Letter of Intent. When you buy enough
shares to fulfill the Letter of Intent, these shares will no longer be
restricted. If, on the other hand, you do not satisfy the Letter of Intent, or
otherwise wish to sell any restricted shares, you will be given the choice of
either buying enough shares to fulfill the Letter of Intent or paying the
difference between any sales charge you previously paid and the otherwise
applicable sales charge based on the intended aggregate purchases described in
the Letter of Intent. You will be given 20 days to make this decision. If you do
not exercise either election, the Distributor will automatically redeem the
number of your
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restricted shares needed to make up the deficiency in sales charges received.
The Distributor will redeem restricted Class A or M Shares before Class C or B
Shares, respectively. Oldest shares will be redeemed before selling newer
shares. Any remaining shares will then be deposited to your account.
RIGHT OF ACCUMULATION. Your purchase of any class of shares of this or any
other Affiliated Phoenix Fund, if made over time by the same person may be added
together to determine whether the combined sum entitles you to a prospective
reduction in sales charges. You must provide certain account information to the
Distributor to exercise this right.
ASSOCIATIONS. Certain groups or associations may be treated as a "person" and
qualify for reduced Class A Share sales charges. The group or association must:
(1) have been in existence for at least six months; (2) have a legitimate
purpose other than to purchase mutual fund shares at a reduced sales charge; (3)
work through an investment dealer; or (4) not be a group whose sole reason for
existing is to consist of members who are credit card holders of a particular
company, policyholders of an insurance company, customers of a bank or a
broker-dealer or clients of an investment adviser.
HOW TO OBTAIN REDUCED DEFERRED SALES CHARGES--
CLASS B AND C SHARES
The CDSC is waived on the redemption (sale) of Class B and C Shares if the
redemption is made (a) within one year of death (i) of the sole shareholder on
an individual account, (ii) of a joint tenant where the surviving joint tenant
is the deceased's spouse, or (iii) of the beneficiary of a Uniform Gifts to
Minors Act (UGMA), Uniform Transfers to Minors Act (UTMA) or other custodial
account; (b) within one year of disability, as defined in Code Section 72(m)(7);
(c) as a mandatory distribution upon reaching age 70 1/2 under any retirement
plan qualified under Code Sections 401, 408 or 403(b) or resulting from the
tax-free return of an excess contribution to an IRA; (d) by 401(k) plans using
an approved participant tracking system for participant hardships, death,
disability or normal retirement, and loans which are subsequently repaid; (e)
based on the exercise of exchange privileges among Class B and C Shares of this
or any other Affiliated Phoenix Fund; (f) based on any direct rollover transfer
of shares from an established Affiliated Phoenix Fund qualified plan into an
Affiliated Phoenix Fund IRA by participants terminating from the qualified plan;
and (g) based on the systematic withdrawal program (Class B Shares only). If, as
described in condition (a) above, an account is transferred to an account
registered in the name of a deceased's estate, the CDSC will be waived on any
redemption from the estate account occurring within one year of the death. If
the Class B or C Shares are not redeemed within one year of the death, they will
remain subject to the applicable CDSC.
CONVERSION FEATURE--CLASS B SHARES
Class B Shares will automatically convert to Class A Shares of the same Fund
eight years after they are bought. Conversion will be on the basis of the then
prevailing net asset value of Class A and B Shares. There is no sales load, fee
or other charge for this feature. Class B Shares acquired through dividend or
distribution reinvestments will be converted into Class A Shares at the same
time that other Class B Shares are converted based on the proportion that the
reinvested shares bear to purchased Class B Shares. The conversion feature is
subject to the continuing availability of an opinion of counsel or a ruling of
the Internal Revenue Service that the assessment of the higher distribution fees
and associated costs with respect to Class B Shares does not result in any
dividends or distributions constituting "preferential dividends" under the Code,
and that the conversion of shares does not constitute a taxable event under
federal income tax law. If the conversion feature is suspended, Class B Shares
would continue to be subject to the higher distribution fee for an indefinite
period. Even if the Funds were unable to obtain such assurances, it might
continue to make distributions if doing so would assist in complying with its
general practice of distributing sufficient income to reduce or eliminate
federal taxes otherwise payable by the Funds.
INVESTOR ACCOUNT SERVICES
The Funds mail periodic statements and reports to shareholders. In order to
reduce the volume and cost of mailings, to the extent possible, only one copy of
most Fund reports will be mailed to households for multiple accounts with the
same surname at the same household address. Please contact Equity Planning to
request additional copies of shareholder reports toll free at (800) 243-4361.
In most cases, changes to any shareholder account may be accomplished by
calling Shareholder Services at (800) 243-1574. More information relating to the
shareholder account services can be found in the Funds' Statement of Additional
Information ("SAI").
BANK DRAFT INVESTING PROGRAM (INVESTO-MATIC PLAN). By completing the
Investo-Matic Section of the New Account Application, you may authorize the bank
named in the form to draw $25 or more from your personal checking or savings
account to be used to purchase additional shares for your account. The amount
you designate will be made available, in form payable to the order of the
Transfer Agent, by the bank on the date the bank draws on your account and will
be used to purchase shares at the applicable offering price.
DISTRIBUTION OPTION. Each Fund currently declares all income dividends and
all capital gain distributions, if any, payable in shares of the Fund at net
asset value or, at your option, in cash. By exercising the distribution option,
you may elect to: (1) receive both dividends and capital gain distributions in
additional shares or (2) receive dividends in cash and capital gain
distributions in additional shares or (3) receive both dividends and capital
gain distributions in cash. If you elect to receive dividends and/or
distributions in cash and the check cannot be delivered or remains uncashed due
to an invalid address, then the dividend and/or distribution will be reinvested
after the Transfer Agent has been informed that the proceeds are undeliverable.
Additional shares will be purchased in your account at the then current net
asset value.
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Dividends and capital gain distributions received in shares are taxable to
you and credited to your account in full and fractional shares computed at the
closing net asset value on the next business day after the record date. No
interest will accrue on amounts represented by uncashed distribution or
redemption checks.
SYSTEMATIC WITHDRAWAL PROGRAM. The Systematic Withdrawal Program allows you
to periodically redeem a portion of your account on a predetermined monthly,
quarterly, semiannual or annual basis. A sufficient number of full and
fractional shares will be redeemed so that the designated payment is made on or
about the 20th day of the month. Shares are tendered for redemption by the
Transfer Agent, as agent for the shareowner, on or about the 15th of the month
at the closing net asset value on the date of redemption. The Systematic
Withdrawal Program also provides for redemptions to be tendered on or about the
10th, 15th or 25th of the month with proceeds to be directed through Automated
Clearing House (ACH) to your bank account. In addition to the limitations stated
below, withdrawals may not be less than $25 and minimum account balance
requirements shall continue to apply.
Shareholders participating in the Systematic Withdrawal Program must own
shares of a Series worth $5,000 or more, as determined by the then current net
asset value per share, and elect to have all dividends reinvested. Participants
in the Program redeeming Class C Shares will be subject to any applicable
contingent deferred sales charge. The purchase of shares while participating in
the withdrawal program will ordinarily be disadvantageous to the Class A or M
Shares investor since a sales charge will be paid by the investor on the
purchase of Class A or M Shares at the same time as other shares are being
redeemed. For this reason, investors in Class A or M Shares may not participate
in an automatic investment program while participating in the Systematic
Withdrawal Program.
Through the Program, Class B shareholders may withdraw up to 1% of their
aggregate net investments (purchases, at initial value, to date net of
non-Program redemptions) each month or up to 3% of their aggregate net
investments each quarter without incurring otherwise applicable contingent
deferred sales charges. Class B shareholders redeeming more shares than the
percentage permitted by the withdrawal program will be subject to any applicable
contingent deferred sales charge on all shares redeemed. Accordingly, the
purchase of Class B Shares will generally not be suitable for an investor who
anticipates withdrawing sums in excess of the above limits shortly after
purchase.
TAX SHELTERED RETIREMENT PLANS. Shares of the Funds are offered in connection
with the following qualified prototype retirement plans: IRA, Rollover IRA,
SEP-IRA, SIMPLE IRA, SIMPLE 401(k), Profit-Sharing and Money Purchase Pension
Plans which can be adopted by self-employed persons ("Keogh") and by
corporations and 403(b) Retirement Plans. Write or call Equity Planning at (800)
243-4361 for further information about the plans.
EXCHANGE PRIVILEGES
You may exchange shares of one Phoenix Fund (except for Class A Shares of the
Money Market Fund) for shares of another Phoenix Fund or any other Affiliated
Phoenix Fund without paying any fees or sales charges. On exchanges with share
classes that carry a contingent deferred sales charge, the CDSC schedule of the
original shares purchased continues to apply. Shares held in book-entry form may
be exchanged for shares of the same class of other Phoenix Funds or any other
Affiliated Phoenix Fund, provided the following conditions are met: (1) the
shares that will be acquired in the exchange (the "Acquired Shares") are
available for sale; (2) the Acquired Shares are the same class as the shares to
be surrendered (the "Exchanged Shares"); (3) the Acquired Shares will be
registered to the same shareholder account as the Exchanged Shares; (4) the
account value of the Fund whose shares are to be acquired must equal or exceed
the minimum initial investment amount required by that Fund after the exchange
is made; and (5) if you have elected not to use the telephone exchange privilege
(see below), a properly executed exchange request must be received by the
Distributor. Exchanges may be made over the telephone or in writing and may be
made at one time or systematically over a period of time. Note, each Fund has
different investment objectives and policies. You should read the prospectus of
the Phoenix Fund or any other Affiliated Phoenix Fund into which the exchange is
to be made before making any exchanges. This privilege may be modified or
terminated at any time on 60 days' notice.
MARKET TIMER RESTRICTIONS. Because excessive trading can hurt Fund
performance and harm shareholders, the Funds reserve the right to temporarily or
permanently terminate exchange privileges or reject any specific order from
anyone whose transactions seem to follow a timing pattern, including those who
request more than one exchange out of a fund within any 30 day period. The
Distributor has entered into agreements with certain market timer entities
permitting them to exchange their clients' shares by telephone. These privileges
are limited under those agreements. The Distributor has the right to reject or
suspend these privileges upon reasonable notice.
TELEPHONE EXCHANGES. If permitted in your state and unless you waive this
privilege in writing, you or your broker may sell or exchange your shares over
the phone by calling the Distributor at (800) 243-1574. Reasonable procedures
will be used to confirm that telephone instructions are genuine. In addition to
requiring that the exchange is only made between accounts with identical
registrations, the Distributor may require address or other forms of
identification and will record telephone instructions. All exchanges will be
confirmed in writing to you. If procedures reasonably designed to prevent
unauthorized telephone exchanges are not followed, the Trust and/or Distributor
may be liable for following telephone instructions that prove to be fraudulent.
Broker/dealers other than the Distributor assume the risk of any loss resulting
from any unauthorized telephone exchange instructions from their firm or their
registered representatives. You assume the risk if
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the Distributor acts upon unauthorized instructions it reasonably believes to be
genuine. During times of severe economic or market changes, this privilege may
be difficult to exercise or may be temporarily suspended. In such event, an
exchange may be effected by written request by the registered shareowner(s).
NET ASSET VALUE
The net asset value per share of each Fund is determined as of the close of
trading of the New York Stock Exchange (the "Exchange") on days when the
Exchange is open for trading. The net asset value per share of a Fund is
determined by adding the values of all securities and other assets of the Fund,
subtracting liabilities, and dividing by the total number of outstanding shares
of the Fund. The total liability allocated to a class, plus that class's
distribution fee and any other expenses allocated solely to that class, are
deducted from the proportionate interest of such class in the assets of the
Fund, and the resulting amount of each is divided by the number of shares of
that class outstanding to produce the net asset value per share.
The Funds' investments are valued at market value or, where market quotations
are not available, at fair value as determined in good faith by the Trustees or
their delegates. The assets of the Money Market Fund are valued on an amortized
cost basis absent extraordinary or unusual market conditions. Foreign and
domestic debt securities (other than short-term investments) are valued on the
basis of broker quotations or valuations provided by a pricing service approved
by the Trustees when such prices are believed to reflect the fair value of such
securities. Foreign and domestic equity securities are valued at the last sale
price or, if there has been no sale that day, at the last bid price, generally.
Short-term investments having a remaining maturity of less than sixty-one days
are valued at amortized cost, which the Trustees have determined approximates
market value. For further information about security valuations, see the
Statement of Additional Information.
HOW TO REDEEM SHARES
You have the right to have the Trust buy back shares at the net asset value
next determined after receipt of a redemption order, and any other required
documentation in proper form, by Phoenix Funds c/o State Street Bank and Trust
Company, P.O. Box 8301, Boston, MA 02266-8301. In the case of a Class B or C
Share redemption, you will be subject to the applicable deferred sales charge,
if any, for such shares (see "Deferred Sales Charge Alternative--Class B and C
Shares," above). Subject to certain restrictions, shares may be redeemed by
telephone or in writing. In addition, shares may be sold through securities
dealers, brokers or agents who may charge customary commissions or fees for
their services. The Funds do not charge any redemption fees. Payment for shares
redeemed is made within seven days, provided that redemption proceeds will not
be disbursed until each check used for purchases of shares has been cleared for
payment by your bank, which may take up to 15 days after receipt of the check.
