PHOENIX CONVERTIBLE FUND SERIES
a series of
Phoenix Series Fund
101 Munson Street
Greenfield, Massachusetts 01301
----------------
August 24, 1998
Dear Shareholder:
A Special Meeting of Shareholders of the Phoenix Convertible Fund Series
(the "Convertible Fund"), a series of the Phoenix Series Fund (the "Trust") will
be held at 11 a.m., local time, on October 5, 1998, at the offices of the
Phoenix Series Fund (the "Meeting"). At the Meeting, the shareholders of the
Convertible Fund will vote on an Agreement and Plan of Reorganization (the
"Plan") under which the Convertible Fund will become part of the Phoenix Income
and Growth Fund (the "Income and Growth Fund"), a series of the Phoenix Income
and Growth Fund (the "Acquiring Trust"), which has substantially similar
investment objectives to those of the Convertible Fund (the "Reorganization").
If the Plan is approved and implemented, each Convertible Fund shareholder will
become a shareholder of the Income and Growth Fund and will receive shares of
the corresponding class of the Income and Growth Fund having an aggregate value
equal to the aggregate value of such shareholder's investment in the Convertible
Fund. No sales charge will be imposed in connection with the Reorganization.
Phoenix Investment Counsel, Inc., the investment adviser to both the Convertible
Fund and the Income and Growth Fund will pay all costs of the Reorganization.
The Reorganization will be conditioned upon receipt of an opinion of counsel
indicating that the Reorganization will qualify as a tax-free reorganization for
Federal income tax purposes.
The Board of Trustees of the Trust believes that the Reorganization offers
shareholders of the Convertible Fund the opportunity to pursue their goals in a
larger fund with a wider scope of potential investment opportunities.
The Board of Trustees of the Trust has carefully considered and has
unanimously approved the proposed Reorganization, as described in the
accompanying materials. The Board of Trustees of the Trust believes that the
Reorganization is in the best interests of the Convertible Fund and its
shareholders and, therefore, recommends that the Convertible Fund shareholders
vote in favor of approving the Plan.
We strongly urge you to review, complete, and return your proxy as soon as
possible. Your vote is important no matter how many shares you own. Voting your
shares early will help to avoid costly follow-up mail and telephone
solicitation. After reviewing the enclosed materials, please exercise your right
to vote today by completing, dating, and signing each proxy card you receive and
mailing the proxy in the self-addressed, postage-paid envelope that has been
enclosed for your convenience. It is very important that you vote, and that your
voting instructions be received no later than October 1, 1998.
Please note that you may receive more than one proxy package if you hold
shares of the Convertible Fund in more than one account, and you should return
separate proxy cards for such accounts. If you have any questions, please call
(800) 243-1574.
Sincerely,
Philip R. McLoughlin
President
Phoenix Series Fund
<PAGE>
PHOENIX CONVERTIBLE FUND SERIES
a series of
Phoenix Series Fund
101 Munson Street
Greenfield, Massachusetts 01301
----------------
Notice of Special Meeting of Shareholders
to be Held October 5, 1998
TO THE SHAREHOLDERS:
Notice is hereby given that a special meeting of shareholders of the
Phoenix Convertible Fund Series (the "Convertible Fund"), a series of Phoenix
Series Fund, a Massachusetts business trust, will be held at the offices of
Phoenix Series Fund, 101 Munson Street, Greenfield, Massachusetts 01301, on
October 5, 1998 at 11 a.m. local time (the "Meeting") for the following
purposes:
1. To consider and act upon a proposal to approve an Agreement and Plan of
Reorganization (the "Plan"), and the transactions contemplated thereby,
including (a) the transfer of all or substantially all of the assets of the
Convertible Fund to Phoenix Income and Growth Fund (the "Income and Growth
Fund") and the assumption by the Income and Growth Fund of certain identified
liabilities in exchange for shares of the corresponding class of the Income and
Growth Fund and (b) the distribution of the shares of the Income and Growth Fund
so received to shareholders of the Convertible Fund.
2. To consider and act upon any matter incidental to the foregoing and to
transact such other business as may properly come before the Meeting and any
adjournments thereof.
You are entitled to vote at the Meeting and any adjournment(s) thereof, if
you owned shares of the Convertible Fund at the close of business on August 11,
1998. If you attend the Meeting, you may vote your shares in person. If you do
not expect to attend the meeting, please complete, date, sign, and return the
enclosed proxy card in the enclosed self-addressed, postage-paid return
envelope.
Please indicate your voting instructions on the enclosed proxy card, then
please date and sign the card and return the proxy card in the envelope
provided. If you sign, date, and return the proxy card but give no voting
instructions, your shares will be voted "FOR" the proposal noticed above. In
order to avoid the additional expense and delay of further solicitation, we ask
your cooperation in mailing in your proxy card promptly. Unless proxy cards
submitted by corporations and partnerships are signed by the appropriate persons
as indicated in the voting instructions on the proxy card, such proxy cards
cannot be voted.
By Order of the Board of Trustees of the
Phoenix Series Fund,
G. Jeffrey Bohne, Secretary
Greenfield, Massachusetts 01301
August 24, 1998
<PAGE>
PHOENIX CONVERTIBLE FUND SERIES
a series of
Phoenix Series Fund
101 Munson Street
Greenfield, Massachusetts 01301
(800) 243-4361
PHOENIX INCOME AND GROWTH FUND
a series of
Phoenix Income and Growth Fund
101 Munson Street
Greenfield, Massachusetts 01301
(800) 243-4361
PROSPECTUS/PROXY STATEMENT
Dated August 24, 1998
This Prospectus/Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Trustees of the Phoenix Series Fund, a
Massachusetts business trust (the "Trust"), for use at the special meeting of
shareholders of the Phoenix Convertible Fund Series (the "Convertible Fund") to
be held at 11 a.m., local time, on October 5, 1998 at the offices of the Trust,
101 Munson Street, Greenfield, Massachusetts 01301, and at any adjournment(s)
thereof (the "Meeting").
The purpose of the Meeting is to consider an Agreement and Plan of
Reorganization (the "Plan") that would effect the reorganization (the
"Reorganization") of the Convertible Fund into the Phoenix Income and Growth
Fund (the "Income and Growth Fund"), the sole portfolio series of the Phoenix
Income and Growth Fund (the "Acquiring Trust") as described below. Pursuant to
the Plan, which has been approved by the Board of Trustees of the Trust, all or
substantially all of the assets of the Convertible Fund would be transferred to
the Income and Growth Fund in exchange for Class A and Class B shares of
beneficial interest in the Income and Growth Fund and the assumption by the
Income and Growth Fund of certain identified liabilities of the Convertible
Fund. These shares of the Income and Growth Fund would then be distributed pro
rata to the shareholders of the Convertible Fund, and then the Convertible Fund
would be liquidated. As a result of the proposed transactions, each shareholder
of the Convertible Fund would receive a number of full and fractional shares of
the corresponding class of the Income and Growth Fund having an aggregate net
asset value equal, on the effective date of the Reorganization, to the aggregate
net asset value of the shareholder's Convertible Fund shares.
The Income and Growth Fund and the Convertible Fund are both portfolio
series of open-end management investment companies and are managed by Phoenix
Investment Counsel, Inc. ("PIC"). National Securities and Research Corporation
("National"), an affiliate of PIC, acted as the adviser to the Income and
Growth Fund until June 1, 1998. As used in this Prospectus/Proxy Statement the
term "Adviser" refers to PIC or National, as the context requires. The primary
investment objective of the Income and Growth Fund is to provide an investment
in a diversified group of securities that are selected for current yield
consistent with preservation of capital. The secondary objective of the Income
and Growth Fund is to achieve capital appreciation that is consistent with the
primary objective. The Convertible Fund seeks as its investment objectives
income and the potential for capital appreciation, which objectives are to be
considered as relatively equal.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about the Convertible Fund, the
Income and Growth Fund, and the transactions contemplated by the proposed
<PAGE>
Reorganization, that the investor should know before voting on the proposed
Reorganization. As used in this Prospectus/ Proxy Statement, the term "Funds"
refers to the Convertible Fund and the Income and Growth Fund, collectively,
and the term "Trusts" refers to the Trust and the Acquiring Trust,
collectively. A copy of the Prospectus for the Income and Growth Fund, dated
August 28, 1998, (the "Income and Growth Prospectus") is included with this
Prospectus/Proxy Statement and is incorporated by reference herein.
A Prospectus and Statement of Additional Information for the Convertible
Fund, each dated February 27, 1998 have been filed with the Securities and
Exchange Commission (the "Commission") and are incorporated by reference
herein. A Statement of Additional Information for the Income and Growth Fund,
dated August 28, 1998, has also been filed with the Commission and is
incorporated by reference herein. Copies of the above-referenced documents may
be obtained without charge by contacting Phoenix Equity Planning Corporation
("Equity Planning") at 100 Bright Meadow Boulevard, Post Office Box 2200,
Enfield, Connecticut 06083-2200, or by telephoning Equity Planning toll-free at
1-800-243-4361.
A Statement of Additional Information, dated August 24, 1998 relating to
the proposed transactions described in this Prospectus/Proxy Statement has been
filed with the Commission and is incorporated by reference herein. Copies of
this Statement of Additional Information may be obtained without charge by
contacting Equity Planning, at 100 Bright Meadow Boulevard, Post Office Box
2200, Enfield, Connecticut 06083-2200, or by telephoning Equity Planning toll
free at 1-800-243-4361.
This Prospectus/Proxy Statement constitutes the proxy statement of the
Convertible Fund for the Meeting and the prospectus for shares of the Income
and Growth Fund that have been registered with the Commission and are being
issued in connection with the Reorganization. This Prospectus/Proxy Statement
is expected to first be sent to shareholders on or about August 24, 1998.
----------------
THE SECURITIES OF THE INCOME AND GROWTH FUND 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/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------
The date of this Prospectus/Proxy Statement is August 24, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY ...................................................... 1
THE PROPOSED REORGANIZATION .................................. 5
PRINCIPAL RISK FACTORS ....................................... 9
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES ............. 10
COMPARATIVE INFORMATION ON DISTRIBUTION ARRANGEMENTS ......... 17
COMPARATIVE INFORMATION ON SHAREHOLDER SERVICES .............. 18
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS ................ 19
FISCAL YEAR .................................................. 21
MANAGEMENT AND OTHER SERVICE PROVIDERS ....................... 21
VOTING INFORMATION ........................................... 21
ADDITIONAL INFORMATION ABOUT THE FUNDS ....................... 24
MISCELLANEOUS ................................................ 24
</TABLE>
<PAGE>
[This page intentionally left blank]
<PAGE>
SUMMARY
Background
The proposed Reorganization is the outcome of deliberations by the Board of
Trustees of the Trusts undertaken at the suggestion of each Adviser. In
November, 1997 each Adviser recommended that the Trustees of the respective
Trusts consider the benefits that would be realized by the shareholders of the
Convertible Fund and the Income and Growth Fund if the Convertible Fund were to
be combined with the Income and Growth Fund. In response to this recommendation,
the Trustees of each Trust who are not "interested persons" of their respective
Trusts (as defined in Section 2(a)(19) of the 1940 Act (the "Independent
Trustees")) requested that management outline a specific reorganization proposal
for their consideration and, in connection therewith, that management provide
the Independent Trustees with an analysis of the specific benefits to be
realized by shareholders from the proposal. After considering the specific
reorganization proposal, the Board of Trustees of each respective Trust,
including the Independent Trustees, at meetings held on May 1, 1998 and May 27,
1998 unanimously approved the Plan.
Summary of the Proposed Reorganization
The Reorganization will be effected pursuant to the Plan, a copy of which
is set forth as Appendix A. The Plan provides for the acquisition of all or
substantially all of the assets of the Convertible Fund by the Income and Growth
Fund in exchange for Class A and Class B shares of the Income and Growth Fund
and the assumption by the Income and Growth Fund of certain identified
liabilities of the Convertible Fund. The Income and Growth Fund shares of the
corresponding class then would be distributed pro rata to the Convertible Fund
shareholders and outstanding Convertible Fund shares would be canceled. The
Reorganization is anticipated to occur on October 9, 1998. As a result of the
Reorganization, each Convertible Fund shareholder would receive a number of full
and fractional shares of the corresponding class of Income and Growth Fund
shares having an aggregate net asset value equal in value to the aggregate net
asset value of his or her Convertible Fund shares, as of the closing date of the
Reorganization. The consummation of the Reorganization is subject to a number of
conditions set forth in the Plan. See "The Proposed Reorganization." Among the
significant conditions (which may not be waived) are (i) the receipt by each
Trust of an opinion of counsel as to the Federal income tax consequences of the
Reorganization and (ii) the approval of the Plan by the shareholders of the
Convertible Fund. The Plan provides that the Adviser will bear all costs and
expenses of the Reorganization, including the costs of the Meeting, the costs
and expenses incurred in the preparation and mailing of the notice, this
Prospectus/Proxy Statement and the proxy, and the solicitation of proxies.
Investment Objectives and Policies
The investment objectives of the Convertible Fund and the Income and Growth
Fund are substantially similar. The investment policies of the Funds differ in
certain important respects. The primary investment objective of the Income and
Growth Fund is to provide an investment in a diversified group of securities
that are selected for current yield consistent with preservation of capital. The
secondary objective of the Income and Growth Fund is to achieve capital
appreciation that is consistent with the primary objective. The Convertible Fund
seeks as its investment objectives income and the potential for capital
appreciation, which objectives are to be considered as relatively equal. See
"Principal Risk Factors" and "Comparison of Investment Objectives and Policies"
below, for further information on the similarities and differences between the
investment objectives, policies and risks of the Income and Growth Fund and the
Convertible Fund. Additional information is also set forth in the Income and
Growth Fund Prospectus.