The requirements to redeem shares are outlined in the table below. Additional
documentation may be required for redemptions by corporations, partnerships or
other organizations, executors, administrators, trustees, custodians, guardians,
or from IRA's or other retirement plans, or if redemption is requested by anyone
but the shareholder(s) of record. To avoid delay in redemption or transfer,
shareholders having questions about specific requirements should contact the
Funds at (800) 243-1574. Redemption requests will not be honored until all
required documents in proper form have been received.
HOW CAN I SELL MY SHARES?
[phone art] By Phone o Sales up to $50,000
o Not available on most retirement accounts
(800) 243-1574 o Requests received after 4PM will be executed
on the following business day
[letter art] In Writing o Letter of instruction from the registered owner
including the fund and account number and the
number of shares or dollar amount you wish to sell
o No signature guarantee is required if your shares
are registered individually, jointly, or as
custodian under the Uniform Gifts to Minors Act
or Uniform Transfers to Minors Act, the proceeds
of the redemption do not exceed $50,000, and the
proceeds are payable to the registered owner(s) at
the address of record
[pen/hand art] By Check o Select checkwriting on your New Account Application
o High Yield Fund, Money Market Fund and U.S.
Government Securities Fund only
o $500 or more per check
o Cannot be used to close an account
Shares previously issued in certificate form cannot be redeemed until the
certificated shares have been deposited to your account.
TELEPHONE REDEMPTIONS
The Trust and the Transfer Agent will employ reasonable procedures to confirm
that telephone instructions are genuine. Address and bank account information
will be verified, telephone redemption instructions will be recorded on tape,
and all redemptions will be confirmed in writing to you. If there has been an
address change within the past 60 days, a telephone redemption will not be
authorized. To the extent that procedures reasonably designed to prevent
unauthorized telephone redemptions are not followed, the Trust and/or the
Transfer Agent may be liable for following telephone instructions for redemption
transactions that prove to be fraudulent. Broker/dealers other than Equity
Planning have agreed to bear the risk of any loss resulting from any
unauthorized telephone redemption instruction from the firm or its registered
representatives. However, you would bear the
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risk of loss resulting from instructions entered by an unauthorized third party
that the Trust and/or the Transfer Agent reasonably believe to be genuine. The
Telephone Redemption Privilege may be modified or terminated at any time on 60
days' notice to shareholders. In addition, during times of drastic economic or
market changes, the Telephone Redemption Privilege may be difficult to exercise
or may be temporarily suspended. In such event, a redemption may be effected by
written request by following the procedure outlined above.
WRITTEN REDEMPTIONS
If you elect not to use the telephone redemption or telephone exchange
privileges, you must submit your request in writing. If the shares are being
exchanged between accounts that are not identically registered, the signature on
such request must be guaranteed by an eligible guarantor institution as defined
by the Transfer Agent in accordance with its signature guarantee procedures.
Currently, such procedures generally permit guarantees by banks, broker dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations.
REDEMPTION IN KIND
To the extent consistent with state and federal law, the Funds may make
payment of the redemption price either in cash or in kind. However, the Funds
have elected to pay in cash all requests for redemption by any shareholder of
record, limited in respect to each shareholder during any 90 day period to the
lesser of $250,000 or 1% of the net asset value of the Funds at the beginning of
such period. This election has been made pursuant to Rule 18f-1 under the
Investment Company Act of 1940 Act and is irrevocable while the Rule is in
effect unless the Securities and Exchange Commission, by order, permits the
withdrawal thereof. In case of a redemption in kind, securities delivered in
payment for shares would be readily marketable and valued at the same value
assigned to them in computing the net asset value per share of the Funds. A
shareholder receiving such securities would incur brokerage costs when he sold
the securities.
ACCOUNT REINSTATEMENT PRIVILEGE
You have a one time privilege of using redemption proceeds from Class A, B, C
and M Shares to purchase Class A Shares of any Phoenix Fund or any other
Affiliated Phoenix Fund with no sales charge (at net asset value next determined
after the request for reinvestment is made). For Federal income tax purposes, a
redemption and reinvestment will be treated as a sale and purchase of shares.
Special rules may apply in computing the amount of gain or loss in these
situations. (See "Dividends, Distributions and Taxes" for information on the
Federal income tax treatment of a disposition of shares.) A written request to
reinstate your account must be received by the Transfer Agent within 180 days of
the redemption, accompanied by payment for the shares (not in excess of the
redemption value). Class B shareholders who have had the contingent deferred
sales charge waived through participation in the Systematic Withdrawal Program
are not eligible to use the Reinstatement Privilege.
REDEMPTION OF SMALL ACCOUNTS
Due to the relatively high cost of maintaining small accounts, the Funds
reserve the right to redeem, at net asset value, the shares of any shareholder
whose account has a value, due to redemptions, of less than $200. Before the
Funds redeem these shares, the shareholder will be given notice that the value
of the shares in the account is less than the minimum amount and will be allowed
60 days to make an additional investment in an amount which will increase the
value of the account to at least $200.
DIVIDENDS, DISTRIBUTIONS AND TAXES
All dividends and distributions with respect to the shares of any class of
any Fund will be payable in shares of such class of the Fund at net asset value
or, at the option of the shareholder, in cash. Any shareholder who purchases
shares of a Fund prior to the close of business on the record date for a
dividend or distribution will be entitled to receive such dividend or
distribution. Dividends and distributions (whether received in shares or in
cash) are treated either as ordinary income or long-term capital gains for
Federal income tax purposes.
The Balanced Fund and the Convertible Fund 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 Fund and the Aggressive Growth Fund each will distribute its net
investment income semi-annually and net realized capital gains, if any, at least
annually.
The High Yield Fund, and the U.S. Government Securities Fund 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 Fund will be declared as dividends daily.
Dividends will be invested or distributed in cash monthly. The net income of the
Money Market Fund 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 Fund is treated as a separate entity for Federal income tax purposes. Each
Fund 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 Fund so qualified for
the last taxable year. Because each Fund 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 Funds 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 Fund, are taxable to
shareholders as long-term capital gains, regardless of how long they have owned
shares in the Fund. Shareholders who are not subject
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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 Funds 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
Funds and different classes of those Funds. Holders of shares of a Fund have
equal rights with regard to voting, redemptions, dividends, distributions, and
liquidations with respect to that Fund. Shareholders of all Funds vote on the
election of Trustees. On matters affecting an individual Fund (such as approval
of an investment advisory agreement or a change in fundamental investment
policies) and on matters affecting an individual class (such as approval of
matters relating to a Plan of Distribution for a particular class of shares), a
separate vote of that Fund or Class is required. 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 Fund, and any class thereof and all income, earnings, profits
and proceeds thereof, are allocated to such Fund, and class, respectively,
subject only to the rights of creditors, and constitute the underlying assets of
such Fund or class. The underlying assets of each Fund are required to be
segregated on the books of account, and are to be charged with the expenses in
respect to such Fund and with a share of the general expenses of the Trust. Any
general expenses of the Trust not readily identifiable as belonging to a
particular Fund or class will be allocated by or under the direction of the
Trustees as they determine fair and equitable.
Unlike the stockholders of a corporation, there is a possibility that the
shareholders of a business trust such as the Trust may be personally liable for
debts or claims against the Trust. The Declaration of Trust provides that
shareholders shall not be subject to any personal liability for the acts or
obligations of the Trust and that every written agreement, undertaking or
obligation made or issued by the Trust shall contain a provision to that effect.
The Declaration of Trust provides for indemnification out of the Trust property
for all losses and expenses of any shareholder held personally liable for the
obligations of the Trust. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability, which is considered remote, is limited
to circumstances in which the Trust itself would be unable to meet its
obligations.
ADDITIONAL INQUIRIES
Inquiries and requests for the Statement of Additional Information, the
Annual Report to Shareholders and the Semi-Annual Report to Shareholders should
be directed to Equity Planning at (800) 243-4361 or 100 Bright Meadow Boulevard,
P.O. Box 2200, Enfield, Connecticut 06083-2200.
APPENDIX
A-1 AND P-1 COMMERCIAL PAPER RATINGS
The Money Market Fund will only invest in commercial paper which at the date
of investment is rated A-l 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.
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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 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.
35
<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>
<S> <C>
Account Type Give Social Security Number or Tax Identification Number of:
- -------------------------------------- -------------------------------------------------------------------------------------
Individual Individual
- -------------------------------------- -------------------------------------------------------------------------------------
Joint (or Joint Tenant) Owner who will be paying tax
- -------------------------------------- -------------------------------------------------------------------------------------
Uniform Gifts to Minors Minor
- -------------------------------------- -------------------------------------------------------------------------------------
Legal Guardian Ward, Minor or Incompetent
- -------------------------------------- -------------------------------------------------------------------------------------
Sole Proprietor Owner of Business (also provide owner's name)
- -------------------------------------- -------------------------------------------------------------------------------------
Trust, Estate, Pension Plan Trust Trust, Estate, Pension Plan Trust (not personal TIN of fiduciary)
- -------------------------------------- -------------------------------------------------------------------------------------
Corporation, Partnership,
Other Organization Corporation, Partnership, Other Organization
- -------------------------------------- -------------------------------------------------------------------------------------
Broker/Nominee Broker/Nominee
- -------------------------------------- -------------------------------------------------------------------------------------
</TABLE>
Step 2. If you do not have a TIN, you must obtain Form SS-5 (Application for
Social Security Number) or Form SS-4 (Application for Employer
Identification Number) from your local Social Security or IRS office
and apply for one. Write "Applied For" in the space on the application.
Step 3. If you are one of the entities listed below, you are exempt from
backup withholding.
o A corporation
o Financial institution
o Section 501(a) exempt organization (IRA, Corporate Retirement Plan,
403(b), Keogh)
o United States or any agency or instrumentality thereof
o A State, the District of Columbia, a possession of the United States,
or any subdivision or instrumentality thereof
o International organization or any agency or instrumentality thereof
o Registered dealer in securities or commodities registered in the
U.S. or a possession of the U.S.
o Real estate investment trust
o Common trust fund operated by a bank under section 584(a)
o An exempt charitable remainder trust, or a non-exempt trust described
in section 4947(a)(1)
o Regulated Investment Company
If you are in doubt as to whether you are exempt, please contact the Internal
Revenue Service.
Step 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 27, 1998. The Statement contains more
detailed information about the Trust and is incorporated into this Prospectus by
reference. You may obtain a free copy of the Statement by writing the Trust c/o
Phoenix Equity Planning Corporation, 100 Bright Meadow Boulevard, P.O. Box 2200,
Enfield, Connecticut 06083-2200.
Financial information relating to the Trust is contained in the Annual Report to
Shareholders for the year ended October 31, 1997 and is incorporated into the
Statement of Additional Information by reference.
[recycled logo] Printed on recycled paper using soybean ink
<PAGE>
PHOENIX FUNDS
PO Box 2200
Enfield CT 06083-2200
[logo] PHOENIX
DUFF & PHELPS
PDP 393 (2/98)
<PAGE>
PHOENIX SERIES FUND
101 Munson Street
Greenfield, Massachusetts 01301
Statement of Additional Information
February 27, 1998
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 27, 1998 and should be read in
conjunction with it. The Trust's Prospectus may be obtained by calling Phoenix
Equity Planning Corporation ("Equity Planning") 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*
PAGE
INVESTMENT POLICIES...................................................... 1
INVESTMENT RESTRICTIONS.................................................. 7
PERFORMANCE INFORMATION.................................................. 8
PERFORMANCE COMPARISONS.................................................. 10
PORTFOLIO TURNOVER....................................................... 10
PORTFOLIO TRANSACTIONS AND BROKERAGE..................................... 10
THE INVESTMENT ADVISER................................................... 11
NET ASSET VALUE.......................................................... 13
HOW TO BUY SHARES........................................................ 14
ALTERNATIVE PURCHASE ARRANGEMENTS........................................ 14
Purchases of Shares of the Money Market Fund.......................... 15
INVESTOR ACCOUNT SERVICES................................................ 15
HOW TO REDEEM SHARES..................................................... 16
TAX-SHELTERED RETIREMENT PLANS........................................... 17
DIVIDENDS, DISTRIBUTIONS AND TAXES....................................... 17
THE DISTRIBUTOR AND DISTRIBUTION PLANS................................... 18
MANAGEMENT OF THE TRUST.................................................. 20
OTHER INFORMATION........................................................ 28
Customer Service: (800) 243-1574
Sales Information: (800) 243-4361
Telephone Orders: (800) 367-5877
Telecommunication Device TTY: (800) 243-1926
PDP427B (2/98)
<PAGE>
INVESTMENT POLICIES
The investment objectives and policies of each Fund 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, and to a lesser extent by the other Funds, are
described below.
REPURCHASE AGREEMENTS. Repurchase Agreements are agreements by which a Fund
purchases a security and obtains a simultaneous commitment from the seller (a
member bank of the Federal Reserve System or, to the extent permitted by the
Investment Company Act of 1940, a recognized securities dealer) that the seller
will repurchase the security at an agreed upon price and date. The resale price
is in excess of the purchase price and reflects an agreed upon market rate
unrelated to the coupon rate on the purchased security.
A repurchase transaction is usually accomplished either by crediting the
amount of securities purchased to the account of the custodian of the 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 Fund, if the seller of the repurchase agreement defaults and does not
repurchase the underlying securities, the Fund might incur a loss if the value
of the underlying securities declines, and disposition costs may be incurred in
connection with liquidating the underlying securities. In addition, if
bankruptcy proceedings are commenced regarding the seller, realization upon the
underlying securities may be delayed or limited, and a loss may be incurred if
the underlying securities decline in value.
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 ten years, and Treasury bonds generally have
maturities of greater than ten 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 Funds, except the Money Market Fund and
U.S. Government Securities Fund, may write covered call options and purchase
call and put options. Options and the related risks are summarized below.
WRITING AND PURCHASING OPTIONS. The exercise price of a call option written
by a Fund may be below, equal to or above the current market value of the
underlying security or securities index at the time the option is written. Call
options written by a Fund normally will have expiration dates between three and
nine months from the date written. During the option period a Fund may be
assigned an exercise notice by the broker-dealer through which the call option
was sold, requiring the Fund to deliver
1
<PAGE>
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 Fund effects a closing
purchase transaction. A closing purchase transaction cannot be effected with
respect to an option once the Fund has received an exercise notice.
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 Fund 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 Fund, to prevent an underlying
security from being called, or to enable a Fund to write another call option
with either a different exercise price or expiration date or both. A Fund may
realize a net gain or loss from a closing purchase transaction, depending upon
whether the amount of the premium received on the call option is more or less
than the cost of effecting the closing purchase transaction. If a call option
written by a Fund expires unexercised, a Fund will realize a gain in the amount
of the premium on the option less the commission paid.
The option activities of a Fund may increase its portfolio turnover rate and
the amount of brokerage commissions paid. A Fund 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 Fund may write call options only if they are
covered and if they remain covered so long as a Fund is obligated as a writer.
If a Fund writes a call option on an individual security, a Fund will own the
underlying security at all times during the option period. A Fund will write
call options on indices only to hedge in an economically appropriate way
portfolio securities which are not otherwise hedged with options or financial
futures contracts. Call options on securities indices written by a Fund will be
"covered" by identifying the specific portfolio securities being hedged.
To secure the obligation to deliver the underlying security, the writer of a
covered call option on an individual security is required to deposit the
underlying security or other assets in escrow with the broker in accordance with
clearing corporation and exchange rules. In the case of an index call option
written by a Fund, a Fund will be required to deposit qualified securities. A
"qualified security" is a security against which a Fund has not written a call
option and which has not been hedged by a Fund by the sale of a financial
futures contract. If at the close of business on any day the market value of the
qualified securities falls below 100% of the current index value times the
multiplier times the number of contracts, a Fund will deposit an amount of cash
or liquid assets equal in value to the difference. In addition, when a Fund
writes a call on an index which is "in-the-money" at the time the call is
written, a Fund 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 Fund's 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 Fund may invest up to 2% of its total assets in exchange-traded call and
put options. A Fund may sell a call option or a put option which it has
previously purchased prior to the purchase (in the case of a call) or the sale
(in the case of a put) of the underlying security. Any such sale of a call
option or a put option would result in a net gain or loss, depending on whether
the amount received on the sale is more or less than the premium and other
transaction costs paid.
In connection with a Fund qualifying as a regulated investment company under
the Internal Revenue Code, other restrictions on a Fund's ability to enter into
option transactions may apply from time to time. See "Dividends, Distributions
and Taxes."
RISKS RELATING TO OPTIONS. During the option period, the writer of a call
option has, in return for the premium received on the option, given up the
opportunity for capital appreciation above the exercise price should the market
price of the underlying security increase, but has retained the risk of loss
should the price of the underlying security decline. The writer has no control
over the time when it may be required to fulfill its obligation as a writer of
the option.
The risk of purchasing a call option or a put option is that a Fund may lose
the premium it paid plus transaction costs. If a Fund does not exercise the
option and is unable to close out the position prior to expiration of the
option, it will lose its entire investment.
An option position may be closed out only on an exchange which provides a
secondary market for an option of the same series. Although a Fund 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 Fund if it so desires, can close out its position by effecting a
closing transaction. If the writer of a covered call
2
<PAGE>
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 Fund or all
of the Funds, 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 Fund will realize a gain or loss on the purchase
or sale of an option on an index depends upon movements in the level of prices
in the market generally or in an industry or market segment rather than upon
movements in the price of an individual security. Accordingly, successful use by
a Fund 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 Fund would not be able to
close out options which it had written or purchased and, if restrictions on
exercise were imposed, might be unable to exercise an option it purchased, which
would result in substantial losses to a Fund. However, it is the Trust's policy
to write or purchase options only on indices which include a sufficient number
of securities so that the likelihood of a trading halt in the index is
minimized.
Because the exercise of an index option is settled in cash, an index call
writer cannot determine the amount of its settlement obligation in advance and,
unlike call writing on portfolio securities, cannot provide in advance for its
potential settlement obligation by holding the underlying securities.
Consequently, a Fund will write call options on indices only subject to the
limitations described above.
Price movements in securities in a Fund's portfolio will not correlate
perfectly with movements in the level of the index and, therefore, a Fund bears
the risk that the price of the securities held by the Fund may not increase as
much as the level of the index. In this event, the Fund would bear a loss on the
call which would not be completely offset by movements in the prices of a Fund's
portfolio securities. It is also possible that the index may rise when the value
of a Fund's portfolio securities does not. If this occurred, the Fund would
experience a loss on the call which would not be offset by an increase in the
value of its portfolio and might also experience a loss in the market value of
portfolio securities.
Unless a Fund has other liquid assets which are sufficient to satisfy the
exercise of a call on an index, a Fund will be required to liquidate portfolio
securities in order to satisfy the exercise. Because an exercise must be settled
within hours after receiving the notice of exercise, if a Fund fails to
anticipate an exercise, it may have to borrow from a bank (in an amount not
exceeding 10% of a Fund's total assets) pending settlement of the sale of
securities in its portfolio and pay interest on such borrowing.
When a Fund has written a call on an index, there is also a risk that the
market may decline between the time a Fund has the call exercised against it, at
a price which is fixed as of the closing level of the index on the date of
exercise, and the time a Fund is able to sell securities in its portfolio. As
with options on portfolio securities, a Fund will not learn that a call has been
exercised until the day following the exercise date but, unlike a call on a
portfolio security where a Fund would be able to deliver the underlying security
in settlement, a Fund may have to sell part of its portfolio securities in order
to make settlement in cash, and the price of such securities might decline
before they could be sold.
If a Fund exercises a put option on an index which it has purchased before
final determination of the closing index value for that day, it runs the risk
that the level of the underlying index may change before closing. If this change
causes the exercised option to fall "out-of-the-money" a Fund will be required
to pay the difference between the closing index value and the exercise price of
the option (multiplied by the applicable multiplier) to the assigned writer.
Although a Fund may be able to minimize this risk by withholding exercise
instructions until just before the daily cutoff time or by selling rather than
exercising an option when the index level is close to the exercise price, it may
not be possible to eliminate this risk entirely because the cutoff times for
index options may be earlier than those fixed for other types of options and may
occur before definitive closing index values are announced.
3
<PAGE>
FINANCIAL FUTURES CONTRACTS AND RELATED OPTIONS. All of the Funds except the
Money Market Fund and the U.S. Government Securities Fund may use financial
futures contracts and related options to hedge against changes in the market
value of its portfolio securities or securities which it intends to purchase.
Hedging is accomplished when an investor takes a position in the futures market
opposite to his cash market position. There are two types of hedges, long (or
buying) and short (or selling) hedges. Historically, prices in the futures
market have tended to move in concert with cash market prices, and prices in the
futures market have maintained a fairly predictable relationship to prices in
the cash market. Thus, a decline in the market value of securities in a Fund's
portfolio may be protected against to a considerable extent by gains realized on
futures contracts sales. Similarly, it is possible to protect against an
increase in the market price of securities which a Fund may wish to purchase in
the future by purchasing futures contracts.
A Fund 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 Fund purchases or sells a security, no
security is delivered or received by a Fund upon the purchase or sale of a
financial futures contract. Initially, a Fund will be required to deposit in a
pledged account with its custodian cash, U.S. Government obligations or fully
paid marginable securities. 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 Fund 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 Fund 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 Fund 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 Fund's existing futures and related options positions and the
premiums paid for related options would exceed 2% of the market value of a
Fund's 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 on a futures contract, any asset, including equity securities and
non-investment grade debt so long as the asset is liquid, unencumbered and
marked to market daily, equal to the market value of the futures contract minus
the Fund's initial margin deposit with respect thereto will be deposited in a
pledged account with the Fund's custodian bank to collateralize fully the
position and thereby ensure that it is not leveraged.
The extent to which a Fund may enter into financial futures contracts and
related options also may be limited by the requirements of the Internal Revenue
Code of 1986 for qualification as a regulated investment company. See
"Dividends, Distributions and Taxes."
RISKS RELATING TO FUTURES CONTRACTS AND RELATED OPTIONS. Positions in futures
contracts and related options may be closed out only on an exchange which
provides a secondary market for such contracts or options. A Fund will enter
into an option
4
<PAGE>
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 Fund would continue
to be required to make daily margin payments. In this situation, if a Fund has
insufficient cash to meet daily margin requirements it may have to sell
portfolio securities to meet its margin obligations at a time when it may be
disadvantageous to do so. In addition, a Fund may be required to take or make
delivery of the securities underlying the futures contracts it holds. The
inability to close out futures positions also could have an adverse impact on a
Fund's ability to hedge its portfolio effectively.
There are several risks in connection with the use of futures contracts as a
hedging device. While hedging can provide protection against an adverse movement
in market prices, it can also limit a hedger's opportunity to benefit fully from
a favorable market movement. In addition, investing in futures contracts and
options on futures contracts will cause a Fund to incur additional brokerage
commissions and may cause an increase in a Fund's 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, interest rates and other market factors within a given time
frame. To the extent market prices remain stable during the period a futures
contract or option is held by a Fund or such prices move in a direction opposite
to that anticipated, a Fund may realize a loss on the hedging transaction which
is not offset by an increase in the value of its portfolio securities. Options
and futures may also fail as a hedging technique in cases where the movements of
the securities underlying the options and futures do not follow the price
movements of the hedged portfolio securities. As a result, a Fund's total return
for the period may be less than if it had not engaged in the hedging
transaction. The loss from investing in futures transactions is potentially
unlimited.
Utilization of futures contracts by a Fund involves the risk of imperfect
correlation in movements in the price of futures contracts and movements in the
price of the securities which are being hedged. If the price of the futures
contract moves more or less than the price of the securities being hedged, a
Fund will experience a gain or loss which will not be completely offset by
movements in the price of the securities. It is possible that, where a Fund has
sold futures contracts to hedge its portfolio against a decline in the market,
the market may advance and the value of securities held in the Fund's portfolio
may decline. If this occurred, a Fund would lose money on the futures contract
and would also experience a decline in value in its portfolio securities. Where
futures are purchased to hedge against a possible increase in the prices of
securities before a Fund is able to invest its cash (or cash equivalents) in
securities (or options) in an orderly fashion, it is possible that the market
may decline; if a Fund then determines not to invest in securities (or options)
at that time because of concern as to possible further market decline or for
other reasons, a Fund will realize a loss on the futures that would not be
offset by a reduction in the price of the securities purchased.
The market prices of futures contracts may be affected if participants in the
futures market elect to close out their contracts through 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 because such action would reduce the liquidity
of the futures market. In addition, from the point of view of speculators,
because 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 Fund
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 Fund 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 Fund's
ownership or the Aggressive Growth Fund's 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
Fund (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
25% of the total assets of a Fund, 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 Fund's 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 Fund with respect to
which the borrowing has been made. Because such expense would not otherwise be
incurred, the net investment income of such Fund 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 Fund with respect to
which the borrowing has been made.
5
<PAGE>
Any investment gains made with the additional monies borrowed in excess of
interest paid will cause the net asset value of a Fund's 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 Fund, the net asset
value of the Fund will decrease faster than would otherwise be the case.