Distribution Arrangements
The Convertible Fund offers two classes of shares. Shares of the
Convertible Fund are offered to the public at a price equal to their net asset
value per share, plus a sales charge which, at the election of the purchaser,
may be imposed
1
<PAGE>
(i) at the time of purchase (Class A Shares) or (ii) on a contingent deferred
basis (Class B Shares). The Income and Growth Fund offers Class A and Class B
shares having substantially identical rights and privileges to those of the
Convertible Fund. See "Comparative Information on Distribution Arrangements"
below for further information on the distribution arrangements of the
Convertible Fund and the Income and Growth Fund. Additional information on
distribution arrangements is also set forth in the Income and Growth Fund
Prospectus.
Dividends and Distributions
Both the Convertible Fund and the Income and Growth Fund distribute their
respective net investment income quarterly, and distribute net realized capital
gains, if any, on an annual basis. All dividends and distributions with respect
to the shares of the Convertible Fund and the Income and Growth Fund are paid in
additional shares of the respective series unless shareholders elect to receive
cash.
Exchanges
The Convertible Fund and the Income and Growth Fund currently offer
shareholders identical exchange privileges. Shareholders of the Convertible Fund
and the Income and Growth Fund may exchange their shares for shares of a
corresponding class of shares of other Phoenix Funds or the Phoenix-Engemann
Funds, Phoenix-Seneca Funds or any other mutual fund advised, subadvised or
distributed by the Adviser, Equity Planning or any of their corporate affiliates
(an "Affiliated Phoenix Fund"). Upon the effectiveness of the Reorganization,
shareholders of the Convertible Fund will be entitled to the exchange privilege
currently offered with respect to shares of the Income and Growth Fund. On
exchanges with share classes that carry a contingent deferred sales charge
("CDSC"), the CDSC schedule of the original shares purchased continues to apply.
Additional information regarding exchanges is also set forth in the Income and
Growth Fund Prospectus.
Redemption Procedures
Shares of both the Convertible Fund and shares of the Income and Growth
Fund may be redeemed at a redemption price equal to the net asset value of the
shares as next determined following the receipt of a redemption order in proper
form. Payments of redemption proceeds for redeemed Convertible Fund and Income
and Growth Fund shares ordinarily are made within seven days after receipt of a
redemption request in proper form and documentation. See "Comparative
Information on Shareholder Services" for more information.
Federal Tax Consequences of Proposed Reorganization
At the closing of the Reorganization, the Trust and the Acquiring Trust
will receive an opinion of counsel that subject to customary assumptions and
representations, upon consummation of the Reorganization, the transfer of the
assets of the Convertible Fund to the Income and Growth Fund and the assumption
by the Income and Growth Fund of certain specified liabilities of the
Convertible Fund will constitute a "reorganization" for Federal income tax
purposes, and the Convertible Fund and the Income and Growth Fund will each be a
"party to a reorganization" for Federal income tax purposes; shareholders of the
Convertible Fund will recognize no gain or loss for Federal income tax purposes
on their receipt of shares of the Income and Growth Fund; the aggregate tax
basis of the Income and Growth Fund shares, including any fractional shares,
received by each shareholder of the Convertible Fund pursuant to the
Reorganization will be the same as the aggregate tax basis of the Convertible
Fund shares held by such shareholder immediately prior to the Reorganization;
and the holding period of the Income and Growth Fund shares, including
fractional shares, to be received by each shareholder of the Convertible Fund
will include the period during which the Convertible Fund shares exchanged
therefor were held by such shareholder (provided that the Convertible Fund
shares were held as a capital asset on the date of the Reorganization). See "The
Proposed Reorganization--Federal Income Tax Consequences" for more information.
2
<PAGE>
Comparative Fee Tables
The tables below are designed to assist an investor in understanding the
various direct and indirect costs and expenses associated with an investment in
the relevant class of shares of each Fund. Each table also includes pro forma
information for the combined Income and Growth Fund resulting from the
Reorganization (the "Combined Income and Growth Fund") assuming the
Reorganization took place on April 30, 1998, and after adjusting such
information to reflect current fees. The expense information for the Income and
Growth Fund and the Convertible Fund is based upon expenses for the twelve
months ended April 30, 1998.
As indicated in the table below, immediately upon consummation of the
Reorganization, the "Total Fund Operating Expenses" for the Combined Income and
Growth Fund are expected to be only slightly higher than the "Total Fund
Operating Expenses" for the Convertible Fund.
<TABLE>
<CAPTION>
Combined Income
Income and Convertible and Growth Fund
Growth Fund Fund Pro Forma
Class A Class B Class A Class B Class A Class B
--------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.70% 0.70% 0.65% 0.65% 0.70% 0.70%
12b-1 Fees (after waiver) (a) 0.25% 1.00% 0.25% 1.00% 0.25% 1.00%
Other Expenses 0.18% 0.18% 0.21% 0.21% 0.17% 0.17%
Total Fund Operating Expenses 1.13% 1.88% 1.11% 1.86% 1.12% 1.87%
</TABLE>
The following table shows shareholder transaction expenses currently
applicable to the purchase of Class A and Class B shares of both Funds. These
expenses will remain in effect as to the Combined Income and Growth Fund
immediately following the Reorganization.
<TABLE>
<CAPTION>
Income and Growth Fund
Convertible Fund Class A Class B
- -------------------------------------------------- ---------- ----------------------------------------------------
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases 4.75% None
(as a percentage of offering price)
Maximum Sales Load Imposed on Reinvested None None
Dividends
Deferred Sales Load (as a percentage of original None 5% during the first year, decreasing 1% annually to
purchase price or redemption proceeds, as 2% during the fourth and fifth years; dropping from
applicable) 2% to 0% after the fifth year
Redemption Fee None None
Exchange Fee None None
</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"). Equity Planning has voluntarily agreed to limit the Class A
12b-1 Fees of the Income and Growth Fund to 0.25% for the 1998 fiscal
year. Class A 12b-1 Fees and Total Fund Operating Expenses for the Income
and Growth Fund would be .30% and 1.18%, respectively absent Equity
Planning's waiver. Class A 12b-1 Fees and Total Fund Operating Expenses
for
3
<PAGE>
the Combined Income and Growth Fund on a pro rata basis would be .30% and
1.17%, respectively, absent Equity Planning's waiver. The 12b-1 Fee for
Class A and Class B Shares includes a service fee. See "Comparative
Information on Distribution Arrangements--Distribution Plans."
Example*
An investor would pay the following expenses on a $1,000 investment
assuming (1) a 5% annual return and (2) redemption at the end of each time
period:
<TABLE>
<CAPTION>
Income and Growth Fund Convertible Fund
--------------------------------------------- --------------------------------------------
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A shares $58 $82 $107 $178 $58 $81 $106 $176
Class B shares(1) $59 $79 $102 $201 $59 $78 $101 $198
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Combined Income and Growth Fund
--------------------------------------------
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Class A shares $58 $81 $106 $177
Class B shares(1) $59 $79 $101 $199
</TABLE>
An investor would pay the following expenses on the same $1,000 investment
assuming no redemption at the end of each time period:
<TABLE>
<CAPTION>
Income and Growth Fund Convertible Fund
--------------------------------------------- --------------------------------------------
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A shares $58 $82 $107 $178 $58 $81 $106 $176
Class B shares(1) $19 $59 $102 $201 $19 $58 $101 $198
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Combined Income and Growth Fund
--------------------------------------------
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Class A shares $58 $81 $106 $177
Class B shares(1) $19 $59 $101 $199
</TABLE>
- ----------------
(1) Ten-year figures assume conversion of Class B shares to Class A shares at
the end of eight years.
* The purpose of the table above is to help the investor understand the various
costs and expenses that the investor will bear directly or indirectly. The
Example should not be considered a representation of past or future return or
expenses. Actual return or expenses may be greater or less than shown.
Risk Factors
The Income and Growth Fund may invest in equity and fixed income
securities, including convertible securities. The risk characteristics of the
Income and Growth Fund will therefore depend on the relative weighting of its
portfolio from time to time. The Income and Growth Fund may invest up to 35% of
its total net assets in non-rated and non-investment grade fixed income
securities (commonly referred to as "junk bonds"). Such securities normally
involve a greater degree of investment and credit risk than does investment in
higher-rated securities and are subject to certain other risks. The Convertible
Fund normally invests at least 65% of its total assets in convertible
securities, which are hybrid securities that combine the investment
characteristics of both fixed income and common stocks. Convertible securities
are subject to particular risks. The Convertible Fund may invest up to 100% of
its total net assets in junk bonds and may also leverage its portfolio through
borrowing arrangements. Both Funds are permitted to invest in foreign
securities, which involve different risks than those involved in securities of
U.S. issuers. See "Principal Risk Factors."
4
<PAGE>
THE PROPOSED REORGANIZATION
Agreement and Plan of Reorganization
The terms and conditions under which the proposed Reorganization may be
consummated are set forth in the Plan. Significant provisions of the Plan are
summarized below. This summary, however, is qualified in its entirety by
reference to the Plan, a form of which is attached to this Prospectus/Proxy
Statement as Appendix A.
The Plan contemplates (i) the acquisition by the Income and Growth Fund, on
the closing date of the Reorganization, of all or substantially all of the
assets of the Convertible Fund in exchange for Class A and Class B shares of the
Income and Growth Fund and the assumption by the Income and Growth Fund of
certain identified liabilities of the Convertible Fund and (ii) the distribution
of shares of the corresponding class of the Income and Growth Fund to the
shareholders of the Convertible Fund in exchange for their respective shares of
the Convertible Fund.
The assets of the Convertible Fund to be acquired by the Income and Growth
Fund include all property, including, without limitation, all cash, securities,
and dividends or interest receivables which are owned by the Convertible Fund
and any deferred or prepaid expenses shown as an asset on the books of the
Convertible Fund on the closing date of the Reorganization. The Income and
Growth Fund will assume all liabilities, accrued expenses, costs, charges, and
reserves of the Convertible Fund reflected on an unaudited statement of assets
and liabilities as of the closing date. The closing of the Reorganization will
occur on the first Friday following satisfaction (or waiver) of the conditions
to closing set forth in the Plan (currently anticipated to be October 9, 1998),
or such later date as the parties may agree (the "Closing Date").
The value of the Convertible Fund' assets to be acquired and the
Convertible Fund' liabilities to be assumed by the Income and Growth Fund and
the net asset value of each class of shares of the Income and Growth Fund will
be determined as of immediately after the close of regular trading on the New
York Stock Exchange on the Closing Date, using the valuation procedures set
forth in the Income and Growth Fund's then-current Prospectus and Statement of
Additional Information. The number of Class A and Class B shares of the Income
and Growth Fund to be issued to the Convertible Fund will be determined by
dividing (a) the value of the aggregate net assets attributable to each class of
shares of the Convertible Fund by (b) the net asset value per share of the
corresponding class of the Income and Growth Fund.
On the Closing Date, the Convertible Fund will liquidate and distribute pro
rata to its shareholders of record the Income and Growth Fund shares received by
the Convertible Fund in exchange for their respective shares in the Convertible
Fund. This liquidation and distribution will be accomplished by opening an
account on the books of the Income and Growth Fund in the name of each
shareholder of record in the Convertible Fund and by crediting thereon the
shares due pursuant to the Reorganization. Every Convertible Fund shareholder
will own shares of the corresponding class of the Income and Growth Fund
immediately after the Reorganization, the value of which will be equal to the
value of the shareholder's Convertible Fund shares immediately prior to the
Reorganization.
At or prior to the Closing Date, the Convertible Fund will declare a
dividend or dividends which, together with all previous such dividends, have the
effect of distributing to the Convertible Fund shareholders all of the
Convertible Fund' investment company taxable income of the Convertible Fund for
all taxable years ending at or prior to the Closing Date (computed without
regard to any deduction for dividends paid) and all of its net capital gains
realized (after reduction for any capital loss carry-forward) in all taxable
years ending at or prior to the Closing Date.
The consummation of the Reorganization is subject to a number of conditions
set forth in the Plan. Certain of these conditions may be waived by the Board of
Trustees of either Trust, or by an authorized officer of each Trust, as
appropriate.
5
<PAGE>
Among the significant conditions which may not be waived are: (i) the receipt by
the Trust and the Acquiring Trust of an opinion of counsel as to certain Federal
income tax aspects of the Reorganization and (ii) the approval of the Plan by
the shareholders of the Convertible Fund. The Plan may be terminated and the
Reorganization abandoned at any time, before or after approval by the
shareholders of the Convertible Fund, prior to the Closing Date, by either party
by resolution of its Board of Trustees. In addition, the Plan may be amended by
mutual agreement, except that no amendment may be made to the Plan subsequent to
the Meeting that would change the provisions for determining the number of
Income and Growth Fund shares to be issued to shareholders of the Convertible
Fund without their further approval.
Reasons for the Reorganization
The proposed Reorganization is the outcome of deliberations by the Board of
Trustees of the Trusts undertaken at the request of each Advisor. In November
1997, each Adviser recommended that the Trustees of the respective Trust
consider the benefits that would be realized by the shareholders of each Fund if
the Convertible Fund were to be combined with the Income and Growth Fund. In
response to this recommendation, the Independent Trustees of each Trust
requested that management outline a specific reorganization proposal for their
consideration and, in connection therewith, that management provide the
Independent Trustees with an analysis of the specific benefits to be realized by
shareholders from the proposal.
At meetings of the Trust held on May 1, 1998 and May 27, 1998, PIC
presented a specific reorganization proposal and supporting information for
review by the Board of Trustees of the Trust. In the course of their review, the
Trustees of the Trust noted that the Reorganization would be a means of
combining two series with substantially similar investment objectives and would
permit the shareholders of the Convertible Fund to pursue their investment goals
in a larger fund. The Trustees also considered that the Income and Growth Fund
offered a wider scope of potential investment opportunities when compared to the
Convertible Fund, which was generally limited to investing 65% of its portfolio
in convertible securities. The Trustees were presented with information showing
that the total expense ratio of the Income and Growth Fund is only slightly
higher than the total expense ratio of the Convertible Fund and the total
expense ratio of the Combined Income and Growth Fund following the
Reorganization is projected to be slightly higher than the current total expense
ratio of the Convertible Fund. The Trustees, however, also considered the fact
that the Reorganization could result in future economies of scale through the
achievement of breakpoints in advisory fees, reduction or elimination of
duplicate costs and expenses and the spreading of fixed and variable costs over
a larger asset base. The Trustees also considered the Advisers' preference to
devote available resources to a single larger fund rather than to two smaller
funds with slightly different investment strategies.