FOREIGN SECURITIES. Each of the Funds, except the Money Market Fund and the
U.S. Government Securities Fund may purchase foreign securities, including those
issued by foreign branches of U.S. banks. In any event, such investments in
foreign securities will be limited to 25% of the total net asset value of the
Balanced Fund, Convertible Fund and Growth Fund. The Aggressive Growth Fund may
invest up to 10% of its total net asset value in foreign securities and the High
Yield Fund 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 Fund 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 Fund may purchase
securities which cannot be sold in the public market without first being
registered with the Securities and Exchange Commission ("SEC") provided that the
Adviser has determined that such securities meet prescribed standards for being
considered as "liquid" securities. See "Investment Restrictions." Liquid
restricted securities may offer higher yields than comparable publicly traded
securities. Such securities ordinarily can be sold by the Trust in secondary
market transactions to certain qualified investors pursuant to rules established
by the SEC, in privately negotiated transactions to a limited number of
purchasers or in a public offering made pursuant to an effective registration
statement under governing law. Private sales of such securities may involve
significant delays and expense. Private sales often require negotiation with one
or more purchasers and may produce less favorable prices than the sale of
similar unrestricted securities. Public sales of previously restricted
securities generally involve the time and expense of the preparation and
processing of a registration statement (and the possible decline in value of the
securities during such period) and may involve the payment of underwriting
commissions. In some instances, the Trust may have to bear certain costs of
registration in order to sell such shares publicly.
DEFERRED COUPON DEBT SECURITIES. The High Yield Fund 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 Fund 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 Fund shares may decline more as a result of an
increase in interest rates than would be the case if the Fund did not invest in
deferred coupon bonds.
6
<PAGE>
LENDING PORTFOLIO SECURITIES. In order to increase its return on investments,
the Trust may make loans of the portfolio securities of any Fund, as long as the
market value of the loaned securities does not exceed 25% of the value of that
Fund's 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 Fund 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
Fund 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 Fund, the market value of the
affected participation would decline, resulting in a loss of value of such
investment to the Fund. Accordingly, such participations are speculative and may
result in the income level and net assets of the Fund 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 Fund cannot be changed
without the approval vote of a majority of the outstanding shares of such Fund,
which is the lesser of (i) 67% or more of the voting securities of such Fund
present at a meeting if the holders of more than 50% of the outstanding voting
securities of such Fund are present or represented by proxy or (ii) more than
50% of the outstanding voting securities of such Fund. A proposed change in
fundamental policy or investment objective will be deemed to have been
effectively acted upon with respect to any Fund if a majority of the outstanding
voting securities of that Fund votes for the approval of the proposal as
provided above, notwithstanding (1) that such matter has not been approved by a
majority of the outstanding securities of any other Fund affected by such matter
and (2) that such matter has not been approved by a majority of the outstanding
voting securities of the Trust.
The following investment restrictions are fundamental policies of the Trust
with respect to all Funds and may not be changed except as described above. The
Trust may not:
1. Purchase for any Fund securities of any issuer, other than obligations
issued or guaranteed as to principal and interest by the United States
Government or its agencies or instrumentalities, if immediately thereafter (i)
more than 5% of such Fund's total assets (taken at market value) would be
invested in the securities of such issuer or (ii) more than 10% of the
outstanding securities of any class of such issuer would be held by such Fund or
by all Funds of the Trust in the aggregate.
2. Concentrate the portfolio investments of any Fund in any one industry. To
comply with this restriction, no security may be purchased for a Fund if such
purchase would cause the value of the aggregate investment of such Fund in any
one industry to exceed 25% of that Fund's total assets (taken at market value).
However, the Money Market Fund 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 Fund's 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 Fund, provided that the market value of the
securities subject to any such loans does not exceed 25% of the value of the
total assets (taken at market value) of such Fund.
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 Fund (excluding the Money Market Fund and the U.S. Government
Securities Fund) may engage in transactions in financial futures contracts and
related options, provided that the sum of the initial margin deposits on such
Fund's existing futures positions and the premiums paid for related options
would not exceed in the aggregate 2% of such Fund's total assets.
7
<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 Fund (excluding the Money Market Fund and the U.S. Government Securities
Fund) may (i) write (sell) exchange-traded covered call options on portfolio
securities and on securities indices and engage in related closing purchase
transactions and (ii) invest up to 2% of its total assets in exchange-traded
call and put options on securities and securities indices.
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 Fund 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
Fund 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 Fund for
temporary administrative purposes provided that any such borrowing does not
exceed 10% of the value of the total assets (taken at market value) of such Fund
and (ii) borrow money for any Fund for investment purposes, provided that any
such borrowing for investment purposes with respect to any such Fund is (a)
authorized by the Trustees prior to any public distribution of the shares of
such Fund or is authorized by the shareholders of such Fund thereafter, (b) is
limited to 25% of the value of the total assets (taken at market value and
including any borrowings) of such Fund, and (c) is subject to an agreement by
the lender that any recourse is limited to the assets of that Fund with respect
to which the borrowing has been made. With the exception of the Convertible Fund
and the Aggressive Growth Fund, no Fund may invest in portfolio securities while
the amount of borrowing of the Fund exceeds 5% of the total assets of such Fund.
Borrowing for investment purposes has not been authorized for any Fund (except
the Convertible Fund and the Aggressive Growth Fund) whose shares are offered by
the Trust.
17. Pledge, mortgage or hypothecate the assets of any Fund to an extent
greater than 10% of the total assets (taken at market value) of such Fund to
secure borrowings made pursuant to the provisions of item 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 Fund) of each Fund's net assets. The Board of Trustees, or the
Adviser acting at its direction, values these securities, taking into
consideration quotations available from broker-dealers and pricing services and
other information deemed relevant.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values of portfolio securities or amount of net assets shall not be
considered a violation of the restrictions.
PERFORMANCE INFORMATION
Performance information for each Fund (and Class of a Fund) 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 Fund, as yield of
the other Funds offered, or any Class of such Fund, and as total return of any
Fund or Class thereof. The current yield for the Money Market Fund 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 Fund (and each Class of
8
<PAGE>
such Fund) 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, 1997, the yield of the Class A Shares
of the Money Market Fund was 4.79% and the effective yield of the Class A Shares
of this Fund was 4.89%.
Quotations of yield for the High Yield, Convertible, U.S. Government
Securities and Balanced Funds 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 Fund or Class of a Fund) accrued during the period ("net investment
income"), and are computed by dividing net investment income by the value of a
share of the Fund 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 Fund,
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, 1997, the yield of the Class A Shares of the
Funds were as follows: 8.95% for the High Yield Fund; 1.35% for the Convertible
Fund; 4.89% for the U.S. Government Securities Fund; and 2.40% for the Balanced
Fund. For the same period, the yield of the Class B Shares of the Funds were as
follows: High Yield 8.63%; Convertible 0.65%; U.S. Government 4.38%; and
Balanced 1.77%.
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 Fund, 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 Fund or a Class of a Fund; (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 Fund was in effect if a Fund has not been in existence
for at least ten years.
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 Fund, where applicable, through October 31, 1997.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF OCTOBER 31, 1997
PERIODS ENDED
------------------------------------------------------
10 YEAR OR
FUND 1 YEAR 5 YEAR SINCE INCEPTION*
- ------------------------------ ------ ------ -----------------
<S> <C> <C> <C>
BALANCED (CLASS A) 12.41% 9.12% 10.71%
BALANCED (CLASS B) 13.13% N/A 12.60%
CONVERTIBLE (CLASS A) 11.82% 9.44% 10.02%
CONVERTIBLE (CLASS B) 12.49% N/A 11.67%
GROWTH (CLASS A) 18.88% 13.39% 13.40%
GROWTH (CLASS B) 19.89% N/A 19.53%
AGGRESSIVE GROWTH (CLASS A) 13.98% 15.75% 12.82%
AGGRESSIVE GROWTH (CLASS B) 14.70% N/A 20.95%
HIGH YIELD (CLASS A) 9.57% 10.89% 10.75%
HIGH YIELD (CLASS B) 10.18% N/A 7.74%
U.S. GOVERNMENT SECURITIES (CLASS A) 2.75% 5.37% 7.56%
U.S. GOVERNMENT SECURITIES (CLASS B) 2.94% N/A 4.84%
</TABLE>
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* Since inception, July 15, 1994 for Class B Balanced, Convertible and Growth;
July 21, 1994 for Class B Aggressive Growth; 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 Fund or Class reflects only the performance
of a hypothetical investment in the Fund 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 Fund, and the market conditions during the given
time period, and should not be considered as a representation of what may be
achieved in the future.
PERFORMANCE COMPARISONS
Each Fund or Class of a Fund may from time to time include in advertisements
containing total return the ranking of those performance figures relative to
such figures for groups of mutual funds having similar investment objectives as
categorized by ranking services such as Lipper Analytical Services, Inc., CDA
Investment Technologies, Inc., Weisenberger Financial Services, Inc. and rating
services such as Morningstar, Inc. Additionally, a Fund or Class of a Fund 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 Fund may, from time to time, illustrate
the benefits of tax deferral by comparing taxable investments to investments
made through tax-deferred retirement plans. The total return may also be used to
compare the performance of the Fund or the Class of a Fund against certain
widely acknowledged outside standards or indices for stock and bond market
performance, such as the Standard & Poor's 500 Composite Stock Price Index (the
"S&P 500"), Dow Jones Industrial Average, Europe Australia Far East Index
(EAFE), Consumer Price Index, Lehman Brothers Corporate Index and Lehman
Brothers T-Bond Index. The S&P 500 is a commonly quoted measure of stock market
performance and represents common stocks of companies of varying sizes segmented
across 90 different industries which are listed on the New York Stock Exchange,
the American Stock Exchange and traded over the NASDAQ National Market System.
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, Russell 2000 Growth Index, Salomon Brothers 90-Day Treasury
Bill Index, CS First Boston High Yield Index and Salomon Brothers Corporate Bond
and Government Bond Indices.
PORTFOLIO TURNOVER
Each Fund 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
Funds' 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 Fund. 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 Fund's shares and
by requirements which enable the Trust to receive certain favorable tax
treatment (see "Taxes"). Historical annual rates of portfolio turnover for all
Funds except the Money Market Fund (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.
BALANCED FUND
In the fiscal years ended October 31, 1996 and October 31, 1997, the turnover
rates for the equity portion of the Balanced Fund were 170% and 193%,
respectively. The turnover rates for the fixed income securities were 229% and
225%, respectively for the same periods.
PORTFOLIO TRANSACTIONS AND BROKERAGE
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
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<PAGE>
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 Fund 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
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.
If the securities in which a particular Fund of the Trust invests are traded
primarily in the over-the-counter market, where possible the Fund 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. In addition, transactions effected on foreign securities
exchanges which do not permit the negotiation of brokerage commissions and where
the Adviser would, under the circumstances, seek to obtain best price and
execution on orders for the Trust.
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 Conduct Rules 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.
The Trust has adopted a policy and procedures governing the execution of
aggregated advisory client orders ("bunching procedures") in an attempt to lower
commission costs on a per-share and per-dollar basis. According to the bunching
procedures, the Adviser shall aggregate transactions unless it believes in its
sole discretion that such aggregation is inconsistent with its duty to seek best
execution (which shall include the duty to seek best price) for the Trust. No
advisory account of the Adviser is to be favored over any other account and each
account that participates in an aggregated order is expected to participate at
the average share price for all transactions of the Adviser in that security on
a given business day, with all transaction costs shared pro rata based on the
Trust's participation in the transaction. If the aggregated order is filled in
its entirety, it shall be allocated among the Adviser's accounts in accordance
with the allocation order, and if the order is partially filled, it shall be
allocated pro rata based on the allocation order. Notwithstanding the foregoing,
the order may be allocated on a basis different from that specified in the
allocation order if all accounts of the Adviser whose orders are allocated
receive fair and equitable treatment and the reason for such different
allocation is explained in writing and is approved in writing by the Adviser's
compliance officer as soon as practicable after the opening of the markets on
the trading day following the day on which the order is executed. If an
aggregated order is partially filled and allocated on a basis different from
that specified in the allocation order, no account that is benefited by such
different allocation may intentionally and knowingly effect any purchase or sale
for a reasonable period following the execution of the aggregated order that
would result in it receiving or selling more shares than the amount of shares it
would have received or sold had the aggregated order been completely filled. The
Trustees will annually review these procedures or as frequently as shall appear
appropriate.
For the fiscal years ended October 31, 1995, 1996 and 1997, brokerage
commissions paid by the Trust on portfolio transactions totaled $10,324,000,
$9,322,374 and $13,168,358 respectively. Brokerage commissions of $8,318,038
paid during the fiscal year ended October 31, 1997, were paid on portfolio
transactions aggregating $8,226,419,731 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.
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.
All of the outstanding stock of the Adviser is owned by Phoenix Equity
Planning Corporation ("Equity Planning"), a 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
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insurance and annuities. Equity Planning, the Distributor of the Trust's
shares, also performs bookkeeping, pricing, and administrative services for the
Trust. (See "The 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 Fund pays expenses incurred in its own operation and also pays a
portion of the Trust's general administration expenses allocated on the basis of
the asset size of the respective Fund, except where allocation of direct
expenses to each Fund or an alternative allocation method can be more fairly
made. 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 fulltime 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 monthly, as described 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.
The Adviser has agreed to reimburse the Trust for the amount, if any, by
which the total operating and management expenses of any Fund (including the
Adviser's compensation, but excluding interest, taxes, brokerage fees and
commissions and extraordinary expenses) for any fiscal year exceed the level of
expenses which such Fund is permitted to bear under the most restrictive expense
limitation imposed on mutual funds by any state in which shares of such Fund 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 Fund 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 Fund's average net asset value for such fiscal
year. In the event legislation were to be adopted in each state so as to
eliminate this restriction, the Trust would take such action necessary to
eliminate this expense limitation.
The Adviser has agreed to assume expenses and reduce the advisory fee for the
benefit of the Money Market Fund 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 monthly.
The agreement continues in force from year to year for all Funds, provided
that, with respect to each Fund, the agreement must be approved at least
annually by the Trustees or by vote of a majority of the outstanding voting
securities of the Funds. 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, 1995,
1996, and 1997, the Adviser received fees of $34,684,220, $35,372,083 and
$34,413,328 respectively under the investment advisory agreements in effect. Of
these totals, the Adviser received fees from each Fund as follows:
1995 1996 1997
----------- ----------- -----------
Growth Fund $14,508,081 $15,914,996 $16,439,785
Aggressive Growth Fund 1,052,902 1,537,430 1,735,384
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1995 1996 1997
----------- ----------- -----------
High Yield Fund 3,336,889 3,366,120 3,713,370
U.S. Government Fund 1,137,873 1,016,243 885,257
Convertible Fund 1,438,064 1,444,901 1,361,661
Balanced Fund 12,384,575 11,281,357 9,489,765
Money Market Fund 825,836 811,036 788,106
For the fiscal years ended October 31, 1995, 1996 and 1997, the Adviser was
not reimbursed for any expenses incurred in providing services which would
otherwise have been provided at the expense of the Trust.
NET ASSET VALUE
The net asset value per share of each Fund is determined as of the close of
trading of the New York Stock Exchange (the "Exchange") on days when the
Exchange is open for trading. The Exchange will be closed on the following
observed national holidays: New Year's Day, Martin Luther King Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. Since the Trust does not price securities on weekends or
United States national holidays, the net asset value of a Fund's foreign assets
may be significantly affected on days when the investor has no access to the
Trust. The net asset value per share of a Fund is determined by adding the
values of all securities and other assets of the Fund, subtracting liabilities,
and dividing by the total number of outstanding shares of the Fund. Assets and
liabilities are determined in accordance with generally accepted accounting
principles and applicable rules and regulations of the Securities and Exchange
Commission. The total liability allocated to a class, plus that class's
distribution fee and any other expenses allocated solely to that class, are
deducted from the proportionate interest of such class in the assets of the
Fund, and the resulting amount of each is divided by the number of shares of
that class outstanding to produce the net asset value per share.
A security that is listed or traded on more than one exchange is valued at
the quotation on the exchange determined to be the primary exchange for such
security by the Trustees or their delegates. Because of the need to obtain
prices as of the close of trading on various exchanges throughout the world, the
calculation of net asset value may not take place for any Fund which invests in
foreign securities contemporaneously with the determination of the prices of the
majority of the portfolio securities of such Fund. All assets and liabilities
initially expressed in foreign currency values will be converted into United
States dollar values at the mean between the bid and ask quotations of such
currencies against United States dollars as last quoted by any recognized
dealer. If an event were to occur after the value of an investment was so
established but before the net asset value per share was determined, which was
likely to materially change the net asset value, then the instrument would be
valued using fair value considerations by the Trustees or their delegates. If at
any time a Fund has investments where market quotations are not readily
available, such investments are valued at the fair value thereof as determined
in good faith by the Trustees although the actual calculations may be made by
persons acting pursuant to the direction of the Trustees.
MONEY MARKET FUND
The assets of the Money Market Fund 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 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 Fund securities
may at times be more or less than their market value. By using amortized cost
valuation, the Money Market Fund 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 Fund's net asset value per share was not constant and
was permitted to fluctuate with the market value of the Fund's 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 Fund's 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 l%, the Trustees will consider what action, if any, should be initiated to
provide fair valuation of the Fund's 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 Fund 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.
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HOW TO BUY SHARES
The minimum initial investment is $500 and the minimum subsequent investment
is $25. However, both the minimum initial and subsequent investment amounts are
$25 for investments pursuant to the "Investo-Matic" plan, a bank draft investing
program administered by the Distributor, or pursuant to the Systematic Exchange
privilege or for an individual retirement account (IRA). In addition, there are
no subsequent investment minimum amounts in connection with the reinvestment of
dividend or capital gain distributions. Completed applications for the purchase
of shares should be mailed to: Phoenix Funds, c/o State Street Bank and Trust
Company, P.O. Box 8301, Boston, MA 02266-8301.
The Trust has authorized one or more brokers to accept on its behalf purchase
and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Trust's behalf.
The Trust will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Customer orders will be priced at the Funds' net asset values next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
ALTERNATIVE PURCHASE ARRANGEMENTS
Shares may be purchased from investment dealers at a price equal to their net
asset value per share, plus a sales charge which (except Class A Shares of the
Money Market Fund), at the election of the purchaser, may be imposed either (i)
at the time of the purchase (the "initial sales charge alternative") or (ii) on
a contingent deferred basis (the "deferred sales charge alternative"). Orders
received by dealers prior to the close of trading on the New York Stock Exchange
are confirmed at the offering price effective at that time, provided the order
is received by the Distributor prior to its close of business.
The alternative purchase arrangements permit an investor to choose the method
of purchasing shares that is more beneficial given the amount of the purchase,
the length of time the investor expects to hold the shares, whether the investor
wishes to receive distributions in cash or to reinvest them in additional shares
of the Funds, and other circumstances. Investors should consider whether, during
the anticipated life of their investment in the Fund, the accumulated continuing
distribution services fee and contingent deferred sales charges on Class B or C
Shares would be less than the initial sales charge and accumulated distribution
services fee on Class A or M Shares purchased at the same time. Note, only the
High Yield Fund offers Class C and Class M Shares.
Dividends paid by the Fund, if any, with respect to each Class of Shares will
be calculated in the same manner at the same time on the same day, except that
fees such as higher distribution services fee and any incremental transfer
agency costs relating to each Class of Shares will be borne exclusively by that
class. See "Dividends, Distributions and Taxes."
CLASS A SHARES
Class A Shares incur a sales charge when they are purchased and enjoy the
benefit of not being subject to any sales charge when they are redeemed. Class A
Shares are subject to an ongoing distribution services fee at an annual rate of
0.25% of the Fund's aggregate average daily net assets attributable to the Class
A Shares. In addition, certain purchases of Class A Shares qualify for reduced
initial sales charges. See the Funds' current Prospectus for additional
information.
CLASS B SHARES
Class B Shares do not incur a sales charge when they are purchased, but they
are subject to a sales charge if they are redeemed within five years of
purchase. The deferred sales charge may be waived in connection with certain
qualifying redemptions. See the Funds' current Prospectus for additional
information.
Class B Shares are subject to an ongoing distribution and services fee at an
aggregate annual rate of up to 1.00% of the Fund's aggregate average daily net
assets attributable to the Class B Shares. Class B Shares enjoy the benefit of
permitting all of the investor's dollars to work from the time the investment is
made. The higher ongoing distribution and services fee paid by Class B Shares
will cause such shares to have a higher expense ratio and to pay lower
dividends, to the extent any dividends are paid, than those related to Class A
Shares. Class B Shares will automatically convert to Class A Shares eight years
after the end of the calendar month in which the shareholder's order to purchase
was accepted, in the circumstances and subject to the qualifications described
in the Funds' Prospectus. The purpose of the conversion feature is to relieve
the holders of the Class B Shares that have been outstanding for a period of
time sufficient for the adviser and the Distributor to have been compensated for
distribution expenses related to the Class B Shares from most of the burden of
such distribution related expenses.
Class B Shares include all shares purchased pursuant to the deferred sales
charge alternative which have been outstanding for less than the period ending
eight years after the end of the month in which the shares were issued. At the
end of this period, Class B Shares will automatically convert to Class A Shares
and will no longer be subject to the higher distribution and services fee. Such
conversion will be on the basis of the relative net asset value of the two
classes without the imposition of any sales load, fee or other charge.
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
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<PAGE>
B Shares in the shareholder's Fund account (other than those in the
sub-account) convert to Class A, an equal pro rata portion of the Class B Share
dividends in the sub-account will also convert to Class A Shares.
CLASS C SHARES--HIGH YIELD FUND ONLY
Class C Shares are purchased without an initial sales charge but are subject
to a deferred sales charge if redeemed within one year of purchase. The deferred
sales charge may be waived in connection with certain qualifying redemptions.
Shares issued in conjunction with the automatic reinvestment of income
distributions and capital gain distributions are not subject to any sales
charges. Class C Shares are subject to an ongoing distribution and services fee
at an aggregate annual rate of up to 1.00% of the Fund's aggregate average daily
net assets attributable to Class C Shares. See the Funds' current Prospectus for
more information.
CLASS M SHARES--HIGH YIELD FUND ONLY
Class M Shares incur a sales charge at the time of purchase but are not
subject to any sales charge when redeemed. Certain purchases of Class M Shares
may qualify for reduced initial sales charges as described in the Funds'
Prospectus. Class M Shares are subject to an ongoing distribution and services
fee at an aggregate annual rate of up to 0.50% of the Fund's aggregate average
daily net assets attributable to Class M Shares.
PURCHASES OF SHARES OF THE MONEY MARKET FUND
The minimum initial investment and the minimum subsequent investment for the
purchase of shares of the Money Market Fund is set forth in the Prospectus.
Shares of the Money Market Fund are sold through registered representatives of
Equity Planning or through brokers or dealers with whom Equity Planning has
sales agreements. (See "Distribution Plans"). 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.
Investments 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. Shares purchased
begin earning dividends the day after funds are credited. Certified checks are
not necessary.
INVESTOR ACCOUNT SERVICES
The Funds offer combination purchase privileges, letters of intent,
accumulation plans, withdrawal plans and reinvestment and exchange privileges as
described in the Funds' current Prospectus. Certain privileges may not be
available in connection with all classes. In most cases, changes to account
services may be accomplished over the phone. Inquiries regarding policies and
procedures relating to shareholder account services should be directed to
Shareholder Services at (800) 243-1574.
EXCHANGES. Under certain circumstances, shares of any Phoenix Fund (except
Class A Shares of the Money Market Fund) may be exchanged for shares of the same
Class of another Phoenix Fund or any other Affiliated Phoenix Fund on the basis
of the relative net asset values per share at the time of the exchange.
Exchanges are subject to the minimum initial investment requirement of the
designated Fund, Series, or Portfolio, except if made in connection with the
Systematic Exchange privilege. Shareholders may exchange shares held in
book-entry form for an equivalent number (value) of the same class of shares of
any other Phoenix Fund, if currently offered. On exchanges with share classes
that carry a contingent deferred sales charge, the CDSC schedule of the original
shares purchased continues to apply. The exchange of shares is treated as a sale
and purchase for federal income tax purposes (see also "Dividends, Distributions
and Taxes").
SYSTEMATIC EXCHANGES. If the conditions above have been met, you or your
broker may, by telephone or written notice, elect to have shares exchanged for
the same class of shares of another Phoenix Fund or any other Affiliated Phoenix
Fund automatically on a monthly, quarterly, semi-annual or annual basis or may
cancel this privilege at any time. If you maintain an account balance of at
least $5,000, or $2,000 for tax qualified retirement benefit plans (calculated
on the basis of the net asset value of the shares held in a single account), you
may direct that shares be automatically exchanged at predetermined intervals for
shares of the same class of another Phoenix Fund. This requirement does not
apply to Phoenix "Self Security" program participants. Systematic exchanges will
be executed upon the close of business on the 10th day of each month or the next
succeeding business day. Systematic exchange forms are available from the
Distributor. Exchanges will be based upon each Fund's net asset value per share
next computed after the close of business on the 10th day of each month (or next
succeeding business day), without sales charge.
DIVIDEND REINVESTMENT ACROSS ACCOUNTS. If you maintain an account balance of
at least $5,000, or $2,000 for tax qualified retirement benefit plans
(calculated on the basis of the net asset value of the shares held in a single
account), you may direct that any dividends and distributions paid with respect
to shares in that account be automatically reinvested in a single account of one
of the other Phoenix Funds or any other Affiliated Phoenix Fund at net asset
value. You should obtain a current prospectus and consider the objectives and
policies of each Fund carefully before directing dividends and distributions to
another Fund. Reinvestment election forms and prospectuses are available from
Equity Planning. Distributions may also be mailed to a second payee and/or
address. Requests for directing distributions to an alternate payee must be made
in writing with a signature guarantee of the registered owner(s). To be
effective with respect to a particular dividend or distribution, notification of
the new distribution option must be received by the Transfer Agent at least
three days prior to the record date of such dividend or distribution. If all
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<PAGE>
shares in your account are repurchased or redeemed or transferred between the
record date and the payment date of a dividend or distribution, you will receive
cash for the dividend or distribution regardless of the distribution option
selected.
INVEST-BY-PHONE. This expedited investment service allows a shareholder to
make an investment in an account by requesting a transfer of funds from the
balance of their bank account. Once a request is phoned in, Equity Planning will
initiate the transaction by wiring a request for monies to the shareholder's
commercial bank, savings bank or credit union via Automated Clearing House
(ACH). The shareholder's bank, which must be an ACH member, will in turn forward
the monies to Equity Planning for credit to the shareholder's account. ACH is a
computer based clearing and settlement operation established for the exchange of
electronic transactions among participating depository institutions.