In the course of their review, the Independent Trustees also noted that the
average annual return of Class A shares of the Income and Growth Fund of 16.10%,
10.93% and 12.58% for the one, five, and ten year periods ended April 30, 1998
compared favorably with the average annual return of 14.82%, 9.66% and 10.46%
for the Class A shares of the Convertible Fund for the same periods. In
addition, the Board of Trustees noted that the Reorganization provides for
continuity of distribution and advisory arrangements and shareholder services.
The Trustees also noted that the Acquiring Trust had elected not to assume any
unreimbursed expenses of Equity Planning related to the sale of Class B Shares
of the Convertible Fund that exist at the time of the Reorganization. Finally,
the Trustees noted that the Reorganization will not result in the recognition of
any gain or loss for Federal income tax purposes either to the Convertible Fund
or the Income and Growth Fund or to the shareholders of either Fund.
After considering these and other factors, the Board of Trustees of the
Trust, including the Independent Trustees, unanimously concluded that the
Reorganization would be in the best interests of the Convertible Fund and its
shareholders and that the interests of existing Convertible Fund shareholders
will not be diluted as a result of the transactions con-
6
<PAGE>
templated by the Reorganization. The Board of Trustees of the Trust then
unanimously voted to approve the Plan and authorize the officers of the Trust to
submit the Plan to shareholders for consideration.
In addition, at meetings held on May 1, 1998 and May 27, 1998, the Board of
Trustees of the Acquiring Trust, including the Independent Trustees, unanimously
concluded that the Reorganization would be in the best interests of the Income
and Growth Fund and the shareholders and that the interests of existing Income
and Growth Fund shareholders will not be diluted as a result of the
Reorganization. The Board of Trustees of the Acquiring Trust also unanimously
voted to approve the Plan.
Federal Income Tax Consequences
Counsel to the Funds, Goodwin, Procter & Hoar LLP, is to opine that,
subject to customary assumptions and representations, on the basis of the
existing provisions of the Internal Revenue Code (the "Code"), the Treasury
Regulations promulgated thereunder and current administrative and judicial
interpretations thereof, for Federal income tax purposes: (a) the transfer of
all or substantially all of the assets of the Convertible Fund solely in
exchange for Income and Growth Fund shares and the assumption by the Income and
Growth Fund of certain assumed liabilities of the Convertible Fund, and the
distribution of such shares to the shareholders of the Convertible Fund, will
constitute a "reorganization" within the meaning of Section 368(a)(1)(C); the
Income and Growth Fund and the Convertible Fund will each be a "party to a
reorganization" within the meaning of Section 368(b); (b) no gain or loss will
be recognized by the Convertible Fund on the transfer of the assets of the
Convertible Fund to the Income and Growth Fund in exchange for Income and Growth
Fund shares and the assumption by the Income and Growth Fund of certain assumed
liabilities of the Convertible Fund or upon the distribution of Income and
Growth Fund shares to the Convertible Fund' shareholders in exchange for their
shares of the Convertible Fund; (c) the tax basis of the Convertible Fund'
assets acquired by the Income and Growth Fund will be the same to the Income and
Growth Fund as the tax basis of such assets to the Convertible Fund immediately
prior to the Reorganization, and the holding period of the assets of the
Convertible Fund in the hands of the Income and Growth Fund will include the
period during which those assets were held by the Convertible Fund; (d) no gain
or loss will be recognized by the Income and Growth Fund upon the receipt of the
assets of the Convertible Fund solely in exchange for the Income and Growth Fund
shares and the assumption by the Income and Growth Fund of certain assumed
liabilities of the Convertible Fund; (e) no gain or loss will be recognized by
shareholders of the Convertible Fund upon the receipt of Income and Growth Fund
shares by such shareholders, provided such shareholders receive solely Income
and Growth Fund shares (including fractional shares) in exchange for their
Convertible Fund shares; and (f) the aggregate tax basis of the Income and
Growth Fund shares, including any fractional shares, received by each
shareholder of the Income and Growth Fund pursuant to the Reorganization will be
the same as the aggregate tax basis of the Convertible Fund shares held by such
shareholder immediately prior to the Reorganization, and the holding period of
the Income and Growth Fund shares, including fractional shares, to be received
by each shareholder of the Convertible Fund will include the period during which
the Convertible Fund shares exchanged therefor were held by such shareholder
(provided that the Convertible Fund shares were held as a capital asset on the
date of the Reorganization).
The receipt of such an opinion is a condition to the consummation of the
Reorganization. The Trust has not obtained an Internal Revenue Service ("IRS")
private letter ruling regarding the federal income tax consequences of the
Reorganization, and the IRS is not bound by advice of counsel. If the transfer
of the assets of the Convertible Fund in exchange for Income and Growth Fund
shares and the assumption by the Income and Growth Fund of certain liabilities
of the Convertible Fund do not constitute a tax-free reorganization, each
Convertible Fund shareholder will recognize gain or loss equal to the difference
between the value of Income and Growth Fund shares such shareholder acquires and
the tax basis of such shareholder's Convertible Fund shares. Shareholders of the
Funds should consult their tax advisers regarding the effect, if any, of the
proposed Reorganization in light of their individual circumstances. Since the
foregoing discussion
7
<PAGE>
relates only to the Federal income tax consequences of the Reorganization,
shareholders of the Funds should also consult tax advisers as to state and local
tax consequences, if any, of the Reorganization.
Capitalization
The following table sets forth the capitalization of the Income and Growth
Fund and the Convertible Fund, and on a pro forma basis for the net Combined
Income and Growth Fund as of April 30, 1998 giving effect to the proposed
acquisition of net assets at net asset value. The pro forma data reflects an
exchange ratio of 1.848392 and 1.836447 for Class A and Class B shares,
respectively, of the Income and Growth Fund issued for each Class A and Class B
share, respectively, of the Convertible Fund.
<TABLE>
<CAPTION>
Combined Income
Income and Convertible and Growth Fund
Growth Fund Fund Pro Forma
----------------- ----------------- ----------------
<S> <C> <C> <C>
Net assets
Class A $ 459,991,986 $ 195,551,146 $ 655,543,132
Class B 361,875,993 8,608,357 370,484,350
Net asset value per share
Class A $ 10.20 $ 18.85 $ 10.20
Class B 10.22 18.77 10.22
Shares outstanding
Class A 45,084,238 10,372,087 64,255,919
Class B 35,407,595 458,660 36,249,900
</TABLE>
The table set forth above should not be relied on to determine the number
of Income and Growth Fund shares to be received in the Reorganization. The
actual number of shares to be received will depend upon the net asset value and
number of shares outstanding of the Convertible Fund and the Income and Growth
Fund at the time of the Reorganization.
Historical Performance Information
The following table sets forth the average annual total return of the Class
A and Class B shares of the Convertible Fund and the Income and Growth Fund for
the periods indicated.
Average Annual Total Returns for
Periods Ending 4/30/98
<TABLE>
<CAPTION>
Fund Name 1 Year 5 Years 10 Years
--------- ------ ------- --------
<S> <C> <C> <C>
Income and Growth Fund
Class A 16.10% 10.93% 12.58%
Class B 17.03% 11.19% --
Convertible Fund
Class A 14.82% 9.66% 10.46%
Class B 15.70% -- --
</TABLE>
The average annual total return for the Class B shares of the Income and
Growth Fund from inception (January 3, 1992) to April 30, 1998 was 11.49%. The
average annual total return for the Class B shares at the Convertible Fund from
inception (July 15, 1994) to April 30, 1998 was 11.92%. Average annual total
return is the compounded return for the
8
<PAGE>
period indicated. It reflects the change in share price, the reinvestment of all
dividends and capital gains and the effect of the maximum sales charge. Class A
shares reflect the deduction of the maximum 4.75% sales charge. Class B shares
are subject to a maximum contingent deferred sales charge of 5%. The 1-year
performance information for Class B shares reflects the deduction of a 4% CDSC.
Returns indicate past performance, which is not predictive of future
performance. Investment return and net asset value will fluctuate, so that
shares, when redeemed, may be worth more or less than the original cost.
PRINCIPAL RISK FACTORS
The following highlights the principal differences between the risk factors
associated with an investment in the Income and Growth Fund as contrasted with
those associated with the Convertible Fund and is qualified in its entirety by
the more extensive discussion of risk factors in the Prospectuses and Statements
of Additional Information for the Income and Growth Fund and the Convertible
Fund.
Under normal circumstances, the Convertible Fund invests at least 65% of
its total assets in convertible securities. Convertible securities are hybrid
securities that combine the investment characteristics of both fixed income
securities and common stocks. Convertible securities generally offer higher
yields than common stocks but lower yields than comparable nonconvertible fixed
income securities. A convertible security may 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 Convertible Fund is
called for redemption, the Convertible Fund may be required to permit the
issuer to redeem the security, convert it into the underlying common stock or
sell it to a third party. The Income and Growth Fund may invest in equity and
fixed income securities, including convertible securities. The risk
characteristics of the Income and Growth Fund will therefore depend on the
relative weighting of its portfolio from time to time.
The Income and Growth Fund may invest up to 35% of its total net assets in
non-rated and non-investment grade fixed income securities (commonly referred to
as "junk" bonds). The Convertible Fund may invest up to 100% of its net assets
in non-rated and non-investment grade convertible securities. Non-investment
grade and certain non-rated securities are predominantly speculative with
respect to the issuer's capacity to repay principal and pay interest. Investment
in non-investment grade and non-rated securities normally involves a greater
degree of investment and credit risk than does investment in securities having
higher ratings. With such securities, there is a greater possibility that an
adverse change in the financial condition of the issuer may affect its ability
to make payments of income and principal. The expenses of the Fund would
increase if it became necessary to seek recovery from such an issuer. The market
prices of non-investment grade and non-rated securities generally fluctuate in
response to changes in economic conditions more than those of higher rated
securities. Non-investment grade and non-rated securities may be thinly traded
and less liquid than investment grade securities and are therefore harder to
value and more susceptible to adverse publicity concerning the issuer. To the
extent that either Fund holds any non-investment grade or non-rated securities,
it may be negatively affected by adverse economic developments, increased
volatility or lack of liquidity.
The Income and Growth Fund is not permitted to leverage its portfolio
through borrowing arrangements. The Convertible Fund may leverage its portfolio
in order to increase its ownership of securities holdings by borrowing from
banks and investing the borrowed funds. Interest on money borrowed will be an
expense of the Convertible 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 benefit the Convertible Fund. 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), the Convertible
Fund will be worse off than it would have been if it had not borrowed.
9
<PAGE>
Both Funds are permitted to make substantial investments in foreign
securities (100% of total assets in the case of the Income and Growth Fund and
25% of net assets in the case of the Convertible Fund). Investing in foreign
securities involves different risks from those involved in investing in
securities of U.S. issuers. 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. investment or exchange control
regulations, political instability which could affect U.S. investment in foreign
countries, difficulty in invoking legal process abroad, and potential
restrictions on the flow of international capital. Additionally, dividends
payable on foreign securities may be subject to foreign taxes withheld prior to
distribution. Foreign securities often trade with less frequency and volume than
domestic securities and therefore may exhibit greater price volatility, and
changes in foreign exchange rates will affect the value of those securities
which are denominated or quoted in currencies other than the U.S. dollar. Many
foreign securities will not be registered with the 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.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion summarizes some of the more significant
similarities and differences in the investment objectives, policies and
restrictions of the Income and Growth Fund and the Convertible Fund. The
discussion below is qualified in its entirety by the discussion elsewhere
herein, and in the Prospectus and Statement of Additional Information for each
Fund.
Investment Objectives and Policies
The investment objectives of the Income and Growth Fund and the Convertible
Fund are substantially similar. The primary investment objective of the Income
and Growth Fund is to provide an investment in a diversified group of securities
that are selected for current yield consistent with preservation of capital. The
secondary objective of the Income and Growth Fund is to achieve capital
appreciation that is consistent with the primary objective. The Convertible Fund
seeks as its investment objectives income and the potential for capital
appreciation, which objectives are to be considered as relatively equal. The
primary investment objective of the Income and Growth Fund and the investment
objectives of the Convertible Fund are "fundamental" policies which may not be
changed without the approval of the holders of at least a "majority of the
outstanding voting securities" (as that term is defined in the 1940 Act) of the
respective Fund. The secondary investment objective of the Income and Growth
Fund is a non-fundamental policy that may be changed by the Acquiring Trust's
Board of Trustees.
The investment policies of the Income and Growth Fund differ from the
investment policies of the Convertible Fund in certain important respects.
The Income and Growth Fund must invest at least 65% of its total assets in
securities that have the potential to produce income and achieve capital growth.
The Income and Growth Fund may invest in common stock, debt securities and
preferred stocks which are convertible into or carry the right to purchase
common stock or other equity securities ("Convertible Securities"), debt
securities, U.S. government securities, and options on securities, securities
indices and currencies. The Income and Growth Fund may invest up to 35% of its
net assets in high risk fixed income securities (commonly known as "junk
bonds"). See "Principal Risk Factors."
10
<PAGE>
Under normal circumstance, the Convertible Fund will invest at least 65% of
its total assets in convertible securities. If at any time the Convertible Fund
investments in common stocks, warrants and non-convertible securities exceeds
35% of the market value of its total assets (other than cash and government
securities), the Convertible Fund will only invest in convertible securities
until the 65% standard is equaled or exceeded. The 65% standard may not be
maintained at all times. The Convertible Fund may invest its assets without
limitation 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. The Convertible Fund is not subject to any limitations with
respect to the rating of the convertible securities in its portfolio, which may
include high, medium, lower and non-rated securities. See "Principal Risk
Factors."
Certain Investment Restrictions
The Convertible Fund and the Income and Growth Fund are both subject to
certain investment restrictions that restrict the scope of their investments.
Fundamental investment restrictions may not be changed without the affirmative
vote of the holders of a majority of the outstanding securities (as defined in
the 1940 Act) of the respective Fund. However, investment restrictions that are
not fundamental may be changed by the Board of Trustees without shareholder
approval. The table below presents a comparison of certain fundamental and
non-fundamental investment restrictions of the Convertible Fund and the Income
and Growth Fund. Fundamental restrictions are followed by an (F);
non-fundamental restrictions are followed by an (nf).
<TABLE>
<CAPTION>
Subject Matter of Restriction Convertible Fund Income and Growth Fund
- ------------------------------- -------------------------------------- -------------------------------
<S> <C> <C>
Borrowing The Convertible Fund may The Income and Growth Fund may
borrow money (a) for temporary not borrow money. (F)
administrative purposes up to 10%
of the value of its total assets and
(b) for investment purposes if such
borrowing is (i) authorized by the
Trustees prior to the public offering
of the Convertible Fund or by
shareholders of the Convertible
Fund thereafter; (ii) limited to 25%
of the value of its total assets
including such borrowings (iii) and
the lender agrees that any recourse
is limited to the assets of the
Convertible Fund. (F)
The Board of Trustees authorized
borrowing for investment purposes
by the Convertible Fund prior to the
public offering of its shares.
- ------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Subject Matter of Restriction Convertible Fund Income and Growth Fund
- -------------------------------- -------------------------------------- ----------------------------------------
<S> <C> <C>
Pledging The Convertible Fund may not The Income and Growth Fund may
assets to an extent greater than 10% not pledge, mortgage or hypothecate
of the value of its total assets and any securities or other property. (F)
any such pledge, mortgage or
hypothecation must be to secure
permitted borrowings. (F)
- -------------------------------------------------------------------------------------------------------------------
Debt Securities-Credit Quality The Convertible Fund may invest The Income and Growth Fund may
up to 100% of its total assets in invest up to 35% of its assets in
non-rated or non-investment grade non-rated or non-investment grade
convertible securities. (nf) high risk fixed income securities. (nf)
- -------------------------------------------------------------------------------------------------------------------
Foreign Securities The Convertible Fund may invest The Income and Growth Fund may
up to 25% of its net assets in invest up to 100% of its total assets
foreign securities. (nf) in foreign securities. (nf)
- -------------------------------------------------------------------------------------------------------------------
Lending The Convertible Fund may not The Income and Growth Fund may
make cash loans, except that it may not make loans, except that it may
(a) purchase bonds, notes or similar lend portfolio securities up to 25%
obligations customarily purchased of net assets at the time the loan is
by institutional investors and (b) made to broker/dealers or other
enter into repurchase agreements financial institutions not affiliated
(except that no more than 10% of with the Trust or the Adviser, subject
the Convertible Fund's net assets to conditions established by the
may be subject to repurchase Adviser and may enter into
agreements maturing in more than repurchase transactions in accordance
seven days). (F) with the Income and Growth Fund
Prospectus. (F)
The Convertible Fund may not The purchase of bonds, notes or
make securities loans except that it similar obligations customarily
may make loans of its portfolio purchased by institutional investors is
securities up to 25% of the value of not considered as making loans by
its total assets. (F) the Income and Growth Fund. (nf)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Subject Matter of Restriction Convertible Fund Income and Growth Fund
- -------------------------------- ------------------------------------------- ---------------------------------------
<S> <C> <C>
Illiquid Securities/Restricted The Convertible Fund may purchase The Income and Growth Fund may
Securities illiquid securities, (including not invest more than 15% of the
repurchase agreements providing for value of its net assets in illiquid
settlement more than seven days securities, including (i) restricted
after notice) or restricted securities securities (except that the Board of
if such illiquid securities do not Trustees may determine that certain
constitute more than 15% of its net Rule 144A securities are liquid), (ii)
assets. (F) repurchase agreements maturing in
more than seven days and (iii)
securities that are not readily
marketable. (nf)
- -------------------------------------------------------------------------------------------------------------------
Margin and Short Sales The Convertible Fund may not The Income and Growth Fund may
purchase securities on margin, not purchase securities on margin or
except that the Fund may obtain engage in short sales. (F)
such short-term credits as may be
necessary for the clearance of
purchases and sales of securities.
(F)
The Convertible Fund may not
make short sales of securities or
maintain a short position. (F)
- -------------------------------------------------------------------------------------------------------------------
Unseasoned Issuers The Convertible Fund may not The Income and Growth Fund may
purchase securities of any issuer not invest more than 5% of its net
which together with predecessors assets in securities of issuers
has a record of less than 3 years' (including their predecessors) who
continuous operation if as a result have been in business for less than
more than 5% of its net assets three years. (nf)
would be so invested. (F)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Subject Matter of Restriction Convertible Fund Income and Growth Fund
- ------------------------------- --------------------------------------- --------------------------------------
<S> <C> <C>
Other Investment Companies The Convertible Fund may not The Income and Growth Fund may
purchase securities of other not purchase any security of an
investment companies, except in the investment trust except for purchases
open market at customary broker's in the open market with no
commissions or as part of a plan of commission other than a customary
merger or consolidation. (F) broker's commission. (F)
- -------------------------------------------------------------------------------------------------------------------
Diversification The Convertible Fund may not The Income and Growth Fund may
purchase securities of an issuer not purchase any securities (other
(other than obligations issued or than U.S. Government obligations) if,
guaranteed by the U.S. government as a result, more than 5% of the
or its agencies or instrumentalities) value of its total assets would be
if immediately thereafter (i) more invested in securities of a single
than 5% of its total assets would be issuer or more than 10% of any class
invested in the securities of such of securities or more than 10% of the
issuer or (ii) more than 10% of the outstanding voting securities of any
outstanding securities of any class issuer would be held. (F).
of such issuer would be held by the
Convertible Fund or by all series of
the Trust in the aggregate. (F)
- -------------------------------------------------------------------------------------------------------------------
Industry Concentration The Convertible Fund may not The Income and Growth Fund may
purchase any security if such not invest more than 25% of its total
purchase would cause its aggregate assets in any one industry or group
investment in any one industry to of industries. (F)
exceed 25% of its total assets. (F)
- -------------------------------------------------------------------------------------------------------------------
Oil & Gas The Convertible Fund may not The Income and Growth Fund may
invest in oil, gas and other mineral not invest in interests (including
exploration programs although it leases) in oil, gas or mineral
may purchase securities of issuers development programs. (nf)
which engage in whole or in part in
such activities. (F)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Subject Matter of Restriction Convertible Fund Income and Growth Fund
- ------------------------------- ----------------------------------------- -----------------------------------------
<S> <C> <C>
Senior Securities The Convertible Fund may not issue The Income and Growth Fund may
senior securities as defined in the not issue senior securities. (F)
1940 Act except that it may borrow
from banks pursuant to its
investment restriction regarding
borrowing and enter into foreign
currency contracts and options
thereon as described in the
Convertible Fund prospectus and
statement of additional information.
(F)
- -------------------------------------------------------------------------------------------------------------------
Futures and Options The Convertible Fund may not The Income and Growth Fund
invest in puts, calls, straddles, or may write covered call options on
combinations thereof, except that securities and securities indices up
the Convertible Fund may (a) to 25% of the value of its net assets.
write exchange-traded covered (nf)
call options on portfolio securities
and enter into closing purchase The Income and Growth Fund does
transactions with respect to such not have any investment restriction
options, and (b) invest up to 2% of regarding investments in financial
its total assets in exchange-traded futures contracts and related options.
call and put options on securities (nf)
and securities indices. (F)
The Convertible Fund may engage
in financial futures contracts and
related options transactions for
hedging purposes, provided that the
sum of the initial margin deposits
on existing futures and related
options positions and the premiums
paid for related options would not
exceed 2% of its total assets. (nf)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Subject Matter of Restriction Convertible Fund Income and Growth Fund
- ----------------------------------- ----------------------------------------- -----------------------------------------
<S> <C> <C>
Securities held by Trustees and The Convertible Fund may not The Income and Growth Fund may
Officers purchase or retain securities of any not purchase or retain securities of
issuer if any officer or Trustee of any issuer if the officers or trustees
the Trust or officer or director of of the Fund who own beneficially
PIC owns beneficially more than 1/2 more than 1/2 of 1% of such issuer,
of 1% of the outstanding securities together own beneficially more than
of the issuer or all such persons 5% of such issuer's securities. (nf)
owning more than 1/2 of 1% of such
securities together own beneficially
more than 5% of such securities.
(F)
- -------------------------------------------------------------------------------------------------------------------
Real Estate and Commodity The Convertible Fund may not The Income and Growth Fund
Contracts make investments in real estate may not deal in real estate but may
or commodities or commodity purchase marketable securities of
contracts although the Convertible companies that deal in real estate or
Fund may purchase securities of interests therein, including real estate
issuers which deal in real estate or investments by excluding real estate
commodities and may purchase limited partnerships. (F)
securities which are secured by real
estate interests such as real estate The Income and Growth Fund
investment trusts. (F) may not deal in commodities or
commodities contracts. (F)
- -------------------------------------------------------------------------------------------------------------------
Mortgage-Related and Other Asset- No fundamental or non-fundamental The Income and Growth Fund may
Backed Securities restriction invest in securities that directly or
indirectly represent an ownership
participation in, or are secured by or
payable from mortgage loans on real
property. (nf)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
COMPARATIVE INFORMATION ON DISTRIBUTION ARRANGEMENTS
Multiple Class Structure
The Convertible Fund offers two classes of shares which may be purchased at
a price equal to their net asset value per share, plus a sales charge which, at
the election of the purchaser, may be imposed (i) at the time of purchase (Class
A Shares) or (ii) on a contingent deferred basis (Class B Shares). Class A
Shares are offered to the public at the next determined net asset value after
receipt of the order by State Street Bank (the Convertible Fund's transfer
agent), plus a maximum sales charge of 4.75% of the offering price (4.99% of the
amount invested) on single purchases of less than $50,000. The sales charge for
Class A Shares is reduced on a graduated scale on single purchases of $50,000 or
more and may be reduced or varied under certain circumstances as described in
the Convertible Fund prospectus. Class B Shares are offered to the public at the
next determined net asset value after receipt of an order by State Street with
no sales charge. Class B Shares are subject to a sales charge if they are
redeemed within five years of purchase. Class B Shares will automatically
convert to Class A Shares without a sales charge at the relative net asset value
of each class eight years after the acquisition of the Class B Shares.
The Income and Growth Fund also offers two classes of shares which may be
purchased at a price equal to their net asset value per share, plus a sales
charge which, at the election of the purchaser, may be imposed (i) at the time
of the purchase (the Class A Shares) or (ii) on a contingent deferred basis (the
Class B Shares). The Class A and Class B shares of the Income and Growth Fund
are offered under the same sales charge arrangements as the Class A and Class B
Shares of the Convertible Fund.
In the proposed Reorganization, shareholders of the Convertible Fund will
receive the corresponding class of shares of the Income and Growth Fund which
they currently hold in the Fund. The Reorganization will be effected at net
asset value without the imposition of a sales charge, and thus, the shares of
the Income and Growth Fund acquired by shareholders of the Fund pursuant to the
proposed Reorganization would not be subject to any sales charge as a result of
the Reorganization. However, holders of the Class B shares acquired as a result
of the Reorganization would continue to be subject to a contingent deferred
sales charge upon subsequent redemption to the same extent as if they had
continued to hold their shares of the Convertible Fund. For purposes of
computing the contingent deferred sales charge that may be payable upon
disposition of any acquired Class B shares of the Income and Growth Fund, the
holding period of the redeemed shares will be "tacked" to the holding period of
the Convertible Fund.
Distribution Plans
Equity Planning serves as the distributor of shares of both the Income and
Growth Fund and the Convertible Fund. The Acquiring Trust has adopted separate
distribution plans under Rule 12b-1 of the 1940 Act for each class of shares of
the Income and Growth Fund relating to the sale and promotion of Income and
Growth Fund shares and the furnishing of shareholder services (the "Income and
Growth Class A Plan" and the "Income and Growth Class B Plan," and collectively
the "Income and Growth Plans").
Pursuant to the Income and Growth Class A Plan, the Acquiring Trust may pay
Equity Planning up to 0.30% annually of the average daily net assets of the
Income and Growth Fund's Class A Shares. However, Equity Planning has
voluntarily agreed to limit the maximum amount of payments under the Income and
Growth Class A Plan for fiscal year 1998 to 0.25% annually of the average daily
net assets of the Income and Growth Fund's Class A Shares. Of the amounts
payable under the Income and Growth Class A Plan, the Acquiring Trust is
required to pay Equity Planning 0.25% annually of average daily net assets of
the Class A shares as compensation for providing shareholder services.
Under the Income and Growth Class B Plan, the Acquiring Trust may pay
Equity Planning up to 1.00% annually of the average daily net assets of the
Income and Growth Fund's Class B Shares. Of the amounts payable to Equity Plan-
17
<PAGE>
ning under the Income and Growth Class B Plan, the Acquiring Trust may reimburse
Equity Planning for actual distribution expenses incurred up to 0.75% annually
of the average daily net assets of the Income and Growth Fund Class B Shares. In
addition, the Acquiring Trust is required to pay Equity Planning 0.25% annually
of average daily net assets as compensation for providing shareholder services.
Equity Planning's distribution expenses from selling Class B Shares may be more
than the payments received from contingent deferred sales charges collected on
redeemed shares and from the Acquiring Trust under the Income and Growth Class B
Plan. Those expenses may be carried over and paid in future years. At April 30,
1998, Equity Planning had incurred unreimbursed expenses under the Income and
Growth Class B Plan of $680,700.