To establish this service, please complete an Invest-by-Phone Application and
attach a voided check if applicable. Upon Equity Planning's acceptance of the
authorization form (usually within two weeks) shareholders may call toll free
(800) 367-5877 prior to 3:00 p.m. (New York time) to place their purchase
request. Instructions as to the account number and amount to be invested must be
communicated to Equity Planning. Equity Planning will then contact the
shareholder's bank via ACH with appropriate instructions. The purchase is
normally credited to the shareholder's account the day following receipt of the
verbal instructions. This service may also be used to request redemption of
shares of the Money Market Fund, 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.
The Trust 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
Under the 1940 Act, payment for shares redeemed must ordinarily be made
within seven days after tender. The right to redeem shares may be suspended and
payment therefor postponed during periods when the New York Stock Exchange is
closed, other than customary weekend and holiday closings, or if permitted by
rules of the Securities and Exchange Commission, during periods when trading on
the Exchange is restricted or during any emergency which makes it impracticable
for the Trust to dispose of its securities or to determine fairly the value of
its net assets or during any other period permitted by order of the Securities
and Exchange Commission for the protection of investors. Furthermore, the
Transfer Agent will not mail redemption proceeds until checks received for
shares purchased have cleared, which may take up to 15 days or more after
receipt of the check. See the Funds' current Prospectus for further information.
The Trust has authorized one or more brokers to accept on its behalf purchase
and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Trust's behalf.
The Trust will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Customer orders will be priced at the Funds' net asset values next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
Redemptions by Class B and Class C shareholders will be subject to the
applicable deferred sales charge, if any.
Each shareholder account in the Funds which has been in existence for at
least one year and has a value of less than $200 may be redeemed upon the giving
of not less than 30 days written notice to the shareholder mailed to the address
of record. During the 60 day period the shareholder has the right to add to the
account to bring its value to $200 or more. See the Funds' current Prospectus
for more information.
BY MAIL
Shareholders may redeem shares by making written request, executed in the
full name of the account, directly to Phoenix Funds c/o State Street Bank and
Trust Company, P.O. Box 8301, Boston, MA 02266-8301. However, when certificates
for shares are in the possession of the shareholder, they must be mailed or
presented, duly endorsed in the full name of the account, with a written request
to Equity Planning that the Trust redeem the shares. See the Funds' current
Prospectus for more information.
TELEPHONE REDEMPTIONS
Shareholders who do not have certificated shares may redeem up to $50,000
worth of their shares by telephone. See the Funds' current Prospectus for
additional information.
BY CHECK (U.S. GOVERNMENT SECURITIES FUND, HIGH YIELD FUND AND MONEY MARKET
FUND ONLY)
Any shareholder of these Funds 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.
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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. Checks drawn from Class B and Class C accounts are subject to the
applicable deferred sales charge, if any.
The checkwriting procedure for redemption enables a shareholder to receive
income accruing on the shares to be redeemed until such time as the check is
presented to 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 Trust does not redeem shares (for
example, a day on which the New York Stock Exchange is closed), or if the check
is presented against redemption proceeds of an investment made by check which
has not been in the account for at least fifteen calendar days, the check may be
returned marked "Non-sufficient Funds" and no shares will be redeemed. A
shareholder may not close his account by a withdrawal check because the exact
value of the account will not be known until after the check is received by
Equity Planning.
REINVESTMENT PRIVILEGE
Shareholders who may have overlooked features of their investment at the time
they redeemed have a privilege of reinvestment of their investment at net asset
value. See the Funds' current Prospectus for more information and conditions
attached to this privilege.
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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
As stated in the Prospectus, it will be the policy of the Trust and of each
Fund that each comply with provisions of the Internal Revenue Code (the "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 Fund 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 Funds 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 ("RIC") each Fund
must, among other things: (a) derive in each taxable year at least 90% of its
gross income from dividends, interest and gains from the sale or other
disposition of securities; and (b) meet certain diversification requirements
imposed under the Code at the end of each quarter of the taxable year. Under
certain state tax laws, each Fund must also comply with the "short-short" test
to qualify for treatment as a RIC for state tax purposes. Under the
"short-short" test the Fund must derive less than 30% of its gross income each
taxable year as gains (without deduction for losses) from the sale or other
disposition of securities for less than three months. If in any taxable year
each Fund does not qualify as a regulated investment company, all of its taxable
income will be taxed at corporate rates. In addition, if in any tax year the
Fund does not qualify as a RIC for state tax purposes a capital gain dividend
may not retain its character in the hands of the shareholder for state tax
purposes.
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 Fund's gross income, in the case of
individual distributees, or 100% of the distributing Fund's gross income, in the
case of corporate distributees. Any income dividends received after December 31,
1987 do not qualify for dividend exclusion on an individual tax return but
corporate shareholders are eligible for a 70% dividends received deduction (80%
in the case of a 20% shareholder) subject to a reduction for various reasons
including
17
<PAGE>
the fact that dividends received from domestic corporations in any year are
less than 100% of the distributing Fund's 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 Funds. 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 Funds 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 Fund 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 "Dividends, Distributions and 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 Fund. Shareholders are urged
to consult counsel or other competent tax advisers regarding specific questions
as to Federal, state or local taxes.
THE 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 Fund 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 Trust
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 Fund.
For the fiscal years ended October 31, 1995, 1996, and 1997, Equity
Planning's gross commissions on sales of Trust shares totaled $6,774,491,
$6,512,356 and $5,398,731, respectively. Of these gross selling commissions,
$856,873, $912,483 and $1,156,623, respectively, were allowed to Equity Planning
as dealer.
18
<PAGE>
Equity Planning also acts as administrative agent of the Trust and as such
performs administrative, bookkeeping and pricing functions for the Trust. As
compensation for such services, Equity Planning is entitled to a fee, payable
monthly and based upon the average of the aggregate daily net asset values of
each Fund, at the following incremental annual rates:
First $100 million .05% plus a minimum fee
$100 million to $300 million .04%
$300 million through $500 million .03%
Greater than $500 million .015%
A minimum fee applies to each Fund as follows:
Money Market Fund $35,000
Aggressive Growth Fund $50,000
Growth Fund $50,000
Balanced Fund $60,000
Convertible Fund $60,000
High Yield Fund $70,000
U.S. Government Securities Fund $70,000
In addition, Equity Planning is paid $12,000 for each class of shares of each
Fund beyond one. For its services during the Trust's fiscal year ended October
31, 1997, Equity Planning received $1,567,552.
DISTRIBUTION PLANS
The Funds have adopted separate amended and restated distribution plans under
Rule 12b-1 of the 1940 Act for each class of shares of the Funds other than
Class A Shares of the Money Market Fund (the "Class A Plan," the "Class B Plan,"
the "Class C Plan," the "Class M Plan" and collectively the "Plans"). The Plans
permit the Funds to reimburse the Distributor for expenses incurred in
connection with activities intended to promote the sale of shares of each class
of shares of the Funds.
Pursuant to the Class B Plan, each Fund may reimburse the Distributor monthly
for actual expense of the Distributor up to 0.75% (0.50% for the Money Market
Fund) of the average daily net assets of the Class B Shares of such Fund. Under
the Class C and Class M Plans, each Fund may reimburse the Distributor monthly
for actual expenses of the Distributor up to 0.75% and 0.25% of the average
daily net assets of the Fund's Class C and Class M Shares, respectively.
Expenditures under the Plans shall consist of: (i) commissions to sales
personnel for selling shares of the Funds; (ii) compensation, sales incentives
and payments to sales, marketing and service personnel; (iii) payments to
broker-dealers and other financial institutions which have entered into
agreements with the Distributor in the form of the Dealer Agreement for Phoenix
Funds for services rendered in connection with the sale and distribution of
shares of the Funds; (iv) payment of expenses incurred in sales and promotional
activities, including advertising expenditures related to the Funds; (v) the
costs of preparing and distributing promotional materials; (vi) the cost of
printing the Funds' Prospectus and Statement of Additional Information for
distribution to potential investors; and (vii) such other similar services that
the Trustees of the Funds determine are reasonably calculated to result in the
sale of shares of the Funds. In addition, the Funds will pay the Distributor
0.25% annually of the average daily net assets of the Funds' shares for
providing services to the shareholders, including assistance in connection with
inquiries related to shareholder accounts (the "Service Fee").
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.
For the fiscal year ended October 31, 1997, the Funds paid Rule l2b-l Fees in
the amount of $14,979,097, of which the principal underwriter received
$3,044,353, W.S. Griffith & Co., Inc., an affiliate received $1,358,415 and
unaffiliated broker-dealers received $10,576,329. Distributor expenses under the
Plans consisted of: (1) advertising ($1,202,861); (2) printing and mailing of
prospectuses to other than current shareholders ($48,128); (3) compensation to
dealers ($14,234,376); (4) compensation to sales personnel ($2,292,849); (5)
service costs ($815,113) and (6) other ($455,735).
19
<PAGE>
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.
<TABLE>
<CAPTION>
POSITION(S) WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE THE TRUST DURING PAST FIVE YEARS
- --------------------- --------- ----------------------
<S> <C> <C>
Robert Chesek (63) Trustee Trustee/Director (1981-present) and Chairman (1989-1994), Phoenix
49 Old Post Road Funds. Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff &
Wethersfield, CT 06109 Phelps Institutional Mutual Funds (1996-present). Vice President,
Common Stock, Phoenix Home Life Mutual Insurance Company
(1980-1994). Director/Trustee, the National Affiliated Investment
Companies (until 1993).
E. Virgil Conway (68) Trustee Chairman, Metropolitan Transportation Authority (1992-present).
Rittenhouse Road Trustee/Director, Consolidated Edison Company of New York, Inc.
Bronxville, NY 10708 (1970-present), Pace University (1978-present), Atlantic Mutual
Insurance Company (1974-present), HRE Properties (1989-present),
Greater New York Councils, Boy Scouts of America (1985-present),
Union Pacific Corp. (1978-present), Blackrock Freddie Mac
Mortgage Securities Fund (Advisory Director) (1990-present),
Centennial Insurance Company (1974-present), Josiah Macy, Jr.,
Foundation (1975-present), The Harlem Youth Development
Foundation (1987-present), Accuhealth (1994-present), Trism, Inc.
(1994-present), Realty Foundation of New York (1972-present), New
York Housing Partnership Development Corp. (Chairman)
(1981-present) and Fund Directions (Advisory Director)
(1993-present). Director/Trustee, Phoenix Funds (1993-present).
Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present). Director, Duff &
Phelps Utilities Tax-Free Income Inc. and Duff & Phelps Utility
and Corporate Bond Trust Inc. (1995-present). Chairman, Audit
Committee of the City of New York (1981-1996). Advisory Director,
Blackrock Fannie Mae Mortgage Securities Fund (1989-1996).
Chairman, Financial Accounting Standards Advisory Council
(1992-1995). Director/Trustee, the National Affiliated Investment
Companies (until 1993).
Harry Dalzell-Payne (68) Trustee Director/Trustee, Phoenix Funds (1983-present). Trustee,
330 East 39th Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Apartment 29G Institutional Mutual Funds (1996-present). Director, Duff &
New York, NY 10016 Phelps Utilities Tax-Free Income Inc. and Duff & Phelps Utility and
Corporate Bond Trust Inc. (1995-present). Director, Farragut Mortgage
Co., Inc. (1991-1994). Director/Trustee, the National Affiliated
Investment Companies (1983-1993). Formerly a Major General of the
British Army.
*Francis E. Jeffries (67) Trustee Director/Trustee, Phoenix Funds (1995-present). Trustee,
6585 Nicholas Blvd. Phoenix-Aberdeen Series Inc. and Phoenix Duff & Phelps
Apt. 1601 Institutional Mutual Funds (1996-present). Director, Duff &
Naples, FL 33963 Phelps Utilities Income Inc. (1987-present), Duff & Phelps
Utilities Tax-Free Income Inc. (1991-present) and Duff & Phelps
Utility and Corporate Bond Trust Inc. (1993-present). Director,
The Empire District Electric Company (1984-present). Director
(1989-1997), Chairman of the Board (1993- 1997), President
(1989-1993), and Chief Executive Officer (1989- 1995), Phoenix
Duff & Phelps Corporation.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE THE TRUST DURING PAST FIVE YEARS
- --------------------- --------- ----------------------
<S> <C> <C>
Leroy Keith, Jr. (58) Trustee Chairman and Chief Executive Officer, Carson Products Company
Chairman and Chief (1995-present). Director/Trustee, Phoenix Funds (1980-present).
Executive Officer Trustee, Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Carson Product Company Institutional Mutual Funds (1996-present). Director, Equifax
64 Ross Road Corp. (1991-present) and Keystone International Fund, Inc.
Savannah, GA 30750 (1989-present). Trustee, Keystone Liquid Trust, Keystone Tax
Exempt Trust, Keystone Tax Free Fund, Master Reserves Tax Free
Trust, and Master Reserves Trust. President, Morehouse College
(1987-1994). Chairman and Chief Executive Officer, Keith Ventures
(1992-1994). Director/Trustee, the National Affiliated Investment
Companies (until 1993). Director, Blue Cross/Blue Shield
(1989-1993) and First Union Bank of Georgia (1989-1993).