The Trust also has adopted distribution plans pursuant to Rule 12b-1 on
behalf of each class of shares of the Convertible Fund, (the "Trust Class A
Plan," "Trust Class B Plan," and collectively, the "Trust Plans"). The terms of
the Trust Plans are substantially identical to those of the Income and Growth
Plans except that under the Trust Class A Plan, Equity Planning may not receive
more than 0.25% of the average daily net assets of the Convertible Fund's Class
A Shares whereas with the Income and Growth Class A Plan, Equity Planning would
be able to increase payments to 30 basis points if it terminated its voluntary
reduction. Equity Planning's distribution expenses from selling Class B Shares
of the Convertible Fund may be more than the payments received from contingent
deferred sales charges collected on redeemed shares and from the Trust under the
Trust Class B Plan. Those expenses may be carried over and paid in future years.
At April 30, 1998, Equity Planning had incurred unreimbursed expenses under the
Trust Class B Plan of $326,900 that were allocable to the Convertible Fund. The
Acquiring Trust will not assume any unreimbursed expenses of Equity Planning
related to the sale of Class B Shares of the Convertible Fund that exist at the
time of the Reorganization.
COMPARATIVE INFORMATION ON SHAREHOLDER SERVICES
Both the Income and Growth Fund and the Convertible Fund offer the same
shareholder services, including a Systematic Withdrawal Program, dividend and/or
capital gain distribution program, telephone exchanges, telephone redemptions
and access to the Investo-Matic Program, an automatic investment program.
The Income and Growth Fund and the Convertible Fund distribute their net
investment income quarterly, and distribute net realized capital gains, if any,
at least annually. All dividends and distributions with respect to the shares of
the Income and Growth Fund and the Convertible Fund are paid in additional
shares of the respective Fund unless shareholders elect to receive cash. The
number of shares received in connection with any reinvestment of dividends will
be based upon the net asset value per share of the applicable class of shares of
the Income and Growth Fund and the Convertible Fund in effect on the record
date.
The Income and Growth Fund and the Convertible Fund currently offer
shareholders identical exchange privileges. Shareholders of the Income and
Growth Fund and the Convertible Fund may exchange their shares for shares of a
corresponding class of shares of other Phoenix Funds or any other Affiliated
Phoenix Fund.
Shares of the Income and Growth Fund and shares of the Convertible Fund may
be redeemed at a redemption price equal to the net asset value of the shares as
next determined following the receipt of a redemption order and any other
required documentation in proper form. In the case of Class B shares redemption,
investors will be subject to the applicable determined deferred sales charge, if
any, for such shares. Payment of redemption proceeds for redeemed Convertible
Fund and Income and Growth Fund shares are made within seven days after receipt
of a redemption request in proper form and documentation.
Because both the Income and Growth Fund and the Convertible Fund offer the
same shareholder services, after the Closing the same services will continue to
be available to the shareholders of the Convertible Fund but in their capacity
as shareholders of the Income and Growth Fund.
18
<PAGE>
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS
The following is a summary of certain provisions of the Declaration of
Trust of each of the Trusts.
Form of Organization
The Income and Growth Fund is a series of the Acquiring Trust, an
unincorporated voluntary association organized under the laws of the
Commonwealth of Massachusetts as a business trust, pursuant to a Declaration of
Trust dated June 25, 1986, and as last amended on June 21, 1994 (the "Phoenix
Income and Growth Fund Declaration of Trust"). The operations of the Income and
Growth Fund are governed by the Phoenix Income and Growth Fund Declaration of
Trust and by Massachusetts law, as applicable. The Convertible Fund is a series
of the Trust, which is an unincorporated voluntary association organized under
the laws of the Commonwealth of Massachusetts as a business trust, pursuant to a
Declaration of Trust dated April 7,1958, as last amended on May 22, 1996
("Phoenix Series Fund Declaration of Trust"). The operations of the Convertible
Fund are governed by the Phoenix Series Fund Declaration of Trust, and by
Massachusetts law, as applicable. Both the Acquiring Trust and the Trust are
registered with the Securities and Exchange Commission as open-end management
investment companies and both are subject to the provisions of the 1940 Act, and
the rules and regulations of the Commission thereunder.
Shares
Each Declaration of Trust provides that the Trustees are authorized to
create an unlimited number of series and, with respect to each series, to issue
an unlimited number of full and fractional shares of one or more classes. The
Trust currently has seven series of shares outstanding: Balanced Fund Series,
Convertible Fund Series, Growth Fund Series, Aggressive Growth Fund Series, High
Yield Fund Series, Money Market Fund Series and the U.S. Government Securities
Fund Series. The Acquiring Trust currently has one series of shares outstanding:
the Phoenix Income and Growth Fund. Each Trust in the future, may organize other
separate series in addition to the currently existing series. The Income and
Growth Fund offers Class A and Class B shares. The Convertible Fund offers Class
A and Class B shares. The shares of a series when issued, are fully paid and
non-assessable, have no preference, preemptive, or similar rights, and are
freely transferable. The assets received by the Trusts for the issue or sale of
shares of a series and any class thereof and all income, earnings, profits and
proceeds thereof, subject only to the rights of creditors, are allocated to such
series and class, respectively, and constitute the rights of such series or
class. Any underlying assets of a series and class are required to be segregated
on the books of account and are to be charged with the expenses in respect to
such series and class and with a share of the general expenses of the respective
Trust.
Meetings
The Phoenix Income and Growth Fund Declaration of Trust does not contain
any requirement for periodic, special meetings of shareholders. Under the
Phoenix Income and Growth Fund Declaration of Trust, meetings of the
shareholders will be called upon written request of shareholders holding in the
aggregate not less than 10% of the outstanding shares of such series having
voting rights. The Phoenix Series Fund Declaration of Trust provides that
holders of 10% of the outstanding shares of the Trust can call a meeting of
shareholders for a purpose requiring shareholder action. Shares of the Trusts do
not have cumulative voting rights and the holders of more than 50% of the shares
of each Trust voting for the election of Trustees can elect all of the Trustees
of the Trust if they choose to do so and in such event the holders of the
remaining shares would not be able to elect any Trustees.
Shareholder Liability
Unlike the stockholders of a corporation, shareholders of a Massachusetts
business trust, such as the Trusts, under certain circumstances, could be held
personally liable for the debts, claims or other obligations of the business
trust. Both
19
<PAGE>
the Phoenix Income and Growth Fund Declaration of Trust and the Phoenix Series
Fund Declaration of Trust, however, disclaim shareholder liability for acts or
obligations of the respective Trust and provide 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 this effect. Each Declaration of Trust
provides for indemnification, out of the property of the respective series of
the Trust with respect to which such shareholder's shares are issued, for all
losses and expenses of any shareholder held personally liable for the
obligations of the Trust. Thus, the risk of a shareholder of either Trust
incurring financial loss on account of shareholder liability is considered
remote since such liability is limited to circumstances in which a disclaimer is
inoperative and the Trust would be unable to meet its obligations.
Liability of Trustees
Under the Phoenix Income and Growth Fund Declaration of Trust and the
Phoenix Series Fund Declaration of Trust, a Trustee will be personally liable
only for his own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee. Under
each Declaration of Trust, Trustees and officers will be indemnified for the
expenses of litigation against them unless it is determined that the person did
not act in good faith in the reasonable belief that the person's action was in
or not opposed to the best interests of the Trust or if his conduct is
determined to constitute willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties. Each Trust may also advance money for these
expenses provided that the Trustee or officer undertakes to repay the Trust if
his conduct is later determined to preclude indemnification.
Voting Requirements
The Phoenix Income and Growth Fund Declaration of Trust generally provides
that, to the extent permitted by the 1940 Act, with respect to matters that
concern only the interests of a series or class, only the holders of shares of
such series are entitled to vote. The Phoenix Series Fund Declaration of Trust
provides for Trust-wide voting on all matters except as to matters for which a
separate vote of a series is required by such Declaration of Trust or as to
matters that affect the interest of one or more but not all series (in which
event only the affected series shall vote.) Each Declaration of Trust provides
for class-specific voting on Rule 12b-1 distribution plans that are applicable
only to a particular class.
Liquidation or Dissolution
In the event of the liquidation or dissolution of a series of either Trust,
the shareholders of the respective series or class are entitled to receive, when
and as declared by the Trustees, the excess of the assets belonging to the
series or class over the liabilities belonging to the series or class. The
assets so distributable to shareholders will be distributed among shareholders
of a series or class in proportion to the number of shares held by them and
recorded on the books of the respective series or class.
Appraisal Rights
The Phoenix Income and Growth Fund Declaration of Trust provides that
shareholders have appraisal rights in connection with any merger or
consolidation with, or transfer of its assets to another entity. However, the
staff of the Commission has taken the position that any rights to appraisal
arising under state law are preempted by the provisions of the 1940 Act and Rule
22c-1 thereunder, which generally requires that shares of a registered open-end
investment company be valued at their next determined net asset value. The
Phoenix Series Fund Declaration of Trust does not grant appraisal rights to
shareholders.
20
<PAGE>
Inspection of Records
The Phoenix Income and Growth Fund Declaration of Trust provides that
shareholders may inspect the records of the Acquiring Trust to the same extent
as is permitted shareholders of a Massachusetts business corporation. The
Phoenix Series Fund Declaration of Trust provides for shareholder inspection of
the records of the Trust to the extent permitted by the Trustees.
FISCAL YEAR
The Income and Growth Fund operates on fiscal years ending April 30. The
Convertible Fund operates on fiscal years ending October 31.
MANAGEMENT AND OTHER SERVICE PROVIDERS
Responsibility for the management and supervision of the Trust, including
the Convertible Fund, rests with the Trust's Board of Trustees. PIC serves as
investment manager to the Trust. Responsibility for the management and
supervision of the Acquiring Trust, including the Income and Growth Fund, rests
with the Acquiring Trust's Board of Trustees. PIC also serves as the investment
adviser to the Income and Growth Fund. National, a direct subsidiary of Phoenix
Investment Partners, Ltd. (formerly known as Phoenix Duff & Phelps Corporation),
acted as the adviser to the Income and Growth Fund prior to June 1, 1998.
Effective June 1, 1998, National transferred advisory responsibilities for the
Acquiring Trust to PIC. John H. Hamlin serves as portfolio manager of the
Convertible Fund and as such is primarily responsible for the day to day
management of the Convertible Fund. Investment and trading decisions for the
Income and Growth Fund are made by a team of equity investment professionals and
a team of fixed income investment professionals. Steven L. Colton is the leader
of the equity team and as such is primarily responsible for the day-to-day
decisions related to the equity holdings in the Income and Growth Fund's
portfolio.
Equity Planning serves as financial agent of the Income and Growth Fund and
the Convertible Fund and, as such, will perform administrative bookkeeping and
pricing functions. Equity Planning also acts as transfer agent for the Income
and Growth Fund and the Convertible Fund.
State Street Bank and Trust Company acts as custodian for the Income and
Growth Fund and the Convertible Fund.
PricewaterhouseCoopers LLP serves as the independent accountants for the
Funds.
VOTING INFORMATION
Quorum and Voting Requirements
This Prospectus/Proxy Statement is being furnished to the shareholders of
the Convertible Fund in connection with the solicitation by the Board of
Trustees of the Phoenix Series Fund of proxies to be used at the Meeting.
Shareholders of record of the Convertible Fund at the close of business on
August 11, 1998 (the "Record Date") will be entitled to vote at the Meeting or
at any adjournments thereof. As of the Record Date, there were 9,918,163.181 and
449,933.585 issued and outstanding Class A and Class B shares, respectively, of
the Convertible Fund. Shareholders are entitled to one vote for each share held
and a proportionate vote for each fractional share held. Shareholders of the
Convertible Fund will vote together as a single class on the Proposal. The
holders of a majority of the shares entitled to vote at the close of business on
the Record Date present in person or represented by proxy will constitute a
quorum for the Meeting. A quorum being present, the approval of the Proposal
requires the affirmative vote of a "majority of the outstanding voting
securities" of the Convertible
21
<PAGE>
Fund as defined in the 1940 Act. Under the 1940 Act, the "vote of a majority of
the outstanding voting securities" means the lesser of either (1) the vote of
67% or more of the shares of the Convertible Fund present at the Meeting if the
holders of more than 50% of the outstanding Convertible Fund shares are present
or represented by proxy, or (2) the vote of the holders of more than 50% of the
outstanding shares of the Convertible Fund. For purposes of determining the
presence of a quorum for transacting business at the Meeting and for determining
whether sufficient votes have been received for approval of the proposal to be
acted upon at the Meeting, abstentions and broker "non-votes" (that is, proxies
from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other persons entitled to vote shares
on a particular matter with respect to which the brokers or nominees do not have
discretionary power) will be treated as shares that are present at the Meeting,
but which have not been voted. For this reason, abstentions and broker non-votes
will assist the Convertible Fund in obtaining a quorum, but both have the
practical effect of a "no" vote for purposes of obtaining the requisite vote for
approval of the proposal.
If either (a) a quorum is not present at the Meeting or (b) a quorum is
present but sufficient votes in favor of the Proposal have not been obtained,
then the persons named as proxies may propose one or more adjournments of the
Meeting without further notice to shareholders to permit further solicitation of
proxies provided such persons determine, after consideration of all relevant
factors, including the nature of the proposal, the percentage of votes then
cast, the percentage of negative votes then cast, the nature of the proposed
solicitation activities and the nature of the reasons for such further
solicitation, that an adjournment and additional solicitation is reasonable and
in the interests of shareholders. The persons named as proxies will vote those
proxies that such persons are required to vote FOR the Proposal in favor of such
an adjournment and will vote those proxies required to be voted AGAINST the
Proposal against such adjournment.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with the shareholder's direction, as indicated thereon, if the proxy
card is received and is properly executed. If the shareholder properly executes
a proxy and gives no voting instructions with respect to the Proposal, the
shares will be voted in favor of the Proposal. The proxies, in their discretion,
may vote upon such other matters as may properly come before the Meeting. The
Board of Trustees of the Trust is not aware of any other matters to come before
the Meeting.
Approval of the Proposal by the shareholders of the Convertible Fund is a
condition of the consummation of the Reorganization. If the Reorganization is
not approved, the Convertible Fund will continue as a series of the Trust and
the Board of Trustees of the Trust may consider other alternatives in the best
interests of the shareholders of the Convertible Fund.
Revocation of Proxies; No Appraisal Rights
Any shareholder who has given a proxy has the right to revoke the proxy any
time prior to its exercise (i) by written notice of the proxy's revocation to
the Secretary of the Trust at the above address prior to the Meeting; (ii) by
the subsequent execution and return of another proxy prior to the Meeting (iii)
by submitting a subsequent telephone vote; or (iv) by being present and voting
in person at the Meeting and giving oral notice of revocation to the Chairman of
the Meeting. Shareholders of the Convertible Fund are not entitled to appraisal
rights in connection with the Reorganization.
Solicitation of Proxies
In addition to solicitation of proxies by mail, officers of the Trust and
officers and regular employees of the Phoenix Investment Counsel, Inc.,
affiliates of Phoenix Investment Counsel, Inc., or other representatives of the
Trust may also solicit proxies by telephone or telegram or in person. The Trust
may also use a proxy solicitation firm (a "Solicitor") to assist with the
mailing and tabulation effort and any special, personal solicitation of proxies.
Shareholders of the Convertible Fund may be asked by the Solicitor's
representatives to cast their votes by authorizing the execution of a proxy by
telephone. Shareholders will either be contacted by a representative of the
Solicitor
22
<PAGE>
using information derived from a shareholder list provided by the Trust or
shareholders may be sent a written communication or left a telephone message
asking the shareholder to telephone the Solicitor at a designated toll-free
number. In all such cases, the representative of the Solicitor will ask for the
shareholder's full name and address, the last four digits of the shareholder's
social security number or employer identification number, the person's title (in
the case of a corporate shareholder) and confirmation that the person is
authorized to direct the voting of the shares. The shareholder will be asked to
confirm that the Prospectus/Proxy Statement and proxy form have been received.
If answered in the affirmative, the Solicitor representative will advise the
shareholder that the shareholder may authorize the execution of a proxy over the
telephone and ask the shareholder if the shareholder desires to authorize the
execution of a proxy at that time. Telephone conversations will be recorded. If
the shareholder chooses to proceed, the representative of the Solicitor will
then ask the shareholder if the shareholder wishes to support the Proposal. If
answered in the affirmative, the Solicitor will read the Proposal to the
shareholder and ask for such shareholder's voting instruction on the Proposal.
Although the representative of the Solicitor will assist with any
questions, the answers to which are contained in the Proxy Statement, the
representative of the Solicitor will not make recommendations on how to vote on
the Proposal. Finally, the representative of the Solicitor will explain that the
Solicitor will execute a written proxy as the shareholder's agent in accordance
with the shareholder's instructions and will forward the proxy to the Trust.
Within 72 hours after each telephone call, the Solicitor will send to each
shareholder who used the telephone proxy voting method a written confirmation of
the shareholder's instructions. The shareholder will be asked to contact the
Solicitor immediately if the shareholder's instructions have not been properly
recorded.
If a shareholder wishes to participate in the Meeting, but does not wish to
authorize the execution of a proxy by telephone, the shareholder may still
submit the proxy form included with this Prospectus/Proxy Statement or attend
the Meeting in person.
The costs of the Meeting, such as the preparation and mailing of the
notice, the Prospectus/Proxy Statement and the proxy, and the solicitation of
proxies, including reimbursement to persons who forward proxy materials to their
clients, and the expenses connected with the solicitation of these proxies in
person, by telephone, or by telegraph, will be borne by PIC. The costs of any
additional solicitation and of any adjourned session of the Meeting will be
borne by PIC. PIC will reimburse banks, brokers, and other persons holding
Convertible Fund shares registered in their names or in the names of their
nominees, for their expenses incurred in sending proxy material to and obtaining
proxies from the beneficial owners of such Convertible Fund shares.
Ownership of Voting Securities
Based on holdings and total shares outstanding as of April 30, 1998, the
Trustees and officers of the Trust owned as a group less than 1% of the
outstanding voting securities of the Convertible Fund. If the Reorganization
were consummated as of April 30, 1998, the Trustees and officers of the Trust
would own less than 1% of the outstanding voting securities of the Combined
Income and Growth Fund based on their holdings and total shares outstanding as
of April 30, 1998. As of April 30, 1998, Merrill Lynch Pierce Fenner & Smith
("Merrill Lynch") was known to own of record 21.19% of the outstanding Class B
shares of the Convertible Fund and 12.07% of the outstanding Class B shares of
the Income and Growth Fund. Merrill Lynch's address is: Merrill Lynch Pierce
Fenner & Smith, 4800 Deer Lake Drive East, Jacksonville, Florida 32246.
THE BOARD OF TRUSTEES OF THE TRUST, INCLUDING THE INDEPENDENT TRUSTEES OF
THE TRUST, RECOMMEND APPROVAL OF THE PLAN OF REORGANIZATION.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE FILL IN, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS NECESSARY IF IT IS MAILED IN THE UNITED STATES.
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<PAGE>
ADDITIONAL INFORMATION ABOUT THE FUNDS
Additional information about the Income and Growth Fund, and the Acquiring
Trust is included in the Income and Growth Fund Prospectus accompanying this
document and is incorporated by reference herein. Further information about the
Income and Growth Fund and the Acquiring Trust is included in the Statement of
Additional Information for the Income and Growth Fund, dated August 28, 1998,
which has been filed with the Commission and is incorporated by reference
herein. A copy of the Income and Growth Fund Statement of Additional Information
may be obtained without charge by contacting Equity Planning at 100 Bright
Meadow Boulevard, Post Office Box 2200, Enfield, Connecticut 06083-2200, or by
telephoning Equity Planning toll-free at 1-800-243-4361.
Additional information about the Convertible Fund, is included in the
current Prospectus for the Convertible Fund dated February 27, 1998 (the
"Convertible Fund Prospectus"). A copy of the Convertible Fund Prospectus has
been filed with the Commission, and is incorporated by reference herein. Further
information about the Convertible Fund is included in the Statement of
Additional Information for the Convertible Fund dated February 27, 1998, which
also has been filed with the Commission and is incorporated by reference herein.
A copy of the Convertible Fund Statement of Additional Information may be
obtained without charge by contacting Equity Planning at 100 Bright Meadow
Boulevard, Post Office Box 2200, Enfield, Connecticut 06083-2200, or by
telephoning Equity Planning toll-free at 1-800-243-4361.
MISCELLANEOUS
Available Information
The Acquiring Trust is registered under the 1940 Act and is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and the 1940 Act, and, in accordance therewith, files reports, proxy materials,
and other information with the Commission. The Trust is also registered under
the 1940 Act and is required to file reports under the 1940 Act. Such reports,
proxy materials, and other information can be inspected at the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 as well as at the following regional offices: New York Regional Office, 75
Park Place, Room 1228, New York, NY 10007; and Chicago Regional Office,
Northwestern Atrium Center, 500 Madison Street, Suite 1400, Chicago, IL 60661.
Copies of such material also can be obtained from the Public Relations Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web Site (http://www.sec.gov) that contains this
Prospectus, Statement of Additional Information, material incorporated by
reference, and other information regarding registrants that file electronically
with the Commission.
Management's Discussion of the Income and Growth Fund's Performance for the
Year Ended April 30, 1998
The fiscal year ended April 30, 1998 was an unusually strong period for
common stocks. The Standard & Poor's 500 Index returned 41.27%. (The Standard
and Poor's 500 Index is an unmanaged, commonly used measure of stock market
performance. The Index is not available for direct investment.) Bonds posted
solid returns although not as spectacular as stocks, with the Lehman Brothers
Aggregate Bond Index up 10.91%. (The Lehman Brothers Aggregate Bond Index is an
unmanaged, commonly used measure of bond market performance. The Index is not
available for direct investment.)
For the 12 months ended April 30, 1998, the Income and Growth Fund Class A
and B shares posted double-digit returns of 21.87% and 21.03%, respectively,
compared with 22.49% for the Income and Growth Fund's benchmark. The Income and
Growth Fund's benchmark was changed from a composite index consisting of 55%
Standard & Poor's 500 Index, 35% Lehman Brothers Aggregate Bond Index, and 10%
90-day T-bills to a composite index consisting of 40% Standard & Poor's 500
Index and 60% Lehman Brothers Aggregate Bond Index to more accurately reflect
the Income
24
<PAGE>
and Growth Fund's asset allocation, which is set at 40% common stocks and 60%
fixed-income securities. The return on Class A shares was within .62 percentage
points of this asset allocation. All performance figures assume reinvestment of
dividends and exclude the effect of sales charges.
Through December, highlights included the Income and Growth Fund's focus on
energy technology issues, such as Nabors Industries. Diamond Offshore Drilling,
and Noble Drilling. Other positive contributors included an overweighted
position in the strongly performing cable industry as well as some individual
holdings, such as Rite Aid and Home Depot.
In December, a management change was made to a team approach. Steve Colton,
formerly with American Century, leads the equity team, which employs a
large-cap, value style that is highly diversified and attempts to return more
than the S&P 500 with lower risk. As a result of the change, the number of
holdings has been increased and sector concentration (notably energy) has been
reduced. Since December, the equity portion has had success in auto stocks like
Ford Motor Corp., drug stocks like Pfizer Inc. and brokerage stocks like Morgan
Stanley, Dean Witter & Co.
The fixed-income portion of the portfolio is managed by a fixed-income
team, using a multi-sector approach. Sector holdings have been opportunistically
shifted over the past 12 months into the most undervalued sectors and out of
sectors determined to be overvalued. Early in the year the Income and Growth
Fund was increasing its exposure to U.S. Treasuries due to historically tight
credit spreads. Over the past six months, the Asian crisis has caused spreads to
widen across all credit-sensitive sectors. The Adviser took advantage of this
spread widening, increasing the Income and Growth Fund's exposure to
investment-grade corporates, taxable municipals, commercial mortgage-backed
securities and emerging markets.
The stock market is experiencing a period of stock market volatility.
Troubles in Asian countries like Indonesia and South Korea, slowing S&P 500
earnings growth, and tight labor markets are among the top concerns of market
forecasters. Offsetting these concerns are such factors as strong flows into
equity mutual funds by aging baby-boomers saving for their retirement, merger
activity, low inflation and interest rates, and global competitiveness of large
U.S. corporations. The Income and Growth Fund's equity holdings are currently
emphasizing the financial services sector, which is benefiting from a strong
fundamental environment and merger activity, and the consumer cyclical sector,
which is benefiting from strong employment growth and consumer confidence.
The fixed-income segment of the portfolio is positioned well for the new
fiscal year. The average credit quality is A+ and the duration is 4.8 years,
approximately equal to the Lehman Brothers Aggregate Bond Index. The sector
allocation is well balanced with exposure to the conventional core sectors, such
as investment-grade corporates and agency mortgage-backed securities and
enhanced core sectors, such as taxable municipals, commercial mortgage-backed
securities, non-agency residential mortgage-backed securities, and
emerging-market debt.
Average Annual Total Returns for Periods Ending 4/30/98
<TABLE>
<CAPTION>
From Inception
1 Year 5 Years 10 Years 1/3/92 to 4/30/98
----------- ----------- ---------- ------------------
<S> <C> <C> <C> <C>
Class A with 4.75% sales charge 16.10% 10.93% 12.58% --
Class A at net asset value 21.87% 12.00% 13.12% --
Class B with CDSC 17.03% 11.19% -- 11.49 %
Class B at net asset value 21.03% 11.19% -- 11.49 %
New Balanced Benchmark*** 22.49% 13.33% 13.06% 12.30%****
Old Balanced Benchmark** 26.38% 15.57% 14.19% 13.84%****
S&P 500 Stock Index* 41.27% 23.32% 18.92% 20.84%****
</TABLE>
25
<PAGE>
Income & Growth at 4/30/98
<TABLE>
<CAPTION>
Old New
Balanced Balanced Income &
S&P 500 Benchmark Benchmark Growth A
--------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
4/30/88 10,000 10,000 10,000 9,525
4/30/89 12,270 11,593 11,372 11,600
4/30/90 13,550 12,745 12,484 12,131
4/30/91 15,939 14,791 14,539 13,902
4/30/92 18,165 16,600 16,340 16,165
4/30/93 19,844 18,274 18,252 18,554
4/30/94 20,904 18,928 18,739 19,182
4/30/95 24,557 21,321 20,864 20,324
4/30/96 31,992 25,543 24,392 24,188
4/30/97 40,055 29,815 27,854 26,832
4/30/98 56,585 37,680 34,118 32,699
</TABLE>
This chart assumes an initial investment of $10,000 made on April 30, 1988
for Class A shares of the Income and Growth Fund. The total return for Class A
shares of the Income and Growth Fund reflects the maximum sales charge of 4.75%
on the initial investment and assumes reinvestment of dividends and capital
gains. Class B share performance will be greater or less than that shown based
on differences in inception date, fees and sales charges. The total return
(since inception 1/3/92) for Class B shares of the Income and Growth Fund
reflects the 5% contingent deferred sales charge (CDSC), which is applicable on
all shares redeemed during the 1st year after purchase and 4% for all shares
redeemed during the 2nd year after purchase (scaled down to 3%--3rd year,
2%--4th and 5th year and 0% thereafter). Returns indicate past performance,
which is not predictive of future performance. Investment return and net asset
value will fluctuate, so that shares, when redeemed, may be worth more or less
than the original cost.
Foreign investing involves special risks, such as currency fluctuation and
less public disclosure as well as economic and political risks.
* The S&P 500 Stock Index is an unmanaged but commonly used measure of
stock total return performance. The S&P 500's performance does not
reflect sales charges.
** The Old Balanced Benchmark is calculated based upon the performance of
the following indices: 55% S&P 500/ 35% Lehman Brothers Aggregate Bond
Index/10% U.S. Treasury bills and is produced by Frank Russell Company.