*Philip R. McLoughlin (51) Trustee and Chairman (1997-present), Vice Chairman (1995-1997) and
President Chief Executive Officer (1995-present), Phoenix Duff & Phelps
Corporation. Director (1994-present) and Executive Vice President,
Investments (1988-present), Phoenix Home Life Mutual Insurance
Company. Director/Trustee and President, Phoenix Funds
(1989-present). Trustee and President, Phoenix-Aberdeen Series Fund
and Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Director, Duff & Phelps Utilities Tax-Free Income
Inc. (1995-present) and Duff & Phelps Utility and Corporate Bond
Trust Inc. (1995-present). Director (1983-present) and Chairman
(1995-present), Phoenix Investment Counsel, Inc. Director
(1984-present) and President (1990-present), Phoenix Equity
Planning Corporation. Director (1993-present), Chairman
(1993-present) and Chief Executive Officer (1993-1995), National
Securities & Research Corporation. Director, Phoenix Realty Group,
Inc. (1994-present), Phoenix Realty Advisors, Inc. (1987-present),
Phoenix Realty Investors, Inc. (1994-present), Phoenix Realty
Securities, Inc. (1994-present), PXRE Corporation (Delaware)
(1985-present), and World Trust Fund (1991-present). Director and
Executive Vice President, Phoenix Life and Annuity Company
(1996-present). Director and Executive Vice President, PHL Variable
Insurance Company (1995-present). Director, Phoenix Charter Oak
Trust Company (1996-present). Director and Vice President, PM
Holdings, Inc. (1985-present). Director and President, Phoenix
Securities Group, Inc. (1993-1995). Director (1992-present) and
President (1992-1994), W.S. Griffith & Co., Inc. Director
(1992-present) and President (1992-1994), Townsend Financial
Advisers, Inc. Director/Trustee, the National Affiliated Investment
Companies (until 1993).
Everett L. Morris (69) Trustee Vice President, W.H. Reaves and Company (1993-present). Director/
164 Laird Road Trustee, Phoenix Funds (1995-present). Trustee, Phoenix-Aberdeen
Colts Neck, NJ 07722 Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Director, Duff & Phelps Utilities Tax-Free Income
Inc. (1991-present) and Duff & Phelps Utility and Corporate Bond
Trust Inc. (1993-present). Director, Public Service Enterprise
Group, Incorporated (1986-1993). President and Chief Operating
Officer, Enterprise Diversified Holdings, Incorporated
(1989-1993).
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE THE TRUST DURING PAST FIVE YEARS
- --------------------- --------- ----------------------
<S> <C> <C>
*James M. Oates (51) Trustee Chairman, IBEX Capital Markets LLC (1997-present). Managing
Managing Director Director, Wydown Group (1994-present). Director, Phoenix Duff &
The Wydown Group Phelps Corporation (1995-present). Director/Trustee, Phoenix
IBEX Capital Markets LLC Funds (1987-present). Trustee, Phoenix-Aberdeen Series Fund and
60 State Street Phoenix Duff & Phelps Institutional Mutual Funds (1996-present).
Suite 950 Director, Govett Worldwide Opportunity Funds, Inc.
Boston, MA 02109 (1991-present), Blue Cross and Blue Shield of New Hampshire
(1994-present), Investors Financial Service Corporation
(1995-present), Investors Bank & Trust Corporation
(1995-present), Plymouth Rubber Co. (1995-present) and Stifel
Financial (1996-present). Member, Chief Executives Organization
(1996-present). Director (1984-1994), President (1984-1994) and
Chief Executive Officer (1986-1994), Neworld Bank.
Director/Trustee, the National Affiliated Investment Companies
(until 1993).
*Calvin J. Pedersen (55) Trustee Director (1986-present), President (1993-present) and Executive
Phoenix Duff & Phelps Vice President (1992-1993), Phoenix Duff & Phelps Corporation.
Corporation Director/Trustee, Phoenix Funds (1995-present). Trustee,
55 East Monroe Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Suite 3600 Institutional Mutual Funds (1996-present). President and Chief
Chicago, IL 60603 Executive Officer, Duff & Phelps Utilities Tax-Free Income Inc.
(1995-present), Duff & Phelps Utilities Income Inc.
(1994-present) and Duff & Phelps Utility and Corporate Bond Trust
Inc. (1995-present).
Herbert Roth, Jr. (69) Trustee Director/Trustee, Phoenix Funds (1980-present). Trustee,
134 Lake Street Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
P.O. Box 909 Institutional Mutual Funds (1996-present). Director, Boston
Sherborn, MA 01770 Edison Company (1978-present), Phoenix Home Life Mutual Insurance
Company (1972-present), Landauer, Inc. (medical services)
(1970-present), Tech Ops./Sevcon, Inc. (electronic controllers)
(1987-present), and Mark IV Industries (diversified manufacturer)
(1985-present). Director, Key Energy Group (oil rig service)
(1988-1994). Director/Trustee, the National Affiliated Investment
Companies (until 1993).
Richard E. Segerson (51) Trustee Managing Director, Mullin Associates (1993-present). Director/
102 Valley Road Trustee, Phoenix Funds (1993-present). Trustee, Phoenix-Aberdeen
New Canaan, CT 07840 Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds
(1996-present). Vice President and General Manager, Coats &
Clark, Inc. (previously Tootal American, Inc.) (1991-1993).
Director/Trustee, the National Affiliated Investment Companies
(1984-1993).
Lowell P. Weicker, Jr. (66) Trustee Trustee/Director, Phoenix Funds (1995-present). Trustee,
731 Lake Avenue Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Greenwich, CT 06830 Institutional Mutual Funds (1996-present). Director, UST Inc.
(1995-present), HPSC Inc. (1995-present), Duty Free International, Inc.
(1997-present) and Compuware (1996-present). Visiting Professor,
University of Virginia (1997-present). Chairman, Dresing, Lierman,
Weicker (1995-1996). Governor of the State of Connecticut (1991-1995).
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE THE TRUST DURING PAST FIVE YEARS
- --------------------- --------- ----------------------
<S> <C> <C>
Michael E. Haylon (40) Executive Vice Director and Executive Vice President--Investments, Phoenix Duff &
President Phelps Corporation (1995-present). Executive Vice President,
Phoenix Funds (1993-present) and Phoenix-Aberdeen Series Fund
(1996-present). Executive Vice President (1997-present), Vice President
(1996-1997), Phoenix Duff & Phelps Institutional Mutual Funds. Director
(1994-present), President (1995-present), Executive Vice President
(1994-1995), Vice President (1991-1994), Phoenix Investment Counsel,
Inc. Director (1994-present), President (1996-present), Executive Vice
President (1994-1996), Vice President (1993-1994), National Securities
& Research Corporation. Director, Phoenix Equity Planning Corporation
(1995-present). Senior Vice President, Securities Investments, Phoenix
Home Life Mutual Insurance Company (1993-1995). Various other positions
with Phoenix Home Life Mutual Insurance Company (1990-1993).
William J. Newman (58) Senior Vice Executive Vice President (1995-present) and Chief Investment Strategist
President (1996-present), Phoenix Investment Counsel, Inc. Senior Vice President
(1995-1996), Executive Vice President and Chief Strategist
(1996-present), National Securities & Research Corporation. Senior
Vice President, Phoenix Equity Planning Corporation (1995-1996).
Vice President, Common Stock and Chief Investment Strategist, Phoenix
Home Life Insurance Company (April, 1995-November, 1995). Senior
Vice President, Phoenix Strategic Equity Series Fund (1996-present), The
Phoenix Edge Series Fund (1995-present), Phoenix Multi-Portfolio Fund
(1995-present), Phoenix Income and Growth Fund (1996-present), Phoenix
Series Fund (1996-present), Phoenix Strategic Allocation Fund, Inc.
(1996-present), Phoenix Worldwide Opportunities Fund (1996-present),
Phoenix Duff & Phelps Institutional Funds (1996-present), and
Phoenix-Aberdeen Series Fund (1996-present). Chief Investment
Strategist, Kidder, Peabody Co., Inc. (1993-1994). Managing Director,
Equities, Bankers Trust Company (1991-1993).
James D. Wehr (40) Senior Vice Managing Director, Fixed Income (1996-present), Vice President
President (1991-1996), Phoenix Investment Counsel, Inc. Managing Director, Fixed
Income (1996-present), Vice President (1993-1996), National Securities
& Research Corporation. Senior Vice President (1997-present), Vice
President (1988-1997) Phoenix Multi-Portfolio Fund; Senior Vice
President (1997-present), Vice President (1990-1997) Phoenix Series
Fund; Senior Vice President (1997-present), Vice President (1991-1997)
The Phoenix Edge Series Fund; Senior Vice President (1997-present),
Vice President (1993-1997) Phoenix California Tax Exempt Bonds, Inc.,
and Senior Vice President (1997-present), Vice President (1996-1997)
Phoenix Duff & Phelps Institutional Mutual Funds. Senior Vice President
(1997-present) Phoenix Multi-Sector Fixed Income Fund, Inc., Phoenix
Multi-Sector Short Term Bond Fund, Phoenix Income and Growth Fund and
Phoenix Strategic Allocation Fund, Inc. Managing Director, Public Fixed
Income, Phoenix Home Life Insurance Company (1991-1995).
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE THE TRUST DURING PAST FIVE YEARS
- --------------------- --------- ----------------------
<S> <C> <C>
David L. Albrycht (36) Vice Managing Director, Fixed Income (1996-present) and Vice President
President (1995-1996), Phoenix Investment Counsel, Inc. Managing Director,
Fixed Income (1996-present) and Investment Officer (1994-1996),
National Securities & Securities Research Corporation. Vice
President, Phoenix Multi-Portfolio Fund (1993-present), Phoenix
Multi-Sector Short Term Bond Fund (1993-present), Phoenix
Multi-Sector Fixed Income Fund, Inc. (1994-present), The Phoenix
Edge Series Fund (1997-present) and Phoenix Series Fund
(1997-present). Portfolio Manager, Phoenix Home Life Mutual
Insurance Company (1995-1996).
Curtiss O. Barrows (46) Vice Managing Director, Fixed Income (1996-present), Vice President
President (1991-1996), Phoenix Investment Counsel, Inc. Managing Director,
Fixed Income (1996-present), Vice President (1993-1996), National
Securities & Research Corporation. Vice President, Phoenix Series Fund
(1985-present), The Phoenix Edge Series Fund (1986-present) and
Phoenix Multi-Portfolio Fund (1995-1997). Portfolio Manger, Public
Bonds, Phoenix Home Life Insurance Company (1991-1995). Various
positions with Phoenix Home Life Mutual Insurance Company (1985-1995).
Steven L. Colton (38) Vice Managing Director/Senior Portfolio Manager, Phoenix Investment
President Counsel, Inc. (1997-present). Vice President/Senior Portfolio
Manager, American Century Investment Management (1987-1997). Portfolio
Manager, American Century/Benham Income and Growth Fund (1990-1997),
American Century/Benham Equity Growth Fund (1991-1996) and American
Century/Benham Utilities Income Fund (1993-1997). Vice President, The
Phoenix Edge Series Fund, Phoenix Series Fund, Phoenix Equity Series
Fund (1997-present).
Roger Engemann (57) Vice Vice President (1998-present), Phoenix Series Fund and Phoenix
600 North Rosemead Blvd. President Investment Counsel, Inc. President and Director (1969-present),
Pasadena, CA 91107 Roger Engemann & Associates, Inc. Owner (1996-present), Pasadena
National Trust Company. President and Director (1988-present),
Pasadena Capital Corporation. Chairman of the Board, President
and Trustee (1986-present), Phoenix-Engemann Funds. President and
Director (1985-present), Roger Engemann Management Co., Inc.
John M. Hamlin (39) Vice Portfolio Manager, Equities (1996-present), Vice President
President (1995-1996), Phoenix Investment Counsel, Inc. Portfolio Manager,
Equities (1996-present), Investment Officer (1993-1996), National
Securities & Research Corporation. Vice President, Phoenix Income
and Growth Fund (1993-present) and Phoenix Series Fund (1994-
present). Portfolio Manager, Common Stock, Phoenix Home Life
Insurance Company (1989-1995).
John D. Kattar (42) Vice Managing Director/Senior Portfolio Manager (1997-present),
President Phoenix Investment Counsel, Inc. Vice President (1997-present),
The Phoenix Edge Series Fund, Phoenix Series Fund and
Phoenix-Aberdeen Series Fund. Director (1989-1997), Senior Vice
President (1993-1996) Baring Asset Management Company, Inc.
Director, (1995-1997) Baring Mutual Fund Management (Luxembourg).