The index's performance does not reflect sales charges.
*** The New Balanced Benchmark is calculated based upon the performance of
the following indices: 40% S&P 500/ 60% Lehman Brothers Aggregate Bond
Index and is produced by Frank Russell Company. The index's performance
does not reflect sales charges.
**** Index information from 1/1/92 to 4/30/98.
26
<PAGE>
Legal Matters
Certain legal matters in connection with the issuance of the shares of the
Income and Growth Fund will be passed upon by Goodwin, Procter & Hoar LLP.
Additional Financial Information
The table set forth below presents certain financial information for the
Income and Growth Fund. This information is derived from the Income and Growth
Fund audited financial statements for the year ended April 30, 1998. The data
should be read in conjunction with the audited financial statements and related
notes, which are included in the Statement of Additional Information related to
this Prospectus/Proxy Statement. The financial highlights for the Income and
Growth Fund for prior periods are contained in the Income and Growth Fund
Prospectus, and the financial statements for the Income and Growth Fund for
prior periods are contained in the Acquiring Trust's Annual Report to
Shareholders which are included in the Statement of Additional Information
related to this Prospectus Proxy/Statement.
27
<PAGE>
PHOENIX INCOME AND GROWTH FUND
Financial Highlights
For a share of beneficial interest outstanding throughout each period
<TABLE>
<CAPTION>
Year Ended April 30, 1998
---------------------------
Class A Class B
------------ ------------
<S> <C> <C>
Net asset value, beginning of period $ 9.86 $ 9.87
Income from investment operations
Net investment income 0.38 0.30
Net realized and unrealized gain (loss) 1.63 1.64
------- --------
Total from investment operations 2.01 1.94
------- --------
Less distributions
Dividends from net investment income (0.39) (0.31)
Dividends from net realized gains (1.28) (1.28)
In excess of accumulated net realized gains -- --
------- --------
Total distributions (1.67) (1.59)
------- --------
Change in net asset value 0.34 0.35
------- --------
Net asset value, end of period $ 10.20 $ 10.22
======== ========
Total return(1) 21.87% 21.03%
Ratios/supplemental data:
Net assets, end of period (thousands) $459,992 $361,876
Ratio to average net assets of:
Expenses 1.13% 1.88%
Net investment income 3.61% 2.86%
Portfolio turnover rate 155% 155%
</TABLE>
- ----------------
(1) Maximum sales charge is not reflected in total return calculation.
28
<PAGE>
OTHER BUSINESS
The Board of Trustees of the Trust knows of no business to be brought
before the Meeting other than the matters set forth in this Prospectus/Proxy
Statement. Should any other matter requiring a vote of Convertible Fund
shareholders arise, however, the proxies will vote thereon according to their
best judgment in the interests of the Convertible Fund and the shareholders of
the Convertible Fund.
29
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this 27th day of May, 1998, by and between PHOENIX INCOME AND GROWTH FUND (the
"Income and Growth Trust"), a Massachusetts business trust with its principal
place of business at 101 Munson Street, Greenfield, Massachusetts 01301, on
behalf of the Phoenix Income and Growth Fund, the sole portfolio series thereof
(the "Acquiring Fund") and PHOENIX SERIES FUND (the "Series Trust"), a
Massachusetts business trust with its principal place of business at 101 Munson
Street, Greenfield, Massachusetts 01301, on behalf of the Phoenix Convertible
Fund Series, a portfolio series thereof (the "Acquired Fund").
All references in this Agreement to action taken by the Acquiring Fund or
the Acquired Fund shall be deemed to refer to action taken by the Income and
Growth Trust or the Series Trust, on behalf of the respective portfolio series.
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer by the Acquired Fund of all or
substantially all of the assets of the Acquired Fund to the Acquiring Fund, in
exchange solely for Class A and Class B shares of beneficial interest in the
Acquiring Fund (the "Acquiring Fund Shares"), the assumption by the Acquiring
Fund of all the liabilities of the Acquired Fund, and the distribution of the
Acquiring Fund Shares to the shareholders of the Acquired Fund in complete
liquidation of the Acquired Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Income and Growth Trust and the Series Trust are each
open-end, registered investment companies of the management type;
WHEREAS, the Board of Trustees of the Income and Growth Trust has
determined that the exchange of all or substantially all of the assets of the
Acquired Fund for Acquiring Fund Shares and the assumption of all the
liabilities of the Acquired Fund by the Acquiring Fund is in the best interests
of the Acquiring Fund and that the interests of the existing shareholders of the
Acquiring Fund would not be diluted as a result of this transaction; and
WHEREAS, the Board of Trustees of the Series Trust has determined that the
exchange of all or substantially all of the assets of the Acquired Fund for
Acquiring Fund Shares and the assumption of all the liabilities of the Acquired
Fund by the Acquiring Fund is in the best interests of the Acquired Fund and
that the interests of the existing shareholders of the Acquired Fund would not
be diluted as a result of this transaction.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. THE TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES, THE ASSUMPTION OF ALL THE LIABILITIES OF THE ACQUIRED FUND AND
THE LIQUIDATION OF THE ACQUIRED FUND
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Acquired Fund agrees
to transfer all or substantially all of the Acquired Fund's assets, as set forth
in paragraph 1.2, to the Acquiring Fund, and the Acquiring Fund agrees in
exchange therefor: (i) to deliver to the Acquired Fund the number of full and
fractional Acquiring Fund Shares, computed in the manner and as of the time and
date set forth in Article 2 and (ii) to assume all the liabilities of the
Acquired Fund, as set forth in paragraph 1.3. Such transactions shall take place
at the closing provided for in paragraph 3.1 (the "Closing").
30
<PAGE>
1.2 The assets of the Acquired Fund to be acquired by the Acquiring Fund
shall consist of all property, including, without limitation, all cash,
securities, commodities and futures interests, and dividends or interest
receivable which are owned by the Acquired Fund and any deferred or prepaid
expenses shown as an asset on the books of the Acquired Fund on the closing
date provided in paragraph 3.1 (the "Closing Date").
1.3 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The Acquiring Fund shall
assume all liabilities, expenses, costs, charges and reserves reflected on an
unaudited statement of assets and liabilities of the Acquired Fund, prepared by
Phoenix Equity Planning Corporation, it its capacity as financial agent for the
Acquired Fund as of the Valuation Date (as defined in paragraph 2.1) in
accordance with generally accepted accounting principles consistently applied
from the prior audited period.
1.4 Immediately after the transfer of assets provided for in paragraph
1.1, the Acquired Fund will distribute pro rata to the Acquired Fund's
shareholders of record, determined as of immediately after the close of
business on the Closing Date (the "Acquired Fund Shareholders"), the Acquiring
Fund Shares received by the Acquired Fund pursuant to paragraph 1.1 and will
completely liquidate. Such distribution and liquidation will be accomplished by
the transfer of the Acquiring Fund Shares then credited to the account of the
Acquired Fund on the books of the Acquiring Fund to open accounts on the share
records of the Acquiring Fund in the names of the Acquired Fund Shareholders
and representing the respective pro rata number of the Acquiring Fund Shares of
the corresponding class due such shareholders. All issued and outstanding
shares of the Acquired Fund will simultaneously be canceled on the books of the
Acquired Fund, although share certificates representing interests in the
Acquired Fund will represent a number of Acquiring Fund Shares after the
Closing Date as determined in accordance with paragraph 2.2. The Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares in
connection with such exchange. Ownership of Acquiring Fund Shares will be shown
on the books of the Acquiring Fund's transfer agent.
2. VALUATION
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder and the net asset value of Acquiring Fund Shares of
each class shall be computed as of immediately after the close of business of
the New York Stock Exchange on the Closing Date (such time and date being
hereinafter called the ("Valuation Date")), using the valuation procedures set
forth in the Acquiring Fund's Declaration of Trust and then-current prospectus
or statement of additional information.
2.2 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's assets and the
assumption of liabilities shall be determined by dividing the value of the net
assets of the Acquired Fund attributable to each class of shares of the
Acquired Fund by the net asset value of an Acquiring Fund Share of the
corresponding class.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be the next Friday that is a full business day
following satisfaction (or waiver as provided herein) of all of the conditions
set forth in Articles 6, 7, and 8 of this Agreement (other than those
conditions which may by their terms be satisfied only at the Closing), or such
later date as the parties may agree to in writing. All acts taking place at the
Closing shall be deemed to take place simultaneously as of immediately after
the close of business on the Closing Date unless otherwise agreed to by the
parties. The close of business on the Closing Date shall be as of 4:00 p.m. New
York Time. The Closing shall be held at the offices of Phoenix Investment
Counsel, Inc. ("PIC"), 56 Prospect Street, Hartford, Connecticut 06115-0480, or
at such other time and/or place as the parties may agree.
3.2 The Series Trust shall cause Phoenix Equity Planning Corporation (the
"Transfer Agent"), transfer agent of the Acquired Fund, to deliver at the
Closing a certificate of an authorized officer stating that its records contain
the names
31
<PAGE>
and addresses of the Acquired Fund Shareholders and the number and percentage
ownership of outstanding shares of each class owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited on the Closing
Date to the Secretary of Series Trust or provide evidence satisfactory to the
Series Trust that such Acquiring Fund Shares have been credited to the Acquired
Fund's account on the books of the Acquiring Fund. At the Closing, each party
shall deliver to the other such bills of sales, checks, assignments, share
certificates, if any, receipts or other documents as such other party or its
counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Series Trust represents and warrants to the Income and Growth Trust
as follows:
(a) The Series Trust is a voluntary association with transferable shares
of the type commonly referred to as a Massachusetts business trust duly
organized and validly existing under the laws of the Commonwealth of
Massachusetts.
(b) The Series Trust is a registered investment company classified as a
management company of the open-end type, and its registration with the
Securities and Exchange Commission (the "Commission"), as an investment
company under the Investment Company Act of 1940, as amended (the "1940
Act"), and the registration of its shares under the Securities Act of 1933,
as amended (the "1933 Act"), are in full force and effect.
(c) The Series Trust is not, and the execution, delivery and performance
of this Agreement will not result, in a material violation of its
Declaration of Trust or By-Laws or of any agreement, indenture, instrument,
contract, lease or other undertaking relating to the Acquired Fund.
(d) The Acquired Fund has no material contracts or other commitments
(other than this Agreement) which will be terminated with liability to the
Acquired Fund prior to the Closing Date.
(e) No material litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or to its
knowledge threatened against the Acquired Fund or any of its properties or
assets. The Acquired Fund knows of no facts which might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated.
(f) The Statement of Assets and Liabilities of the Acquired Fund at
October 31, 1997 has been audited by Price Waterhouse, LLP, independent
accountants, and is in accordance with generally accepted accounting
principles consistently applied and such statement (copies of which have
been furnished to Income and Growth Trust,) fairly reflects the financial
condition of the Acquired Fund as of such date, and there are no known
contingent liabilities of the Acquired Fund as of such date not disclosed
therein.
(g) Since October 31, 1997, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquired Fund of indebtedness maturing more than
one year from the date such indebtedness was incurred. For the purposes of
this subparagraph (g), a decline in net asset value per share of the
Acquired Fund, the discharge of Acquired Fund liabilities, or the
redemption of Acquired Fund shares by Acquired Fund Shareholders shall not
constitute a material adverse change.
(h) All Federal and other tax returns and reports of the Acquired Fund
required by law to have been filed have been filed and are correct, and all
Federal and other taxes shown as due or required to be shown as due on said
returns
32
<PAGE>
and reports have been paid or provision has been made for the payment
thereof, and to the best of the Acquired Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to
such returns.
(i) For each taxable year of its operation, the Acquired Fund has met the
requirements of Subchapter M of the Code for qualification as a regulated
investment company and has elected to be treated as such.
(j) All issued and outstanding shares of the Acquired Fund are duly and
validly issued and outstanding, fully paid and non-assessable by the
Acquired Fund (recognizing that, under Massachusetts law, Acquired Fund
Shareholders could, under certain circumstances be held personally liable
for obligations of the Acquired Fund). The Acquired Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquired Fund shares, nor is there outstanding any
security convertible into any of the Acquired Fund shares (except for the
conversion feature of the Class B shares into Class A shares as described
in the current prospectus of the Acquired Fund).
(k) The execution, delivery and performance of this Agreement has been
duly authorized prior to the Closing Date by all necessary action on the
part of the Board of Trustees of the Series Trust, and, subject to the
approval of the Acquired Fund Shareholders, this Agreement constitutes a
valid and binding obligation of the Series Trust enforceable in accordance
with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors' rights, and to general equity principles.
4.2 The Income and Growth Trust represents and warrants to the Series Trust
as follows:
(a) The Income and Growth Trust is a voluntary association with
transferable shares of the type commonly referred to as a Massachusetts
business trust duly organized and validly existing under the laws of the
Commonwealth of Massachusetts.
(b) The Income and Growth Trust is a registered investment company
classified as a management company of the open-end type, and its
registration with the Commission, as an investment company under the 1940
Act, and the registration of its shares under the 1933 Act are in full
force and effect.
(c) The current prospectus and statement of additional information of the
Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations
of the Commission thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading.
(d) The Income and Growth Trust is not, and the execution, delivery and
performance of this Agreement will not result in a material violation of
the Acquiring Fund's Declaration of Trust or By-laws or of any agreement,
indenture, instrument, contract, lease or other undertaking relating to the
Acquiring Fund.
(e) No material litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or to its
knowledge threatened against the Acquiring Fund or any of its properties or
assets. The Acquiring Fund knows of no facts which might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body which materially and adversely affects the Acquiring Fund's business
or its ability to consummate the transactions herein contemplated.
33
<PAGE>
(f) The Statement of Assets and Liabilities of the Acquiring Fund at
April 30, 1998, has been audited by Price Waterhouse, LLP, independent
accountants and is in accordance with generally accepted accounting
principles consistently applied and such statement (copies of which have
been furnished to the Series Trust), fairly reflects the financial
condition of the Acquiring Fund as of such date, and there are no known
contingent liabilities of the Acquiring Fund as of such date not disclosed
therein.
(g) Since April 30, 1998, there has not been any material adverse change
in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquiring Fund of indebtedness maturing more than
one year from the date such indebtedness was incurred. For the purposes of
this subparagraph (g), a decline in net asset value per share of the
Acquiring Fund Shares, the discharge of Acquiring Fund liabilities, or the
redemption of Acquiring Fund shares by Acquiring Fund shareholders, shall
not constitute a material adverse change.
(h) All Federal and other tax returns and reports of the Acquiring Fund
required by law to have been filed have been filed and are correct, and all
Federal and other taxes shown as due or required to be shown as due on said
returns and reports have been paid or provision has been made for the
payment thereof, and, to the best of the Acquiring Fund's knowledge, no
such return is currently under audit and no assessment has been asserted
with respect to such returns.
(i) For each taxable year of its operation, the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification as a
regulated investment company and has elected to be treated as such.
(j) All issued and outstanding Acquiring Fund Shares are duly and validly
issued and outstanding, fully paid and non-assessable by the Acquiring Fund
(recognizing that, under Massachusetts law, Acquiring Fund shareholders
could under certain circumstances be held personally liable for the
obligations of the Acquiring Fund). The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares (except for the conversion
feature of the Class B shares into Class A shares as described in the
current prospectus of the Acquiring Fund).
(k) The execution, delivery and performance of this Agreement has been
fully authorized prior to the Closing Date by all necessary action, if any,
on the part of the Board of Trustees of the Income and Growth Trust and
this Agreement constitutes a valid and binding obligation of the Acquiring
Fund enforceable in accordance with its terms, subject as to enforcement,
to bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors rights, and to general equity
principles.
(l) The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund for the account of the Acquired Fund Shareholders, pursuant to the
terms of this Agreement at the Closing Date have been duly authorized.
5. COVENANTS OF THE ACQUIRING FUND, AND THE ACQUIRED FUND
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date,
it being understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions, the dividends
contemplated by Section 8.6 hereof, and any other distribution that may be
advisable.
5.2 The Series Trust will call a meeting of the Acquired Fund Shareholders
to consider and act upon this Agreement and to take all other action necessary
to obtain approval of the transactions contemplated herein.
34
<PAGE>
5.3 The Acquired Fund, covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.
5.4 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Fund Shares.
5.5 Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.6 The Series Trust will provide the Acquiring Fund with information
reasonably necessary for the preparation of a registration statement on Form
N-14 of the Income and Growth Trust (the "Registration Statement"), such
Registration Statement to consist of, without limitation, a prospectus (the
"Prospectus") that includes a proxy statement of the Acquired Fund (the "Proxy
Statement").
5.7 The Income and Growth Trust agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940 Act,
and such of the state blue sky or securities laws as may be necessary in order
to continue the operations of the Acquiring Fund after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Series Trust to consummate the transactions
provided for herein shall be subject, at its election, to the performance by
the Income and Growth Trust and the Acquiring Fund of all the obligations to be
performed by them hereunder on or before the Closing Date, and, in addition
thereto, to the following further conditions:
6.1 All representations and warranties of the Income and Growth Trust
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2 The Income and Growth Trust shall have delivered to the Series Trust a
certificate executed in its name by its President or Vice President and its
Treasurer or Assistant Treasurer, in a form reasonably satisfactory to the
Series Trust, and dated as of the Closing Date, to the effect that the
representations and warranties of the Income and Growth Trust made in this
Agreement are true and correct in all material respects at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement and as to such other matters as the Series Trust shall
reasonably request.
6.3 The Acquiring Fund Shares to be issued and delivered to the Acquiring
Fund, for the account of the Acquired Fund Shareholders when so issued and
delivered, shall be duly and validly issued, and shall be fully paid and non-
assessable by the Acquiring Fund (recognizing that, under Massachusetts law,
shareholders of the Acquiring Fund could under certain circumstances be held
personally liable for its obligations);
6.4 The Proxy Statement and Prospectus (only insofar as they relate to the
Acquiring Fund), on the effective date of the Registration Statement and on the
Closing Date, (i) shall comply in all material respects with the applicable
provisions of the 1933 Act, the Securities Exchange Act of 1934, as amended
(the "1934 Act") and the 1940 Act and the regulations thereunder and (ii) shall
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statement herein in
light of the circumstances under which such statements were made, not
materially misleading.
35
<PAGE>
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Income and Growth Trust to complete the
transactions provided for herein shall be subject, at its election, to the
performance by the Series Trust and the Acquired Fund of all of the obligations
to be performed by them hereunder on or before the Closing Date and, in
addition thereto, to the following conditions:
7.1 All representations and warranties of the Series Trust contained in
this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
7.2 The Series Trust shall have delivered to the Income and Growth Trust a
statement of the Acquired Fund's assets and liabilities, as of the Closing
Date, certified by the Treasurer of the Acquired Fund; and
7.3 The Series Trust shall have delivered to the Income and Growth Trust
on the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Income and Growth Trust, and dated as of the Closing Date,
to the effect that the representations and warranties of the Multi-Portfolio
Trust, with respect to the Series Trust made in this Agreement are true and
correct in all material respects at and as of the Closing Date, except as they
may be affected by the transactions contemplated by this Agreement, and as to
such other matters as the Income and Growth Trust shall reasonably request.
7.4 The Acquired Fund shall have good and marketable title to the Acquired
Fund's assets to be transferred to the Acquiring Fund pursuant to paragraph 1.1
and full right, power, and authority to sell, assign, transfer and deliver such
assets hereunder, and, upon delivery and payment for such assets.
7.5 The Proxy Statement and Prospectus (other than information therein
that relates to the Income and Growth Trust or the Acquiring Fund), on the
effective date of the Registration Statement and on the Closing Date (i) shall
comply in all material respects with the applicable provisions of the 1933 Act,
the 1934 Act, the 1940 Act and the regulations thereunder and (ii) shall not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
materially misleading.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND
The obligations of the Series Trust and the Income and Growth Trust to
consummate the transactions contemplated by this Agreement shall be subject, at
their election (except as provided in paragraphs 8.1 and 8.5 below) to the
following conditions:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the holders of the outstanding shares of beneficial interest in the
Acquired Fund in accordance with the provisions of the Declaration of Trust and
By-Laws of the Series Trust and certified copies of the resolutions evidencing
such approval shall have been delivered to the Income and Growth Trust.
Notwithstanding anything herein to the contrary, neither the Income and Growth
Trust nor the Series Trust may waive the conditions set forth in this paragraph
8.1:
8.2 On the Closing Date, no action, suit or other proceeding shall be
threatened or pending before any court or governmental agency in which it is
sought to restrain or prohibit, or to obtain damages or other relief in
connection with this Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
the Income and Growth Trust or the Series Trust to permit consummation, in all
material
36
<PAGE>
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Income and Growth Trust or the Series Trust.
8.4 The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The parties shall have received an opinion from the law firm of
Goodwin, Procter & Hoar LLP addressed to the Income and Growth Trust and Series
Trust substantially to the effect that the transaction contemplated by this
Agreement shall constitute a tax-free reorganization for Federal income tax
purposes. The delivery of such opinion is conditioned upon receipt by the law
firm of Goodwin, Procter & Hoar LLP of representations it shall request of the
Income and Growth Trust and the Series Trust. Notwithstanding anything herein
to the contrary, neither the Income and Growth Trust nor the Series Trust may
waive the condition set forth in this paragraph 8.5.
8.6 At or immediately prior to the Closing, the Series Trust shall have
declared and paid a dividend or dividends which, together with all previous
such dividends, shall have the effect of distributing to the Acquired Fund
Shareholders all of such Acquired Fund's investment company taxable income for
taxable years ending at or prior to the Closing and all of its net capital
gain, if any, realized in taxable years ending at or prior to the Closing
(after reduction for any capital loss carry-forward).
9. BROKERAGE FEES AND EXPENSES
9.1 The Income and Growth Trust and the Series Trust each represents and
warrants to the other that there are no brokers or finders entitled to receive
any payments in connection with the transactions provided for herein.
9.2 All of the expenses and costs of the Reorganization and the
transactions contemplated thereby shall be borne by PIC.
10. ENTIRE AGREEMENT
10.1 The Income and Growth Trust and the Series Trust agree that neither
party has made any representation, warranty or covenant not set forth herein
and that this Agreement constitutes the entire agreement between the parties.
11. TERMINATION
This Agreement and the transactions contemplated hereby may be terminated
and abandoned by either party by resolution of the party's Board of Trustees,
at any time prior to the Closing Date, if circumstances should develop that, in
the opinion of such Board, make proceeding with the Agreement inadvisable. In
the event of any such termination, there shall be no liability for damages on
the part of either the Income and Growth Trust or the Series Trust, or their
respective Trustees or officers, to the other party.
12. AMENDMENTS
This agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the Series
Trust and the Income and Growth Trust; provided, however, that following the
meeting of the Acquired Fund Shareholders called by the Series Trust pursuant
to paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring Fund Shares
to be issued to the Acquired Fund Shareholders under this Agreement to the
detriment of such shareholders without their further approval.
37
<PAGE>
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the parties hereto at their
principal place of business.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
14.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts each of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
14.5 It is expressly agreed that the obligations of the Series Trust
hereunder shall not be binding upon any of the trustees, shareholders,
nominees, officers, agents, or employees of the Series Trust personally, but
shall bind only the trust property of the Series Trust, as provided in the
Declaration of Trust of the Series Trust. The execution and delivery by such
officers of the Series Trust shall not be deemed to have been made by any of
them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Acquired Fund as provided in the
Declaration of Trust of the Series Trust. The Series Trust is a series company
with multiple series, and has entered into this Agreement on behalf of one such
series, the Acquired Fund. With respect to any obligation of the Series Trust
arising hereunder, the Income and Growth Trust and the Acquiring Fund shall
look for payment or satisfaction of such obligations solely to the assets and
property of the Acquired Fund.
14.6 It is expressly agreed that the obligations of the Income and Growth
Trust hereunder shall not be binding upon any of the trustees, shareholders,
nominees, officers, agents or employees of the Income and Growth Trust
personally, but shall bind only the trust property of the Income and Growth
Trust, as provided in the Declaration of Trust of the Income and Growth Trust.
The execution and delivery by such officers of the Income and Growth Trust
shall not be deemed to have been made by any of them individually or to impose
any liability on any of them personally, but shall bind only the trust property
of the Income and Growth Trust as provided in the Declaration of Trust of the
Income and Growth Trust. The Income and Growth Trust is a series company with a
sole portfolio series, the Acquiring Fund and has entered into this Agreement
on behalf of such series. With respect to any obligation of the Income and
Growth Trust arising hereunder, the Series Trust and the Acquired Fund shall
look for payment or satisfaction of such obligations solely to the assets and
property of the Acquiring Fund.
14.7 The sole remedy of a party hereto for a breach of any representation
or warranty made in this Agreement by the other party shall be an election by
the non-breaching party not to complete the transactions contemplated herein as
set forth in Paragraph 6.1 and 7.1.
38
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its President or Vice President and its seal to be affixed
hereto and arrested by its Secretary or Assistant Secretary.
PHOENIX INCOME AND GROWTH FUND, on
behalf of the Phoenix Income and
Growth Fund
<TABLE>
<S> <C>
ATTEST:
/s/ G. Jeffrey Bohne By: /s/ Philip R. McLoughlin
- ------------------------------ ----------------------------------
G. Jeffrey Bohne Name: Philip R. McLoughlin
Secretary Title: President
PHOENIX SERIES FUND, on behalf of the
Phoenix Convertible Fund Series
ATTEST:
/s/ G. Jeffrey Bohne By: /s/ James D. Wehr
- ------------------------------ --------------------------------
G. Jeffrey Bohne Name: James D. Wehr
Secretary Title: Senior Vice President
</TABLE>
39
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS
---------, ----
The undersigned shareholder of Phoenix Convertible Fund Series (the
"Convertible Fund"), revoking any and all previous proxies heretofore given for
shares of the Convertible Fund held by the undersigned ("Shares"), does hereby
appoint [_____________________] and [_____________________], and each and any of
them, with full power of substitution each, to be the attorneys and proxies of
the undersigned (the "Proxies"), to attend the special meeting of the
shareholders of the Convertible Fund to be held on the____ day of September,
1998, at [________] A.M., local time, at the offices of the Convertible Fund at
101 Munson Street, Greenfield, Massachusetts 01301, and any adjournments thereof
(the "Meeting"), and to represent and direct shares of the Convertible Fund held
by the undersigned as of the record date for the Meeting for the Proposal
specified below.
This proxy, if properly executed, will be voted in the manner as
directed herein by the undersigned shareholder. Unless otherwise specified below
in the squares provided, the undersigned's vote will be cast "FOR" the Proposal.
If no direction is made for the Proposal, this proxy will be voted "FOR" the
Proposal. In their discretion, the Proxies are authorized to transact and vote
upon such other matters and business as may come before the Meeting or any
adjournments thereof.
To approve an Agreement and Plan of Reorganization (the "Plan"), and
the transactions contemplated thereby, including (a) the transfer of
all or substantially all of the assets of the Convertible Fund to
Phoenix Income and Growth Fund (the "Income and Growth Fund") and the
assumption by the Income and Growth Fund of certain identified
liabilities in exchange for shares of the corresponding class of the
Income and Growth Fund and (b) the distribution of the shares of the
Income and Growth Fund so received to shareholders of the Convertible
Fund.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
To transact such other business as properly may come before the Meeting
or any adjournment(s) thereof.
To avoid the expense of adjourning the Meeting to a subsequent date,
please return this proxy in the enclosed self-addressed, postage-paid envelope.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF PHOENIX
SERIES FUND, WHICH RECOMMENDS A VOTE FOR THE PROPOSAL.
Dated: , 1998
------------------------
--------------------------------------
Name
--------------------------------------
Signature of Shareholder