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE THE TRUST DURING PAST FIVE YEARS
- --------------------- --------- ----------------------
<S> <C> <C>
William E. Keen, III (34) Vice Assistant Vice President, Phoenix Equity Planning Corporation
100 Bright Meadow Blvd. President (1996-present). Vice President, Phoenix Funds, Phoenix Duff &
P.O. Box 2200 Phelps Institutional Mutual Funds and Phoenix-Aberdeen Series
Enfield, CT 06083-2200 Fund (1996-present). Assistant Vice President, USAffinity
Investments LP (1994-1995). Treasurer and Secretary, USAffinity
Funds (1994-1995). Manager, Fund Administration, SEI Corporation
(1991-1994).
Christopher J. Kelleher (42) Vice Managing Director, Fixed Income (1996-present), Vice President
President (1991-1996), Phoenix Investment Counsel, Inc. Managing Director,
Fixed Income (1996-present), Vice President (1993-1996), National
Securities & Research Corporation. Vice President, Phoenix Series Fund
(1989-present), The Phoenix Edge Series Fund (1989-1997) and Phoenix
Duff & Phelps Institutional Mutual Funds (1996-present). Portfolio
Manager, Public Bonds, Phoenix Home Life Insurance Company (1991-1995).
James E. Mair (56) Vice Vice President (1998-present), Phoenix Series Fund and Phoenix
600 North Rosemead Blvd. President Investment Counsel, Inc. Executive Vice President (1994-present)
Pasadena, CA 91107 and Senior Vice President (1983-1994), Roger Engemann &
Associates, Inc. Executive Vice President (1994-present) and
Security Analyst (1985-1994), Roger Engemann Management Co., Inc.
Executive Vice President and Director (1994-present), Senior Vice
President and Director (1990-1994), Pasadena Capital Corporation.
Director (1989-present), Pasadena National Trust Company.
William R. Moyer (53) Vice Senior Vice President and Chief Financial Officer, Phoenix Duff &
100 Bright Meadow Blvd. President Phelps Corporation (1995-present). Senior Vice President, Finance
P.O. Box 2200 (1990-present), Chief Financial Officer (1996-present), and
Enfield, CT 06083-2200 Treasurer (1994-1996), Phoenix Equity Planning Corporation.
Senior Vice President (1990-present), Chief Financial Officer
(1996-present) and Treasurer (1994-present), Phoenix Investment
Counsel, Inc. Senior Vice President, Finance (1993-present),
Chief Financial Officer (1996-present), and Treasurer
(1994-present), National Securities & Research Corporation.
Senior Vice President and Chief Financial Officer, Duff & Phelps
Investment Management Co. (1996-present). Vice President, Phoenix
Funds (1990-present), Phoenix-Duff & Phelps Institutional Mutual
Funds (1996-present) and Phoenix-Aberdeen Series Fund
(1996-present). Senior Vice President and Chief Financial
Officer, W. S. Griffith & Co., Inc. (1992-1995) and Townsend
Financial Advisers, Inc. (1993-1995). Vice President, the
National Affiliated Investment Companies (until 1993). Vice
President, Investment Products Finance, Phoenix Home Life Mutual
Insurance Company (1990-1995).
Leonard J. Saltiel (43) Vice Managing Director, Operations and Senice (1996-present), Senior
President Vice President (1994-1996), Phoenix Equity Planning Corporation.
Vice President, Phoenix Funds (1994-present), Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present) and Phoenix-Aberdeen Series
Fund (1996-present). Vice President, National Securities & Research
Corporation (1994-1995). Vice President, Investment Operations,
Phoenix Home Life Mutual Insurance Company (1994-1995). Various
positions with Home Life Insurance Company and Phoenix Home Life Mutual
Insurance Company (1987-1994).
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE THE TRUST DURING PAST FIVE YEARS
- --------------------- --------- ----------------------
<S> <C> <C>
Julie L. Sapia (40) Vice Director, Money Market Trading (1997-present), Head Money Market
President Trader (1997), Money Market Trader (1995-1997), Phoenix
Investment Counsel, Inc. Vice President (1997-present), The
Phoenix Edge Series Fund, Phoenix Series Fund, Phoenix Duff &
Phelps Institutional Mutual Funds and Phoenix-Aberdeen Series
Fund. Various positions with Phoenix Home Life Mutual Insurance
Company (1985-1995).
Dorothy J. Skaret (45) Vice Director, Money Market Trading (1996-present), Vice President
President (1991-1996), Phoenix Investment Counsel Inc. Director, Money
Market Trading (1996-present), Vice President (1993-1996),
National Securities & Research Corporation. Vice President,
Phoenix Series Fund (1990-present), The Phoenix Edge Series Fund
(1990-present), Phoenix-Aberdeen Series Fund (1996-present),
Phoenix Realty Securities, Inc. (1995-present), and Phoenix Duff
& Phelps Institutional Mutual Funds (1996-present). Director,
Public Fixed Income, Phoenix Home Life Mutual Insurance Company
(1991-1995). Various positions with Phoenix Home Life Mutual
Insurance Company (1986-1991).
John S. Tilson (53) Vice Vice President (1998-present), Phoenix Series Fund and Phoenix
600 North Rosemead Blvd. President Investment Counsel, Inc. Executive Vice President (1994-present),
Pasadena, CA 91107 Senior Vice President (1983-1994), Roger Engemann & Associates,
Inc. Executive Vice President and Director (1994-present), Senior
Vice President and Director (1990-1994), Pasadena Capital
Corporation. Executive Vice President (1994-present) and Security
Analyst (1985-1994), Roger Engemann Management Co., Inc. Chief
Financial Officer and Secretary (1988-present), Phoenix-Engemann
Funds.
Pierre G. Trinque (42) Vice Vice President (1997-present), The Phoenix Edge Series Fund and
President Phoenix Series Fund. Managing Director, Equities (March,
1997-November, 1997), Managing Director, Director of Equity
Research (October, 1996-March, 1997), Senior Research Analyst,
Equities (January, 1996-October, 1996) and Associate Portfolio
Manager-Institutional Funds (1992-1995), Phoenix Investment
Counsel, Inc.
Nancy G. Curtiss (45) Treasurer Vice President, Fund Accounting (1994-present) and Treasurer
(1996-present), Phoenix Equity Planning Corporation. Treasurer,
Phoenix Funds (1994-present), Phoenix Duff & Phelps Institutional
Mutual Funds (1996-present) and Phoenix-Aberdeen Series Fund
(1996-present). Second Vice President and Treasurer, Fund
Accounting, Phoenix Home Life Mutual Insurance Company
(1994-1995). Various positions with Phoenix Home Life Insurance
Company (1987-1994).
G. Jeffrey Bohne (50) Secretary Vice President and General Manager, Phoenix Home Life Mutual
101 Munson Street Insurance Co. (1993-present). Vice President, Transfer Agent
Greenfield, MA 01301 Operations (1993-1996). Vice President, Mutual Fund Customer
Service (1996-present), Phoenix Equity Planning Corporation, Secretary
and/or Clerk, Phoenix Funds (1993-present), Phoenix Duff & Phelps
Institutional Mutual Funds (1996-present) and Phoenix-Aberdeen Series
Fund (1996-present). Vice President, Home Life of New York
Insurance Company (1984-1992).
</TABLE>
- ------------------
*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 or Phoenix Duff & Phelps Corporation.
26
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of October 31, 1997 with
respect to each person who owns of record or is known by the Trust to own of
record or beneficially own 5% or more of any class of the Trust's equity
securities.
<TABLE>
<CAPTION>
NAME OF SHAREHOLDER NAME OF FUND NUMBER OF SHARES PERCENT OF CLASS
<S> <C> <C> <C>
Trustees of Phoenix Savings and Aggressive 877,591.291 6.18%
Investment Plan Growth Fund
100 Bright Meadow Blvd Class A
PO Box 1900
Enfield, CT 06083-1900
Phoenix Securities Group Inc. Money Market 29,576,711.080 14.26%
100 Bright Meadow Blvd Fund Class A
Enfield, CT 06082
MLPF&S for the sole benefit of its U.S. Government 90,650.000 15.44%
customers* Securities Fund
ATTN: Fund Administration Class B
4800 Deer Lake Dr E 3rd Fl
Jacksonville, FL 32246-6484
MLPF&S for the sole benefit of its High Yield Fund 960,215.000 15.69%
customers* Class B
ATTN: Fund Administration
4800 Deer Lake Dr E 3rd Fl
Jacksonville, FL 32246-6484
MLPF&S for the sole benefit of its Convertible Fund 87,702.000 22.20%
customers* Class B
ATTN: Fund Administration
4800 Deer Lake Dr E 3rd Fl
Jacksonville, FL 32246-6484
MLPF&S for the sole benefit of its Growth Fund 135,582.839 5.45%
customers* Class B
ATTN: Fund Administration
4800 Deer Lake Dr E 3rd Fl
Jacksonville, FL 32246-6484
</TABLE>
*Record owner only for its individual customers. To the Trust's knowledge, no
customer beneficially owned 5% or more of the total outstanding shares of any
Class of any Fund.
At October 31, 1997, the Trustees and officers as a group owned less than 1%
of the then outstanding shares of the Trust.
For services rendered to the Trust during the fiscal year ended October 31,
1997, the Trustees received an aggregate of $141,173 from the Trust as Trustees'
fees. For services on the Board of Trustees of the Phoenix Funds, each Trustee
who is not a full-time employee of the Adviser or any of its affiliates
currently receives a retainer at the annual rate of $40,000 and $2,500 per joint
meeting of the Boards. Each Trustee who serves on the Audit Committee receives a
retainer at the annual rate of $2,000 and a fee of $2,000 per joint Audit
Committee meeting attended. Each Trustee who serves on the Nominating Committee
receives an annual retainer at the annual rate of $1,000 and a fee of $1,000 per
joint Nominating Committee meeting attended. Each Trustee who serves on the
Executive Committee and who is not an interested person of the Trust receives a
retainer at the annual rate of $1,000 and $1,000 per joint Executive Committee
meeting attended. The function of the Executive Committee is to serve as a
contract review, compliance review and performance review delegate of the full
Board of Trustees. Costs are allocated equally to each of the Series and the
Funds within the Phoenix Fund complex. The foregoing fees do not include
reimbursement of expenses incurred in connection with meeting attendance.
Officers and employees of the Adviser who are not interested persons are
compensated for their services by the Adviser and receive no compensation from
the Trust.
27
<PAGE>
For the Trust's last fiscal year ending October 31, 1997, the Trustees
received the following compensation:
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
PENSION OR FROM FUND AND
AGGREGATE RETIREMENT BENEFITS ESTIMATED FUND COMPLEX
COMPENSATION ACCRUED AS PART ANNUAL BENEFITS (13 FUNDS)
NAME FROM FUND OF FUND EXPENSES UPON RETIREMENT PAID TO TRUSTEES
---- --------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
C. Duane Blinn** $12,600* $132,500
Robert Chesek $11,078 $118,000
E. Virgil Conway+ $13,860 $146,500
Harry Dalzell-Payne+ $12,075 $130,000
Francis E. Jeffries $ 7,875* $ 85,000
Leroy Keith, Jr. $11,078 None None $118,000
Philip R. McLoughlin+ $ 0 for any for any $ 0
Everett L. Morris+ $11,498* Trustee Trustee $126,000
James M. Oates+ $11,498 $124,500
Calvin J. Pedersen $ 0 $ 0
Philip R. Reynolds** $11,078 $118,000
Herbert Roth, Jr. + $14,438* $152,500
Richard E. Segerson $12,285 $131,000
Lowell P. Weicker, Jr. $11,813 $125,000
</TABLE>
*This compensation (and the earnings thereon) will be deferred pursuant to the
Deferred Compensation Plan. At October 31, 1997, the total amount of deferred
compensation (including interest and other accumulation earned on the original
amounts deferred) accrued for Messrs. Blinn, Jeffries, Morris and Roth was
$395,602, $49,350, $108,675 and $135,965, respectively. At present, by
agreement among the Fund, the Distributor and the electing director, director
fees that are deferred are paid by the Fund to the Distributor. The liability
for the deferred compensation obligation appears only as a liability of the
Distributor.
**Pursuant to the retirement policy of the Phoenix Funds, Messrs. Blinn and
Reynolds retired from the Board of Trustees effective January 1, 1998.
+Messrs. Conway, Dalzell-Payne, McLoughlin, Morris, Oates and Roth are members
of the Executive Committee.
OTHER INFORMATION
FINANCIAL STATEMENTS
Financial information relating to the Trust is contained in the Annual Report
to Shareholders for the year ended October 31, 1997 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, 160 Federal Street, Boston, MA 02110, has been selected
independent accountants for the Trust. Price Waterhouse LLP audits the Trust's
annual financial statements and expresses an opinion thereon.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company ("State Street"), P.O. Box 351, Boston,
MA 02101, serves as custodian of the Trust's assets (the "Custodian") and Equity
Planning acts as Transfer Agent for the Trust (the "Transfer Agent").
REPORT TO SHAREHOLDERS
The fiscal year of the Trust ends on October 31. The Trust will send
financial statements to its shareholders at least semiannually. An Annual Report
containing financial statements audited by the Trust's independent accountants
will be sent to shareholders each year.
28
